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GRADE : XII SECTION : C MID TERM : 2

SUBJECT: ACCOUNTANCY (2021-2022) DATE : 04/10/2021
NAME : _______________ (CODE-055) MARKS : 40
OFFLINE EXAMINATION TIME : 90 minutes
General Instructions:
Read the following instructions very carefully and strictly follow them:
1. This question paper comprises three PARTS – I, II and III.
There are 69 questions in the question paper.
2. Part - I -is compulsory for all candidates.
3. Part - II Analysis of Financial Statement and Part –III Computerized Accounting.
You have to attempt only one of the given OPTIONS.
4. There is an internal choice provided in each Sections.
I. Part-I, contains three Sections -A, B and C.
Section A has questions from 1 to 18 and
Section B has questions from 19 to 36,
you have to attempt any 15 questions each in both the sections.
II. Part I, Section C has questions from 37 to 41. You have to attempt any four questions.
III. Part II, contains two Sections – A and B. Section A has questions from 42 to 48,
you have to attempt any five questions and
Section B has questions from 49 to 55, you have to attempt any six questions.
IV. Part III, contains two Sections – A and B. Section A has questions from 49 to 62,
you have to attempt any five questions and
Section B has questions from 63 to 69, you have to attempt any six questions.
5. All questions carry equal marks. There is no negative marking.
6. Specific Instructions related to each Part and subdivisions (Section) is mentioned clearly
before the questions. Candidates should read them thoroughly and attempt accordingly.
PART – I
SECTION – A
Instructions
From question number 1 to 18, attempt any 15 questions.
Q. 1) Rent payable to partner is ____
A) Appropriation of profit
B) Charge against profit
C) Credited to profit and loss account
D) Debited to profit and loss appropriation account
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Q. 2) Salary payable to partners is ____.
A) Appropriation of profit
B) Charge against profit
C) Debited to profit and loss account
D) Credited to profit and loss appropriation account

Q. 3) Milan, Khilan and Silam were partners sharing profits in the ratio of 2:2:1.
They decided to share future profits in the ratio 7:5:3 with effect from 1st April, 2019.
After, the revaluation of assets and re-assessment of liabilities, revaluation account showed
a loss of ₹ 15,000. The amount to be debited in the capital account of Milan because of loss
on revaluation will be ____.
A) ₹ 15,000
B) ₹ 6,000
C) ₹ 7,000
D) ₹ 5,000

Q. 4) A, B, C and D are partners sharing profits in the ratio of 4:3:2:1. They admit E as a new
partner for 1/10th share. It is agreed that C and D will retain their original shares.
What will be new profit sharing ratio?
A) 4:3:2:1:1
B) 24:18:14:7:7
C) 7:5:4:2:2
D) 36:27:18:9:10

Q. 5)
A company purchased a building for ₹ 1,80,000 and issued as payment equity shares at 20%
premium.
Journal entry will be
A) Building a/c Dr. 2,00,000
To Share capital a/c 1,60,000
To Securities premium reserve a/c 40,000
B) Share capital a/c Dr. 2,00,000
To Building a/c 1,80,000
To Securities premium reserve a/c 20,000
C) Building a/c Dr. 1,80,000
To Share capital a/c 1,50,000

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 To Securities premium reserve a/c 30,000
D) Building a/c Dr. 1,80,000
To Share capital a/c 30,000
To Securities premium reserve a/c 1,50,000

Q. 6) The portion of share capital which can be called-up only on the winding up of the
company is called ____.
A) Authorised capital
B) Called up capital
C) Uncalled capital
D) Reserve capital

Q. 7) Shareholders receive from the company ____.

A) Interest
B) Interest and dividend
C) Profit
D) Dividend

Q. 8) Which one of the following items is not a part of subscribed capital?

A) Equity shares
B) Preference shares
C) Forfeited shares
D) Bonus shares

Q. 9) A, B and C are partners in a firm. They admit D on 1st April, 2020, for 1/3 share in the
profits of the firm. D acquired his share as 1/12 from A and the remaining from B and C in the
ratio of 2:1.
The sacrificing ratio of the old partners will be ___.
A) 1:1:2
B) 2:1:1
C) 1:2:1
D) 2:2:1

Q. 10) Arif, Ravi and Ben are partners in a firm sharing profits and losses in the ratio of 6:4:1.
Arif guaranteed a minimum profit of ₹ 16,000 to Ben. The trading profit of the firm for the
year ending 31st March 2021 was ₹ 1,32,000.

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Arifs share in the profits of the firm will be ____.
A) ₹ 72,000
B) ₹ 68,000
C) ₹ 69,600
D) ₹ 16,000

Q. 11) Simi, Manu and Beena are partners in a firm sharing profits and losses in the ratio of
2:2:1. The balances of their fixed capital accounts on 1st April, 2020, were :
Simi ₹ 1,00,000, Manu ₹ 1,00,000 and Beena ₹ 80,000.
After the accounts for the year ended 31st March, 2021, were prepared, it was discovered that
interest on capital @ 10% per annum had been credited to the partner’s current accounts even
though it was not provided in the partnership deed.
The error in Simi’s capital account/current account will be rectified by _____.
A) Debiting her capital account with ₹ 1,200
B) Crediting her current account with ₹ 1,200
C) Debiting her current account with ₹ 1,200
D) Crediting her capital account with ₹ 1,200

Q. 12) X Ltd. Forfeited 400 shares of ₹ 10 each issued at a premium of 40% to Kiran who had
applied for 480 shares. After having paid ₹ 6 (including ₹ 2 premium) on application,
she did not pay allotment and first and final call.
The amount to be credited to ‘Forfeited shares account’ will be ____.
A) ₹ 2,080
B) ₹ 2,880
C) ₹ 1,920
D) ₹ 1,600

Q. 13) If a shareholder does not pay his dues on allotment, for the amount due,
there will be a ___.
A) Debit balance in the share forfeiture account
B) Credit balance in the share forfeiture account
C) Debit balance in the share allotment account
D) Credit balance in the share allotment account

Q. 14) Moti Ltd. Forfeited 2,000 shares of ₹ 10 each, ₹ 8 called up, for non-payment of first
call of ₹ 2 per share. Out of these, 1,500 shares were reissued for ₹ 10,500 as ₹ 8 paid up.

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What is the amount to be transferred to capital reserve?
A) ₹ 4,500
B) ₹ 10,500
C) ₹ 7,500
D) ₹ 14,500

Q. 15) A and B were partners. C joins them and it is decided that A’s share will be half of B’s
share and C’s share will be one third of A’s share, find new profit sharing ratio.
A) 1:2:1
B) 2:4:1
C) 3:6:2
D) 3:6:1

Q. 16) A, B and C sharing profits and losses in the ratio of 3:2:1, decide to share future profits
and losses in the ratio of 4:3:2. ‘Investment Fluctuation Resrve’ appeared in the books at
₹ 1,50,000 at the time of change in profit sharing ratio, and investments
(market value ₹ 3,90,000) appears at ₹ 4,50,000. In such a case ____.
A) A’s capital a/c will be debited by ₹ 5,000
B) A’s capital a/c will be credited by ₹ 5,000
C) A’s capital a/c will be credited by ₹ 45,000
D) A’s capital a/c will be credited by ₹ 40,000

Q. 17) A and B are partners with capital s of ₹ 3,00,000 and ₹ 2,00,000 respectively.
Normal rate of return is 15% and goodwill calculated at 2 years purchase of super profit is
valued at ₹ 1,00,000. What were the average profits of the firm?
A) ₹ 1,25,000
B) ₹ 25,000
C) ₹ 1,75,000
D) ₹ 60,000

Q. 18) P, Q and R are partners sharing profits in 2:2:1. They distributed the profit for the year
ending 31st March 2021, ₹ 5,00,000 without providing for the following:
i) Salary to P @ ₹ 15,000 per month
ii) Salary to Q @ ₹ 30,000 per quarter
In the adjustment journal entry:
A) Cr. P ₹ 1,80,000 and Cr. Q ₹ 1,20,000

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B) Cr. Q ₹ 1,80,000 and Dr. R ₹ 1,80,000
C) Cr. P ₹ 60,000 and Dr. R ₹ 60,000
D) Dr. P ₹ 60,000 and Cr. R ₹ 60,000

PART – I
SECTION – B
Instructions:
From question number 19 to 36, attempt any 15 questions.
Q. 19) Chitra and Samyu were partners in a firm. Their respective fixed capitals were
₹ 15,00,000 and ₹ 10,00,000. The partnership deed provided interest on drawings @ 6% p.a.
During the year ended 31.03.2021, Chitra’s drawings were ₹ 10,000 per month drawn at the
end of every month and Samyu’s drawings were ₹ 30,000 per quarter drawn at the beginning of
every quarter.
Net profit for the year were distributed without taking into consideration the interest on
drawings. In the adjusting entry ____.
A) Cr. Chitra ₹ 600 and Dr. Samyu ₹ 600
B) Dr. Chitra ₹ 600 and Cr. Samyu ₹ 600
C) Cr. Chitra ₹ 300 and Dr. Divya ₹ 300
D) Dr. Chitra ₹ 300 and Cr. Divya ₹ 300

Q. 20) P, Q and R have been sharing sharing profits in the ratio of 2:2:1 respectively. R wants
that he should share profits equally along with P and Q and he further wants that change in
profit sharing ratio should be applicable retrospectively for the last three years. Other partners
have no objection to this.
The profits for the last three years were ₹ 1,20,000, ₹ 1,40,000 and ₹ 1,90,000.
In the adjustment entry ____.
A) Dr. P ₹ 75,000 Dr. Q ₹ 75,000 Cr. R ₹ 1,50,000
B) Dr. P ₹ 1,50,000 Cr. Q ₹ 1,50,000 Cr. R ₹ 1,50,000
C) Dr. P ₹ 30,000 Dr. Q ₹ 30,000 Cr. R ₹ 60,000
D) Cr. P ₹ 30,000 Cr. Q ₹ 30,000 Cr. R ₹ 60,000

Q. 21) The partners of the firm distributed the profits for the year ended 31 st March, 2021,
₹ 90,000 in equal proportion without providing for the following adjustments.
i) A and B each were entitled to a salary of ₹ 1,500 per quarter.
ii) C was entitled to a commission of ₹ 18,000
iii) Profits were to be shared in the ratio of 3:2:1

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In the adjustment entry ____.
A) Dr. A ₹ 4,000 Dr. B ₹ 4,000 Cr. C ₹ 8,000
B) Cr. A ₹ 4,000 Cr. B ₹ 4,000 Dr. C ₹ 8,000
C) Dr. A ₹ 6,000 Cr. B ₹ 4,000 Cr. C ₹ 2,000
D) Cr. A ₹ 6,000 Dr. B ₹ 4,000 Dr. C ₹ 2,000

Q. 22) A, B and C are partners sharing profits in the ratio of 5:3:2.

With effect from 1st April, 2021 they decided to share profits in the ratio of 2:2:1.
Goodwill of the firm is valued at ₹ 1,20,000. In adjusting entry for goodwill ___.
A) Cr. A by ₹ 48,000 Cr. B by ₹ 48,000 Cr. C by ₹ 24,000
B) Cr. A by ₹ 60,000 Cr. B by ₹ 36,000 Cr. C by ₹ 24,000
C) Cr. A by ₹ 12,000 Dr. B by ₹ 12,000
D) Dr. A by ₹ 12,000 Cr. B by ₹ 12,000

Q. 23) X Ltd. purchased the following assets from Y Ltd.

PARTICULARS BOOK VALUE ₹ AGREED VALUE ₹
Plant and machinery 10,00,000 20% less
Stock 2,50,000 60% more
Payment was made 20% by cheque and the remaining amount
by equity shares of ₹ 10 each, ₹ 6 paid. Number of equity shares issued will be ___.
A) ₹ 2,00,000
B) ₹ 96,000
C) ₹ 1,20,000
D) ₹ 1,60,000

Q. 24) Gupta limited forfeited 4,000 shares of ₹ 10 each for non-payment of final call of ₹ 3
per share. Out of these, 3,000 shares were re-issued as fully paid up in such a way that ₹ 9,000
were transferred to capital reserve. Shares were re-issued for ____.
A) ₹ 4 per share
B) ₹ 6 per share
C) ₹ 10 per share
D) ₹ 3 per share

Q. 25) X Ltd. forfeited 1,000 shares of ₹ 10 each, issued at 30% premium (to be paid at the
time of allotment) for non-payment of first call of ₹ 2 per share.
The second and final call of ₹ 3 has not yet been called.
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Out of these, 600 shares were re-issued as ₹ 7 paid up for ₹ 7 per share.
Amount transferred to capita reserve account will be ____.
A) ₹ 1,200
B) ₹ 5,000
C) ₹ 4,800
D) ₹ 3,000

Q. 26) A, B and C were partners sharing profits and losses in the ratio of 7:3:2. From 1st
January, 2021 they decided to share profits and losses in the ratio of 8:4:3. Goodwill is valued
at ₹ 3,00,000 and General Reserve appeared in their books at ₹ 60,000 which they do not want
to distribute. In adjustment entry ____.
A) Cr. A by ₹ 18,000 Dr. B by ₹ 6,000 Dr. C by ₹ 12,000
B) Dr. A by ₹ 18,000 Cr. B by ₹ 6,000 Cr. C by ₹ 12,000
C) Cr. A by ₹ 18,000 Dr. B by ₹ 12,000 Dr. C by ₹ 6,000
D) Dr. A by ₹ 18,000 Cr. B by ₹ 12,000 Cr. C by ₹ 6,000

Q. 27) X, Y and Z are partners sharing profits and losses in the ratio 5:3:2. They decide to
share the future profits in the ratio 3:2:1. Advertisement Suspense Account appearing in the
balance sheet on the date if no information is available for the same will be ____.
A) Debited to the partners in old profit sharing ratio
B) Debited to the partners in new profit sharing ratio
C) Adjusted among the partners in the their sacrificing/ gaining ratio
D) Carried forward to new balance sheet without any adjustment

Q. 28) A and B are partners sharing profits and losses in the ratio of 5:4.
C is admitted for 1/5th share. A and B decide to share equally in future.
Goodwill of the firm is valued at ₹ 4,50,000.
C brings one-third share of his goodwill in cash.
Journal entry for distribution of premium for goodwill will be ____.

DATE PARTICULARS L.F. AMOUNT Dr. (₹) AMOUNT Cr. (₹)

A) C’s Current a/c Dr. 90,000 .
To A’s Capital a/c 70,000
To B’s Capital a/c 20,000
B) Premium for Goodwill a/c Dr. 60,000 .
C’s Current a/c Dr. 30,000 .

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 To A’s Capital a/c . 70,000
To B’s Capital a/c . 20,000
C) Premium for Goodwill a/c Dr. 30,000 .
C’s Current a/c Dr. 60,000 .
To A’s Capital a/c . 45,000
To B’s Capital a/c . 45,000
D) Premium for Goodwill a/c Dr. 30,000 .
C’s Current a/c Dr. 60,000 .
To A’s Capital a/c . 70,000
To B’s Capital a/c . 20,000

Q. 29) A and B are partners in a firm sharing profits and losses in the ratio of 3:2. C is admitted
into partnership. A sacrifices 1/3 of his share and B 1/10 from his share in favour of C.
C brings ₹ 1,20,000 as his share of goodwill in cash. Goodwill credited to A and B will be ___.
A) A ₹ 40,000 B ₹ 80,000
B) A ₹ 1,08,000 B ₹ 12,000
C) A ₹ 72,000 B ₹ 48,000
D) A ₹ 80,000 B ₹ 40,000

Q. 30) X Ltd. invited applications for issuing 2,00,000 shares of ₹ 100 each
at a premium of ₹ 20 per share. The amount was payable as follows:
On application ₹ 30 (including premium)
On allotment ₹ 50
On first and final call ₹ 40
Applications were received for 3,00,000 shares and pro-rata allotment was made to all the
applicants. All calls were made and duly received except allotment and first and final call from
Tina who had applied for 2,400 shares. Her shares were forfeited.
Amount credited to share forfeited account will be ___.
A) ₹ 72,000
B) ₹ 48,000
C) ₹ 40,000
D) ₹ 16,000

Q. 31) Z Ltd. invited applications for issuing 40,000 equity shares of ₹ 100 each at a premium
of ₹ 25 per share. The amount was payable as follows:
On application - ₹ 20 per share (including ₹ 4 premium)
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On allotment - ₹ 30 per share (including ₹ 5 premium)
On first call - ₹ 40 per share (including ₹ 6 premium)
On second and final call – Balance amount
Gayatri, a shareholder holding 200 shares, did not pay the ‘first’ and ‘second and final call’ and
her shares were forfeited after the second and final call.
Calls in Arrears account will be credited by ___.
A) ₹ 11,800
B) ₹ 8,200
C) ₹ 15,000
D) ₹ 7,000

Q. 32) Given below are two statements,

one labelled as Assertion (A) and the other labelled as Reason (R)
Assertion (A) - shares of private company are non-transferable
Reason (R) – Preparation of article is necessary for a private company
In the context of the above two statements, which of the following is correct?
Codes:
A) Both (A) and (R) are correct and (R) is the correct reason of (A)
B) Both (A) and (R) are correct but (R) is not the correct reason of (A)
C) Only (R) is correct
D) Both (A) and (R) are wrong

Q. 33) A Ltd. forfeited 2,000 shares of ₹ 10 each fully called up for non-payment of final call
of ₹ 2 per share. 1,200 of these shares were reissued at ₹ 7 per share, fully paid up,
What is the net balance in share forfeiture account?
A) ₹ 9,600
B) ₹ 6,400
C) ₹ 16,000
D) ₹ 2,800

Q. 34) Given below are two statements,

one labelled as Assertion (A) and the other labelled as Reason (R)
Assertion (A) – A firm has a right to keep assets in its own name.
Reason (R) – Assets of the firm are joint property of all partners.
In the context of the above two statements, which of the following is correct?
Codes:

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A) Both (A) and (R) are correct and (R) is the correct reason of (A)
B) Both (A) and (R) are correct but (R) is not the correct reason of (A)
C) Only (R) is correct
D) Both (A) and (R) are wrong

Q. 35) Given below are two statements,

one labelled as Assertion (A) and the other labelled as Reason (R)
Assertion (A) – Any change in the existing agreement of partnership results in reconstitution of
a firm.
Reason (R) – Reconstitution of a firm may happen in case of admission or retirement of a
partner.
In the context of the above two statements, which of the following is correct?
Codes:
A) Both (A) and (R) are correct and (R) is the correct reason of (A)
B) Both (A) and (R) are correct but (R) is not the correct reason of (A)
C) Only (R) is correct
D) Both (A) and (R) are wrong

Q. 36) Given below are two statements,

one labelled as Assertion (A) and the other labelled as Reason (R)
Assertion (A) – Sharing of profits is an essential feature of a partnership. If a partner is
deprived of his right to share the profits of the firm, he cannot be called a partner
Reason (R) – It is essential that all partners must share losses also.
In the context of the above two statements, which of the following is correct?
Codes:
A) Both (A) and (R) are correct and (R) is the correct reason of (A)
B) Both (A) and (R) are correct but (R) is not the correct reason of (A)
C) Only (R) is correct
D) Both (A) and (R) are wrong
PART – I
SECTION – C
Instructions:
From the question number 37 to 41, attempt any 4 questions.
Q. 37) Surya issued prospectus inviting applications for 42,500 equity shares of ₹ 100 each
payable as ₹ 10 on application, ₹ 20 on allotment, ₹ 30 on first call and balance on second and
final call.

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Applications were received for 40,000 shares. Suresh to whom 1,600 shares were allotted
failed to pay final call money and these shares were forfeited. Of the forfeited shares, 600
shares were reissued to Mahesh, credited as fully paid for ₹ 95 per share.
Subscribed and fully paid capital will be ____.
A) ₹ 39,00,000
B) ₹ 40,00,000
C) ₹ 39,60,000
D) ₹ 40,60,000

Q. 38) Given below are two statements,

one labelled as Assertion (A) and the other labelled as Reason (R)
Assertion (A) – Securities premium reserve is a part of reserve and surplus of the company.
Reason (R) – Securities premium reserve is shown under the head ‘shareholders funds’ in a
company’s balance sheet.
In the context of the above two statements, which of the following is correct?
Codes:
A) Both (A) and (R) are correct and (R) is the correct reason of (A)
B) Both (A) and (R) are correct but (R) is not the correct reason of (A)
C) Only (R) is correct
D) Both (A) and (R) are wrong

Case based MCQ

P and Q were partners in a firm sharing in the ratio of 4:3. On 1st April, 2021 they admitted R
as a new partner for 1/4th share in the profits of the firm. On the date of R’s admission, the
balance sheet of P and Q showed a General reserve of ₹ 2,80,000 and Advertisement suspense
account of ₹ 1,40,000.
The following was agreed upon, on R’s admission:
i) R’s share of goodwill is agreed at ₹ 70,000 of which he is to bring half in cash.
ii) New profit sharing ratio is agreed at 2:1:1
On the basis of the above information you are required to answer the following questions:
Q. 39) In respect of goodwill __.
A) Cr. P’s Capital a/c by ₹ 40,000 and Q’s Capital a/c by ₹ 30,000
B) Cr. P’s Capital a/c by ₹ 20,000 and Q’s Capital a/c by ₹ 15,000
C) Cr. P’s Capital a/c by ₹ 10,000 and Q’s Capital a/c by ₹ 25,000
D) Cr. P’s Capital a/c by ₹ 20,000 and Q’s Capital a/c by ₹ 50,000

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Q. 40) In respect of general reserve:
A) Cr. P’s Capital a/c by ₹ 1,40,000 Q’s Capital a/c by ₹ 70,000 and R’s Capital a/c by ₹ 70,000
B) Cr. P’s Capital a/c by ₹ 80,000 and Q’s Capital a/c by ₹ 2,00,000
C) Cr. P’s Capital a/c by ₹ 1,60,000 and Q’s Capital a/c by ₹ 1,20,000
D) Cr. P’s Capital a/c by ₹ 40,000 and Q’s Capital a/c by ₹ 30,000 & Dr. R’s Capital a/c by ₹ 70,000

Q. 41) In respect of Advertisement suspense account:

A) Dr. P’s Capital a/c by ₹ 80,000 and Q’s Capital a/c by ₹ 60,000
B) Dr. P’s Capital a/c by ₹ 40,000 and Q’s Capital a/c by ₹ 1,00,000
C) Dr. P’s Capital a/c by ₹ 70,000 and Q’s Capital a/c by ₹ 35,000 and R’s Capital a/c by ₹ 35,000
D) Dr. R;s Capital a/c by ₹ 35,000

PART – II
SECTION – A
Analysis of Financial Statements

Instructions:
From question number 42 to 48, attempt any 5 questions.
Q. 42) ‘Forfeited shares account’ appears in the balance sheet of the company under the subhead:
A) Reserves and surplus
B) Long-term provisions
C) Share capital
D) Other current liabilities

Q. 43) Match the following:

i) Debt Equity ratio a) Times
ii) Operating ratio b) Percentages
iii) Working capital turnover ratio c) Proportionate
Choose the correct option
A) i) a ii) b iii) c
B) i) a ii) c iii) b
C) i) c ii) a iii) b
D) i) c ii) b iii) a

Q. 44) Current assets of a company are ₹ 5,00,000 and its current ratio is 2:5.

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Thereafter, it received ₹ 2,00,000 from its debtors and made payment of ₹ 1,00,000 to its
creditors. Current ratio will be ___.
A) 2:1
B) 5:1
C) 6:1
D) 4:1

Q. 45) Which of the following is correct sequence to be shown under sub-heading ‘Reserve and
Surplus’ to be shown in the balance sheet.
A) i) Securities premium reserve ii) Capital reserve iii) Capital redemption reserve
iv) Debenture redemption reserve
B) i) Capital reserve ii) Capital redemption reserve iii) Securities premium reserve
iv) Debenture redemption reserve
C) i) Capital reserve ii) Capital redemption reserve iii) Debenture redemption reserve
iv) Securities premium reserve
D) i) Capital reserve ii) Securities premium reserve iii) Debenture redemption reserve
iv) Capital redemption reserve

Q. 46) Match the following

i) Calls in arrears a) Current assets
ii) Interest due on calls in arrears b) Share capital
iii) Calls in advance c) Current liabilities
iv) Interest on calls in advance d) Reserve and surplus
Choose the correct option:
A) i-a ii-b iii-c iv-c
B) i-b ii-c iii-a iv-c
C) i-b ii-a iii-c iv-c
D) i-b ii-a iii-a iv-c

Q. 47) Given below are two statements,

one labelled as Assertion (A) and the other labelled as Reason (R)
Assertion (A) – Dividend is paid on calls in advance also.
Reason (R) – Interest is paid on calls in advance also.
In the context of the above two statements, which of the following is correct?
Codes:
A) Both (A) and (R) are correct and (R) is the correct reason of (A)
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B) Both (A) and (R) are correct but (R) is not the correct reason of (A)
C) Only (R) is correct
D) Both (A) and (R) are wrong

Q. 48) Given below are two statements,

one labelled as Assertion (A) and the other labelled as Reason (R)
Assertion (A) – In vertical analysis only the figures of one year are analysed.
Reason (R) – In horizontal analysis the figures of two or more years are analysed.
In the context of the above two statements, which of the following is correct?
Codes:
A) Both (A) and (R) are correct and (R) is the correct reason of (A)
B) Both (A) and (R) are correct but (R) is not the correct reason of (A)
C) Only (R) is correct
D) Both (A) and (R) are wrong

PART – II
SECTION – B
Instructions:
From question number 49 to 55, attempt any 6 questions.
Q. 49) Credit revenue from operations ₹ 9,00,000
Trade receivables turnover ratio 6 times
Closing trade receivables were 1.5 times than that in the beginning.
Closing trade receivables will be ____.
A) ₹ 1,20,000
B) ₹ 60,000
C) ₹ 1,80,000
D) ₹ 90,000

Q. 50) On the basis of following data, a company’s gross profit ratio will be ___.
Net profit ₹ 80,000 Wages ₹ 10,000 Office expenses ₹ 30,000 Selling expenses ₹ 20,000
Total revenue from operations ₹ 5,00,000
A) 28 %
B) 26 %
C) 4 %
D) 6 %

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Q. 51) A firm has current ratio of 3.6:1 and Quick ratio of 2.4:1.
Assuming inventory at ₹ 72,000 what will be the amount of current assets?
A) ₹ 2,16,000
B) ₹ 1,44,000
C) ₹ 24,000
D) ₹ 36,000

Q. 52)
PARTICULARS ₹
Credit revenue from operations 15,00,000
Cash revenue from operations 10,00,000
Employee benefit expenses 3,00,000
Selling and distribution expenses 2,00,000
Loss on sale of machinery 1,00,000
Gross profit ration 40 %
Operation ratio will be ___.
A) 80 %
B) 84 %
C) 60 %
D) 64 %

Q. 53)
PARTICULARS ₹
Share capital 20,00,000
General reserve 5,00,000
Surplus (1,00,000)
Debt-equity ratio 2.5:1
Long term debts will be ____.
A) ₹ 9,60,000
B) ₹ 60,00,000
C) ₹ 65,00,000
D) ₹ 62,50,000

Q. 54) If current assets are ₹ 12,00,000 Working capital is ₹ 7,20,000

Inventories are ₹ 3,60,000 Liquid ratio will be ___.
A) 2.5:1
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B) 1:1
C) 1.75:1
D) 2:1

Q. 55) Given below are two statements,

one labelled as Assertion (A) and the other labelled as Reason (R)
Assertion (A) – Interest coverage ratio is a profitability ratio.
Reason (R) – Interest coverage ratio is an activity ratio.
In the context of the above two statements, which of the following is correct?
Codes:
A) Both (A) and (R) are correct and (R) is the correct reason of (A)
B) Both (A) and (R) are correct but (R) is not the correct reason of (A)
C) Only (R) is correct
D) Both (A) and (R) are wrong
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SOLUTIONS TO MIDTERM 2 - GRADE XII SECTION C
1) B) Charge against profit
2) A) Appropriation of profit
3) B) ₹ 6,000
4) B) New profit sharing ratio will be 24:18:14:7:7
Hint – C’s share = 2/10 D’s share = 1/10 and E’s share = 1/10
Remaining share = 1 – 2/10 – 1/10 – 1/10 = 6/10
A and B will share 6/10 in their existing ratio i.e. 4:3
Hence, A’s share = 6/10 X 4/7 = 24/70
B’s share = 6/10 X 3/7 = 18/70
New ratio of A, B, C, D and E = 24/70:18/70:2/10:1/10:1/10 = 24:18:14:7:7
5) C) Building a/c Dr. 1,80,000
To Share capital a/c 1,50,000
To Securities premium reserve a/c 30,000
6) D) Reserve capital
7) D) Dividend
8) C) Forfeited shares
9) C) 1:2:1
Hint – d ACQUIRED = 1/12 FROM a
Hence, remaining share = 1/3 – 1/12 = 4-1/12 = 3/12
This 3/12 will be acquired from B and C in 2:1
As such share acquired from B = 3/12 X 2/3 = 2/12
Share acquired from C = 3/12 X 1/3 = 1/12
Sacrificing ratio of A, B and C = 1/12:2/12:1/12 or 1:2:1
10) B) ₹ 68,000
Ben’s share = 1,32,000 X 1/11 = ₹ 12,000
Deficiency in Ben’s share = 16,000 – 12,000 = ₹ 4,000
Arif’s share = 1,32,000 X 6/11 = ₹ 72,000
Arif’s net share = 72,000 – 4,000 = ₹ 68,000
11) (B)
Particulars Simi Manu Beena Total
Cancellation of interest on capital Dr. 10,000 10,000 8,000 28,000
₹ 28,000 divided in 2:2:1 Cr. 11,200 11,200 5,600 28,000
Balance 1,200 Cr. 1,200 Cr. 2,400 Dr. .

12) (A) 2,080

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Hint:
Amount received on application 480 X 6 = ₹ 2,880
Less: Credited to securities premium reserve 400 X ₹ 2 = ₹ 800
Credited to ‘forfeited shares a/c’ = ₹ 2,080
13) C) Debit balance in the share allotment account
14) C) ₹ 7,500
15) D) 3:6:1
Hint New ratio between A and B = 1:2 or 1/3 : 2/3
C’s share will be 1/3 of A’s share, hence C’s share = 1/3 X 1/3 = 1/9
Hence, new rati of A, B and C = 1/3:2/3:1/9 = 3:6:1
16) C) A’s Capital a/c will be credited by ₹ 45,000
17) A) ₹ 1,25,000
Hint: Normal profit = 15% of ₹ 5,00,000 = ₹ 75,000
Super profit = 1,00,000/2 = ₹ 50,000
Average profit = Normal profit + Super profit = 75,000 + 50,000 = ₹ 1,25,000
18) C) Cr. P ₹ 60,000 and Dr. R ₹ 60,000
Hint Adjustment table
Particulars P₹ Q₹ R ₹ total
Salary Cr. 1,80,000 1,20,000 ---------- 3,00,000
Division of ₹ 3,00,000 in 2:2:1 Dr. 1,20,000 1,20,000 60,000 3,00,000
Balance 60,000 Cr. ---------- 60,000 Dr. --------

19) (A) Cr. Chitra ₹ 600 and Dr. Samyu ₹ 600

Hint Interest on Chitra’s drawings = ₹ 1,20,000 X 6/100 X 5.5/12 =₹ 3,300
Interest on Drawings = ₹ 1,20,000 X 6/100 X 7.5/12 = ₹ 4,500
Adjustment table
Particulars P₹ Q₹ Total ₹
Interest on Drawings Dr. 3,300 4,500 7,800
Division of ₹ 7,800 in profit sharing ratio i.e. equally Cr. 3,900 3,900 7,800
Balance Cr. 600 Dr. 600
20) C) Dr. P ₹ 30,000 Dr. Q ₹ 30,000 Cr. R ₹ 60,000
Hint
Adjustment table
Particulars P₹ Q₹ R ₹
Total profit for 3 years 1,20,000 + 1,40,000 + 1,90,000 = 4,50,000 . . .
This profit has already been divided in the ratio of 2:2:1 1,80,000 1,80,000 90,000
If profits are shared equally 4,50,000/ 3 = 1,50,000 1,50,000 1,50,000 1,50,000
Net effect Dr. Dr. Cr.
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 30,000 30,000 60,000
21) D) Cr. A ₹ 6,000 Dr. B ₹ 4,000 Dr. C ₹ 2,000
Particulars P₹ Q₹ R ₹ total
Salary Cr. 6,000 6,000 . 12,000
Commission Cr. . . 18,000 18,000
Remaining profit . . . .
90,000 – 12,000 – 18,000 = 60,000 . . . .
will be divided between A, B and C . . . .
in 3:2:1 Cr. 30,000 20,000 10,000 60,000
Total Cr. 36,000 26,000 28,000 90,000
Less: Profit already distributed . . . .
(90,000 equally) Dr. 30,000 30,000 30,000 90,000
Balance Cr. 6,000 Dr. 4,000 Dr. 2,000 -------
22) C) Cr. A by ₹ 12,000 Dr. B by ₹ 12,000
Hint Old ratio 5:3:2
New ratio 2:2:1
Sacrifice of gain
A = 5/10 – 2/5 = 5-4/10 = 1/10 sacrifice
B = 3/10 – 2/5 = 3-4/10 = 1/10 gain
C = 2/10 – 1/5 = 2-2/10 = Nil
Since A has sacrificed, he will be credited by 1/10 of ₹ 1,20,000 = ₹ 12,000
Since B has gained, he will be debited by 1/10 of ₹ 1,20,000 = ₹ 12,000
23) D) ₹ 1,60,000
Hint
Agreed value of plant and machinery = 8,00,000
Agreed value of stock 2,50,000 X 160/100 = 4,00,000
Total = 12,00,000
Payment made: 20% by cheque = 2,40,000
Balance = 9,60,000
No. of shares issued 9,60,000/6 = 1,60,000
24) B) ₹ 6 per share
Hint
Forfeited amount on 3,000 reissued shares 3,000 X ₹7 = 21,000
Less: Transferred to capital reserve = 9,000
Loss on reissue = 12,000
Per share loss on reissue = 12,000/3,000 = ₹ 4 per share
Hence, shares were reissued at ₹ 10 - ₹ 4 = ₹ 6
25) D) ₹ 3,000
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Hint
Amount called up (₹ 10 – final call of ₹ 3) =7
Less: Amount not paid on first call =2
Amount paid (or forfeited) = 5 per share

Forfeited amount on 1,000 shares is ₹ 5 per share

As such forfeited amount on 600 reissued share @ ₹ 5 = 3,000
Less: Loss on reissue = Nil
Transferred to capital reserve a/c = 3,000
26) C) Cr. A by ₹ 18,000 Dr. B by ₹ 12,000 Dr. C by ₹ 6,000
Hint Value of goodwill = 3,00,000
General reserve = 60,000
Total amount to be adjusted = 3,60,000
Old ratio = 7:3:2 and new ratio = 8:4:3
Sacrifice or gain
A = 7/12 – 8/15 = 35-32/60 = 3/60 (sacrifice) 3,60,000 X 3/60 = 18,000 Cr.
B = 3/12 – 4/15 = 15-16/60 = 1/60 (gain) 3,60,000 X 1/60 = 6,000 Dr.
C = 2/12 – 3/15 = 10-12/60 = 2/60 (gain) 3,60,000 X 2/60 = 12,000 Dr.
27) A) Debited to the partners in old profit sharing ratio
28)
D) Premium for Goodwill a/c Dr. 30,000 .
C’s Current a/c Dr. 60,000 .
To A’s Capital a/c . 70,000
To B’s Capital a/c . 20,000
Hint
C’s share = 1/5 remaining share 1-1/5 = 4/5
A’s share = 1/2 X 4/5 = 4/10 B’s share = 1/2 X 4/5 = 4/10
New share of A, B and C = 4/10: 4/10:1/5 or 2:2:1
Sacrifice by A = 5/9 – 2/9 = 7/45
Sacrifice by B = 4/9 – 2/5 = 2/45
Sacrifice ratio = 7:2
Firm’s goodwill is 4,50,000 and c’s share = 4,50,000 x 1/5 = 90,000
A’s share of goodwill = 90,000 X 7/9=70,000 B’s share of goodwill = 90,00 X 2/9 = 20,000
29) D) A ₹ 80,000 and B ₹ 40,000
Hint Sacrificed by A = 3/5 x 1/3 = 1/5
Sacrificed by b = 1/10

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Sacrifice ratio of A and B 1/5 : 1/10 = 2:1
A’s share of goodwill = 1,20,000 x 2/3 = 80,000
B’s share of goodwill = 1,20,000 x 1/3 = 40,000
30) C) ₹ 40,000
Share allotted to Tina 2,400 x 2,00,000 /3,00,000 = 1,600
Excess application money received from Tina = 2,400 – 1,600 = 800 share x ₹30 = ₹ 24,000
Allotment money due from Tina = 1,600 x ₹ 50 = ₹ 80,000
Less: Excess received on application = ₹ 24,000
Allotment money not received = ₹ 56,000
Entry for forfeiture
Share capital a/c Dr. 1,60,000 (1,600 x 100)
To Share allotment a/c 56,000
To share first and final call a/c 64,000
To share forfeiture a/c 40,000
31) C) ₹ 15,000
Hint Amount not paid on first call 200 shares x ₹ 40 = 8,000
Amount not paid on second and final call 200 shares x ₹ 35 = 7,000
Total =15,000
32) B) Both (A) and (R) are correct but (R) is not the correct reason of (A)
33) B) ₹ 6,400
34) A) Both (A) and (R) are correct and (R) is the correct reason of (A)
35) A) Both (A) and (R) are correct and (R) is the correct reason of (A)
36) C) Only (R) is correct
37) C) ₹ 39,60,000
Subscribed capital
Subscribed and fully paid up capital
39,000 equity shares of ₹ 100 each 39,00,000
Add: forfeited shares (1,000 shares @ ₹ 60 each) 60,000 total = 39,60,000
38) B) Both (A) and (R) are correct but (R) is not the correct reason of (A)
39) D) Cr. P’s Capital a/c by ₹ 20,000 and Q’s Capital a/c by ₹ 50,000
Hint Calculation of sacrificing ratio
P’s sacrifice = 4/7 – 2/4 = 2/28 Q’s sacrifice = 3/7 – 1/4 = 5/28
Sacrifice ratio = 2/28 – 5/28 = 2:5
Goodwill credited to P = 70,000 x 2/7 = ₹ 20,000
Goodwill credited to Q = 70,000 x 5/7 = ₹ 50,000
40) C) Cr. P’s Capital a/c by ₹ 1,60,000 and Q’s Capital a/c by ₹ 1,20,000

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Hint: General reserve will be credited to old partners in old profit sharing ratio
41) A) Dr. P’s Capital a/c by ₹ 80,000 and Q’s Capital a/c by ₹ 60,000
Analysis of financial statements
42) C) Share capital
43) D) i) c ii) b iii) a
44) D) 4:1
Hint Current ratio = current assets / current liabilities
2.5 (given) = 5,00,000 (given) /current liabilities
Current liabilities = 2,00,000
Receipt of ₹ 2,00,000 will not affect the current ratio.
But payment to creditors will decrease the current assets as well as current liabilities.
Hence, current ratio = 5,00,000 – 1,00,000 / 2,00,000 – 1,00,000 = 4:1
45) B) i) Capital reserve ii) Capital redemption reserve iii) Securities premium reserve
iv) Debenture redemption reserve
46) C) i-b ii-a iii-c iv-c
47) D) Both (A) and (R) are wrong
48) A) Both (A) and (R) are correct and (R) is the correct reason of (A)
49) C) ₹ 1,80,000
50) B) 26 %
51) A) ₹ 2,16,000
Hint Current ratio is 3.6 and quick ratio is 2.4
Difference between current ratio and quick ratio is inventory.
Therefore, inventory is 3.6 – 2.4 = 1.2
If inventory is 1.2 current assets = 3.6
If inventory is 1 current assets = 3.6/1.2
If inventory is 72,000 current assets = 3.6/1.2 x 72,000 = ₹ 2,16,000
52) A) 80%
Hint Operating ratio = cost of revenue from operations + operating exps/Rev. from operations
Revenue from operations = 15,00,000 + 10,00,000 = 25,00,000
Cost of revenue from operations = Revenue from operations – Gross profit
= 25,00,000 – 40% of 25,00,000 = ₹ 15,00,000
Operating expenses = Employee benefit expenses + selling and distribution expenses
= 3,00,000 + 2,00,000 = ₹ 5,00,000
Operating ratio = 15,00,000 + 5,00,000/25,00,000 x 100 = 80%
53) B) ₹ 60,00,000
Hint Debt equity ratio = long term debts / shareholder’s funds

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Shareholder’s funds = share capital + General reserve + surplus
= 20,00,000 + 5,00,000 – 1,00,000 = 24,00,000
2.5 = Long term debts/24,00,000
Long term debts = 24,00,000 x 2.5 = 60,00,000
54) C) 1.75:1
Hint Liquid ratio = liquid assets/ current liabilities
Liquid assets = Current assets – Inventories
= 12,00,000 – 3,60,000 = 8,40,000
Current liabilities = Current assets – working capital
= 12,00,000 – 7,20,000 = 4,80,000
Liquid ratio = 8,40,000/4,80,000 = 1.75:1
V. CHITRA
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