AHSEC Class 12 Accountancy Question Paper Solved 2024 English Medium, Class AHSEC 12 Accountancy Question Paper Solved PDF Download, to each Paper is Assam Board Exam in the list of AHSEC so that you can easily browse through different subjects and select needs one. AHSEC Class 12 Accountancy Previous Years Question Paper Solved in English can be of great value to excel in the examination.
AHSEC Class 12 Accountancy Question Paper Solved 2024 English Medium
AHSEC Old Question Paper provided is as per the 2024 AHSEC Board Exam and covers all the questions from the AHSEC Class 12 Accountancy Solved Question Paper 2024 English Medium. Access the detailed Class 12 Accountancy 2024 Previous Years Question Paper Solved provided here and get a good grip on the subject. AHSEC 2024 Accountancy Question Paper Solved Access the AHSEC 2024 Accountancy Old Question Paper Solved, AHSEC Class 12 Accountancy Solved Question Paper 2024 of English in Page Format. Make use of them during your practice and score well in the exams.
ACCOUNTANCY
2024
ACCOUNTANCY OLD QUESTION PAPER SOLVED
1. Fill in the blanks with appropriate word/words: (any four)
(i) Partners current accounts are prepared when the capital accounts are _____.
Ans: Fixed.
(ii) Company has a separate_____ entity apart from its members.
Ans: Legal.
(iii) Current ratio is the relationship between current assets and______.
Ans: Current liabilities.
(iv) Equity shareholders are_______ of a company.
Ans: Owner.
(v) At the time of dissolution of partnership firm, assets are transferred to Realisation Account at ________.
Ans: Book value.
(b) State whether the following statements are ‘True’ or ‘False’:
(i) Debentureholders do not have right to vote in the meetings of the company.
Ans: True.
(ii) Premium for goodwill is shared in gaining ratio.
Ans: True.
(c) Choose the correct alternative:
(i) The portion of the authorised capital which is offered to the public for sale in the form of shares is called
(a) Subscribed capital.
(b) Issued capital.
(c) Called-up capital.
(d) Paid-up capital.
Ans: (b) Issued capital.
(ii) In the absence of partnership deed, the rate of interest allowed on partner’s capital is
(a) 6%
(b) 5%
(c) 6.5%
(d) None of the above.
Ans: (b) 5%
2. What is meant by re-issue of forfeited shares?
Ans: Re-Issue of Shares refers to the process by which a company allocates new shares to shareholders. Forfeiture of Shares: Forfeiture of Shares refers to the process by which a company cancels the shares of a shareholder due to non-payment of amounts due, such as allotment money or call money. These shares are reissued at a price lower than the original issue price, and any unpaid amounts are settled by the new buyer. Thereafter, the company has an option of selling such forfeited shares. The sale of forfeited shares is called ‘reissue of shares’.
3. Write any two demerits of partnership business.
Ans: Here are two demerits of partnership business
(i) Unlimited Liability: In a partnership, each partner has unlimited liability, meaning they are personally responsible for the debts and obligations of the business, which can risk their personal assets. The latter is designed specifically to insulate individual LLC members (partners or stakeholders) from risk.
(ii) Disagreements Among Partners: Financial disputes put stress and strain on the partnership, leading to conflicts that can damage the business. Differences in opinions, goals, or working styles can lead to conflicts among partners, affecting decision-making and the overall success of the business.
4. Mention two features of a debenture.
Ans: Here are two features of a debenture:
(i) Fixed Interest: A fixed interest rate is an unchanging rate charged on a liability, such as a loan or a mortgage. Debentures carry a fixed rate of interest, which is paid periodically to the debenture holders, regardless of the company’s profits or losses. It’s also known as a fixed term bond. You may be able to choose how long your savings are locked away for, or it may be an amount of time set by the bank.
(ii) Secured Debentures: Secured debentures are that kind of debentures where a charge is being established on the properties or assets of the enterprise for the purpose of any payment. In case of default, debenture holders have the right to claim these assets. They offer more security to investors compared to unsecured debentures.
Or
Write the meaning of Cash flow from investing activities’.
Ans: Cash flow from investing activities includes any inflows or outflows of cash from a company’s long-term investments. The cash flow statement reports the amount of cash and cash equivalents leaving and entering a company. These activities primarily involve the acquisition and disposal of long-term assets such as property, plant, equipment, and investments in marketable securities. The primary objective of cash flow statement is to provide useful information about cash flows (inflows and outflows) of an enterprise during a particular period under various heads, i.e., operating activities, investing activities and financing activities.
5. Give two circumstances under which the fixed capitals of partners may change.
Ans: Under the fixed capital method, the capital of partners may change in the following two circumstances:
(i) When fresh capital is introduced by the partner with the consent of other partners. it alters the capital structure of the firm, leading to a change in the fixed capital accounts of the partners.
(ii) When a part of the capital is withdrawn by the partner with the consent of other partners, it leads to a reduction in the partner’s capital balance and changes in the firm’s capital structure.
Or
Why is Profit and Loss Adjustment Account prepared?
Ans: Profit and loss adjustment account is prepared to record those transaction or omissions and errors which were left while preparing the final accounts and they are found after the final accounts have been prepared and the profits distributed among the partners. It ensures the proper allocation of profits among partners in a partnership firm. This account is typically used during events like reconstitution, admission, retirement, or dissolution of the partnership. Adjustments may include revaluation of assets, correction of understated or overstated expenses, and undistributed profits. It is commonly used to close the books at the end of an accounting period.
6. What is meant by ‘calls-in-advance’?
Ans: Calls-in-Advance refers to the amount paid by a shareholder to a company before it is officially called or due.
Thus, the amount of future calls is received in advance by the company. In other words, when a shareholder pays the whole amount or a part of the amount in advance, i.e., before the company calls, then it is termed as calls in advance. The company treats this amount as a liability until the respective calls are made. Calls-in-advance do not confer voting or dividend rights on the prepaid amount. However, the company may pay interest on this amount, as specified in its Articles of Association, typically at a rate not exceeding the prescribed limit under company law. It reflects prudent financial management by the shareholder.
7. Mention two limitations of financial statement analysis.
Ans: Here are two limitations of financial statement analysis:
(i) The financial analysis might be ambiguous without the prior knowledge of the changes in accounting procedure followed by an enterprise.
(ii) Financial statements are based on past data, which may not accurately reflect the current or future financial condition of the business.
(iii) The financial statements are outlined on the ground of accounting concept, as such, it does not mirror the current position.
Or
What is meant by the term ‘cash equivalents’?
Ans: Cash equivalents, also known as “cash and equivalents,” are one of the three main asset classes in financial investment along with stocks and bonds. Cash equivalents are short-term, highly liquid investment that are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value. These financial instruments often have short maturities, highly liquid markets, and low risk.
8. Write three situations when a partnership firm is compulsorily dissolved.
Ans: A partnership firm is compulsorily dissolved in the following situations:
(i) If all partners, except one, are declared insolvent, the firm must be dissolved as it cannot legally continue operations.
(ii) when all the partners or all but one partner, become insolvent, rendering them incompetent to sign a contract;
(iii) If the business or its objectives become illegal due to changes in law or regulations.
9. Give any three items that can be shown under the heading ‘Reserves and Surplus’ in a company’s Balance Sheet.
Ans: Under the heading ‘Reserves and Surplus’ in a company’s Balance Sheet, the following three items can be shown:
(i) Capital Reserve: This represents reserves created from non-operational activities like the sale of fixed assets or revaluation surplus, and is not distributed as dividends. It’s derived from the accumulated capital surplus of a company and is created out of its profit.
(ii) Revenue Reserve: Revenue reserve is the type of reserve that is created from the net profit that a company makes during a financial year. These are funds set aside from profits for specific purposes, such as contingencies, depreciation, or expansion, and can be used to cover future losses or reinvested in the business.
(iii) Revaluation Reserve: Revaluation Reserve is a special reserve created when a company revalues its fixed assets, such as land, buildings, or machinery. When these assets are revalued to reflect their current market value, the difference between the old book value and the new revalued amount is credited to the revaluation reserve. An increase in value is credited to the reserve account and a decrease is debited from the reserve account.
Or
Name any three items of current assets.
Ans: Three items of current assets are:
(i) Cash and Cash Equivalents: This includes cash in hand, cash at bank, and short-term investments that are easily convertible into cash. Cash equivalents are low-risk, short-term investment securities with maturity periods of 90 days (three months) or less.
(ii) Accounts Receivable: Accounts receivable can be considered a “current asset” because it’s usually converted to cash within one year. When a receivable is converted into cash after more than one year, instead of being recorded as a current asset, it’s recorded as a long-term asset. Amounts owed to the company by customers for goods or services sold on credit.
(iii) Inventory: Assets whose value is recorded in the Current Assets account are considered current assets.Goods and materials held by the company for sale or production in the normal course of business.
10. Current liabilities of a a company are ₹3,50,000. Its current ratio is y 3:1 and liquid ratio is 1.75:1. Calculate the current assets.
Ans: Current Liabilities = ₹3,50,000
Current Ratio = 3:1
Liquid Ratio = 1.75:1
Calculate Current Assets using the Current Ratio:
Current Assets = Current Ratio × Current Liabilities
Current Assets = 3×3,50,000 = ₹10,50,000
Calculate Liquid Assets using the Liquid Ratio:
Liquid Assets = Liquid Ratio × Current Liabilities
Liquid Assets =1.75 × 3,50,000 = ₹6,12,500
Thus, the Current Assets of the company are ₹10,50,000.
Or
Mention any three objectives of preparing a comparative statement.
Ans: Following are the objectives of preparing comparative statement:
(i) Trend Analysis: To analyze the performance of a company over multiple periods, identifying trends in revenues, expenses, and profits.
(ii) Facilitating Analysis: To facilitate a detailed analysis of financial data, aiding in the identification of strengths, weaknesses, opportunities, and threats.
(iii) Decision-Making: To provide essential information for management to make informed decisions regarding operations, investments, and strategic planning. To assist management and other stakeholders in making informed decisions based on historical financial trends.
(iv) Performance Evaluation: To assess the company’s financial health and efficiency by comparing current performance with past results.
(v) Providing Basis for Forecasting: To provide a basis for forecasting and planning by offering insights into the probable direction of future financial performance.
(vi) Investor Insight: To offer useful data for investors and stakeholders to understand the company’s growth, profitability, and risk.
Or
What is computerised accounting system?
Ans: A computerized accounting system uses software to manage and record financial transactions. The computerised accounting is also one of the database-oriented applications wherein the transaction data is stored in well-organised database. The user operates on such database using the required and desired interface and also takes the desired reports by suitable transformations of stored data into information. Therefore, the fundamentals of computerised accounting embrace all the basic requirements of any database-oriented application in computers. Accordingly, the computerised accounting system has the above four additional requirements. QuickBooks, Xero, FreshBooks, Wave Accounting are some of the most commonly used computer based accounting systems.
11. A and B are partners sharing profits and losses equally. They have admitted C into the firm. A has surrendered 1/3 of his share and B has surrendered 1/6 of his share in favour of C. Ascertain the new profit sharing ratio.
Ans: A’s original share = 1/2
B’s original share = 1/2
A surrenders 1/3 of his share:
A surrenders= 1/3 × 1/2 = 1/6
B surrenders 1/6 of his share:
B surrenders = ⅙ ×1/2 = 1/12
The total amount surrendered by A and B is:
Total surrenders= (⅙ +1/12) = (2/12) + (1/12) = 3/12 = 1/4
Thus, C receives 1/4 of the profit.
Calculate the New Profit Sharing Ratio
A’s new share = 1/3=4/12
B’s new share = 5/12
C’s share = 1/4=3/12
The new profit-sharing ratio is 4:5:3 (A:B:C).
Or
Explain in brief the ‘average profit method’ of goodwill valuation.
Ans: Average Profit method is one of the simplest methods of goodwill valuation that is used commonly. In this method, the value of goodwill is calculated by multiplying the average estimated profit or average future profit with the number of years of purchase. he process involves determining the average annual profit by adding the profits of the years under consideration and dividing by the number of years. Goodwill can be defined as the reputation of the business earned through hard work, honesty, quality, and customer satisfactory services. Goodwill helps to earn profits in the future without much effort because of the retention of the customers. This average profit is then multiplied by a predetermined multiplier or number of years’ purchase to calculate the value of goodwill. This method is simple and suitable for businesses with consistent earnings. However, it may not accurately reflect future potential if the business has fluctuating profits or specific intangible assets. Thus, because of the existence of goodwill, one firm earns more profit than the other firms in the same industry. It is an attractive force that brings old customers to that old place. Goodwill is the value of the share of profit sacrificed by the sacrificing partner, in partnership.
OR
Write three advantages of using graphs.
Ans: Using graphs in accounting offers several advantages:
(i) Simplifies Data Interpretation: Graphs provide a visual representation of complex financial data, making it easier to understand trends, patterns, and comparisons at a glance. This helps both management and stakeholders quickly grasp key financial insights. The basic concept of data interpretation is that it focuses on statistical modelling and knowledge in particular data analysis.
(ii) Improves Decision-Making: Visualizing data through graphs allows for better identification of issues like declining sales or increasing costs, which aids in making informed, timely decisions. This, in turn, improves the decision-making process by providing clear insights and understanding of the data.
(iii) Enhanced Communication: Charts and graphs help to express complex data in a simple format. Graphs effectively communicate financial information in presentations or reports, allowing accountants and managers to convey ideas more clearly, ensuring stakeholders understand the financial performance of the business.
12. Prepare a Common Size Income Statement of Maina Ltd. from the following informations:
| Particulars | 2022 | 2023 |
| Sales | 1,05,000 | 1,10,000 |
| Sales Returns | 5,000 | 10,000 |
| Cost of Goods Sold | 70,000 | 74,800 |
| Office Expenses | 3,000 | 3,200 |
| Non-Operating Incomes | 5,000 | 6,600 |
| Non-Operating Expenses | 1,000 | 1,100 |
| Income Tax Rate | 50% | 50% |
Ans: Common Size Income Statement for 2022
| Particulars | Amount (₹) | Common Size Percentage (2022) |
| Sales | 1,05,000 | 100% |
| Sales Returns | (5,000) | (5,000 / 1,00,000) × 100 = 5% |
| Net Sales | 1,00,000 | 100% |
| Cost of Goods Sold | 70,000 | (70,000 / 1,00,000) × 100 = 70% |
| Office Expenses | 3,000 | (3,000 / 1,00,000) × 100 = 3% |
| Non-Operating Income | 5,000 | (5,000 / 1,00,000) × 100 = 5% |
| Non-Operating Expenses | 1,000 | (1,000 / 1,00,000) × 100 = 1% |
| Income Before Tax | 1,00,000 – 70,000 – 3,000 + 5,000 – 1,000 = 31,000 | (31,000 / 1,00,000) × 100 = 31% |
| Income Tax (50%) | 15,500 | (15,500 / 1,00,000) × 100 = 15.5% |
| Net Income | 31,000 – 15,500 = 15,500 | (15,500 / 1,00,000) × 100 = 15.5% |
Common Size Income Statement for 2023
| Particulars | Amount (₹) | Common Size Percentage (2023) |
| Sales | 1,10,000 | 100% |
| Sales Returns | (10,000) | (10,000 / 1,00,000) × 100 = 10% |
| Net Sales | 1,00,000 | 100% |
| Cost of Goods Sold | 74,800 | (74,800 / 1,00,000) × 100 = 74.8% |
| Office Expenses | 3,200 | (3,200 / 1,00,000) × 100 = 3.2% |
| Non-Operating Income | 6,600 | (6,600 / 1,00,000) × 100 = 6.6% |
| Non-Operating Expenses | 1,100 | (1,100 / 1,00,000) × 100 = 1.1% |
| Income Before Tax | 1,00,000 – 74,800 – 3,200 + 6,600 – 1,100 = 27,500 | (27,500 / 1,00,000) × 100 = 27.5% |
| Income Tax (50%) | 13,750 | (13,750 / 1,00,000) × 100 = 13.75% |
| Net Income | 27,500 – 13,750 = 13,750 | (13,750 / 1,00,000) × 100 = 13.75% |
OR
Explain in brief the tools of financial analysis.
Ans: The tools of financial analysis are:
(i) Ratio Analysis: Involves calculating financial ratios like liquidity ratios, profitability ratios, and solvency ratios to assess the company’s performance and financial health. t can be used to check various factors of a business such as profitability, liquidity, solvency and efficiency of the company or the business.
(ii) Trend Analysis: Trend analysis is a form of analysing financial data, and it is expressed as a percentage for each year. Examines financial data over a period of time to identify trends in revenues, expenses, profits, and other financial metrics.
(iii) Common Size Statements: A common size statement is a sort of financial statement analysis and interpretation. Involves expressing financial statements (like the balance sheet and income statement) as percentages to facilitate comparisons across periods or companies.
(iv) Cash Flow Analysis: Cash flow is the movement of money into and out of a company over a certain period of time. If the company’s inflows of cash exceed its outflows, its net cash flow is positive. Analyzes the cash inflows and outflows to determine the company’s liquidity and operational efficiency.
(v) Vertical and Horizontal Analysis: Vertical analysis compares financial statement items with a base figure, while horizontal analysis compares financial data across different periods. Concentrates on the relationships between line items within a single period, highlighting the composition and structure.
OR
Explain the concepts of ‘data validation’ and ‘data verification’.
Ans: Data Validation: Data validation is the process of verifying and validating data that is collected before it is used. Any type of data handling task, whether it is gathering data, analyzing it, or structuring it for presentation, must include data validation to ensure accurate results. Any type of data handling task, whether it is gathering data, analyzing it, or structuring it for presentation, must include data validation to ensure accurate results.
Data verification: Data verification is the process of ensuring that data is accurate, complete, and reliable. It involves checking data against predefined standards, rules, or a source of truth to confirm its validity and correctness. In some domains it is referred to Source Data Verification (SDV), such as in clinical trials. Different types of validation can be performed depending on destination constraints or objectives.
13. Give Journal entries in the books of Pakhi Ltd. for issue of debentures under the following situations:
(a) Issued 5,000, 8% debentures of ₹ 100 each at par redeemable at 5% premium after 4 years.
Ans: Debentures Issued at Par (₹100 each)
| Date | Particulars | J/L | Amount(Dr.) | Amount(Cr.) |
| Bank A/c To 8% Debentures A/c(Being 5,000 debentures of ₹100 each issued at par) | 5,00,000 | |||
| 5,00,000 |
To Record Redemption Premium (5% on ₹5,00,000)
| Date | Particulars | J/L | Amount(Dr.) | Amount(Cr.) |
| Debenture Redemption Fund A/c To Premium on Redemption A/c(Being 5% premium on redemption provided) | 5,00,000 | |||
5,00,000 |
(b) Issued 6,000, 9% debentures of ₹ 100 each at 5% premium, redeemable at par after 4 years.
Ans: Debentures Issued at 5% Premium (₹100 + ₹5 = ₹105 each)
| Date | Particulars | J/L | Amount(Dr.) | Amount(Cr.) |
| Bank A/c To 9% Debentures A/c To Securities Premium A/c(Being 6,000 debentures of ₹100 each issued at 5% premium) | 6,30,000 | |||
| 6,30,00030,000 |
(c) Issued 7,000, 10% debentures of ₹ 100 each at 5% discount, redeemable at par after 4 years.
Ans: Debentures Issued at 5% Discount (₹100 – ₹5 = ₹95 each)
| Date | Particulars | J/L | Amount(Dr.) | Amount(Cr.) |
| Bank A/cTo 10% Debentures A/c To Discount on Issue of Debentures A/c(Being 7,000 debentures of ₹100 each issued at 5% discount) | 6,65,000 | |||
| 6,65,000 | ||||
| 35,000 |
(d) Issued 8,000, 10% debentures of ₹100 each at 5% premium, redeemable at 10% premium after 4 years.
Ans: Debentures Issued at 5% Premium (₹100 + ₹5 = ₹105 each)
| Date | Particulars | J/L | Amount(Dr.) | Amount(Cr.) |
| Bank A/cTo 10% Debentures A/c To Securities Premium A/c(Being 7,000 debentures of ₹100 each issued at 5% discount) | 8,40,000 | |||
| 8,00,00040,000 | ||||
To Record Redemption Premium (10% on ₹8,00,000)
| Date | Particulars | J/L | Amount(Dr.) | Amount(Cr.) |
| Debenture Redemption Fund A/c To Premium on Redemption A/c(Being 10% premium on redemption provided) | 80,000 | |||
80,000 |
(e) Issued 5,000, 9% debentures of ₹ 100 each to the vendors for purchasing a machinery of ₹5,00,000.
Ans: Debentures Issued to Vendors (₹100 each)
| Date | Particulars | J/L | Amount(Dr.) | Amount(Cr.) |
| Debenture Redemption Fund A/c To 9% Debentures A/c(Being 5,000 debentures of ₹100 each issued to vendors in exchange for machinery) | 5,00,000 | |||
5,00,000 |
Or
Give six points of distinctions between a share and a debenture.
Ans: Following are the distinctions between a share and a debenture:
| Basic of distinction | Debentures | Shares |
| Meaning | A debenture is a type of long-term debt instrument that is not backed by collateral. Debentures are backed only by the creditworthiness and reputation of the issuer. Both corporations and governments frequently issue debentures to raise capital or funds. | A share is a term often referred to as stake. Whenever a private company goes public, it raises the capital for the organisation by selling shares of the company to the public or investors. Every company’s shares are finite, and a share represents a percentage of ownership in a company or a financial asset. |
| Interest/Return | Debentures are typically unsecured and may have long-term maturity dates. As a result, the interest rate for debentures is usually lower than that of shares. | Shares can be bought and sold on the stock exchange, providing investors with liquidity. The price of a share fluctuates according to market demand and supply. The return from shares is higher than from debentures and is not fixed. |
| Risk | Debentures are less risky, as they provide fixed interest, regardless of profit. | Shares carry higher risk, as dividends depend on profits. |
| Voting Rights | Shares cannot be transformed into debentures | Debenture holders can change their securities into shares. |
| Repayment | Debentures are repaid upon maturity or according to the terms set at issuance. | Share capital is not repaid unless the company is liquidated; it represents long-term ownership. |
Or
Explain the applications of Spreadsheet in Accounting.
Ans: Following the applications of Spreadsheet in Accounting:
(i) Financial Statements Preparation: A company’s accounting professional typically prepares financial statements, which give a clear picture of the company’s financial position at a specific time. Spreadsheets can be used to create balance sheets, income statements, and cash flow statements. With formulas and templates, accountants can quickly input financial data and generate accurate reports.
(ii) Data Analysis: Spreadsheets can process large datasets, making it easier for accountants to analyze trends, patterns, and key financial metrics. Functions like SUM, AVERAGE, VLOOKUP, and pivot tables help in organizing and summarizing financial data for better insights. Thorough review of the financial statement allows businesses to detect discrepancies, prevent fraud, and make informed strategic decisions.
(iii) Audit and Reconciliation: Reconciliation is an accounting procedure that compares two sets of records to check that the figures are correct and in agreement and confirms that accounts in a general ledger are consistent and complete. Spreadsheets are often used for reconciling bank statements and financial accounts. They help compare records from different sources (e.g., bank statements vs. internal records) to identify discrepancies.
(iv) Tax Calculations: Tax expenses are calculated by multiplying the tax rate of the individual or business by the income received or generated before taxes. Spreadsheets are ideal for calculating tax liabilities, including income tax, sales tax, and VAT. They can automatically compute taxable income, deductions, and tax owed, ensuring accuracy and compliance.
(v) Depreciation Calculation: Spreadsheets can calculate depreciation for fixed assets using different methods like straight-line or declining balance. This helps in maintaining accurate records of asset value over time. Determine the useful life of the asset. Divide the sum of step (2) by the number arrived at in step (3) to get the annual depreciation amount.
14. Susanta, Ananta and Diganta were in partnership sharing profits and losses in the ratio of 3:2:1 On 1.1.2023. Susanta wasires from the firm. On that date Balance Sheet of the firm was as follows:
Balance Sheet
| Liabilities | Rs. | Assets | Rs. |
| Creditors | 50,000 | Cash at bank | 6,000 |
| Reserve Fund | 60,000 | Debtors | 1,50,000 |
| Capital | Stock | 30,000 | |
| Susanta= 80,000Ananta= 60,000Diganta=40,000 | 1,80,000 | Furniture | 24,000 |
| Land and Building | 80,000 | ||
| 2,90,000 | 2,90,000 |
The terms of the Retirement were:
(i) Goodwill of the firm were valued at ₹1,20,000
(ii) Land and Building to be appreciated by ₹20,000
(iii) Provision for Bad Debts to be made @ 2% on debtors
(iv) Furniture to be depreciated by 24,000
(v) Susanta’s capital is to be transferred to his Loan Account
Give Journal entries relating to the above transactions.
Ans: Journal entries
| Date | Particulars | J/L | Amount(Dr.) | Amount(Cr.) |
| Ananta’s Capital A/cDiganta’s Capital A/cTo Susanta’s Capital A/c (Being goodwill adjusted in the gaining ratio 1:1) | 30,00030,000 | 60,000 | ||
| Revaluation A/cTo Provision for Bad Debts A/c | 3,000 | 3,000 | ||
| Revaluation A/c To Furniture A/c | 24,000 | 24,000 | ||
| Susanta’s Capital A/cAnanta’s Capital A/c Diganta’s Capital A/cTo Revaluation A/c | 3,5002,3331,167 | 7,000 | ||
| Reserve Fund A/cTo Susanta’s Capital A/cTo Ananta’s Capital A/cTo Diganta’s Capital A/c | 60,000 | 30,00020,00010,000 | ||
| Susanta’s Capital A/cTo Susanta’s Loan A/c | 1,36,500 | 1,36,500 |
(Calculation: ₹80,000 + ₹60,000 – ₹3,500)
OR
Explain how the amount due to a deceased partner is ascertained?
Ans: Following are the amount due to a deceased partner is ascertained:
(i) Determine the Capital Account Balance: the capital account is a part of the balance sheet that shows the owner’s equity in a business.The balance in the deceased partner’s capital account at the time of death is calculated. This reflects the partner’s share of the business capital.
(ii) Adjust for Profit or Loss: The share of profit or loss earned by the deceased partner up to the date of death is calculated. It is commonly used to close the books at the end of an accounting period.
(iii) Calculate the Share of Reserves and Undistributed Profits: If the firm has accumulated reserves (like general reserve or revaluation reserve), the deceased partner’s share of these reserves should be included in the amount due.
(iv) Adjustment for Goodwill: If goodwill is to be considered, the deceased partner’s share in the goodwill (calculated based on the partnership agreement or goodwill valuation method) should also be added. Debit the Gaining partner’s capital account and credit the sacrificing partner’s capital account.
(v) Settle Liabilities: Settlement Liability means a net liability due to the final agreement of claims or rights arising out of the settlement of an Allowable Cost Audit. Any outstanding liabilities or advances owed by the deceased partner to the firm (like drawings or loans) are deducted from the total.
(vi) Payment to Legal Representatives: Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased. After these calculations, the amount due to the deceased partner, which includes their capital, share of profits, reserves, and goodwill, is payable to their legal heirs or representatives.
15. Distinguish between dissolution of partnership and dissolution of partnership.
Ans: Distinguish between dissolution of partnership and dissolution of firm are:
| Basic of Distinguish | Dissolution of partnership | Dissolution of firm |
| Meaning | Dissolving a partnership firm means discontinuing the business under the name of the said partnership firm. In this case, all liabilities are finally settled by selling off assets or transferring them to a particular partner, settling all accounts that existed with the partnership firm. | If a relationship between all the partners of firm is dissolved then it is known as dissolution of firm. |
| Impact | Only affects the relationship between partners, not the firm. | Ends the firm’s business operations and liabilities. |
| Continuation of business | In event of dissolution of partnership, business continues as usual, but the partnership is reconstituted | When all the existing partnership of an organisation is dissolved, it is known as dissolution of a firm |
| Business Continuation | In the dissolution of a firm, business comes to an end. | In the dissolution of the partnership, the business continues. |
| Books of Accounts | In case of dissolution of a firm, all the accounts of the firm are closed. | In case of dissolution of a partnership, books of accounts need not be closed. |
OR
Ravi and Vicky are partners in a firm sharing profits and losses in the ratio of 3:2. They decided to dissolve their firm on 31st December, 2022. Their Balance Sheet on that date was as under:
Balance Sheet
| Liabilities | Rs. | Assets | Rs. |
| Capitals: | Furniture | 16,000 | |
| Ravi | 17,500 | Investment | 4,000 |
| Vicky | 10,000 | Debtors | 2,000 |
| Creditors | 2,000 | Stock | 3,000 |
| Profit and Loss A/c | 1,500 | Cash at Bank | 6,000 |
| 31,000 | 31,000 |
Ravi took over the investments at an agreed value of 3,800.-Other assets were realised as follows:
Furniture-218,000
Debtors-90% of Book value
Stock-2,800
Creditors of the firm agreed to accept 5% less. Expenses of realisation amounted to 2400. Close the firm’s books by preparing a Realisation Account, Partners’ Capital Accounts and Bank Account.
Ans: Realisation Account
| Particulars | Account(Dr.) | Particulars | Account(Cr.) |
| Furniture | 16,000 | To Creditors | 2,000 |
| Investments | 4,000 | To Ravi (Investments taken) | 3,800 |
| Debtors | 2,000 | To Cash (Furniture) | 18,000 |
| Stock | 3,000 | To Cash (Debtors) | 1,800 |
| To Cash (Stock) | 2,800 | ||
| To Profit transferred (P&L) | 14,600 | ||
| To Realisation Expenses | 2,400 | ||
| Total | 27,400 | Total | 27,400 |
Partners’ Capital Accounts
| Particulars | Ravi (₹) | Other Partner (₹) | Total (₹) |
| To Realisation Account | 14,600 | 14,600 | 29,200 |
| By Bank (Final Settlement) | 10,000 | 10,000 | 20,000 |
| Total | 24,600 | 24,600 | 49,200 |
Bank Account
| Particulars | Amount (₹) | Particulars | Amount (₹) |
| By Realisation Account | 18,000 | To Realisation Expenses | 2,400 |
| By Realisation Account | 1,800 | To Creditors (Payment to creditors) | 2,000 |
| By Realisation Account | 2,800 | To Partners (Final payments) | 20,000 |
| Total | 22,600 | Total | 24,400 |
16. Anvi Ltd. has issued 10,000 equity shares of Rs.10 each at a premium of Rs.2 each payable as follows:
On Application – ₹2
On Allotment- ₹5 (including premium)
On First and Final Call – ₹5
The shares have been fully subscribed, called up and paid-up except the following:
(a) Allotment and First and Final Call money on 500 shares held by Ritu, and
(b) First and Final Call money on 600 shares held by Jitu.
All these shares have been forfeited and re-issued at 10% discount as fully paid.
Give Journal entries in the books of the company.
Ans: Journal entries of Anvi Ltd.
| Date | Particulars | J/L | Amount(Cr.) | Amount(Dr.) |
| Bank A/c 10,000×₹2To Equity Share Application A/c(Being application money received for 10,000 shares @ ₹2 each) | 20,000 | 20,000 | ||
| Equity Share Application A/cTo Equity Share Capital A/c(Being application money transferred to share capital) | 20,000 | 20,000 | ||
| Equity Share Allotment A/c 10,000×5=₹To Equity Share Capital A/cTo Securities Premium A/c(Being allotment money due for 10,000 shares, including premium @ ₹2 per share) | 50,000 | 40,00010,000 | ||
| Bank A/cTo Equity Share Allotment A/c(Being allotment money received, excluding Ritu’s 500 shares) | 47,500 | 47,500 | ||
| Equity Share First and Final Call A/c 10,000×₹5To Equity Share Capital A/c(Being first and final call money due on 10,000 shares) | 50,000 | |||
| Bank A/cTo Equity Share First and Final Call A/c(Being first and final call money received, excluding Ritu’s 500 shares and Jitu’s 600 shares) | 44,500 | 44,500 | ||
| Equity Share Capital A/cSecurities Premium A/cTo Equity Share Allotment A/cTo Equity Share First and Final Call A/cTo Forfeited Shares A/c(Being 1,100 shares forfeited for non-payment of allotment and call money) | 7,2001,000 | 2,500 3,0002,700 | ||
| Bank A/cForfeited Shares A/cTo Equity Share Capital A/c | 9,900 | 1,10011,000 | ||
| Forfeited Shares A/cTo Capital Reserve A/c(Being balance in forfeited shares account transferred to capital reserve) | 16,00 | 1,600 |
OR
(a) For what purposes ‘securities premium’ can be used?
Ans: Securities Premium Account can be used for writing off any preliminary expenses of the company. To write off expenses of issue of shares and debentures, such as commission paid or discount given on the issue of shares. It is an important component of shareholders’ equity and can be used for specific purposes as per the Companies Act, including Issuing Fully Paid-Up Bonus Shares, Writing Off Preliminary Expenses, Paying for Commission or Discount and Buyback of Shares.
(b) Write three distinctions between equity share and preference share.
Ans: Following are the distinctions between equity share and preference share:
| Basic of Distinctions | Equity share | Preference share |
| Meaning | Equity shares provide investors with partial ownership whereas preference share offer fixed dividends to shareholders. | Preference shares are usually issued by companies whose owners are looking to raise additional capital to finance their business, often as part of a funding round. Issuing preference shares gives founders the ability to get cash without giving up control of the company but only if the preference shares are non-voting. |
| Voting Rights | Equity shareholders have voting rights in company decisions. | Preference shareholders usually do not have voting rights. |
| Objective | Issuing equity shares can enhance a company’s market reputation and credibility, especially when listed on stock exchanges. | These shares enable shareholders to claim a portion of the company’s excess earnings after dividends are paid to other shareholders at the time of liquidation. |
OR
What are the steps involved in installation of computerised accounting system (CAS)?
Ans: The steps involved in installation of computerised accounting system (CAS) are:
(i) Identifying transactions: Identifying transactions is a crucial step in the installation of a Computerized Accounting System (CAS). It involves categorizing all financial transactions, such as sales, purchases, receipts, and payments, based on the business’s chart of accounts.
(ii) Data Migration: Transfer existing accounting data (e.g., trial balance, customer/vendor information, transactions) from the old system or manual records into the new computerized system.
(iii) Hardware Setup: Ensure that the necessary hardware, such as computers, servers, printers, and networking infrastructure, is in place and meets the system’s requirements.
(iv) Accounting System Configuration: Now, you work with the consultant to configure your accounting system to fit your business based on the system design document. Everything should be tested to ensure its working in this phase.
(v) Systems Training: Systems training refers to educating and training employees about the various processes of an organisation. It includes everything from theoretical knowledge to hands-on experience of the various systems used in the organisation.
(vi) Ongoing Support: Ensure continuous support from software vendors or IT personnel for troubleshooting, system updates, and resolving any technical issues that may arise after installation.
(vii) Regular Backup and Maintenance: Set up regular data backups and maintenance schedules to ensure the system remains secure, reliable, and up-to-date with software updates and patches.
17. Mihir and Karan are partners in a firm sharing profits in the ratio of 3:2. On April 1, 2022 their Balance Sheet was as under:
| Liabilities | ₹ | Assets | ₹ |
| Sundry Creditors | 85,000 | Bank | |
| Capitals | Stock | ||
| Mihir=70,000Karan= 60,000 | 1,30,000 | Plant and Machinery | |
| Building | |||
| Goodwill | |||
| Debtors- 24,000Less: Provision-1,000 | 23,000 | ||
| 2,15,000 | 2,15,000 |
On the above date, they admitted Sunil as a new partner on the following terms:
(i) Sunil will bring 250,000 for his capital.
(i) He would get 1/5th share in the future profits.
(iii) Goodwill of the firm is valued at ₹ 1,20,000.
(iv) Sunil will bring necessary premium for goodwill.
Pass Journal entries to record the above transaction. Prepare Partner’s Capital Accounts and Balance Sheet of the new firm.
Ans: Journal entries
| Date | Particulars | J/L | Amount(Cr.) | Amount(Dr.) |
| Bank A/c To Sunil’s Capital A/c(Being Sunil’s capital contribution brought into the firm) | 2,50,000 | 2,50,000 | ||
| Bank A/cTo Mihir’s Capital A/cTo Karan’s Capital A/c | 24,000 | 14,4009,600 | ||
| Mihir’s Capital A/cKaran’s Capital A/cTo Goodwill A/c | 14,4009,600 | 24,000 |
Partner’s Capital Accounts
| Particulars | Mihir | Karan | Sunil |
| Opening Balance | 70,000 | 60,000 | – |
| Bank (Capital Brought) | – | – | 2,50,000 |
| Bank (Goodwill) | 14,400 | 9,600 | – |
| To Goodwill A/c | (14,400) | (9,600) | – |
| Closing Balance | 70,000 | 60,000 | 2,50,000 |
Balance Sheet
| Liabilities | Amount | Assets | Amount |
| Sundry Creditors | 85,000 | Bank | 3,74,4000 |
| Mihir’s Capital | 70,000 | Stock | 70,000 |
| Karan’s Capital | 60,000 | Plant and Machinery | 50,000 |
| Sunil’s Capital | 2,50,000 | Building | 50,000 |
| Goodwill | – | ||
| Debtors (23,000 − 1,000) | 22,000 | ||
| Total | 4,65,000 | Total | 4,65,000 |
(i) Distinguish between Profit and Loss Account and Profit and Loss Appropriation Account.
Ans: Following distinguish between Profit and Loss Account and Profit and Loss Appropriation Account:
| Basic of Distinguish | Profit and Loss Account | Profit and Loss Appropriation Account |
| Meaning | A profit and loss account shows a company’s revenue and expenses over a particular period of time, typically either one month or consolidated months over a year. | Profit and loss (P&L) appropriation accounts detail a business’s net income distribution, detailing how much is set aside for various purposes. |
| Principle | Profit and Loss Account follows matching principle, i.e., matching revenue against expenses. | Profit and Loss Appropriation Account does not follow matching principle. |
| Nature | It is an expense and income account. | It is a distribution account prepared after the Profit and Loss Account. |
| Basis | Profit and Loss Account is not prepared on the basis of Partnership Deed, except for interest on loan from partners. | Profit and Loss Appropriation Account is prepared on the basis of the Partnership Deed. |
| Balance Transferred | Net profit or loss is transferred to the capital or appropriation account. | The balance of the appropriation account is transferred to the partners’ capital accounts. |
(ii) Mention any three rights of a partner.
Ans: Here are three rights of a partner are:
(i) Right to Participate in Business: A basic principle of democracy holds that all citizens have a right to participate in decisions that affect their personal interests, including decisions taken in the context of employment. Every partner has the right to take part in the management and decision-making process of the firm unless agreed otherwise in the partnership deed.
(ii) Right to Share Profits: Section 253(2) of the Indian Contract Act lays down that all partners are entitled to share equally in the profits of the partnership business and must contribute equally towards the losses sustained by the partnership. Partners are entitled to share the profits of the firm in the agreed ratio. If no specific ratio is mentioned, profits are shared equally.
(iii) Right to Access Books of Accounts: It was held that “Section 209(4)(a) of the Companies Act 1956 directs that the books of accounts and other books and papers shall be open to inspection by any director during business hours. Partners have the right to inspect and copy the books of accounts and records of the firm at any time to ensure transparency and accountability.
18. Biswa and Pradip are partner partners in a firm. The Trial Balance of the firm as on 31st December, 2022 was as under:
| Debit | Amount | Credit | Amount |
| Drawings:Biswa-4,000Pradip-3,000 | 7,000 | Capital:Biswas-65,000Pradip-40,000 | 1,05,000 |
| Cash at Bank | 45,000 | Sundry Creditors | 18,400 |
| Sundry Debtors | Bank Loan | 5,000 | |
| Insurance | Commission | 300 | |
| Advertisement | Trading A/C (Gross Profit) | 5.200 | |
| Closing Stock | |||
| Cash in hand | |||
| Commission | |||
| Motor Car | |||
| Machinery | |||
| 1,85,900 | 1,85,900 |
Prepare Profit and Loss Account, Profed Loss Appropriation Account and the Balance Sheet of the firm for the year ended 31st December, 2022 after considering the following information:
(a) Partners are to share profits and losses in the proportion of 3/5 and 2/5 respectively.
(b) Write off depreciation 10% on Machinery and 20% on Motor.
(c) Create a provision of 5% on Sundry Debtors for Doubtful Debts.
(d) Partners are entitled to Interest on Capital @ 5% per annum and Pradip is entitled to a salary of 21,800 per annum.
Ans:
Profit and loss A/c of the firm
for the year ended
31st December, 2022
| Particulars | Amount (Dr) | Particulars | Amount (Cr) |
| Advertisement | 300 | Gross Profit (b/f) | 5,200 |
| Depreciation on Motor Car (20%) | 1,040 | ||
| Depreciation on Machinery (10%) | 520 | ||
| Provision for Doubtful Debts (5%) | 250 | ||
| Net Profit c/d | 30,90 | ||
| Total | 5,200 | 5,200 |
Profit and Loss Appropriation Account
for the year ended
31st December, 2022
| Particulars | Amount (Dr) | Particulars | Amount (Dr) |
| Interest on Capital: Pradip: 2,000Biswa: 3250 | 5250 | Net Profit b/f | 30,90 |
| Salary to Pradip:Profit transferred to:- Biswa: 1854 – Pradip: 1236 | 3090 | Balance b/d | 5250 |
| 9520 | 9520 |
Balance Sheet
As on 31st December, 2022
| Liabilities | Amount | Assets | Amount |
| Capital Accounts: | Cash at Bank | 45,000 | |
| Biswa: (65,000 + 3,250 + 1,854) | 70,104 | Sundry Debtors | 5,000 |
| Pradip: (40,000 + 2,000 + 1,236 – 2,180) | 41,056 | Less: Provision for Doubtful Debts (5%) | 4750 |
| Sundry Creditors | 18,400 | Closing Stock | 5200 |
| Bank Loan | 5,000 | Motor Car | 4,160 |
| Machinery | 4,680 | ||
| Total | 1,34,560 | Total | 1,34,560 |
For Old Course: (in lieu of Project Works)
19. Answer the following questions:
(a) Write distinctions between Fixed Capital Account and Fluctuating Capital Account.
Ans: Distinctions between Fixed Capital Account and Fluctuating Capital Account.
| Basis of Distinction | Fixed Capital Account | Fluctuating Capital Account |
| Meaning | Fixed capital is the value of capital assets available for production purposes at a given point in time. All capital goods are included which are accounted for in gross fixed capital formation. | Fluctuating means one that is not stable or one that is changing frequently. The same can be said about the fluctuating capital account. Under the fluctuating capital account, the capital of the partners keeps on fluctuating. |
| Adjustments | Adjustments for drawings, interest on capital, salary, etc., are recorded in the Current Account. | Adjustments for all transactions are made directly in the Capital Account. |
| Accounting Considerations | Requires separate accounts and reporting for fixed capital. | Typically aggregated into a single account for fluctuating capital. |
| Risk and Volatility | Lower risk and volatility due to long-term nature. | Higher risk and volatility due to the short-term nature. |
| Credit / Debit balance | Fixed capital accounts constantly demonstrate a credit balance | Fluctuating capital might sometimes illustrate a debit balance |
(b) What is Ratio Analysis? Mention any three limitations of ratio analysis.
Ans: Ratio analysis is a quantitative procedure of obtaining a look into a firm’s functional efficiency, liquidity, revenues, and profitability by analysing its financial records and statements. Ratio analysis is a very important factor that will help in doing an analysis of the fundamentals of equity. It helps us in ascertaining profitability, operational efficiency, solvency, etc.
The limitations of ratio analysis are:
(i) Historical Data: Historical data in ratio analysis refers to past financial information from a company’s records, such as balance sheets and income statements. By analysing patterns in profitability, liquidity, and debt ratios, firms can make accurate projections about future performance, helping them in strategic planning and resource allocation.
(ii) Limited Comparability: Ratios may not be directly comparable across companies due to differences in accounting policies, financial practices, and industry norms.
(iii) Affected by Inflation: Inflation interferes with ratio breakdown (analysis) assessments for one company over time by increasing the firm’s earnings without increasing the sales. This is because the value of the asset will increase.
(c) Explain uses of Financial Statement.
Ans: Following are some of the uses of financial statements:
(i) Determine the financial position of the business: Financial statements are crucial for determining a business’s financial position by providing key information about assets, liabilities, equity, revenue, and expenses. Both assets and liabilities are displayed as either current or non-current on the balance sheet, indicating whether they’re short- or long-term.
(ii) To obtain credit: Financial statements present the picture of the business to the potential lenders and this information can be used by them to provide additional credit for business expansion or restrict the credit so as to start recovery. They help assess profitability, liquidity, and solvency, enabling creditors to evaluate the company’s ability to repay loans. Clear, accurate financials increase trust and improve chances of securing credit.
(iii) Decision-Making: Decision making is the process of making choices by identifying a decision, gathering information, and assessing alternative resolutions. They assist management in making strategic decisions such as investments, cost-cutting, or expansion plans.
(iv) Planning and Forecasting: Financial statements are essential for budgeting, predicting future trends, and setting financial goals: A financial goal is a scientifically defined financial milestone that you plan to achieve or reach. They can then use that data to adjust their plans and budgets until their forecasts show that their plan is achievable. Financial goals comprise earning, saving, investing, and spending in proportions that match your short-term, medium-term, or long-term plans.
(d) What is meant by Cash Flow Statement? Mention any three objectives of preparing cash flow statement.
Ans: A Cash Flow Statement is a financial document that shows the inflow and outflow of cash within a business over a specific period. The CFS highlights a company’s cash management, including how well it generates cash. This financial statement complements the balance sheet and the income statement.
Three key objectives of preparing a Cash Flow Statement are:
(i) Assessing Liquidity: It helps determine the company’s ability to meet its short-term financial obligations by tracking cash inflows and outflows. There are several ratios that measure accounting liquidity, which differ in how strictly they define liquid assets.
(ii) Evaluating Financial Health: The statement provides insights into the company’s financial stability, showing how well it manages cash in its operating, investing, and financing activities. However, of the four, perhaps the best measurement of a company’s health is the level of its profitability.
(iii) Investment and Decision-Making: An investment decision refers to the process of determining the amount of capital required to produce the desired level of output, taking into account the optimal profitability and the cost of investment.Investors, creditors, and management use the cash flow statement to make informed decisions regarding investments, creditworthiness, and future financial planning based on the company’s cash generation ability.
(e) Explain the average profit method of valuation of goodwill. What is Revaluation Account?
Ans: Average Profit method is one of the simplest methods of goodwill valuation that is used commonly. In this method, the value of goodwill is calculated by multiplying the average estimated profit or average future profit with the number of years of purchase.
(i) Calculate the Average Profit: To determine the average profit, you need to take the profits of the business over a specified number of years (usually 3-5 years), sum them up, and then divide by the number of years. This gives the average annual profit.
Average profit = Sum of Profits over a Period / Number of Years
(ii) Calculate the Goodwill: The goodwill is then determined by multiplying the average profit by the number of years’ purchase. The formula is:
Goodwill = Average Profit×Number of Years’ Purchase.
Revaluation Account is an account that is opened at the time of admission, retirement and death of a partner. This account records the effect of every increase or decrease in the value of assets and liabilities. The balance of this account (which may be either profit or loss) is transferred to the Old Partners’ Capital Accounts, as the new partner has no right over such profits earned prior to his/her admission. Revaluation account is prepared at the time of admission of a new partner or in case of death or retirement of a partner.
