Answer Key

Mock Test -1 2011

Q1. Two sources of income of a chartable hospital are (any two) (1 Mark)
(i) Donation
(ii) Government Grant
(iii) OPD charges
(iv) Room rent
Q2. A’s claim is valid as if there is no partnership deed interest on partner’s loan is to be paid at 6%
p.a. even if there is loss as interest on partner’s loan is a charge on profits.
(1Mark)

Q3. It is necessary to revalue assets and reassess liabilities at the time of admission of new partner
as if assets and liabilities are overstated or understated in the books then its benefit or loss
should not affect the new partner.

(1Mark)
Q4. Goodwill = Super Profit x No. of years’ purchase
24,000 = Super Profit x 3

Super profit = 8,000 (1/2 Mark)

Now,

Super profit = Firm’s Average Profit - Normal Profit

80,000 = 20,000 – Normal profit

Normal profit = 12,000

Normal profit =

Capital employed =12000*100/8= 1,50,000 (1/2 Mark)

(1 Mark)

Q5. The maximum permissible discount that can be allowed on reissue of forfeited shares is to the
extent of the amount forfeited on shares or Original Discount plus amount forfeited on shares.
(1 Mark)
Q6. Balance –sheet of Saas Bahu Gossip Club (Relevant items only )

as on 31 -3 – 2010

Capital
Prize fund 3,50,000 35,0000
Add Donation received 60,000 (1/2 (1/2 Mark)
Mark) 11,500
Add Interest received 20,000 (1/2
Mark)
Add Accrued interest 11,500 (1 3,91,500
Mark)
4,41,500
Less prizes awarded 50,000 (1/2
Mark)

Q7. Difference between Reserve capital and Capital Reserve (any three)
Basis Reserve Capital Capital Reserve
Nature Reserve Capital is the part of Capital Reserve is the
face value which is not called amount of Profit which is of
by the company during its life capital nature.
Disclosure in Balance Reserve Capital in never Capital Reserve is shown in
 Sheet shown in the Balance Sheet the Balance sheet under the
head ‘Reserves & Surplus.
Receipt of amount Reserve Capital is received at Capital Reserve is received
the time of winding up, if during the life of the
required. company.
Creation It is not necessary to create If is necessary to create
Reserve Capital Capital Reserve if there are
capital profits.

Q8. (i) Share Capital A/c(200*8) Dr. 1600

To Discounts on issue of share A/c 80

To Share Forfeiture A/c 920

To share Allotment A/c 600

(1 Mark)

(ii) Bank A/c Dr. 1920

To share Capital A/c 1600

To Securities premium A/c 320

(1 Mark)

(iii) Share Forfeiture A/c Dr. 736

To Capital Reserve A/c 736

(1 Mark)

Q9.
Calculate of Capital in the beginning.
X Y Z
Capital at the end 40,000 30,000 20,000
Add Drawings during the year 10,000 7,500 4,500
50,000 37,500 24,500
Less Profit transferred (20,000) (20,000) (20,000)
Capitals in the beginning 30,000 17,500 (1 Mark)
4,500

Calculate of Adjustment
Particulars X Y Z Total
Wrong Profit transferred (Dr.) 20,000 20,000 20,000 60,000
Interest on Capital omitted (Cr.) 1,500 875 225 2,600
Correct Profit (Cr.) 28,700 17,220 11,480 57,400
(60,000-2,600 = 57,400)
Net Adjustment (Cr.)10,20 ( Dr.)1,90 (Dr.)8,295 (2Marks)
--
0 5
Journal
Particular
Y’s Capital A/c 1,905
Dr. 8,295
Z’s Capital A/c Dr. 10,200 (1 Mark)
To X’s Capital A/c
 (4 Marks)
Q10.
(i) Ena’s Gaining Share E:M:T - 5:3:2

Tina’s Gaining Share

Ena’s New share

Tina’s New share

Ena : Tina
6/10 4/10 or 3 : 2 (1 Mark)
(ii) Total capital of the New Firm
Ena’s Capital 43,200
Tina’s Capital 11,200
Meena’s Capital 36600
Cash required 35,600 (36,600 + 3,000 – 4,000)
Total Capital 90,000
Ena’s Capital 54,000(9000*3/5)
Tina’s Capital 36,000(9000*2/5) (1 Mark)
Cash to be brought in by Ena = 54,000 – 43,200 = 10,800
Cash to be brought in by Tina = 36,000 – 11,200 = 24,800
(1 Mark)

(iii) Journal Entry

Particulars Dr. Cr.
Cash A/c 35,600
Dr. 10,800
To Ena’s capital A/c 24,800
To Tina ‘s Capital A/c
Meena’s Capital A/c 36,600
Dr. 36,600 (1 Mark)
To Cash A/c
(4 Marks)
Q11.
(i) Land Buildings A/c Dr. 30,00,000

Plant & Machinery A/c Dr. 20,00,000

Furniture Dr. 3,00,000

Stock A/c Dr. 5,00,000

To S. Creditors A/c 6,00,000

To Capital Reserve A/c 2,00,000

To Lotus Ltd. 50,00,000 (2

Marks)

(ii) Lotus Ltd. Dr. 50,00,000 Dr.5000000 No.of

debts:5000000/125=40000 debts

Loss On issues of Debenture A/c Dr. 4,00,000

To 12% Debentures A/c (40000*100) 40,00,000

To Securities premium A/c (40000*25)(40000*10) 10,00,000

 To premium on redemption of Debenture A/c 4,00,000 (2 Marks)

(if entries are not correct 1 Mark to be given for calculation of no. of debentures)

Q.12 Income & Expenditure A/c

For the year ended 31st March 2010

Expenditure Income
To salary By Subscription
11,000 12,000 28,000
Add : outstanding 5,000 Add : outstanding 30,000 (1/2 Mark
1,000 2,200 for 2009-10 3,000 for each
To office expenses 800 2,000 amount)
To sports a material 300 By Donations
To Newspapers 12,700
To Loss sale of Investment (4 Marks)
To Surplus
33,000 33,000
Balance Sheet
as on 1st April 2009
Liabilities Assets
Capital Fund 16,500 Cash in Hand
Outstanding subscription
(3,000 + 2,000 )
Investment
(2 Marks)
16,500
(6 Marks)
Q13.
(a) Journal
Particulars Dr. Cr.

March 31
Profit & loss Appropriation A/c 12,00,000
Dr. 12,00,000
To Debenture Redemption Reserve A/c (1 Mark)
,, 9% Debenture A/c 50,00,000
Dr 50,00,000
To Debenture holders A/c (1 /2 Mark)
(Being debenture of Rs. 50,00,000 is due to
debenture holder)
,, Debenture holder A/c 50,00,000
Dr. 50,00,000
To Bank A/c (1 /2 Mark)
(Being payment of Rs.50,00,000 is made to the
debenture holder)
,, Debenture Redemption Reserve A/c 25,00000
Dr. 25,00000
To General Reserve A/c (1 Mark)
(Being 50 % of debenture redeemed to general
reserve account)
(3 Marks)
(b) Journal
Particulars Dr. Cr.

March 31 12% Debentures A/c 9,60,000

Dr. 96,000
Premium on redemption of Debentures A/c 10,56,000
Dr. (1 Mark)
To Debenture Holders A/c
 (Being debenture of due to payment to debenture
holder)

Debenture Holders A/c 10,56,000

Dr. 44,000
Discount on issue of equity shares A/c(11000*4) 11,00,000
Dr. (1 Mark)
To Debenture shares capital
A/c( 11000*4)

(1 Mark to be given for calculation of number of shares=1056000/96=11000)

(3 Marks)

Q14.
Revaluation A/c
Particulars Rs. Particulars Rs.
To Patents A/c 3,000 By Building A/c 5,000
To Machinery A/c 2,000
5,000 5,000 (1 Mark)

A’s Capital A/c

Particulars Rs. Particulars Rs.
To A’s Executor A/c 61,625 By balance b/d 30,000
(1/2 Mark) By Reserves 5,000 (1/2 Mark)
By Interest on Capital 2,250 (1 Mark)
(Working note 2) 5,625 (1 Mark)
By Profit & Loss Suspense 11,250 (1/2 Mark)
A/c (Working note 7,500 (1/2 Mark)
1)

By B’s Capital A/c (By good

will account)
By C’s Capital A/c(By good
will account)

61,625 61,625

A’s Executor A/c

Particulars Rs. Particulars Rs.
To Cash A/c 30812.50 By A’s Capital A/c 61,625
To A’s Executors Loan 30812.50

(1/2 Mark)
61,625 61,625

( 1/2 Mark to be given to calculate Gaining Ratio which is 3: 2)(See working Note 3)
(6 Marks)

WORKING NOTES
1) Goodwill=Average Profit*No.of years
Average Profit=(13000+12000+20000+15000)/4=15000
Goodwill=15000*2.5=37500
A’s share=37500*3/10=18750
B’s Share=18750*3/5=11250
C’s share=18750*2/5=7500

2) Calculation of Int.on capital

A B C
Closing Capital 30000 25000 15000
Profit During the year 7500 4500 3000
22500 20500 12000
 Int on Capital=22500*10%=2250
3) Calculation of sacrifice ratio
Old ratio=5:3:2
A died
New ratio between B& C will be 3:2(Sacrifice Ratio)

Q15.
Revaluation A/c
Particulars Rs. Particulars Rs.
To Fixtures & Fittings A/c 200 By stock A/c 2,500
To Provision for d/d A/c 2200 By Loss Transferred to
To Outstanding bill for repairs2000 A’s Capital A/c
A/c 1,140 1,900
B’s Capital A/c (2 Marks)
760
4400 4400

Partner’s capital A/c

Particulars A B C Particulars
To Goodwill 14,400 9,600 By Balance b/d 24,000 60,000
To Profit & Loss 4,800 3,200 By premium A/c 5,000 5,000
To Revaluation 1,140 760 By cash A/c 12,020
To Balance c/d 8,660 51,440 12,020
(3 Marks)
29,000 65,000 12,020 29,000 65,000 12,020

Balance Sheet of A, B & C

as on 1st January 2010
Liabilities Rs. Assets Rs.
Sundry creditors 40,000 Sundry debtors
Outstanding bill for 2,000 42,000 37,800
repairs Less : Provision for d/d 24,000
Capital A/c 8,660 (4200) 300
A 51,440 Stock 52,020
B 12,020 Fixtures & Fittings ( 2 Marks)
C Cash in Hand

1,14,120 1,14,120

(1 Mark to be given for any working note related to capital of new partner and sacrificing ratio)
(8 Marks)
OR
Realisation Account
Particulars Rs. Particulars Rs.
To Sundry Assets: By Sundry Liabilities:
Stock 75,000 Provision for b/d 6,000
Book debts 66,000 Sundry Creditors 75,000
Plant and Machinery 45,000 Employees Provident 30,000
Land and Building 48,000 Fund 15,000
To Mrs. Chopra’s Capital 15,000 Mr. Chopra’s Loan
A/c By Mrs. Chopra’s Capital A/c
To Bank A/c (liabilities) 50 % Stock 60,000
S. Creditors 97,500 30,000
67,500 5,250 Goodwill
Emp. Prov. Fund 30,000
30,000 By Bank A/c ( Assets)
To Bank A/c (Expenses) 1,32,900 Book Debts 2,98,65
To Profit transferred to:- 54,000 0 (4
Mrs. Chopra’s Cap. 66,450 Half Stock marks)
Mrs. Gupta’s Cap. 66,450 48,750
Plant & Machinery
75,900
Land & Building
1,20,000
 4,84,650 4,84,65
0

Partners’ Capital A/c

Particulars Chopra Gupta Particulars Chopra Gupta
To Realisation 60,000 By Balance b/d 90,000 30,000
To Bank A/c 1,23,450 1,08,450 By JLP Reserve 6,000 6,000
By Reserve 6,000 6,000
By Realisation 15,000
By Realisation 66,450 (2 Marks)
66,450
1,83,450 1,08,450 1,83,450 1,08,450

Bank A/c
Particulars Rs. Particulars Rs.
To Balance b/d 30,000 By Realisation A/c 97,500
To Cash A/c 6,000 By Realisation A/c 5,250
To Realisation A/c 2,98,650 By Mrs. Chopra’s Capital 1,23,450
A/c 1,08,450
By Mrs. Gupta’s Capital (2 Marks)
A/c
3,34,650 3,34,650

Q16. Journal of Arihant Ltd.

Date Particulars L.F. Debit Credit
(Rs.) (Rs.)
(½ mark) Bank A/c 1,60,000
Dr. 1,60,000
To Share Application A/c

Share Application A/c 1,60,000

Dr. 1,00,000
To Share Capital A/c 50,000
To Share Allotment A/c 10,000
To Bank A/c

(1 mark) Share Allotment A/c 1,50,000

Dr. 50,000
Discount on issue of Shares A/c
Dr. 2,00,000
To Share Capital A/c

(1 mark) Bank A/c 99,200

Dr. 99,200
To Share Allotment A/c
(1,50,000 – 50,000 – 800)

(1 mark) Share Capital A/c 2,400

Dr. 400
To Discount on issue of Share A/c 1,200
To Share Forfeiture A/c 800
To Shares Allotment A/c

(½ mark) Share First & Final Call A/c 1,98,400

Dr. 1,98,400
To Share Capital A/c

(½ mark) Bank A/c 1,96,400

Dr. 1,96,400
To Share First & Final Call A/c

(1 mark) Share Capital A/c 5,000

Dr. 500
To Discount on issue of Share A/c 2,500
 To Share Forfeiture A/c 2,000
To Share First & Final Call A/c

(½ mark) Bank A/c 6,300

Dr. 700
Discount on issue of Shares A/c 7,000
Dr.
To Share Capital A/c

(1 mark) Share Forfeiture A/c 2,000

Dr. 2,000
To Capital Reserve A/c

( 8 Marks)
OR
Journal of Sanchita Ltd.
Date Particulars L.F. Debit Credit
(Rs.) (Rs.)
(½ mark) Bank A/c 12,000
Dr. 12,000
To Share Application A/c

(1 mark) Share Allotment A/c 28,000

Dr. 12,000
To Share Capital A/c 16,000
To Securities Premium A/c

(1 mark) Bank A/c 25,872

Dr. 25,872
To Share Allotment A/c
(28,000 – 1,600 – 528)

(1 mark) Share Capital A/c 400

Dr. 320
Securities Premium A/c 192
Dr. 528
To Share Forfeiture A/c
To Shares Allotment A/c

(½ mark) Share First & Final Call A/c 19,600

Dr. 19,600
To Share Capital A/c

(½ mark) Bank A/c 19,000

Dr. 19,000
To Share First & Final Call A/c

(1 mark) Share Capital A/c 1,200

Dr. 600
To Share Forfeiture A/c 600
To Share First & Final Call A/c

(½ mark) Bank A/c 800

Dr. 200
Share Forfeiture A/c 1,000
Dr.
To Share Capital A/c

(1 mark) Share Forfeiture A/c Dr. 292

To Capital Reserve A/c 292

(8 Marks)

Q17. Major Head – Current Liabilities & Provisions (1/2 Mark)

 Sub Head - Current Liabilities (1/2 Mark)
(1 Mark)
Q18. Financing Activity (1 Mark)
Q19. (any one of the following)
(i) Issue of Equity Shares or Preference Shares
(ii) Buy back of Equity Shares or Redemption of Preference Shares
(iii) Payment of Dividend (1
Mark)
Q20. (i) Earning Capacity: Analysis of financial statements helps to judge the earning capacity of the
business. It enables shareholders and potential investors to judge future growth prospects of the
business.
(ii) Financial Position: Short-term creditors are interested to know the ability of the business to
pay its short-term obligations and long-term lenders are interested to know the safety of their
investment in the business and ability of the business to pay interest. Analysis of financial
statements helps them to judge the long-term and short-term financial position of the business.
(iii) Efficiency of Management: Analysis of financial statements helps in assessing the areas of
strength and weakness of the business. It enables management to find the scope of
improvement and better utilization of resources available in the business. (3 Marks)
Q21. Credit Sales=50,000-10,000=40,000
DTR=Credit Sales/Avg.Debt
5=40,00,000/Avg Debt
Avg Debt=8,00,000
8,00,000=x+3x/2
x=4,00,000
Closing Debt=400000*3=12,00,000
(1 Mark)

Q22. Common size Income statement of ….

For the year ended on 31st Dec 2009 & 2010
Particulars 2009 2010 2009 2010
(1 Mark) (1 Mark) % to Sales
% to Sales
(1 Mark) (1 Mark)
Sales 8,00,000 10,00,000 100 100
Less : cost of goods sold 4,80,000 7,00,000 60 70
Gross profit 3,20,000 3,00,000 40 30
Less : Indirect Exp. 1,20,000 80,000 15 8
Net Profit before Tax 2,00,000 2,20,000 25 22
Less : Income tax 1,00,000 1,10,000 12.5 11
Net Profit after tax. 1,00,000 1,10,000 12.5 11

Q23. Net Profit before Tax

Fixed Assets A/c
To Balance B/d 3,00,000 By Cash A/c 72,000
To Cash A/c 1,80,000 By Acc Dep. A/c 5,000
By P & L A/c 3,000
By Bal . c/d 4,00,000

4,80,000 4,80,000

Accumulated Depreciation A/c

To Assets A/c 5,000 By Balance b/d 70,000
To Balance C/d 96,000 By P& L A/c 31,000

1,01,000 1,01,000
 Cash Flow Statement of Rex Ltd. For the year ended on 2010
Particulars Rs. Rs.
Cash flow from operating Activities
Net profit before Tax 145000
Add : Non – cash & Non –Operating Expenses
Depreciation
31,000 34000
Loss on sale of Machinery
3000
Less : Non – cash & Non – operating income . 179000
Interest received on investment (24000)
24000
Operating profit before working capital Changes 155000
Add : Increase in creditors 10000
10000
165000
Less : Increase in Debtors . (5000)
(2 Marks)
Cash generated in operating activities 150000
Less : payment of tax (15000)
Cash inflow from operative activities 145000

Cash Flow From Investing Activities

Purchase of fixed assts (180000)
Purchase of investment (166000)
Sale of machine 72000
Interest received on investment 24000
Net cash outflow from investing activities
Cash Flow from Financing Activities (1 Mark)
(250000)
Issue of shares
Payment of dividend (½ Mark)
150000
(20000)
Net cash inflow from financing activities 130000
Net increase in cash & cash equivalents (A + B +C) 25000
Add : Opening Balance of cash & cash equivalents 20000
Closing Balance of cash & cash equivalents. 45000
(1 Mark for working Notes) (6
Marks)

To TIF to General 25000 By P & L A/c 127000

Reserve 42000 By Bal . b/d 80000
To Proposed Dividend
140000
To balance c/d
207000 207000

General Instruction: 25% Marks should be deducted for not writing narrations.