Solution

HALF YEARLY EXAMINATION

Class 12 - Accountancy

1.
(c) P ₹ 42,000; Q ₹ 28,000; R ₹ 20,000
Explanation: P ₹ 42,000; Q ₹ 28,000; R ₹ 20,000
P= 45000-3000=42000
Q=30000-2000=28000
R=15000+3000+2000=20000

OR
(a) Partners' Capital Accounts
Explanation: When only Partner's Capital Account is maintained all the adjustments are made in the Capital account itself and
no separate account is to be opened for such thing.
2.
(c) X ₹ 16,000; Y ₹ 8,000
Explanation: 200000x8%=16000
100000x8%=8000

OR

(b) Partners who give the guarantee

Explanation: Partners who give the guarantee
3.
(d) ₹12,000
Explanation: Interest on Capital = 120000 × 10/100 = 12,000
4. (a) A = Rs.1,000 and B = Rs. 500
Explanation:
Calculation of Interest on loan:
The loan is given by A = Rs. 40,000
Loan given by B = Rs.20,000
5 6
Interest on A’s Loan = 40,000 × 100
×
12
= Rs.1,000
5 6
Interest on B’s Loan = 20,000 × 100
×
12
= Rs. 500
OR

(c) P = ₹35,000, Q = ₹30,000, R = ₹25,000

Explanation: New Profit Sharing Raio = [Link]
P’s Share of Profit = 90,000 × = 45,000
3

Q’s Share of Profit = 90,000 × 2

6
= 30,000
R’s Share of Profit = 90,000 × 1

6
= 15,000
R should get a minimum profit of rs. 25,000 but he is getting only Rs.15,000, deficiency Rs.10,000 (25,000 - 10,000) will be
met by P.
Now P’s Share will be = 45,000 - 10,000 = Rs. 35,000
5.
(d) ₹ 600
Explanation: (4,000 -1,000) x 2/10 = 600
6. (a) In which profit sharing ratio of gaining partners increase
Explanation: Gaining Ratio is calculated at the time of admission or retirement or death of a partner. It is the excess of the new

1 / 17
 ratio over the old ratio of old partners except for a retired or deceased partner. The formula for gaining ratio:
Gaining Ratio = New Ratio - Old ratio
7. (a) Profit and Loss Adjustment Account
Explanation: Instead of changing the prepared accounts, a rectified entry or adjustment entry should be done for these types of
adjustments. Profit and Loss adjustment are always prepared to make such adjustments. For example, Profit and Loss-
Adjustment account are prepared in case of a change in existing profit sharing ratio, admission of a new partner,
retirement/death etc., It is also known as Revaluation Account. But In P&L Adjustment A/c all adjustment including the
revaluation of assets and reassessment of liability are made and in Revaluation only revaluation of assets and reassessment of
liability.
8.
(d) Dissolution of partnership firm
Explanation: In case of dissolution, the firm ceases to exist as in the dissolution, the relationship between the partners is
terminated.
9. (a) Premium for Goodwill Account
Explanation: If the new partner brings in cash for his share of goodwill, in addition to his capital, it is known as a premium
method. When the new partner brings nothing but only the capital, and the value of goodwill is erected or raised, this method of
treatment is called Revaluation Method. This goodwill is distributed in the sacrificing ratio to the old partners who sacrifice.
The accounting entry is:
Cash a/c... Dr.
To Premium for Goodwill a/c
(Being premium for goodwill brought in by the new partner)
10.
(b) Assests Account
Explanation: On admission of a new partner, increase in the value of assets is debited to Assets account and shown in the
balance sheet and the revaluation account. It is credited to the Revaluation account and P/L adjustment and old partners capital
account are not used for asset and liability revaluation.
11. (a) Both A and R are true and R is the correct explanation of A.
Explanation: Both A and R are true and R is the correct explanation of A.
12.
(c) 8,800
Explanation: Calculation of Nem’s account for goodwill (to be credited his account):
The total capital of the new firm = Sam's capital × reciprocal of his share
= 5 × Rs.60,000 = Rs. 3,00,000
Combined capital = Hem’s + Nem’s + Sam’s = Rs.80,000 + Rs. 50,000 + Rs.60,000 = Rs.1,90,000
Goodwill of the firm = Rs.1,10,000 (Rs. 3,00,000 - Rs.1,90,000)
1
Sam’s share = 1,10,000 × 5
= Rs. 22,000
2
Nem’s account to be credited with = 22,000 × 5
(sacrificing ratio) = 8,800
OR
(a) No, it puts Naman and Manik to disadvantage
Explanation: It is always better to distribute all the accumulated profits and reserves at the time of admission of a new partner.
All accumulated profits and reserves belong to the old partners only, to avoid the future disputes, it is better to distribute all the
profits and reserves (by old partners) otherwise it will be a disadvantage for them.
13. (a) Both A and R are true and R is the correct explanation of A.
Explanation: Both A and R are true and R is the correct explanation of A.
14.
(b) Surrender of shares
Explanation: When a shareholder returns back his shares to the company, it is known as the surrender of shares and not
forfeiture of shares. Holder in this case voluntarily abandons his share in favour of the company.
OR

2 / 17
 (c) Issued share capital
Explanation: Subscribed share capital is a part of the issued share capital that is subscribed. The subscribed share capital has
two types paid up and not fully paid up.
15.
(b) Company is managed by all the members
Explanation: The Statement given as ‘Company is managed by all the members’ is not correct because it is not mandatory for
all the members to run the company. Company is run by their chosen representatives known as directors.
16.
(b) Capital Reserve ₹6,000
Explanation: The amount of capital reserve will be calculated as = (amount of shares forfeited/no of shares forfeited × no of
shares reissued) - amount of discount on the reissue
Forfeited Shares A/c ... Dr. 6,000
To Capital Reserve 6,000
Amount forfeited = 8000
Amount used on reissue = 2000
Capital Reserve = 8,000 - 2,000 = 6,000
17.
(c) Debit Debenture Suspense A/c ₹ 1,00,000 and Credit Debentures A/c ₹ 1,00,000.
Explanation: Debit Debenture Suspense A/c ₹ 1,00,000 and Credit Debentures A/c ₹ 1,00,000.
OR
(a) Loss on Issue will be debited by ₹ 35,000
Explanation: Loss on Issue will be debited by ₹ 35,000
18.
(c) Personal Account
Explanation: Personal Account
19. (a) Long-term Borrowings of a Company
Explanation: Long-term Borrowings of a Company
20. (a) All of these
Explanation: All of these
OR

(c) Vendor A/c

Explanation: When a company purchased assets form an outsider i.e. vendor and payment is not made in cash and it is settled
by issue of debentures in such a case Vendor’s Account is to be credited and the asset is debited.
21. a. If interest on Capital and Partners’ salaries and interest on drawings is charged against profit, the solution will be as:
Profit and Loss Appropriation Account

Dr. Cr.

Particulars Amount (₹) Particulars Amount (₹)

Profit transferred to Profit and Loss 30,000

Tripathi's Current Account 18,000

Chauhan’s Current Account 12,000

30,000 30,000

Partners’ Capital Account

Dr. Cr.

Particulars Tripathi Chauhan Particulars Tripathi Chauhan

3 / 17
 Balance b/d 60,000 40,000

Balance c/d 60,000 40,000

60,000 40,000 60,000 40,000

Partners’ Current Account

Dr. Cr.

Particulars Tripathi Chauhan Particulars Tripathi Chauhan

Drawings 12,000 8,000 Interest on Capital 3,000 2,000

Interest on Drawings 600 400 Partners’ Salaries 12,000 12,000

Balance c/d 20,400 17,600 Profit & Loss Appropriation 18,000 12,000

33,000 26,000 33,000 26,000

b. If interest on Capital and Partners’ salaries and interest on drawings is distributed out of profit, the solution will be as:
Profit and Loss Appropriation Account

Dr. Cr.

Particulars Amount (₹) Particulars Amount (₹)

Partners’ Salary Profit and Loss (Profit) 30,000

Tripathi 1,000 × 12 = 12,000 Interest on Drawings

Chauhan 1,000 × 12 = 12,000 24,000 Tripathi 600

Chauhan 400 1,000

Interest on Capital

Tripathi 3,000

Chauhan 2,000 5,000

Profit Transferred to:

Tripathi’s Current 1,200

Chauhan’s Current 800 2,000

31,000 31,000

Partners’ Capital Account

Dr. Cr.

Particulars Tripathi Chauhan Particulars Tripathi Chauhan

Balance b/d 60,000 40,000

Balance c/d 60,000 40,000

60,000 40,000 60,000 40,000

Partners’ Current Account

Dr. Cr.

Particulars Tripathi Chauhan Particulars Tripathi Chauhan

Drawings 12,000 8,000 Partners’ Salaries 12,000 12,000

Interest on Drawings 600 400 Interest on Capital 3,000 2,000

Balance c/d 3,600 6,400 Profit and Loss Appropriation 1,200 800

16,200 14,800 16,200 14,800

4 / 17
22. Old Ratio of A, B and C = 7 : 5 : 4
New Ratio of A, B and C = 3 : 2 : 1
Sacrifice or Gain =
21 − 24
A= 7

16
−
3

6
=
48
=
48
3
(Gain)
5 2 15 − 16 1
B= 16
−
6
=
48
=
48
(Gain)
12 − 8
C= 4

16
−
1

6
=
48
=
4

48
(Sacrifice)
In the books of Firm
JOURNAL
Date Particulars L.F. Dr. (₹) Cr. (₹)

2023 April 1 A's Capital A/c Dr. 5,400

B's Capital A/c Dr. 1,800

To C's Capital A/c

7,200
(Adjustment for goodwill due to change in profit sharing ratio)
Working Note:
C's Capital A/c is credited with ₹ 7,200 and he has sacrificed 4

48
share.
48
Hence, the total value of goodwill must be: ₹ 7,200 × 4
= ₹ 86,400
3
A's share 48
of ₹ 86,400 = ₹ 5,400
B's share 1

48
of ₹ 86,400 = ₹ 1,800
23. IN THE BOOKS OF FIRM
JOURNAL ENTRIES
Date Particulars L.F. Dr.(₹) Cr.(₹)

Cash/Bank A/c Dr. 20,000

To Premium for Goodwill A/c

20,000
(Being the share of premium brought in cash by C)

Premium for Goodwill A/c Dr. 20,000

To A's Capital A/c 12,000

To B's Capital A/c

(Being the distribution of premium among the sacrificing partners in their sacrificing ratio, 8,000
i.e., 3 : 2) (Notes 1, 2 and 3)
Notes:
i. A's sacrifice = 3

5
×
1

2
=
10
3
; B's sacrifice = 2

5
×
1

2
=
2

10
. Sacrificing Ratio between A and B = 3 : 2
3 5
ii. C's Share = 10
+
2

10
=
10
or 1

iii. Goodwill brought by C = 1

2
of 40,000 i.e., ₹20,000

24. Books of Srikant and Raman Journal

Date Particular L.F. Dr. (₹) Cr. (₹)

Bank A/c Dr. 38,000

To Venkat’s Capital A/c 30,000

1.
To Premium for Goodwill A/c 8,000

(Amount brought in by Venkat as his capital and his share of goodwill)

Premium for Goodwill A/c Dr. 8,000

To Srikant’s Capital A/c 4,800

2.
To Raman’s Capital A/c 3,200

(Goodwill brought in by Venkat shared by old partners in their ratio of sacrifice)

5 / 17
 3. Srikant’s Capital A/c Dr. 7,200

Raman’s Capital A/c Dr. 4,800

To Goodwill A/c 12,000

(Goodwill already appearing in books written-off in the old ratio)

Note: Since nothing is given about the ratio in which the new partner acquires his share of profit from Srikant and Raman, it is
implied that they sacrifice their share of profit in favour of Venkat in the old ratio i.e., 3 : 2.
OR
When a new partner is admitted, assets are revalued and liabilities are reassessed so that the gain or loss arising on account of such
revaluation up to the date of admission of a new partner may be ascertained and adjusted in the Old partners' Capital Account in
their old profit-sharing ratio and the new partner should neither gain nor suffer because of change in the value of assets or amount
of liabilities.
Revaluation Account
Dr. Cr.

Particulars Amount Particulars Amount

To Decrease in Value of assets By Increase in value of assets

To Increase in Value of liabilities By Decrease in value of liabilities

To Unrecorded liabilities By Unrecorded assets

To Profit on Revaluation (in old ratio) By Loss on Revaluation (old ratio)

25. Balance Sheet
as at 31.03.2018
Particulars Note No. Rs.

I. EQUITY & LIABILITIES

1. Shareholder's Funds

(a) Share Capital 1 7,44,000

Notes to Accounts:
Particulars Rs.

1. Share Capital

(a) Authorised Capital:

1,00,000 Shares @ Rs. 10 each 10,00,000

(b) Issued Capital:

80,000 Shares @ Rs.10 each 8,00,000

(c) Subscribed and fully paid up:

72,000 shares @ Rs. 10 each 7,20,000

(d) Subscribed but not fully paid up:

3,000 shares @ Rs. 10 each 30,000

(-) calls in arrears 6,000 24,000

7,44,000
OR
Issued 1,00,000 equity shares of ₹ 10 each at a premium of ₹ 5
Applied 1,00,000 shares
Books of Shiva Limited
Journal

6 / 17
 Date Particulars L.F. Dr. (₹) Cr. (₹)

Bank A/c Dr. 15,00,000

To Equity Share Application and Allotment A/c 15,00,000

(Share application and allotment money received for 1,00,000 Shares at ₹ 15 each including
₹ 5 premium)

Equity Share Application and Allotment A/c Dr. 15,00,000

To Equity Share Capital A/c 10,00,000

To Securities Premium A/c 5,00,000

(Application and allotment money of 1,00,000 shares transferred to Equity Share Capital
Account at ₹ 10 each and Securities Premium at ₹ 5 each)
26. Journal Entries
Date Particulars L.F Dr. (₹) Cr. (₹)

Bank A/c Dr. 5,00,000

To 15% Debentures Application and Allotment A/c 5,00,000

(assets Purchased)

15% Debenture Application and Allotment A/c Dr. 5,00,000

Loss on issue of Debenture A/c Dr. 25,000

To 12% Debentures A/c 5,00,000

To Premium on Redemption A/c 25,000

(transfer of application money to debenture account issued at par, but redeemable at a premium
of 5%)
27. A gains by 3/10-1/4=1/20
B gains by 3/10-1/4=1/20
C losses by 1/4-2/10=1/20
D losses by 1/4-2/10=1/20
So if goodwill is valued at Rs 20000, A and B should pay @Rs 1000 each (i.e. Rs. 20000 × 1

20
) to C and D.
Journal
Particulars Dr. (Rs.) Cr. (Rs.)

A'capital a/c.......Dr. 1,000

B'capital a/c.......Dr. 1,000

To C's capital a/c 1,000

To D's capital a/c 1,000

(Being goodwill adjusted through capital a/c in sacrificing and gaining.)

28. Journal
Date Particulars L.F. Dr. (₹) Cr. (₹)

2013

April, 1 Bank A/c Dr. 1,00,000

To Aditi's capital A/c 1,00,000

(Amount of capital brought in by Aditi)

April, 1 Aditi's capital A/c Dr. 25,000

To Saloni's capital A/c 17,500

7 / 17
 To Srishti's capital A/c 7,500

(Aditi’s share of goodwill credited to sacrificing partner’s capital A/cs)

Aditi entered in partnership = 1/6th share
Capital = 100000
Goodwill of the firm = total capital of the firm - total capital of all partners
Total capital of the firm = 100000 × 6/1 = 600000
Total capital of all partners = 200000 + 150000 + 100000 = 450000
Hidden goodwill = 600000 - 450000 = 150000
Aditi share of goodwill = 150000 × 1/6 = 25000
If no information is given so old ratio is sacrificing ratio 7 : 3
29. Jyoti Power Ltd.
JOURNAL
Date Particulars L.F. Amt (Dr.) Amt (Cr.)

Bank A/c (20,00,000 × 13) Dr. 2,60,00,000

To Equity Share Application and Allotment A/c 2,60,00,000

(Being the application money received on 20,00,000 shares @ ₹ 10 each, and ₹ 3 as

premium)

Equity Share Application and Allotment A/c Dr. 2,60,00,000

To Equity Share Capital A/c (8,50,000 × 10) 85,00,000

To Securities Premium Reserves A/c (8,50,000 × 3) 25,50,000

To Bank A/c (11,50,000 × 13) 1,49,50,000

(Being the shares allotted and share application money transferred to share capital
account and balance refunded)
Values which the company wants to propagate are :
i. Value of equality is shown by the company by alloting shares on Pro- rata basis.
ii. Providing employment opportunities to the youth in backward areas by setting up a power plant.
iii. Promoting peace and harmony in the society.
Note : When the amount on the share is received in lump sum then "Share Application and Allotment" is used instead of "Share
Application" A/c.
OR
Journal Entries
Dr. Cr.
Date Particulars L.F.
(Rs.) (Rs.)

Share Capital A/c (100 × Rs. 9) Dr. 900

To Forfeited Shares A/c (100*2) 200

To Calls-in-Arrears A/c (100*7)

(Being the forfeiture of 100 Shares, Rs. 9 called-up, on which allotment money of Rs. 3 and first 700
call money of Rs. 4 have not been received)

Bank A/c( 100× Rs. 8) Dr. 800

Forfeited Shares A/c(100× Rs. 2) Dr. 200

To Share Capital A/c (100× Rs. 10)

1,000
(Being the reissue of 100 shares fully paid-up at Rs. 8)

Shares reissued @ Rs. 10 (Per Share):

(i) Share Capital A/c (100× Rs. 9) Dr. 900

To Forfeited Shares A/c (100× Rs. 2) 200

8 / 17
 To Calls-in-Arrears A/c (100× Rs. 7) 700
(Being the forfeiture of 100 shares, Rs. 9 called-up, on which allotment money of Rs. 3 and first
call money of Rs. 4 have not been received)

(ii) Bank A/c( 100× Rs. 10) Dr. 1,000

To Share Capital A/c (100× Rs. 10)

1,000
(Being the reissue of 100 forfeited shares, fully paid-up at par)

(iii) Forfeited Shares A/c Dr. 200

To Capital Reserve A/c

200
( Being the gain on reissue transferred to Capital Reserve )
Note : Maximum discount that can be allowed on reissue of forfeited shares is the amount forfeited i.e. amount credited to the
forfeited shares. In other words, reissue price can not be less than the amount unpaid on forfeited shares.
If forfeited shares are issued at par or premium the total amount forfeited on the share is a gain of capital nature and transferred to
capital reserve.
30. There are two methods to calculate interest on drawings : –
1. Simple Method: Under this method, interest on drawings is calculated on each and every amount of drawing separately. It is
calculated from the date of drawing till the close of accounting period. The formula to calculate interest is:
rate of interest Months
interest on drawings = amount of drawings × ×
100 12

2. Product Method: In this method, the following steps are performed : –

Calculate products of each drawing and its duration.
Add different products
Interest is calculated on the total of products so arrived at , for a period of one month. The formula to calculate interest
under this method is:
Rate of interest 1
interest on drawings = T otal of products × ×
100 12

​Rakesh's Interest on Drawings

Date Amt(Rs) Period Product(Rs)

May 31, 2006 600 10 Months 6,000

June 30, 2006 500 9 months 4,500

August 31, 2006 1,000 7 months 7,000

November 1, 2006 400 5 months 2,000

December 31, 2006 1,500 3 months 4,500

January 31, 2007 300 2 months 600

March 01, 2007 700 1 month 700

Total 25,300
Interest on Drawings of Rakesh
6
⇒ Sum of product ×Rate × = 25,300 × = Rs 126,50
1 1
×
12 100 12

Interest on Roshan’s Drawings (By Average method)

1
6

⇒ Total Drawings × Rate ×

12
2
= 4,800 × 6

100
×
13

2×12
= Rs 156
31. Journal Entries
Date Particulars L.F. Dr. Cr.

i Revaluation A/c Dr. 22,200

To Fixed Assets A/c 15,000

To Provision for doubtful debts A/c 7,200

(Being assets revalued.)

ii Stock A/c Dr. 50,000

9 / 17
 Creditors A/c Dr. 3,700

To Revaluation A/c 53,700

(Being asset and liability revalued.)

iii Revaluation A/c Dr. 31,500

To A's Capital A/c 18,000

To B's Capital A/c 13,500

(Being revaluation profits adjusted.)

iv A's Capital A/c Dr. 4,000

To B's Capital A/c 4,000

(Being reserves adjusted.)

Capital Accounts
Particulars A B Particulars A B

To B's Capital A/c 4,000 ..... By Balance b/d 2,40,000 1,20,000

To Balance c/d 2,54,000 1,37,500 By A's Capital A/c ..... 4,000

By Revaluation A/c 18,000 13,500

2,58,000 1,37,500 2,58,000 1,37,500

Revised Balance Sheet
Liabilities ₹ Assets ₹

Sundry Creditors 24,300 Cash 20,000

Reserve 42,000 Sundry Debtors 1,20,000

Capital A/cs: Less : Provision 7,200 1,12,800

A 2,54,000 Stock 1,90,000

B 1,37,500 3,91,500 Fixed Assets 1,35,000

4,57,800 4,57,800
Working Note :
14−12
A's Gain = − 2

3
4

7
=
21
=
2

21
9−7
B's sacrifice = 3

7
−
1

3
=
21
=
2

21

OR
Revaluation A/c
Particulars ₹ Particulars ₹

To Profit Transferred: By Land & Building 2,10,000

A 1,40,000

B 70,000 2,10,000

2,10,000 2,10,000
Partners' Capital A/c
particulars A B Particulars A B

To A's Capital A/c - 20,000 By Balance b/d 3,00,000 2,00,000

To Reserve A/c 180,000 1,20,000 By Rev. Profit 1,40,000 70,000

To Bank A/c (Bal. fig.) 20,000 By B's Capital A/c 20,000 -

To Balance c/d 3,60,000 2,40,000 By Reserve A/c 1,00,000 50,000

10 / 17
 By Bank A/c [Bal. fig.] 60,000

5,60,000 3,80,000 5,60,000 3,80,000

Balance Sheet (Revised)
Liabilities ₹ Assets ₹

Capital Accounts: Land & Building 5,00,000

A 3,60,000 Furniture 80,000

B 2,40,000 6,00,000 Stock 2,40,000

Reserves 3,00,000 Debtors 1,50,000

Creditors 2,00,000 Bank [60,000 + 60,000 + 20,000] 1,00,000

Cash 30,000

11,00,000 11,00,000
Working Note:
i. Old Ratio of A : B = 2 : 1
ii. New Ratio of A : B = 3 : 2
iii. Sac./Gain to A = (2/3) - (3/5) = [(10 - 9)/15] = (1/15) Sac.
to B = [1/3] - (2/5) [(5 - 6)/15] (-1/15) Gain
iv. Share of Goodwill to A = ₹[3,00,000 × (1/15)] = ₹20,000 (Cr)
B = ₹[3,00,000 × (-1/15)] = ₹20,000 (Dr.)
v. Total Capital of New firm = ₹ 6,00,000
New Capital of "A" = ₹[6,00,000 × (3/5)] = ₹3,60,000
"B" = ₹[6,00,000 × (2/5)] = ₹2,40,000
32. In The Books of A, B, Cand D
JOURNAL ENTRIES
Date Particulars L.F. Dr. (₹) Cr. (₹)

2022

April
Furniture A/c Dr. 9,500
1

Business Premises A/c Dr. 20,500

To Revaluation A/c 30,000

(Increase in the value of assets recorded through revaluation)

Revaluation A/c Dr. 30,000

To A's Capital A/c 15,000

To B's Capital A/c 10,000

To C's Capital A/c 5,000

(Transfer of profit on revaluation to partners in the ratio of 3 : 2 : 1)

Bank A/c Dr. 1,50,000

To D’s Capital A/c 1,20,000

To Premium for Goodwill A/c 30,000

(Amount brought in by D for capital and premium for goodwill)

Premium for Goodwill A/c Dr. 30,000

To A's Capital A/c 22,500

11 / 17
 To B's Capital A/c 7,500

(Premium for goodwill brought in by D credited to old partners A and B in their

sacrificing ratio of 3 : 1)

C’s Capital A/c Dr. 10,000

To A's Capital A/c 7,500

To B's Capital A/c 2,500

(Adjustment for goodwill for acquiring 1

12
th share by C from A and B in their sacrificing
ratio of 3 : 1)
REVALUATION ACCOUNT
Dr. Cr.

Particulars ₹ Particulars ₹

To Profit on revaluation transferred to: By Furniture A/c 9,500

A's Capital A/c 15,000 By Business Premises A/c 20,500

B's Capital A/c 10,000

C's Capital A/c 5,000 30,000

30,000 30,000
CAPITAL ACCOUNTS
Dr. Cr.

Particulars A B C D Particulars A B C D

₹ ₹ ₹ ₹ ₹ ₹ ₹ ₹

To A's Capital
____ ____ 7,500 ____ By Balance b/d 1,20,000 1,20,000 1,20,000 ____
A/c

To B's Capital By Revaluation A/c

____ ____ 2,500 ____ 15,000 10,000 5,000 ____
A/c (profit)

To Balance c/d 1,65,000 1,40,000 1,15,000 1,20,000 By Bank A/c ____ ____ ____ 1,20,000

By Premium for goodwill

22,500 7,500 ____ ____
A/c

By C’s Capital A/c 7,500 2,500

1,65,000 1,40,000 1,25,000 1,20,000 1,65,000 1,40,000 1,25,000 1,20,000

BALANCE SHEET
as at 1st April, 2022
Liabilities ₹ Assets ₹

Capital Accounts: Business Premises 2,25,500

A 1,65,000 Furniture 1,04,500

B 1,40,000 Stock-in-Trade 40,000

C 1,15,000 Debtors 28,000

D 1,20,000 5,40,000 Cash at Bank 1,65,000

Sundry Creditors 20,000 Cash in hand 4,200

Outstanding Salaries and Wages 7,200

5,67,200 5,67,200

12 / 17
 Working Notes :
i. Old Ratio of A, B and C = 3 : 2 : 1
New Ratio of A, B, C and D = : 1

4
1

4
:
1

4
:
1

Sacrifice or Gain:
6−3
A= − =3

6
1

4
= 12
3

12
(Sacrifice)
4−3
B= 2

6
−
1

4
= 12
= 1

12
(Sacrifice)
2−3
C= 1

6
−
1

4
= 12
= 1

12
(Gain)
ii. Entire amount of premium for goodwill paid by D will be credited to A and B in their sacrificing ratio of 3 : 1.
iii. C will compensate A and B for acquiring th share on the basis of premium paid by D. The amount of compensation will be:
1

12

Firm’s goodwill = ₹ 30,000 × 4

1
= ₹ 1,20,000
Compensation paid by C = ₹ 1,20,000 × 1

12
= ₹ 10,000
OR
Admission, death, retirement etc
33. Issued 1,000 equity shares of ₹ 10 each
Applied 1,800 shares
Allotment made as: Amount payable per shares as:

Applied Allotted Application ₹3

40,000 30,000 Allotment ₹4

35,000 20,000 First Call ₹3

1,800 1,000 ₹ 10
Books of XYZ Limited
Journal Entries
Date Particulars L.F. Dr. (₹) Cr. (₹)

Bank A/c Dr. 2,25,000

To Equity Share Application A/c 2,25,000

(Share application money received for 75,000 shares at ₹ 3 each)

Equity Share Application A/c Dr. 2,25,000

To Equity Share Capital A/c 1,50,000

To Equity Share Allotment A/c 75,000

(Application money of 50,000 shares transferred to share capital and the remaining
amount adjusted on allotment)

Equity Share Allotment A/c Dr. 2,00,000

To Equity Share Capital A/c 2,00,000

(Share allotment due on 50,000 shares at ₹ 4 each)

Bank A/c Dr. 1,21,400

To Equity Share Allotment A/c 1,21,400

(Share allotment received on 48,800 shares after adjusting the excess money on
application)

Equity Share Capital A/c (1,200 × ₹ 7) Dr. 8,400

To Share Forfeiture A/c 4,800

To Equity Share Allotment A/c 3,600

(1,200 shares of ₹ 10 each ₹ 7 called-up forfeited for the non-payment of allotment)

Equity Share First and Final Call A/c Dr. 1,46,400

13 / 17
 To Equity Share Capital A/c 1,46,400

(First and final call due on 48,800 shares at ₹ 3 each)

Bank A/c Dr. 1,45,200

To Equity Share First and Final Call A/c 1,45,200

(Share first and call received 48,800 shares at ₹ 3 each)

Equity Share Capital A/c Dr. 4,000

To Share Forfeiture A/c (400 × ₹ 7) 2,800

To Equity Shares First and Final Call A/c 1,200

(400 shares forfeited for the non-payment of first and final call)

Bank A/c Dr. 8,000

Share Forfeiture A/c Dr. 2,000

To Equity Share Capital A/c 10,000

(1,000 shares of ₹ 10 each re-issued at ₹ 8 per share fully paid-up)

Share Forfeiture A/c Dr. 3,200

To Capital Reserve A/c 3,200

(Balance of 1,000 re-issued shares in Share Forfeiture Account transferred to Capital

Reserve Account)
Working Notes:-
Rumu’s Share
40,000
Number of shares applied = 30,000
× 1, 200 = 1,600 shares

Money received on Application 1,600 shares × ₹ 3 = ₹ 4,800

Money adjusted on Application 1,200 Shares × ₹ 3 = ₹ 3,600

Excess on Application ₹ 1,200

Allotment due on 1,200 shares × ₹ 4 = 4,800

Less: Excess money on Application = 1,200

Calls-in-Arrears on Allotment 3,600

Share Allotment
Share Allotment due 50,000 shares × ₹ 4 = 2,00,000

Less: Excess money on application = 75,000

= 1,25,000

Less: Calls-in-Arrears on Allotment = 3,600

Money received on Allotment = 1,21,400

Shamu’s Shares
20,000
Number of shares allotted to Shamu = 35,000
× 700 = 400 shares
First and Final Call
First and Final Call due; 48,800 shares × ₹ 3 = 1,46,400

Less: Calls-in-Arrears by Shamu; 400 shares × ₹ 3 = 1,200

Money received on of First and Final Call 1,45,200

Capital Reserve
Shares re-issued out the shares forfeited from Ramu = 1,000 shares - Shamu’s shares

14 / 17
= 1,000 - 400
= 600 shares
on re-isssue Ramu’s shares:
Capital Reverse on re-issue of 600 shares forfeited from Ramu
4800
Share Forfeiture Cr. 1200
=₹4

Share Forfeiture Dr. =₹2

Share Forfeiture after re-issued ₹ 2 per share

Capital Reserve after re-issue of 600 shares = Share Forfeiture after re-issue (per share) × 600 shares
= ₹ 2 × 600
= ₹ 1,200
on re-isssue Shamu’s shares:
Share Forfeiture Cr. ₹7

Share Forfeiture Dr. ₹2

Share Forfeiture after re-issue ₹ 5 per share

Capital Reserve after re-issue of 400 shares = Share Forfeiture after re-issue (per share) × 600 shares
= ₹ 5 × 400
= ₹ 2,000
Total amount of Capital Reserve = Capital Reserve of 600 shares + Capital Reserve of 400 shares
Total amount of Capital Reserve = Capital Reserve of 600 shares + Capital Reserve of 400 shares
= ₹ 1,200 + ₹ 2,000 = ₹ 3,200
OR
JOURNAL ENTRIES
Date Particulars LF Dr. (Rs.) Cr. (Rs.)

Bank A/c...........Dr. 5,70,000

To Equity Share Application A/c 5,70,000

(Being application money received.)

Equity Share Application A/c...........Dr. 5,70,000

To Equity Share Capital A/c 2,00,000

To Securities Premium Reserve A/c 1,00,000

To Equity Share Allotment A/c 1,50,000

To Bank A/c 1,20,000

(Being application money transferred.)

Equity Share Allotment...........Dr. 4,00,000

To Equity Share Capital A/c 3,00,000

To Securities Premium Reserve A/c 1,00,000

(Being allotment money due.)

Bank A/c...........Dr. 2,43,500

Calls in Arrears Ac...........Dr. 6,500

To Equity Share Allotment A/c 2,50,000

(Being allotment money received.)

Equity Share First Call A/c...........Dr. 3,00,000

To Equity Share Capital A/c 3,00,000

15 / 17
 (Being call money due.)

Bank A/c...........Dr. 2,85,000

Calls in Arrears A/c...........Dr. 15,000

To Equity Share First Call A/c 3,00,000

(Being call money received.)

Equity Share Capital A/c...........Dr. 16,000

Securities Premium Reserve A/c...........Dr. 2,000

To Share Forfeited A/c 5,500

To Calls in Arrears A/c 12,500

(Being Share forfeited.)

Equity Share Second & Final Call A/c...........Dr. 1,96,000

To Equity Share Capital A/c 1,96,000

(Being second & final call due.)

Bank A/c...........Dr. 1,90,000

Calls in Arrears A/c...........Dr. 6,000

To Equity Share Second & Final Call A/c 1,96,000

(Being Call money received.)

Equity Share Capital A/c...........Dr. 30,000

To Share forfeited A/c 15,000

To Calls in Arrears 15,000

(Being Shares forfeited.)

Bank A/c...........Dr. 32,000

Share Forfeited A/c...........Dr. 8,000

To Equity Share Capital A/c 40,000

(Being share reissued.)

Share forfeited A/c...........Dr. 9,750

To Capital Reserve A/c 9,750

(Being share forfeited transferred.)

34. In the books of Solar Power Ltd.
An Extract of Balance Sheet
As at 31st March, 2018
Particulars Note No. Amount (₹)

I. EQUITIES AND LIABILITIES

1. Shareholders’ Funds

Reserves and Surplus 3 (1,20,000)

2. Non-Current Liabilities

a. Long-term Borrowings 1 10,00,000

b. Other long-term Liabilities 2 1,50,000

II. Assets

16 / 17
Current Assets

Cash and Cash Equivalents 4 9,50,000

Notes to Accounts of balance sheet:
Note No. Particulars Amount (₹)

1. Long-term Borrowings

10,000, 8% Debentures of ₹100 each

10,00,000
10,000 × 100

2. Other long-term Liabilities

Premium on Redemption of Debentures 1,50,000

3. Reserves and Surplus

Securities Premium Reserve 80,000

Less: Loss on Issue of Debentures written off (80,000)

Statement of Profit and Loss Nil

Less: Loss on Issue of Debentures written off (1,20,000) (1,20,000)

4. Cash and Cash Equivalents

Cash at bank
9,50,000
8% debentures @ ₹ 95 each (10,000 × 95)

17 / 17