Mock Examination Paper 1

General Instructions for attempting the Question Paper:

(i) The Question Paper has 50 Questions and student will have to attempt 40 Questions.
(ii) Case Study Based Questions have 4 Questions each. These questions shall be considered as 4 Questions.
(iii) Time allowed to attempt the Question Paper is 45 Minutes. Separate reading time is not allowed.
(iv) Each Question carries 1 (One) mark.
(v) For each incorrect answer 1 (One) mark will be deducted.
Disclaimer: This is a Mock Examination Paper. Actual Examination paper may differ.

1. Total Assets of a NPO at the end are ` 25,00,000. External Liabilities are ` 12,75,000. If the deficit for the
year is ` 1,50,000, Opening Capital Fund will be
1. ` 12,25,000. 2. ` 13,75,000.
3. ` 10,75,000. 4. ` 12,75,000.
2. Suchit and Ruchi are partners in a firm sharing profits and losses equally. Ruchi withdrew ` 13,000 in the
middle of each quarter, throughout the year. Interest on Drawings by Ruchi @ 6% p.a. will be
1. ` 1,240. 2. ` 1,560.
3. ` 1,480. 4. ` 1,820.
Shivani after working for 15 years in corporate sector started a retail company by the name of Cocomelon Ltd.
that sells Baby Products both online and offline. It was incorporated on 1 April, 2019 with registered office in
Tirupur, Tamil Nadu. It has a registered capital of 12,00,000 equity shares of ` 100 each. Since large investments
were required for Land and Building and Plant and Machinery, it issued 1,20,000 equity shares to Teddy Bear
Ltd. in full consideration of assets acquired from them. Besides this, the company issued 3,00,000 equity shares
for cash at par payable as ` 30 on application, ` 20 on allotment, ` 25 on first call and ` 25 on second and final
call. Shares are fully subscribed by the public. All the shareholders have paid the due amounts except Vinod
who did not pay both the calls on his 500 shares and Paras who did not pay first call on his 300 shares. Shares
of Vinod were later forfeited and out of them 300 shares were reissued at ` 120 per share.
Based on above information, answer the questions numbered 3 to 6.
3. Shares issued to Teddy Bear Ltd. would be
1. Preferential Allotment.
2. Employee Stock Option Plan.
3. Issue for Consideration other than cash.
4. Right Issue of Shares.
4. Number of Equity Shares that have been subscribed are
1. 3,20,000. 2. 4,20,000.
3. 4,19,800. 4. 4,19,200.
5. Securities Premium (Securities Premium Reserve) to be shown in Reserves and Surplus at the year end
will be
1. ` 30,000. 2. ` 6,000.
3. NIL. 4. ` 24,000.
6. When forfeited shares are reissued, gain (profit) on reissue of shares is transferred to
1. General Reserve. 2. Securities Premium Reserve.
3. Workmen Compensation Reserve. 4. Capital Reserve.
7. On 1st April, 2021, Luke Ltd. issued 60,000, 11% Debentures of ` 100 each redeemable on 30th September,
2022. While preparing Balance Sheet as on 31st March, 2022, the company will show these 9% Debentures as
1. Current Maturities of Short-term Debts under the sub-head Other Current Liabilities and main head
Current Liabilities.
2. Short-term Borrowings under the head Current Liabilities.
3. Current Maturities of Long-term Debts under the sub-head Other Current Liabilities and main head
Current Liabilities.
4. Other Current Liabilities under the head Current Liabilities.
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 8. Amount paid to creditors for Food Items during the year was ` 4,50,000. Creditors for Food Items in the
beginning and end of the year were ` 49,000 and ` 65,500 respectively. Cash purchases of Food Items
were ` 1,25,000. The amount of Food Items purchased by Jan Aahaar Canteen during the current
year was
1. ` 4,50,000. 2. ` 4,33,500.
3. ` 4,66,500. 4. ` 5,91,500.
9. Pawan and Shekhar are partners with capitals of ` 3,00,000 and ` 2,00,000 respectively. As per their
Partnership Deed, interest on capital is allowed @ 10% p.a. Net Profit for the year is ` 30,000. Share of
profit that will be credited to each partner for the year ended 31st March, 2022 will be
1. Pawan: ` 30,000; Shekhar: ` 20,000. 2. Pawan: ` 20,000; Shekhar: ` 10,000.
3. Pawan: ` 18,000; Shekhar: ` 12,000. 4. Pawan: ` 30,000; Shekhar: Nil.
10. The correct sequence in the procedure of share issue is:
A. Receipt of Applications B. Allotment of Shares
C. Issue of Prospectus D. Minimum Subscription

Choose the correct option:
1. A, B, D and C 2. C, A, D and B
3. C, B, D, and A 4. B, A, C and D
11. Horizontal Analysis is
1. The calculation of relative weighing of component with in a particular financial period.
2. The comparison of current year figures with the previous year figures.
3. The comparison of one company and results with another company.
4. The comparison of Profit & Loss Account with the Balance Sheet.
12. Opening Balance of Research Fund was ` 12,80,000. During the year, donation received towards this fund
amounted to ` 2,54,000; Amount spent on research activities was ` 1,75,300 and Interest received on
Research Fund Investment was ` 25,000. The Research Fund that would be shown in the Balance Sheet
of Sarabhai Research Institute at the end of the year will be
1. ` 13,58,700. 2. ` 15,59,000.
3. ` 13,83,700. 4. ` 13,05,000.
13. Match the entries (items) in LIST I with entries (items) in LIST II:
List I List II
A. Interest on Capital as a charge I. Credited to Profit & Loss Appropriation Account
B. Interest on Drawings II. Debited to Profit & Loss Account
C. Rent paid to the partner III. Debited to Profit & Loss Appropriation Account
D. Interest charged on loan to partner IV. Credited to Profit & Loss Account.

Choose the correct option:
1. A-II, B-I, C-IV and D-III 2. A-II, B-I, C-III and D-IV
3. A-II, B-I, C-II and D-IV 4. A-II, B-III, C-I and D-IV
14. Under which of the following heading/sub-heading Calls-in-Advance will be shown in the Balance
Sheet of a company as per Schedule III, Part I of the Companies Act, 2013?
1. Current Liabilities
2. Share Capital
3. Share Application Money Pending Allotment
4. Reserves and Surplus
15. The correct sequence of closing books of NPO is:
A. Determine Items of Income and Expenses from Receipts & Payments Account.
B. Determine Surplus or Deficit in Income & Expenditure Account.
C. Calculate Opening Capital Fund.
D. Prepare Balance Sheet as at the end of the year.
1. A, B, D and C 2. A, B, C and D
3. C, B, A and D 4. B, D, C and A
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 16. Depending upon the terms and conditions of issue and redemption of debentures, which of the following
situations are commonly found in practice:
A. Issued at par and redeemable at discount
B. Issued at discount and redeemable at discount
C. Issued at a premium and redeemable at par
D. Issued at par and redeemable at a premium
Choose the correct option:
1. A and B only 2. B and C only
3. A and C only 4. C and D only
17. Rakesh and Keshav were partners in a firm. Assets of the firm are ` 20,00,000 (excluding goodwill) and
liabilities are ` 5,00,000, while capitalised value of average profit was ` 18,00,000. By capitalisation of
Average Profit Method, value of Goodwill of the firm is
1. ` 2,00,000. 2. ` 3,00,000.
3. ` 4,00,000. 4. ` 3,50,000.
18. Genco Ltd. forfeited 500 shares of ` 10 each fully called-up for non-payment of final call of ` 3 per share.
300 of these shares were reissued at ` 8 per share, fully paid-up. Amount credited to Capital Reserve is
1. ` 1,500. 2. ` 2,100.
3. ` 3,200. 4. ` 1,800.
19. Correct order or sequence of the following sub-heads under the head Property, Plant and Equipment
and Intangible Assets in the Assets part of the Balance Sheet as per Schedule III of the Companies Act, 2013 is:
A. Intangible Assets under Development
B. Property, Plant and Equipment
C. Capital Work-in-Progress
D. Intangible Assets

Choose the correct option:
1. B, D, A and C 2. B, A, C and D
3. B, D, C and A 4. B, A, D and C
20. Match the entries (items) in LIST I with entries (items) in LIST II:
List I List II
A. Amount that will be shown as receipt from subscription in Receipts & Payments Account, if a club has 500 I. ` 3,16,000
members each paying an annual subscription of ` 600. Outstanding subscription for current year is ` 27,000 and
subscription received in advance ` 13,000.
B. Rent paid by club is ` 2,80,000 in the current year, amount that will be shown in Income & Expenditure Account II. ` 3,00,000
if unpaid rent is ` 15,000 and rent paid in advance for the current year in the previous year was ` 11,000.
C. Amount paid to creditors for Food Materials during the year is ` 3,20,000; Stock of Food Material at the beginning and III. ` 3,06,000
end of year ` 23,300 and ` 26,300 respectively. Creditors for food materials at the beginning and end is
` 25,000 and ` 24,000 respectively. Amount that will be shown in debit side of Income & Expenditure Account will be
D. A Not-for-Profit Organisation has investment @ 8 % per annum. Interest in the Receipts & Payments Account is ` 18,000 IV. ` 2,86,000
and Interest in the assets side of balance sheet is ` 6,000. The value of Investment is

Choose the correct option:
1. A-IV, B-III, C-I and D-II 2. A-II, B-IV, C-I and D-III
3. A-IV, B-II, C-I and D-III 4. A-III, B-II, C-I and D-IV
21. Rimcol Ltd. issued 90,000, 10% Debentures of ` 100 each at a discount of 4%. The company has balances
in Securities Premium Reserve and Capital Reserve of ` 2,40,000 and ` 80,000 respectively. Discount on
Issue of Debentures of ` 3,60,000 will be written off by passing the entry as:
1. Dr. Statement of Profit & Loss and Cr. Discount on Issue of Debentures A/c by ` 3,60,000
2. Dr. Securities Premium Reserve A/c by ` 2,40,000 and Statement of Profit & Loss (Finance Cost) by
` 1,20,000; Cr. Discount on Issue of Debentures A/c by ` 3,60,000
3. Dr. Capital Reserve A/c by ` 80,000 and Statement of Profit & Loss by ` 2,80,000; Cr. Discount on
Issue of Debentures A/c by ` 3,60,000
4. Dr. Securities Premium Reserve A/c by ` 2,40,000, Capital Reserve A/c by ` 80,000 and Statement of
Profit & Loss by ` 40,000; Cr. Discount on Issue of Debentures A/c by ` 3,60,000.
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 22. Based on the following information, Fixed Assets Turnover Ratio will be:
Shareholders’ Funds ` 14,50,000; Long-term Loans ` 6,30,000; 8% Debentures ` 7,20,000; Long-term
Provisions ` 2,16,000; Current Assets ` 11,33,000; Current Liabilities ` 1,17,000. Gross Profit ` 9,00,000.
Rate of Gross Profit on Cost 25%.
1. 3 Times 2. 2.5 Times
3. 2.25 Times 4. 3.75 Times
23. Which of the following is/are Restricted Fund?
A. General Fund.
B. Grant received from Government for ‘Covid Booster Vaccine’.
C. Annuity Fund.
D. Fixed Assets Fund.

Choose the correct option:
1. A, B, C and D 2. B, C and D only
3. A and B only 4. A only
24. Good, Better and Best are partners sharing profits in the ratio of 5 : 3 : 2. They decided to share profits
in the ratio of 2 : 3 : 5 with effect from 1st April, 2022. They decided to adjust the following reserves,
accumulated profits, and losses without affecting their book values:
Book Value `
Profit & Loss A/c 15,000
General Reserve 60,000
Advertising Suspense A/c 30,000
The adjustment entry will be:
1. Dr. Best’s Capital A/c and Cr. Good’s Capital A/c by ` 13,500.
2. Dr. Good’s Capital A/c and Cr. Best’s Capital A/c by ` 13,500.
3. Dr. Better’s Capital A/c and Cr. Good’s Capital A/c by ` 13,500.
4. Dr. Good’s Capital A/c and Cr. Better’s Capital A/c by ` 13,500.
25. VGS TEXTILES Ltd. issued 30,000; 9% Debentures of ` 100 each on 1st April, 2020. The issue was fully
subscribed. According to the terms of issue, interest is due on half-yearly basis. As per the policy of the
company it pays the interest on debentures after a week it becomes due for payment. As on 31st March,
2021, Interest accrued and due on Debentures would be
1. ` 1,35,000. 2. ` 2,70,000.
3. ` 67,500. 4. ` 1,02,500.
26. Fixed assets of a company are ` 10,00,000, Fixed Asset Turnover Ratio is 2 times, Current Liabilities are
` 3,60,000. Its Liquid Ratio is 0.8, Prepaid Expenses ` 72,000, Inventories ` 1,40,000. Based on the above
information, Currents Assets Turnover ratio will be
1. 3 times. 2. 4 times.
3. 5 times. 4. 2 times.
27. Which of the following transactions will be shown in both Revaluation Account and Partner’s Capital
Account?
A. Goodwill appearing in the books at the time of change in profit-sharing ratio.
B. Investment Fluctuation Reserve, when the book value and the market value of investment is same.
C. Investment Fluctuation Reserve, when the market value of investment is more than the book value.
D. Claim of Workmen Compensation is more than the Workmen Compensation Reserve.

Choose the correct option:
1. D only 2. C only
3. B and C only 4. A only

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 28. Match the entries (items) in LIST I with entries (items) in LIST II:
List I List II
A. Option granted to subscribe for, the shares of the company at a future date at a I. Private Placement
predetermined price.
B. When the shares are issued to promoters for incorporating a company. II. Sweat Equity
C. Shares issued by a company for intellectual property rights or providing know- III. Incorporation Cost
hows or any providing any value additions in any form.
D. Issue and allotment of shares to a selected group of persons. IV. Employees Stock Option Plan

Choose the correct option:

1. A-IV, B-III, C-II and D-I 2. A-IV, B-III, C-I and D-II
3. A-IV, B-III, C-II and D-I 4. A-IV, B-II, C-III and D-I
29. A firm having Debtors of ` 2,10,000 with Provision for Doubtful Debts of ` 30,000 was dissolved. 2/3rd
of Debtors was taken over by a partner at 20% discount and remaining were sold to a Debt Collection
Agency at 10% discount. The value of Debtors realised is
1. ` 35,000. 2. ` 73,000.
3. ` 1,85,000. 4. ` 1,12,000.
30. Blue Grand Ltd. has the following information:
Net Profit before Tax ` 22,00,000; Equity Share Capital (` 10 per share) ` 24,00,000, 8% Preference Share
Capital ` 15,00,000; If Dividend paid is 20%, its Dividend Per Share (DPS) is
1. ` 2. 2. ` 4.
3. ` 5. 4. ` 3.5.
31. Total assets of a partnership firm, which is dissolved were ` 30,00,000; its total liabilities were ` 6,00,000.
Assets were realised at 80% and Liabilities were settled at 5% less. If realisation expenses were ` 30,000,
the Profit or Loss on realisation will be
1. Profit ` 18,00,000. 2. Loss ` 6,00,000.
3. Profit ` 6,00,000. 4. Loss ` 18,00,000.
32. Premium payable on redemption of debentures is a/an
1. Liability. 2. Asset.
3. Expense. 4. Income.
33. M, U and V were partners sharing profit and losses in the ratio of 2 : 2 : 1. The firm closes its books of
account on 31st March every year. U died on 5th November, 2021. As per the partnership deed, the
executors of the deceased partner are entitled to his share of profit up to the date of death, calculated
on the basis of last year’s profit. Profit for the year ended 31st March, 2021 was ` 2,64,000. U’s share of
profit will be
1. ` 52,800. 2. ` 63,360.
3. ` 1,58,400. 4. ` 31,680.
Sterling Leisure Club has tie ups with many resorts across South Indian States whereby the members of the club
can enjoy the facilities of the resorts and hotels after making reservations through the centralised online portal
of the club. All these facilities are through the digital portal and minimum of human touch taking all the
precautions of pandemic with first in the business of self check in. It is a partnership firm with Meena, Aparna
and Apoorva as partners and capitals investment of ` 50,00,000, ` 50,00,000 and ` 80,00,000 respectively and
profit-sharing ratio of 5 : 5 : 8.
They are looking to expand their business to North India initially and gradually to East, West and Central India.
They had decided to introduce adequate capital so that their respective capitals are twice the present capitals.
Capitals were brought by Meena and Aparna as was required but Apoorva could bring ` 40,00,000 against her
share of ` 80,00,000. It was agreed, that to cover the shortfall in capital, new partner should be admitted who
would bring the amount that Apoorva could not bring and that the new partner would get share of profits equal
to 1/4th of her share which would be sacrificed by Apoorva alone. Praveen was admitted who had studied
Engineering with them in Tamil Nadu, now living in Mohali, Punjab. She brought the required capital and
` 20,00,000 as Premium for Goodwill.
Based on the above information, choose the correct option to the questions numbered 34 to 37.
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 34. New Profit-sharing Ratio of Meena, Aparna, Apoorva and Praveen is
1. 1 : 1 : 1 : 1. 2. 5 : 5 : 8 : 8.
3. 5 : 5 : 6 : 2. 4. 5 : 5 : 8 : 4.
35. Total amount of funds brought in by the new partner Praveen is
1. ` 1,00,00,000. 2. ` 60,00,000.
3. ` 40,00,000. 4. ` 80,00,000.
36. Premium for Goodwill brought by Praveen will be
1. All the Old partners in their profit-sharing ratio;
2. Apoorva’s Capital Account will be credited by the amount of Premium for Goodwill;
3. All the Old partners equally;
4. None of the above.
37. How many additional partners can be inducted into the business?
1. 50 2. 46
3. 100 4. 96
38. Amount is not set aside to DRR if the
1. Debentures are not convertible. 2. Debentures are partly convertible.
3. Debentures are fully convertible. 4. Debentures are redeemable in cash.
39. After debentures are redeemed in lumpsum, balance in DRR is transferred to
1. General Reserve. 2. Securities Premium Reserve.
3. Workmen Compensation Reserve. 4. Capital Reserve.
40. Which of the following will be transferred to Realisation Account?
A. Goodwill appearing in the books at the time of dissolution of firm.
B. Investment Fluctuation Reserve, if the firm has investments.
C. Provision for Doubtful Debts.
D. General Reserve.
Choose the correct option:
1. D only 2. A, B, and C only
3. B and C only 4. A, B, and D only
41. K, P, M and G are sharing profits and losses in the ratio 4 : 3 : 2 : 1. M retires and K, P, G share future
profits equally. If the Goodwill valued at the retirement is ` 9,00,000, Journal entry will be:
1. K’s Capital A/c ...Dr. ` 60,000
P’s Capital A/c ...Dr. ` 60,000
G’s Capital A/c ...Dr. ` 60,000
 To M’s Capital A/c ` 1,80,000
2. K’s Capital A/c ...Dr. ` 1,80,000
 To M’s Capital A/c ` 1,80,000
3. P’s Capital A/c ...Dr. ` 30,000
G’s Capital A/c ...Dr. ` 2,10,000
 To M’s Capital A/c ` 1,80,000
 To K’s Capital A/c ` 60,000
4. P’s Capital A/c ...Dr. ` 1,20,000
G’s Capital A/c ...Dr. ` 60,000
 To M’s Capital A/c ` 1,80,000
42. GCL Ltd. has Equipment whose written down value as on 1st April, 2021 was ` 8,60,000 and on
31st March, 2022 was ` 9,50,000. Depreciation for the year was ` 40,000. In the beginning of the year,
a part of Equipment was sold for ` 25,000, which had a written down value of ` 20,000. Calculate Cash
Flow from Investing Activities.
1. ` 1,25,000 2. ` (1,25,000)
3. ` 2,50,000 4. ` (2,50,000)
43. Paul and Karan are two partners in a firm having Capitals of ₹ 2,50,000 each. Rahul is admitted for 1/3rd
share for which he brings ₹ 3,00,000 for his share of capital. The amount of goodwill will be
1. ` 1,00,000. 2. ` 50,000.
3. Nil. 4. ` 2,50,000.
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 44. Ajanta Ltd. has balance in Provision for Tax Account of ` 1,50,000 and ` 1,75,000 as on 31st March, 2021
and 2022 respectively. It made a provision for tax during the year of ` 1,65,000. The amount of tax paid
during the year was
1. ` 1,50,000. 2. ` 1,60,000.
3. ` 1,40,000. 4. ` 1,75,000.
45. Ritika and Mahima are partners sharing profits and losses in the ratio of 2 : 1. Their Capital Accounts
have balances of ` 1,02,000 and ` 73,000 respectively. They admit Swati on 1st April, 2021 for 1/5th
share in profits. Swati brings ` 25,000 as her share of goodwill. She agrees to contribute capital in
new profit-sharing ratio. Thus, amount towards her capital would be
1. ` 40,000. 2. ` 32,000.
3. ` 50,000. 4. ` 1,25,000.
46. As per Accounting Standard (AS) 16, Borrowing Cost prescribes that the Loss on Issue of Debentures
Account is written off
1. During the life of Debentures 2. As per Articles of Association.
3. In the year in which Debentures are allotted. 4. In the year of redemption of Debentures
47. The tool that guides the user through creation of database and queries and forms is known as
1. Access wizard. 2. DBMS.
3. Spreadsheet. 4. SQL.
48. A ‘Query’ in a database does not have the following features:
A. They do not allow computations.
B. They present outcomes in tables.
C. Enables extraction of data from one or more tables.
D. The field name in a query can start with a blank.

Choose the correct option:
1. A, B and D only 2. A, B and C only
3. A and B only 4. B, C and D only
49. Excel automatically redraws the chart
1. If a change is made in data. 2. If a change is made in the range data.
3. Both (1) and (2). 4. None of the above.
50. The correct order or sequence to merge cells in a spreadsheet, without centering them is
A. Select left or right allignment
B. Click on ‘Allignment’ Group
C. Select cells to be merged
D. Click on ‘Merge and Centre’.

Choose the correct option:
1. D, C, B and A 2. D, C, A and B
3. A, B, C and D 4. D, B, C and A
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 Mock Examination Paper 1 (Answers)
1. 2.
BALANCE SHEET as at 31st March, 2021
Liabilities ` Assets `
External Liabilities 12,75,000 Total Assets 25,00,000
Capital Fund (Balancing Figure) 13,75,000
Less: Deficit 1,50,000 12,25,000
25,00,000 25,00,000

2. 2. Total amount withdrawn = ` 52,000

Rate of interest is 6% p.a.
6 6
Therefore, Interest on Drawings = ` 52,000 × × = ` 1,560.
100 12
Note: Interest on Drawings is calculated for average period of 6 months [i.e., (10.5 + 1.5)/2].

3. 3. A company may issue shares for consideration other than cash such as against purchase of Assets or
purchase of running business. Shares issued to Teddy Bear Ltd. are against purchase consideration of
purchase of assets. Hence, it is issue of shares for consideration other than cash.
4. 3. Issue for Consideration other than cash + Issue of Shares to public for cash – Forfeited shares + Reissued shares
= 1,20,000 + 3,00,000 – 500 + 300 = 4,19,800 equity shares
5. 2. Number of shares reissued × Securities premium per share
300 × ` 20 = ` 6,000
6. 4. Gain on reissue of shares is capital profit and hence transferred to Capital Reserve.
7. 2. Debentures are classified or shown in the Equity and Liabilities part of Balance Sheet under the main head
Current Liabilities and sub-head Short-term Borrowings, if they are due for redemption within 12 months
or within the period of Operating Cycle from the date of Balance Sheet. In the given case, these
11% Debentures are issued to be redeemed within 12 months from the date of Balance Sheet, i.e.,
31st March, 2022.
8. 4.
Dr. CREDITORS FOR FOOD ITEMS ACCOUNT Cr.
Particulars ` Particulars `
To Cash/Bank A/c 4,50,000 By Balance b/d 49,000
To Balance c/d 65,500 By Purchases of Food Items (Credit purchases) 4,66,500
  —Balancing Figure
5,15,500 5,15,500

Total Food Items Purchased = Cash Purchases + Credit Purchases

= ` 1,25,000 + ` 4,66,500 = ` 5,91,500.
9. 3. Interest on Pawan’s Capital and Shekhar’s Capital are ` 30,000 and ` 20,000 respectively. Net Profit, i.e.,
profit as per Profit & Loss Account transferred to Profit & Loss Appropriation Account for appropriation to
partners is ` 30,000. Since, profit available for appropriation is less than the total amount of interest on
capital, available profit will be distributed in the ratio of interest on capital, i.e., 3 : 2.
Thus, amount appropriated to each partner will be:
Pawan = ` 30,000 × 3/5 = ` 18,000;
Shekhar = ` 30,000 × 2/5 = ` 12,000.

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 10. 2. The steps in the procedure of share issue are:
C. Issue of Prospectus: The company first issues the prospectus to the public. Prospectus is an
invitation to the public that a new company has come into existence and it needs funds for doing
business. It contains complete information about the company and the manner in which the money
is to be collected from the prospective investors.
A. Receipt of Applications: When prospectus is issued to public, prospective investors subscribe the
shares of the company make an application along with the application money and deposit the same
with a scheduled bank as specified in the prospectus.
D. Minimum Subscription: Minimum subscription, i.e., 90% of the Issued share capital should be
received before shares are allotted. Thus, a company will verify whether it has received subscription
for 90% of the issue.
B. Allotment of Shares: If minimum subscription has been received, the company will proceed to allot
the shares after fulfilling certain other legal formalities.
11. 2. Horizontal analysis is an analytical method where entires (items) in financial statements are compared to show
financial performance over a specific period of time. It requires financial statements of two or more accounting
periods.
12. 3. Balance Sheet as at 31st March, ...
Liabilities ` `
Research Fund:
Opening Balance 12,80,000
Add: Donations Received 2,54,000
   Interest on Research Fund Investment 25,000
Less: Expenses on Research (1,75,300) 13,83,700
13. 3. A. Interest on Capital as a charge against profit. It is debited to Profit & Loss Account. [List II, Option (II)]
B. Interest on Drawings is an income for the firm. It is credited to Profit & Loss Appropriation Account.
[List II, Option (I)]
C. Rent paid to the partner is a charge against profit. Hence, it is debited to Profit & Loss Account.
[List II, Option (II)]
D. Interest charged on Loan to Partner is an income for the firm. Hence, it is credited to Profit & Loss
Account. [List II, Option (IV)]
14. 1. A company, if its Article of Association permits, may receive amount against calls not yet made. It is the
amount received by the company against share capital but is not called by the company to be paid. It is
termed as Calls-in-Advance. Since, it is not called to be paid, it cannot be shown as part of the Share capital.
It is therefore, shown as Other Current Liabilities under the main head Current Liabilities in the Equity and
Liabilities part of the Balance Sheet.
15. 2. A. Determine Items of Incomes and Expenses from Receipts & Payments Account. Only revenue receipts/
expenses of current accounting period are taken to prepare Income & Expenditure Account which are
adjusted for prepaid and outstanding.
B. Determine Surplus or Deficit in Income & Expenditure Account, by comparing total of debit side and
total of credit side of Income & Expenditure Account. If total of credit side is more than the total of
debit side, it is surplus (i.e., excess of income over expenditure). And if, total of debit side is more than
the total of credit side, it is deficit (i.e., excess of expenditure over income). Surplus or deficit is
transferred to the Capital Fund and shown in the Balance Sheet.
C. Opening Capital Fund: By preparing Balance Sheet in the beginning of the year.
D. Closing Balance Sheet: Prepare Balance Sheet as at the end of the year.
16. 4. Debentures are not normally redeemed at discount. Thus, situations (A) and (B) are not normally found in
practice.
17. 2. Goodwill = Capitalised Value of Average Profit ̶ Net Assets
= ` 18,00,000 ̶ ` 15,00,000* = ` 3,00,000.
*Net Assets = ` 20,00,000 ̶ ` 5,00,000 = ` 15,00,000.
18. 1. Amount of Share Forfeiture on 300 Shares = ` 2,100 (300 × ` 7)
Less: Amount adjusted on reissue of forfeited shares = ` 600 (300 × ` 2)
Amount to be transferred to Capital Reserve (` 2,100 – ` 600) = ` 1,500.

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 19. 3. As per Schedule III of the Companies Act, 2013, the correct order or sequence for showing Property, Plant
and Equipment and Intangible Assets is as follows:
B. Property, Plant and Equipment
D. Intangible Assets
C. Capital Work-in-Progress
A. Intangible Assets under Development
20. 1. A. Subscription Due for the year ended 31st March, 2021 (500 × ` 600) ` 3,00,000
Less: Subscription outstanding for current year (As on 31st March, 2021) (` 27,000)
Add: Advance Subscription received (As on 31st March, 2021) ` 13,000
Subscription as per Receipts & Payments Account ` 2,86,000

B. Rent paid by club 2,80,000

Add: Outstanding for current year 15,000
Rent paid in advance for the current year in previous year 11,000
Rent debited to Income & Expenditure A/c ` 3,06,000

C.
Dr. CREDITORS FOR FOOD MATERIALS ACCOUNT Cr.
Particulars ` Particulars `
To Cash/Bank A/c 3,20,000 By Balance b/d 25,000
To Balance c/d 24,000 By Purchases of Food Materials (Credit purchases) 3,19,000
  —Balancing Figure
3,44,000 3,44,000

Total Food Material Consumed = Stock of Food Material in the Beginning + Purchases – Stock of Food
Material at the end
= ` 23,300 + ` 3,19,000 – ` 26,300 = ` 3,16,000.
D. Total Interest on investment = Interest received which is shown in Receipts & Payments Account +
Accrued Interest which is shown in the assets side of balance sheet.
` 24,000 = ` 18,000 + ` 6,000
Total Interest on Investment = Value of Investment × Rate/100
` 24,000 = Value of Investment × 8/100
Value of Investment = ` 3,00,000.
21. 2. Securities Premium Reserve A/c …Dr. ` 2,40,000
Statement of Profit & Loss (Finance Cost) ...Dr. ` 1,20,000
 To Discount on Issue of Debentures A/c ` 3,60,000
(Discount on Issue of Debentures written off from Securities Premium Reserve Account and balance from
Statement of Profit & Loss)
Note: Loss on Issue of Debentures is a capital loss for a company, which is written off from
(i) Securities Premium Reserve and/or,
(ii) Statement of Profit & Loss, in the year it is incurred, i.e., in the year debentures are allotted.
22. 3. Fixed Assets Turnover Ratio = Revenue from Operations/Fixed Assets
= ` 45,00,000/` 20,00,000 = 2.25 times
Working Note:
Gross Profit 25% on Cost = ` 9,00,000 (Let Cost be ` 100; Gross Profit ` 25; Sales ` 125)
Sales (Revenue from Operations) = ` 9,00,000 × ` 125/` 25 = ` 45,00,000
Non-current Liabilities = Long-term Loans + 8% Debentures + Long-term Provisions
` 15,66,0000 = ` 6,30,000 + ` 7,20,000 + ` 2,16,000
Total Liabilities = Shareholders’ Funds + Non-current Liabilities + Current Liabilities
` 31,33,000 = ` 14,50,000 + ` 15,66,000 + ` 1,17,000
Total Liabilities = Total Assets
Total Assets = Fixed Assets + Current Assets
` 31,33,000 = Fixed Assets + ` 11,33,000
Fixed Assets = ` 20,00,000
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 23. 2. General Fund is an Unrestricted Fund which means the fund use of which is not restricted. Management can
use the amount in the fund as is considered appropriate, but for the purpose for which the organisation exists.
All the remaining Funds are for a particular purpose. Hence, they are restricted funds.
24. 1. (i) Calculation of Sacrificed/(Gained) Share of each Partner:
Particulars Good Better Best
I. Old Profit Share 5/10 3/10 2/10
II. New Profit Share 2/10 3/10 5/10
III. Sacrifice/(Gain) 3/10 … (3/10)
(ii) Calculation of Sacrificed/Gained share of each Partner in General Reserve, Accumulated
Profits and Fictitious Asset:
Net Effect = Profit & Loss A/c + General Reserve ̶ Fictitious Asset (Advertisement Suspense)
     = ` 15,000 + ` 60,000 ̶ ` 30,000 = ` 45,000.
Good’s Sacrificed Share = ` 45,000 × 3/10 = ` 13,500;
Best’s Gained Share = ` 45,000 × 3/10 = ` 13,500.
Note: If the question is silent about the balance of Profit & Loss A/c, it is assumed to be credit balance.
25. 1. Interest Accrued and Due or Outstanding Interest is the amount of interest that has become due for
payment but is not paid. Thus, as on 31st March, 2021, interest accrued and due on debentures would be
` 1,35,000 (i.e., ` 30,00,000 × 9/100 × 6/12).
26. 1. Current Assets Turnover Ratio = Revenue from Operations/Current Assets
= ` 20,00,000/` 5,00,000 = 4 times
Working Note:
Fixed Assets Turnover Ratio = Revenue from Operations/Fixed Assets
2 = Revenue from Operations/` 10,00,000
Revenue from Operations = ` 20,00,000
Current Liabilities = ` 3,60,000
Liquid Ratio = Liquid Assets/Current Liabilities
i.e., 0.8 = Liquid Assets/` 3,60,000
Therefore, Liquid Assets = ` 2,88,000
Liquid Assets = Current Assets – Inventories – Prepaid Expenses
` 2,88,000 = Current Assets – ` 1,40,000 – ` 72,000
Current Assets = ` 5,00,000.
27. 2. Difference between market value of investment and book value is an increase in Asset hence credited to
revaluation account and Investment Fluctuation Reserve becomes free reserve and will be credited to
capital accounts of all partners in old ratio.
28. 3. A. Option granted to subscribe for, the shares of the company at a future date at a predetermined price
are termed as Employees Stock Option Plan. [List II, Option (IV)]
B. When the shares are issued to promoters for incorporating the company, it is debited to Incorporation
Cost Account. [List II, Option (III)]
C. Shares issued by a company for intellectual property rights or providing know-hows or any providing
any value additions in any form are categorised as Sweat Equity. [List II, Option (II)]
D. Shares issue and allotment of shares to a selected group of persons means the shares are privately
placed i.e., it is Private Placement of Shares. [List II, Option (I)]
29. 3. Total Debtors = ` 2,10,000
Debtors taken over by Partner = 2/3 × ` 2,10,000 = ` 1,40,000
Value at which Debtors are taken by partner = ` 1,40,000 – 20% of ` 1,40,000
= ` 1,12,000
Value of Debtors sold to Debt Collection Agency = 1/3 × 2,10,000 = ` 70,000
Value at which balance Debtors are sold = ` 70,000 – 10% of ` 70,000
= ` 73,000
Debtors realised = ` 1,12,000 + ` 73,000 = ` 1,85,000
30. 1. Dividend Per Share (EPS) = Dividend Payable to Equity Shareholders/No. of Equity Shares
= ` 4,80,000/2,40,000 = ` 2.
Note: Dividend = 20% of ` 24,00,000 = ` 4,80,000
No. of Equity Shares = ` 24,00,000/` 10 = 2,40,000 Equity Shares.
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 31. 2.
Dr. REALISATION ACCOUNT Cr.
Particulars ` Particulars `
To Sundry Assets 30,00,000 By Liabilities 6,00,000
To Bank A/c (Liabilities paid) 5,70,000 By Bank A/c (Assets realised) 24,00,000
To Bank A/c (Realisation Expenses) 30,000 By Loss (Balancing Figure)* 6,00,000
36,00,000 36,00,000

32. 1. Premium payable on redemption of debentures is a liability since it is payable to the Debentureholder on
the redemption of debentures.
33. 2. Since U died on 5th November, 2021, total number of days has to be calculated from 1st April to 5th November
which is as follows:
April 30; May 31; June 30; July 31; August 31; September 30; October 31; November 5 = 219 days
U’s share of profit = ` 2,64,000 × 2/5 × 219/365 = ` 63,360.
34. 3.    Old Profit–sharing Ratio = 5 : 5 : 8
   Praveen’s Profit Share = 8/18 × 1/4 = 8/72
Apoorva’s New Profit Share = 8/18 – 8/72 = 24/72
New Profit-sharing Ratio 5 : 5 : 6 : 2, calculated as follows:
Meena’s Profit Share = 5/18 × 4/4 = 20/72
Aparna’s Profit Share = 5/18 × 4/4 = 20/72
Apoorva’s Profit Share = 24/72
Praveen’s Profit Share = 8/72
New Profit-sharing Ratio = 20 : 20 : 24 : 8 or 5 : 5 : 6 : 2.
35. 2. Praveen’s Capital = Apoorva’s required capital – Capital brought by her
= ` 80,00,000 – ` 40,00,000 = ` 40,00,000
And Premium of ` 20,00,000, Total = ` 60,00,000.
36. 2. Only Apoorva has sacrificed profit share. Hence, premium for goodwill brought by Praveen will be credited
to Apoorva’s Capital Account.
37. 2. Maximum number of partners in a firm can be 50 as is specified in the Companies Act, 2013 in
Section 464 read along with Rule 10 of the Companies (Miscellaneous) Rules, 2014. It can therefore, induct
46 more partners.
38. 3. When Debentures are fully convertible amount is not transferred to DRR.
39. 1. After Redemption is over in lumpsum, balance from DRR is transferred to General Reserve.
40. 2. A. Goodwill appearing in the books is transferred to Realisation Account
B. Investment Fluctuation Reserve is transferred to Realisation Account, if the firm has investments since
investments are transferred to Realisation Account.
C. Provisions or Reserve on any asset is transferred to Realisation Account
D. General Reserve is credited to Partners’ Capital Accounts.
41. 3. Gaining Ratio = New profit share – Old profit share
K’s Gain = 1/3 – 4/10 = (2/30) sacrifice
P’s Gain = 1/3 – 3/10 = 1/30
G’s Gain = 1/3 – 1/10 = 7/30
Thus, K is sacrificing to the extent of 2/30, whereas P and G are gaining in the ratio of 1 : 7.
M’s Share of goodwill on retirement = ` 9,00,000 × 2/10 = ` 1,80,000
Since K is sacrificing, he will be compensated by P and G
K’s share of compensation = Goodwill of the firm × Share sacrificed
= ` 9,00,000 × 2/30 = ` 60,000
Total amount paid by P and G = M’s share of Goodwill + K’s share of compensation
` 1,80,000 + ` 60,000 = ` 2,40,000 in the Gaining ratio of 1 : 7
P will give = 2,40,000 × 1/8 = ` 30,000
G will give = 2,40,000 × 7/8 = ` 2,10,000.

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 42. 2. Cash Flow from Investing Activities: `
Sale Proceeds of Equipment 25,000
Purchase of Equipment* (1,50,000)
Cash Used in Investing Activities (1,25,000)
* Purchase of Equipment = ` 9,50,000 (Closing Equipment) + ` 20,000 (Value of Equipment Sold) +
` 40,000 (Depreciation) – ` 8,60,000 (Opening Equipment) = ` 1,50,000.
43. 1. A. Total Capital of the New Firm based on Rahul’s Capital* = ` 9,00,000
B. Less: Net worth of the Reconstituted Firm** = ` 8,00,000
C. Value of Firm’s Goodwill (A – B) = ` 1,00,000
*Total Capital of New Firm = Share brought by new partner × Reciprocal of his share
= ` 3,00,000 × 3 = ` 9,00,000
**Net worth of reconstituted firm = ` 2,50,000 + ` 2,50,000 + ` 3,00,000 = ` 8,00,000.
44. 3. Tax Paid = ` 1,50,000 (Opening Balance) + ` 1,65,000 (Provision Made) – ` 1,75,000 (Closing Balance)
= ` 1,40,000.
45. 3. As, Profit share of Swati is 1/5, remaining share 4/5 (i.e., 1 – 1/5), belongs to Ritika and Mahima.
Thus, combined capital of Ritika and Mahima for 4/5th share
= ` 1,02,000 + ` 73,000 + ` 25,000 (Premium for Goodwill) = ` 2,00,000;
Total Capital of New Firm = ` 2,00,000 × 5/4 = ` 2,50,000;
Swati’s Capital = ` 2,50,000 × 1/5 = ` 50,000.
46. 3. Accounting Standard (AS) 16, Borrowing Cost prescribes that the Loss on Issue of Debentures Account is
written off in the year in which it is incurred, i.e., in the year in which debentures are allotted.
47. 1.
48. 1.
49. 3.
50. 1.

    

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