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JOINT VENTURE QUESTION-1 X and Y entered into a Joint Venture to construct a building for a contract price of Rs.4,00,000 payable as to Rs. 3,00,000 by instalments in cash and Rs.1,00,000 in fully paid shares of the company. A bank account was opened in their joint names, A paying Rs. 1,20,000 and Y Rs. 80,000. They agreed to share profits or losses in proportion to their cash contributions.

They purchased materials for Rs.1,25,000 in cash and Rs. 60,000 from Z on credit. Total wages amount to Rs. 96,000 out of which Rs. 20,000 were paid by Y. Architect’s fees amounted to Rs. 15,000 some materials amounting to Rs. 20,000 were destroyed by fire insurance company admitted a claim of 80%.

The contract was completed and price duly received. Account of Z was settled at a discount of Rs. 3,000. Half the number of shares received from the company were sold for cash at a premium of 5% and the other half were taken over by X and Y at a discount of 10% . Show the necessary accounts. QUESTION- 2 Arvind, Benu and Cathy under take the construction of a factory building for Roxy Ltd at a price of Rs 1500000. The consideration was to be paid as follows: (i) Rs.12,00,000 in cash (ii) Rs.3,00,000 in debentures of Roxy Ltd. They contributed towards the venture as follows: Arvind Rs.6,00,000, Benu Rs.3,00,000 and Cathy Rs.2,00,000. These amounts were deposited in the joint bank account. Arvind got the plan prepared and paid Rs.17,000 as architects fees. Benu brought a concrete mixer for Rs.75,000 and Cathy brought a truck valued at Rs. 50,000. They purchased a plant for Rs.2,40,000 and materials worth Rs.2,00,000. Rs.3,25,000 was incurred for wages. On completion of the venture Arvind took over materials worth Rs.72,000. Benu took over the concrete mixer for Rs.22,000 and Cathy took back the truck at Rs.18,000. The plant was disposed off at Rs.85,000. The contract price was duly received on completion of the project. The debentures were taken over by Arvind at Rs.2,70,000. They had agreed to share profits and losses in the ratio of their capital contributions. Prepare:

(a) The joint venture account (b) The joint bank account (c) The capital accounts of the co-venturers (d) The debentures account

. QUESTION- 3 Sure and Fast entered into a joint venture to consign 1,000 sugar bags to their agent Sloe. They are to share profits and losses 2/5th and 3/5th respectively. Sure consigned 400 bags at Rs.650 per bag, paying Rs.2,500 for freight, Rs.400 for insurance and Rs.200 for other expenses.

Fast consigned 600 bags at Rs.660 per bag and paid Rs.2,800 for freight and Rs.500 for other expenses. Sure advanced to fast Rs.1,00,000 on account of the venture. All the bags were sold by sloe @ Rs.700 per bag out of which he deducted Rs2.50 per bag for expenses and Rs3.50 per bag for his commission. Sloe remitted Rs 95000 to fast and the balance to sure by bank draft. Sure accepted a bill for the balance due for the settlement of the venture accounts. Prepare– joint venture account, Fast account, sloe account in the books of sure. Question 4 J.J sarees of Kanpur purchased 1000 metres of cloth @Rs 60 per metres and sent it to Subham Sarees of Jaipur to be sold on joint venture. J.J Sarees spent Rs.2,000 on packing, etc. and Shubham Sarees spent Rs.5,000 as freight and clearing charges. J.J Sarees drew a bill for Rs.50,000 which was accepted by Shubham Sarees. J.J Sarees discounted the bill for Rs.48,500 with the bank. Shubham Sarees sold 900 metres of cloth @ Rs.90 per metre and spent Rs.2,520 in this respect. Remaining stock was taken over by J.J sarees at cost. Shubham Sarees had to receive commission @ 5 % on sales. Profit sharing ratio is 3/5 and 2/5. Shubham Sarees sent a cheque to J.J sarees for the balance due. Prepare in the books of J.J sarees: (a) joint venture account (b) shubhams account Question 5 Carter and Donald entered into a joint venture and agreed to share profits and losses in the ratio of 3:2. Apart from this, Donald was entitled to a commission of 5 % of the net profit of joint venture after charging such commission. Carter supplied goods worth Rs.75,000 and paid Rs.5,000 for carriage. During transit goods costing Rs 10000 were damaged and a sum of Rs.2,000 was recovered from the insurance company. Donald reported that 80% of the remaining goods were sold at a profit of 40% on their original cost. Towards the end of the venture, the closing stock of goods which was lying in Donalds godown was taken over by him at an agreed valuation of Rs 14000. You are required to prepare the joint venture account and Donalds account in the books of carter. Question 6 J and Q entered into a joint venture with the object of constructing an office building of a multinational company for a contract price of Rs.15,00,000.they agreed to share profits and losses in the ratio of 2:1 respectively. During the course of the venture, the following transaction took place:

1. J purchased steel rods worth Rs.4,50,000 subject to trade discount @ 10% and paid for freight Rs.10,000 and also bought a plant for Rs.50,000.

2. Q took a loan of Rs 4,00,000 from a bank and bought cement costing Rs.3,00,000 and bricks worth Rs.2,00,000

3. J remitted Rs 200000 to Q towards joint venture. 4. Q paid for godown rent Rs.25,000 and also bought stone chips worth Rs.2,00,000. 5. Q draws a bill of exchange on J for Rs.2,50,000 which was discounted by Q at a cost of Rs.5,000. 6. Q repaid the bank loan and paid Rs.8,000 as interest.

Finally, the contract was completed, at the end of which Q decided to take the plant for Rs.12,000.

The joint venture was closed by J receiving Rs.8,00,000 and Q Rs.7,00,000 from the company. You are required to prepare:

a) Memorandum joint venture account. b) Joint venture account with Q in the books of J

. Question 7 Rajesh and Iqbal entered into a joint venture, to share profits and losses equally. The following transactions take place between them:- Rajesh remits cash Rs.3,000to Iqbal as an advance. Rajesh buys goods for Rs.9,000 Rajesh pays for repairs Rs.600 Iqubal pays rent Rs.300 Iqbalpays for insurance Rs.400 Iqbal buys goods for Rs.1,000. Rajesh sells all the goods for Rs.20,000 and final settlement is done on the same date prepare a memorandum joint venture account and personal accounts of the ventures in their respective books. Question 8 Marigold and violent enter into a joint venture to make a film for the government for Rs.3,00,000. A joint bank account is opened, marigold contributing Rs.75,000 and violet Rs.45,000. The following payments were made: Materials 60,000 Wages 1,05,000 Hire of equipment 7,500 Violet supplied certain sets which were valued at Rs 9000.at the end of the venture marigold took over the sets and left- over materials for Rs 6000. The government paid Rs 262500 only because of certain defects. Prepare the necessary accounts and ascertain the profit or loss of the venture. Question 9 DILIP and raj are doing business separately as engineering contractors. They under take jointly to build and install new machinery for a company for a contract price of Rs 134000, Rs 84000 being payable in instalments in cash and the balance as fully paid shares in new company. A bank account is opened in joint names, Dilip paying Rs.45,000 and Raj Rs.20,000. They agree to share profits and losses on the proportion of 3/5 and 2/5 respectively. The transactions are as follows: Amount advanced to suppliers for supply of materials 52,000 Value of materials supplied by suppliers 89,000 Balance amount paid to suppliers in full and final settlement- 35,500 Paid wages 36,000 Materials purchased in cash 2,500 Materials consultants fees paid 9,250 Engineering consultants fees paid 3,250

Value of stock lost by fire and not covered by insurance – 3,500 The contract is completed and price duly received. Dilip takes over all the shares at an agreed value of Rs.47,000 and raj takes the balance stock of materials worth Rs.3,500 at an agreed value of Rs.2,750. Show the necessary ledger accounts assuming a separate set of books is opened. Question 10 S, T and W having agreed to share profits and losses equally, entered into a joint venture to construct a multi- storied commercial complex for a multinational company at a contract price of Rs 10,00000, payable Rs 8,00,000 in cash and the balance in shares of the company. A joint bank account was thus opened where S paid Rs.4,00,000. T Rs. 2,00,000 and W Rs. 3,00,000. Expenses incurred on behalf of the joint venture were as follows: Materials Rs 2,00,000 Wages Rs 1,50,000 Expenses Rs 1,25,000 Materials supplied by S from his stock amounted to Rs.1,25,000. Finally, the venture was closed by T taking the closing stock at a valuation of Rs.1,00,000 and W taking up the shares at Rs.1,74,000. From the above you are required to prepare the joint venture account and shares account only. Question 11 Andrew and Martin entered into a joint venture for the purchase and sale of second hand machines and to share profits and losses in the ratio of 3:2. Andrew contributed Rs 200000 for the purchase of machines and Martin paid wages amounting to Rs 50000. Other expenses paid by Andrew and Martin were Rs 7000 and 12000 respectively. Martin also bought machines amounting to Rs 150000. One machine was taken over by Andrew for Rs 25000. The rest of the machines were sold by Martin for Rs 500000. You are required to show the joint venture account and Martins account in the books of Andrew only. Question 12 Elder and Larch entered into a joint venture sharing profits and losses equally. Elder supplied goods to the value of Rs 2500 and incurred expenses of Rs 200. Larch supplied goods to the value of Rs 2000 and his expenses amounted to Rs 150. Larch sold the entire lot of goods on behalf of the joint venture and realized Rs 6000. Larch was entitled to a commission of Rs 5 % on sales. Larch settled his account by a bank draft. You are required to:

(a) Prepare a memorandum joint venture account. (b) Pass journal in the books of elder and larch to record the transactions as are relevant to them.

. Question 13

‘A’ and ‘B’ are doing business separately as building contractors. They undertook jointly to construct a building for a newly started joint stock company for a Contract price of Rs.2,00,000 payable as to Rs.1,60,000 by installments in cash and Rs. 40,000 in fully paid shares of the company. A banking Account is opened in their joint names ‘A’ paying in Rs.50,000 and ‘B’ Rs.30,000. They are to share profits or losses in the proportion of 2/3 and 1/3 respectively. Their transactions were as follows:- Rs. Paid Wages 60,000 Bought Materials 1,40,000 Materials supplied by ‘A’ 10,000 Material supplied by ‘B’ 8,000 Architect’s fees paid by ‘A’ 4,000 The contract was completed and the price was duly received. The Joint Venture was closed by ‘A’ taking up all the shares of the company at an agreed valuation of Rs. 32,000 and B taking up the stock of materials at an agreed valuation of Rs. 6,000. Show the necessary ledger accounts. Question 17 A, B and C entered into a Joint Venture, with equal risks, contributing Rs.20,000, Rs.27,500 and Rs.35,000 respectively. The amounts were banked in a Joint Account. Transactions of the venture were as under: Purchase of goods (of which Rs.12,600 were paid by A Personally) Rs.66,600. Expenses of goods purchased (of which Rs.1,670 were paid by B personally) Rs.5,669. Total sales (of which goods worth Rs.32,000 were sold to Namish on credit who accepted a bill for 3 months. The bill was immediately discounted @12% p.a.) C, who affected these transactions, was allowed 6% commission on sales.

You are required to write up the journal entries dealing with the above transactions, assuming that all accounts are settled and also prepare Ledger Accounts. Question 18 A and B entered into a venture sharing 1:2 and opened a joint bank account paying Rs.60,000 and Rs.1,00,000 respectively. All purchases and sales to be made through bank account but expenses were to be met by them from their own sources. Each venturer is entitled to 6% commission on sales made by him. A brought goods for Rs.50,000 and paid freight RS.4,000. He sold 80% of the goods at 40% profit and incurred selling expenses Rs.3,200, 3/5th of the unsold stock was destroyed by fire and claim received from the insurance company for Rs.4,100 was deposited into the bank. B brought goods for Rs.90,000 and paid carriage Rs,5,000. He sold 90% of the goods at 33 1/3% profit incurring selling expenses Rs.4,580. Unsold stock lying with each venturer was kept by the venturer himself at cost. Prepare necessary accounts, assuming that the accounts were settled Question 19 Rajan and Sajan enter into a Joint Venture to construct a building for D.A.V College, Delhi. The amount contributed by each of them was Rs.5,00,000. Besides Rajan also paid wages of Rs.1,25,000 and Sajan gave materials for Rs.75,000. Further Materials were purchased on credit from Shyam and Sunil for Rs.50,000 and Rs.1,25,000 respectively. Other expenses incurred on completing the building out of Joint Bank account were Rs. 6,50,000. The work as approved and payment was released by college authorities Rs.11,25,000. Shyam was paid Rs.47,500 in full settlement. During the execution of contract Rajan paid Sajan Rs.25,000. Prepare necessary ledger accounts assuming that separate books were maintained or Joint Venture. Question 20 X and Y of Bombay agreed to import cotton into India as a Joint Venture on May 10th, 2006. They opened a bank account X contributing Rs.1,50,000 and Y Rs.1,00,000 and agreed to divide profits and losses according to their cash contributions. They remitted Rs.2,20,000 to their agent in Cairo to pay for the cotton purchases there and later on further Rs.15,000 in settlement of his account. The freight, insurance and dock charges are all paid in Bombay and amounted to Rs.13,500. On December 31, 2006 various sales realized Rs.3,40,000 net which enabled them to repay themselves (taking no account of interest) the cash respectively advanced by them on May 10, 2006. The venture was closed X taking over unsold stock for Rs.4,500. You are required to give necessary ledger accounts to record the above transactions. Question 21 Amar and Bobby entered into a joint venture for the construction of ‘Onkar Cinema Hall’ at an estimated cost of Rs.10,00,000. Amar invested an amount of Rs.3,00,000 and Bobby Rs.2,00,000. They opened a Joint Bank account and deposited their capital. They also agreed to share profit and losses in the ratio of 3:2. They agreed to charge interest o capital @ 9%.

They spent Rs.2,00,000 on material, Rs.1,50,000 on wages, Rs.2,70,000 on Plant and Machinery. They borrowed from the bank amount of Rs.2,50,000at the rate of 9% p.a. The construction bill was passed for an amount of Rs.8,50,000 and they repaid the loan borrowed from the bank, paying 6bmonths’s interest for the loan. The value of plant and machinery was to be depreciated by 25%. The venture was carried on for a period of one year. The plant and machinery were taken over by Amar. Prepare:

(i) Joint Venture A/c (ii) Joint Bank A/c (iii) Individual ledger account of coventurers.

Question 22 A and B entered into a Joint Venture to purchase and develop certain land as industrial estate. For that purpose, a Joint Bank Account was opened, where in A deposited Rs.60,000 and B deposited Rs.40,000. A piece of land measuring 18,000 sq. mtrs was purchased for Rs.3 per sq. mtr. The following expenses were paid from the Joint Bank Account. Rs. Cost of earth filling to level land 14,000 Compensation paid to hutment dwellers for vacating possession 5,000 Municipal Taxes 2,000 Cost of barbed wire fence 3,000 Architect’s fee for plans 1,000 Stamp duty and solicitor’s charges 6,000 General expenses 2,000 Income from sale of timber 2,000 It wad decided to sell land in smaller plots of 500 sq. mtrs each. One sixth of the total area was left for roads etc. 10 plots were sold at Rs.12 per sq. mtr through the brokers who were paid 2% brokerage on the sale price of the land A retained one plot for his personal use at an agreed price of Rs.5,000. The remaining plots were sold at a consolidated price of Rs.76,200 directly. A and B shared profits and losses in the proportion of amounts invested by them. All transactions have been effected through Joint Bank Account. Prepare Joint Venture Account, Joint Bank Account and accounts of A and B assuming that all accounts are settled. Question 23

Ashok of Allahabad and Sharad of Varanasi enter into a Joint Venture to purchase and sell second hand motor cars, and to share profits and losses in the ratio of 3:2. On January 15th, 2007 Ashok bought 5 card for Rs.43,000 and on January 31, 2007 he sold these card for Rs.58,000, out of which he remitted Rs.11,000 to Sharad, paying balance into his own bank account. On January 31st 2007 Ashok bought three cars for Rs.36,000 and he paid tax and insurance Rs.1,400 and repair charges amounting Rs.2,000. He sold one car on Feb. 2nd 2007 for Rs.14,000, which he paid into his own bank account. Shrad then took over the other cars at a valuation of Rs.26,000 and the venture was closed on February 10, 2007.

Pass necessary journal entries in the books of Ashok and also give the ledger accounts. Question 24 A and B entered into a Joint Venture to purchase and sell crackers during the Diwali season. Profits or losses were to be shared equally between A and B. A was to purchase crackers from Sivakasi and send it to B of Bhatinda who would sell it. On August 1st, 2007 A purchased crackers worth Rs.1,00,000 and incurred the following expenses.

Forwarding charges Rs.6,000 Insurance charges Rs.2,000

He immediately drew upon B for Rs.1,00,000 for three months. The acceptance was discounted at 18% p.a. B paid the following expenses. Cartage Rs.3,000 Commission to agents Rs.5,000 Rental Charges Rs.4,000 The whole crackers were disposed for Rs.2,00,000. He forwarded a cheque to A for the amount due on 31st October, 2007. You are required to prepare the following account.

1. Memorandum Joint Venture account 2. Joint Venture with B account in A’s books. 3. Joint Venture with A account in B’s books.

Question 25 David of Bombay and Khosla of Delhi, entered into a joint venture for the purpose of buying and selling second hand motor cars. David to make purchases and Khosla to effect sales. The profit or loss was to be shared equally. Khosla remitted a sum of Rs.1,50,000 to David towards the venture. David purchased 5 cars for Rs.1,60,000 and paid Rs.60,000 for their reconditioning and sent them to Delhi. He also incurred an expense of Rs.5,000 in transporting the cars to Delhi.

Khosla sold 4 cars for Rs.2,40,000 and retained the fifth car for himself at an agreed value of Rs.50,000. his expenses were insurance Rs.1,000, garage rent Rs.2,000, brokerage Rs.2,000 and sundry expenses Rs.400. Each party’s ledger contains a record of his own transactions in joint venture account. Prepare memorandum joint venture account and joint venture account with David in the books of Khosla. Assuming that the matter was finally settled between the parties.

FUNDAMENTALS- PARTNERSHIP QUESTION-1

X and Y started a partnership business on 1st January,2004.They contributed rupees 80000and

rupees 60000 respectively as their capitals. The terms of the partnership agreement are as

given follows-

20% of profit to be transferred to general reserve.

Interest on capital 212%p.a and interest on drawings @10%p.a

X and y to get a monthly salary of rupees 2000 and rupees 3000 respectively.

X is entitled to a commission of rupees 7000.

Sharing of profit or loss will be in the ratio of their capital contribution.

The profit for the year ended 31st December,2004, before making above appropriations was

rupees 125375.The drawings of x and y were rupees 40000 and rupees 50000 respectively.

Required:. Prepare profit and loss appropriation account and partner’s capital accounts

assuming that their capitals are (a) fluctuating (b) fixed.

QUESTION-2

A,B,C are partners sharing profits and losses in the proportion of A-1/2;B-3/10;C-1/5 after

providing for interest@5%p.a on their respective capitals, which amount to,A rupees 100000;B

rupees 6000 and C rupees 40000 and allowing B AND c A SALARY OF RUPEES 10000 EACH P.A.

INTEREST @5% TO BE ALLOWED OR CHARGED ON OPENING BALANCES IN Current Accounts.

During the year 2002,A has drawn rupees 20000; and B and C in addition to their salaries have

drawn rupees 5000 and rupees 2000 respectively. The profit and loss account for the year

mailto:interest@5%25p.a

ended 31st December 2002, showed a net profit of rupees 90000 before charging(1)Interest on

capital, and (2) partner’s salaries. On 1st January, 2002, the balance in the current accounts of

the partners were A(Cr.) rupees 5000, B(Dr.) rupees 3000 and C (Dr.) rupees 2000.

REQUIRED: Show the profit and loss appropriation account, partner’s capital and current

accounts as on 31st December,2002.

QUESTION-3

A,B and C are partners with capitals of rupees 40000, rupees 30000 and rupees 20000

respectively. B and C entitled to annual salaries of rupees 2000 and rupees 3000 respectively

payable before division of profits. Interest on capital is allowed at 5percent per annum,but

interest is not charged on drawings. Of the first rupees 12000 divisible as profit in any year, A is

entitled to 50%, B to 30% and C to 20%. Annual profits in excess of rupees 12000 are divisible

equally. The profit for the year ended 31st December, 2002 was rupees 20100 after debiting

partner’s salaries but before charging interest on capital .The partner’s drawings for the year

were- A rupees 8000; B rupees 7500 and C rupees 4000. The balance on the partner’s current

accounts on 1st January ,2002 were A rupees 3000 credit; B rupees 500; C rupees 1000 debit.

REQUIRED: Prepare profit and loss appropriation account and the partner’s current accounts

for the year 2002.

QUESTION-4 X, Y AND Z are in partnership with capital of Rs 120000 (credit), Rs 100000 (credit) and Rs 8000

(debit) respectively on 1st April 2001. their partnership deed provides for the following;

7.5 % of profit to be transferred to general reserve.

Partners are to be only allowed interest on capital @ 5 % p.a and are to be charged interest on

drawing @ 6 % p.a

Z is entitled to a salary of Rs 7000.

X is entitled to a remuneration of 10 % of the net profit before making any appropriation.

Y is entitled to a commission of 8% of the net profit after making all appropriations.

During the year, X withdrew Rs 1000 p.m at the beginning of every month, Y Rs 1000 during the

month and Z Rs 1000 at the end of every month. On 1st oct 2001, Z granted a loan of Rs 600000.

The manager is entitled to a salary of Rs 100 p.m and a commission of 10 % of the net profits

after charging his salary and commission.

The net profit of the firm for the year ended on 31st march, 2002 before providing for any of the

adjustments was Rs 162000. Prepare profit and loss appropriation account for the year ended

on 31st march 2002.

QUESTION-5

Pony, Sony and Johny were in partnership which they began on 1st april,2001 with capital

contributions of rupees 80000, rupees 55600 and rupees 31800. Sony and Johny are entitled

to draw salary of rupees 5000 and rupees 4000 p.a. respectively before division of profits.

Interest is allowed on capital at 5%p.a. and is not charged on drawings. Of the net profit, the

first rupees 30000 is divided in the ratio of 40:35:25 among them respectively the balance is

shared equally.

The profit for the year ending on 31st march,2002 after debiting the partner’s salaries, but

before charging interest on capital was rupees 56340 and the partner’s have drawn rupees

26000 each for personal purchases.

REQUIRED: Prepare profit and loss appropriation account and partner’s capital accounts for the

year ending on 31st march,2002.

QUESTION-6

M/s Arun and Varun are in partnership sharing profits and losses in the ratio 3:1. On 1st

April,2001 their capitals were rupees 50000 and rupees 30000. During the year ending on 31st

March,2002, they earned a net profit of rupees of 50000. The terms of partnership are as

follows:

Interest on capital is to be charged @6% per annum.

Arun will get a commission at 2% on turnover.

Varun will get a salary of rupees 500 per month and a commission of 5% on profit after

deduction of interest, salary and commission(including his own commission).

Partner’s drawings for the year were:Arun rupees 8000 and Varun rupees 6000. Turnover for

the year was rupees 300000.

After considering the above factors, you are required to prepare the profit and loss

appropriation account and the capital accounts of the partners.

QUESTION-7

A,B,AND C are partners in a firm. Their terms of agreement are as follows:

A B C

Interest on capital @ 6%p.a 6%p.a 6%p.a

Interest on drawings(except salary) is to be charged 6%p.a 6%p.a 6%p.a

salary@ Rs 500p.m ---- ----

C is entitled to receive a commission on the profits after charging such commission and making above adjustments

5% ---- -----

On 1st april 2001 A,B,AND C have capitals of Rs 15000, 20000 and 12000 respectively but B

withdrew Rs 2000 on 31st December 2001 and C introduced Rs 200 on 21st march 2002. A had

no drawings except salary but B’s drawings were Rs 500 on 1st august and Rs 700 on 30th

November 2001. C regularly drew at the rate of Rs 200 at the end of each month. The profits

before making above adjustments for the financial year ended on 31st march 2002 were Rs

22245. prepare profit and loss appropriation account.

QUESTION-8 X,YAND Z ARE IN PARTNERSHIP sharing their profits and losses in the ratio of 5:2:3 respectively. On 1st april 2001 their capitals and current accounts were:

CURRENTS ACCOUNTS(RS) CAPITALS ACCOUNTS(Rs)

X 1160(cr) 16000

Y 700(dr) 20000

Z 420(cr) 24000

By agreement, interest on capital is allowed at 5% p.a. On 1st October 2001 by mutual

agreement, X increased his capital by paying a further Rs 4000 into the partnership bank

account while Y reduced his capital to Rs 12000 but left his withdrawn capital in the partnership

as a loan bearing interest at 5%p.a

Partners are allowed to with draw from current accounts at any time during the financial year

but are charged interest on the amount involved. Details of drawings made and interest

chargeable in respect of each partner for the financial year ending 31st march 2002 are :

Drawings (Rs) Interest on drawings Rs

X 4800 180

Y 3600 60

Z 6000 50

Y is remunerated for his participation in the running of the partnership by an annual salary Rs

5000.

The trading profit ( before interest)for the year ending on 31st march 2002 was Rs 39810.

You are required to prepare profit and loss appropriation account and the partners capitals

accounts and current accounts.

QUESTION 9

SMALL, BIG AND BOOST own expanding enterprises with fixed capitals of Rs 200000 Rs 400000

and Rs 600000 respectively. Their current account balances on 31.3.2001 are Rs 50000, Rs

100000 (Dr) and Rs 150000(Dr)respectively.

On 1.4.2001 they adopted the fluctuating capitals method of accounting,i.e they transfer their

current account balances to the capitals accounts, on this given date.

The clauses of the partnership deed provide for-

Interest on capitals @ 10%p.a ( now on the fluctuating capitals balances as from 1.4.2001 )

A monthly allowances of Rs 6000, Rs4000 and Rs3000 for Big,Boost and small respectively is to

be accounted for.

Loan capital of a partner earns him interest @ 20% p.a (which interest is compulsory tobe

drawn in cash, by concerned partner each year, on the last date).

A 10% reserve is to be set aside on the year’s on the last date.

Profit-Sharing ratio is 1:1:2 for small, big and boost respectively.

REQUIRED: Compile the profit and loss appropriation A/c. and the capital accounts of the

partners for the year April 2000 to March 2002. Net profit before interest is rupees 500000.

Boost loan capital reflects a credit balance of rupees 150000. The monthly drawings for 2001-

2002 of each totaled to rupees 25000 for the year.

QUESTION-10

Ms Bubble and Mr. Blow , each doing business as sole proprietors, started a partnership Glow

Food Product’s on first april ,2001.

Mrs. Bubble brought in machinery valued at rupees 550000 whereas Mr. Blow brought in office

equipment costing rupees 50000 and 50% of a legacy of rupees 1500000, she had inherited.

Mid year on 30.9.2001, Mr. Blow invested rupees 100000 as loan capital, but claimed interest

@20%p.a. (agreed upon because the firm needed working capital).

1. Interest on capital allowed @10%p.a. and interest on drawings @10%p.a. to be charged only

on the monthly uniform drawings of each.

2. Loan capital, if introduced ,bears interest.

3. A HOLIDAY ALLOWANCE OF RUPEES 7000 EACH TO BE APPROPRIATED FOR THE YEARLY NET

PROFIT (DRAWN IN CASH ON 30TH September of the year by each of them).

4. Account for an entertainment allowance for Mr. Blow ,@rupees 1000 per month.

5. Account for a 2% commission earning on gross profit for Ms. Bubble .(Gross profit=5 times the

year’s net profit in the first year).

6. The maximum permissible amount of monthly drawings is rupees 5000 each whilst Mr. Blow

withdrew this amount, Ms. Bubble drew only rupees 3000 per month.

REQUIRED: Compile the profit and loss appropriation account for the first year and the

partner’s personal accounts.Net profit before interest rupees 210000 for 2001-2002.

QUESTION11

: Research, Executive and Finance are in equal partnership dealing in energy conservation

equipment. The balances of their personal accounts on 1st april, 2001 and other relevant

details are as under:

Research Executive Finance

Fixed capital account Rs 350000 Rs300000 Rs550000

Current account Rs 20000 Rs15000 Rs60000

Monthly allowances Rs 1500 Rs1800 Rs 1200

Interest on capital 10%p.a 10%p.a 10%p.a

Intereston drawings 10%p.a 10p.a 10p.a

Drawings Rs1400monthly(at the end of every month)

Rs3000monthly(but on the last date of every month)

---

Fixed capitals Rs150000 withdrawn on 1.10.2001

-- Rs 300000 additional investment on 1.1.2002

The net profit earned is Rs 210150. Compile the profit and loss appropriation account for the year ended April 2001 to march 2002 and the partners fixed capital accounts to reflect the required details. QUESTION 12 :Mr.Honesty and Mr.Repute were equal partners which they began in 20X1 with capital

contributions of Rs.4,60,000 and Rs.2,30,000 respectively.By 1st april 20X4.Their capital

accounts reflected credit balances of Rs.6,00,000 and Rs.4,00,000 respectively.

The articles of partnership agreed upon in 20x1 specified:

(a) Interest on capital @ 5%p.a but interest on drawings @ 10%p.a

(b) Interest on partners’ loan when payable, was fixed at 15%p.a

(c) Mr.Honesty was entitled to a quarterly salary of Rs.8,000 and Ms.Repute and Mr.Honesty a

monthly allowance of Rs1,500 each to cover heavy out-of-pocket expenses for entertaining

important businesss contacts.

(d) Additional drawings for ‘emergencies’ permitted on their mutual consent.

(e) From 20X2, the partners had agreed to set aside Rs.10,000 yearly as contingency Reserve’.

REQUIRED:Draw up the profit and loss appropriation account for the year ending on 31.3.2005

and the partners, capital accounts for the year, given that:

1. Mr. Honesty and Mr. Repute had each drawn rupees 2000 and rupees 1000 monthly on last

date.

2. The net profit available for appropriation for 2004-2005, after accounting the yearly expenses,

including rupees 15000 paid as interest on a bank loan but before interest on partner’s loan

was rupees 275000.

3. Ms. Repute had invested rupees 150000 in the business as a loan on 1.10.2004.

QUESTION-13 On first April 2001 L and M went into partnership sharing profits in the ratio of 3:2. On 31st March ,2002 after preparation of the trading and profit and loss account, the following balances remained in their books: RS.

Capital A/c :L

36000

:M

20000

:M

20000

Drawing :L

3600

:M 2400

Loan from L 4000

Stocks

8000

Debtors

15000

Creditors

6400

Cash at bank

3500

Net profit before interest

9600

Fixed assets

43500

The following has still to be taken into account:

1. L is entitled to 5% loan interest.

2. M has taken goods worth rupees 60 for his own personal use.

3. Interest on capital:L rupees 1200;M rupees 900

4. Interest on drawing: L rupees 300; M rupees 200

5. M is entitled to a salary of rupees 600 before profits are shared.

6. During the year, M introduced certain fixed assets into the business valued at rupees 1800

7. REQUIRED: Prepare profit and loss appropriation account , partner’s capital accounts ,partner’s

current account (where necessary)and balance sheet as at 31st MARCH ,2002

under1)Fluctuating capital method, and (2) Fixed capital method.

QUESTION -14 :Pride ,prejudice and vanity are in partnership since four years.The data is as under:-

For 20X1-20X2 Pride Prejudice Vanity

Capitals Rs2,00,000 30,00,000 5,00,000

Current A\c balances Rs2,30,000 2,60,000 50,000

Drawings Rs40,000 30,000 40,000

Details regarding drawings uniform through on last date of on 1st date of accounting

year

the year accounting year

Loan Capital to earn interest @15%p.a- - 2,00,000

Interest on capital p.a 10% 10% 10%

Interest on drawinga p.a 20% 20% 20%

Commission on purchases on sales amount

@2% @1% =50% of total

earned by pride & prejudice

Profit Shares 2 1 1

The credit balance of the profit & loss A\c is Rs2,50,000 for the accounting year April 20X1 to

march,20X2.The sales are 4 times the Net Profit of the year and the purchases are Rs6,00,000.

By mutual agreement, Rs2,00,000 each from the current A\c of pride and prejudice are to be

transferred to their respective capital accounts, to help them earn their fair share of interest on

capital,as from 1.4.20X1.

Required:Record this transfer and compile the profit and loss appropriation A\c for the year

ended on 31.3.20X2 and the fixed capital accounts and central accounts.

QUESTION 15 :R,S and T are partners sharing profits and losses in proportion to their capitals at the beginning

of the year.They are entitled annually todraw Rs3,000, Rs2,500

And Rs2,000 respectively as out of their anticipated share of profits.Any drawings in excess of

these amounts are to be regarded as advances taken from the firm and are to be subject to

interest at the rate of 18%p.a.The capital as at the beginning of the year are to be allowed

interest at the rate of 15%p.a.

The capital of the partners as at the beginning of the year were, R Rs40,000, S Rs30,000 and T

Rs 20,000.The credit balances of their current accounts were as.R Rs 1,152, S Rs 1,864 and T

Rs576.Their drawings during the year were as R Rs 7,00,S Rs 9,500 and T Rs 3,000.The profit for

the year was Rs 30,420

Before making any adjustments for interest as above.

Required:Draw up profit and loss appropriation account, Capital and Current Account of the

partners.

QUESTION 16 :River, Well,Spring and Lake are in partnership.Their firm name is Plentiful Waters &Co.They

have mutually agree to:

(i) Allow interest on capital @ 15%p.a.

(ii) Charge interest on drawing @ 10%p.a.

(iii) Accept Well’s claim for a salary of Rs6,000 per month for six months only,for round the clock

work put in by him, in the drought-stricken areas.

(iv) Charge an annual allowance of Rs 1,500 per two months per partner to the business to help

cover expenses and complete successfully with cut-throat competition.

(v) River and Well have each contributed equally towards total Loan Capital of Rs 10,00,000

borrowed by the firm from them.

(vi) Rs 20,000p.a is set aside as Reserve if the net profit available for appropriation is greater than

Rs 4,50,000.

(vii) For sharing the residue of profits, rivers profit is 50%. Partners well, spring and lake get their

share from the remaining profit, in the ratio of 2:2:1.

The required data for the year 1.4.20X1 to 31.3.20X2 is-

(a) Capital-River Rs 6,00,000.Well Rs 4,00,000.Spring and Lake Rs 5,00,000 each.

(b) Each withdrew 10% of their opening capital balances as on 1.4.20X1 as drawings for the year.

(c) The year’s net profit before interest is reported as Rs 5,06,000.Its scrutiny reveals that the

partner’s annual allowance was debited in the profit & loss account and the Rs 20,000 payable

to the business manager as his special commission has not been accounted for at all.

Required: Compile the profit & loss appropriation accont and capital accounts, using

facts and financial data given.

QUESTION 17 Hill, Vale and Dale are in partnership,sharing profits and losses in the ratio of 2:2:1 respectively.

Interest is charged on partner’s drawings at the rate of 6% p.a. and credited on partner’s

capital amount balances at the rate of 6%p.a.

Vale is the firm’s marketing manager and for his specialized services, he is credited with a salary

of rupees 2000 per quarter.

During the year ended 30th April ,2002 ,the net profit of the firm was rupees 62000 and the

partner’s drawings were:

HILL Rs.12000

VALE Rs.8000

DALE Rs.8000

In each case ,the above drawings were made in two equal instalments on 31st October,2001

and 30th april,2002.

On 31st October, 2001 the firm agreed that Hill should withdraw rupees 10000 from his capital

account and that Dale should subscribe a similar amount to his capital account.

The balances of the partner’s accounts at 1st May 2001, were as follows:

All Credit Balances

capital Current

Accounts accounts

rupees Rupees

HILL 80000 6400

VALE 70000 5600

DALE 60000 4800

Transfer 5% of the net profit to the reserve fund of the firm.

REQUIRED:

(1)Prepare the firm’s profit and loss appropriation account for the year ended 30th April, 2002

(2) Prepare the partner’s capital and current acconts for the year ended 30th April, 2002.

QUESTION-18 On 1.1.2001 Precious, Noble and Perfect entered into partnership with capital of rupees 60000,

rupees 50000 and rupees 30000 respectively.

Perfect advanced rs.10000 as loan to the partnership on 1.7.2001. The partnership deed

contained the following clauses:

a. Interest on capital at 6% p.a.

b. Interest on drawing at 6%. Each drew rs. 4000 at the end of each quarter commencing from

31.3.2001.

c. Working partners Precious and Noble to get salaries of rs.200 and rs.300 per month.

d. Interest on loan was given to Perfect at 6% p.a.

e. Profits and losses to be shared in the ratio 4:2:1 up to rs.70000 and above rs.70000 equally.

Net profit of the firm for the year ending 31.12.2001(before above adjustments) was rs.

111000.

REQUIRED: Prepare profit and loss appropriation account and personal accounts of the partners

assuming capitals to be fixed.

QUESTION-19 Pullu,Tullu ,Gullu and Chhota are the four partners, sharing profits as 4:3:2:1.They earned a

profit of rupees 180000 for the year ended 31.12.2001.As per the deed, they are to charge a

commission @20% of the profits after charging such commission which they will share as

2:3:2:3.

REQUIRED:Prepare profit and loss appropriation account showing the distribution of profits and

the share of each partner

Question 20 Simmi and Sonu are partners in a firm, sharing profits and losses in the ratio of 3:1. The profit and loss account of the firm or the year ending March 31, 2009 shows a net profit of Rs.1,50,000. Prepare the Profit and Loss Appropriation account by taking into consideration the following information :

(i) Partners capital on April 1, 2008 : Simmi – Rs.30,000 : Sonu – Rs.60,000

(ii) Current accounts balances on April 1, 2008 : Simmi – Rs.30,000 (cr.) : Sonu – Rs.15,000 (cr.)

(iii) Partners drawings during the year amounted to Simmi – Rs.20,000 : Sonu – Rs.15,000

(iv) Interest on capital was allowed @ 5% p.a (v) Interest on drawings was to be charged @ 6% p.a at an average of six months. (vi) Partners salaries : Simmi Rs.12,000 Sonu Rs.9,000. Also show the partners current accounts. (vii) Transfer 20% of distributable profits to general reserve.

Question 21 Sharma and Verma were partners in a firm. Their partnership agreement provides that.

(i) Profits and losses shared by Sharma and Varma in the ratio of 3:2 (ii) 5% interest is to be allowed on capital. (iii) Verma should be paid a monthly salary of rs.600

The following balances are extracted from the books of the firm on December 31, 2008. Sharma Verma Capital accounts Rs.40,000 Rs.40,000 Current accounts Rs,7,200 (cr.) Rs.2,800 (cr.) Drawings Rs.10,850 Rs.8,150 Net profit or the year, before charging interest on capital and partner’s salary was Rs.9,500. It was found that Verma was regularly drawing his monthly salary. But it was not recorded in drawings account nor debited to the profit and loss account. Prepare the Profit and Loss Appropriation Account and the Partner’s Current accounts. Question 22

A, B and C are partners sharing profits and losses in the proportions of 3:2:1 with capitals of Rs.10,000, Rs.10,000 and Rs.5,000 respectively. Each partner is entitled to 5% interest on his capital; B and C are entitled to a salary of Rs.150 and Rs.100 per month respectively. During the year 2008, the drawings of the partners in anticipation of their shares of profit and salary are A Rs.1,000 B Rs.1,000 and C Rs.1,200. The profits for the year prior to calculation of interest on capital but after charging salary of partners amounted to Rs.8,000. The above figure of profit is before charging depreciation at 7 ½ per cent on furniture valued at rs.5,000 and writing off a bad debt of Rs.150 You are required to prepare partners capital accounts.

(i) Where capitals are fixed (ii) Where capitals are fluctuating.

Question 23 A and B are partners in a firm. A withdrew Rs.1,000 p.m on first day of every month and B withdrewRs.500 p.m on the last day of every month. Their capitals were Rs.70,000 and Rs.50,000. Interest on capital is 10% and on drawings interest rate is 5%. A made additional capital Rs.10,000 on 30th September, 2008. As per the agreement first Rs.20,000 profits are to be shares equally and any excess over Rs.20,000 will be shared in 3:1 ratio, B salary is Rs.500 p.m. Out of profits Rs.10,000 is transferred to general reserve. A is to get 5% commission on net profits after charging his commission. The profits were Rs.99,000. It was found that B had withdrawn goods Rs.1,000 for his personal use this was not recorded in the books. Prepare profit and Loss Appropriation account. Question 24 X, Y and Z are partners sharing profits equally. Their new ration will be 5:3:2. The following items of assets and liabilities are subject to revaluation as per agreement. 1. Plant and Machinery Rs.1,50,000 (it was found overvalued by Rs.20,000) 2. Furniture RS.30,000. (It was decided to increase its value to Rs.40,000) 3. Equipment Rs.15,000. (It was decided to depreciate its value to 40%) 4. Creditors Rs.20,000. (Creditors of Rs.3,000 have given up their claim) 5. Bills payable Rs.10,000. (B/P are reduced to Rs.6,000) Pass Journal entries for the above.

Question 25 A ,b,c are partners sharing profits and loss in the ratio of 3:2:1. A withdraws Rs 2000 at the beginning of every month, b withdraws Rs 1500 in the middle of every month where as c withdraws Rs 1000 at the end the end of every month. Interest on capitals and drawings is to be charged @ 10% p.a. c is also to be allowed a salary of Rs 800 per month. Afgter deducting salary but before allowing any any type of interest, the profit for the year ending 31st December 1996 was Rs 1,22,150. Prepare profit and loss appropriation account, partners capitals accounts and current accounts from the additional information given below:- A (Rs) B (Rs) C(Rs) Capital accounts on 1st jan 1996 200000 150000 100000 Additional capitals introduced on- 1st april, 1996 50000 30000 -- Capitals withdrawn on 1st octeber- 1996 -- -- 20000 Current accounts on 1st jan1996 12200 5500 4100(dr) Loan accounts on 1st jan 1996 40000 -- -- QUESTION 26

Admission of a partner

Question 1 Deepika and Rajashree are partners in a firm sharing profits and losses in the ratio of 3: 2 . On 31st December, 1988, their Balance Sheet was as under: Liabilities Rs. Assets Rs. Sundry Creditors 16,000 Cash in Hand 1,200 Public Deposits 61,000 Cash at Bank 2,800 Bank Overdraft 6,000 Stock 32,000 Outstanding Liabilities 2,000 Prepaid Insurance 1,000

Capital Accounts: Sundry Debtors 28,800 Deepika 48,000 Less: Provision for Rajshree 40,000 Doubtful Debts 800 28,000 Plant and Machinery 48,000 Land and Building 50,000 Furniture 10,000 1,73,000 1,73,000 On the above date, the partners decide to admit Anshu as a partner on the following terms:

(i) The new profit – sharing ratio of Deepika, Rajshree and Anshu will be 5 : 3: 2, respectively, (ii) Anshu shall bring Rs. 32,000 as his capital. (iii) Anshu is unable to bring in any cash for his share of goodwill. Partners, therefore, decide to

calculate goodwill on the basis of Anshu’s share in the profits and the capital contribution made by him to the firm.

(iv) Plant and Machinery would be increased by Rs. 12,000 (v) Stock would be increased to Rs. 40,000 (vi) Provision for Doubtful Debts is to be maintained at Rs. 4,000. Value of Land and Building has

appreciated by 20%. Furniture has depreciated by 10%. (vii) There is an additional liability of Rs. 8,000 being outstanding salary payable to employees of the

firm. This liability is not included in the outstanding liabilities, stated in the above Balance Sheet. Partners decide to show this liability in the books of accounts of the reconstituted new firm. Prepare Revaluation Account Partners’ Capital Accounts and the Balance Sheet of Deepika, Rajshree and Anshu. QUESTION-2 The balance of the partnership firm of X and Y who were sharing profits in the ratio of 5:3 respectively, as on 31st march, 2009 was as follows:

Creditors 25,000 Cash at bank 11,200

General reserve 20,000 Bills receivable 12,800

X capital 75,000 Debtors 20,000

Y capital 60,000 Stock 35,000

Furniture 21,000

Machinery 30,000

Buildings 50,000

1,80,000 1,80,000

On the above date, Z was admitted on the following terms: Z was to get 1/5 share in the profits. Z was to pay Rs.50,000 as capital and Rs.16,000 for his share of goodwill. Machinery was to be depreciated by 10% and Building was to be appreciated by 20% Stock was valued at 25% above cost. It was to be brought into books of the new firm at cost price. There was a liability for repairs to furniture amounting to Rs.600; the same was to be recorded in the books. Capital accounts of the old partners were to be adjusted in the profits sharing ratio by opening the necessary current accounts. Prepare revaluation account, capital accounts and the initial balance sheet of the new firm. Question 3 The following is the balance sheet of A and B, who had been sharing profits in proportion of three- fourth and one-fourth, on 31st December, 1993

Liabilities Rs. Assets Rs.



A’s capital 30,000 Debtors 16,000

B’s capital 16,000 Stock 20,000

Office furniture 1,000

Land &building 25,000

87,500 87,500

They agreed to take C into partnership on 1st January 1994 on the following terms: That C pays Rs.14,000 as his capital for one-fifth share in the future profits. That the good of the firm be valued at Rs.20,000. That stock and furniture be reduced by 10% and a provision for doubtful debts be created on debtors at 5%. That the value of land and building be appreciated by 20% That the capital accounts of the partners be adjusted on the basis of their profits- sharing arrangements and any excess or deficiency be transferred to their currents. Prepare revaluation account, partner’s capital accounts and balance sheet of the new firm. Question 4 A and B are partners in a firm sharing profits in the ratio of 2:1. Their balance sheet as on 31.3.06 stood as follows:


Sundry creditors 80,000 Land and building 2,00,000

General reserve 60,000 Stock 1,10,000

Provision for repairing of 20,000 Sundry debtors 1,50,000

building

As capital 2,20,000 Bank 20,000

Bs capital 1,00,000

4,80,000 4,80,000

On 1st April 2006 they admit C as a partner and the following terms were agreed upon: i) The new profits sharing ratio should be 2:2:1. ii) C is to bring in Rs 130000 as his capital. iii) Goodwill is to be valued on the basis of the capitalization at 12% of the normal average profits

of the last three years. Profits of the last three years were as follows: iv) For the year ended 31.3.04 profit Rs 15000 (including insurance claim received Rs 50000) v) For the year ended 31.3.05 loss Rs 20000 (including voluntary retirement compensation paid Rs

100000) vi) For the year ended 31.3.06 profit Rs 175000(including a profit of Rs 40000 on the sales of

assets) vii) C is to bring half of his share of goodwill in cash and the other half was to be purchased by him

from A and B which is to be debited to Cs current account. viii) Of the sundry debtors Rs 15000 proved to be bad and there is doubtful amount of Rs 7000. ix) Provision is to be made for an unrecorded bill of a supplier amounting to Rs 20000. Provision

for repair of building should also be increased by Rs 10000. x) Land and building are to be increased to Rs 240000. xi) Capitals to be adjusted according to profit sharing ratio taking C s capital as the base, any

excess or shortfall to be adjusted in cash. Show necessary journal entries and draw up the readjusted balance sheet of the new firm. Question 5 M and N are partners in 2:1 ratio. Their balance sheet before the admission of X stood as follows:


M’s capital 30,000 Bank 3,000

N’s capital 25,000 Stock 20,000

Creditors 6,000 Bills receivable 8,000

Salaries due 4,000 Furniture 10,000

Provident fund 6,000 Building 30,000

71,000 71,000

X was admitted on the following terms: X will bring cash Rs 15000 for his 1/3 share in profits. X will bring good will in cash Rs. 9,000. M agreed to take over salaries. N will take over 25% of stock at a value 10% above cost and M will take over furniture cost Rs. 2,000 for Rs .2,600 after this being got repaired by firm for Rs.200. Building is valued at Rs.3,000 in excess of the book value. Show revaluation account, capital accounts and prepare balance sheet.

Question 6 Ram and Shyam are partners in a firm sharing profits in ratio of 2:1. On 1st April 2009 their balance sheet was as under:


Creditors 15,000 Building 12,000

Bills payable 5,000 Plant 5,000

Rams capital 25,000 Furniture 1,200

Shyams capital 10,500 Stock 10,400

Debtors 24000

Less provision 2400 21,600

Investment( market value Rs 3800)

3,200

Bank 2,100

55,500 55,500

They admitted Gopal for ½ share on the following terms: Gopal will bring Rs 8000 for capital and Rs 2100 for good will. The assets were revalued as follows: building Rs 16000; plant Rs 3200; Stock worth Rs 1040 was found value less and to be written off. Reserve for bad and doubtful debts to be reduced by Rs 1400. Furniture is to be taken by Ram at a value of Rs 1100. Investment is to be recorded at its market value. Prepare revaluation account, partners capital account, and new balance sheet. Question 7 Swadesh and Swaraj were partners sharing profits equally. Their balance sheet as on March 31, 2009 was as follows:

Liabilities Amount Assets Amount

Creditors 50,000 Cash 3,000

Provident fund 15,000 Cash at bank 15,000

o/s expenses 3,000 Debtors 20000

Swadesh capital 60,000 Less provision 500 19,500

Swaraj capital 40,000 Stock 20,000

Furniture 10,000

Machinery 18,000

Land & building 73,500

Advertisement suspense a/c

9,000

1,68,000 1,68,000

On that date, they agreed to admit sambhav as a partner on the following terms:

1) Sambhav shall get 1/5th share in the profits and he will bring Rs 20000 as his capital and Rs 5000 as his share of goodwill.

2) Goodwill brought by sambhav shall be withdrawn by Swadesh and Swaraj. 3) Provision for bad and doubtful debts should be brought upto 5% on debtors. 4) Machinery be depreciated by Rs 2000 and furniture by Rs 12.5%. 5) Half of stock is increased by 30%. 6) Land and building be appreciated by 20%. 7) Investments of Rs.2,000 which did not appear in books should be duly recorded.

Record necessary journal entries and prepare the balance sheet of the new firm. Question 8 Rohit and Bal sharing profits in the ratio of 5:3 had the following balance sheet as on march 31, 2009:-


Khoslas loan a/c 10,000 Goodwill 8,000

Bills payable 4,000 Building 17,000

Employees fund 14,000 Plant 13,500

Rohit capital a/c 40,000 Furniture 2,000

Bal capital a/c 20,000 Debtors 16,500

Bills receivable 7,500

Stock 11,000

Bank 5,500

Profit and loss a/c 7,000

88,000 88,000

On 1st april, 2009 they decided to admit khosla into the partnership giving him 1/5 share. He brings in Rs 15000 as capital and his loan was also converted in to capital. The partners decided to revalue the assets as follows:- Goodwill Rs 25000; plant Rs 12500; debtors Rs 15500; stock Rs 16250; building Rs 20000; furniture Rs 1000; bills receivable Rs 6250.you are required to show the journal entries, revaluation a/c, capital a/c and balance sheet. Question 9 A and B are partners in 3:2 ratio. C is admitted for 1/5th share. Their balance sheet as o n 31st march, 2009 was as follows:

BALANCE SHEET

Liabilities Rs Assets Rs

Creditors 16000 Building 80000

General reserve 10000 Computers 20000

Profit and loss account 5000 Vehicles 30000

A’s capital 75000 Accrued rent 1000

B’s capital 50000 Joint life policy 12000

Debtors 8000

Bank 5000

156000 156000

On Cs admission the following decisions were taken:- 1) C will bring Rs 40000 as capital 2) Goodwill of the firm is valued on the basis of C’s share in the profits and capital contributed by

him. 3) Vehicles was not depreciated@ Rs 3000 p.a in the last two years. 4) Accrued rent is recovered. 5) To write off joint life policy.

Show revaluation a/c capital a/c’s and balance sheet. QUESTION -10 Aand B are partners sharing profits and losses in the ratio of 4:1. They admit C into partnership for 1/6 share for which he pays Rs 20000 for goodwill. A, B , and C decided to share future profits in the ratio of 3:2;1 respectively. Give the necessary journals entries. A and B are partners sharing profits in the ratio of 3:2. They admit C into the firm for ¼ share in profits which he takes 1/6 from A and 1/12 from B . C brings Rs 5000 as goodwill out of his share of Rs 9000. No goodwill account appears in the books of the firm. Pass necessary journal entries to record this arrangement A and B are partners sharing profits in the ratio of 4:3:2. D is admitted for 2/9 share of profits and brings Rs 30000 as his capital and Rs 10000 for his share of goodwill. The new profit sharing ratio will be A:B:C:D. 3:2:2:2. JOURNALISE THE ABOVE ARRANGEMENTS IN THE BOOKS A and B are3 partners sharing profits and losses as 2:1. C and D are admitted and profits sharing ratio becomes 4:2:3:1. Good will of the firm is valued at Rs 20000. D brings required good will and Rs 5000 cash for capital. C brings in Rs 5000 cash Rs 4000 worth stock as his capital in addition to the required amount of good will in cash.show the necessary journal entries. The balance of the partnership firm of X and Y who were sharing profits in the ratio of 5:3 respectively, as on 31st march, 2007 was as follows:





Furniture 21,000

Machinery 30,000

Buildings 50,000

1,80,000 1,80,000

On the above date, Z was admitted on the following terms: Z was to get 1/5 share in the profits. Z was to pay Rs.50,000 as capital and Rs.16,000 for his share of goodwill. Machinery was to be depreciated by 10% and Building was to be appreciated by 20% Stock was valued at 25% above cost. It was to be brought into books of the new firm at cost price. There was a liability for repairs to furniture amounting to Rs.600; the same was to be recorded in the books. Capital accounts of the old partners were to be adjusted in the profits sharing ratio by opening the necessary current accounts. Prepare revaluation account, capital accounts and the initial balance sheet of the new firm. Question 11 John, bull and wool were in partnership, sharing profits and losses in the ratio of 2;2:1. Their balance sheet as on 31st march 1990, is given below:


Sundry creditors 25,700 Land and building 50,000

Outstanding liabilities 3,000 Furniture 13,000

General reserve 13,000 Stock of goods 23,500

John capital 24,000 Sundry debtors 11,000

Bull capital 24,000 Cash 2,200

Wools capital 10,000

99,700 99,700

The partners have agreed to take Tuna as a partner with effect from 1st April 1990, on the following terms: Tuna shall bring Rs.10,000 towards capital. The value of goodwill shall be fixed at Rs.15,000. The goodwill account shall be written off, after Tunas admission. The value of stock shall be increased by Rs.5,000. The furniture should be depreciated by 10%. The value of land and building should be enhanced by 20% Provision for doubtful debts should be made at 10% of the debtors. The outstanding liabilities include Rs.1,000 due to Mr. Grip which has been paid by John privately. Necessary entry to reimburse Mr. John as per his request, before admitting the new partner, has to be passed. The new profit sharing ratio will be 5:5;3:2. Prepare revaluation account and the capital accounts of all the four partners. Also prepare a balance sheet of the new firm. Question 12

J and R are partners. V is admitted as a partner for ¼ share of profit but is unable to contribute premium for Good will in cash amounting to Rs.8,000 and so it is decided to raise a loan account in the name of V. You are required to pass a single journal entry in order to give effect to the above problem. Question 13 X,Y,Z are partners sharing profits and losses in the ratio of 2:2:1 respectively. Their balance sheet as on 31st March 2003 is as given below:

Balance Sheet as on 31st March 2003


O/s Liabilities 6,000 Furniture 26,000

General reserve 26,000 Stock 47,000

X capital 48,000 Sundry debtors 22,000

Y capital 48,000 Cash 4,400

Z capital 20,000

1,99,400 1,99,400

The partners decided to admit Mr. T as a partner with effect from 1st April 2003, on the following terms:

i. Mr. T will bring Rs.20,000 as capital and Rs.10,000 as his share of Goodwill. ii. Mr. T could bring only Rs.2,500 as goodwill in cash.

iii. The value of stock should be increased by Rs.10, 000. The furniture should be depreciated by 10 % and value of land and building should be enhanced by 20 %.

iv. Provision for bad and doubtful debts should be made at 10 % of the debtors. v. The outstanding liability includes Rs.2,000 due to Mr. R which has been paid by Mr. X privately.

Necessary entry is to be passed to reimburse Mr. X before admitting the new partner. vi. The new profit sharing ratio for X, Y, Z, is 5:5:2.

vii. Creditors include Rs.5,000 received as commission from Mr. A. viii. Partners decided not to show good will in the books of the new firm.

Give necessary journal entries to incorporate the above changes. Also prepare capital accounts of partners and balance sheet of the new firm. Question 14 The following is the balance sheet of James and Dias as on 31.12.07


JAMES CAPITAL 60,000 Land 6,000

Dias capital 40,000 Building 40,000

Creditors 18,000 Furniture 4000

Stock 25,000

Investment 16,000

Bank 15,000

Cash 12,000

1,18,000 1,18,000

The partners shared profits and losses in the ratio of 3:2. From 01.01.08, they agreed to share profits and losses equalluy. For this purpose the following particulars are provided:- Building is to be appreciated by 25 % Current value of furniture is to be taken at Rs 3000. Land is valued at Rs 15000 Stock is valued at Rs 30000. Prepare a revaluation account, partners capital accounts and the revised balance sheet as on 01.01.08. Question 15 From the following information, calculate the value of goodwill of a firm of Chander and Gupta.

(a) At 3 years purchase of Average Profits. (b) At 4 years purchase of Super Profits. (c) On the basis of capitalistion of Super Profits. (d) On the basis of capitalization of Average Profits/

(i) Average capital employed in the business is Rs.7,00,000. (ii) Net trading results of the firm for the past years-profit 2004 Rs.1,47,000. Loss 2005

Rs.1,48,100. Profit 2006 Rs.4,48,700. (iii) Rate of interest expected from capita having regard to the risk involved 18%. (iv) Remuneration to each partner for his service Rs.500 p.m. (v) Assets (excluding goodwill) Rs.7,54,762. Liabilities Rs.31,329.

Question 16 M and N are partners in 2:1 ratio. Their balance sheet before the admission of X stood as follows.

BALANCE SHEET


Capital : M N

30,000 25,000

Bank

3,000

Creditors 6,000 Stock 20,000

Salaries due 4,000 Bills Receivable 8,000

Provident fund 6,000 Furniture 10,000

Building 30,000

71,000 71,000

X was admitted on the following terms:

(i) X will bring cash Rs.15,000 for his 1/3 share in profits. (ii) X will bring goodwill in cash Rs.9,000. (iii) M agreed to take over salaries.

(iv) N will take over 25% of stocks at a value 10% above cost and M will take over furniture cost Rs.2,000 after this being got repaired by firm for Rs.200.

(v) Building is valued at Rs.3,000 in excess of book value. Show revaluation account, capital account an prepare Balance Sheet. Question 17 Blue and Black are partner in 5:3 ratio. They admit White. The new ratio being 4:3:2. White brings cash Rs.30,000 as capital but he is not in a position to pay anything or goodwill, which is valued at three years purchase of average profits of last five years.

BALANCE SHEET


Workmen compensation fund 2,700 Bank 2,400

Creditors 6,100 Debtors 18,000

Contingency reserve 4,000 Stock 15,000

Bank loan 7,000 Furniture 7,800

Capital : Blue Black

45,000 20,000

Building 20,000

84,800 84,800

The profit for the last five years were : Ist year Rs.13,000, IInd year Rs.17,000, IIIrd year Rs.18,000, IVth year Rs.20,000, Vth year Rs.14,500. The following revaluations are to be recorded.

a) Building is over stated by Rs.2,000, now it is to be brought down. b) Stock worth Rs.2,500 was found obsolete, which is to be written off. c) Bank loan is immediately paid off. d) Ajit, a debtor, whose account was written off last year with Rs.900 has paid the amount which

is not yet recorded. e) Liability of Rs.300 is payable against workmen compensation fund. f) Furniture is depreciated by Rs.600.

You are required to prepare Revaluation account, capital accounts and Balance Sheet. Question 18 A and B are partners sharing profits in the ratio of 3:1. Their balance sheet as on 31-03-2009 was as follows:

BALANCE SHEET


A’s Capital 9,000 Bank 1,000

B’s Capital 3,000 Debtors 6,000


Workmen’s compensation fund 2,000 Investments 5,000

Goodwill 1,000

16,000 16,000

C is admitted for 2/5th share in future profits. For this purpose following adjustments are agreed upon. C will bring in cash Rs.8,000 for capital and Rs.2,000 for Goodwill. Market value of Investments is Rs.4,500 and it is decided to create reserve, claim on account of workmen’s compensation is Rs.1,000. Goodwill is not to appear in the new firm at all. Required to prepare ledger accounts, I.e., Revaluation account, Partner’s capital accounts to record the above and show the Balance Sheet. Question 19 L and M share the profits of a business in the ratio of 5:3. They admit N into the firm for a 1/4th share in the profits to be contributed equally by L and M. On the date of admission, the Balance Sheet of the firm was as follows.

BALANCE SHEET


L’s Capital 30,000 Machinery 26,000

M’s Capital 20,000 Furniture 18,000

Workmen’s compensation fund 4,000 Stock 10,000

Bank loan 12,000 Debtors 8,000

Creditors 2,000 Bank 6,000

68,000 68,000

Terms of N’s admission were as follows:

a) N will bring Rs.25,000 as his capital b) Goodwill of the firm is to be valued at 4 year’s purchase of the average super profits of the last

three years. Average profits of the last three years are Rs.20,000, while the normal profits that can be earned with the capital employed are Rs.12,000.

c) Furniture is to be appreciated by Rs.6,000 and the value of Stock to be reduced by 20%. Required to prepare Revaluation account, Partner’s Capital accounts and Balance Sheet of the firm after taking into account the above adjustments. Show the working. Question 20 Swadesh and Swaraj are partners sharing profits equally. Their Balance Sheet as on March 31st, 2009 was as follows:



Provident fund 15,000 Cash at Bank 15,000

Outstanding expenses 3,000 Debtors 20,000 Less: provision 500

19,500

Capital: Swadesh Swaraj

60,000 40,000

Stock 20,000

Furniture 10,000

Machinery 18,000

Land and Building 73,500

Advertisement suspense a/c 9,000

1,68,000 1,68,000

On that date, they agreed to admit Sambhav as a partner on the following terms:

1. Sambhav shall get 1/5th share in profits and he will bring Rs.20,000 as his capital and Rs.5,000 as his share of Goodwill.

2. Goodwill brought by Sambhav shall be withdrawn by old partners. 3. Provision for bad and doubtful debts should be brought up to 5% on debtors. 4. Machinery be depreciated by Rs.2,000 and furniture by 12.5%. 5. Half of the stock is increased by 30%. 6. Land and Building be appreciated by 20% and 7. Investments of Rs.2,000 which did not appear in books should by duly recorded.

Record necessary journal entries and prepare the Balance Sheet of the new firm. Question 21 Rohit and Bal sharing profits in the ratio of 5:3 had the following Balance Sheet as on March 31st, 2009.


Khosla’s loan 10,000 Goodwill 8,000

Bills Payable 4,000 Building 17,000

Employees Fund 14,000 Plant 13,500

Capital : Rohit Bal

40,000 20,000

Furniture 2,000

Debtors 16,500

Bills Receivable 7,500

Stock 11,000

Bank 5,500

Profit and Loss a/c 7,000

88,000 88,000

On 1st April, 2009 they decided to admit Khosla into partnership giving him 1/5th share. He brings Rs.15,000 as capital and his loan was also converted in to capital. The partners decide to revalue the assets as follows: Goodwill Rs.25,000, Plant Rs.12,500, Debtors Rs.15,500, Stock Rs.16,250, Building Rs.20,000, Furniture Rs.1,000, Bills Receivable Rs.6,250. You are required to Show journal entries, Revaluation Account. Question 22 A and B are partners in 3:2 ratio. C is admitted for 1/5th share. Their Balance Sheet as on 31st March, 2009 was as follows:

BALANCE SHEET



General Reserve 10,000 Computers 20,000

Profit and Loss a/c 5,000 Vehicles 30,000

Capital : A B

75,000 50,000

Accrued Rent 1,000

Joint life policy 12,000

Debtors 8,000

Bank 5,000

1,56,000 1,56,000

On C’s admission the following decisions were taken

a) C will bring Rs. 40,000 as capital. b) Goodwill of the firm is valued on the basis of C’s share in profits and capital contributed by him. c) Vehicles were not depreciated @ 10% p.a. in last two years. d) Accrued rent is recovered. e) To write off joint life policy.

Show revaluation account, capital accounts and Balance Sheet. Question 23 A, B and C are partners sharing profits and losses in the ratio of 2:3:5. On 31st March, 2009 their Balance Sheet was as follows.

BALANCE SHEET


A’s Capital 36,000 Cash 18,000

B’s Capital 44,000 Bills Receivable 24,000

C’s Capital 52,000 Furniture 28,000


Bills payable 32,000 Debtors 42,000

Profit and loss a/c 14,000 Investments 32,000

Machinery 34,000

Goodwill 20,000

2,42,000 2,42,000

They admit D into partnership on the following terms:

a) Furniture, Investments and Machinery to be depreciated by 15%. b) Stock is revalued a Rs.48,000. c) Goodwill to be valued at Rs.36,000 d) Outstanding Rent amounted to Rs.1,800. e) Unexpired salaries Rs.800. f) D to bring Rs.32,000 towards capital for 1/6th share and partners to readjust their capital

accounts on the basis of their profits-sharing ratio. g) Adjustment of capitals to be made by cash.

QUESTION NO 24 X and Y are partners sharing profits and losses in the ratio of 3;2. Their balance sheet as on 31st December, 1993 was as under:


Creditors 15000 Cash 5000

General reserve 12000 Debtors 20000

X capital 60000 Less provision 800 19200

Y capital 30000 Patents 14800

X current account 10000 Investments 8000

Y current account 2000 Fixed assets 72000

Good will 10000

129000 129000

They admit Z on the following terms:

A PROVISION OF 5 % uis to be created on debtors. Accured income of Rs 1500 does not appear in the books and Rs 5000 are outstanding for

salaries. Present market value of investment is Rs 6000. X takes over the3 investment at this value. New profit sharing sharing ratio of partners will be 4;3;2. Z will bring in Rs 20000 as his capital. Z is to pay in cash an amount equal to his share in firms goodwill at twice the average profits of

the last 3 years which were Rs 30000; Rs 20000 and Rs 25000 respectively. Half the amount of goodwill is withdrawn by old partners.

You are required to prepare revaluation account, capital accounts, current accounts and balance sheet of the new firm.

Question No 25 A and B SHARE THE PROFITS OF A BUSINESS IN THE RATIO OF 5:3. They admit C into the firm for 1/4th share in the profits to be contributed equally by A and B. on the date of admission of C the balance sheet of the firm was as follows:


A capital 40000 Machinery 30000

B capital 30000 Furniture 20000

Workmens compensation fund

4000 Stock 15000

Creditors 2000 Debtors 15000

Provident fund 10000 Bank 6000

86000 86000

Terms of C admission were as follows:

1. C will bring Rs 30000 for his share of capital and goodwill. 2. Goodwill of the firm has been valued at 3 years purchase of the average profits of the last 4

years. Average profits of the last four years are Rs 20000 while the normal profits that can be earned with the capital employed are Rs 12000.

3. Furniture is undervalued by Rs 12000 and the value of stock is reduced to Rs 13000. Provident fund be raised by Rs 1000.

4. Creditors are unrecorded to the extent of Rs 6000. 5. Prepare revaluation account, partners capital accounts and the new balance sheet of A,B,C.

Given below is the balance sheet of Krishna and suresh who are partners in a firm sharing profits in the ratio of 3;2;


Creditors 15000 Plant and machinery

30000

Contingency reserve 5000 Patents 5000

Krishna capital 30000 Furniture 3000

Suresh 20,000 Stock 16,000

Debtors 15,000

Cash 1,000

70,000 70,000

On that date Mohan is admitted as a partner for 1/5th share on the following terms :- a) He is to contribute Rs.14,000 as his share capital which includes his share of premium for

goodwill.

b) Goodwill is valued at 2 years’ purchase of the average profits of the last 4 years, which were Rs. 10,000; Rs.9,000; Rs 8,000 and Rs. 13,000 respectively.

c) Plants to be written down to Rs.25,000 and patents written up by Rs. 8,000. d) A joint life policy taken in the name of partners for Rs.50,000 on which premiums have been

paid, has a surrender value of Rs.7,000. Prepare the Revaluation Account, Partners Capital Accounts and the Balance Sheet of the firm. Question No. 26 A , B and C were in partnership sharing profit in the proportions of 3:2:1. Their Balance Sheet on 31st Jan,2004 was as under:


Sundry Creditors 72,100 Goodwill 12,000

Capital accounts Sundry assets 7,18,000

A 3,00,000

B 2,20,000

C 1,20,000

Current Accounts

A 12,000

B 3,500

C 2,400

7,30,000 7,30,000

The partners had taken out a life policy on their joint lives for Rs.1,00,000, charging the

premium to Profit and Loss Account as and when paid. The present surrender value of their policy is Rs.36,000. On 1st Feb, 2004, D was introduced as a partner, bringing in Rs. 1,25,000 in cash as his capital and a further Rs.30,000 for his share of goodwill. He was to take 1/6th share of profits, the old partners sharing the balance in the proportions of 8;4:3. It was decided that no account for life policy was to be raised in the books, but the necessary adjustment in this respect was to be made through their current accounts. The value of the policy was to be taken at the present surrender value with an addition of 10% thereof. Make the necessary journal entries to record the above transactions and prepare the opening Balance Sheet of the new firm. Question No. 27 A and B are partners in a firm sharing profits and losses in the ratio of 3:2. On 31st march,2009, their Balance Sheet was as under:-


Sundry Creditors 70,000 Bank 40,000

Capital accounts Debtors 1,20,000

A 1,50,000 Stock 60,000

B 80,000 Furniture 50,000

Goodwill 30,000

3,00,000 3,00,000

On the above date C is admitted as a partner. A surrender 1/6th of his share and B 1/3rd of his share in favour of C. goodwill is valued at Rs. 1,20,000. C brings in only ½ of his share of goodwill in cash and rs.1,00,000 as his capital. Following adjustments are agreed upon:-

1) Stock is to be reduced to rs.56,000 and furniture by Rs. 5,000. 2) There is an unrecorded asset worth Rs. 20,000. 3) One month’s rent of Rs 15,000 is outstanding. 4) A creditor for goods purchase for Rs. 10,000 had been omitted to be recorded although the

gods had been correctly included in stock. 5) Insurance premium amounting to Rs.8,000 was debited to P/L A/c , of which Rs. 2,000 is related

to the period after 31st March,2009. You are required to prepare Revaluation Account, Partners capital Accounts and the Balance sheet of the new firm. Also calculate the new profit sharing ratio.

Partnership Accounts (Retirement & Death of partner) Question 1 X, Y and Z are partners having capita of Rs.1,50,000, Rs.2,00,000 and Rs.1,00,000. The profit/loss are being shred in capital ratio. The following revaluations are done on the retirement of Z. In the balance sheet debtors exist Rs.80,000 and provision for doubtful debts Rs.5,000. What entries will be passed in the following cases:

(a) Provision for doubtful debts is to be increased to 10% (b) Provision for doubtful debts is to be increased by 2% (c) Provision for doubtful debts is required at 5% (d) Bad Debts are Rs.3,000 and provision for doubtful debts is required at 10% (e) Debtors are found to be 100% good to the extent of 78,000 and accordingly provision is to be

maintained. Question 2 A, B and C are partners in 2:2:1 ratio. Their balance sheet as on 31-03-2009 was as follows.

BALANCE SHEET


Capital: A B C

30,000 25,000 20,000

Goodwill 40,000

Creditors 15,000 Plant 20,000

Gratuity Payable 20,000 Stock 15,000

Debtors 25,000

Cash 10,000

1,10,000 1,10,000

B retired on this date and following decisions were taken: (a) Goodwill is valued at Rs.30,000. (b) 1/3 of stock is valued at Rs.4,700 (c) A customer owing Rs.3,000 was declared insolvent. (d) One supplier has surrendered his claim of Rs.1,000 due to defective supply. B will be paid after two years. Prepare Revaluation account, Capital account and Balance Sheet. Question 3 X, Y and Z were partners sharing profit in proportion of 3:2:1. Their Balance Sheet on 31-03-2009 was as follows.

BALANCE SHEET


Capital: X Y Z

21,100 14,000 12,000

Building 16,000

Reserve 6,000 Plant 24,000

Bills Payable 2,000 Motor Car 6,000


Debtors 7,000 Less Provision. 1,000

6,000

Cash at Bank 1,100

63,100 63,100

X retires on that date on the following terms:

(i) The goodwill of the fir is to be valued at Rs.12,000 (ii) Stock and Building are to be appreciated by 10% (iii) Plant and Motor Car are to be depreciated by 10%

(iv) Liability for the payment of gratuity to worker Rs.4,800 is not yet recorded in the books, but the same is to be provided for now.

(v) Provision on debtors no more required. (vi) The amount payable to X is to be paid in four equal annual instalments beginning from 1-04-

2009 with interest at 10% p.a. You are required to prepare:

1) Revaluation account 2) Partner’s capital accounts 3) New Balance Sheet of Y and Z and X’s loan account till it is finally paid.

Question 4 The balance sheet of M, N and O who are sharing profit and losses in the proportion of one–half, one-third and one-sixth respectively was as follows on 31-03-2007.

BALANCE SHEET


Bills Payable 6,400 Cash in hand 150

Sundry creditors 12,500 Cash at bank 25,500

Capital M N O

40,000 25,000 20,000


Profit and loss a/c 4,500 Book debts 17,8100

Stock 22,300

Furniture 3,500

Plant & Machinery 9,750

Buildings 24,000

1,08,400 1,08,400

M retires from the business from 1-4-2007 and his share in the firm is to be ascertained on a revaluation of the assets as follows: Stock Rs.20,000, Furniture Rs.3,000, Plant and Machinery Rs.9,000, Building Rs.20,000, Rs.850 are to be provided for doubtful debts. The goodwill of the firm is agreed to be valued at Rs.6,000. M is to be paid Rs.11,050 in cash on retirement and the balance in three equal yearly instalments with interest at 5% per annum. Pass the journal entries, show the necessary accounts required to give effect to the above, balance sheet of the continuing partners and the account of M till it is finally closed. Question 5 The following is the balance sheet of Jain, Gupta and Malik as at March 31, 2009.

BALANCE SHEET


Creditors 19,800 Land and Buildings 26,000

Telephone bill outstanding 300 Bonds 14,370

Accounts payable Cash 5,500

Accumulated profits 8,975 Bills receivable 23,450

Capital accounts Jain Gupta Malik

40,000 60,000 20,000

Sundry Debtors 26,700

Office Furniture 18,250

Stock 18,100

Plant and Machinery 20,230

Computers 13,200

1,65,800 1,65,800

The partners have been sharing profits in the ratio of 5:3:2. Malik decides to retire from business on April 1, 2009 and his share in the business is to be calculated as per the following terms of revaluation of assets and liabilities: Stock Rs.20,000, Office furniture Rs.14,250, Plant and Machinery Rs23,550, Land and Building Rs.20,000 A provision of Rs.1,700 to be created for doubtful debts. The goodwill of the firm is valued at Rs.9,000. The continuing partners agreed to pay Rs.16,500 as cash on retirement of Malik, to be contributed by continuing partners in the ratio of 3:2. The balance in the capital account of Malik will be treated as loan. Prepare revaluation account, capital accounts, and balane sheet of reconstituted firm.

Question 6 Ram and Co. is a partnership firm with Ram, Vijay and Shyam as partners sharing profits and losses in the ratio of 5:3:2. The balance sheet of the firm on 31st March, 2009 is as under:

BALANCE SHEET


Ram’s capital 80,000 Land and Buildings 2,10,000

Vijay’s capital 20,000 Plant and Machinery 1,30,000

Shyam’s capital 30,000 Furniture 40,000

General Reserve 20,000 Investments 12,000

Long term loans 3,00,000 Stock 1,26,000

Bank overdraft 44,000 Debtors 1,39,000

Trade Creditors 1,13,000

Workmen compensation fund 50,000

6,57,000 6,57,000

It was mutually agreed that Vijay will retire from partnership, and for this purpose the following adjustments are to be made:

(i) Goodwill is to be valued at Rs.1 lakh but the same will not appear as an asset in the new firm. (ii) Land and Building and Plant and machinery are to be depreciated by 10% and 5% respectively. (iii) Investments are to be taken over by Vijay, at Rs.15,000. (iv) Provision of 20% is to be made on debtors to cover doubtful debts. (v) There is a liability of Rs.10,000 on a joint life policy of Rs.1,00,000 was realized.

Ram and Shyam will share profits equally. The amount due to Vijay is to be transferred to his loan account. Required : Prepare Revaluation account, capital accounts of partners and Balance Sheet of the reconstituted firm. Question 7 P, Q and R were partners sharing profits and losses in the ratio of 5:3:2 respectively. They had taken out and joint life policy of the face value of Rs.20,000. On 31st March, 2009 its surrender value was Rs.4,000. On this date the balance sheet of the firm stood as follows:

BALANCE SHEET


Sundry Creditors 5,300 Fixed assets 25,000

Expenses outstanding 700 Stock 11,000

Reserve 3,000 Book debts 9,000

Capitals: P Q R

20,000 10,000

8,000

Cash at Bank 2,000

47,000 47,000

On this date Q decided to retire and for the purpose

(i) Goodwill was valued at Rs.15,000 (ii) Fixed assets were valued at Rs.30,000 (iii) Stock was considered as worth Rs.10,000 (iv) Q was to be paid through cash brought in by P and R in such a way as to make their capitals

proportionate to their new profit sharing ratio which was to be 3:2 respectively. The joint life policy was not to appear n the balance sheet. Record these matters in the journal of the firm and prepare the resultant balance sheet. Question 8 Albert, Boris and Cyril are partners sharing profits and losses in the ratio of 3:2:1 and their balance sheet as on 31st March, 2009 stood as under:

BALANCE SHEET


Albert’s capital 50,000 Building 70,000

Boris’s capital 50,000 Machinery 25,000

Cyril’s capital 50,000 Stock 32,000


Bank 25,000

1,67,000 1,67,000

Albert died on 1st July, 2009 and the following decisions were taken by the surviving partners. According to the partnership deed, his executors were entitled to:

(i) The deceased partner’s capital as appearing in the last balance sheet and interest thereon at 6% per annum upto the date of death.

(ii) His share of profit for the period he was alive based on the figures of 31st March 2009. (iii) Goodwill according to his share of profit to be calculated by taking twice the amount of the

average profit of the last three years. The profits of the previous years were: 31st March 2009 Rs.11,000 31st March 2008 Rs.15,000 31st March 2007 Rs.10,000

(iv) Assets were to be revalued : Building Rs.80,000

Stock Rs.30,000 Provision for bad debts @10% Assume that all the above changes are to be incorporated in the new firm and are not to be written off, prepare the Revaluation account, partners capital accounts and a Balance sheet as on 1st July 2009. Question 9 Akhil, Nikhil and Sunil were partners sharing profits and losses equally. Following was their Balance Sheet as on 31st March 2009.

BALANCE SHEET


Trade creditors 4,000 Building 20,000

General Reserve 4,500 Plant and Machinery 8,000

Capitals: Akhil Nikhil Sunil

19,500 12,000

8,000

Stock 3,500

Debtors 8,000

Bank 8,500

48,000 48,000

Sunil died on 1st August 2009. The partnership deed provided that the executors of deceased partner was entitled to:

(i) Balance of partner’s capital account and his share of accumulated reserve. (ii) Share of goodwill calculated on the basis of three times the average profits of last four years.

Goodwill account is not to be raised. (iii) Share of profit from the closure of the last accounting year, till the date of death on the basis of

profit of the preceeding completed year before death.

(iv) Interest on deceased’s capital @ 6% p.a. Rs.5,000 would be paid to deceased executors immediately and the balance was to be kept in his loan account. Profits and losses for the preceding year’s were 2006- Rs.8,000 profit, 2007- Rs.10,000 loss, 2008- Rs.12,000 profit, 2009-18,000 profit. Pass the necessary journal entries and prepare Sunil’s Capital account and Sunil’s executor’s account. Question 10 Nithya, Sathya and Mithya were partners sharing profits and losses in the ratio of 5:3:2. Their Balance Sheet as on December 31, 2008 was as follows.

BALANCE SHEET


Creditors 14,000 Investments 10,000

Reserve Fund 6,000 Goodwill 5,000

Capitals: Nithya Sathya Mithya

30,000 30,000 20,000

Premises 20,000

Patents 6,000

Machinery 30,000

Stock 13,000

Debtors 8,000

Bank 8,000

1,00,000 1,00,000

Mithya dies on 1-5-2009. The agreement between the executors of Mithya and the partners stated that:

(i) Goodwill of the firm be valued at 2 ½ times the average profits of last four years. The profits of four years were 2005- Rs.13,000, 2006- Rs.12,000, 2007- Rs.16,000, 2008- Rs.15,000.

(ii) The patents are to be valued at Rs.8,000, Machinery Rs.25,000 and premises Rs.25,000. (iii) The share of profit of Mithya should be calculated on the basis of the profit of 2006.

(iv) Rs.4,200 should be paid immediately and the balance should be paid in 4 equal half-yearly instalments carrying interest at 10%. Record the necessary journal entries to give effect to the above and write the executors account till the amount is fully paid. Also prepare the balance sheet of Nithya and Sathya as it would appear on 1-5-2009 after giving effect to the adjustments. Question 11 A, B and C were partners in a firm sharing profits and losses in the ratio of 5:3:2 respectively. A died on 28th February, 2009. The Balance sheet on that date was as follows:

BALANCE SHEET


A’s capital 12,000 Goodwill 6,000

B’s capital 16,000 Machinery 25,000

C’s capital 12,000 Furniture 6,000

General reserve 12,000 Stock 9,000


Cash 3,000

74,000 74,000

The firm had a joint life policy in the names of partners for insured value of Rs.60,000. The premium paid on policy was debited to profit and loss account. The partnership deed provided that on the death of a partner the assets and liabilities are to be revalued. The assets and liabilities were revalued as follows on A’s death:

a) Machinery Rs.45,000 and furniture Rs.7,000 b) A provision of 10% was created for doubtful debts. c) A provision of Rs.15,000 was made for taxation. d) The goodwill of the firm was valued at Rs.15,000 on A’s death. e) Death claim for policy was realized in full.

The amount payable to A was transferred to his executors account. You are required to prepare: Revaluation account Capital accounts of partners, and

Balance Sheet of B and C. Question 12 The following is the Balance Sheet of Ram, Mohan and Sohan as on 31st March, 2007.

BALANCE SHEET


Sundry creditors 11,500 Tools 3,000

Reserve Fund 7,500 Furniture 18,000

Ram’s capital 20,000 Stock 16,000

Mohan’s capital 10,000 Debtors 12,000

Sohan’s capital 8,500 Cash at bank 8,000

Cash in hand 500

57,500 57,500

Ram, Mohan and Sohan shred profits and losses in the ratio of 2:2:1. Sohan died on 31st March, 2007. Under the partnership agreement the executors of Sohan was entitled to ;

a) Amount standing to credit of his capital account b) Interest on capital which amounted to Rs.150 c) His share of Goodwill Rs.5,000 d) His share of profit from the closing of last financial year to the date of death which amounted

to Rs.750 Sohan’s executors were paid Rs.1,775 on 1st April, 2007 and the balance in four equal yearly instalments from 31-3-2007 with interest @6% p.a. Required: Pass necessary journal entries and draw up Sohan’s account to be rendered to his executors and Sohan’s Executor’s account till it is finally paid.

Partnership Accounts (Dissolution of Partnership firm) Question 1 Surabhi and Sakhi who share profits and losses in the ratio of 5:3 agree to dissolve the firm on 30th September, 2004. The position of the firm is indicated by the following Balance Sheet.


Sundry Creditors 9,316 Goodwill 4,000

Loan from Surabhi 3,684 Fixtures 1,000

Loan from Sakshi 400 Machinery 2,000

Capitals Surabhi Sakshi

8,000 5,400

Stock 9,200

Due from Customers 10,000

Cash at Bank 200

Accumulated Loss 400

26,800 26,800

The assets were realized as follows: Goodwill Rs.2,000, Fixtures Rs.800, Stock Rs.8,500, Debtors Rs.9,200, Sakshi took over the Machinery at Rs.2,100. Creditors were paid Rs.9,290 in full settlement. Realisation expenses amounted to Rs.150. A bill for Rs.160 due for sales tax was received during the course of realization and this was paid. Required to prepare Realisation Account, Capital Accounts of Partners, and Bank account. Question 2 X, Y and Z are in partnership sharing profits and losses equally. On 31st March, 2004 their Balance Sheet was as follows:



Y’s loan account 2,500 Debtors 12,500

Bills payable 500 Stock 29,000

Reserve Fund 3,000 Machinery 5,000

X’s Current account 1,500 Z’s current account 3,000

Y’s Current account 1,500 Goodwill 10,000

X’s Capital 20,000 Furniture 1,000

Y’s capital 10,000

Z’s capital 10,000

62,000 62,000

On the date they dissolved their partnership and the following arrangements was made among the partners:

a) X agrees to pay creditors. b) Z takes over the stock at an agreed valuation of Rs.25,000 c) Z takes over Goodwill at Rs.15,000 d) Bills payable were cleared off, Rs.10 being allowed for discount. e) The remaining assets were auctioned and realized Rs.15,000. Expenses of relisation amounted

to rs.120. f) Y’s loan was also paid off.

Required: Prepare Realisation Account, Bank Account, Current Accounts, Partners Capital Account. Question 3 Ritika, Sanyukta and Neha are partners in a business dividing profits equally. Their Balance Sheet as at 31st March, 2004 is as follows.


Creditors 10,000 Furniture 2,100

Bills Payable 2,000 Stock 15,400

Capital : Ritika Sanyukta Neha

12,000

9,000 1,000

Sundry Debtors 18,000 Less: Provision 900

17,100

Current accounts Ritika Sanyukta

2,000 2,000

Neha’s current a/c 5,000

Reserve fund 3,000 Cash at Bank 1,400

41,000 41,000

Neha is insolvent and her estate pays Rs.1,800 to the firm. The Partnership is consequently dissolved and Sundry Debtors, Stock and Furniture realized Rs.23,600, Sundry Creditors were paid at Rs.8,000. Required : Prepare ledger accounts to close the books of the firm in accordance with decision in Garner vs. Murray. Question 4

Following is the Balance Sheet of Sun, Moon and Earth as on 31st March, 2004



Reserve Fund 15,000 Stock 20,000

Capital accounts : Sun Moon

25,000 15,000

Machinery 20,000

Debtors 10,000


Earth’s Capital 9,000

75,000 75,000

Earth is insolvent but his estate pays Rs.2,000. It is decided to wind up the partnership firm. The assets realized Sundry Debtors Rs.7,500, Bills Receivable Rs.7,000, Stock Rs.16,000 and Plant and Machinery Rs.14,000. The cost of winding up came to Rs.2,500. Required: Give necessary accounts to close the books of the firm (i) When capitals are fixed and (ii) When capitals are fluctuating. Question 5 Cloud, Storm and Rain are partners in a firm sharing 3:2:1. On 31.3.2004 their Balance Sheet was as under:


Cloud’s Capital 80,000 Premises 40,000

Storm’s Capital 60,000 Furniture 20,000

Sundry Creditors 40,000 Debtors 80,000

6% Cloud’s loan 20,000 Stock 40,000

Rain’s Capital 20,000

2,00,000 2,00,000

On the same date the firm is dissolved. Assets realized Rs.1,20,000 and dissolution expenses Rs.1,000. Cloud’s Loan was paid together with interest and creditors discharged at 10% discount. Rain became insolvent and he could not fetch anything towards his debts. Close the books of firm. Question 6 A, B and C are partners in a firm. Their Balance Sheet as on 31st March, 2004 is given as under:


Sundry Creditors 30,000 Bank account 6,000

Bills Payable 18,000 Furniture 12,000

Reserve Fund 9,000 Machinery 30,000

P & L A/c 4,500 Debtors 30,000

Capitals: A B

12,000

9,000

B’s Capital A/c

4,500

82,500 82,500

The partnership is dissolved due to insolvency of B who is unable to contribute anything in the payment of his debt. Machinery and furniture realized Rs.22,500 and Rs.4,800 respectively. Rs.18,000 were recovered from debtors. Rs.28,500 were paid to creditors in full settlement. Bills Payable were paid at a discount of 5%. Dissolution expenses were Rs.200. Required: Prepare necessary accounts in the books of the firm when capitals are floating. Solve the solution according to Garner Vs Murray and also according to Indian Practice. Question 7 X, Y and Z were partners in a firm sharing profits and losses in the ratio of 1:2:2. The Balance Sheet of the firm as on 30th June, 2004 on which date the firm was dissolved, is given below:

Liabilities Rs Assets Rs.

X’s Capital 20,000 Land and Building 4,00,000

Y’s Capital 3,60,000 Machinery 2,50,000

Z’s Capital 2,40,000 Furniture 1,80,000

Bills Payable 20,000 Investments 60,000

Bank Loan 2,50,000 Debtors 40,000

Creditors 55,000 Bills Receivable 12,0000

Cash in hand 3,000

9,45,000 9,45,000

The assets realized and liabilities paid-off are as under:

a) Land and Building, Investments, Debtors and Bills Receivable realized Rs. 3,50,000, Rs.40,000, Rs.38,000 and Rs.10,000 respectively.

b) Machinery and Furniture were taken over by Z at Rs.2,25,000 and Rs.1,60,000 respectively. c) Bank loan, Bills payable and creditors were paid off in full.

X became insolvent and could not contribute anything to the firm. The deficiency of X’s capital was ultimately borne by Y and Z as per the method applied in Garner Vs. Murray case. Required: Prepare a Realisation Account, Partners’ Capital Accounts and a Cash Account to close the books of the firm, showing the calculations clearly. Question 8 A, B, C and D were partners in a firm. Their Balance Sheet on the date of dissolution was as follows:


A’s Capital 20,000 Cash in hand 45,000

B’s Capital 11,500 C’s Capital 19,000

Creditors 14,000 D’s Capital 5,000

Realisation A/c 20,000

69,000 69,000

C is insolvent and cannot contribute anything. Show the partners capita accounts assuming :

a) Garner Vs Murray applicable. b) Garner Vs Murray is not applicable and section 48 of Indian Partnership Act 1932, is to be

applied. All calculations to be done to the nearest rupee. Question 9 Following is the Balance Sheet of M/s Techtronix Limited as on 31st December, 2000.



Ram’s Loan 13,500 Stock 30,000

Capitals : Ram Rahim

6,750 4,050

Debtors 9,000

Furniture 4,050

Building 20,400

Robert’s Capital 13,500

78,300 78,300

The firm was dissolved as all the partners became insolvent. Rahim and Robert were not able to contribute anything whereas Ram contributed Rs.2,025 from his estate. Sundry assets realized Rs.43,200. Realisation expenses were Rs.4,050. Prepare necessary accounts to close the books of the firm. Question 10 Alton, Bowers and Crann dissolve partnership, and the Realisation of their assets resulted in a deficiency of Rs.25,000. The partners’ capital accounts stood as follows: Alton Rs.24,000, Bowers Rs.16,000, Crann’s capital account was in debit to the extent of Rs. 10,000. There was also a general reserve of Rs.15,000 followed by profit and loss account debit balance of Rs20,000. Crann was unable to contribute towards the deficiency. Prepare partners’ capital accounts, showing how the available cash should be allocated between Alton and Bowers. The partners shared profits and losses in the ratio of 2:2:1. Question 11 Field, Meadow and Park were in partnership sharing profit and losses equally. Their Balance Sheet as at 30th June, 2004 was as under:


Capital Accounts: Field Meadow Park

30,880 10,080 15,760


Sundry Creditors 14,176 Furniture and Fixtures 3,390

Bills Payable 6,720 Sundry Debtors 11,330

Joint Life Policy 9,684


Stock in Trade 23,950

Cash at Bank 3,360

77,616 77,616

The value of Joint Life Policy shown in the Balance Sheet represents the surrender value of the policy taken by the firm for Rs.24,000 to enable the settlement of accounts with the partner’s estate in case of death of a partner during the continuance of the firm. Field died on 1st July, 2004. The remaining partner could not arrive at any understanding with legal representatives of Field. Consequently it was decided that the firm would be dissolved, subject to following adjustments:

a) The sum assured for Joint Life Policy was realized from the insurance company. b) Plant and Machinery realized at 70% of the book value. c) Furniture and Fixtures were taken over by the partner Park at a market value of Rs.2,000. d) Bills receivable and sundry debtors had to be discounted at 5%. e) Stock in trade comprised :

(i) Easily marketable items 70% of the total inventory which was realized in full. (ii) Obsolete items 10% of the total inventory which had to be discarded (iii) The rest of the items in the stock realized 50% of their book value.

f) A liability for Rs.1,000 which had not been recorded in the books of the firm had to be settled by the firm before its dissolution You are required to prepare Realisation account. Question 12 Prakash, Kiran and Rishab are partners in a firm sharing profits and losses in the ratio of 3:2:1. Their Balance Sheet as on 31st March, 2006 stood as follows.

BALANCE SHEET As on 31st December, 2006


Creditors 25,000 Cash at Bank 2,000

Bills Payable 10,000 Debtors 20,000 Less: Provision 2,000

18,000

General Reserve 27,000 Stock 25,200

Workmen’s compensation fund 3,000 Investments 20.000

Mrs. Prakash’s loan 5,000 Bills Receivable 8,000

Capitals: Machinery 60,000

Prakash Kiran

60,000 40,000

Goodwill 6,000

Profit and Loss A/c 19,800

Rishab’s Capital A/c 11,000

On the above date the firm was dissolved and the following transactions took place:

a) The assets were sold off for the following amounts: Stock Rs.20,000, Debtors Rs.15,000, Machinery Rs.40,000, Investments Rs.18,000.

b) Kiran took over the bolls receivable at Rs.7,000 and bills payable at book value. c) There was an unrecorded asset of Rs.4,000 which was sold for Rs.1,200. d) Prakash agreed to pay off his wife’s loan. e) A contingent liability for a bill discounted at Rs.8,000 was settled by Prakash. f) Creditors were settled at a discount of 10% and goodwill realized Rs.5,000. g) Realisation expenses were Rs.2,100 which were met by Kiran.

You are required to: (i) Pass necessary Journal entries (ii) Prepare the Realisation account on dissolution of firm. (iii) Prepare Capital accounts of partners.

Question 13 Prakash, Kiran and Rishab are partners in a firm sharing profits and losses in the ratio of 3:2:1. Their balance sheet as on 31st march 2006 stood as follows.


Creditors 25,000 Cash at Bank 2,000

Bills payable 10,000 Debtors 20,000

General Reserve 27,000 Less: P.B.D 2,000 18000 Workmen’s compensation fund 3,000 Stock 25,200

Mrs. Prakash loan 5,000 Investment 20,000

Prakash Capital 60,000 Bills Receivable 8000

Kiran’s Capital 40,000 Machinery 60,000

Goodwill 6,000

Profit and Loss a/c 19,800

Rishab’s Capital ac 11,000

1,70,000 1,70,000

On the above date the firm was dissolved and the following transactions took place. (a) The assets were sold off for the following amounts: Stock Rs.20,200 Debtors Rs.15,000,

Machinery Rs.40,000 and investments Rs.18,000. (b) Kiran took over Bills Receivable at Rs.7,000 and the bills payable at book value. (c) There was an unrecorded asset of Rs.4,000 which was sold for Rs.1,200. (d) Prakash agreed to pay off his wife’s loan. (e) A contingent liability for a bill discounted at Rs.8,000 was settled by Prakash. (f) Creditors were settled at a discount of 10%. And the goodwill realized Rs,5,000

(g) Realisation expenses were Rs.2,100 which were met by Kiran. You are required to pass the necessary Journal entries prepare the realization account on the dissolution of the firm and prepare the capital accounts of the partners. Question 14 Bale and Yale are equal partners of a firm, the balance sheet of which is given below as on 31.3.2007, the date on which they decided to dissolve the partnership. Balance sheet as on 31.3.2007


Bales capital 50000 Building 45000

Yale capital 40000 Machinery 15000

General reserve 8000 Furniture 12000

Bales loan 3000 Debtors `8000

Creditors 14000 Stock 24000

Bank 11000

115000 115000

i) The assets realized were as follows: Stock 22000 Debtors 7500 Machinery 16000 Building 35000

ii) Yale took over the furniture at Rs 9000 iii) Bale agreed to accept Rs 2500 in full settlement of his loan account. iv) Dissolution expenses amounted to Rs 2500.

Prepare: Realization account Capital accounts of partners Bales loan account Bank account Question 15 Amar, Akbar and Antony were partners sharing profits and losses as: Amar 40%, Akbar 40%, and Antony 20%. Their balance sheet as on 31st December, 2006 was as follows: Sundry creditors 9000 Land 8000 Amar’s loan 7000 Plant 17000 Reserve 5000 less dep 1000 16000 Amar capital 24000 Loose tools 3000 Akbar capital 20000 Stock 20000 Antony capital 15000 Debtors 30000 less p.b.d.d 2000 28000 Cash at bank 5000 -------- --------- 80000 80000

-------- --------- The partners decided to dissolve the firm with effect from 31st December 2006. In order to give effect to this decision, draw up a realization account, partner’s capital accounts and the bank accounts after taking into consideration the following:

(a) Amar agreed to take over part of the business for which he agreed to pay Rs 10000 for goodwill, which had not been previously valued.

(b) Amar also took over land at book value and plant at Rs 12000. (c) Loose tools, stock and debtors realized Rs 2000, Rs 15000, and Rs 22000 respectively. (d) Sundry creditors were paid off at a discount of 10 %. (e) The expenses of realization were Rs 1500. (f) A contingent liability of Rs 1000 which occurred during the period was duly paid off

Question 16 The following was the balance sheet of Fox and Wolf as on 31st March, 2007, when they decided to dissolve the firm:


Fox capital 30,000 Cash at bank 4,500

Wolf capital 24,000 Stock 18,000


Mrs. wolf loan 40,000 Furniture 12,000

Bills payable 23,000 Machinery 1,06,500

Profit and loss account 22,500

2,05,500 2,05,500

i) The assets realized: Stock Rs.10,500 Debtors Rs.27,750 MachineryRs.88,500

ii) Furniture was taken over by Fox at Rs.7,500. Bills payable were paid in full, while creditors were settled at 2% discount. Mrs. Wolf accepted Rs.38,500 in full settlement of her loan account.

iii) There was a claim for damages against the firm for Rs.4,000 which was settlement at Rs.2,000. iv) One customer, whose account was written off as bad, now paid Rs 1800 which is not included

in Rs.27,750 given above. Actual realization expenses amounted to Rs 2100. Prepare realization account, capital accounts, bank account to close the firm. Question 17 A, B, C and D were partners in a firm. Their balance sheet on the date of dissolution was as follows:


A’s capital a/c 20,000 Cash in hand 45,000

B’s capital a/c 15,000 C’s capital 19,000

Creditors 14,000 D’ capital 5,000

Realization account 20,000

69,000 69,000

C is insolvent and cannot contribute anything. Show the partners capital accounts assuming; 1. Garner vs. Murray is applicable. 2. Garner vs. Murray is not applicable.

Question 18 X, Y and Z were partners in a firm sharing profits and losses in the ratio of 1:2:2. The balance sheet of the firm as on 30th June, 2007 on which date the firm was dissolved, is given below: Balance sheet as on 30th June, 2007


X’s capital 20,000 Land and building 4,00,000

Y’s capital 3,60,000 Machinery 2,50,000

Z’s capital 2,40,000 Furniture 1,80,000

Bills payable 20,000 Investments 60,000

Bank loan 2,50,000 Debtors 40,000


Cash in hand 3,000

9,45,000 9,45,000

The assets realized and the liabilities paid off are as under: i) Land and building, investments, debtors and bills receivable realized Rs 350000, Rs 40000,

Rs38000 and Rs 10000 respectively. ii) Machinery and furniture were taken over by Z at Rs 225000 and Rs 160000 respectively. iii) Bank loan, bills payable and the creditors were paid off in full.

X became insolvent and could not contribute anything to the firm. The deficiency of X’s capital accounts was ultimately bore by Y and Z as per the method applied in the garner vs Murray case. Prepare a realization account, partner’s capital accounts and a cash account to close the books of the firm, showing the calculations clearly. Question 19 Alton, Bowers and Crann dissolved partnership, and the realization of their assets resulted in a deficiency of Rs 25000. The partner’s capital accounts stood as follows: Alton Rs.24,000; Boers Rs.16,000 Cranns capital account was in debit to the extent of Rs.10,000. There was also a general reserve of Rs.15,000 followed by a profit and loss account debit balance of Rs.20,000. Crann was unable to contribute towards the deficiency. Prepare partners capital accounts, showing how the available cash should be allocated. Prepare partners capital accounts, showing how the available cash should be allocated between Alton and Bowers. The partners shared profits and losses in the ratio of 2:2:1. Question 44 Following is the balance sheet of M/s Tektronix, a partnership firm as on 31st December, 2006:



Rams loan 13,500 Stock 30,000

Rams capital 6,750 Debtors 9,000

Rahims capital 4,050 Furniture 4,050

Building 20,400

Roberts capital 13,500

78,300 78,300

The firm was dissolved as all partners became insolvent. Rahim and Robert were not able to contribute anything where as Ram contributed Rs.2,025 from his estate. Sundry assets realized Rs.43,200. Realization expenses were Rs.4,050 prepare necessary to close the books of the firm. Question 22 A, B and C were in partnership sharing profits and losses in the ratio of 3:2:1. The Balance Sheet o f the firm on the date of dissolution was as follows: - Rs. Rs. Sundry Creditors 22,000 Cash at Bank 7,000 General Reserve 12,000 Sundry Debtors 20,000 Less: Prov. for D.D 1,000 19,000 Capital Accounts ‘A’ 84,000 Stock 28,000 ‘B’ 50,000 Furniture 6,000 Plant and Machinery 34,000 Buildings 60,000 Capital A/c –C 14,000 1,68,000 1,68,000 Plant and Machinery was sold for Rs.23,420, and building was sold for Rs.33,200. Stock was sold for 20% less than its book value. Bad debts amounted to Rs.1,620. Furniture was taken over by A for Rs. 4,500. Discount of Rs. 800 is received on payment to creditors. Outstanding Creditors not provided for amounting to Rs.2,500 were also paid. The expenses of realization amounted to Rs. 1,200. C became insolvent and he could pay only 20 paise in the rupee. Prepare Ledger Accounts to close the books of the firm following Garner Vs. Murray Rule.

Company Accounts (Share Capital) Question 1 A company made an issue of 10,000 shares of Rs. 10 each payable as follows: Rs.3 on application Rs.2 on allotment Rs.4 on first call Rs.2 on second call. All money was received except from a shareholder holding 200 shares on which only application and allotment money was received. Pass necessary entry on account of the forfeiture if :

(a) Shares are forfeited after first call. (b) Shares are forfeited after second call.

Question 2 Sugandha Exports Limited invited applications for 10,000 Equity Shares of Rs.10 each for public subscription. The amount payable on shares is payable as under: On application Re.1 per share On allotment Rs.2 per share On first call Rs.3 per share On second call Rs.4 per share. All money payable on application, allotment and calls have been duly received with the following exceptions: ‘A’ who holds 100 shares failed to pay the money on allotment and calls. ‘B’ to whom 50 shares have been allotted failed to pay the money on first and final call. ‘C’ who holds 30 shares, has not paid the amount due on final call. The shares of ‘A’, ‘B’ and ‘C’ were forfeited. Required: Pass the journal entries in the books of Sugandha Exports Ltd, including bank transactions.

Question 3 Gautam Plastics Ltd., had an authorized capital of Rs.5,00,000 divided into shares of Rs.20. On these, 8,000 shares were issued as fully paid in payment of building purchased. 16,000 shares were subscribed for by the public and, during the year 2001, Rs.10 per share was called up payable Rs.4 on application, Rs.2 on allotment, Rs.2 on first call and Rs.2 on second call. The amounts received in respect of these shares were as follows: On 12,000 Shares full amount called On 2,500 Shares Rs.8 per share, On 1,000 Shares Rs.6 per share, On 500 Shares Rs.4 per share. The directors forfeited 1,500 shares on which less than Rs.8 per share has been paid. Give journal and cash book entries recording the capital transaction of the company. Question 4 A company makes an issue of 50,000 equity shares of Rs.10 each at 10% discount (allowed at the time of allotment) the net amount is payable as follows: On application and allotment Rs.5 On first call Rs.2 On final call Rs.2 A share holder holding 200 shares did not pay final call money. His shares were forfeited. These shares were re-issued to Mr. C at Rs.7 per share. Pass journal entries in respect of forfeiture and reissue of shares only. Question 5 1. Novelty Ltd., forfeited 150 shares of Rs.10 each issued at a discount at 10% discount. The amount was payable as follows : On application Rs.2 On allotment Rs.3 On final call Rs.4 Final call was not received on these shares. 2. Blue Print Ltd., forfeited 200 shares of Rs.20 each allotted to Harneet. These shares were issued at Re.1 discount. Final call of Rs.3 has not been called up. Harneet has not paid first call money of Rs.5 per share. Record above in journal.

Question 6 X Ltd., issued shares of Rs.10 each at 10% premium payable as follows: On application Rs.2 On allotment Rs.3 (including premium) On first call Rs.2 On final call Rs.4 Mahesh who was holding 50 shares did not pay his allotment and first call and his shares were forfeited. Suresh who was holding 30 shares did not pay first call and his shares were also forfeited. Journalise the transactions relating to forfeiture of shares. Question 7 Taxmeco Limited had issued capital of 2,00,000 Equity shares of Rs.20 each, on which Rs.17.50 per share had been called up. Calls-in-arrears in respect of 200 shares held by P amounted to Rs.1,000. By a resolution of the Board of Directors, these 200 shares were forfeited and reissued at Rs.12.50 per share paid in consideration of Rs.2,000 due from the company and immediate payment of Rs.5 per share in cash to make them Rs.17.50 per share paid. Record journal entries in the books of Taxmeco Limited to record the above. Question 8 On June 1, a limited company offered for subscription 50,000 Equity shares of Rs.100 each at a premium of Rs.20 per share payable as given below: On application Rs.20 per share On allotment (including premium Rs.50 per share Two months after allotment Rs.50 per share Applications were received for 84,000 shares. On July 1, the Directors proceeded to allot shares proportionately. Of these, applications for 4,500 shares were accompanied with full amount and hence were accepted in full and the balance allotment was made pro rata. Excess amount paid by applicants was utilized towards allotment and call money due from them. One of the applicant to whom 300 shares were allotted proportionately, failed to pay the call money. His shares were forfeited on November 30, and subsequently 200 shares issued @ Rs.130 per share. Record entries relating to these transactions in the journal of the company. Question 9 Majestic Auto Parts Ltd., issued for public subscription 60,000 Equity shares of Rs.10 each at a premium of Rs.2 per share payable as follows: With application Rs.2.50 per share

On allotment (including premium) Rs.5 per share On first call Rs.2 per share On final cal Rs.2.50 per share Application were received for 1,80,000 shares. Allotment was made on pro-rata basis. Excess money on application was adjusted against the amount due on allotment. X, to whom 2,400 shares were allotted, failed to pay the two calls. These shares were subsequently forfeited after the second call was made. Of these 2,000 shares were reissued to one Z as fully paid at Rs.7 per share. Record journal entries in the books of the company to record these transactions relating to share capital. Question 10 A limited company with a nominal capital of Rs.5,00,000 in shares of Rs.10 each issued 20,000 shares payable Rs.2.50 per share on application, Rs.2.50 per share on allotment and Rs.5 per share three months later. All moneys due were duly received, but one shareholder failed to pay the amount due on allotment on his 250 shares while another shareholder who held 100 shares paid all the amount due in full together with call money. After serving notice for non-payment, 250 shares on which allotment money was not received were forfeited and 200 forfeited shares were subsequently reissued at Rs.5 paid up for Rs.7 per share. Give journal entries in the books of the company and prepare the balance sheet. Question 11 Tara Tarini Mills Ltd., invited applications for 15,000 equity shares of Rs.10 each, payable : On application Rs.2 per share On allotment Rs.4 per share (including premium) On first call Rs.3 per share On final call Rs.2 per share. Applications were received for 20,000 shares and directors decide to deal with the application as:

(a) To refuse allotment to applicants for 2,000 shares (b) To allot on 100% basis to applicants for 6,000 shares (c) To allot the remaining shares among remaining applicants on pro-rata basis (d) To adjust the surplus applications money against the amount due on allotment.

Whole o the money was received except two calls on 75 shares, which were forfeited. Out of these 50 shares were re-issued at Rs.7 per share. Record these transactions in cash book and journal proper of the company. Question 12 Bharat Tyres Ltd., invited applications for 1,00,000 Equity shares of Rs.10 each issued at a premium of Rs.4 per share. The amount was payable as follows. On application Rs.6 (including premium Rs.2) On allotment Rs6 (including premium Rs.2)

Balance on first and final call. Applications for 1,50,000 shares were received. Allotment was made to al the applicants on pro-rata basis. Subodh to whom 200 shares were allotted failed to pay allotment and call money. Vikram to whom 100 shares were allotted failed to pay the call money. Their shares were forfeited and afterwards re-issued @ Rs.8 per share fully paid up. Pass necessary journal entries. Question 13 Kalinga Steel Tubes Limited issued a prospectus inviting applications for 2,00,000 Equity shares of Rs.10 each at a premium of Rs.2.50 per share payable as follows: With application Rs.2.50 On allotment (including premium) Rs.5 On first call Rs.2.50 On second call Rs.2.50 Applications were received for 3,00,000 shares and allotment was made on pro-rata basis. Money overpaid on applications was adjusted to the amount due on allotment. Kanta, to whom 400 shares were allotted, failed to pay the allotment money and the first call, her shares were forfeited after the first call. Shameem, to whom 600 shares were allotted, failed to pay the two calls and hence his shares were forfeited. Of the shares forfeited, 800 shares were reissued to Mary credited as fully paid for Rs.9 per share, the whole of Kanta’s shares being included. Record journal entries in the books of the company to record the above transactions relating to share capital and present the relevant items in the Balance sheet. Question 14 XY Ltd., invited applications for issuing 50,000 Equity shares of Rs.10 each. The amount payable was as follows: On application Rs.3 per share On allotment Rs.4 per share On first and final call Rs.3 per share Applications were received for 75,000 shares are pro-rata allotment was made as follows: Applicants for 40,000 shares were allotted 30,000 shares on pro-rata basis. Applicants for 35,000 shares were allotted 20,000 shares on pro-rata basis. Ramu to whom 1,200 shares were allotted out of the group applying for 40,000 shares failed to pay the allotment money. His shares were forfeited immediately after allotment. Shamu who has applied for 700 shares out of the group applying for 35,000 shares failed to pay the first and final call. His shares were also forfeited. Out of the forfeited shares, 1,000 shares were reissued @ Rs.8 per share fully paid up. The re-issued shares included all the forfeited shares of Shamu. Pass necessary journal entries to record the above transactions.

Question 15 K Ltd., has been registered with in authorized capital of Rs.2,00,000 divided into 2,000 shares of Rs.100 each of which, 1,000 shares were offered for public subscription at a premium of rs.5 per share, payable as under : On application Rs.10 On allotment Rs.25 (including premium) On first call Rs.40 On final call Rs.30 Applications were received for 1,800 shares, of which application for 300 shares were rejected outright; the rest of the applications were allotted 1,000 shares on pro-rata basis. Excess application money was transferred to allotment. All the amounts were duly received except from Sundar, holder of 100 shares, who failed to pay allotment and first call money. His shares were later forfeited, and re-issued to Shyam at Rs.60 per share Rs.70 paid up. Final call has not been made. Pass necessary Cash Book and journal entries in the books of K Limited. Question 16 Bharath Limited invited applications for issuing 2,00,000 Equity shares of Rs.10 each. The amount was payable as follows: On application Rs.3 per share On allotment Rs.5 per share On first and final call Rs.2 per share Application for 3,00,000 shares were received and pro-rata allotment was made to all the applicants on the following basis : Applications for 2,00,000 shares were allotted 1,50,000 shares on prorate basis. Bajaj who was allotted 3,000 shares out of the group applying for 2,00,000 shares, failed to pay the allotment money. His shares were forfeited immediately after allotment. Sharma who had applied for 2,000 shares out of the group applying for 1,00,000 shares failed to pay the first and final call. His shares were also forfeited. Out of the forfeited shares 3,500 shares were re-issued as fully paid up @ Rs.8 per share. The re-issued shares included all the forfeited shares of Bajaj. Required: Pass the necessary journal entries to record the above transactions. Give journal entries for forfeiture and re-issue of shares:

(i) A Ltd., forfeited 1,000 shares of Rs.10 each, Rs.7 called up, issued at a premium of 20% (to be paid at the time of allotment) for non-payment of a first call of Rs.2 per share. Out of these, 600 shares were re-issued as Rs.7 paid up for Rs.4 per share.

(ii) B Ltd. Forfeited 1,000 shares of Rs. 10 each, Rs.7 called up, issued at a premium of 20% ( to be paid a the time of allotment) for non-payment of allotment money of Rs. 4 per share (including premium) and first call of Rs.2 per share. Out of these, 600 shares were re-issued as fully paid for Rs. 8.50 per share. Question17 X Ltd., earned a profit of Rs.18,00,000 for the year ending 31st March, 1995 after making provision for depreciation and taxation. Rs.2,80,000 profit was brought forward from last year to this year. Following recommendations were made by the directors of the company to appropriate this profit:-

(i) To pay Rs. 1,20,000 as bonus to the employees of the company; (ii) To transfer Rs.8,40,000 to General Reserve ; (iii) To propose dividend @12% on equity shares ; (iv) To transfer Rs.75,000 to staff gratuity fund; (v) To transfer Rs.60,000 to Development Rebate Reserve; (vi) To transfer Rs.2,00,000 equity shares of Rs.10 each fully paid. (vii) Transfer Rs.80,000 from exempt profit reserve account to profit and loss appropriation account

on 31st March 1995. (viii) For the year ending at 31st March, 1995 Directors transferred Rs.60,000 to dividend reserve and

Rs. 50,000 to debenture redemption fund account. Prepare Profit and Loss Appropriation Account. Question18 X Ltd. Invited applications for 20,000 shares of Rs. 10 each payable as follows: Rs.3 on Application, Rs.2 on Allotment, Rs.2.50 on First Call and Rs.2.50 on Second Call. Public applied for 30,000 shares and the allotments were made as under: To Applicants for 8,000 shares ……………………………. Full To Applicants for 16,000 shares ………………………….. 12,000 shares To Applicants for 6,000 shares …………………………….. Nil All moneys were duly received. Pass Journal Entries and Prepare Balance Sheet. Question 19 The following balances have been extracted from the books of Jennings Company Limited as at 31st December, 2004. Dr. (Rs.) Cr. (Rs.) Machinery 1,60,000 Land and Building 6,74,000 Depreciation on Machinery 16,000 Purchases (adjusted) 4,00,000 Closing Stock 1,50,000 Wages 1,20,000 Sales 10,00,000

Salaries 80,000 Bank overdraft 2,00,000 10% Debentures (issued on 1.1.04) 1,00,000 Equity share capital – 2,000 shares of Rs.100 Each – fully paid Preference share capital – 1,000, 6% shares of Rs.100 each – fully paid 1,00,000 16,00,000 16,00,000 The Board of Directors of Jennings Limited had decided to make the following appropriations:

(ii) To declare an equity dividend @ 10% on paid up capital. (iii) To pay dividend on the Preference Share Capital in full. (iv) To transfer Rs.2,00,000 to general reserve.

You are required to prepare a profit and loss account in as much detail as possible for the year ended 31st December, 2004 and the balance sheet of the company as at that date in the prescribed form. QUESTION 20 From the following information, prepare the Profit & Loss Appropriation Account of Crispin Ltd. For the year ended 31st March, 1999: Balance brought forward from last year – Rs.1,00,000 (Credit) Current year’s profit after all necessary adjustments - Rs.4,60,000. The Board of Directors at the annual general meeting approved the following appropriations:

(a) Provide 15% dividend on equity shares. (b) Provision for taxation – Rs. 15,000 (c) Dividend Equalisation Fund - Rs. 21,000 (d) Transfer to debenture redemption reserve – Rs. 18,000 (e) Rs. 20,000 to be transferred to Reserve Fund. (f) Sinking Fund - Rs. 13,000

The Capital structure of the company consisted of: (ii) 1,00,000 equity shares of Rs.10 each fully called up (calls–in–arrears Rs. 10,000) (iii) 5,000, 12% cumulative preference shares of Rs.100 each dully called up. (iv) 6,000, 13% convertible debentures of Rs.1,000 each .

Question 21 Welfare Limited issued 1,000 shares of Rs.100 each. All moneys were received except for 100 shares on which Rs.90 was received per share. These 100 shares were forfeited and 52 shares were reissued for Rs.80 each fully paid up. Show share forfeited account and balance sheet as at closing date. Question 22 Good Luck limited had offered 10,000 shares of Rs.100 each for public subscription. The amounts were payable as follows:

On application Rs 40 On allotment Rs 30 On first call Rs 20 On second call Rs 10 Such Deo who was allotted 200 shares failed to pay the amount due on allotment and both the calls. Deoki Nandan who allotted 300 shares failed to pay the amount due on both the calls. Nand kishore who was allotted 400 shares failed to pay the amount due on second call. The directors after giving prior notice forfeited the shares on 31st December 2006. You are required to show the journal entries regarding the issue of shares and forfeiture of shares and show how the share capital will appear in the balance sheet of Good Luck limited as on 31st Dec 2006. Question 23 HARDCORE COMPUTERS limited having authorised capital of 20,000 shares @ Rs.10 each, issued 15,000 shares to the public. Applications were received for 10,000 shares. The amount payable was as follows: On application Rs.3 per share On allotment Rs.4 per share On first and final call Rs.5 per share All sums were duly received by the company except the following: Mr. Perfect holder of 100 shares did not pay allotment and call money. Mr. Rightholder of 200 shares did not pay call money. The company forfeited all the shares of Mr. Perfect and subsequently re-issued them at Rs 8 fully paid up. Show the entries in the cash book and journal of the company. Also prepare the balance sheet Question 24 Better prospects ltd issued 30000 shares of Rs 10 each at a premium of Rs 2 per share, payable as follows: Rs.2 on application Rs.5 on allotment (including premium) Rs.5 on first and final call. All the shares were applied for and allotted. All moneys were received with the exception of first and final call on 500 shares which were forfeited. 300 of these shares were re issued as fully paid @ Rs.8 per share. Give the journal entries in the books of the company in respect of the above transactions. Show the balance sheet. Question 25 X and co limited with an authorized capital of Rs.2,00,000 equity shares of Rs.10 each, issued the entire shares payable as follows: Rs.5 on application (including Rs 2 as premium) Rs.4 on allotment Rs.3 on call

All share money is received in full with the exception of the allotment money on 200 shares and the call money on 500 shares (including 200 shares on which allotment money has not been paid) The above 500 shares are duly forfeited and 400 of these (including the 200 shares on which allotment moneys has not been paid) are re-issued at Rs.7 per share payable by the purchaser. Make the necessary journals and show the liability side of the balance sheet giving effect to the above transactions. Question 26 Winston was allotted 100 shares of Rs 100 each by Diplod Ltd originally issued at a discount of Rs 6 per share. He failed to pay final call of Rs.35. These shares were forfeited and out of these 50 shares were re issued to slack at Rs.90 each as fully paid up. Journalise the transactions in respect of forfeiture and re issue of shares only. Question 27 ABC company limited with an authorized capital of 15000 equity shares of Rs.10 each, issued 12000 shares to the public for subscription at a discount of Rs.2 per share applicable during allotment, called up as follows; Application Re.1; Allotment Rs.3; and first and final call of Rs.2 each. Applications were received for 10,000 shares. All the moneys were received excepting the following: Mr. Q holding 100 shares failed to pay the allotment money and his shares were forfeited after the first call was made. Similarly Mr. R holding 200 shares failed to pay the first call money and his shares were forfeited after the final call was made. Subsequently 50 shares of Mr. Q and 100 shares of Mr. R were re issued to Mr. S at Rs.7 each. From the above you are required to prepare: Bank account Discount on issue of shares account Equity share capital account Calls in arrears account Equity share forfeited account and Capital reserve account

Company Accounts (Issue of Debentures) Question 1 Journalise the followings:

(a) Issued 5,000 7% debentures of Rs.100 each, at par. (b) Issued 5,000 7% debentures of Rs.100 each at 10% Premium.

(c) Issued 5,00,000 7 % debentures at Rs.90 each. All the debentures are redeemable at par. Question 2 Topon Ltd. issued 20,000 debentures of Rs.100 each payable Rs.10 on application Rs.30 on allotment and balance on first and final call. Applications were received for 24,000 debentures. X, the applicant of 1,000 debentures was refused allotment and Y the applicant for 8,000 debentures was allotted 5,000 debentures. Excess application money was adjusted towards allotment. Pass necessary Journal entries. Question 3 A Limited company made an issue, which was fully subscribed of 1,000 debentures of Rs.100 each at Rs.97. The debentures were allotted on 31st July, 2008. subscriptions being payable 10% on application, 40% on allotment, 25% on 30th September and the balance on 30th November 2008. Under the terms of the issue, payment could be made in full on 31st July, 2008 interest on any amounts prepaid being allowable at the rate of 10% per annum; such interest was not deductible from the subscriber’s payment but was payable by the company on 30th November 2008. The allotees of 300 debentures took advantage of the prepayment terms, while others paid on the due dates. Journalise the entries to be made in the company’s books. (Ignore Debenture Interest) Question 4 A company issued 1,000 6% debentures of Rs.100 each at Rs.110 payable as follows: Rs.30 on application (including premium Rs.5) Rs.30 on allotment (including premium Rs.5) Rs.50 on first and final call. All the debentures were applied for and allotted. All money due was received, except final call on 20 debentures. Pass journal entries for the above. Question 5 A company purchased assets of book value of Rs.99,000 from a firm. It was agreed that purchase consideration be paid by issuing 11% debentures of Rs.100 each. Assuming:

(i) Debentures have been issued at par. (ii) Debentures have been issued at 10% discount. (iii) Debentures have been issued at 10% premium.

Give the necessary journal entries.

Question 6 Z Ltd, purchased building for Rs.2,20,000. Half of the payment was made in cash and the remaining half by the issue of 12% debentures at a premium of 10% Pass the necessary journal entries. Question 7 Find out purchase price of asset in the following cases ad pass necessary entries :

(a) A company paid Rs.50,000 cash for the purchase of plant and issued 6,000 12% debentures of Rs.100 each at 10% premium.

(b) A company issued 7,000 10% debentures of Rs.100 each at Rs.96 and issued a bank draft of Rs.1,20,000 for the purchase of equipments. Question 8 Star Automobiles Ltd., took over assets of Rs.2,35,000 and liabilities of Rs.40,000 of Ashok Automobiles ltd., for the purchase consideration of Rs.2,20,000. Purchase consideration was payable by issuing debentures of Rs.100 at 10% premium. Give journal entries in the books of Star Automobiles Ltd. Question 9 X Company has issued 20,000 10% Debentures of Rs.100 each at par. These are redeemable at par. Show journal entries. Question 10 X Ltd., issued 7,000 10% debentures of Rs.100 each at 5% discount redeemable at par, pass journal entries. Question 11 Safety Locks Ltd., issued to the public 2,500 123% debentures of Rs.100 each at 10% premium. The cost of the issue of the debentures is Rs.2 per debenture. These debentures are redeemable at par. Pass necessary entries. Question 12 P Ltd., issues 7,000 debentures of Rs.100 each at a discount of 10% with the condition that these shall be redeemed at a premium of 5% after the expiry of three years. Pass the necessary journal entries for the issue of these debentures. Question 13 India Steel Ltd., issued 6,000 12% Debentures of Rs.100 each at par redeemable at 5% premium. Pass necessary entries in journal. Question 14

Richstech Ltd., offered 20,00,000, 10% debentures of Rs.200 each at a discount of 7% redeemable at premium of 8% after 9 years. Record necessary entries in the books of the company. Question 15 Athire Cosmetics Ltd., issued 5,000, 9% Debentures of Rs.100 each on April 1, 2008 redeemable at a premium of 8% after 10 years. According to the terms of prospectus Rs.40 is payable on application and balance on allotment of debentures. Record necessary entries regarding issue of debentures. Question 16 Record journal entries in following cases :

(a) Issued Rs.1,00,000 12% Debentures at par, redeemable at par. (b) Issued Rs.1,00,000 12% Debentures at a discount of 10%, redeemable at par. (c) Issued Rs.1,00,000 12% Debentures at a premium of 5%, redeemable at par. (d) Issued Rs.1,00,000 12% Debentures at par, redeemable at 10% premium. (e) Issued Rs.1,00,000 12% Debentures at par, redeemable at 10% premium. (f) Issued Rs.1,00,000 12% Debentures at a discount of 5% redeemable at 5% premium.

Question 17 A limited company issued Rs.10,00,000 debentures at a discount of 6%, repayable at the end of five years. Show the amount of discount that should be written off in each of the five years. Also show the discount on debentures account in the ledger for this period. Question 18 X Ltd., issued debentures @ 94% for Rs.1,00,000 on 1st January, 2004 repayable by five equal annual drawings of Rs.20,000 starting on 31st December 2004. Calculate what amount of discount to be written off each year assuming that the company closes its accounts on calendar year basis. Question 19 On 1st January, 2003 A limited company issued Rs.2,00,000 debentures at 6% discount repayable by draw of lots starting from 31st December, 2004 of Rs.40,000 over year. Show discount on issue of debentures account till all debentures are redeemed. Question 20 Ankur Jewellery Ltd., issued 50,00,000 8% Debentures of Rs.100 at a discount of 10% on April 1, 2004 redeemable at premium of 4 % by draw of lots as under : 20,00,000 Debenture on March 31, 2006 10,00,000 Debenture on March 31, 2007 20,00,000 Debenture on March 31, 2008

Compute the amount of discount to be written off in each year till debentures are paid. Also prepare a discount/loss on issue of debenture account. Question 21 X Limited issued 12% Debentures of Rs.10,00,000 at 8 % discount redeemable at par. Assume that the debentures are redeemed by drawings method in the following manner: Year Face Value (Rs.)

2 1,00,000 3 2,00,000 4 3,00,000 5 4,00,000

Required : Prepare Discount on issue of Debentures account. Question 22 X Ltd., issued debentures of Rs.20,00,000 at 8% discount redeemable at par. Assume that the debentures are redeemed by drawings method in the following manner. Year end Face Value (Rs.)

2 2,00,000 3 4,00,000 4 6,00,000 5 8,00,000

Question 23 X Ltd., issued 6,000, 12% Debentures of Rs.100 each at a discount of 6% on 1-1-2004. The debentures were repayable in instalments of Rs.2,00,000 starting from 31st December, 2006. Show the Discount on issue of Debentures account for the year 2004 to 2008. Calculate the Debenture Discount to be written off each year.

Question 24 On 1.1.2001, Prasad and company limited issued 1000, 10% debentures of Rs.1,000 each at Rs. 980. Under the terms of issue, 1/5 of the debentures are annually redeemable by drawing, the first redemption occurring on 31.12.2003. Prepare the debentures discount account for the first six years. Question 25 From the following details show in a neatly drawn balance sheet how the capital structure and other items relating to a limited company would appear: The authorized capital consisted of 3,000 10% cumulative preference shares of Rs.100 each and 8,000 ordinary shares of Rs 100 each, out of which 1,000 cumulative preference shares were issued to the public, fully called and paid up, and 3000 ordinary shares have been issued and fully called up but there are arrears of Rs.8,000. Capital reserve account Rs.15,000, mortgage debentures Rs.50,000, bank over draft Rs.25,000, profit and loss account Rs.76,000, securities premium account Rs.22,000. Question 26 The trainee accountant of John Smith and Company Ltd., who has gained a little knowledge of accounts, has drafted the following Balance Sheet.

Balance Sheet

for the year ended 31st December, 2005

Assets Rs. Liabilities Rs.

Land and Building 1,09,500 Capital 18,000 equity shares of Rs.10 each fully called up

1,80,000

Fixed Deposit accepted 15,000 General Reserve 40,000

Furniture 30,000 Preliminary exp 12,000

Goodwill 10,000 10% Debentures 35,000

Stock 24,000 Provision for taxation 22,000

Creditors 9,000 Discount on issue of shares 10,000

Machinery 25,000 Profit and loss a/c (Cr) 8,000

Cash 38,000 Investment in Zee Ltd 15,000

Bills Payable 7,000 Bills Receivable 7,000

Bank 72,000 Proposed dividend 14,000

Capital reserve 12,000 Debtors 9,000

Calls in arrears 2,000 Unclaimed dividends 11,000

Securities premium 10,000 Authorized capital 20,000 equity shares of Rs.10 each

Share forfeiture 500

3,63,500 3,63,500

You are required to redraft the above balance sheet as per Schedule VI Part I of the Companies Act 1956. Question 27 From the following balances extracted on 31st March 2006 from the books of Modern Ltd., Prepare a Balance Sheet in the form prescribed under the Companies Act, 1956.

Rs. Rs.

Land 80,000

Cash in Mill 7,000

Share capital 6,30,000

Building 2,12,500

Calls-in-arrears 25,000

Creditors 6,18,000

Capital Reserve 1,54,000

Preliminary expenses 30,000

Brokerage on shares 12,000

Stores 90,000

Wages due 29,000

Godown rent due 3,600

Stock-in-trade 2,50,000

Unexpired Insurance 8,200

Cash in office 1,25,000

Employees Benefit Fund 15,000

Salaries due 3,500

Bad Debts Provision 6,500

Cash at bank 62,000

Livestock 4,900

Machinery 5,08,000

Loose tools 1,30,000

Debtors 1,20,000

Unclaimed dividend 5,000

Profit and Loss account 2,00,000

12% Debentures 1,00,000

Bank loan account 1,50,000

Investments 2,50,000

Note : Bills discounted but not matured Rs.40,000. Question 28 From the following Trial Balance of Tata Limited, prepare Trading Profit and loss account for the year ended 31st March, 2007 and a Balance Sheet as that date.

Rs. Rs.

Plant and machinery 70,000 Discount received 3,200

Freehold premises 1,05,000 Sales 1,65,000

Sundry Debtors 32,500 General reserve 18,000

Purchases 90,000 Sundry creditors 18,250

Salaries 13,500 Transfer fee 250

Wages 8,000 P & L a/c (1-4-2006) 47,000

Rent 2,300 Share capital: 10,000 equity shares of Rs.10 each

1,30,000

Bad debts 850 Dividend 6,650

Stock (1-4-2006) 14,500

Income Tax 8,000

Dividend 9,000

Interim Dividend 12,000

Insurance premium 300

Cash at Bank 19,500

Cash in hand 2,900

3,88,350 3,88,350

The following adjustments are necessary:

(a) Depreciation Plant and Machinery at 8 1/2 %. (b) Stock on 31st March 2007 amounted to Rs.42,000 (c) Bad Debts Reserve at 4% on Debtors. (d) One quarter of insurance premium is to be provided for.

Question 29 The following trial balance has been extracted from the books of Jennings Company Limited as at 31st December, 2005.

Balances Dr. (Rs.) Cr. (Rs.)

Machinery 1,60,000

Land and Buildings 6,74,000

Depreciation on Machinery 16,000

Purchases (adjusted) 4,00,000

Closing stock 1,50,000

Wages 1,20,000

Sales 10,00,000

Salaries 80,000

Bank overdraft 2,00,000

10% Debentures (issued on 1-1-05) 1,00,000

Equity share capital 2,000 shares of Rs.100 each fully paid

2,00,000

Preference share capital 1,000 shares of Rs.100 each fully paid

1,00,000

16,00,000 16,00,000

The Board of Directors of Jennings Company Limited had decided to make the following appropriations:

(a) To declare an equity dividend @ 10% on paid up capital. (b) To pay dividend on the preference share capital in full. (c) To transfer Rs.2,00,000 to general reserve.

You are required to prepare a profit and loss account in as much detail as possible for the year ended 31st December, 2005 and the Balance Sheet of the company as at that date in the prescribed form. Note: Ignore Income Tax. Question 30 The Max Auto Parts Co., Ltd., was registered with an authorized capital of Rs.10,00,000 divided into equity shares of Rs.10 each of which 40,000 shares had been issued and fully paid. The following is the Trial Balance extracted on 31st March, 2002.

Dr (Rs.) Cr (Rs.)

Stock (1st April 2001) 1,86,420

Purchases and Sales 7,18,210 11,69,900

Returns 12,680 9,850

Manufacturing Wages 1,09,740

Sundry manufacturing expenses 19,240

Carriage inwards 4,910

18% Bank Loa (secured) 50,000

Interest on Bank Loan 4,500

Office salaries and expenses 17,870

Auditors fee 8,600

Directors remuneration 26,250

Preliminary expenses 6.000

Freehold premises 1,64,210

Plant and Machinery 1,28,400

Furniture 5,000

Loose tools 12,500

Debtors and Creditors 1,05,400 62,200

Cash in hand 19.530

Cash at bank 96,860

Advance payment of tax 84,290

P & L a/c (1st April, 2007) 38,640

Share capital 4,00,000

17,30,610 17,30,610

You are required to prepare profit and loss account for the year ended 31st March 2002 and a Balance Sheet as at that date after taking into consideration the following adjustments:

(i) On 31st March, 2002 outstanding manufacturing wages and outstanding office salary stood at Rs.1,890 and Rs.1,200 respectively. On the same date stock was valued at Rs.1,24,840 and loose tools at Rs.10,000.

(ii) Provide for interest on Bank loan for 6 months. (iii) Depreciation on Plant and Machinery is to be provided @ 15% while on office furniture it is to

be @ 10%. (iv) Write off one-third of balance of preliminary expenses. (v) Make a provision for income tax @ 50%. (vi) The directors recommended a maiden (first) dividend @ 15% for the year ending 31st March,

2002 after a transfer of 5% of net profit to General Reserve. Question 31 The following balances are extracted on 31st March, 2008 from the books of R.K. Ltd.,

Particulars Dr. (Rs.) Cr. (Rs.)

Cash in hand 50,000

Machinery at cost 1,50,000

Furniture at cost 75,000

Sundry debtors 1,55,000

Bad debts written off 5,000

Rent Rates and Taxes 10,000

Directors fee 5,000


Salaries and wages 50,000

Dividend paid on preference shares 15,000

Equity shares (interim) 10,000

Share capital 10,000 15% Preference shares of Rs.10 each.

12,000 Equity shares of Rs.10 each 1,00,000 1,20,000

Gross profit for the year 2,50,000

Profit and Loss A/c 15,000

Provision for doubtful debts 5,000

Sundry creditors 1,85,000

6,75,000 6,75,000

Additional information:

(i) Machinery and Furniture are to be depreciated by 10% and 5% respectively. (ii) The provision for doubtful debts to be made up to Rs.10,000. (iii) The Authorised capital of the company is Rs.2,50,000 divided in to 13,000 Preference shares

15% @ Rs.10 each, and 12,000 Equity shares of Rs.10 each. You are required to prepare Profit and Loss account for the year ended 31st March 2008. Balance Sheet as at 31st March, 2008 in the form prescribed under the Companies Act 1956. Previous years figures are not required and also ignore taxation. Question 32 The trainee accountant of john smith and comp-any ltd who has gained a little knowledge of accounts has drafted the following balance sheet: Balance sheet for the year ended 31st December 2006

Assets Rs. Liabilities Rs.

Land and building 1,09,500 Capital-18000equity shares of Rs 10 each fully called up

1,80,000

Fixed deposit accepted 15,000 General reserve 40,000

Furniture 30,000 Preliminary expenses 12,000

Goodwill 10,000 10% debentures 35,000

Stock 24,000 Provision for taxation 22,000

Creditors 9,000 Discount on issue on shares

10,000

Machinery 25,000 Profit and loss a/c(Cr) 8,000

Cash 38,000 Investment in Zee Ltd 15,000

Bills payable 7,000 Bills receivable 7,000

Bank 72,000 Proposed dividend 14,000

Capital reserve 12,000 Debtors 9,000

Calls in arrears 2,000 Unclaimed dividend 11,000

Securities premium 10,000 Authorized capital-20000equity shares of Rs 10 each

Share forfeiture 500

3,63,500 3,63,500

You are required to redraft the above balance sheet as per schedule VI part I of the companies act, 1956. Question 33 The following trial balance has been extracted from the books of Jennings company Limited as on 31 st December, 2006:

Balances Dr. Cr.

Machinery 1,60,000

Land and building 6,74,000

Depreciation on machinery 16,000

Purchases(adjusted) 4,00,000


Wages 1,20,000

Sales 10,00,000

Salaries 80,000

Bank over draft 2,00,000

10% Debentures(issued on 1.1.06) 1,00,000

Equity share capital-2000 shares of Rs 100 each fully paid

2,00,000

Preference share capital- 1000 6% shares of Rs 100 each fully paid

1,00,000

16,00,000 16,00,000

The board of directors of Jennings Company limited had decided to make the following appropriations: To declare an equity dividend @ 10% on paid up capital. To pay dividend on the preference share capital in full. To transfer Rs 200000 to general reserve. You are required to prepare a profit and loss account in as much detail as possible for the year ended 31st December 2006 and the balance sheet of the company as that date in the prescribed form. Question 34 From the following information, prepare the profit and loss appropriation account of Crispin Ltd for the year ended 31st March 2007: balance brought forward from last year Rs. 1,00,000 (credit) Current year’s profit after all necessary adjustments – 4,60,000. The board of directors at the annual general meeting approved the following appropriations”

a) Provide 15% dividend on equity shares. b) Provision for taxation – Rs.15,000. c) Dividend equalization fund – Rs. 21,000. d) Transfer to debenture redemption reserve Rs 18,000. e) Rs. 20,000-00 to be transferred to Reserve fund f) Sinking fund- Rs 13000.

The capital structure of the company consisted of: 100000 equity shares of Rs 10 each fully called up (calls- in –arrears Rs.10000) 5000, 12% cumulative preference shares of Rs 100 each fully called up. 6000, 13% convertible debentures of Rs.1,000 each. Question 35 Give journal entries for forfeiture and re-issue of shares:

(i) A Ltd., forfeited 1,000 shares of Rs.10 each, Rs.7 called up, issued at a premium of 20% (to be paid at the time of allotment) for non-payment of a first call of Rs.2 per share. Out of these, 600 shares were re-issued as Rs.7 paid up for Rs.4 per share.

(ii) B Ltd. Forfeited 1,000 shares of Rs. 10 each, Rs.7 called up, issued at a premium of 20% ( to be paid a the time of allotment) for non-payment of allotment money of Rs. 4 per share (including premium) and first call of Rs.2 per share. Out of these, 600 shares were re-issued as fully paid for Rs. 8.50 per share. Question 36 X Ltd., earned a profit of Rs.18,00,000 for the year ending 31st March, 1995 after making provision for depreciation and taxation. Rs.2,80,000 profit was brought forward from last year to this year. Following recommendations were made by the directors of the company to appropriate this profit:-

(ix) To pay Rs. 1,20,000 as bonus to the employees of the company;

(x) To transfer Rs.8,40,000 to General Reserve ; (xi) To propose dividend @12% on equity shares ; (xii) To transfer Rs.75,000 to staff gratuity fund; (xiii) To transfer Rs.60,000 to Development Rebate Reserve; (xiv) To transfer Rs.2,00,000 equity shares of Rs.10 each fully paid. (xv) Transfer Rs.80,000 from exempt profit reserve account to profit and loss appropriation account

on 31st March 1995. (xvi) For the year ending at 31st March, 1995 Directors transferred Rs.60,000 to dividend reserve and

Rs. 50,000 to debenture redemption fund account. Prepare Profit and Loss Appropriation Account. CASH FLOW STATEMENT Question 22 From the following income statement, prepare a statement showing cash from operating activities by direct method.

INCOMESTATEMENT For the year ended 31.3.2007

Particulars Rs. Particulars Rs.

To opening stock 10,000

To purchases Cash purchases 20,000 Credit purchases 85,000 1,05,000 Less: returns 5,000

1,00,000

By sales Cash sales 40,000 Credit sales 1,70,000 2,10,000 Less: returns 10,000

2,00,000

To office & selling exp 51,000 By trading commission 1,02,000

To discount allowed to customers

6,000 By closing stock 5,000

To bad debts 4,000 By discount received from suppliers

3,000

To depreciation 19,000

To provision for tax 40,000

To profit 80,000

3,10,000 3,10,000

Question 23

Prepare cash flow statement from operating activities by direct method from the following given information.

PROFIT AND LOSS ACCOUNT For the year ended 31st Match 2007


To operating stock 50,000

To purchases Cash purchases 40,000 Credit purchases 60,000

1,00,000

By sales Cash sales 50,000 Credit sales 1,50,000

2,00,000

To office exp 25,000 By closing stock 25,000

To bad debts 5,000 By commissions 15,000

To discount allowed 1,000 By discount received 2,000

To tax provision 15,000

To Net profit 46,000

2,42,000 2,42,000

Question 24 Calculate cash from operating activities by indirect method from the following details.

March 2007 March 2008

Bills receivable 15,000 20,000

Debtors 80,000 1,00,000

Creditors 40,000 50,000

Bills payable 15,000 12,000

Outstanding expenses 4,000 5,000

Prepaid expenses 1,500 2,000

Accrued income 1,000 1,500

Income received in advance 1,000 500

2,40,000

Question 25 From the following extracts of balance sheet, find out cash flow from financing activities.

BALANCE SHEET (INCOMPLETE)

Liabilities 2006 2007 Assets 2006 2007

Equity share capital

2,00,000 3,00,000 Discount on debentures

8,000 15,000

8% Preference capital

1,00,000 50,000 Underwriting commission

-------- 3,000

Securities premium

------ 10,000

1. Equity shares were issued at the end of 2007 at 10% premium. 2. debentures were issued at 10% discount in the beginning 3. preference shares were paid dividend % 8& 4. Interest on debentures is paid.

Question 26 Abdul Nayeem & Co. provides you with their profit and loss account and balance sheet for the previous two years. The directors are interested in tracking down the activities that generate cash inflows during the year ending 31st March, 2006. prepare cash flow statement.

BALANCE SHEETS As on 31st March 2006


Equity share capital

2,50,000 5,00,000 Fixed Assets (Land)

4,00,000 5,00,000

Preference capital 50,000 20,000 Investments 2,00,000 -----------

Debentures 1,00,000 40,000 Machinery 1,50,000 3,00,000

Long term borrowings

--------- 30,000 Cash in hand 41,000 2,00,000

Net profit 1,00,000 1,19,000

Reserves and surplus

2,91,000 2,91,000

7,91,000 7,91,000 7,91,000 7,91,000

PROFIT AND LOSS ACCOUNT

For year ending 31.03.2006


To Purchases (Cash) 15,000 By sales (Cash) 30,000

To salaries and wages 5,000 By interest received 10,000

To income tax 1,000 By dividend received 15,000

To debenture interest 6,000

To dividend (Preference shares)

3,000

To dividend (Equity shares) 6,000

To net profit 19,000

55,000 55,000

Question 27 From the following comparative balance sheets of a company, prepare cash flow statement by indirect method.

Liabilities 1.1.08 31.12.08 Assets 1.1.08 31.12.08

Share capital 2,00,000 2,00,000 Cash 8,000 7,200

Reserves and surplus

96,000 98,000 Stock 50,000 44,000

Secured loan -------- 40,000 Debtors 70,000 76,800

Unsecured loan 60,000 50,000 Machinery 3,00,000 3,42,000

4,28,000 4,70,000 4,28,000 4,70,000

During the year, dividend paid was Rs.52,000 and depreciation charged was Rs.18,000 Question 28 From the following information prepare cash flow statement as on March 31st, 2009.


Share capital 80,000 1,60,000 Goodwill 30,000 20,000

General Reserve 4,000 10,000 Building 40,000 90,000

Profit and loss 50,000 60,000 Machinery 49,000 98,000

Creditors 5,000 3,000 Debtors 15,000 20,000

Bills payable 15,000 25,000 Cash in hand 20,000 30,000

1,54,000 2,58,000 1,54,000 2,58,000

Depreciation provided during the year on machinery was Rs.10,000 Question 29 From the following Balance Sheet of Rajan Ltd., prepare Cash Flow Statement by indirect method.


Equity Share capital 1,50,000 2,00,000 Goodwill 36,000 20,000

12% Pref. Share capital

75,000 50,000 Building 80,000 60,000

General Reserve 20,000 35,000 Plant 40,000 1,00,000

P & L A/c 15,000 24,000 Debtors 1,19,000 1,54,500

Creditors 37,500 49,500 Stock 10,000 15,000

Cash 12,500 9,000

2,97,500 3,58,500 2,97,500 3,58,500

Depreciation charged on Plant was Rs.10,000 and on Building Rs.60,000. Question 30 The Balance Sheets of Gargi Limited as at 31st December 2000 and 2001 are given below.

Assets 2001 2002

Cash balances 60,000 50,000

Trade debtors 1,00,000 75,000

Inventory 1,20,000 1,40,000

Land 80,000 1,00,000

Plant and Machinery 2,50,000 2,00,000

Accumulated depreciation on plant (80,000) (60,000)

Total assets 5,30,000 5,05,000

Liabilities

Trade creditors 40,000 30,000

Debentures 90,000 1,50,000

Equity share capital 2,40,000 2,00,000

Retained earnings 1,60,000 1,25,000

Total liabilities and capital 5,30,000 5,50,000

Cash dividends of Rs.25,000 have been paid during the year. You are required to prepare a cash flow statement on indirect basis. Question 31 Balance sheets o X ad Y on 31st March were as follows:

Balance Sheets


Creditors 2,00,000 2,20,000 Building 1,75,000 3,00,000

Mrs X’s loan 1,25,000 ------ Land 2,00,000 2,50,000

Bank loan 2,00,000 2,50,000 Machinery 4,00,000 2,75,000

Capital 6,25,000 7,65,000 Stock 1,75,000 1,25,000

Debtors 1,50,000 2,50,000

Cash 50,000 35,000

11,50,000 12,35,000 11,50,000 12,35,000

During the year a machine costing Rs.50,000 (accumulated depreciation Rs.15,000) was sold for Rs.25,000. The provision for depreciation against machinery as on 31st March 2005 and 31st March 2006 was of Rs.1,25,000 and Rs.2,00,000 respectively. Net profit for the year amounted to Rs.2,25,000. You are required to prepare cash flow statement. Question 32 The following are the comparative balance sheets of XYZ Ltd., as on 31st December 2006 and 2007.


Share capital (@ 10 each)

3,50,000 3,70,000 Land 1,00,000 1,50,000

Profit and loss 50,400 52,800 Stocks 2,46,000 2,13,500

9% Debentures 60,000 30,000 Goodwill 50,000 25,000

Creditors 51,600 59,200 Cash and Bank 42,000 35,000

Temporary investments

3,000 4,000

Debtors 71,000 84,500

5,12,000 5,12,000 5,12,000 5,12,000

Other particulars provided to you are : (a) Dividends declared and paid during the year Rs.17,500. (b) Land was revalued during the year at Rs.1,50,000 and the profit on revaluation transferred to profit and loss account . You are required to prepare a Cash flow statement for the year ended 31-12-2007. Question 33 From the following details relating to the accounts of Grow More Ltd., prepare Cash Flow Statement.

Liabilities 31.3.06 31.305 Assets 31.306 31.3.05

Share capital 10,00,000 8,00,000 Plant and 7,00,000 5,00,000

Machinery

Reserve 2,00,000 1,50,000 Land and building

6,00,000 4,00,000

Profit and loss 1,00,000 60,000 Investment 1,00,000 --------

Debentures 2,00,000 ------- Debtors 5,00,000 7,00,000

Provision for taxation

1,00,000 70,00,000 Stock 4,00,000 2,00,000

Proposed dividend

2,00,000 1,00,000 Cash on hand/ bank

2,00,000 2,00,000

Sundry creditors 7,00,000 8,20,000

25,00,000 20,00,000 25,00,000 20,00,000

Additional information.

1. Depreciation @ 25% was charged on the opening value of Plant and Machinery. 2. During the year one old machine costing Rs.50,000 (WDV 20,000) was sold for Rs.35,000 3. Rs.5,000 was paid towards Income tax during the year. 4. Building under construction was not subject to any depreciation.

Question 34 (Indirect Method). The balance sheets of R and Co. Pvt. Ltd., as at March 31, 2003 and 2004 are represented as follows:

31.3.2003 31.3.2004

Cash 6,000 8,000

Debtors 7,000 12,000

Prepaid Rent 3,600 2,400

Stock 32,000 28,000

Investments 40,000 40,000

Fixed assets 70,000 88,000

1,58,600 1,78,400

Accumulated depreciation 20,000 21,500

Creditors 7,200 9,000

Taxes payable 6,000 6,000

Bills payable 14,000 26,000

Debentures 35,000 35,000

Equity capital 50,000 60,000

Profit and loss account 26,400 20,900

1,58,600 ,78,400

Supplemental notes : i) Purchased a new fixed asset costing Rs.25,000; paid Rs.13,000 and given short term bills

payable for the reminder. ii) Issued additional capital for cash. iii) Disposed off a fully depreciated asset having an original cost of Rs.7,000 and no salvage value. iv) Net loss for the year amounted to Rs.1,500.

Prepare a cash-flow statement as per AS-3 (Revised) Question 35 With the help of the following balance sheets, prepare cash flow statement for the year ending 31st March 2006.


Equity Share capital 75,000 87,500 Goodwill 25,000 20,000

Profit and loss 15,000 17,500 Machinery 1,02,500 1,35,000

General Reserve 25,000 37,500 10% Investments

7,500 20,000

10% Debentures 37,500 62,500 Stock 10,000 13,750

Sundry creditors 18,750 27,500 Debtors 20,000 47,500

Bills payable 2,500 3,750 Cash in hand 30,000 32,500

Accumulated depreciation

22,500 32,500 Discount on issue of Debentures

30,000 32,500

Additional information Investments costing Rs.7,500 were sold for Rs.7,000 during the year 2006. A new machine was purchased for Rs.32,500. Question 36 Balance sheets of M/s Ram and Shyam as on January 1, 2004 and 31st December 2004, were as follows:

Liabilities Jan 1, 2004

Dec 31 2004

Assets Jan 1, 2004

Dec 31 2004

Creditors 40,000 44,000 Cash 10,000 7,000

Mrs. Ram’s loan 25,000 ---- Debtors 30,000 50,000

Loan from Bank 40,000 50,000 Stock 35,000 25,000

Capital 1,25,000 1,53,000 Machinery 80,000 55,000

Land 40,000 50,000

Building 35,000 60,000

2,30,000 2,47,000 2,30,000 2,47,000

During the year a machine costing Rs.10,000 (accumulated depreciation Rs.3,000) was sold for Rs.5,000. The balance of provision for depreciation against machinery as on 1 January 2004 was Rs.25,000 and on 31st December 2004 Rs.40,000. Net profit for the year amounted to Rs.45,000. Required: Prepare a Cash Flow statement [AS-3 (Revised)] Question 37 From the following information, prepare cash flow statement by using indirect method as per AS-3, issued by the institute of Chartered Accountants of India.


Capital 5,00,000 5,00,000 Plant and Machinery Less: Dep.

2,73,000

61,000 2,12,000

4,27,000

79,000 3,48,000

Retained earning

2,65,000 3,69,000 Current Assets Debtors Less: Prov.

2,39,000 15,000

2,24,000

2,83,000 19,000

2,64,000

Debentures ----- 90,000 Cash 1,52,000 1,82,000

Current liabilities Creditors

88,000

82,000

Marketable securities

1,18,000 1,50,000

Bank loan 15,000 30,000 Inventories 2,01,000 1,92,000

Liability for expenses

33,000 27,000 Prepaid expenses

9,000 12,000

Dividend payable

15,000 30,000

Creditors for Plant purchased

--------- 30,000

9,16,000 11,48,000 9,16,000 11,48,000

Additional Information:

1. Net income for the year 2001, after charging depreciation Rs.18,000 is Rs.2,24,000. 2. Debtors of Rs.23,000 were determined to be worthless and were written off against the

provision for doubtful debts account. 3. The Board of Directors declared dividend of Rs.1,20,000.

Question 38 The following data are provided for Zia Ltd., : Prepare statement of cash flow using the (i) Direct Method and (ii) Indirect method [AS-3 Revised]

Income Statement Data

Revenues

Cost of goods sold 84,000

Depreciation expenses (48,000)

Interest expenses (4,000)

Other expenses (6,000)

Other expenses (22,000)

Net Income 4,000

Comparative Balance Sheet Data

Current Assets 2007 2006

Cash 20,000 16,000

Debtors (net) 12,000 7,000

Stock in hand 16,000 14,000

Non Current Assets

Plant and Machinery Less: accumulated Depreciation

24,000 (8,000)

20,000 (4,000)

Total Assets 64,000 53,000

Liabilities

Creditors 12,000 14,000

Non-current Note Payable Less: discount on note

20,000 (1,600)

20,000 (2,000)

30,400 32,000

Owner’s Equity

Equity share capital 24,000 14,000

Retained earnings 9,600 7,000

33,600 21,000

Required : Prepare statement of cash lows using the (i) Direct Method and (ii) Indirect method. [AS-3 (Revised)] Question 8

Following are the Balance Sheets of X Ltd: 31st Dec.1993 31sDec.1992 Rs. Rs.

Assets: Land 1,40,000 2,50,000 Plant & Machinery 1,80,000 1,50,000 Goodwill 60,000 50,000 Stock 2,10,000 2,40,000 Debtors 4,55,000 2,10,000 Bank 1,97,000 1,49,000 12,42,000 10,49,000 Liabilities: Share Capital 4,50,000 4,50,000 Retained Earnings 3,78,000 3,56,000 Creditors 1,34,000 1,68,000 Provision for Taxation10,000 75,000 Mortgage Loan 2,70,000 - 12,42,000 10,49,000 Additional Information:-

a) Gain on sale of Land Rs. 30,000. b) Depreciation on Plant & Machinery was provided at 10% on last year’s balance. c) Mortgage Loan was taken on 1st April 1993@12% p.a. and interest has been paid up-to date.

Question 59 The balance sheet of Rajneesh ltd for the years 2004 and 2005 were as follows:


Share capital 1,00,000 1,25,000 Land & building

1,00,000 95,000

Debentures 10,000 7,500 Plant & machinery

75,000 87,000

Profit & loss 30,250 33,800 Stock 50,000 37,000

Bank o/d 35,000 Sundry debtors

40,000 32,100

Proposed dividend

15,000 16,500 Bank -- 4,000

Bills payable 75,000 72,600 Cash 250 300

2,65,250 2,55,400 2,65,250 2,55,400

Additional information: Depreciation written off on land and building during the year 2005 was Rs.6000. Land was purchased for Rs.19,000 during the year 2005. Prepare the cash flow statement of Rajneesh Ltd. Question 59

The balance sheet of Rajneesh ltd for the years 2004 and 2005 were as follows:



1,00,000 95,000


75,000 87,000



40,000 32,100

Proposed dividend

15,000 16,500 Bank -- 4,000


2,65,250 2,55,400 2,65,250 2,55,400

Additional information: Depreciation written off on land and building during the year 2005 was Rs.6000. Land was purchased for Rs.19,000 during the year 2005. Prepare the cash flow statement of Rajneesh Ltd. Question 59 The balance sheet of Rajneesh ltd for the years 2004 and 2005 were as follows:



1,00,000 95,000


75,000 87,000



40,000 32,100

Proposed dividend

15,000 16,500 Bank -- 4,000


2,65,250 2,55,400 2,65,250 2,55,400

Additional information: Depreciation written off on land and building during the year 2005 was Rs.6000. Land was purchased for Rs.19,000 during the year 2005. Prepare the cash flow statement of Rajneesh Ltd. Question 60

The balance sheets of Amaranth and company limited as on 31.0306 and 31.03.07 were as follows:-

Equity share capital 50,000 72,500 Fixed assets 46,700 83,000

Profit &loss a/c 10,000 15,000 Stock 29,000 32,500

11%debentures 10,000 20,000 Cash 2,000 2,500

Creditors 8,700 11,000 Preliminary expenses

1,000 500

78,700 1,18,500 78,700 1,18,500

Additional information:- Depreciation on fixed assets for the year 2006-07 was Rs 11700. Interest paid on debentures Rs 1100. From the above information prepare a cash flow statement as per accounting standard-3. Question 12 The following figures relate to the costing of a manufacture of electric fans for a period of 3 months ending 31st Dec., 2000: Rs. Completed stock on 1st Oct., 2000 Nil Completed stock on 31st Dec., 2000 20,250 Stock of raw materials 1st Oct., 2000 5,000 Stock of raw materials 31st Dec., 2000 3,500 Factory wages 75,000 Indirect charges 12,500 Materials purchased 32,500 Sales 1,12,500 The number of fans manufactured during the 3 months was 3,000. Prepare a statement the cost per fan and the price to be quoted for 750 fans to realize the same percentage of profit as was realized during the three months.

Partnership – FUNDAMENTALS

QUESTION-1 X and Y started a partnership business on 1st January,2004.They contributed

rupees 80000and rupees 60000 respectively as their capitals. The terms of the partnership

agreement are as given follows-

20% of profit to be transferred to general reserve.

Interest on capital 212%p.a and interest on drawings @10%p.a

X and y to get a monthly salary of rupees 2000 and rupees 3000 respectively.

X is entitled to a commission of rupees 7000.

Sharing of profit or loss will be in the ratio of their capital contribution.

The profit for the year ended 31st December,2004, before making above appropriations was

rupees 125375.The drawings of x and y were rupees 40000 and rupees 50000 respectively.

Required:. Prepare profit and loss appropriation account and partner’s capital accounts

assuming that their capitals are (a) fluctuating (b) fixed.

QUESTION-2 A,B,C are partners sharing profits and losses in the proportion of A-1/2;B-

3/10;C-1/5 after providing for interest@5%p.a on their respective capitals, which amount

to,A rupees 100000;B rupees 6000 and C rupees 40000 and allowing B AND c A SALARY OF

RUPEES 10000 EACH P.A. INTEREST @5% TO BE ALLOWED OR CHARGED ON OPENING

BALANCES IN Current Accounts. During the year 2002,A has drawn rupees 20000; and B and C

in addition to their salaries have drawn rupees 5000 and rupees 2000 respectively. The profit

and loss account for the year ended 31st December 2002, showed a net profit of rupees 90000

before charging(1)Interest on capital, and (2) partner’s salaries. On 1st January, 2002, the

balance in the current accounts of the partners were A(Cr.) rupees 5000, B(Dr.) rupees 3000

and C (Dr.) rupees 2000.

REQUIRED: Show the profit and loss appropriation account, partner’s capital and current

accounts as on 31st December,2002.

mailto:interest@5%25p.a

QUESTION-3 A,B and C are partners with capitals of rupees 40000, rupees 30000 and rupees

20000 respectively. B and C entitled to annual salaries of rupees 2000 and rupees 3000

respectively payable before division of profits. Interest on capital is allowed at 5percent per

annum,but interest is not charged on drawings. Of the first rupees 12000 divisible as profit in

any year, A is entitled to 50%, B to 30% and C to 20%. Annual profits in excess of rupees

12000 are divisible equally. The profit for the year ended 31st December, 2002 was rupees

20100 after debiting partner’s salaries but before charging interest on capital .The partner’s

drawings for the year were- A rupees 8000; B rupees 7500 and C rupees 4000. The balance on

the partner’s current accounts on 1st January ,2002 were A rupees 3000 credit; B rupees 500;

C rupees 1000 debit.

REQUIRED: Prepare profit and loss appropriation account and the partner’s current accounts

for the year 2002.

QUESTION-4 X, Y AND Z are in partnership with capital of Rs 120000 (credit), Rs 100000 (credit) and Rs

8000 (debit) respectively on 1st April 2001. their partnership deed provides for the following;

7.5 % of profit to be transferred to general reserve.

Partners are to be only allowed interest on capital @ 5 % p.a and are to be charged interest

on drawing @ 6 % p.a

Z is entitled to a salary of Rs 7000.

X is entitled to a remuneration of 10 % of the net profit before making any appropriation.

Y is entitled to a commission of 8% of the net profit after making all appropriations.

During the year, X withdrew Rs 1000 p.m at the beginning of every month, Y Rs 1000 during

the month and Z Rs 1000 at the end of every month. On 1st oct 2001, Z granted a loan of Rs

600000.

The manager is entitled to a salary of Rs 100 p.m and a commission of 10 % of the net profits

after charging his salary and commission.

The net profit of the firm for the year ended on 31st march, 2002 before providing for any of

the adjustments was Rs 162000. Prepare profit and loss appropriation account for the year

ended on 31st march 2002.

QUESTION-5 Pony, Sony and Johny were in partnership which they began on 1st april,2001

with capital contributions of rupees 80000, rupees 55600 and rupees 31800. Sony and Johny

are entitled to draw salary of rupees 5000 and rupees 4000 p.a. respectively before division

of profits. Interest is allowed on capital at 5%p.a. and is not charged on drawings. Of the net

profit, the first rupees 30000 is divided in the ratio of 40:35:25 among them respectively the

balance is shared equally.

The profit for the year ending on 31st march,2002 after debiting the partner’s salaries, but

before charging interest on capital was rupees 56340 and the partner’s have drawn rupees

26000 each for personal purchases.

REQUIRED: Prepare profit and loss appropriation account and partner’s capital accounts for

the year ending on 31st march,2002.

QUESTION-6 M/s Arun and Varun are in partnership sharing profits and losses in the ratio 3:1.

On 1st April,2001 their capitals were rupees 50000 and rupees 30000. During the year ending

on 31st March,2002, they earned a net profit of rupees of 50000. The terms of partnership are

as follows:

Interest on capital is to be charged @6% per annum.

Arun will get a commission at 2% on turnover.

Varun will get a salary of rupees 500 per month and a commission of 5% on profit after

deduction of interest, salary and commission(including his own commission).

Partner’s drawings for the year were:Arun rupees 8000 and Varun rupees 6000. Turnover for

the year was rupees 300000.

After considering the above factors, you are required to prepare the profit and loss

appropriation account and the capital accounts of the partners.

QUESTION-7

A,B,AND C are partners in a firm. Their terms of agreement are as follows:

A B C

Interest on capital @ 6%p.a 6%p.a 6%p.a

Interest on drawings(except salary) is to be charged 6%p.a 6%p.a 6%p.a

salary@ Rs 500p.m ---- ----

C is entitled to receive a commission on the profits after charging such commission and making above adjustments

5% ---- -----

On 1st april 2001 A,B,AND C have capitals of Rs 15000, 20000 and 12000 respectively but B

withdrew Rs 2000 on 31st December 2001 and C introduced Rs 200 on 21st march 2002. A had

no drawings except salary but B’s drawings were Rs 500 on 1st august and Rs 700 on 30th

November 2001. C regularly drew at the rate of Rs 200 at the end of each month. The profits

before making above adjustments for the financial year ended on 31st march 2002 were Rs

22245. prepare profit and loss appropriation account.

QUESTION-8 X,YAND Z ARE IN PARTNERSHIP sharing their profits and losses in the ratio of 5:2:3 respectively. On 1st april 2001 their capitals and current accounts were:

CURRENTS ACCOUNTS(RS) CAPITALS ACCOUNTS(Rs)

X 1160(cr) 16000

Y 700(dr) 20000

Z 420(cr) 24000

By agreement, interest on capital is allowed at 5% p.a. On 1st October 2001 by mutual

agreement, X increased his capital by paying a further Rs 4000 into the partnership bank

account while Y reduced his capital to Rs 12000 but left his withdrawn capital in the

partnership as a loan bearing interest at 5%p.a

Partners are allowed to with draw from current accounts at any time during the financial year

but are charged interest on the amount involved. Details of drawings made and interest

chargeable in respect of each partner for the financial year ending 31st march 2002 are :

Drawings (Rs) Interest on drawings Rs

X 4800 180

Y 3600 60

Z 6000 50

Y is remunerated for his participation in the running of the partnership by an annual salary Rs

5000.

The trading profit for the year ending on 31st march 2002 was Rs 39810.

You are required to prepare profit and loss appropriation account and the partners capitals

accounts and current accounts.

QUESTION 9

SMALL, BIG AND BOOST own expanding enterprises with fixed capitals of Rs 200000 Rs

400000 and Rs 600000 respectively. Their current account balances on 31.3.2001 are Rs

50000, Rs 100000 (Dr) and Rs 150000(Dr)respectively.

On 1.4.2001 they adopted the fluctuating capitals method of accounting,i.e they transfer

their current account balances to the capitals accounts, on this given date.

The clauses of the partnership deed provide for-

Interest on capitals @ 10%p.a ( now on the fluctuating capitals balances as from 1.4.2001 )

A monthly allowances of Rs 6000, Rs4000 and Rs3000 for Big,Boost and small respectively is

to be accounted for.

Loan capital of a partner earns him interest @ 20% p.a (which interest is compulsory to

drawn in cash, by concerned partner each year, on the last date).

A 10% reserve is to be set aside on the year’s on the last date.

Profit-Sharing ratio is 1:1:2 for small, big and boost respectively.

REQUIRED: Compile the profit and loss appropriation A/c. and the capital accounts of the

partners for the year April 2000 to March 2002. Net profit before interest is rupees 500000.

Boost loan capital reflects a credit balance of rupees 150000. The monthly drawings for 2001-

2002 of each totaled to rupees 25000 for the year.

QUESTION-10 Ms Babble and Mr. Blow , each doing business as sole proprietors, started a

partnership Glow Food Product’s on first april ,2001.

Mrs. Bubble brought in machinery valued at rupees 550000 whereas Mr. Blow brought in

office equipment costing rupees 50000 and 50% of a legacy of rupees 1500000, she had

inherited.

Mid year on 30.9.2001, Mr. Blow invested rupees 100000 as loan capital, but claimed interest

@20%p.a. (agreed upon because the firm needed working capital).

7. Interest on capital allowed @10%p.a. and interest on drawings @10%p.a. to be charged only

on the monthly uniform drawings of each.

8. Loan capital, if introduced ,bears interest.

9. A HOLIDAY ALLOWANCE OF RUPEES 7000 EACH TO BE APPROPRIATED FOR THE YEARLY NET

PROFIT (DRAWN IN CASH ON 30TH September of the year by each of them).

10. Account for an entertainment allowance for Mr. Blow ,@rupees 1000 per month.

11. Account for a 2% commission earning on gross profit for Ms. Bubble .(Gross profit=5 times

the year’s net profit in the first year).

12. The maximum permissible amount of monthly drawings is rupees 5000 each whilst Mr. Blow

withdrew this amount, Ms. Bubble drew only rupees 3000 per month.

REQUIRED:Compile the profit and loss appropriation account for the first year and the

partner’s personal accounts.Net profit before interest rupees 210000 for 2001-2002.

QUESTION11: Research, Executive and Finance are in equal partnership dealing in energy

conservation equipment. The balances of their personal accounts on 1st april, 2001 and other

relevant details are as under:

Research Executive Finance

Fixed capital account Rs 350000 Rs300000 Rs550000

Current account Rs 20000 Rs15000 Rs60000

Monthly allowances Rs 1500 Rs1800 Rs 1200

Interest on capital 10%p.a 10%p.a 10%p.a

Intereston drawings 10%p.a 10p.a 10p.a

Drawings Rs1400monthly(at the end of every month)

Rs3000monthly(but on the last date of every month)

---

Fixed capitals Rs150000 withdrawn on 1.10.2001

-- Rs 300000 additional investment on 1.1.2002

The net profit earned is Rs 210150. Compile the profit and loss appropriation account for the year ended april 2001 to march 2002 and the partners fixed capital accounts to reflect the required details.

QUESTION 12 :Mr.Honesty and Mr.Repute were equal partners which they began in 20X1 with capital

contributions of Rs.4,60,000 and Rs.2,30,000 respectively.By 1st april 20X4.Their capital

accounts reflected credit balances of Rs.6,00,000 and Rs.4,00,000 respectively.

The articles of partnership agreed upon in 20x1 specified:

(f) Interest on capital @ 5%p.a but interest on drawings @ 10%p.a

(g) Interest on partners’ loan when payable, was fixed at 15%p.a

(h) Mr.Honesty was entitled to a quarterly salary of Rs.8,000 and Ms.Repute and Mr.Honesty a

monthly allowance of Rs1,500 each to cover heavy out-of-pocket expenses for entertaining

important businesss contacts.

(i) Additional drawings for ‘emergencies’ permitted on their mutual consent.

(j) From 20X2, the partners had agreed to set aside Rs.10,000 yearly as contingency Reserve’.

REQUIRED:Draw up the profit and loss appropriation account for the year ending on

31.3.2005 and the partners, capital accounts for the year, given that:

1. Mr. Honesty and Mr. Repute had each drawn rupees 2000 and rupees 1000 monthly on last

date.

2. The net profit available for appropriation for 2004-2005, after accounting the yearly

expenses, including rupees 15000 paid as interest on a bank loan but before interest on

partner’s loan was rupees 275000.

3. Ms. Repute had invested rupees 150000 in the business as a loan on 1.10.2004.

QUESTION-13 On first April 2001 L and M went into partnership sharing profits in the ratio of 3:2. On 31st March ,2002 after preparation of the trading and profit and loss account, the following balances remained in their books: RS.

Capital A/c :L

36000

:M

20000

Drawing :L

3600

Drawing :L

3600

:M 2400

Loan from L 4000

Stocks

8000

Debtors

15000

Creditors

6400

Cash at bank

3500

Net profit before interest

9600

Fixed assets

43500

The following has still to be taken into account:

8. L is entitled to 5% loan interest.

9. M has taken goods worth rupees 60 for his own personal use.

10. Interest on capital:L rupees 1200;M rupees 900

11. Interest on drawing: L rupees 300; M rupees 200

12. M is entitled to a salary of rupees 600 before profits are shared.

13. During the year, M introduced certain fixed assets into the business valued at rupees 1800

14. REQUIRED:Prepare profit and loss appropriation account , partner’s capital accounts

,partner’s current account (where necessary)and balance sheet as at 31st MARCH ,2002

under1)Fluctuating capital method, and (2) Fixed capital method.

QUESTION -14 :Pride ,prejudice and vanity are in partnership since four years.The data is as under:-

For 20X1-20X2 Pride Prejudice Vanity

Capitals Rs2,00,000 30,00,000 5,00,000

Current A\c balances Rs2,30,000 2,60,000 50,000

Drawings Rs40,000 30,000 40,000

Details regarding drawings uniform through on last date of on 1st date of

accounting year

the year accounting year

Loan Capital to earn interest @15%p.a- - 2,00,000

Interest on capital p.a 10% 10% 10%

Interest on drawinga p.a 20% 20% 20%

Commission on purchases on sales amount

@2% @1% =50% of total

earned by pride & prejudice

Profit Shares 2 1 1

The credit balance of the profit & loss A\c is Rs2,50,000 for the accounting year April 20X1 to

march,20X2.The sales are 4 times the Net Profit of the year and the purchases are Rs6,00,000.

By mutual agreement, Rs2,00,000 each from the current A\c of pride and prejudice are to be

transferred to their respective capital accounts, to help them earn their fair share of interest

on capital,as from 1.4.20X1.

Required:Record this transfer and compile the profit and loss appropriation A\c for the

year ended on 31.3.20X2 and the fixed capital accounts and central accounts.

QUESTION 15 :R,S and T are partners sharing profits and losses in proportion to their capitals at the

beginning of the year.They are entitled annually todraw Rs3,000, Rs2,500

And Rs2,000 respectively as out of their anticipated share of profits.Any drawings in excess of

these amounts are to be regarded as advances taken from the firm and are to be subject to

interest at the rate of 18%p.a.The capital as at the beginning of the year are to be allowed

interest at the rate of 15%p.a.

The capital of the partners as at the beginning of the year were, R Rs40,000, S Rs30,000

and T Rs 20,000.The credit balances of their current accounts were as.R Rs 1,152, S Rs 1,864

and T Rs576.Their drawings during the year were as R Rs 7,00,S Rs 9,500 and T Rs 3,000.The

profit for the year was Rs 30,420

Before making any adjustments for interest as above.

Required:Draw up profit and loss appropriation account, Capital and Current Account of the

partners.

QUESTION 16

:River, Well,Spring and Lake are in partnership.Their firm name is Plentiful Waters &Co.They

have mutually agree to:

(viii) Allow interest on capital @ 15%p.a.

(ix) Charge interest on drawing @ 10%p.a.

(x) Accept Well’s claim for a salary of Rs6,000 per month for six months only,for round the clock

work put in by him, in the drought-stricken areas.

(xi) Charge an annual allowance of Rs 1,500 per two months per partner to the business to help

cover expenses and complete successfully with cut-throat competition.

(xii) River and Well have each contributed equally towards total Loan Capital of Rs 10,00,000

borrowed by the firm from them.

(xiii) Rs 20,000p.a is set aside as Reserve if the net profit available for appropriation is greater than

Rs 4,50,000.

The required data for the year 1.4.20X1 to 31.3.20X2 is-

(d) Capital-River Rs 6,00,000.Well Rs 4,00,000.Spring and Lake Rs 5,00,000 each.

(e) Each withdrew 10% of their opening capital balances as on 1.4.20X1 as drawings for the year.

(f) The year’s net profit before interest is reported as Rs 5,06,000.Its scrutiny reveals that the

partner’s annual allowance was debited in the profit & loss account and the Rs 20,000

payable to the business manager as his special commission has not been accounted for at al.

Required: Compile the profit & loss appropriation accont only, using facts and

financial data given.

QUESTION 16 Hill, Vale and Dale are in partnership,sharing profits and losses in the ratio of 2:2:1

respectively. Interest is charged on partner’s drawings at the rate of 6% p.a. and credited on

partner’s capital amount balances at the rate of 6%p.a.

Vale is the firm’s marketing manager and for his specialized services, he is credited with a

salary of rupees 2000 per quarter.

During the year ended 30th April ,2002 ,the net profit of the firm was rupees 62000 and the

partner’s drawings were:

HILL Rs.12000

VALE Rs.8000

DALE Rs.8000

In each case ,the above drawings were made in two equal instalments on 31st October,2001

and 30th april,2002.

On 31st October, 2001 the firm agreed that Hill should withdraw rupees 10000 from his capital

account and that Dale should subscribe a similar amount to his capital account.

The balances of the partner’s accounts at 1st May 2001, were as follows:

All Credit Balances

capital Current

Accounts accounts

rupees Rupees

HILL 80000 6400

VALE 70000 5600

DALE 60000 4800

Transfer 5% of the net profit to the reserve fund of the firm.

REQUIRED:

(1)Prepare the firm’s profit and loss appropriation account for the year ended 30th April, 2002

(2) Prepare the partner’s capital and current acconts for the year ended 30th April, 2002.

QUESTION-17 On 1.1.2001 Precious, Noble and Perfect entered into partnership with capital of rupees

60000, rupees 50000 and rupees 30000 respectively.

Perfect advanced rs.10000 as loan to the partnership on 1.7.2001. The partnership deed

contained the following clauses:

f. Interest on capital at 6% p.a.

g. Interest on drawing at 6%. Each drew rs. 4000 at the end of each quarter commencing from

31.3.2001.

h. Working partners Precious and Noble to get salaries of rs.200 and rs.300 per month.

i. Interest on loan was given to Perfect at 6% p.a.

j. Profits and losses to be shared in the ratio 4:2:1 up to rs.70000 and above rs.70000 equally.

Net profit of the firm for the year ending 31.12.2001(before above adjustments) was rs.

111000.

REQUIRED: Prepare profit and loss appropriation account and personal accounts of the

partners assuming capitals to be fixed.

QUESTION-18 Pullu,Tullu ,Gullu and Chhota are the four partners, sharing profits as 4:3:2:1.They earned a

profit of rupees 180000 for the year ended 31.12.2001.As per the deed, they are to charge a

commission @20% of the profits after charging such commission which they will share as

2:3:2:3.

REQUIRED:Prepare profit and loss appropriation account showing the distribution of profits

and the share of each partner

QUESTION-19

Ted, Phil and Gordan are in partnership sharing profits two- fifths, two- fifth and one-fifth and throughout the half year ended 31st Dec 2001 their capitals accounts have remained unchanged at Rs.60,000, Rs.40,000 and Rs.30,000 respectively. Their current account balances on 1st July 2001 were: Phil Rs.8,550 (Dr) Gordan Rs.6,550 (Dr) Ted Rs.12,000 (Cr) During 2001, Ted withdrew Rs.200 at the beginning of each month; Gordon withdrew Rs.400 at the end of each month while Phil withdrew Rs.1,800 during the period of six months. Their partnership deed provides that:

(a) Partners are allowed interest on capital @ 5 % p.a. (b) Partners are allowed or charged interest on current accounts balances @ 4 % p.a. (c) Interest on drawing @ 6 % p.a. (d) Gordon is entitled to a salary of Rs.500 per month. (e) Ted is entitled to a commission of 5 % of the correct net profit of the firm. (f) Phil is entitled to a commission of 5 % of the correct net profit of the firm after charging such

commission. During the half year ended 2001, the net profit of the firm was Rs 2,07,000 after charging Gordons salary which had been debited to wages and salaries account. You are required to prepare the profit and loss appropriation account of the firm only.

Admission

The balance of the partnership firm of X and Y who were sharing profits in the ratio of 5:3 respectively, as on 31st march, 2007 was as follows:





Furniture 21,000

Machinery 30,000

Buildings 50,000

1,80,000 1,80,000

On the above date, Z was admitted on the following terms: Z was to get 1/5 share in the profits. Z was to pay Rs.50,000 as capital and Rs.16,000 for his share of goodwill. Machinery was to be depreciated by 10% and Building was to be appreciated by 20% Stock was valued at 25% above cost. It was to be brought into books of the new firm at cost price. There was a liability for repairs to furniture amounting to Rs.600; the same was to be recorded in the books. Capital accounts of the old partners were to be adjusted in the profits sharing ratio by opening the necessary current accounts. Prepare revaluation account, capital accounts and the initial balance sheet of the new firm. Question 20 John, bull and wool were in partnership, sharing profits and losses in the ratio of 2;2:1. Their balance sheet as on 31st march 1990, is given below:


Sundry creditors 25,700 Land and building 50,000

Outstanding liabilities 3,000 Furniture 13,000

General reserve 13,000 Stock of goods 23,500

John capital 24,000 Sundry debtors 11,000

Bull capital 24,000 Cash 2,200

Wools capital 10,000

99,700 99,700

The partners have agreed to take Tuna as a partner with effect from 1st April 1990, on the following terms: Tuna shall bring Rs.10,000 towards capital. The value of goodwill shall be fixed at Rs.15,000. The goodwill account shall be written off, after Tunas admission. The value of stock shall be increased by Rs.5,000. The furniture should be depreciated by 10%. The value of land and building should be enhanced by 20%

Provision for doubtful debts should be made at 10% of the debtors. The outstanding liabilities include Rs.1,000 due to Mr. Grip which has been paid by John privately. Necessary entry to reimburse Mr. John as per his request, before admitting the new partner, has to be passed. The new profit sharing ratio will be 5:5;3:2. Prepare revaluation account and the capital accounts of all the four partners. Also prepare a balance sheet of the new firm. Question 21 The following is the balance sheet of A and B, who had been sharing profits in proportion of three- fourth and one-fourth, on 31st December, 1993




A’s capital 30,000 Debtors 16,000

B’s capital 16,000 Stock 20,000

Office furniture 1,000

Land &building 25,000

87,500 87,500

They agreed to take C into partnership on 1st January 1994 on the following terms: That C pays Rs.14,000 as his capital for one-fifth share in the future profits. That the good of the firm be valued at Rs.20,000. That stock and furniture be reduced by 10% and a provision for doubtful debts be created on debtors at 5%. That the value of land and building be appreciated by 20% That the capital accounts of the partners be adjusted on the basis of their profits- sharing arrangements and any excess or deficiency be transferred to their currents. Prepare revaluation account, partner’s capital accounts and balance sheet of the new firm. Question 22 A and B are partners in a firm sharing profits in the ratio of 2:1. Their balance sheet as on 31.3.06 stood as follows:



General reserve 60,000 Stock 1,10,000

Provision for repairing of building

20,000 Sundry debtors 1,50,000

As capital 2,20,000 Bank 20,000

Bs capital 1,00,000

4,80,000 4,80,000

On 1st April 2006 they admit C as a partner and the following terms were agreed upon: xii) The new profits sharing ratio should be 2:2:1.

xiii) C is to bring in Rs 130000 as his capital. xiv) Goodwill is to be valued on the basis of the capitalization at 12% of the normal average profits

of the last three years. Profits of the last three years were as follows: xv) For the year ended 31.3.04 profit Rs 15000 (including insurance claim received Rs 50000) xvi) For the year ended 31.3.05 loss Rs 20000 (including voluntary retirement compensation paid Rs

100000) xvii) For the year ended 31.3.06 profit Rs 175000(including a profit of Rs 40000 on the sales

of assets) xviii) C is to bring half of his share of goodwill in cash and the other half was to be purchased

by him from A and B which is to be debited to Cs current account. xix) Of the sundry debtors Rs 15000 proved to be bad and there is doubtful amount of Rs 7000. xx) Provision is to be made for an unrecorded bill of a supplier amounting to Rs 20000. Provision

for repair of building should also be increased by Rs 10000. xxi) Land and building are to be increased to Rs 240000. xxii) Capitals to be adjusted according to profit sharing ratio taking C s capital as the base,

any excess or shortfall to be adjusted in cash. Show necessary journal entries and draw up the readjusted balance sheet of the new firm. Question 23 M and N are partners in 2:1 ratio. Their balance sheet before the admission of X stood as follows:


M’s capital 30,000 Bank 3,000

N’s capital 25,000 Stock 20,000


Salaries due 4,000 Furniture 10,000

Provident fund 6,000 Building 30,000

71,000 71,000

X was admitted on the following terms: X will bring cash Rs 15000 for his 1/3 share in profits. X will bring good will in cash Rs. 9,000. M agreed to take over salaries. N will take over 25% of stock at a value 10% above cost and M will take over furniture cost Rs. 2,000 for Rs .2,600 after this being got repaired by firm for Rs.200. Building is valued at Rs.3,000 in excess of the book value. Show revaluation account, capital accounts and prepare balance sheet. Question 24 Ram and Shyam are partners in a firm sharing profits in ratio of 2:1. On 1st April 2009 their balance sheet was as under:



Bills payable 5,000 Plant 5,000

Rams capital 25,000 Furniture 1,200

Shyams capital 10,500 Stock 10,400

Debtors 24000

Less provision 2400 21,600

Investment( market value Rs 3800)

3,200

Bank 2,100

55,500 55,500

They admitted Gopal for ½ share on the following terms: Gopal will bring Rs 8000 for capital and Rs 2100 for good will. The assets were revalued as follows: building Rs 16000; plant Rs 3200; Stock worth Rs 1040 was found value less and to be written off. Reserve for bad and doubtful debts to be reduced by Rs 1400. Furniture is to be taken by Ram at a value of Rs 1100. Investment is to be recorded at its market value. Prepare revaluation account, partners capital account, and new balance sheet. Question 25 Swadesh and Swaraj were partners sharing profits equally. Their balance sheet as on March 31, 2009 was as follows:



Provident fund 15,000 Cash at bank 15,000

o/s expenses 3,000 Debtors 20000

Swadesh capital 60,000 Less provision 500 19,500

Swaraj capital 40,000 Stock 20,000

Furniture 10,000

Machinery 18,000

Land & building 73,500

Advertisement suspense a/c

9,000

1,68,000 1,68,000

On that date, they agreed to admit sambhav as a partner on the following terms: 8) Sambhav shall get 1/5th share in the profits and he will bring Rs 20000 as his capital and Rs 5000

as his share of goodwill. 9) Goodwill brought by sambhav shall be withdrawn by Swadesh and Swaraj. 10) Provision for bad and doubtful debts should be brought upto 5% on debtors. 11) Machinery be depreciated by Rs 2000 and furniture by Rs 12.5%. 12) Half of stock is increased by 30%. 13) Land and building be appreciated by 20%. 14) Investments of Rs.2,000 which did not appear in books should be duly recorded.

Record necessary journal entries and prepare the balance sheet of the new firm.

Question 26 Rohit and Bal sharing profits in the ratio of 5:3 had the following balance sheet as on march 31, 2009:-


Khoslas loan a/c 10,000 Goodwill 8,000

Bills payable 4,000 Building 17,000

Employees fund 14,000 Plant 13,500

Rohit capital a/c 40,000 Furniture 2,000

Bal capital a/c 20,000 Debtors 16,500


Stock 11,000

Bank 5,500

Profit and loss a/c 7,000

88,000 88,000

On 1st april, 2009 they decided to admit khosla into the partnership giving him 1/5 share. He brings in Rs 15000 as capital and his loan was also converted in to capital. The partners decided to revalue the assets as follows:- Goodwill Rs 25000; plant Rs 12500; debtors Rs 15500; stock Rs 16250; building Rs 20000; furniture Rs 1000; bills receivable Rs 6250.you are required to show the journal entries, revaluation a/c, capital a/c and balance sheet. Question 27 A and B are partners in 3:2 ratio. C is admitted for 1/5th share. Their balance sheet as o n 31st march, 2009 was as follows:

BALANCE SHEET


Creditors 16000 Building 80000

General reserve 10000 Computers 20000

Profit and loss account 5000 Vehicles 30000

A’s capital 75000 Accrued rent 1000

B’s capital 50000 Joint life policy 12000

Debtors 8000

Bank 5000

156000 156000

On Cs admission the following decisions were taken:- 6) C will bring Rs 40000 as capital 7) Goodwill of the firm is valued on the basis of C’s share in the profits and capital contributed by

him. 8) Vehicles was not depreciated@ Rs 3000 p.a in the last two years. 9) Accrued rent is recovered. 10) To write off joint life policy.

Show revaluation a/c capital a/c’s and balance sheet.

QUESTION 28 Aand B are partners sharing profits and losses in the ratio of 4:1. They admit C into partnership for 1/6 share for which he pays Rs 20000 for goodwill. A, B , and C decided to share future profits in the ratio of 3:2;1 respectively. Give the necessary journals entries. A and B are partners sharing profits in the ratio of 3:2. They admit C into the firm for ¼ share in profits which he takes 1/6 from A and 1/12 from B . C brings Rs 5000 as goodwill out of his share of Rs 9000. No goodwill account appears in the books of the firm. Pass necessary journal entries to record this arrangement.

RETIREMENT

X, Y and Z are partners having capita of Rs.1,50,000, Rs.2,00,000 and Rs.1,00,000. The profit/loss are being shred in capital ratio. The following revaluations are done on the retirement of Z. In the balance sheet debtors exist Rs.80,000 and provision for doubtful debts Rs.5,000. What entries will be passed in the following cases:

(f) Provision for doubtful debts is to be increased to 10% (g) Provision for doubtful debts is to be increased by 2% (h) Provision for doubtful debts is required at 5% (i) Bad Debts are Rs.3,000 and provision for doubtful debts is required at 10% (j) Debtors are found to be 100% good to the extent of 78,000 and accordingly provision is to be

maintained. Question 136 A, B and C are partners in 2:2:1 ratio. Their balance sheet as on 31-03-2009 was as follows.

BALANCE SHEET


Capital: A B C

30,000 25,000 20,000

Goodwill 40,000

Creditors 15,000 Plant 20,000

Gratuity Payable 20,000 Stock 15,000

Debtors 25,000

Cash 10,000

1,10,000 1,10,000

B retired on this date and following decisions were taken: (a) Goodwill is valued at Rs.30,000. (b) 1/3 of stock is valued at Rs.4,700 (c) A customer owing Rs.3,000 was declared insolvent.

(d) One supplier has surrendered his claim of Rs.1,000 due to defective supply. B will be paid after two years. Prepare Revaluation account, Capital account and Balance Sheet. Question 137 X, Y and Z were partners sharing profit in proportion of 3:2:1. Their Balance Sheet on 31-03-2009 was as follows.

BALANCE SHEET


Capital: X Y Z

21,100 14,000 12,000

Building 16,000

Reserve 6,000 Plant 24,000

Bills Payable 2,000 Motor Car 6,000


Debtors 7,000 Less Provision. 1,000

6,000

Cash at Bank 1,100

63,100 63,100

X retires on that date on the following terms:

(vii) The goodwill of the fir is to be valued at Rs.12,000 (viii) Stock and Building are to be appreciated by 10% (ix) Plant and Motor Car are to be depreciated by 10% (x) Liability for the payment of gratuity to worker Rs.4,800 is not yet recorded in the books, but the

same is to be provided for now. (xi) Provision on debtors no more required. (xii) The amount payable to X is to be paid in four equal annual instalments beginning from 1-04-

2009 with interest at 10% p.a. You are required to prepare:

4) Revaluation account 5) Partner’s capital accounts 6) New Balance Sheet of Y and Z and X’s loan account till it is finally paid.

138 The balance sheet of M, N and O who are sharing profit and losses in the proportion of one–half, one-third and one-sixth respectively was as follows on 31-03-2007.

BALANCE SHEET


Bills Payable 6,400 Cash in hand 150

Sundry creditors 12,500 Cash at bank 25,500

Capital M N O

40,000 25,000 20,000


Profit and loss a/c 4,500 Book debts 17,8100

Stock 22,300

Furniture 3,500

Plant & Machinery 9,750

Buildings 24,000

1,08,400 1,08,400

M retires from the business from 1-4-2007 and his share in the firm is to be ascertained on a revaluation of the assets as follows: Stock Rs.20,000, Furniture Rs.3,000, Plant and Machinery Rs.9,000, Building Rs.20,000, Rs.850 are to be provided for doubtful debts. The goodwill of the firm is agreed to be valued at Rs.6,000. M is to be paid Rs.11,050 in cash on retirement and the balance in three equal yearly instalments with interest at 5% per annum. Pass the journal entries, show the necessary accounts required to give effect to the above, balance sheet of the continuing partners and the account of M till it is finally closed. Question 139 The following is the balance sheet of Jain, Gupta and Malik as at March 31, 2009.

BALANCE SHEET


Creditors 19,800 Land and Buildings 26,000

Telephone bill outstanding 300 Bonds 14,370

Accounts payable Cash 5,500

Accumulated profits 8,975 Bills receivable 23,450

Capital accounts Jain Gupta Malik

40,000 60,000 20,000

Sundry Debtors 26,700

Office Furniture 18,250

Stock 18,100


Computers 13,200

1,65,800 1,65,800

The partners have been sharing profits in the ratio of 5:3:2. Malik decides to retire from business on April 1, 2009 and his share in the business is to be calculated as per the following terms of revaluation of assets and liabilities: Stock Rs.20,000, Office furniture Rs.14,250, Plant and Machinery Rs23,550, Land and Building Rs.20,000

A provision of Rs.1,700 to be created for doubtful debts. The goodwill of the firm is valued at Rs.9,000. The continuing partners agreed to pay Rs.16,500 as cash on retirement of Malik, to be contributed by continuing partners in the ratio of 3:2. The balance in the capital account of Malik will be treated as loan. Prepare revaluation account, capital accounts, and balane sheet of reconstituted firm.

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