CMA PUSHPENDER KHULBE 8130510204

S.NO CONTENTS PAGE TEACHER SELF

1 DEPRECIATION 2
RECTIFICATION OF
2 ERRORS 4
3 BILLS OF EXCHANGE 7
4 CONSIGNMENT 9
5 JOINT VENTURE 13
6 INSURANCE CLAIMS 15
7 HIRE PURCHASE 20
8 BRANCH ACCOUNTS 24
9 DEPARTMENT 32
10 LEASES 36
11 ROYALTIES 39
12 FINAL ACCOUNTS 42
13 NPO 53
14 SINGLE ENTRY SYSTEM 66
15 PARTNERSHIP 77
16 ACCOUNTING STANDARDS 92
17 OBJECTIVES 98

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1. Depreciation
Q1) On 1.1.11 machinery was purchased for ₹ 80,000. On 1.7.12 additions were made to the amount of ₹
40,000. On 31.3.2013, machinery purchased on 1.7.2012, costing ₹ 12,000 was sold for ₹ 11,000 and on
30.06.2013 machinery purchased on 1.1.2014 costing ₹ 32,000 was sold for ₹ 26,700. On 1.10.2013, additions
were made to the amount of ₹ 20,000. Depreciation was provided at 10% p.a. on the Diminishing Balance
Method.
Show the Machinery Accounts for three years from 2011-2013. (year ended 31st December) [78432]

Q2) S & Co. purchased a machine for ₹ 1,00,000 on 1.1.2011. Another machine costing ₹ 1,50,000 was
purchasedon 1.7.2012. On 31.12.2013, the machine purchased on 1.1.2011 was sold for ₹ 50,000. The
company provides depreciation at 15% on Straight Line Method. The company closes its accounts on 31st
December every year.
Prepare – (i) Machinery A/c, (ii) Machinery Disposal A/c and (iii) Provision for Depreciation A/c.

Q3) On 1st April, 2011, Som Ltd. purchased a machine for ₹66,000 and spent ₹5,000 on shipping and
forwarding charges,₹7,000 as import duty, ₹1,000 for carriage and installation, ₹500 as brokerage and ₹500
for an iron pad. It was estimated that the machine will have a scrap value of ₹ 5,000 at the end of its useful life
which is 15 years. On 1st January, 2012 repairs and renewals of ₹ 3,000 were carried out. On 1st October,
2013 this machine was sold for ₹ 50,000. Prepare Machinery Account for the 3 years. [17500]

Q4) Ram Ltd. which depreciates its machinery at 10% p.a. on Diminishing Balance Method, had on 1st
January,2013 ₹ 9,72,000 on the debit side of Machinery Account.
During the year 2013 machinery purchased on 1st January, 2011 for ₹ 80,000 was sold for ₹ 45,000 on 1st
July, 2013and a new machinery at a cost of ₹ 1,50,000 was purchased and installed on the same date,
installation charges being ₹ 8,000.
The company wanted to change the method of depreciation from Diminishing Balance Method to Straight
Line Method with effect from 1st January, 2011. Difference of depreciation up to 31st December, 2013 to be
adjusted. The rate of depreciation remains the same as before. Show Machinery Account. [934100]

Q5) M/s. Hot and Cold commenced business on 01.07.2008. When they purchased a new machinery at a cost
of ₹ 8,00,000. On 01.01.2010 they purchased another machinery for ₹ 6,00,000 and again on 01.10.2012
machinery costing ₹ 15,00,000 was purchased. They adopted a method of charging depreciation @ 20% p.a.
on diminishing balance basis.
On 01.07.2012, they changed the method of providing depreciation and adopted the method of writing off the
Machinery Account at 15% p.a. under straight line method with retrospective effect from 01.07.2008, the
adjustment being made in the accounts for the year ended 30.06.2013.
The depreciation has been charged on time basis. You are required to calculate the difference in depreciation
to be adjusted in the Machinery on 01.07.2012, and show the Machinery Account for the year ended
30.06.2013. [1816250]

Q6) State whether the following items are in the nature of Capital, Revenue and/or Deferred Revenue
Expenditure.
(i) Expenditure on special advertising campaign ₹ 66,000; suppose the advantage will be received for six
years.
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(ii) An amount of ₹ 8,000 spent as legal charges for abuse of Trade Mark.
(iii) Legal charges of ₹ 15,000 incurred for raising loan.
(iv) Share issue expenses ₹ 5,000.
(v) Freight charges on a new machine ₹ 1,500 and erection charges ₹ 1,800 for that machine.

Q7) Shyama Limited purchased a second-hand plant for ₹ 7,50,000 on 1st July, 2011 and immediately spent ₹
2,50,000 in overhauling. On 1st January, 2012 an additional machinery at a cost of ₹ 6,50,000 was purchased.
On 1st October, 2013 the plant purchased on 1st July, 2011 became obsolete and it was sold for ₹ 2,50,000.
On that date a new machinery was purchased at a cost of ₹ 15,00,000. Depreciation was provided @ 15%
per annum on diminishing balance method. Books are closed on 31st March in every year.
You are required to prepared Plant and Machinery Account upto 31st March, 2014. [2786156]

Q8) On 31st December, 2011 two machines which were purchased on 1.10.2008 costing ₹ 50,000 and ₹
20,000 respectively had to be discarded and replaced by two new machines costing ₹ 50,000 and ₹ 25,000
respectively. One of the discarded machine was sold for ₹ 20,000 and other for ₹ 10,000. The balance of
Machinery Account on April 1, 2011 was ₹ 3,00,000 against which the depreciation provision stood at ₹
1,50,000. Depreciation was provided @ 10% on Reducing Balance Method. Prepare the Machinery Account,
Provision for Depreciation Account and Machinery Disposal Account. [325000]

Q9) On 1st April, 2010, M/s. N. R. Sons & Co. purchased four machines for ₹ 2,60,000 each. On 1st April,
2011, one machine was sold for ₹ 2,05,000. On 1st July, 2012, the second machine was destroyed by fire and
insurance claim received ₹ 1,75,000 on 15th July, 2012. A new machine costing ₹ 4,50,000 was purchased on
1st October, 2012. Books are closed on 31st March every year and depreciation has been charged @ 15% per
annum on diminishing balance method. You are required to prepare machinery account for 4 years still 31st
March, 2014. (Calculations to be shown in nearest rupee). [625256]

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2.RECTIFICATION OF ERRORS
Q1) Rectify the following errors assuming that the errors were detected (a) Before the Preparation of Trial
Balance; (b)After the preparation of Trial Balance and (c) After the preparation of Final Accounts.
(i) Purchase Plant for ₹ 10,000 wrongly passed through Purchase Account.
(ii) Sales Day Book was cast short by ₹ 1,000.
(iii) Cash paid to Mr. X for ₹ 1,000 was posted to his account as ₹ 100.
(iv) Purchase goods from Mr. T for ₹ 3,500 was entered in the Purchase Day Book as ₹ 500.
(v) Paid salary for ₹ 3,000 wrongly passed through wages account.

Q2) A merchant, while balancing his books of accounts notices that the T.B. did not tally. It showed excess
credit of ₹
1,700. He placed the difference to Suspense A/c. Subsequently he noticed the following errors:
(a) Goods brought from Narayan for ₹ 5,000 were posted to the credit of Narayan’s A/c as ₹ 5,500
(b) An item of ₹ 750 entered in Purchase Returns Book was posted to the credit of Pandey to whom the goods
had been returned.
(c) Sundry items of furniture sold for ₹ 26,000 were entered in the sales book.
(d) Discount of ₹ 300 from creditors had been duly entered in creditor’s A/c but was not posted to discount
A/c.
Pass necessary journal entries to rectify these errors. Also show the Suspense A/c.

Q3) Pass necessary journal entries to rectify the following errors:

(a) An amount of ₹ 200 withdrawn by owner for personal use was debited to trade expenses.
(b) Purchase of goods of ₹ 300 from Nathan was wrongly entered in sales book.
(c) A credit sale of ₹ 100 to Santhanam was wrongly passed through purchase book.
(d) ₹ 150 received from Malhotra was credited to Mehrotra.
(e) ₹ 375 paid as salary to cashier Dhawan was debited to his personal A/c.
(f) A bill of ₹ 2,750 for extension of building was debited to building repairs A/c
(g) Goods of ₹ 500 returned by Akashdeep were taken into stock, but returns were not posted.
(h) Old furniture sold for ₹ 200 to Sethi was recorded in sales book.
(i) The period end total of sales book was under cast by ₹ 100.
(j) Amount of ₹ 80 received as interest was credited to commission.

Q4) Rectifying the following errors by way of journal entries and work out their effect on profit or loss of the
concern:
a. Return inward book was cast short by ₹ 500.
b. ₹ 300 received from Ram has been debited to Mr. Shyam.
c. Wages paid for the installation of a machine debited to wages account for ₹ 1,000.
d. A purchase made for ₹ 1,000 was posted to purchase account as ₹ 100.
e. Purchase of furniture amounting to ₹ 3,000 debited to purchase account.
f. Goods purchased for proprietor’s use for ₹ 1,000 debited to purchase account.

EXAM QUESTIONS
Q1) The Trial Balance of a concern has agreed but the following mistakes were discovered after the
preparation of Final Accounts. 6
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(i) No adjustment entry was passed for an amount of ₹ 2,000 relating to outstanding rent.
(ii)Purchase book was overcast by ₹ 1,000.
₹ 4,000 depreciation of Machinery has been omitted to be recorded in the book.
(iii)
(iv)₹ 600 paid for purchase of stationary has been debited to Purchase A/c.
(v) Sales books was overcast by ₹ 1,000.
(vi)₹ 5,000 received in respect of Book Debt had been credited to Sales A/c. Show the
effect of the above errors in Profit and Loss Account & Balance Sheet.

Q2) The Trial Balance of a concern has agreed but the following mistakes were discovered after the
preparation of final Accounts.
(i) No adjustment entry was passed for an amount of ₹ 2,000 relating to outstanding rent.
(ii) Purchase book was overcast by ₹ 1,000.
(iii) ₹ 4,000 depreciation of Machinery has been omitted to be recorded in the book.
(iv) ₹ 600 paid for purchase of stationary has been debited to Purchase A/c.
(v) Sales books was overcast by ₹ 1,000.
(vi) ₹ 5,000 received in respect of Book Debt had been credited to Sales A/c.
Show the effect of the above errors in Profit and Loss Account & Balance Sheet.

Q3) The Trial Balance of S Ltd. as on 31/03/2018 showed the credit in excess by ₹ 415 which was been
carried to Suspense Account. On a closed scrutiny of the books, the following errors were revealed:
(i) A cheque of ₹ 3,456 received from AB Ltd. after allowing it a discount of ₹ 46 was endorsed
to CD Ltd. in full settlement for ₹ 3,500. The cheque was finally dishonoured but no entries
are passed in the books of account.
(ii) Goods of the value of ₹ 230 returned by PQ Ltd. were entered in Purchase Day book and
posted there from to MN Ltd. as ₹ 320.
(iii) Bad debts aggregating ₹ 505 written off during the year in Sales Ledger but were not
recorded in General Ledger.
(iv) Bill for ₹ 750 received from Z Ltd. for repairs to Machinery was entered in the Inward
Invoice Book as ₹ 650.
(v) Goods worth ₹ 1,234 purchased from Y Ltd. on 28/03/2018 had not been entered in Day book
and credited to Y Ltd. but Goods were not delivered till 5th April, 2018. The title of Goods
was however passed on 28/03/2018 and was taken into stock on 31-03-2018.
(vi) ₹ 79 paid for Freight on Machinery was debited to Freight account as ₹ 97.
Pass the necessary Journal Entries to rectify the above mentioned errors.

Q4) A bookkeeper extracted the following Trial Balance as on 31st March, 2018:

Heads of Accounts Dr. (Rs.) Cr. (Rs.)

Furniture 20,000 --------

Capital -------- 2,00,000
Debtors 2,00,000 --------
Stock (1st April, 2017) 1,04,000 --------
Creditors --------- 80,000
Trade Expenses 50,000 ------
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Sales --------- 8,58,000

Wages 30,000 --------
Stock (31st March, 2018) 98,000 --------
Machinery --------- 50,000
Purchases 6,25,000 --------
Wife's loan to the business 50,000 --------
Discount Allowed -------- 4,000
Drawings made by the Proprietor -------- 45,000
Motor Van 60,000 -------
Total 12,37,000 12,37,000

You are required to:

(i) State the errors giving reasons,
Redraft the Trial Balance correctly.

Q5) Rectify the following errors:

(i) A Credit Sale of goods to X ₹ 3,000 posted as ₹ 30,000.
(ii) A Cash Sale of goods to Y ₹ 3,000 posted as ₹ 30,000.
(iii) A Credit Sale of Furniture to Z ₹ 3,000 posted as ₹ 30,000.
(iv) A Credit Sale of goods of ₹ 3,000 to Krishan entered in the purchases book, as ₹ 30,000 and
posted therefrom to the credit of Kishan as ₹ 3,000.
(v) A Cash Sale of goods of ₹ 3,000 to Krishan posted to the credited of Kishan as ₹ 30,000.
(vi) A Credit Purchase of old machinery from Sohan for ₹ 17,000 was entered in the Purchases
Book as purchase from Mohan for ₹ 71,000. ₹ 3,000 paid as Repair Charges of this
Machinery debited to General Expenses Account.
(vii) A Bill drawn on Meenu for ₹ 30,000 was passed through bills payable book with ₹ 3,000 and
posted therefrom to the credit of Meena as ₹ 300.
(viii) Sales included a sale of furniture having a book of value of ₹ 900 for ₹ 850 on 31st
March, 2018.

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2. BILLS OF EXCHANGE
Q1) On 1.4.2017 A draws a bill on B for ₹1,00,000 3 months after date. B accepts the bills signs on it and
returns to A. Pass necessary journal entries in the books of A and B in each of the following cases:
1. The bill is hold by A till maturity.
2. The bill is discounted with bank on 4.4.2017 at a discount of 6 % p.a.
3. The bill is endorsed to C to make a final settlement of a due of ₹1,05,000 on 1.4.2017.

Q2) Sagar purchased goods worth ₹ 1,000 from Ravi for which the latter drew a bill on the former, payable
after onemonth. Sagar accepted it and returned it to Ravi. Ravi endorsed it to Kamal, and Kamal to Amal.
Amal discountedthe bill with State Bank of India at 6% p.a. On maturity, the bill was dishonoured, noting
charge being ₹ 10.
Show the entries in the books of all the parties including the books of State Bank of India.

Q3) Sunil owed Anil ₹ 80,000. Anil draws a bill on Sunil for that amount for 3 months on 1st April. Sunil
accepts it andreturns it to Anil. On 15th April, Anil discounts it with Citi Bank at a discount of 12% p.a. On
the due date the bill wasdishonoured, the bank paid noting charges of ₹ 100. Anil settles the bank’s claim
along with noting charges in cash.Sunil accepted another bill for 3 months for the amount due plus interest of
₹ 3,000 on 1st July. Before the new billbecame due, Sunil retires the bill with a rebate of ₹ 500. Show journal
entries in books of Anil.

Q4) On 1st April Mr. Bala draws a bill of ₹ 1,20,000 on Mr. Lala for the amount due for 4 months. On getting
acceptance, on 5th April, Bala endorses it to Mr. Kala in full settlement of his claim of ₹1,40,000 by paying
the difference in cash.Lala approached Bala on 25th July saying that he needed to renew the bill for a further
period of 4 months at an interest of 12% p.a. which Bala accepted. A fresh bill including interest was accepted
by Lala on 1st August. Bala settled his liability to Kala by cheque. This was duly settled on the due date. Pass
journal entries in the books of Bala and Lala. Also show Bills Receivables A/c and bills Payable A/c.

Q5) Vijay draws a bill for ₹ 60,000 and Anand accepts the same for mutual accommodation of both of them to
the extent of Vijay 2/3rd and Anand 1/3rd. Vijay discounts it with bank for ₹ 56,400 and remits 1/3rd share to
Anand. Before the due date, Anand draws another bill for ₹ 84,000 on Vijay in order to provide funds to meet
the first bill on same sharing basis. The second bill is discounted at ₹ 81,600. With these proceeds, the first
bill is settled and ₹ 14,400 were remitted to Vijay. Before the due date of the second bill, Vijay becomes
insolvent and Anand receives a dividend of only 50 paise in a rupee in full satisfaction. Pass journal entries in
the books of Vijay.

Q6) Pass journal entries in the books of Hema for the following transactions :
(i) Hema’s acceptance to Nanda for ₹ 5,000 renewed for 3 month with interest at 10% p.a.
(ii) Nalini’s acceptance to Hema was for ₹ 10,000 was retired one month before due date at a discount of 12%
p.a.
(iii) Discounted Natasha’s acceptance to Hema for ₹ 4,000 with the bank for ₹ 3,920
(iv) Neela requests Hema to renew her acceptance for ₹ 3,500 for 3 months. Hema accepted on the condition
that interest of ₹ 100 was paid in cash which Neela did.
(v) Received an acceptance from Geeta for ₹ 1,200 and it was endorsed to Seeta in full settlement of her
claim.

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Q7) Rahim, for mutual accommodation, draws a bill for ₹ 3,000 on Ratan. Rahim discounted it for ₹ 2,925.
He remits ₹ 975 to Ratan. On the due date, Rahim is unable to remit his dues to Ratan to enable him to meet
the bill. He, however, accepts a bill for ₹ 3,750 which Ratan discounts for ₹ 3,625. Ratan sends ₹ 175 to
Rahim after discounting the above bill. Rahim becomes insolvent and a dividend of 80 paise in the rupee is
received from his estate.Pass the necessary journal entries in the books of both the parties.

Q8) Babai sold goods to Kachari for ₹ 90,000 on 1st April, 2014 for which the later accepted three bills of ₹
30,000each due respectively in 1,2 and 3 months. The first bill is retained by Babai and is duly met. The
second bill was discounted (discount being ₹ 600) and is met in due course. The third bill is also discounted
(discount being ₹ 900) and is dishonoured, the Noting charges being ₹ 150. New arrangements were duly
made whereby Kachari pays Cash ₹ 10,150 and accepted and new bill duein 2 months for the balance of the
amount with interest at 15% p.a. The bill is retained, on due date the same is dishonoured, noting charges
being ₹ 180. Kachari declared insolvent on 15th Sept. 2014 and 35 paise in a rupee were received from his
estate.

Q9) Gouru and Gyani were friends and in need of funds. On 1st April, 2015 Gouru drew a bill for ₹ 2,00,000
for three months on Gyani. On 04.04.2015 Gouru got the bill discounted at 15% per annum and remitted half
of the proceeds to Gyani. On the due date, Gyani could not meet the bill, instead, Gouru accepted Gyani’s bill
for ₹ 1,20,000 on 4th July, 2015 for two months. This was discounted by Gyani at 15% per annum and out
this ₹ 19,500 was paid to Gouru after deducting ₹ 500 discounting charges. Due to financial crisis, Gouru
became insolvent and the bill drawn on his was dishonoured and his estate paid 40%.

EXAM QUESTIONS
Q1 Sunil owed Anil ₹ 80,000. Anil draws a bill on Sunil for that amount for 3 months on 1 st April. Sunil
accepts it and returns it to Anil. On 15th April, Anil discounts it with Citi Bank at a discount of 12% p.a. On the
due date the bill was dishonoured, the bank paid noting charges ₹ 100. Anil settles the bank's claim along
with noting charges in cash. Sunil accepted another bill for 3 months for the amount due plus interest of ₹
3,000 on 1st July. Before the new bill become due, Sunil retires the bill with a rebate of ₹ 500. Show journal
entries in books of Anil.

Q2) (A) X sells goods to Y for ₹ 2,00,000. Instead of one bill of ₹ 2,00,000, X draws three bills of
exchange on Y for ₹ 40,000; ₹ 60,000 and ₹ 1,00,000. What is the value involved in drawing three bills
instead of one?
B) Sunny draws a bill on Vivek for three months. On the due date, Vivek finds himself in financial
difficulties and requests Sunny to renew the bill for a further period of one month. Sunny agrees to
his request. What is the virtue involved in renewing the bill?
C) What is the value involved in accepting an accommodation bill?
What is the reason that a drawer cannot file a suit against drawee in case of dishonour of an accommodation
bill?

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3.CONSIGNMENT ACCOUNTING
Q1) X Ltd. of Gujrat purchased 5,000 sarees @ ₹ 100 per saree. Out of these 3,000 sarees were sent on
consignment to Y Ltd. of Kolkata at the selling price of ₹ 150 per saree. The consignors paid ₹ 5,000 for
packing and freight. Y Ltd. sold 2,500 sarees @ ₹ 160 per saree and incurred ₹ 500 for selling expenses and
remitted ₹ 2,50,000 to Gujrat on account. They are entitled to a commission of 5% on total sales plus a further
of 25% commission on any surplus price realized over ₹ 150 per saree. 1,500 sarees were sold at Gujrat @ ₹
110 per saree.prepare (i) Consignment Account, and (ii) Y Ltd. Account.

Q2) From the following particulars ascertain the value of unsold stock on Consignment.
Goods sent (1,000 kgs.) ₹ 20,000
Consignor’s expenses ₹ 4,000
Consignees non-recurring expenses ₹ 3,000
Sold (800 kgs.) ₹ 40,000
Loss due to natural wastage (100 kgs.)
Q3) 5,000 shirts were consigned by Raizada & Co. of Delhi to Zing of Tokyo at cost of ₹ 375 each. Raizada
& Co. paid freight ₹ 50,000 and Insurance ₹ 7,500. During the transit 500 shirts were totally damaged by fire.
Zing took delivery of the remaining shirts and paid ₹ 72,000 on custom duty.
Zing had sent a bank draft to Raizada & Co. for ₹ 2,50,000 as advance payment. 4,000 shirts were sold by him
at ₹ 500 each. Expenses incurred by Zing on godown rent and advertisement etc. amounted to ₹ 10,000. He is
entitled to a commission of 5%. One of the customer to whom the goods were sold on credit could not pay the
cost of 25 shirts.
Prepare the Consignment Account and the Account of Zing in the books of Raizada & Co. Zing settled his
account immediately. Nothing was recovered from the insurer for the damaged goods.

Q4) Lubrizols Ltd. of Mumbai consigned 1,000 barrels of lubricant oil costing ₹ 800 per barrel to Central Oil
Co. of Kolkata on 1.1.2013. Lubrizols Ltd. paid ₹ 50,000 as freight and insurance. 25 barrels were destroyed
on 7.1.2013 in transit. The insurance claim was settled at ₹ 15,000 and was paid directly to the consignor.
Central Oil took delivery of the consignment on 19.1.2013 and accepted a bill drawn upon them by Lubrizols
Ltd., for ₹ 5,00,000 for 3 months. On 31.3.2013 Central Oil reported as follows:
(i) 750 barrels were sold as ₹ 1,200 per barrel.
(ii) The other expenses were:
Clearing charges 11,250
Godown Rent 10,000
Wages 30,000
Printing, Stationery, Advertisement 20,000
25 barrels of oil were lost due to leakage which is considered to be normal loss.
Central Oil Co. is entitled to a commission of 5% on all the sales affected by them. Central Oil Company paid
the amount due in respect of the consignment on 31st March itself.
Show the Consignment Account, the Account of Central Oil Co., and the Lost –in-Transit Account as they
will appear in the books of Lubrizols Ltd.

Q5) Mr. X, the consignor, consigned goods to Mr. Y 100 Radio sets valued ₹ 50,000. This was made by
adding 25% on cost. Mr. X paid ₹ 5,000 for freight and insurance. 20 sets are lost – in- transit for which Mr. X
recorded ₹ 5,000 from the Insurance company. Mr. Y received remaining goods in good condition. He
incurred ₹ 4,000 for freight and miscellaneous expenses and ₹ 3,000 for godown rent. He sold 60 sets for ₹
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50,000. Show the necessary ledger account in the books of Mr. X assuming that Mr. Y was entitled to an
ordinary Commission of 10% on sales and 5% Del Credere Commission on
sales. He also reported that ₹ 1,000 were provide bad .

Q6) This was made by adding 25% on cost. Mantu paid ₹ 2,500 for freight and ₹ 1,500 for insurance.
During transit 1/10 th of the goods was totally destroyed by fire and a sum of ₹ 2,400 was realised from the
insuance company. On arrival of the goods, Pandey paid ₹ 1,800 as carriage to godown. During
the year ended 30th June 2013, Pandey paid ₹ 3,600 for godown rent and ₹ 1,900 for selling expenses.
1/9 th of the remaining goods was again destroyed by fire in godown and nothing was recorded from
the insurance company. On 1.6.2013, Pandey sold half ( 1/2 ) the original goods for ₹ 30,000 and charged
a commission of 5% on sales as on 30.6.2013, Pandey sent a bank draft to Mantu for the amount so far due
from him. You are required to prepare the following ledger accounts in the books of Mantu of Chennai for the
year ended 30.6.2013.
(a) Consignment to Patna Account;
(b) Goods Destroyed by Fire Account; and
(c) Personal Account of Pandey.
Q7)Shri Babubhai oil mills of Baroda sent 10000 kg of oil to M/s Gupta & Sons in Delhi. The cost of oil is ₹
40 per kg. Babubhai paid ₹ 5,000 as freight and ₹ 2,500 as insurance. In transit 250 kg of oil was accidently
destroyed for which insurance company paid ₹ 450 in full settlement to Babubhai.
M/s Gupta & Sons took delivery of the balance. Later they reported that 7500 kg was sold @ ₹ 60 per kg.
Expenses incurred by them were rent ₹ 2,000, advertisement ₹ 5,000 and salaries ₹ 5000. M/s Gupta & Sons
are entitled to commission of 3% and Del Credre commission of 1.5%. One customer who purchased 1000 kg
paid only 80% of the amount due. M/s Gupta & Sons also reported loss of 100 kg due to leakage. The final
amount due was settled.
Prepare necessary ledger accounts in the books of Babubhai.
Q8) Sangita Machine Corporation sent 200 sewing machines to Rita agencies. It spent ₹ 7500 on packing. The
cost of each machine was ₹ 2,000, but it was invoiced at 20% above cost. 20 machines were lost in transit &
insurance company accepted claim of ₹ 20,000 only. Rita agencies paid freight of ₹ 9,000, carriage ₹ 3,600,
Octroi ₹ 1,800 and rent ₹ 1800. They sold 150 machines at ₹ 3,500 per machine. They were entitled to
commission of 5% on invoice price and additional 20% of any excess realized
on invoice price and 2% Del Credre commission. They accepted a bill drawn by Sangita Machine Corporation
for ₹ 3,00,000 and remitted the balance by demand draft along with account sale. Draw up necessary ledger
accounts in the books of Sangita Machine Corporation and Rita Agencies.

Q9) Ram of Patna consigns to Shyam of Delhi for sale at invoice price or over. Shyam is entitled to a
commission @ 5% on invoice price and 25% of any surplus price realized. Ram draws on Shyam at 90 days
sight for 80% of the invoice price as security money. Shyam remits the balance of proceeds after sales,
deducting his commission by sight draft. Goods consigned by Ram to Shyam costing ₹ 20,900 including
freight and were invoiced at ₹ 28,400. Sales made by Shyam were ₹ 26,760 and goods in his hand unsold at
31st Dec, represented an invoice price of ₹ 6,920. (Original cost including freight ₹ 5,220). Sight draft
received by Ram from Shyam upto 31st Dec was ₹ 6,280. Others were in- transit.
Prepare necessary Ledger Accounts in the books of Ram.
Q10) R of Ranchi consigned goods costing ₹ 1,60,000 to B of Bombay. The terms of the consignment were:
(a) Consignee to get a commission of 5 per cent on cash sales and 4 per cent on credit sales.
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(b) Any goods taken by the consignee himself or goods lost through consignee’s negligence, shall be valued at
cost plus 12½ per cent and no commission will be allowed on them.
The expenses incurred by the consignor were: Carriage and freight ₹ 6,720 and Insurance ₹ 3,440. The
consignor received ₹ 50,000 as advance against the consignment. Account Sales together with a draft for the
balance due was received by the consignor showing the following position:
Goods costing ₹ 1,28,000 were sold for cash at ₹ 1,40,000 and on credit at ₹ 1,08,000. Goods costing ₹ 8,000
were taken by B and goods costing ₹ 4,000 were lost through B’s negligence. The expenses incurred by B
were: Advertisement ₹ 1,720; other selling expenses ₹ 1,080.
Show the ledger accounts in the books of R.
Q11) Mr. Naitik sends goods to the value of ₹ 9,37,500 at cost to Mr. Jatin on consignment basis to be sold at
5% commission on sales on 01.01.2015. Jatin accepted a bill of ₹ 2,50,000 drawn by Naitik for 4 months on
the same date. Naitik discounted the bill with his banker @ 15% p.a. on 04.02.2015. Naitik incurred ₹ 75,000
by way of freight and other expenses, whereas expenses of Jatin were ₹ 50,000 out of which 60% were non-
recurring.
Jatin sent the final balance of ₹ 7,68,750 to Naitik on 31.03.2015 along with account sales. The Gross Profit
margin is 25% on Sales and 10% of Goods Remained unsold with Jatin.
You are required to prepare:
(i) Consignment Account and
(ii) Jatin Account – in the books of Mr. Naitik.

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3. JOINT VENTURE
Q1) Prabir and Mihir doing business separately as building contractors undertake jointly to build a skyscraper
for a newly started public limited company for a contract price of ₹ 1,00,00,000 payable as ₹ 80,00,000 in
cash and the balance by way of fully paid equity shares of the new company. A Bank A/c was opened for this
purpose in which Prabir paid ₹ 25,00,000 and Mihir ₹ 15,00,000. The profit sharing ratio was agreed as 2:1
between Prabir and Mihir.
The transactions were:
(a) Advance received from the company ₹ 50,00,000
(b) Wages to contractors ₹ 10,00,000
(c) Bought materials ₹ 60,00,000
(d) Material supplied by Prabir ₹ 10,00,000
(e) Material supplied by Mihir ₹ 15,00,000
(f) Architect’s fees paid from Joint Bank account ₹ 21,00,000
The contract was completed and the price was duly paid. The joint venture was duly closed by Prabir taking
all the shares at ₹ 18,00,000 and Mihir taking over the balance material for ₹ 3,00,000. Prepare the Joint
Venture A/c, Joint Bank A/c. Co-venturer’s A/cs and Shares A/c.

Q2) P and Q entered into a joint venture for underwriting the subscription at par of 25,000 shares of ₹ 10 each
of a JointStock Company. They agreed to share profits or losses in the ratio of 3:2 respectively. The
consideration for guaranteeing the subscription was 250 other shares of ₹ 10 each fully paid to be issued to
them. The public took up 24,000 of the shares and the remaining shares of the guaranteed issue were taken up
by P and Q who provide cash equally. The entire shareholding of the venture was then sold through other
brokers, 60% at a price of ₹ 9.50 less brokerage 50 paisa per share, 20% at a price of ₹ 9.75 less brokerage 50
paisa per share and the balance were taken over by P and Q equally at ₹ 9.00 per share.
Prepare a Joint Venture Account, the Joint Bank Account, and Capital Accounts of P and Q.

Q3) Anil and Mukesh enter into a venture to take a job for ₹2,40,000. they provide the following information
regarding
the expenditure incurred by them:
ANIL MUKESH
₹ ₹
Materials 68,000 50,000
Cement 13,000 17,000
Wages 27,000
Architects fees 10,000
License fees 5,000
Plant 20,000
Plant was valued at ₹10,000 at the end of the contract and Mukesh agreed to take it at that value. Contract
amount was received by Anil. Show necessary accounts.

Q4) A and B decided to work on a joint venture for the sale of electric motors. On 21.05.2016 A purchased
200 electric motors @ ₹175 each and dispatched 150 motors to B incurring ₹1,000 as freight and insurance
charges, 10 motors were damaged in transit. On 01.02.2017 ₹500 was received by A from the insurance
company in full settlement of claim. On 15.03.2017 A sold 50 motors @₹225 each. He received ₹15,000 from
B on 01.04.2017. On 25.05.2017 B took delivery of motors and incurred the following expenses:

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Clearing charges ₹125, repairs charges for the damaged motors in transit ₹300, and godown rent ₹600, B sold
the electric motors as follows:
On 01.02.2017 10 damaged motors @₹.170 each, on 15.03.2018 40 motors @₹200/- each and 01.04.2017 20
motors @₹315 each, on 03.04.2017 80 motors @ ₹250 each.
It is agreed that they are entitled to commission @ 10 % on the respective sales effected by them and that
profits and losses will be shared by A and B in the ratio of 2:1. B remits to A the balance of money due on
30.04.2017.
Prepare joint venture A/c with B in the books of A and Memorandum joint venture account.

Q5) John and Smith entered into a joint venture business to buy and sale garments to share profits or losses in
the ratio of 5:3. John supplied 400 bales of shirting at ₹ 500 each and also paid ₹ 18,000 as carriage &
insurance. Smith supplied 500 bales of suiting at ₹ 480 each and paid ₹ 22,000 as advertisement & carriage.
John paid ₹ 50,000 as advance to Smith.
John sold 500 bales of suiting at ₹ 600 each for cash and also all 400 bales of shirting at ₹ 650 each for cash.
John is entitles for commission of 2.5% on total sales plus an allowance of ₹ 2,000 for looking after business.
The joint venture was closed and the claims were settled.
Prepare Joint Venture A/c and Smith’s A/c in the books of John and John’s A/c in the books of Smith.

Q6) M and N decided to work in partnership with the following scheme, agreeing to share profits as under :
M — ¾th share.
N—¼th share.
They guaranteed the subscription at par of 10,00,000 shares of ₹ 1 each in U Ltd. And to pay all expenses up
to allotment in consideration of U. Ltd. issuing to them 50,000 other shares of ₹ 1 each fully paid together
with acommission @ 5% in cash which will be taken by M and N in 3 : 2.
M and N introduced cash as follows:
M— Stamp Charges, etc., 4,000
Advertising Charges 3,000
Printing Charges 3,000
N— Rent 2,000
Solicitor’s Charges 3,000
Application fell short of the 10,00,000 shares by 30,000 shares and N introduced ₹ 30,000 for the purchase of
those shares. The guarantee having been fulfilled, U Ltd. handed over to the venturers 50,000 shares and also
paid the commission in cash. All their holdings were subsequently sold by the venturer N receiving ₹ 18,000
and M ₹ 50,000. Write-up necessary accounts in the books of both the parties on the presumption that
Memorandum Joint Venture
Account is opened for the purpose.

Q7) Sahani and Sahu entered into a joint venture to sale 800 bags of food grains. The business risks are to be
shared in the ratio of 3:2 between them. Sahani supplied 400 bags at ₹ 800 per bag and paid freight
₹ 8,000 and insurance ₹ 2,000. Sahu sent 400 bags at ₹ 1,000 per bag. He paid ₹ 2,500 as freight, Insurance ₹
8,000 and sundry expenses as ₹ 500. Sahani paid ₹ 50,000 as advance to Sahu.
They appointed Sandeep as agent for sale of grains. Sandeep sold all bags at ₹ 1,200 per bag. He deducted ₹
21,000 as his expenses and commission of 5% on sales. He remitted ₹ 6,00,000 by cheque to Sahani and the
balance to Sahu by way of a bill of exchange. The co-venturers settled their accounts. Prepare Joint Venture
A/c Sahu’s A/c and Sandeep’s A/c in the books of Mr. Sahani.
Q8) Daga of Kolkata sent to Lodha of Kanpur goods costing ₹ 40,000 on consignment at a commission of 5%
on gross sales. The packaging and forwarding charges incurred by consignor amounted to ₹ 4,000. The

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consignee paid freight and carriage of ₹ 1,000 at Kanpur. Three-fourth of the goods were sold for ₹ 48,000.
Then the consignee remitted the amount due from him to consignor along with the account sale, but he desired
to return the goods still lying unsold with him as he was not agreeable to continue the arrangement of
consignment. He was then persuaded to continue on joint venture basis sharing profit or loss as Daga 3/5th
and Lodha 2/5th. Daga then supplied another lot of goods of ₹ 20,000 and Lodha sold out all the goods in his
hand for ₹ 50,000 (gross). Daga paid expenses ₹ 2,000 and Lodha ₹ 1,700 for the second lot of goods.
Show necessary Ledger A/c in the books of both parties. No final settlement of balance due is yet made.

Q9) Satish and Sunit made a JV to underwrite the subscription at par of the equity share capital of Soft
Systems Ltd. consisting of 100,000 shares of ₹ 10 each. They agreed to pay all expenses up to the allotment of
shares. They agreed to share profits or losses in the ratio of 3:2. The consideration in return for this
underwriting was allotment of 12,000 other shares of ₹ 10 each at par to be issued to them fully paid. Satish
provided for ₹ 12,000 registration fees, ₹ 11,000 advertisement, ₹ 7,500 for printing & distributing prospectus
and ₹ 2,000 for printing & stationery. Sunit paid ₹ 3,000 office rent, ₹ 13,750 as legal charges, and ₹ 9,000
salary of clerks. The issue fell short by 15,000 shares. Satish took these over on joint A/c by paying for the
same in full. He sold the entire holding at ₹ 12 (net). Sunit sold the 12,000 shares allotted as consideration at
the same price.
Prepare necessary ledger accounts in the books of both parties.

Q10) X and Y entered into a joint venture for purchase and sale of some household items. They agreed to
share profits and losses in the ratio of their respective contributions. X contributed ₹ 10,000 in cash and Y ₹
13,000. The whole amount was placed in a Joint Bank Account. Goods were purchased by X for ₹ 10,000 and
expenses paid by Y amounted to ₹ 2,000. They also purchased goods for ₹ 15,000 through the Joint Bank
Account. The expenses on purchase and sale of the articles amounted to ₹ 6,000 (including those met by Y).
Goods costing ₹ 20,000 were sold for ₹ 45,000 and the balance were lost by fire.
Prepare Joint Venture Account, Joint Bank Account and the Ventures’ Accounts closing the venture.

Q11) Jiban and Mitrik decided to work in joint venture with the following scheme, agreeing to share profits in
the ratio of 2/3 and 1/3: They guaranteed the subscription at par of 50 lakhs shares of ₹ 10 each in Rainbow
Ltd. and to pay all expenses up to allotment in consideration of RAINBOW LTD. issuing to them 3,00,000
other shares of ₹ 10 each fully paid together with a commission @ 5% in cash which will be taken by Jiban
and Mitrik in 3 : 2.Co-ventures introduced cash as follows:
JIBAN Stamp charges, etc. ₹ 1,65,000
Advertising charges ₹ 1,35,000
Car expenses ₹ 1,54,000
Printing charges ₹ 1,88,000
MITRIK Rent ₹ 1,30,000
Solicitor’s charges ₹ 80,000
Application fell short of the 50 lakhs shares by 1,20,000 shares and Mitrik introduced ₹ 12,00,000 for the
purchase of those shares.
The guarantee having been fulfilled, Rainbow Ltd. handed over to the ventures 3,00,000 shares and also paid
the Commission in cash. All their holdings were subsequently sold by the venture Mitrik receiving ₹
12,50,000and Jiban ₹ 25,00,000.
You are required to prepare the:
(i) Memorandum Joint Venture Account and
(ii) Joint Venture Account with Mitrik – in the Books of JIBAN

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4. INSURANCE CLAIMS
Q1) A fire occurred on 15th September 2013 in the premises of Sen & Co. from the following figures,
calculate the amount of claim to be lodged with the insurance company for loss of stock.
Particulars Amount
₹
Stock at cost on 1.1.2012 40,000
Stock at cost on 1.1.2013 60,000
Purchases in 2012 80,000
Purchase from 1.1.2012 to 15.9.2013 1,76,000
Sales in 2012 1,20,000
Sales from 1.1.2013 to 15.9.2013 2,10,000
Salvage value of stock after fire was ₹ 4,000.

Q2) X Ltd. has taken out a fire policy of ₹ 1,60,000 covering its stock. A fire occurred on 31st March, 2013.
The following particulars are available :
₹
Stock as on 31.12.2012 60,000
Purchases to the date of fire 2,60,000
Sales to the date of fire 1,80,000
Carriage Inwards 1,600
Commission on purchase to be paid @2%
Gross Profit Ratio @ 50% on cost
You are asked to ascertain (i) total loss of stock; (ii) amount of claim to be made against the Insurance
Company assuming that the policy was subject to average clause. Stock salvage amounted to ₹ 41,360.

Q3) A fire occurred in the premises of Sri. G. Vekatesh on 1.4.2013 and a considerable part of the stock was
destroyed. The stock salvaged was ₹ 28,000. Sri Venkatesh had taken a fire insurance policy for ₹ 171,000 to
cover the lossof stock by fire. You are required to ascertain the insurance claim which the company should
claim from the insurance company for the loss of stock by fire. The following particulars are available:
₹ ₹
Purchases for the year 2012 9,38,000 Stock on 1.1.12 1,44,000
Sales for the year 2012 11,60,000 Stock on 31.12.2012 2,42,000
Purch from 1.1.13 to 1.4.13 1,82,000 Wages paid during 2012 1,00,000
Sales from 1.1.13-1.4.13 2,40,000 Wages paid 1.1.13-1.4.13 18,000
Sri Venkatesh had in June 2012 consigned goods worth ₹ 50,000, which unfortunately were lost in an
accident. Since there was no insurance cover taken, the loss had to be borne by him full.
Stocks at the end of each year for and till the end of calendar year 2011 had been valued at cost less 10%.
From 2012, however there was a change in the valuation of closing stock which was ascertained by adding
10% to its costs.

Q4) On 1.4.2013, godown of Y Ltd. was destroyed by fire. The records of the company revealed the following
particulars:
₹
Stock on 1.1.2012 75,000
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Stock on 31.12.2012 80,000

Purchases during 2012 3,10,000
Sales during 2012 4,00,000
Purchase from 1.1.2013 to the date of fire 75,000
Sales from 1.1.2013 to the date of fire 1,00,000
In valuing Closing Stock of 2012, ₹ 5,000 was written off whose cost was ₹ 4,800. Part of this stock was sold
in 2013 at a loss of ₹ 400, of ₹ 2,400. Stock salvaged was ₹ 5,000. The godown and the cost of which was
fully insured. Indicate from above amount of claim to be made against the insurance company

Q5) On 30.09.2013 the stock of Harshvardhan was lost in a fire accident. From the available records the
following information is made available to you to enable you to prepare a statement of claim of the insurer:
Particulars Amount ₹ Particulars Amount ₹
Stock at cost on 1.4.2012 75,000 Sales for the year ended31.3.2013 6,30,000
Stock at cost on 31.3.2013 1,04,000 Purchase less returns up to 30.09.2013 2,90,000
Purchases for the year ended 31.3.2013 5,07,500 Sales less returns up to 30.09.2013 3,68,100
In valuing the stock on 31.03.2013 due to obsolescence 50% of the value of the stock which originally cost ₹
12,000 had been written-off. In May 2013, ¾th of these stocks had been sold at 90% of original cost and it is
now expected that the balance of the obsolete stock would also realize the same price, subject to the above,
G.P had remained uniform throughout stock to the value of ₹ 14,400 was salvaged.

Q6) From the following particulars prepare a claim for loss of profits under the Consequential Loss Policy.
Date of Fire: June 30, 2013
Period of indemnity: Six Months
Particulars Amount
₹
Sum Insured 25,000
Turnover for the year ended June 30, 2013 1,00,000
Net Profit for the accounting year ending March 31, 2013 6,250
Standing charges for the accounting year ending March 31, 2013 14,250
Turn Over for the year ending March 31, 2013 99,000
Turn Over for the indemnity period from 1.7.13 – 31.12.13 28,000
Turn Over for the period from 1.7.12 – 31.12.12 55,000
The turnover of the year 12-13 had shown a tendency of increase of 10% over the turnover of the preceding
year.

Q7) There was a serious fire in the premises of M/s ABC on 1.9.2013. Their business activities were
interrupted until 31st December, 2013, when normal trading conditions were re-established. M/s. ABC are
insured under the loss or profit policy for ₹ 42,000 the period of indemnity being six months. You are able to
ascertain the following information.
(i) The net profit for the year ended 31st December, 2012 was ₹ 20,000
(ii) The annual insurable standing charges amounted to ₹ 30,000, of which ₹ 2,000 were not included in the
definition of insured standing charges under the policy.
(iii) The additional cost of working in order to investigate the damage caused by the fire amounted to ₹ 600
and but for the expenditure the business would have had to shut down.
(iv) The savings in insured standing charges in consequence of the fire amounted to ₹ 1,500.
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(v) The turnover for the period for four months ended April 30, August 31, December 31, in each of the years
2012and 2013 was as follows:
2012 65,000 80,000 95,000
2013 70,000 80,000 15,000
You are required to compute the relevant claim under the terms of the loss of profit policy.

Q8) A fire occurred on 1st July, 2012 in the premises of A. Ltd. and business was practically disorganized up
to 30th November 2012. From the books of account, the following information was extracted:
Sl. No. Particulars Amount
Actual turnover from 1st July 2013 to November,
2013 1,20,000
Turnover from 1st July to 30th November, 2012 4,00,000
Net Profit for the last financial year 1,80,000
Insured Standing Charges for the last financial year 1,20,000
Turnover for the last financial year 10,00,000
Turnover for the year ending 30th June, 2013 11,00,000
Total Standing Charges for the year 1,44,000
The company incurred additional expenses amounting to ₹ 18,000 which reduced the loss in turnover. There
was also a savings during the indemnity period of ₹ 4,972. The company holds a ‘Loss of Profit’ policy for ₹
3,30,000 having an indemnity period for 6 months. There has been a considerable increase in trade and it has
been agreed that an adjustment of 20% be made in respect of upward trend in turnover.
Compute claim under ‘Loss of Profit Insurance’.

Q9) On 15th December, 2014 the premises of Nagar Ltd. were destroyed by fire, but sufficient records were
saved from which the following particulars were ascertained:
₹
Stock at cost on 1st April, 2013 2,20,500
Stock at cost on 31st March, 2014 2,38,800
Purchases less returns, year ended 31st March, 2014 11,94,000
Sales less returns, year ended 31st March, 2014 14,61,000
Purchases less returns, 1st April, 2014 to 15th December, 2014 10,15,000
Sales less returns, 1st April, 2014 to 15th December, 2014 11,62,000

In valuing stock for Balance Sheet as at 31st March, 2014 ₹ 6,900 had been written off for certain stock which
was a poor selling line, having cost of ₹ 20,700. A portion of these goods were sold in June, 2014 at a loss of
₹ 750 on the original cost of ₹ 10,350. The remainder of this stock was now estimated to be worth the original
cost. Subject to the above exception, gross profit had remained at a uniform rate throughout. The stock
salvaged was ₹ 17,500. The stock was insured for ₹ 2,50,000.

EXAM QUESTIONS
Q1) Ram trader's godown caught fire on 29th August, 2016, and a large part of the stock of goods was
destroyed. However, goods costing ₹ 54,000 could be salvaged incurring fire fighting expenses
amounting to ₹ 2,350.The trader provides you the following additional information:
₹
Cost of stock on 1st April, 2015 3,55,250
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Cost of stock on 31st March, 2016 3,95,050

Purchases during the year ended 31st March, 2016 28,39,800
Purchases from 1st April, 2016 to the date of fire 16,55,350
Cost of goods distributed as samples for advertising from 1st April, 2016 to 20,500
the date of fire
Cost of goods withdrawn by trader for personal use form 1st April, 2016 to 1,000
the date of fire
Sales for the year ended 31st March, 2016 40,00,000
Sales from 1st April, 2016 to the date of fire 22,68,000

The insurance company also admitted fire fighting expenses. The trader had taken the fire
insurance policy for ₹ 4,50,000 with an average clause.
Calculate the amount of the claim that will be admitted by the insurance company.

Q2) On 15th December, 2017, a fire occurred in the premises of M/s. OM Exports. Most of the
stocks were destroyed. Cost of Stock salvaged being ₹ 1,40,000. From the books of account, the
following particulars were available:
(i) Stock at the close of account on 31st March, 2017 was valued at ₹ 9,40,000.
(ii) Purchases from 01.04.2017 to 15-12-2017 amounted to ₹ 13,20,000 and the sales during that
period amounted to ₹ 20,25,000.
On the basis of his accounts for the past three years, it appears that average gross profit ratio is
20% on sales.
Compute the amount of the claim, if the stock were insured for ₹ 4,00,000.

Q3) CCL wants to take up a loss of profit policy. Turnover during the current year is expected to
increase by 20%. The company will avail overdraft facilities from its bank @ 15% interest to
boost up the sales. The average daily overdraft balance will be around Rs. 3 Lakh. All other fixed
expenses will remain same. The following further details are also available from the previous
year's account:

Particulars Rs.
Total variable expenses 24,00,000
Fixed expenses: Salaries
Rent, Rates and Taxes 3,30,000
Travelling expenses 30,000
Postage, Telegram, Telephone 50,000
Director's fees 60,000
Audit fees Miscellaneous 10,000
income Net Profit 20,000
70,000
4,20,000
Determine the amount of policy to be taken for the current year

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Q4) On 31st January, 2019 the premises of Toli Textiles Limited were destroyed by fire. The
records of the company revealed the following particulars:
₹
Stock on 01.04.2017 11,35,000
Stock on 31.03.2018 12,64,100
Purchase Less returns, during the year ended 31st March, 2018 65,45,000
Sales Less returns, during the year ended 31st March, 2018 91,00,000
Purchase Less return, from 01.04.2018 to 31.01.2019 56,64,000
Sales Less returns, from 01.04.2018 to 31.01.2019 78,24,000

In valuing stock on 31st March, 2018 ₹ 45,900 had been written off out of certain stock which was of
a poor selling line, having cost ₹ 1,37,700. A portion of these goods were sold in October, 2018 at a
loss ₹ 11,080 on the original cost of ₹ 55,080. The remaining stock of this goods on the date of fire
was to be valued at 80% of its original cost. Subject to the above exception, gross profit had remained
at a uniform rate throughout. The stock salvaged from fire was ₹ 1,23,800.
You are required to compute the amount of claim to be lodged for loss of stock. The stock was insured for ₹
12,50,000.

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5. HIRE PURCHASE
Q1) X purchases a car on hire-purchase system on 1.1.11. The total cash price of the car is ₹ 4,50,000 payable
₹ 90,000 down and three installments of ₹ 1,70,000, ₹ 1,50,000 and ₹ 1,08,460 payable at the end of first,
second and third year respectively. Interest is charged at 10% p.a.
You are required to calculate interest paid by the buyer to the seller each year.

Q2) X purchased a T.V on hire-purchase system. As per terms he is required to pay ₹ 3000 down, ₹ 4000 at
the end of first year, ₹ 3000 at the end of second year, and ₹ 5000 at end of third year. Interest is charged at
12% p.a. You are required to calculate total cash price of T.V and interest paid with each installment.

Q3) X & Co. purchased a Motor car on April 1, 2009 on hire-purchase paying ₹ 60,000 cash down and
balance in four annual installments of ₹ 55,000, ₹ 50,000, ₹ 45000 and ₹ 40,000 each Installment comprising
equal amount of cash price at the end of each accounting period. You are required to calculate total cash
price and amount of interest in each Installment.

Q4) On 1.1.2010 X purchase a plant from Y on hire purchase system. The hire purchase rate was settled at ₹
60,000, payable as to ₹ 15,000 on 1.1.2010 and ₹ 15,000 at the end of three successive year. Interest was
charged @5% p.a. The asset was to be depreciated in the books of the purchaser at 10% p.a. on Reducing
Balance Method. Giventhe present value of an annuity of Re. 1 p.a. @5% interest is ₹ 2.7232.
Ascertain the cash price.

Q5) On 1.1.2009 Mr. X took delivery from Mr. Y of 5 machines on a hire purchase system. ₹ 4,000 being
paid on delivery and the balance in five installments of ₹ 6,000 each, payable annually on 31st December. The
vendor company charges 5% interest p.a. on yearly balances. The cash price of 5 machines was ₹ 30,000.
Show the entries (without narration) Assets Account, Mr. Y Account for 5 years assuming that the purchaser
charges depreciation @20% on straight line method.

Q6) On 1.1.2011, A purchased 5 Machines from B. Payment was to be made—20% down and the balance in
four annual instalments of ₹2,80,000, ₹ 2,60,000, ₹ 2,40,000 and ₹ 2,20,000 commencing from 31.12.2011.
The vendor charged interest @ 10% p.a. A, writes off depreciation @ 20% p.a. on the original cost.
On A’s failure to pay the instalment due on 31.12.2012, after negotiations on 01.01.2013 B agreed to leave
two machines with A adjusting the value of the other three machines against the amount due.The machines
being valued at cost less 40% p.a. depreciation on W.D.V basis, B after spending ₹6000 on repairs of each of
such machines sold @ ₹70,000 on 30th June 2013. Prepare the relevant accounts in the books of A and B.

Q7) A Transport purchased from Kolkata Motors 3 Tempos costing ₹50,000 each on the hire purchase system
on 1.1.2011. Payment was to be made ₹30,000 down and the remainder in 3 equal annual instalments payable
on 31.12.2011, 31.12.2012 and 31.12.2013 together with interest @ 9%. p.a. A Transport writes off
depreciation at the rate of 20% p.a. on the diminishing balance. It paid the instalment due at the end of the first
year i.e. 31.12.2011 but could not pay the next on 31.12.2012. Kolkata Motors agreed to leave one Tempo
with the purchaser on 31.12.2012 adjusting the value of the other 2 Tempos against the amount due on
31.12.2012. The Tempos were valued on the basis of 30% depreciation annually on W.D.V. basis.
Required: Show the necessary accounts in the books of A Transport for the year 2011, 2012,2013.

Q8) On 1 January 2012, A purchased from B a plant valued at ₹7,45,000; payment to be made by four semi-
annual instalments of ₹2,10,000 each; interest being charged at 5% per half year. A paid the first instalment on
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1st July 2012 but failed to pay the next. B repossessed the plant on 4 January 2013.On 5 January 2013, after
negotitation, A was allowed to retain the plant of which the original cash price was ₹3,90,000 and he was to
bear the loss on the remainder which was taken over by B on that date for ₹3,75,000. B waived the interest
after 31st December 2012. Another agreement was signed for payment of the balance amount.
Show by ledger accounts the necessary records in the books of A charging depreciation at 10% per annum
half yearly on the written down value.

Q9) Z sold 3 Machinery for a total cash sale price of ₹6,00,000 on hire purchase basis to X on 01.01.2011.
The terms of agreement provided for 30% as cash down and the balance of the cash price in three equal
instalments together with interest at 10% per annum compounded annually. The instalments were payable as
per the following schedule:
1st instalment on 31.12.2012; 2nd instalment on 31.12.2013 and 3rd instalment on 31.12.2014.X paid the 1st
instalment on time but failed to pay thereafter. On his failure to pay the second instalment, Z repossessed two
machineries and valued them at 50% of the cash price. X charges 10% p.a. depreciation on straight line
method.Prepare necessary ledger accounts in the books of X for 2011-2013.

Q10) X purchased a truck for ₹ 2,80,000, payment to be made ₹ 91,000 down and 3 installments of ₹ 76,000
each at the end of each year. Rate of interest is charged at 10% p.a. Buyer depreciates assets at 15% p.a. on
written down value method. Because of financial difficulties, X, after having paid down payment and first
installment to the end of 1st year could not pay second installment and seller took possession of the truck.
Seller, after spending ₹ 9,200 on repairs of the asset sold for ₹ 150,000. Show the relevant accounts in the
books of the purchaser & the vendor.

Q11) On 1.1.2010, B & Brothers bought 5 computers from Chirag Computers on hire-purchase. The cash
price of each computer was ₹ 20,000. It was agreed ₹ 30,000 each at the end of each year. The Vendor charges
interest @ 10% p.a. The buyer depreciates computers at 20% p.a. on the diminishing balance method.
B & Brothers paid cash down of ₹ 5,000 each and two instalments but failed to pay the last instalment.
Consequently, the Computer Traders repossessed three sets, leaving two sets with the buyer and adjusting the
value of 3 sets against the amount due. The sets repossessed were valued on the basis of 30% depreciation p.a.
on the written down value. The sets repossessed were sold by the Chirag Computers for ₹ 30,000 after
necessary rapairs amounting to ₹ 5,000 on 30th June 2013.
Required : Open the necessary ledger account in the books of both the parties

Q11) On 1st April, 2012 Gauru & Co. purchased a machinery on hire purchases system from Machinery Mart
for a cash price of ₹ 7,50,000 to be paid as ₹ 1,18,050 cash down and the balance by three equal annual
installments of ₹ 3,00,000 each. Interest is charged @ 20% per annum. Gauru & Co. has decided to write
off depreciation on machinery @ 15% per annum on diminishing balance method. Gauru & Co. paid the
installment due at the end of the first year but could not pay the next installments. On 31st March, 2014 the
Machinery Mart took the possession of the machinery. On 15th April, 2014 the Machinery Mart spent
₹30,000 on the repairs of the machinery and sold it for ₹1,80,000 on 20th April, 2014. Installment due on
31.03.2014 was paid by Gauru & Co. on 10th April. You are required to prepare:
(i) Gauru & Co.’s Account and Returned Stock Account in the books of Machinery Mart.
(ii) Machinery Account and Machinery Mart’s Account in the books of Gauru & Co.

Q12) On 1st April, 2010 Guru purchased a machinery for cash price of ₹5,06,872 on hire purchase system
from Machinery Mart. Payment to be made ₹1,50,000 down and the balance by four equal annual
installments. Interest is charged @ 15% per annum. Guru depreciates machinery at 20% per annum on written

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down value method. Guru paid down payment and first two installments but could not pay the remaining
installments. On 31st March, 2013 the Machinery Mart took possession of machinery.
You are required to prepare Machinery Account and Machinery Mart Account in the books of Guru.
Since the problem is silent regarding the amount of equal instalment, it is assumed that the balance of cash
price will be paid equally along with the interest on the amount outstanding.

Q13) Exe Ltd. purchased a vehicle for ₹2,80,000, down payment to be made ₹91,000 and 3 installments of
₹76,000 each at the end of each year. Rate of interest is charged at 10% p.a. Buyer depreciates assets at 15%
on written down value method. Because of financial difficulties, Exe Ltd. after having paid the down payment
and first installment at the end of 1st year, could not pay the second installment. Hence, the seller took
possession of the vehicle. The Seller after spending ₹ 9.200 on repairs of the asset, sold it for ₹1,50,000. Show
the relevant accounts in the books of the purchaser and the vendor.

EXAM QUESTIONS
Q1) Moon purchased a machine on Hire Purchase System. The total cost price of the machine was ₹
15,00,000 payable 20% down and four annual installments of
₹ 4,20,000, ₹ 3,90,000, ₹ 3,60,000 and ₹ 3,30,000 at the end of the 1st year, 2nd year, 3rd year and 4th year
respectively. Calculate the interest included in each year's installment assuming that the sales were made at
the beginning of the year.

Q2) On 1st April, 2012, X Ltd. sells a Truck on hire purchase basis to X Transporters & Co. for a total
purchase price of ₹ 18,00,000 payable as to ₹ 4,80,000 as down payment and the balance in three equal
annual installments of ₹ 4,40,000 each payable on 31st March, 2013, 2014, and 2015.
The hire vendor charges interest @10% per annum.
You are required to ascertain the cash price of the truck for X Transporters & Co. Calculations may be made
to the nearest rupee.

Q3M/s. Zed Laptop Co. has a hire-purchase department and goods are sold on hire- purchase adding 25%
to cost. From the following information (all figures are at hire- purchase price), Prepare Hire-Purchase
Trading Account for the year ending, March 31, 2017:
₹
April 01, 2016 goods with customers (Instalments not yet due) 80,000
Goods sold on Hire-purchase during the year 4,00,000
Cash received during the year from customers 3,00,000
Instalments due but not yet received at the end of the year, customers 10,000
paying

Q4) The following particulars relate to hire purchase transactions:

(i) X purchased three cars from Y on hire purchase basis, the cash price of each car being ₹
2,00,000.
(ii) The hire purchaser charged depreciation @ 20% on diminishing balance method.
(iii) Two cars were seized by on hire vendor when second instalment was not paid at the end of
the second year. The hire vendor valued the two cars at cash price less 30% depreciation
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charged under it diminishing balance method.

(iv) The hire vendor spent ₹ 10,000 on repairs of the cars and then sold them for a total amount
of ₹ 1,70,000.

You are required to compute:

(I) Agreed value of two cars taken back by the hire vendor.
(II) Book value of car left with the hire purchaser.
(III) Profit or loss to hire purchaser on two cars taken back by their hire vendor.
Profit or loss of cars repossessed, when sold by the hire vendor.

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6. BRANCH ACCOUNTS
Q1) From the following particulars prepare Branch Trading and Profit and Loss Account in the books of Head
Office: The Delhi stores invoiced goods to its Patna Branch at cost which sells both for cash and credit. Cash
received by the branch is remitted to H.O. Branch expense are paid direct from the H.O. except petty expense
which are met by the branch.
Opening Balance:
Stock 5,000 Rates & Taxes 3,000
Debtors 20,000 Salary & Wages 6,000
Petty Cash 1,000 Petty expense by the branch 1,000
Goods from H.O. 50,000 Pilferage of goods 1,000
Cash Sales 30,000 Closing Balance:
Credit Sales 40,000 Stock 8,000
Sales Return 4,000 Debtors 25,000
Bad Debts 1,000 Petty Cash 800
Discount Allowed 1,000
Goods returned to H.O. 5,000

Q2) X Ltd. has its H.O. in Delhi and a branch in Mumbai. H.O. supplied goods to its branch at cost plus
3313%. From the particulars given below prepare a Branch Trading Account in the books of H.O.
Opening Stock (I.P.) 40,000 Sales:
Goods sent to Branch (I.P.) 2,50,000 Cash 1,00,000
Return to H.O. (I.P.) 10,000 Credit 3,00,000
Discount allowed to customers 10,000
Closing Stock (I.P.) 60,000
It is estimated that 2% of the goods received are lost through natural wastage.

Q3) June 2019

Y Ltd. with its H.O. in Delhi invoiced goods to its branch at Patna at 20% less than the catalogue price which
is cost plus 50%, with instruction that cash sales were to be made at invoice price and credit sales at catalogue
price less discount at 15% on prompt payment.
From the following particulars, prepare the Branch Trading and Profit and Loss Account for the year ended
31st March 2013 in H.O. books so as to show the actual profit and loss for the branch for the year.

Stock on 1.4.2012 (Invoice Price) 12,000 Discount allowed to Debtors 13,365

Debtors ( ,, ) 10,000 Expense 6,000
Goods received from H.O. (I.P.) 1,32,000 Remittance to H.O. 1,20,000
Cash sales 46,000 Debtors (31.03.2013) 11,000
Credit Sales 1,00,000 Cash in hand (31.03.2013) 5,635
Cash received from Debtors 85,635 Stock on 31.03.2013 (Invoice Price) 15,000
It was further reported that a part of stock at the branch was lost by fire (not covered by insurance) during the
year whose value is to be ascertained and provisions should be made for discount to be allowed to Debtors as
on 31.03.2013 on the basis of years trend of prompt payment.
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Q4) White ltd. With their head office at Kolkata, invoiced goods to their Ranchi branch at 20% less than list
price, which is cost plus 100%, with instruction that cash sales are made at invoice price and credit sales at list
price. From the following particulars, prepare branch stock account and branch stock adjustment account for
the year ended 31.12.2018.
Stock on 1.1.2018 (at invoice price) ₹ 2,400
Debtors on 1.1.2018 ₹ 2,000
Cash received from debtors ₹ 17,127
Goods received from H.O (at invoice price) ₹ 26,400
Goods returned to H.O ₹200 Sales- cash: ₹ 9,200
Credit: ₹ 20,000
Expenses at branch ₹ 3,473
Remittance to H.O ₹ 24,000
Debtors on 31.12.18 ₹ 4,873
Stock on 31.12.2018 ₹ 3,520.

Q5) From the following information, prepare Delhi Branch Account in the books of head office for the year
ending on 31st March 2013:
Opening Stock (at cost) 17,80,000 Discount allowed to Customers 5,000
Opening Debtors 1,40,000 Bad Debts written off 10,000
Opening Petty Cash 2,500 Credit sales 72,94,000
Furniture (in the beginning) 60,000 Cash Sales 3,20,000
Opening Creditors 60,000 Petty Expenses paid by Branch 80,000
Goods sent to Branch (at Cost) 52,20,000 Cheques sent to Branch for expense
Goods returned by Branch to H.O (at cost) 78,000 Salaries 3,00,000
Goods returned by Customers to Branch 57,000 Rent and Insurance 1,20,000
Cash received by Branch from its Customers 61,10,000 Petty Cash 78,700
Goods are sold to customers at cost plus 50%. Depreciate the furniture @ 10% p.a.

Q6) Prepare a Branch account in the books of Head Office from the following particulars for the year ended
31st March, 2013 assuming that H.O. sold goods at cost price 25%.
Stock on 1.4.2012 (I.P.) 12,500 Discount allowed to Customers 5,000
Debtors ( ,, ) 5,000 Bad Debts written off 10,000
Purchase ( ,, ) 1,000 Credit sales 72,94,000
Goods sent to branch (I.P.) 40,000 Bad Debts 2,000
Goods return to H.O. (I.P.) 5,000 Allowances to customers 1,000
Cash Sales 12,000 Returns Inwards 1,000
Cash received from Debtors 30,000 Charges sent to Bank:
Rates & Taxes 3,000
Salaries 8,000
Misc. Exps. 1,000
Stock on 31.03.2013 (I.P.) 15,000
Debtors ( ,, ) 4,000
Petty Cash ( ,, ) 1,000
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Q7) Multichained Stores Ltd. Delhi, has its branches at Lucknow and Chennai. It charges goods to its
Branches at cost plus 25%. Following information is available of the transactions of the Lucknow Branch for
the year ended on 31st March 2013:
Balances on 01.04.2012
Stock (at invoice price) 30,000
Debtors 10,000
Petty Cash 50
Transactions during 2012-13 (Lucknow Branch):
Goods send to Lucknow Branch (at invoice price) 3,25,000
Goods returned to Head Office (at invoice price) 10,000
Cash Sales 1,00,000
Credit Sales 1,75,000
Goods pilfered (at invoice price) 2,000
Goods lost by fire (at invoice price) 5,000
Insurance Co. paid to H.O. for loss by fire at Lucknow 3,000
Cash sent for petty expenses 34,000
Bad debts at Branch 500
Goods transferred to Chennai Branch under H.O. advice 15,000
Insurance charges paid by H.O. 500
Goods returned by Debtors 500
Balance on 31.03.2013
Petty Cash 230
Debtors 14,000
Goods worth ₹15,000 (including above) sent by Lucknow Branch to Chennai Branch was in-transit on
31.03.2013.
Show the following accounts in the books of Multichained Stores Ltd.: (a) Lucknow Branch Stock Account;
(b) Lucknow Branch Debtors Account; (c) Lucknow Branch Adjustment Account; (d) Lucknow Branch Profit
& Loss Account, and (e) Stock Reserve Account.

Q8) A merchant of Kolkata opens a new branch in Mathura, which trades independently of the Head Office.
Goods supplied by Head Office 20,00,000
Purchases from outsiders :
— Credit 15,55,000
— Cash 3,00,000
Sales :
— Credit 25,05,000
— Cash 4,60,000
Cash received from Customers 30,45,000
Trade Creditors Paid 14,25,000
Expenses paid by Branch 8,95,000
Furniture purchased by Branch on credit 3,50,000
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Cash received from Head Office initially 4,00,000

Remittances to Head Office 11,00,000
The transactions of the Branch for the year ended 31.3.2013 are as under :
Prepare the Trading and Profit and Loss Account, Balance Sheet, Head Office Account in the books of Branch
:
1. The account of the Branch Fixed Assets are maintained in the Head Office books.
2. Write off depreciation on furniture at 5 percent per annum for full year.
3. A remmittance of ₹ 2,00,000 from the Branch to the Head Office is in transit.
4. The Branch value its closing stock at ₹ 12,00,000.

Q9) Priya Sales Corporation of Jaipur has a Branch at Kota to which goods are sent @ 331/3% above cost.
The Branch makes sales both for cash and on credit. Branch expenses are paid direct from Head Office and
the Branch has to remit all cash received into the Head Office Bank Account at Kota.
Following further details are given for the year ended 31st March, 2012:
Particulars (₹)
Goods sent to Branch (at invoice price) 18,00,000
Goods returned by Branch (at invoice price) 20,000
Stock at Branch on 1.4.2011 (at invoice price) 2,40,000
Branch Debtors on 1.4.2011 2,15,000
Sales during the year:
- Cash 5,80,000
-Credit 11,40,000
Cash received from Branch debtors 10,45,000
Discount allowed to by Branch to debtors 14,800
Bad debts 9,200
Sales return at Kota Branch 25,000
Salaries and wages at Branch 1,80,000
Rent, Rates and Taxes at Branch 42,000
Sundry expenses at Branch 15,000
Stock at Branch on 31.3.2012 (at invoice price) 3,60,000

You are required to show Branch Stock Account, Branch Adjustment Account, Branch Expenses Account,
Branch Debtors Account, Branch Goods sent to Branch Account and Branch Profit & Loss Account in the
books of the Head Office.

Q10) A head office in Calcutta supplies goods to its branch at Madras at cost. The branch sells the goods for
cash and on credit and remits the proceeds to the head office promptly, the branch expenses being met by the
head office by cheque. The following are the transactions relating to the branch for the year ended 31st
December, 2015 :
₹
Stock at Branch on 01-01-2015 6,000
Debtors at Branch on 01-01-2015 8,000
Goods sent to Branch during the year 45,000
Total sales at Branch (including cash sales ₹ 22,000) 74,000
Goods returned by Branch 2,000
Goods returned by Customers 2,000
Collections from Debtors 42,000
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Discount allowed 2,000

Bad Debt written off 1,000
Cheques sent by Head Office towards Branch Expenses—
Salaries 5000
Rent 2500
Petty expenses 500
Stock at Branch on 31-12-15 9000
Prepare Branch Account and Goods sent to Branch Account in the H. O. books

Q11) A head office in Calcutta has a branch in Ahmedabad to which goods are invoiced at cost price. The
following are the transactions between the head office and the branch for the year ending December 31st,
2015:
Stock at Branch on 01-01-2015 12,500
Debtors at Branch on 01-01-2015 12,000
Petty Cash at Branch on 01-01-2015 300
Goods sent to Branch 45,000
Remittances from Branch :
Cash Sales 16,000
Money received from Debtors 29,500 45,500
Goods returned to H. O. 3,000
Bad Debts at Branch 500
Discount allowed to Branch Debtors 1,300
Goods returned by customers to Branch 2,000
Cheques sent to Branch—
for Salaries and Wages 9,000
for Insurance 3,000
for Petty Cash 510 12,510
Stock at Branch on 31-12-2015 15,000
Debtors at Branch on 31-12-2015 22,500
Petty Cash at Branch on 31-12-2015 200
Write up the ledger accounts in the books of H. O. to record the above transactions.

Q12) A H. O. invoiced to their Delhi Branch during the year ended 31-12-2015 goods at selling price (being
1/3 added to cost) amounting to ₹ 74,000. The credit sales of the Branch were ₹ 31,000 and cash sales ₹
17,000. The Branch returned ₹ 2,000 stock at invoice price and had returns from customers ₹ 1,000. The
discounts allowed to customers by the Branch amounted to ₹ 1,200. The Branch remitted to H.O. ₹ 38,600
being the amount of cash sales and recipts from customers. The opening and closing stocks of the Branch
were ₹ 15,000 and ₹ 39,000 respectively at selling price. The Branch had Debtors of ₹ 12,000 at the
beginning. Loss through pilferage was ascertained to be ₹ 1,000 at selling price.
Write up the necessary accounts to record the above in the books of H. O. under synthetic method.

Q13) During the year ended 31st December, 2015, X & Co. of Madras sent to their Branch at Bombay goods
costing₹ 1,00,000. They used to invoice to the Branch at a price designed to show a gross profit of 33 1/3 per
cent on invoice price. Collections at the Branch from debtors amounting to ₹ 26,390 were all sent to Head
Office.
Branch transactions daring the year were:
Cash Sales— ₹ 1,21,050

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Credit Sales— ₹ 27,600

Goods returned by customers— ₹ 300
Goods returned to Head Office— ₹ 780 (invoice price)

on 31-12-14 on 31-12-15
Stock (at invoice price) 2,250 2,700
Sundry Debtors 1,320 2,230
Goods at the Branch of ₹ 1,260 (invoice price) were lost. Insurance Company paid ₹ 730 on the claim. Branch
expenses, paid by Head Office, amount to ₹ 36,780.
Show the necessary Ledger Accounts as would appear in the Head Office books recording the above
transactions relating to the Branch including Branch Profit & Loss Account.

Q14) Bombay Traders Ltd. sends goods to its Madras Branch at cost plus 25 per cent. From the following
particulars you are required to show the necessary ledger accounts in the Head Office books :
₹
Opening stock at Branch at cost to Branch 20,000
Goods sent to Branch at invoice price 80,000
Loss-in-transit at invoice price 10,000
Pilferage at invoice price 4,000
Normal loss through wastage at invoice price 2,000
Sales 1,22,000
Expenses 32,000
Closing stock at Branch at cost to Branch 24,000
Recovered from Insurance Company against loss-in-transit 6,000

Q15. From the following information, prepare Branch Account showing the profit or loss of the branch.
Opening Stock 30,000
Goods sent to branch 90,000
Sales 1,20,000
Expenses: Salaries 10,000
Other Expenses 4,000
The closing stock could not be ascertained, but it is known that the branch usually sells at cost plus 20%.
The branch manager is entitled to a commission of 5% on the profit of the branch before charging such
commission.
Answer:Branch Profit (transferred to P&L A/c) — ₹5,700

Q16. A company with its Heads Office at Kolkata has a Branch at Chennai. The Branch receives all goods
from Head Office who remits cash for all expenses. Total sales by Branch for year ended 31.03.2012
amounted to ₹ 6,50,000 out of which 75% on Credit. Other details for Chennai Branch were as under:
Particulars 01.04.2011 30.03.2012
Stock 4,000 30,000
Debtor 45,000 30,000
Petty Cash 250 ---
Petty Cash sent by Head Office ₹ 3,000 but ₹ 2,500 is spent for Petty Expenses. The expenses of ₹ 45,000 are
actually spent by Branch. All sales are made by the Branch at Cost plus 25%.

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You are required to prepare the Chennai Branch A/c in the books of Head Office for the year ended
31.03.2012.
Answer: Branch Profit (transferred to General P&L A/c — ₹82,500]

Q17. Jaggu & Co., (Delhi) operates a branch at Jaipur to which goods are invoiced at wholesale price which is
cost plus 25%. The branch sells the goods at the retail price which is wholesale price plus 20%.
The following information provided for the year ended 31.03.2014:
Stock at the branch on 01.04.2013 1,65,000
Goods invoiced to the branch during the year 17,82,000
Expenses of the branch for the year 1,10,000
Gross profit made by the branch 3,30,000
Stock at the branch on 31.03.2014 1,98,000
Some goods were destroyed by the fire during the year.
You are required to prepare, Branch Stock Account, Branch Profit & Loss Account and Branch Stock Reserve
Account in the books of Head Office for the year ended 31st March, 2014.

EXAM QUESTIONS
Q1) Prepare a Branch account in the books of Head Office from the following particulars for the year
ended 31st March, 2017 assuming that H.O. supplied goods at cost plus 25%.
Particulars Amount Particulars Amount
(₹) (₹)
Stock on 1.4.2016 (LP.) 12,500 Bad Debts 2,000
Debtors „ 5,000 Allowances to customers 1,000
Petty Cash „ 1,000 Returns Inwards 1,000
Goods sent to branch (LP.) 40,000 Cheques sent to Branch for expenses: Rates
Goods return to H.O. (LP.) 5,000 & Taxes 3,000
Cash Sales 12,000 Salaries 8,000
Cash received from debtors 30,000 Misc. Exps. 1,000
Stock on 31.03.2017 (LP.) 15,000
Debtors „ 4,000
Petty Cash „ 1,000

Q2)The following details are available in respect of a business for a year.

Dept Op Stock Purchase Sales
X 120 units 1,000 units 1,020 units at ₹ 20.00 each
Y 80 units 2,000 units 1,920 units at ₹ 22.50 each
Z 152 units 2,400 units 2,496 units at ₹ 25.00 each

The total value of purchases is ₹ 1,00,000. It is observed that the rate of Gross Profit is the same in each
department. Prepare Departmental Trading Account for the above year.

3. The following information provided by the Shobha Departmental Store for the year ended 31st
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March, 2018:
Dept Purchase Sales Closing Stock
units
X 2500 2550 units @ Rs. 160 per 250
unit
Y 5000 4800 units @ Rs.180 per 400
unit
Z 6000 6240 units @ Rs. 200 per 140
unit
The total value of purchases is Rs. 15 Lakh. It is observed that the rate of gross profit is the
same in each department.
You are required to prepare the Departmental Trading Account for the year ended
31 st March, 2018.

4. Rukmani Stores, Delhi invoiced goods to its Jaipur Branch @ 20% less than the Catalogue price
which is cost plus 50% with instructions that cash sales were to be made at invoice price and
credit sales at catalogue price and allow discount on prompt payment. The following details
related to branch are provided by Rukmani Stores for the year ended 31st March, 2019:

₹
Invoiced Stock: On 01.04.2018 4,50,000
On 31.03.2019 5,10,000
Branch Debtors: On 01.04.2018 3,60,000
Branch Furniture: On 01.04.2018 1,20,000
Cash Sales 13,60,000
Credit Sales 21,50,000
Goods Invoiced to Branch 32,10,000
Goods returned by Branch (Invoice Price) 84,000
Expenses Paid by H.O.: Rent 1,25,000
Salaries 1,80,000
Petty Expenses paid by Branch 11,000
Cash received from Branch Debtors 18,65,000
Remittances by Branch to H.O. 32,00,000
Discount allowed to Branch Debtors 1,85,000
Branch Bad debts 15,800
Goods Returned by Branch Debtors 12,600

It was decided to make provision for discount of ₹ 42,500 on closing debtors for prompt
payment. Depreciate the furniture @ 10% per annum.
You are required to prepare Jaipur Branch Account and Goods Sent to Branch Account in the books of
Rukmani Stores.

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7. DEPARTMENTAL ACCONTS
Q1 dec 2018 The following information provided by the Shobha Departmental Store for the year ended 31st
March,2018:
Department Purchase(units) Sales Closing Stock(units)
X 2500 2550 units @ ₹ 160 per unit 250
Y 5000 4800 units @ ₹180 per unit 400
Z 6000 6240 units @ ₹ 200 per unit 140
The total value of purchases is ₹ 15 Lakh. It is observed that the rate of gross profit is the same in each
department.
You are required to prepare the Departmental Trading Account for the year ended 31 st March, 2018.

Q2) From the following Trial Balance, prepare Departmental Trading and Profit and Loss Account for the
year ended 31.12.2013 and a Balance Sheet as at the date in the books of Sri S. Maity:
Particulars Dr. Cr.
Stock (1.1.2013):
Dept. A 5,400
Dept. B 4,900
Purchases:
Dept. A 9,800
Dept. B 7,350
Sales:
Dept. A 16,900
Dept. B 13,520
Wages:
Dept. A 1,340
Dept. B 240
Rent 1,870
Salaries 1,320
Lighting and
Heating 420
Discount Allowed 441
Discount Received 133
Advertising 738
Carriage Inward 469
Furniture and
Fittings 600
Plant and
Machinery 4,200
Sundry Debtors 1,820
Sundry Creditors 3,737
Capital 9,530
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Drawings 900
Cash in hand 32
Cash at Bank 1,980
TOTAL 43820 43820
The following information is also provided:
Rent and Lighting and Heating are to be allocated between Factory and Office in the ratio of 3:2.
Rent, Lighting and Heating, Salaries and Depreciation are to be apportioned to A and B Depts. as 2:1.
Other expenses and incomes are to be apportioned to A and B Depts. on suitable basis.
The following adjustments are to be made:
Rent Prepaid ₹370; Lighting and Heating outstanding ₹180; Depreciation of Furniture and Fittings @ 10%
p.a. and Plant and Machinery @ 10% p.a. The Stock at 31.12.2012: Dept. A ₹2,748; Dept. B ₹2,401.

Q3) The Trading and Profit & Loss Account of Bindas Ltd. for the year ended 31st March is as under :
Purchases Sales
Transistors (A) 1,60,000 Transistors (A) 1,75,000
Tape Recorders (B) 1,25,000 Tape Recorders (B) 1,40,000
Servicing and repair jobs (C) 80,000 Servicing and Repair Jobs (C) 35,000
Salaries and wages 48,000 Stock on 31st March
Rent 10,800 Transistors (A) 60,100
Sundry Expenses 11,000 Tape Recorders (B) 20,300
Net Profit 40,200 Spare parts for servicing & repair jobs (C) 44,600
Prepare Departmental Accounts for each of the three Departments A, B and C mentioned above after taking
into consideration the following :
(a) Transistors and Tape Recorders are sold at the Showroom. Servicing and Repairs are carried out at the
Workshop.
(b) Salaries and wages comprise as follows: Showroom 3/4th and Workshop 1/4th
It was decided to allocate the Showroom Salaries and Wages in ratio 1:2 between Departments A and B.
(c) Workshop Rent is ₹ 500 per month. Showroom Rent is to be divided equally between Departments A and
B.
(d) Sundry Expenses are to be allocated on the basis of the turnover of each Department.

Q4) Department A sells goods to Department B at a profit of 25% on cost and to department C at 10% profit
on cost. Department B sells goods to Department A and Department C at a profit of 15% and 20% on sales
respectively. Dept. C charges 20% and 25% profit on cost and department A and department b respectively.
Department managers are entitled to 10% commission on net profit after eliminating unrealised profit on
department sales being eliminated. Departmental profit after charging managers commission but before
adjustment of unrealized profits are: Dept. A ₹ 72,000; Dept. B ₹ 54,000; and Dept. C ₹ 36,000. Stock lying at
different departments at the end of the year are:

Q5) DEC 2019

Snow White Ltd has two departments — Cloth and Readymade Clothes. Ready Made Clothes are made by the
Firm itself out of cloth supplied by the Cloth Department at its usual selling price. From the following figures,
prepare
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Departmental Trading and Profit and Loss Accounts for the year ended 31st March 2013.
CLOTH READYMATE
PARTICULARS DEPT CLOTHES
Opening Stock on 1st April, 2012 3,00,000 50,000
Purchases 20,00,000 15,000
Sales 22,00,000 4,50,000
Transfer to Readymade Clothes
Department 3,00,000 —
Expenses - Manufacturing — 60,000
Selling 20,000 6,000
Closing Stock on 31st March, 2013 2,00,000 60,000
The Stock in the Readymade Clothes Department may be considered as consisting of 75% Cloth and 25%
other expenses. The Cloth Department earned Gross Profit at the rate of 15% during the year 2011-12.
General Expenses of the business as a whole came to ₹ 1,10,000.

Q6) A & co. has two departments P & Q. department P sells goods to department Q at normal selling prices.
From the following particulars, prepare departmental Trading & PL account for the year ended 31.03.2018
and also ascertain the net profit to be transferred to Balance Sheet:
Particulars Department P(₹) Department Q(₹)
Opening stock 5,00,000 NIL
Purchases 28,00,000 3,00,000
Goods from P NIL 8,00,000
Wages 3,50,000 2,00,000
Travelling expenses 20,000 1,60,000
Closing stock at cost to the department 8,00,000 2,09,000
Sales 30,00,000 2,00,0000
Printing & Stationery 30,000 25,000

The following expenses incurred for both the departments were not apportioned between the departments:
Salaries ₹ 33,000, advertisement expenses ₹1,20,000,General expenses ₹ 5,00,000,Depreciation is to be
charged @30% on the machinery worth ₹ 96,000.
The advertisement expenses of the departments are to be apportioned in the turnover ratio. Salaries and
depreciation are to be apportioned in the ratio 2:1 and 1:3 respectively. General expenses are to be
apportioned in the ratio 3:1.

Q7) Pooma Ltd. has 2 departments M & S. From the following particulars, prepare Departmental Trading
Account & Consolidated Trading Account for the year ended 31st March, 2013.
Particulars M (₹) S (₹)
Opening Stock 20,000 12,000
Purchases 92,000 68,000
Carriage Inwards 2,000 2,000
Wages 12,000 8,000
Sales (excluding inter dept
transfers) 1,40,000 1,12,000
Purchased Goods transferred
By S to M 10,000 —
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By M to S — 8,000
Finished Goods transferred
By S to M 35,000 —
By M to S — 40,000
Return of Finished Goods
By M to S 10,000 —
By S to M — 7,000
Closing Stock
Purchased Goods 4,500 6,000
Finished Goods 24,000 14,000

Purchased Goods have been transferred at their respective departmental Purchase Cost & Finished Goods
at Departmental Market Price. 20% of Finished Stock (Closing) at each Department represented Finished
Goodsreceived from the other Department.

Q8) Department X sells goods to Department Y at a profit of 25% on cost & to Department Z at a profit of
10% on cost. Department Y sells goods to X & Z at a profit of 15% & 20% on sales, respectively.
Department Z charges 20% & 25% profit on cost to Department X & Y, respectively.
Department Managers are entitled to 10% Commission on Net Profit subject to Unrealised profits on
Departmental sales being eliminated.
Departmental profits after charging manager’s commission, bur before adjustment of unrealised profits are : X
= ₹ 36,000; Y = ₹ 27,000; Z = ₹ 18,000
Stocks lying at different departments at the year end are as under :
Particulars X (₹) Y (₹) Z (₹)
Transfer from Department X — 15,000 11,000
Transfer from Department Y 14,000 — 12,000
Transfer from Department Z 6,000 5,000 —
Find out the correct Departmental Profits after charging Managers’ Commission.

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8. ACCOUNTING STANDARDS
1.

2.

3.

4.

5.

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6.

7.

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9. ROYALTIES
Q1) The Bihar Coal Co. Ltd. holds a lease of coal mines for a period of twelve years, commencing from 1st
April 2006. According to the lease, the company is to pay ₹ 7.50 as royalty per ton with a minimum rent of ₹
150,000 per year. Short workings can, however, be recovered out of the royalty in excess of the minimum rent
of the next two years only. For the year of a strike the minimum rent is to be reduced to 60%. The output in
tons for the 6 years ending 31st March, 2012 is as under :
2006-07 :10,000; 2007-08 :12,000; 2008-09:25,000; 2009-10: 20,000; 2010-11: 50,000; and 2011-12: 15,000
(strike).
Write up the necessary Ledger Accounts in the books of Bihar Coal Co. Ltd.

Q2) A. Ltd. obtain from B.S. Ltd. a lease of some coal-bearing land, the terms being a royalty of ₹ 15 per ton
of coal raised subject to a minimum rent of ₹ 75,000 p.a. with a right of recoupment of short-working over the
first four years of the lease. From the following details, show (i) Short-working Account, (ii) Royalty Account
and (iii) B.S. Ltd. Account in the books of A. Ltd.
closing
Year sales stock
2009 2,000 300
2010 3,500 400
2011 4,800 600
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2012 5,600 500

2013 8,000 800

Q3) The following information has been obtained from the books of a lesee relating to the years 2008-09 to
2011-12 :
Payments to Landlord (after tax deducted @ 20% at Source) :
2008-09 ₹ 12,000
2009-10 ₹ 12,000
2010-11 ₹ 12,000
2011-12 ₹ 19,200
Short-working recovered : 2009-10 ₹ 2,500
2010-11 ₹ 1,000
Short-working written-off : 2010-11 ₹ 500
Balance of Short-working Account forward on April 1, 2008 ₹ 800 (which are in 2008-09). According to the
terms of agreement short-working is recoverable within the next two years following the year in which short-
working arises.
You are required to show the necessary accounts in the books of the lessee for the four years ended 31st
March 2012.

Q4) A fire occurred in the office premises of lessee in the evening of 31.3.2012 destroying most of the books
and records. From the documents saved, the following information is gathered:
Short-working recovered :
2009-10 ₹ 4,000 (towards short-workings which arose in 2006-07)
2010-11 ₹ 8,000 (including ₹ 1,000 for short-working 2007-08)
2011-12 ₹ 2,000
Short-working lapsed :
2008-09 ₹ 3,000
2009-10 ₹ 3,600
2011-12 ₹ 2,000
A sum of ₹ 50,000 was paid to the landlord in 2008-09. The agreement of Royalty contains a clause of
Minimum Rent payable for fixed amount and recoupment of short-workings within 3 years following the year
in which Shortworkings arise.
Information as regards payments to landlord subsequent to the year 2008-09 is not readily available.
Show the Short – working Account and the Royalty Account in the books of lessee.

Q5) On 1st April, 2010 Rukmani Limited leased a coal mine at a minimum rent of ₹36,000 for the first year, ₹
60,000 for second year and there after ₹ 1,20,000 per annum merging into a royalty of ₹ 3 per tonne with right
to recoup short workings over two years after occurring short workings. The output for first year years is as
follows:
Year 1 2 3 4
Coal output (in tones) 6,000 17,200 44,000 1,00,000
You are required to prepare Royalty Account, Short workings Account and Landlord’s Account in the books
of Rukmani Ltd.

Q6) DEC 2019

On 1st April, 2009 Mahi Limited obtained a mine on lease from Kachari Limited. The terms were as follows:
(i) Royalty at ₹25 per tonne raised.
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(ii) Minimum Rent ₹1,50,000 per annum.

(iii) Short workings can be recouped in the next two years only but subject to a maximum of ₹ 37,500 per
year. In the event of strike, the minimum rent would be taken pro-rata on the basis of actual working days
but in the event of lockout, the lease would enjoy concession in respect of minimum rent for 50% of the
period of lockout. In addition to the above, Mahi Ltd. has been granted a right to receive cash subsidy
equal to 50% of the Unrecoupable shortworkings by the State Government up to the first 5 years of the
lease.

Year 2009-10 2010-11 2011-1 2012-13 2013-14 2014-15

Production 2000 3000 8000 9000 4000 6000
(Tonnes)
Period of strike for
73 days)
(Lockout for two
months)
Show the ne cessary Ledger Accounts in the books of Mahi Limited.

Q7) dec 2018

Mansi Ltd. acquires the lease of a mine from Nanu Ltd. on the following terms:
(i) Minimum Rent of ₹40 Lakh per annum merging into a royalty of ₹50 per tonne.
(ii) Shortworkings are recoverable out of future earnings subject to:
(I) Only half of the excess earnings over minimum rent may be used for this purpose.
(II) No Shortworkings may be carried forward for recoupment if output falls below 40000 Tonnes, in any
year.Output for the first four years was : 32000 Tonnes; 48000 Tonnes; 64000 Tonnes and 112000 Tonnes
respectively.Prepare the necessary accounts for above four years in the books of the Lessee.

EAXM QUESTIONS
Q1) Mansi Ltd. acquires the lease of a mine from Nanu Ltd. on the following terms:
(i) Minimum Rent of Rs.40 Lakh per annum merging into a royalty of Rs.50 per tonne.
(ii) Shortworkings are recoverable out of future earnings subject to:
(I) Only half of the excess earnings over minimum rent may be used for this purpose.
(II) No Shortworkings may be carried forward for recoupment if output falls below 40000
Tonnes, in any year.
Output for the first four years was : 32000 Tonnes; 48000 Tonnes; 64000 Tonnes and 112000 Tonnes
respectively.
Prepare the necessary accounts for above four years in the books of the Lessee.

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10. FINAL ACCOUNT

Q1) The provision for Doubtful Debt A/c shows a balance of ₹5,000 on Jan 01, 2014. The bad debt during the
year 2014 amounted to ₹3,000. The sundry debtors on Dec 31 2014 were ₹ 50,000. On Dec 31 2014 there was
an additional bad debt of ₹ 3000. Create a new provision @ 10 % on debtors. Bad debt recovered ₹ 500.
You are required to show necessary ledger accounts and balance sheet.

Q2) Prepare Bad Debts Accounts, Provision for Bad Debts Accounts under each of the above methods from
the following information and also the Profit and Loss Account and Balance sheet:-
01.01.2012 Provision for Bad Debts ₹ 5,000
31.12.2012 Bad Debts written off ₹ 3,000
Sundry Debtors ₹ 1,25,000
31.12.2013 Bad Debts written off ₹ 2,500
Sundry Debtors ₹ 1,00,000
Provision for Doubtful debts to be provided for @ 5% for 2012 and 2.5% for 2013.

Q3) On 01.01.2013 the balance of Provision for doubtful debts was ₹ 5,000. The Bad Debts during the year
were ₹ 900. The Sundry Debtors as on 31.12.2013 stood at ₹ 40,400 out of these debtors of ₹ 400 are bad and
cannot be realized. The Provision for Doubtful Debts is to be raised to 5% on Sundry Debtors. Show the
necessary ledger accounts and the balance sheet.
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Q4) On 01.04.2012, M/s Singh Bros. had a provision for bad debts of ₹ 6,500 against their book debts. During
2012-13,₹ 4,200 proved irrecoverable and it was desired to maintain the provision for bad debts @4% on
debtors which stood at ₹ 1,95,000 before writing off Bad Debts. They also decided to maintain a provision for
discount on debtors @2%. Show Provision for Bad Debt Account and Provision for Discount on Debtors
Account as would appear in the books of the firm in 2012-13.

Q5) A company maintains its reserve for bad debts @ 5% and a reserve for discount on debtors @ 2%.
You are given the following details :
2012(₹) 2013(₹)
Bad debts 800 1,500
Discount allowed 1,200 500
Sundry debtors (before providing all bad debts and discounts) amounted to ₹ 60,000 on 31.12.2012 and ₹
42,000 on 31.12.2013.
On 1.1.2012, Reserve for bad debts and Reserve of discount on debtors had balance of ₹ 4,550 and
₹ 800 respectively.
Show Reserve for Bad Debts and Reserve for Discount on Debtors Account.

Q6) On 31.12.2012, Sundry Debtors and Provision for Doubtful Debts are ₹ 50,000 and ₹ 5,000 respectively.
During the year 2013, ₹ 3,000 are bad and written off on 30.9.2013, an amount of ₹ 400 was received on
account of a debt which was written off as bad last year on 31.12.2013, the debtors left was verified and it was
found that sundry debtors stood in the books were ₹ 40,000 out of which a customer Mr. X who owed ₹ 800
was to be written off as bad.
Prepare Bad Debt A/c. Provision for Doubtful A/c. assuming that some percentage should be maintained for
provision for Doubtful debt as it was on 31.12.2012.
Show also how the illustration appear in Profit & Loss A/c. and Balance Sheet.

Q7) Following are the ledger balances presented by M/s. P. Sen as on 31st March 2013.
PARTICULARS AMT PARTICULAR AMT
Stock (1.4.2012) 10,000 Sales 3,00,000
Purchase 1,60,000 Return Inward 16,000
Carriage
Inwards 10,000 Return Outward 10,000
Royalty on
Wages 30,000 Production 6,000
Freight 8,000 Gas and Fuel 2,000

Additional Information:
(1) Stock on 31.3.2013: (i) Market Price ₹ 24,000; (ii) Cost Price ₹ 20,000;
(2) Stock valued ₹ 10,000 were destroyed by fire and insurance company admitted the claim to the extent of
₹ 6,000.
(3) Goods purchased for ₹ 6,000 on 29th March, 2013, but still lying in-transit, not at all recorded in the
books.
(4) Goods taken for the proprietor for his own use for ₹ 3,000.
(5) Outstanding wages amounted to ₹ 4,000.
(6) Freight was paid in advance for ₹ 1,000.

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Q8) Following is the Trial Balance of M/s Brijesh and Sons. Prepare final accounts for the year ended on 31st
March 2013.
Particulars Debit (₹) Credit (₹)
Stock as on 01.04.2012: Finished goods 2,00,000
Purchases and Sales 22,00,000 35,00,000
B lils receivables 50,000
R eturns 1,00,000 50,000
Carriage Inwards 50,000
Debtors and Creditors 2,00,000 4,00,000
Carriage Outwards 40,000
Discounts 5,000 5,000
Salaries and wages 2,20,000
Insurance 60,000
R ent 60,000
Wages and salaries 80,000
Bad deb ts 10,000
Furniture 4,00,000
Brijesh’s capital 5,00,000
Brijesh’s drawing 70,000
Loose tools 1,00,000
Printing & stationery 30,000
Advertising 50,000
Cash in hand 45,000
Cash at b ank 2,00,000
Petty Cash 5,000
Machinery 3,00,000
Commis sion 10,000 30,000
T otal 44,85,000 44,85,000
Adjustments: (i) Finished goods stock. Stock on 31st March was valued at Cost price ₹ 4,20,000 and market
price ₹ 400,000. (ii) Depreciate furniture @ 10% p.a. and machinery @ 20% p.a. on reducing balance method.
(iii) Rent of ₹ 5,000 was paid in advance. (iv) Salaries & wages due but not paid ₹ 30,000. (v)Make a
provision for doubtful debts @ 5% on debtors. (vi) Commission receivable ₹ 5,000.

Q9) Mr. Arvindkumar had a small business enterprise. He has given the trial balance as at 31st March 2013
Particulars Debit (₹) Credit (₹)
Mr. Arvinkumar’s Capital 1,00,000
Machinery 36,000
Depreciation on machinery 4,000
Repairs to machinery 5,200
Wages 54,000
Salaries 21,000
Income tax of Mr. Arvindkumar 1,000
Cash in hand 4,000
Land & Building 1,49,000
Depreciation on building 5,000
Purchases 2,50,000
Purchase returns 3,000
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Sales 4,98,000
Citi Bank 7,600
Accrued Income 3,000
Salaries outstanding 4,000
Bills receivables 30,000
Provision for doubtful debts 10,000
Bills payable 16,000
Bad debts 2,000
Discount on purchases 7,080
Debtors 70,000
Creditors 62,520
Opening stock 74,000
Total 7,08,200 7,08,200
Additional information:
(1) Stock as on 31st March 2013 was valued at ₹ 60,000
(2) Write off further ₹ 6,000 as bad debt and maintain a provision of 5% on doubtful debt. (3) Goods costing ₹
10,000 were sent on approval basis to a customer for ₹ 12,000 on 30th March, 2013. This was
recorded as actual sales.
(4) ₹ 2,400 paid as rent for office was debited to Landlord’s A/c and was included in debtors.
(5) General Manager is to be given commission at 10% of net profits after charging his commission.
(6) Works manager is to be given a commission at 12% of net profit before charging General Manager’s
commissionand his own.
You are required to prepare final accounts in the books of Mr. Arvindkumar.

Q10) Abhay runs a small shop and deals in various goods. He has not been able to tally his trial balance and
has closed it by taking the difference to Suspense A/c. It is given below.
Particulars (as on 31st March 2013) Debit (₹) Credit (₹)
Abhay’s capital 1,50,000
Drawings 75,000
Fixed assets 1,35,000

Opening stock 36,500

Purchases & returns 6,75,000 13,500
Sales & returns 34,000 8,50,000
Due from customer & to creditors 95,000 3,25,000
Expenses 45,750
Cash 3,000
Bank deposits & interest earned 55,000 5,750
Suspense A/c 4,000
Advertising 2,00,000
Total 13,51,250 13,51,250
Mr. Abhay has requested you to help him in tallying his trial balance and also prepare his final accounts. On
investigation of his books you get the following information:
(i) Closing Stock on 31st March 2013 was ₹ 45,000 at cost and could sell over this value.
(ii) Depreciation of ₹ 13,500 needs to be provided for the year.
(iii) A withdrawal slip indicated a cash withdrawal of ₹ 15,000 which was charged as drawing. However, it
was noticed that ₹ 11,000 was used for business purpose only and was entered as expenses in cash book.

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(iv) Goods worth ₹ 19,000 were purchased on 24th March 2013 and sold on 29th March 2013 for ₹23,750.
Sales were recorded correctly, but purchase invoice was missed out.
(v) Purchase returns of ₹ 1,500 were routed through sales return. Party’s A/c was correctly posted.
(vi) Expenses include ₹ 3,750 related to the period after 31st March 2013.
(vii) Purchase book was over-cast by ₹ 1,000. Posting to suppliers’ A/c is correct.
(viii) Advertising will be useful for generating revenue for 5 years.

Q11) Mr. Oswal maintains his accounts on Mercantile basis. The following Trial Balance has been prepared
from his books as at 31st March, 2013 after making necessary adjustments for outstanding and accrued items
as well as depreciation:
Trial Balance
as at 31st March, 2013
Particulars Dr.
(₹)
Cr.
(₹)
Plant and Machinery 2,12,500
Sundry Creditors 2,64,000
Sales 6,50,000
Purchases 4,20,000
Salaries 40,000
Prepaid Insurance 370
Advance Rent 2,000
Outstanding Salary 6,000Advance Salary 2,500
Electricity+ Charges 2,650
Furniture and Fixtures 72,000
Opening Stock 50,000
Outstanding Electricity Charges 450
Insurance 1,200
Rent 10,000
Miscellaneous Expenses 14,000
Cash in hand 3,000
Investments 80,000
Drawings 24,000
Dividend from Investments 8,000
Accrued Dividend from Investments 1,500
Depreciation on Plant and Machinery 37,500
Depreciation on Furniture 8,000
Capital Account 2,11,970
Telephone Charges 6,000
Sundry Debtors 1,70,500
Stationery and Printing 1,200
Cash at Bank 65,000
Interest on Loan 8,000
Interest Due but not paid on loan 1,500
Loan Account 90,000
12,31,920 12,31,920

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Additional Information:
(i) Salaries include ₹ 10,000 towards renovation of Proprietor’s residence.
(ii) Closing Stock amounted to ₹ 75,000.
Mr. Oswal, however, request you to prepare a Trading and Profit & Loss Account for the year ended 31st
March,
2013 and a Balance Sheet as on that date following cash basis of accounting.

Q12) The following Trial Balance has been prepared from the books of Mr. Sexena as on 31st March, 2013
after making necessary adjustments for depreciation on Fixed Assets, outstanding and accrued items and
difference under Suspense Account.
Trial Balance as at 31st March, 2013
Particulars Dr. (₹) Particulars Cr. (₹)
Machineries 1,70,000 Sundry Creditors 82,000
Furniture 49,500 Capital Account 2,45,750
Outstanding
Sundry Debtors 38,000 Expenses:
Drawings 28,000 Salaries 1,500
Travelling Expenses 6,500 Printing 600
Insurance 1,500 Audit Fees 1,000
Audit Fees 1,000 Bank Interest 1,200
Salaries 49,000 Discounts 1,800
Rent 5,000 Sales (Less Return) 6,80,000
Cash in hand 7,800
Cash at Bank 18,500
Stock-in-trade (1-4-2012) 80,000
Prepaid Insurance 250
Miscellaneous Expenses 21,200
Discounts 1,200
Printing & Stationery 1,500
Purchase (Less Returns) 4,60,000
Depreciation:
Machineries 30,000
Furniture 5,500
Suspense Account 39,400
10,13,850 10,13,850

On the subsequent scrutiny following mistakes were noticed:

(i) A new machinery was purchase for ₹ 50,000 but the amount was wrongly posted to Furniture Account as
₹ 5,000.
(ii) Cash received from Debtors ₹ 5,600 was omitted to be posted in the ledger.
(iii) Goods withdrawn by the proprietor for personal use but no entry was passed ₹ 5,000.
(iv) Sales included ₹ 30,000 as goods sold cash on behalf of Mr. Thakurlal who allowed 15% commission on
such sales for which effect is to be given.
You are further told that:-
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(a) Closing stock on physical verification amounted to ₹ 47,500.

(b) Depreciation on Machineries and Furniture has been provided @ 15% and 10%, respectively, on reducing
balancing system.
Full year’s depreciation is provided on addition.
You are requested to prepare a Trading and Profit & Loss Account for the year ended 31st March 2013 and a
Balance Sheet as on that date so as to represent a True and Correct picture.

Q14) The following Trail Balance has been extracted from the books of Mr. Agarwal as on 31.3.2013:
Trial Balance as on 31.3.2013
Particulars Dr. (₹) Particulars Cr. (₹)
Purchase 6,80,000 Sales 8,38,200
Sundry Debtors 96,000 Capital Account 1,97,000
Drawings 36,000 Sundry Creditors 1,14,000
Bad Debts 2,000 Outstanding Salary 2,500
Furniture & Fixtures 81,000 Sale of Old Papers 1,500
Office Equipments 54,000 Bank Overdraft (UBI) 60,000
Salaries 24,000
Advanced Salary 1,500
Carriage Inward 6,500
Miscellaneous Expenses 12,000
Travelling Expenses 6,500
Stationery & Printing 1,500
Rent 18,000
Electricity & Telephone 6,800
Cash In Hand 5,900
Cash at Bank (SBI) 53,000
Stock (1.4.2012) 50,000
Repairs 7,500
Motor Car 56,000
Depreciation: 15,000
Furniture 9,000
Office Equipment 6,000
12,13,200 12,13,200
Additional Information:
(i) Sales includes ₹ 60,000 towards goods for cash on account of a joint venture with Mr. Reddy who incurred
₹ 800 as forwarding expenses. The joint venture earned a profit of ₹ 15,000 to which Mr. Reddy is entitled to
60%
(ii) The motor car account represents an old motor car which was replaced on 1.4.2012 by a new motor car
costing ₹ 1,20,000 with an additional cash payment of ₹ 40,000 laying debited to Purchase Account. (iii) UBI
has allowed an overdraft limit against hypothecation of stocks keeping a margin of 20%. The present
balance is the maximum as permitted by the Bank.
(iv) Sundry Debtors include ₹ 4,000 as due from Mr. Trivedi and Sundry Creditors include ₹ 7,000 as payable
to him.
(v) On 31.3.2013 outstanding rent amounted to ₹ 6,000 and you are informed that 50% of the total rent is
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attributable towards Agarwal’s resident.

(vi) Depreciation to be provided on motor car @ 20% (excluding sold item).
Mr. Agarwal requests you to prepare a Trading and Profit & Loss Account for the year ended 31.3.2013 and
a Balance Sheet as on that date.

Q15) Prepare trading and profit and loss account for the year ended 31st December, 2014 from the following
details:
₹ ₹
Purchase 1,50,000 Rent, rates and taxes 2,450
Sales 2,70,000 Interest received 540
Returns outward 20,000 Discount allowed 600
Returns inward 30,000 Discount received 460
Wages 25,000 Insurance charges 500
Salaries 15,000 Bad debts 650
Carriage inward 3,000 Trade expenses 200
Carriage outward 2,000 Advertisement 900
Duty and clearing charges 500 Depreciation : on plant 1,250
Factory rent 2,500 on furniture 300
Office rent 1,500 Stock on 1.1.14 37,000
Fuel and power 1,000 Stock on 31.12.14 55,000
Travelling and conveyance 950
[Answer: Gross Profit ₹ 96,000, Net Profit ₹ 70,700.]

Q16) The following is the trial balance of Hari as on 31st March, 2014. You are requested to prepare the
trading
and profit and loss account for the year ended 31st March, 2014 and a balance sheet as on that date after
making the necessary adjustments:
Dr Cr..
Purchases 3,10,000
Sales 4,20,000
Discount on sales 20,000
Stock of goods as on 1.4.13 50,000
Cash in hand 2,100
Cash at bank 12,000
Mr. Hari’s capital 2,88,600
Drawings 4,000
Rates and taxes 5,000
Salaries 32,000
Postage and telephones 11,500
Commission paid to salesmen 35,000
Insurance 9,000
Furniture and fittings 22,000
Advertising 17,000
Printing and stationery 3,000
Motor car 48,000
Bad debts 2,000
Cash discounts 4,000

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General expenses 14,000

Carriage inwards 22,000
Carriage outwards 10,000
Wages 20,000
Sundry creditors 40,000
Sundry debtors 96,000
7,48,600 7,48,600
The following adjustments are to be made:
(i) Stock on 31st March, 2014 was valued at ₹ 1,45,000.
(ii) Mr. Hari has taken out for personal use goods costing ₹ 5,000 out of purchases during the year.
(iii) Furniture purchased for ₹ 10,000 was wrongly included in purchases.
(iv) ₹ 5,000 due from a debtor included in sundry debtors has become bad.
(v) Creditors include a balance of ₹ 4,000 to the credit of Mr. Ram in respect of which it has been settled that
only ₹ 1,000 is to be paid to him.
(vi) Provision for bad debts to be created at 5% on sundry debtors.
(vii) Depreciate furniture and fittings by 10% and motor car by 25%.
(viii) The salesmen are entitled to a commission of 10% on sales.
[Answer: Gross Profit ₹1,58,000, Net Loss ₹11,250, Balance Sheet Total - ₹3,10,350]

Q17) From the following trial balance and information, prepare trading and profit and loss account of Mr.
Rishabh for the year ended 31.3.14 and a balance sheet as on that date :
Dr. Cr.
Capital - 1,00,000
Drawings 12,000 -
Land and buildings 90,000 -
Plant and machinery 20,000 -
Furniture 5,000 —
Sales — 1,40,000
Returns outward — 4,000
Debtors 18,400 -
Loan from Gajanand on 1.7.13 @ 6% p.a. — 30,000
Purchases 80,000 —
Returns inward 5,000 —
Carriage 10,000 -
Sundry expenses 600 -
Printing and stationery 500 —
Insurance expenses 1,000 -
Provision for bad and doubtful debts — 1,000
Provision for discount on debtors — 380
Bad debts 400 —
Profit of textile department - 10,000
Stock of general goods on 1.4.13 21,300 -
Salaries and wages 18,500 -
Creditors — 12,000
Trade expenses 800 -
Stock of textile goods on 31.3.14 8,000 -
Cash at bank 4,600 —

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Cash in hand 1,280 -

2,97,380 2,97,380
Information:
(i) Stock of general goods on 31.3.14 valued at ₹ 27,300.
(ii) Fire occurred on 23.3.14 and ₹ 10,000 worth of general goods were destroyed. The insurance company
accepted claim for ₹ 6,000 only and paid the claim money on 10.4.14.
(iii) Bad debts amounting to ₹ 400 are to be written off. Provision for bad and doubtful debts is to be made at
5% and for discount at 2% on debtors. Make a provision of 2% on creditors for discount.
(iv) Received ₹ 6,000 worth of goods on 27.3.14 but the invoice of purchase was not recorded in purchases
book.
(v) Rishabh took away goods worth ₹ 2,000 for personal use but no record was made thereof.
(vi) Charge depreciation at 2% on land and buildings, 20% on plant and machinery, and 5% on furniture.
(vii) Insurance prepaid amounts to ₹ 200.
[Answer: Gross Profit ₹61,000, Net Loss ₹38,098, Balance Sheet Total - ₹1,73,088
Purchases — ₹(80,000 + 6,000) – ₹2,000 = ₹84,000]

Q18) On 1st April, 2013 the balance of provision for bad and doubtful debts was ₹ 13,000. The bad debts
during the year 2013-14 were ₹ 9,500. The sundry debtors as on 31st March, 2014 stood at ₹ 3,25,000 out of
these debtors of ₹ 2,500 are bad and cannot be realized. The provision for bad and doubtful debts is to be
raised to 5% on sundry debtors.
(i) Pass necessary adjustment entries for bad debts and its provision on 31st March, 2014.
(ii) Prepare the necessary ledger accounts.
(iii) Show the relevant items in the profit and loss account and Balance Sheet.
[Answer: Provision for Bad and Doubtful Debts as on 31st March,2014 (as per P& L A/c) — ₹15,125,
Sundry Debtors as on 31st March,2014 (as per Balance Sheet) — ₹3,06,375.]

Q19) On 31st December, 2014 sundry debtors and provision for bad debts stood at ₹ 60,000 and ₹ 4,500
respectively. During the year 2015, bad debts amounting to ₹ 3,460 were written off. On 30th June, 2015 an
amount of ₹ 240 was received on account of a debt written off as bad last year. The debtors list on 31st
December, 2015 was verified and it was found that amongst sundry debtors amounting to ₹ 40,680, Sri
Becharam who owed ₹ 680 was to be written off as bad. It was decided to maintain the provision for bad debts
at the same percentage as it was on 31st December, 2014.
Prepare bad debts account and provision for bad debts account. Also show how the relevant items would
appear in the profit and loss account and balance sheet.
[Answer: Provision for Bad Debts as on 31st March, 2014 (as per P& L A/c) — ₹2,400,
Sundry Debtors as on 31st March, 2014 (as per Balance Sheet) — ₹37,000]

EXAM QUESTIONS

Q1) A company maintains its reserve for bad debts @ 5% and a reserve for discount on debtors @
2%. You are given the following details:
Particulars 2016 2017
Bad debts 800 1,500
Discount allowed 1,200 500
Sundry debtors (before providing all bad debts & discounts) 60,000 42,000
On 01/01/2016, Reserve for bad debts and Reserve of discount on debtors had balance of ₹ 4,550
and ₹ 800 respectively.
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Show Reserve for Bad Debts and Reserve for Discount on Debtors Account for the year 2016 and 2017

Q2)Following is the Trial Balance as on 31st March, 2019 of Bajrang Traders:

Particulars Debit (₹) Credit (₹)
Stock on 01.04.2018 1,35,000
Purchases and Sales 28,50,000 46,25,000
Returns 35,000 22,500
Carriage Inwards 24,000
Carriage Outwards 33,000
Wages 1,25,000
Salaries 3,52,000
Printing and Stationery 6,500
Insurance Premium 15,000
Repairs 11,000
Discounts Allowed 30,500
Discounts Received 15,500
Bad Debts 28,000
Provision for Bad Debts 35,000
Advertisement 38,000
Interest on Investment 42,000
Drawings 2,10,000
Investment 8,00,000
Furniture and Fixtures 3,50,000
Office Equipments 2,45,000
Land and Building 15,00,000
Sundry Debtors and Creditors 6,90,000 4,55,000
Establishment Expenses 35,000
Capital 31,05,000
Cash at Bank 7,24,000
Cash in Hand 63,000
Total 83,00,000 83,00,000

Additional Information:
(i) Closing Stock of goods amounted to ₹ 1,85,000 and of stationery amounted to ₹ 1,500.
(ii) Depreciation to be charged on Land and Building @ 10%; On Office Equipments @ 15%;
and On Furniture and Fixtures @ 10%.
(iii) Insurance Premium paid on 1st July, 2018 for one year.
(iv) Write off further as bad debts ₹ 5,000 and maintain a provision for bad debts of 5% on debtors.
(v) Provision made for discount on debtors @ 2%.
(vi) Goods costing ₹ 12,500 used for given free samples to customers.

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(vii) Goods costing ₹ 25,000 were sent on approval basis to a customer for ₹ 40,000 on 26th March,
2019. This was recorded as actual sales but approval did not receive till 31st March, 2019.
(viii) Outstanding salaries were for one month.
(ix) Investment made at 7.50% per annum on 1st May, 2018.
You are required to prepare Trading Account and Profit & Loss Account for the year ended 31st March, 2019
and a Balance Sheet as on that date.

11. NPO
Q1) On 31st December 2012, a club had subscription in arrears of ₹16,000 and in advance ₹4,000. During the
year ended 31-12-2013, the club received subscription of ₹2,08,000 of which ₹10,400 was related to 2014. On
31st December 2012, there were 4 members who had not paid subscription for 2013 @ ₹1,600 per person.
Write up subscription A/c for the year 2013.

Q2) The sports club of Orissa had received in 2012-2013 ₹ 2,000 towards subscription. Subscription for 2011-
12 unpaidon 1.4.2012 were ₹ 200.
Subscriptions paid in advance on 31.3.2012 were ₹ 50 and the same on 31.3.2013 was ₹ 40. Subscriptions for
2012-2013 unpaid on 31.3.2013 were ₹ 90.
Show how the subscriptions item will appear in the Income and Expenditure Account.

Q3) The amount of Subscription appears in the Income and Expenditure Account of South Indian Club is
₹ 3,000.
Adjustments were made in respect of the following:
Subscription for 2012 unpaid at 1st Jan. 2013, ₹ 400; ₹ 200 of which was received in 2013.
Subscription paid in advance at 1.1.2013 ₹ 100.
Subscription paid in advance at 31.12.2013 ₹ 80.

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Subscription for 2013 unpaid at 31.12.2013 ₹ 140.

Prepare Subscription Account.

Q4) From the following information, prepare the Subscription Account for the year ending on March, 31,
2013
(i) Subscription in arrears on 31.03.2012 ₹ 1,500
(ii) Subscription received in advance on 31.03.2012 ₹ 1,000
(iii) Amount of Subscription received during 2012-13 ₹ 40,000, which includes ₹ 500 for the year 2011-12, ₹
1,500 for the year 2013-14.
(iv) Subscription outstanding ₹ 1,000.

Q5) The accumulated balance of Life Membership fees at the beginning of the year 2012 was ₹6,40,000. This
represents the balance of life membership fees paid by 20 members since the club started about 6 years ago. In
the current year, 10 new life memberships were received totaling ₹ 4,00,000.
It’s the policy of the club to spread these fees over 20 years to income. The amount payable per person is
always ₹ 40,000.
What is the amount to be recognised as income for the current year and what amount will be deferred through
the balance sheet?

Q6) The following summary of the Cash Book has been prepared by the treasurer of a club:
Amount Amount
Receipts (₹) Expenses (₹)
To Balance b/d 4,740 By Wages – outdoor staff 13,380
” Subscriptions 29,720 ” Restaurant Purchase 50,400
” Entrance Fees 3,200 ” Rent – 18 months’ to July 30, 2013 7,500
” Restaurant Receipts 56,800 ” Rates 2,700
” Games & Competition Receipts 13,640 ” Secretary’s Salary 3,120
” Due to Secretary for Petty 80 ” Lighting 7,200
” Competition Prizes 4,000
” Printing & Postage etc. 6,000
” Placed in Fixed Deposit 8,000
” Balance c/d 5,880
1,08,180 1,08,180

On April 1, 2012 the club’s assets were:- Furniture ₹ 48,000, Restaurant stock ₹ 2,600; Stock of prizes ₹ 800;
₹ 5,200 was owing for supplies to the restaurant. On March, 31, 2013, the Restaurant stocks were ₹ 3,000 and
prizes in hand were ₹ 500, while the club owed ₹ 5,600 for restaurant supplies.
It was also found that subscriptions unpaid at March 31, 2013, amounted to ₹ 1,000 and that the figure of ₹
29,720 shown in the Cash Book included ₹ 700 in respect of previous year and ₹ 400 paid in advance for the
following year.
Prepare an account showing the Profit or Loss made on the Restaurant and a General Income and Expenditure
Account for the year ended 31.3.2013, together with a Balance Sheet as at that date, after writing 10% off the
Furniture.

Q7) ‘Citizen Club’ was registered in a city and the accountant prepared the following Receipts and Payments
Account for the year ended Dec. 31, 2013 and showed a deficit of ₹ 14,520 :

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(₹) (₹)
Receipts :
Subscriptions 62,130
Fair Receipts 7,200
Variety Show Receipts (net) 12,810
Interest 690
Bar Collection 22,350
Cash spent more 1,000
1,06,180
Payments :
Premises 30,000
Honorarium to Secretary 12,000
Rent 2,400
Rates and Taxes 3,780
Printing and Stationery 1,410
Sundry Expenses 5,350
Wages 2,520
Fair Expenses 7,170
Bar Purchase- payments 17,310
Repairs 960
New Car (less proceeds of old car ₹ 9,000) 37,800
1,20,700
Deficit 14,520
The additional information should be obtained:
1.1.2013 31.12.2013
(₹) (₹)
Cash in hand 450 –
Bank balance as per Pass Book 24,690 10,440
Cheques issued not presented for Sundry Expenses 270 90
Subscriptions due 3,600 2,940
Premises at Cost 87,000 1,17,000
Accumulated dep. on Premises 56,400 –
Car at Cost 36,570 46,800
Accumulated dep. on Car 30,870 –
Bar Stock 2,130 2,610
Creditors for Bar Purchases 1,770 1,290

Cash overspent represents honorarium to secretary not withdrawn due to Cash deficit. His annual honorarium
is ₹ 12,000. Depreciation on premises and car is to be provided at 5% and 20% on written-down value.
You are required to prepare the correct Receipts and Payments Account, Income and Expenditure Account
and Balance Sheet as at Dec. 31, 2013.

Q8) Prepare Income & Expenditure A/c for the year ended 31-12-2013 and the balance sheet as on 31-12-
2013 in the books of an Education society.
Particulars Debit (₹) Credit (₹)
Library Books 2,30,000
Books Added during the year 52,200
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Furniture 1,59,500
Addition to Furniture 35,500
Buildings 37,89,000
Investment 21,25,000
Creditors 1,77,900
Debtors 59,700
Investment Reserve Fund 1,85,000
Entrance Fees 2,02,600
Examination Fees 32,500
Certificate Fees 7,800
Subscriptions Received 2,75,800
Hire Charges 95,500
Interest 85,000
Other Receipts 4,400
Salary 1,55,900
Printing & Stationery 8,500
Postage & Telephone 2,500
Insurance 10,400
Examination Expenses 24,000
Periodicals 15,600
Prizes Fund 2,15,000
Prizes Investments 2,10,400
Prizes Investment Income 10,200
Prizes Given 9,500
Prizes Bank Balance 2,450
Donations (capital) 1,99,000
General Expenses 5,250
Capital Fund 54,71,720
Bank Balance 65,500
Cash in Hand 1,520
Total 69,62,420 69,62,420
Additional information :
Subscription receivable ₹22,500, subscription received for 2014 ₹7,850, Interest accrued on investments
₹6,250, salaryoutstanding for 2013 ₹12,500, Prepaid insurance ₹4,500.
Depreciate Books @ 15%, Building @ 1% and Furniture @ 10%.

Q9) From the following Receipts and Payments account prepare an Income and Expenditure account for the
year ended 31.12.2016
Receipts and Payments Account for the year ended 31.12.2016
Receipts ₹ Payments ₹
To Balance b/d : Cash in hand 1,200 By Purchase of furniture 10,000
: Cash at Bank 3,400 By Rent 3,600
To Subscriptions 24,500 By Honourarium 4,000
To Entrance fees 3,000 By Salaries 2,100
By Sports expenses 4,700

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By Sundry expenses 1,100

By Printing and Stationery 800
By Balance c/d : Cash in hand 1,700
: Cash at Bank 4,100
32,100 32,100
Additional information:
Particulars 31.12.2015 31.12.2016
₹ ₹
Subscription due 2,100 3,200
Subscriptions received in advance 1,400 2,700
Rent outstanding 600 300
Salaries paid in advance 1,200 900
Furniture 18,000 23,000
60 % of the entrance fees are to be capitalized. Interest on savings bank account for ₹ 280 has not been
entered in the cash book. An old furniture (WDV ₹ 8,000) was exchanged at an agreed price of ₹ 5,000 for a
new furniture costing ₹ 15,000.

Q10) The following information was obtained from the books of Young Bengal Club as on 31-03-2013 at the
end of first year of the club. Prepare the Receipts & Payments A/c, Income & Expenditure A/c and Balance
sheet of the club
(1) Donations received for Building & Books - ₹ 2,00,000
(2) Other revenue incomes and receipts were:
Rev. Income (₹) Actual Receipts (₹)
Entrance fees 17,000 17,000
Subscription 20,000 19,000
Locker rent 600 600
Sundry Income 1,600 1,060
Refreshment account Nil 16,000
(3) Other revenue expenditure and actual payments were
Rev. Exp (₹) Actual Payment (₹)
Land (cost ₹10,000) Nil 10,000
Furniture (cost ₹ 146,000) Nil 130,000
Salaries 5,000 4,800
Maintenance of play ground 2,000 1,000
Rent 8,000 8,000
Refreshment account Nil 8,000
Donations were utilized to the extent of ₹25,000 for buying books, balance were unutilized. In order to keep it
safe, 9% Govt. Securities were purchased on 31-3-2013 for ₹1, 60,000. Remaining amount was put in bank as
term deposit on 31-3-2013. Depreciate Furniture and books @ 10% for the whole year.

Q11) Following is the receipt and payment A/c of a club for the year ended 31-03-2013
Dr. Receipt and Payments for the year ended 31.3.2013 Cr.
Receipts Amount (₹) Payments Amount (₹)
To Opening balance: By Administrative expenses 1,25,000
Cash 3,000 “ Programme expenses 2,75,000
Bank 7,000 “ F.D. with bank 1,25,000
“ Membership fees received: “ Investment in ICICI Bonds 3,00,000
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“ Fixed assets purchased 80,000

up to 31-03-2012 14,000
for 2012-13 1,50,000
for 2013-14 16,000
“ Advertisements 5,00,000
“ F.D. with bank 75,000
“ Interest on savings A/c 700
“ Interest on F.D 22,000 “ Closing balance:
“ Sale of tickets – Prog 25,000 Cash 2,700
“ Govt. Security Maturity Bank 5,000
(cost 80,000 & interest 8,000) 1,00,000
9,12,700 9,12,700
The club informs you that:
(a) Membership fee for 2012-13 due is ₹25,000; and ₹1,000 from a member who has not yet paid for 2011-12
as well. A provision needs to be done on this.
(b) Income receivable on 31-03-2013 on ICICI bond is ₹30,000 and on Govt. Securities is ₹24,000
(c) Prepaid expenses on 31-3-2013 amounts to ₹7,000
(d) Outstanding expenses as on 31-3-2013 ₹8,000
(e) Depreciation to be provided is ₹12,500
(f) Programme is an annual feature.

Q12) Prepare the Balance Sheet of Ocean Blue club based on following information: ₹
Furniture (before depreciation) 8,000 Outstanding consultancy 1,000
Depreciation on furniture 800 Allowances outstanding 800
Building fund 30,000 Capital Grants 10,000
Income from building fund 2,000 Entrance fees (50% be funded) 4,000
Fixed deposits 20,000 Legacies received(funded) 8,000
Opening General fund 10,000 Prize fund 10,000
Excess of income over expenditure 20,000 Income of prize fund 1,000
Opening balance of capital fund 60,000 Expenses of prize fund 800
Cost of swimming pool 40,000 Investment of prize fund 10,000
Equipments 20,000 Balance in current A/c 10,000
Investment of general fund 36,000 Cash in hand 800
Subscription outstanding 10,000

Q13) maintained by the Secretary:

Receipts Amount(₹) Payments Amount (₹)
Opening Balance 1.1.2013 4,200 Manager’s Salary 1,000
Entrance Fees 2012 1,000 Printing and Stationery 2,600
Do 2013 10,000 Advertising 1,800
Subscriptions 2012 600 Fire Insurance 1,200
Do 2013 15,000 Investments Purchased 20,000
Int. Received on Invst. 3,000 Closing Balance 31.12.2013 7,600
Subscriptions 2014 400
34,200 34,200

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It was ascertained from enquiry that the following represented a fair picture of the Income and Expenditure of
theClub for the year 2013 for audit purpose:
Expenditure Amount (₹) Income Amount (₹)
Manager’s Salary 1,500 Entrance Fees 10,500
Printing & Stationery 2,000 Subscription 15,600
Add: Accrued 400 Interest on Invst. 4,000
Advt (accrued Nil) 1,600
Audit Fees 500
Fire Insurance 1,000
Depreciation 4,940
Surplus 18,160
30,100 30,100
You are required to prepare the Balance Sheet of the Club as on 31.12.2012 and 31.12.2013, it being given
that thevalues of the Fixed Assets as on 31.12.2012 were: Building ₹ 44,000, Cricket Equipment ₹ 25,000 and
Furniture ₹ 4,000.
The rates of depreciation are Building 5%, Cricket Equipments 10%, Furniture 6%.
Your are entitled to make assumptions as may be justified.

Q14) The Income and Expenditure Account of the Calcutta Club is:
Income and Expenditure Account for the year ended 31st December, 2013
Expenditure Amount ₹ Income Amount ₹
To Salaries 1,750 By Subscription 2,000
,, General Expenses 500 ,, Donation 1,050
,, Depreciation 300
,, Surplus 500
3,050 3,050
Adjustments are made in respect of the following:
(1) Subscription for 2012 unpaid at 1.1.2013 ₹ 200; ₹ 180 of which was received in 2013.
(2) Subscription paid in advance at 1.1.2013 ₹ 50.
(3) Subscription paid in advance at 31.12.2013 ₹ 40.
(4) Subscription for 2012 unpaid at 31.12.2013 ₹ 70.
(5) Sundry Asset at the beginning of the period ₹ 2,600; Sundry Asset after depreciation ₹ 2,700 at the end of
the period.
(6) Cash balance at 1.1.2013 ₹ 160.
Prepare a Receipts and Payments Account.

Q15) From the following Receipts and Payments Account of Jaipur Krida Parishad for the year ended 31st
March, 2014 and additional information given, prepare an income and expenditure account for the year ended
31st March, 2014 and balance sheet as on 31st March, 2014.
Receipts and Payments Account for the ended 31.3.14
Receipts Amount(₹) Payment Amount (₹)
Opening Balance : Cash 18,600 Secretary Honorarium 1,25,000
Bank 55,450 Staff Salaries 4,10,000
Subscription 4,30,000 Charities 25,000
Sale of Old News Papers 3,500 Printing & Stationary 15,000
Legacies 80,000 Postage expenses 1,500

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Interest on investment 25,000 Rates & Taxes 8,500

Endowment Fund Receipts 1,50,000 Upkeep of group 65,000
Proceeds of Sports 1,45,600 Purch. of sports materials 2,10,000
Advt. in the Year Book 1,15,400 Miscellaneous Expenses 55,850
Closing balance: Cash 24,500
Bank 83,200
10,23,550 10,23,550
Additional Information:
Assets and liabilities as on 31st March, 2013 and 31st March, 2014 were as follows:-
Particulars 31.03.13(₹) 31.03.14(₹)
Outstanding subscription 45,600 85,600
Subs. received in advance 12,400 16,300
Office equipments 80,000 68,000
Furniture 60,000 54,000
Ground land 5,00,000 5,00,000
Sports material 20,000 27,000
Outstanding staff salaries 40,000 50,000
There was no purchase and sale of office equipments and furniture during the year. Legacies receipts shall be
capitalized. Investments are made in securities, the rate of interest being 9% per annum, the date of investment
was 1st July, 2012 and the amount of investment was ₹ 3,00,000. Due date of interest was 31st March every
year.

Q16) The Income & Expenditure Account of Jayashree Sangha Club for the year ended 31.12.2012 as given
below:
Expenditure ₹ Income ₹
To Salaries 20,500 By Subscription 52,000
To Newspaper 1,500 By Sale of Newspaper 2,500
To Audit Fees 2,500 By Admission Fees 12,000
To General Expenses 22,000 By Donation 15,000
To Printing & Stationery 7,500 By Miscellaneous Income 500
To Travelling Expenses 2,000
To Rent 3,500
To Depreciation of Furniture 2,500
To Surplus 20,000
82,000 82,000
The following is the Balance Sheet of the Club as on 31.12.2011
Liabilities Amount(₹) Assets Amount(₹)
Outstanding salary 2,000 Furniture 15,000
Subs. Rec. in advance 2,500 Sports equipment 20,000
Accumulated fund 45,500 Accrued Subscription 5,000
Cash at Bank 10,000
50,000 50,000
Prepare Receipts & Payments Account for the year ended 31.12.2012 taking into account the following
adjustments:
(i) Subscription received in advance ₹ 1,500
(ii) Salary due for ₹ 1,500 but not paid for the year
(iii) 60% of the admission fee to be capitalized
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(iv) Subscription due for 2012 but not received ₹ 3,000

Q17) Following is the Balance Sheet of the Rashtriya Club as on 1st April, 2014:
Liabilities Amount(₹) Assets Amount(₹)
Capital Fund 5,42,500 Invest. in 4% bonds 1,50,000
Creditors 1,00,000 Stock 60,000
Subs rec in adv. for 14-15 30,000 Outstanding subs:
Outstanding salaries 70,000 For 2012-13 1,90,000
For 2013-14 3,00,000
Balance at Bank 42,500
7,42,500 7,42,500
Following balances on 31st March, 2015:
Creditors ₹ 50,000; Subscriptions for 2015-16 ₹ 40,000; Cash at Bank ₹ 1,77,000; Arrears of Subscriptions for
2013-14 ₹ 1,00,000: Arrears of Subscriptions for 2014-15 ₹ 2,70,000; Members arrears for provisions sold ₹
40,000.
Details of Transactions during 2014-15:
Subscription received out of arrears of 2012-13 ₹ 1,80,000; Arrears of 2013-14 ₹ 1,70,000; Cash sales of
provisions ₹ 1,20,000; Salaries paid ₹ 4,00,000; Interest received ₹ 4,500; 4% Bonds purchased ₹ 1,00,000 on
1.4.2014; Cash purchases of provision 9,00,000; Credit sale of provision to members ₹ 9,00,000.
Other information:
Subscription during 2014-15 was ₹ 7,00,000; Total purchase of provision ₹ 10,90,000; Profit on provisions ₹
1,20,000; the salaries for the year 2014-15 were ₹ 4,50,000 Rent ₹ 20,000.
You are required to prepare the Receipts and Payments Account, and the Income and Expenditure Account
for the year ending 31st March, 2015.

Q18) Jodhpur Club furnishes you the Receipts and Payments Account for the year ended 31.03.2013.
Receipts Amount (₹) Payment Amount (₹)
Cash in hand (01.04.12) 40,000 Salary 20,000
Cash in bank (01.04.12) 1,00,000 Repair expenses 5,000
Donations 50,000 Furniture 60,000
Subscriptions 1,20,000 Investments 60,000
Entrance fee 10,000 Miscellaneous Exp 5,000
Interest on investments 1,000 Insurance premium 2,000
Interest from banks 4,000 Bil. table & other sports item 80,000
Stationary expenses 1,500
Drama expenses 5,000
Sale of old newspaper 1,500 Cash in hand (31.03.13) 26,500
Sale of drama tickets. 10,500 Cash in bank (31.03.13) 72,000
3,37,000 3,37,000
Additional information:
(i) Subscriptions in arrear for 2012-13 ₹ 9,000 and subscription in advance for the year 2013-14 ₹ 3,500.
(ii) ₹ 400 was the insurance premium outstanding as on 31.03.2012.
(iii) Miscellaneous expenses prepaid ₹ 900.
(iv) 50% of donation is to be capitalized.
(v) Entrance fees to be treated as revenue income.
(vi) 8% interest has accrued on investments for five months.
(vii) Billiards table and other sports equipments costing ₹ 3,00,000 were purchased in the financial year 2011-

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12 and of which ₹ 80,000 was not paid 31.03.12. There is no charge for Depreciation to be considered.
You are required to prepare income and expenditure account for the year ended 31.03.13 and Balance
Sheet of the Club as at 31.03.13.
Answer:
(i) Excess of Income over Expenditure - ₹1,41,500;
(ii) Balance Sheet Total as on 01.04.2012 — ₹4,40,000;
(iii) Balance Sheet Total as on 31.03.2013 — ₹5,30,400.

Q19) The Income and Expenditure Account of the Bhartia Club for the year ended 31st March, 214 is as
follows:
Expenditure ₹ Income ₹
To Salaries 95,000 By Subscription 1,50,000
To General Expenses 20,000 By Entrance Fee 5,000
To Audit Fee 5,000 By Collection for Annual Sports Meet 65,000
To Stationery and Printing 9,000
To Secretary’s Honorarium 20,000
To Interest 2,000
To Bank Charges 1,000

To Depreciation 6,000
To Exp on Annual Sports Meet 50,000
To Surplus 12,000
2,20,000 2,20,000
Other Information:
₹
Subscription outstanding on 31.03.2013 12,000
Subscription received in advance on 31.03.2013 9,000
Subscription outstanding on 31.03.2014 15,000
Subscription received in advance on 31.03.2014 5,400
Salaries outstanding on 31.03.2013 8,000
Salaries outstanding on 31.03.2014 9,000
Audit fee outstanding on 31.03.2013 4,000
Audit fee outstanding on 31.03.2014 5,000
General expenses period on 31.03.2014 1,200
Sports equipments as on 31.03.2014 52,000
Sports equipments after dep on 31.03.2014 54,000
Other balances as on 31.03.2014:
Freehold Ground 2,00,000
Bank Loan 40,000
Cash & Bank 32,000
You are required to prepare the Receipts and Payments Account for the year ended 31st March, 2014 and
Balance sheet as at 31st March, 2014.
Answer:
(i) Receipts and payment A/c Balance for the year ended 31.03.2014 — ₹32,000;
(ii) Subscription Received during 2013-14 — ₹1,43,400.
(iv) Salary paid during 2013-14 — ₹94,000.

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(v) Balance Sheet Total as on 31.03.2014 — ₹3.02.200.

Q20) Income and Expenditure Account and the Balance Sheet of Nav Bharat Club are as under:
Income and Expenditure Account for the year ending 31st March, 2012
Dr. Cr.
Expenditure ₹ Income ₹
To Upkeep of Ground 21,000 By Subscription 56,640
To Printing & Stationery 2,800 By Sale of old newspapers 530
To Salaries 28,000 By Lectures 8,000
To Depreciation: By Entrance Fee 2,900
Ground & Building 9,000 By Miscellaneous Incomes 1,200
Furniture 1,000 10,000
To Repairs 3,500
To Surplus 3,970
69,270 69,270

Q21) Balance Sheet as at 31st March 2012

Liabilities Amount(₹) Assets Amount(₹)
Capital Fund: Ground & Building 1,43,200
Opening Balance 1,56,430 Furniture 9,000
Add: Entrance Fee 2,900 Sports Prize Fund:
Add: Surplus 3,970 1,63,300 Investment 43,000
Sports Prize Fund: Subscription 2,600
Opening Balance 51,000 Cash and Bank 19,400
Add: Interest 4,500
55,500
Less: Prizes 6,500 49,000
Outstanding Salary 4,200
Subscription in Advance 700
2,17,200 2,17,200
The following adjustments have been made in the above accounts:
(i) Upkeep of ground ₹ 1,500 and printing and stationery ₹ 510 relating to 2010-2011 were paid in 2011-12.
(ii) One-half of entrance fee has been capitalized.
(iii) Subscription outstanding in 2010-11 was ₹ 3,100 and for 2011-12 ₹ 2,600.
(iv) Subscription received in advance in 2010-11 was ₹ 1,100 and in 2011-12 for 2012-13 ₹ 700.
(v) Outstanding salary on 31.03.2011 was ₹ 3,600.
Prepare Receipts & Payments Account for the year ended on 31st March, 2012.
Answer:
(i) Receipts and payments A/c Balance 19,400,
(ii) Subscription received during 2011-12 ₹56,740.

EXAM QUESTIONS
1. The following is the Income and Expenditure Account of Gama Club for the year ended 31st March,
2017:
Income and Expenditure Account for the year ended 31st March, 2017
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₹ ₹
To Salaries 19,500 By Subscription 68,000
To Rent 4,500 By Donation 5,000
To Printing 750
To Insurance 500
To Audit Fees 750
To Games & Sports 3,500
To Subscriptions written off 350
To Miscellaneous Expenses 14,500
To Loss on sale of Furniture 2,500
To Depreciation:
Sports Equipment 6,000
Furniture 3,100
To Excess of income over expenditure 17,050
73,000 73,000

Additional information:
31-03-2016 31-03-2017
₹ ₹
Subscription in arrears 2,600 3,700
Advance Subscriptions 1,000 1,500
Outstanding expenses:
Rent 500 800
Salaries 1,200 350
Audit Fee 500 750
Sports Equipment less depreciation 25,000 24,000
Furniture less depreciation 30,000 27,900
Prepaid Insurance — 150

Book value of furniture sold is ₹ 7,000. Entrance fees capitalized ₹ 4,000. On 1st April, 2016 there was
no cash in hand but Bank Overdraft was for ₹ 15,000. On 31st March, 2017 cash in hand amounted to
₹ 850 and the rest was Bank balance.
Prepare the Receipts and Payments Account of the Club for the year ended 31st March, 2017.

Q2) Following is the summary of Receipts and Payments of Radix Clinic for the year ended 31st
March, 2017:
₹
Opening Cash Balance 56,000
Donation Received (including ₹ 50,000 for Building Fund.) 1,55,000
Payment to creditors for Medicines Supply 2,10,000
Salaries 70,000
Purchase of Medical Equipments 1,05,000
Medical Camp Collections 87,500
Subscription Received 3,50,000
Interest on Investments @ 9% p.a. 63,000
Honorarium to Doctors 1,90,000
Telephone Expenses 6,000
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Medical Camp Expenses 10,500

Miscellaneous Expenses 7,000
Additional Information:
SI. 1.4.16 31.3.17
No ₹ ₹
1. Subscription Due 10,500 15,400
2. Subscription Received in Advance 8,400 4,900
3. Stock of Medicine 70,000 1,05,000
4. Medical Equipments 1,47,000 2,14,200
5. Building 3,50,000 3,15,000
6. Creditor for Medicine Supply 63,000 91,000
7. Investments 7,00,000 7,00,000
You are required to prepare Receipts and Payments Account and Income and Expenditure Account for the
year ended 31st March, 2017 and the Balance Sheet as on 31st March, 2017.

4. The following information provided by the Nav Yuvak Mandal, Delhi for the first year ended 31st
March, 2018:
 Donations received for building Rs.25 Lakh.

 Other incomes and receipts were:

(Rs. in ‘000)

Particulars Capital Income Revenue Income Actual Receipt

(Rs.) (Rs.)
Entrance fees ------ 251 251
Life Membership fees 105 ----- 105
Subscription ------ 1160 1151
Play Ground rent ------ 120 110
Refreshment account ------ 115 115
Sundry incomes ------- 62 49
 Expenditures and actual payment were: (Rs. in ‘000)

Particulars Capital Revenue Actual

Expenditure Expenditure Payment (Rs.)
(Rs.) (Rs.)
Land 800 ... 800
Books 236 ... 202
Furniture 345 ... 315
Honorarium and salaries ... 165 131
Maintenance of play ground ... 52 50
Refreshment account ... 79 79
Insurance Premium ... 12 15
Sundry expenses ... 70 65
Others: Donation were utilized to the extent of Rs.13 Lakh in construction of building, balance were
unutilized. In order to keep in safe, 8% Government Securities were purchased on 31st December,

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2017 for Rs.10.50 Lakh. Remaining amount was put in bank as term deposit on 31st March, 2018.
During the year 2017-18, Subscription received in advance Rs.52,000 for the year 2018-19.
Depreciation to be charged on Building and Furniture @ 10% and on Books @ 15%.
You are required to prepare the Receipts & Payments Account, Income & Expenditure Account and Balance
Sheet as on 31st March, 2018.

12. SINGLE ENTR SYSYTEM

Q1) Mr. Prakash keeps his accounts on single entry system. He has given following information about his
assets and liabilities.
Item On 31-3-2015 On 31-3-2016
Creditors 55,200 58,500
Cash at bank 600 1500
Bills payable 26,400 28,200
Bills receivables 16,200 18,300
Debtors 45,600 56,000
Stock in trade 31,000 47,300
Machinery 66,200 78,000
Computer 18,000 17,000

During the year, Prakash brought in additional ₹ 7,500 cash in business. He withdrew goods of ₹2,100 and
cash of ₹ 7,200 for his personal use. Interest on opening capital is to be given at 5% and interest on drawing is
to be charged at 10%.
Prepare statement of profit or loss for the year ended 31-03-2016.

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Q2) On 1st April 2012, Neha started a beauty Parlour. She acquired a shop for ₹12,00,000 and paid ₹2,00,000
for interior fittings. She put ₹4,00,000 into business bank A/c. She carried on till 31st March 2013, when she
wanted to know what the parlour has earned over the period. She has approached you to find out the business
results with followinginformation as on 31-03- 2013:
In addition to the shop and fitting she had following possessions: Stock ₹6,00,000, Motor car (purchased on
30-09-2012) ₹5,50,000, Cash at bank ₹2,50,000. Based on her limited knowledge she has told you to charge
depreciation of 2% p.a. on shop, 5% p.a. on fittings and 20% on car.
On 31-3-2013, ₹ 1,40,000 was payable to creditors, and ₹ 1,00,000 to a friend for money borrowed for
business. She had withdrawn ₹ 2,000 per month from the business.
Prepare her statement of profit or loss for the year.

Q3) Mr. Raman starts a business with ₹30,000 cash as her capital on January 1, 2016. At the close of the year
the financial position of her business was as follows:
Creditors ₹ 20,000, Cash at Bank ₹ 15,000, Debtors ₹ 25,000, Stock ₹ 20,000, Plant ₹ 40,000.
During the year, Mr Raman drew ₹ 1000 every month. On July 1 2016, he introduced further capital
amounting to ₹ 15000.
You are required to ascertain profit or loss made by her during the year. Following adjustments are required to
be made: Plant to be depreciated at 10 % and reserve of 2 ½ % is to be raised against debtors.

Q4) The following information is available from Sachin who maintains books of accounts on single entry
system.
Particulars 01.04.2016 31.03.2017
Cash and bank 20,000 21,000
Sundry debtors 17,000 25,000
Stock 40,000 60,000
Furniture 29,000 29,000
Creditors 32,000 22,000
10 % loan from Mrs. Sachin 30,000 30,000
Sachin withdrew ₹5,000 from the business every month for meeting his household expenses. During the year
he sold investments held by him privately for ₹35,000 and invested the amount in his business. At the end of
the year 2015-16, it was found that full years interest t on loan from Mrs. Sachin had not been paid.
Depreciation @ 10% p.a was to be provided on furniture for the full year. Shop assistant was to be given a
share of 5% on the profits ascertained before charging such share. Calculate profit earned during the year
ended 31.03.2016 by Sachin.

Q5) The books of Mr. Z showed the following information:

January 1, 2016 December 31, 2016
₹ ₹
Bank balance nil 50,000
Debtors nil 87,500
Creditors nil 46,000
Stock 50,000 62,500
Fixed assets 7,500 9,000

The following are the details of the bank transactions (figures in ₹.)
Receipts from customers 3,40,000 Expenses paid 49,250
Payment to Creditors 2,80,000 Drawings 25,000

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Capital brought in 5,000 Purchase of Fixed Assets 5,000

Sale of Fixed Assets 1,750
Other information:
1. Cost of goods sold ₹ 2,60,000;
2. Gross profit @25% on cost of goods sold;
3. Book value of fixed assets sold ₹ 2,500.
Prepare trading, profit & loss account for the year ended December 31, 2016.

Q6) From the following particulars presented by Rama Brothers, who maintain their accounts under Single
Entry System,calculate total purchase and total sales.
Particulars Balance on 1.4.2012 31.3.2013
Debtors 28,000 24,000
Bills Receivable 14,000 15,000
Creditors 16,000 32,000
Bills Payable 8,000 15,000

Transaction during the year Amount (₹)

Cash Received from Debtors 2,00,000
Cash paid to creditors 1,60,000
Discount Allowed 1,000
Discount Received 2,000
Bad Debts 3,000
Returns Inwards 5,000
Return Outward 6,000
Bills Receivable dishonoured 4,000
Cash paid against Bills Payable 10,000
Cash Received against Bills
Receivable 16,000
Cash Sales 60,000
Cash Purchase 40,000

Q7) Mrs. Laxmi, a retail trader needs final accounts for the year ended 31-03-2013 for the purpose of taking a
bank loan. However, she informs you that principle of double entry had not been followed. With following
inputs, prepare a Profit & Loss A/c for the year ended 31-03-2013 and Balance sheet as on 31-03-2013.
Details of receipts and payments:
(1) Cash deposited in bank ₹ 3,500
(2) Dividend on personal A/c deposited into bank ₹ 250
(3) Tuition fees of Laxmi’s daughter paid by cheque ₹4,500
(4) Rent for the year by cheque ₹ 9,000
(5) Cash received from debtors ₹ 52,500
(6) Paid to creditors ₹ 40,025
(7) Salaries & wages paid in cash ₹ 9,000
(8) Transportation in cash ₹ 2,750
(9) Office electricity in cash ₹ 6,600
(10) Electricity (house) in cash ₹ 7,200

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(11) General expenses in cash ₹ 890.

Opening and closing balances of assets & liabilities:

Particulars 31-3-2012 31-3-2013
Stock 42,500 22,500
Bank 55,500 20,500
Cash 10,850 10,500
Debtors 16,800 14,800
Creditors 15,600 22,800
Investments 15,000 15,000
She also informs you that she draws ₹6,000 from bank on monthly basis and some debtors deposit cheques
directly in bank.

Q8) Mr. Kumar kept no books of accounts for his business. An analysis of his rough Cash Book for the
calendar year 2015 shows the following particulars :
Receipts ₹ Payments ₹
Received from Debtors 60,000 Overdraft on 1-1-2015 7,400
Further Capital introduced 5,000 Paid to Creditors 25,000
Business Expenses 10,000
Wages paid 15,500
Proprietor’s drawings 3,000
Balance at Bank on 31-12-2015 4,000
Cash in hand 100

65000 65,000

The following information are also available:

On 31-12-2014 On 31-12-2015
₹ ₹
Debtors 53,000 88,000
Creditors 15,000 19,500
Stock-in-trade 17,000 19,000
Plant and Machinery 20,000 20,000
Furniture and Fittings 1,400 1,400
All his sales and purchases were on credit
From the above particulars prepare Trading’and Profit and Loss Account for the year ended 31 -12-2015 and
a Balance Sheet as at that date after providing for dcprcciauon on Plant and Machinery @ 10 per cent, and
on Furniture and Fittings @ 5 per cent, per annum.

Q9) Mr. Jaiswal commenced business as a Cloth Merchant on 1stJanuary, 2015, with a capital of ₹ 2,000. On
the same day, he purchased furniture for cash ₹ 600. The books are maintained by Single Entry. From the
following particulars (i) calculate the cash on hand as on 31-12-15, (ii) prepare a Trading and Profit and Loss
Account for the year ending 31st December, 2015 and (iii) a Balance Sheet as on that date :
₹
Sales (including cash sales of ₹ 1,400) 3,400

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Purchases (including cash purchases of ₹ 800) 3,000

Jaiswal’s drawings 240
Salaries of Staff 400
Bad Debts written off 100
Business Expenses 140
Stock of goods on 31-12-2015 1,300
Sundry Debtors on 31 -12-2015 1,040
Sundry Creditors on 31-12-2015 720
Mr. Jaiswal took cloth costing ₹ 100 from the shop for private use and paid ₹ 40 cash to his son, but omitted
to record these transactions in his books. Provide depreciauon on furniture at 10 per cent per annum.

Q10) N is a small trader. He maintains no books but only an account with a bank in which all takings are
lodged after meeting business expenses and his personsl drawings and in which all payments for business
purchases are passed through. You are required to ascertain his trading result for the year ended 31-3-15 and
Balance Sheet as on that date from the following information:
(i) The bank statement shows deposits during the year of ₹ 12,020 and withdrawals of ₹ 11,850.
(ii) The Assets and Liabilities on 31-3-16 were:
Stock— ₹ 1,100; Book Debts— ₹ 1,150; Bank balance—₹ 320; Furniture—₹ 2,000 and Trade creditors— ₹
400.
(iii) In the absence of reliable information, estimates are supplied on the following matters:
(a) The Stock and Book Debts have each increased by ₹ 100 during the year. There was no purchase or
sale of furniture during the year.
(b) The trade creditors were ₹ 200 on 1-4-95.
(c) During the year the personal expenses amounted to ₹ 800 and business expenses ₹ 700.

Q11) The Statement of Affairs of Mr. M on Saturday, the 31st December 2015 was as follows:
Liabilites ₹ Assets ₹
Capital 50,000 Fixed Assets 30,000
Sundry Creditors 10000 Stock 10,000
Liability for Expenses 1,000 Debtors 15,000
Bank 5,000
Cash 1,000

61,000 61,000

Mr. M did not maintain his books on the Double Entry System. But he carefully follows the following system:
1. Every week he draws ₹ 200.
2. After meeting his weekly sundry expenses (₹ 100 on average) and his drawings, the balance of weekly
collections is banked at the commencement of the next week.
3. No cash purchase is made and creditors are paid by cheques.
4. Sales are at fixed price which include 20% profit on sales.
5. Credit sales are few and are noted in a diary. Payments are received in cheques only from such parties.
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6. Expenses other than sundries and other special drawings are made in cheques.
7. All unpaid bills are kept in a file carefully.
The following are his bank transactions for 13 weeks :
₹ ₹
Balance on Jan. 1 5,000 Creditors paid 40,000
Cheques deposited 2,000 Rent paid 600
Cash deposited 42,000 Expenses (other than Sundry Expenses) 3,000
Balance on April 1 5,400
49,000 49,000

After 13 weeks on 1st April (Monday) the entire cash was missing when it was to be deposited in the bank.
The
following further facts are ascertained :
1. Stock on that day was valued at ₹ 4,000 ;
2. Sundry Debtors amounted to ₹ 20,000 as per diary ;
3. Sundry Creditors were ₹ 8,000 as per unpaid bills file. Find out the amount of cash missing.

Q12) The following information is supplied from defective records. You are required to prepare Trading and
Profit &
Loss Account for the year ended 31st December, 2015 and Balance Sheet as on that date:
1st January 31st January
2015 2015
₹ ₹
Creditors 15,770 12,400
General Expenses owing 600 330
Sundry assets 11,610 12,040
Stock 8,040 11,120
Cash in hand and at Bank 6,960 8,080
Debtors ? 17,870

Details relating to the year’s transactions : ₹

Cash and discount credited to Debtors 64,000
Returns from Debtors 1,450
Bad debts 420
Sales—Cash and Credit 71,810
Discount allowed by Creditors 700
Returns to Creditors 400
Capital introduced (paid into Bank) 8,500
Receipts from Debtors (paid into Bank) 62,500
Cash purchases 1,030
Expenses paid by cash 9,570
Purchase of machinery by cheque 430
Withdrawn from Bank into cash 9,240
Drawings by cheque 3,180
Cash payment into Bank 5,000
Cash in hand at end 1,200
Payments to Creditors by cheque 60,270
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Q13) Mr. Dave does not maintain his accounts strictly on double entry system. The following statement of
affairs was, however, prepared by him as on 31st March, 2014:
Statement of Affairs
₹ ₹
Capital account 28,000 Leasehold land 2,075
Sundry creditors 3,170 Plant and machinery 4,940
Bills payable 2,150 Stock-in-trade 9,673
Book debts 15,550
Cash in hand 1,082
33,320 33,320

On 31st March, 2015 it was learnt that he had introduced further capital of ₹1,000 on 1st July,2014 and he had
drawn ₹1,580 on various dates during the year. It was also ascertained that the proprietor had taken ₹75 worth
of goods for his own use.
Statement prepared on the same date disclosed that book debts were ₹14,640, creditors were ₹2,039 and
bills payable were ₹1,775. The stock was valued at ₹11,417 and the cash in hand amount to ₹917 on the same
date.
You are required to prepare: (a) a statement of profit or loss for the year 2014 – 15; and (b) a statement of
affairs of Dave as on 31st march, 2015 taking into consideration the following:
5% reserve to be created on book debts, 7 ½ % depreciation to be written off plant and machinery, ₹125 to
be written off the lease, 5% interest to be allowed on capital.
[Answer: Net Profit ₹1,602, Total of Statement of Affairs — ₹32,761

Q14) Mr. A does not maintain complete double entry books of accounts. From the following details determine
profit for the year and prepare a statement of affairs as at the end of the year.
₹1,000 (cost) furniture was sold for ₹5,000 on 1st January, 2014. 10% depreciation is to be charged on
furniture.
Mr. A has drawn ₹1,000 per month. ₹2,000 was invested by Mr. A in 2014.
01.01.14 31.12.14
₹ ₹
Stock 40,000 60,000
Debtors 30,000 40,000
Cash 2,000 1,000
Bank 10,000 5,000 (overdraft)
Creditors 15,000 25,000
Outstanding expenses 5,000 8,000
Furniture (cost) 3,000 2,000
Bank balance on 1st January,2014 is as Per cash book, but the bank overdraft on 31st December, 2014 is as
per bank statement. ₹2,000 cheques drawn in December, 2014 have not been encased within the year.
[Answer: Net Profit ₹7,800, Total of Statement of Affairs — ₹1,02,800]

Q15) June 2019

Mr. Kanan is running a business of readymade garments. He does not maintain his books of accounts under
double entry system. While assessing the income of Mr. Kanan for the financial year 2018-19, Income Tax
Officer feels that he has not disclosed the full income earned by him from his business. He provides you the
following information:
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On 31st March, 2018

Sundry Assets ₹ 16,65,000
Liabilities ₹ 4,13,000
On 31st March, 2019
Sundry Assets ₹ 28,40,000
Liabilities ₹ 5,80,000
Mr. Kanan’s drawings for the year 2018-19 ₹ 32,000 per month
Income declared to the Income Tax Officer ₹ 9,12,000
During the year 2018-19, one life insurance policy of Mr. Kanan was matured and amount received
₹ 50,000 was retained in the business.
State whether the Income Tax Officer’s contention is correct. Explain by giving your working.

JUNE-2018) The following is the Balance Sheet of Chirag as on 31st March, 2015:

Liabilities ` Assets `
Capital Account 48,000 Building 32,500
Loan 15,000 Furniture 5,000
Credilor 31,000 Motor Car 9,000
Stock 20,000
Debtors 17,000
Cash in hand 2,000
Cash at Bank 8,500
94,000 94,000

A riot occurred on the night of 31st March, 2016 in which all books and records were lost. The cashier
had absconded with the available cash. He gives you the following information:
(a) His sales for the year ended 31st March, 2016 were 20% higher than the previous year's. He always
sells his goods at cost plus 25%; 20% of the total sales for the year ended 31st March, 2016 were
for cash. There were no cash purchases.
(b) On 1st April, 2015 the stock level was raised to ` 30,000 and stock was maintained at this new level
all throughout the year.
(c) Collection from debtors amounted to ` 1,40,000 of which ` 35,000 was received in
cash, Business expenses amounted to ` 20,000 of which ` 5,000 was outstanding on 31st March,
2016 and ` 6,000 was paid by cheques.
(d) Analysis of the Pass Book revealed the Payment to Creditors ` 1,37,500, Personal Drawing ` 7,500,
Cash deposited in Bank ` 71,500 and Cash withdrawn from Bank
` 12,000.
(e)Gross Profit as per last year's audited accounts was ` 30,000.
(f)Provide depreciation on Building and Furniture at 5% and Motor Car at 20%.
(g)The amount defalcated by the cashier may be treated as recoverable from him.
You are required to prepare the Trading and Profit and Loss Account for the year ended 31st March, 2016 and
Balance Sheet as on that date.

EXAM QUESTIONS
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Q1) The statement of Affairs of Mr. M on Saturday, the 31st December 2015 was as follows:
₹ ₹
Capital 50,000 Fixed Assets 30,000
Sundry Creditors 10,000 Stock 10,000
Liability for Expenses 1,000 Debtors 15,000
Bank 5,000
Cash 1,000

61,000 61,000
Mr. M did not maintain his books on the Double Entry System. But he carefully follows the following
system:
(a) Every week he draws ₹ 200.
(b) After meeting his weekly sundry expenses (₹ 100 on average) and his drawings, the
balance of weekly collection is banked at the commencement of the next week.
(c) No cash purchase is made and creditors are paid by cheques.
(d) Sales are at fixed price which include 20% profit on sales.
(e) Credit sales are few and are noted in a diary. Payments are received in cheques only from such
parties.
(f) Expenses other than sundries and other special drawings are made in cheques.
(g) All unpaid bills are kept in a file carefully.
The following are his bank transactions for 13 weeks:
₹ ₹
Balance on Jan. 1 5,000 Creditors paid 40,000
Cheques deposited 2,000 Rent paid 600
Cash deposited 42,000 Expenses (other than Sundry Expenses) 3,000
Balance on April 1 5,400
49,000 49,000
After 13 weeks on 1st April (Monday) the entire cash was missing when it was to be deposited in the
bank. The following further facts are ascertained:
(a) Stock on that day was valued at ₹ 4,000;
(b) Sundry Debtors amounted to ₹ 20,000 as per diary;
Sundry Creditors were ₹ 8,000 as per unpaid bills file. Find out the amount of cash missing.

Q2) The premises of X Ltd. caught fire on 22nd January, 2015 and the stock was damaged. The value of
goods salvaged was negligible. The firm made up accounts to 31st March each year. On 31st March,
2014 the stock at cost was ₹13,27,200 as against
₹9,62,200 on 31st March, 2013.

Purchases from 1st April, 2014 to the date of fire were ₹ 34,82,700 as against ₹45,25,000 for the
full year 2013-2014 and the corresponding sales figures were ₹49,17,000 and ₹52,00,000
respectively.

You are given the following further information:

(i) In July, 2014, goods costing ₹1,00,000 were given away for advertising purposes, no entries
being made in the books.
(ii) The rate of gross profit is constant.
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(iii) X Ltd. had taken an insurance policy of ₹5,50,000 which was subject to the average clause.
From the above information, you are required to make an estimate of the stock in hand on the date
of fire and compute the amount of the claim to be lodged to the insurance company.

Q3) The following information relates to the business of ABC Enterprises, who requests you to prepare a
Trading and profit & loss A/c for the year ended 31st March, 2017 and a Balance Sheet as on that date:
(a) Assets and Liabilities as on:
01.04.201 31.03.201
6 7
(₹) (₹)
Furniture 60,000 63,500
Stock 80,000 70,000
Sundry Debtors 1,60,000 ?
Sundry Creditors 1,10,000 1,50,000
Prepaid Expenses 6,000 7,000
Outstanding Expenses 20,000 18,000
Cash in Hand & Bank Balance 12,000 26,250

(b) Cash transaction during the year:

(i) Collection from Debtors, after allowing discount of ₹15,000 amounted to
₹5,85,000.
(ii) Collection on discounting of Bills of Exchange, after deduction of discount of
₹1,250 by bank, totalled to ₹61,250.
(iii) Creditors of ₹4,00,000 were paid ₹3,92,000 in full settlement of their dues.
(iv) Payment of Freight inward of ₹30,000.
(v) Amount withdrawn for personal use ₹70,000.
(vi) Payment for office furniture ₹10,000.
(vii) Investment carrying annual interest of 6% were purchased at ₹ 95 (200 shares, face value ₹
100 each) on 1st October, 2016 and payment made thereof.
(viii) Expenses including salaries paid ₹ 95,000.
(ix) Miscellaneous receipts of ₹ 5,000.

(c) Bills of exchange drawn on and accepted by customers during the year amounted to ₹1,00,000.
Of these, bills of exchange of ₹20,000 were endorsed in favour of creditors. An endorsed bill of
exchange of ₹ 4,000 was dishonoured.
(d) Goods costing ₹ 9,000 were used as advertising material.
(e) Goods are invariably sold to show a gross profit of 20% on sales.
(f) Difference in cash book, if any, is to be treated as further drawing or introduction of capital by
proprietor of ABC enterprises.
(g) Provide at 2% for doubtful debts on closing debtor.

Q4) Ram Prakash keeps his books on Single Entry System. From the following information
provided by him, prepare Trading and Profit & Loss Account for the year ended 31st March,
2018 and Balance Sheet as at that date:
Particulars 31.3. 2017 31.3.2018
Furniture 1,00,000 1,20,000
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Stock of Goods-in-Trade 60,000 20,000

Sundry Debtors 1,20,000 1,40,000
Prepaid Expenses ------ 4,000
Sundry Creditors 40,000 ?
Unpaid Expenses 12,000 20,000
Cash 22,000 6,000
Receipts and payment during the year were as follows:
Particulars Rs
Receipts from Debtors 4,20,000
Paid to Creditors 2,00,000
Transportation 40,000
Drawings 1,20,000
Sundry Expenses 1,40,000
Furniture Purchased 20,000

Other Information: There were considerable amount of Cash Sales. Credit Purchases during the year
amounted Rs. 2,30,000. Provide a provision for Doubtful Debts to the extent of 10% on Debtors.

Q5) Mr. Kanan is running a business of readymade garments. He does not maintain his books of
accounts under double entry system. While assessing the income of Mr. Kanan for the
financial year 2018-19, Income Tax Officer feels that he has not disclosed the full income
earned by him from his business. He provides you the following information:

On 31st March, 2018

Sundry Assets ₹ 16,65,000
Liabilities ₹ 4,13,000
On 31st March, 2019
Sundry Assets ₹ 28,40,000
Liabilities ₹ 5,80,000
Mr. Kanan's drawings for the year 2018-19 ₹ 32,000 per month
Income declared to the Income Tax Officer ₹ 9,12,000

During the year 2018-19, one life insurance policy of Mr. Kanan was matured and amount
received ₹ 50,000 was retained in the business.
State whether the Income Tax Officer's contention is correct. Explain by giving your working.

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13. PARTNERSHIP
Q1) Anik and babul were carrying on business in partnership sharing profits and losses in the ratio of 3:2. On
December
31, 2017 their balance Sheet was as follows:
Balance Sheet
Liabilities ₹ Assets ₹
Capital :
Anik 30,200 Land and Building 40,000
Babul 35,400 Furniture 10,600
Bank Loan 20,000 Stock 38,500
Sundry Creditors 20,800 Debtors 19,000
Bills payable 10,000 Cash 20,300
Workmen comp. fund 12,000
Total 1,28,400 Total 1,28,400
On January 1, 2018 Charu was admitted to partnership on the following conditions:
a. Charu would be entitled to 1/3rd share in profits.
b. Charu would bring ₹30,000 as his capital.
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c. He would not be able to bring his share of Goodwill in cash for ₹10,000.
d. The book value of land and building will be increased by ₹10,000, that of furniture would be reduced to
₹10,000 and stock would be reduced by 10%.
e. A provision for bad debts @ 5% of sundry debtors would be created
f. The actual liability of workmen compensation fund is estimated at ₹2,000.
g. Bank loan would be paid off.
Prepare Revaluation Account, Partners Capital Accounts and the Balance sheet of the new firm.

Q2) X, Y and Z were in partnership sharing profits and losses in the ratio 3 : 2 : 1. Their Balance Sheet stood
as under:
Balance Sheet as at 1.4.2012
Liabilities ₹ Assets ₹
Capital Fixed Assets 80,000
X 40,000 Machinery Replacement 15,000
Y 30,000 Investment: 10,000
Z 20,000 90,000 Investment (MV ₹ 7,000) 33,000
General Reserve 12,000 Current Asset
Machinery Replacement Fund 16,000
Investment Fluctuation Fund 15,000
Current Liabilities 5,000
1,38,000 1,38,000

Show the entries for accumulated profits/reserves assuming that Mr. T is admitted as partner for 1/5th share.

Q3) A and B are partner in a firm sharing profit and losses in the ratio of 4 : 1. Their Balance Sheet as on 31st
March 2013 stood as follows :
Liabilities ₹ Assets ₹
Capital A/c Furniture 20,000
A 25,000 Stock 40,000
B 65,000 90,000 Bills Receivable 10,000
Reserve 20,000 Debtors 30,000
Creditors 25,000 Cash at Bank 40,000
Bills Payable 5,000
1,40,000 1,40,000

They agreed to take C as a partner with effect from 1st April 2013 on the following terms :
(a) A, B and C will share profit and losses in the ratio of 5 : 3 : 2.
(b) C will bring ₹ 20,000 as premium for goodwill and ₹ 30,000 as capital.
(c) Half of the Reserve is to be withdrawn by the partners.
(d) The asset will be revalued as follows : Furniture ₹ 30,000; Stock ₹ 39,500; Debtors ₹ 28,500.
(e) A creditor of ₹ 12,000 has agreed to forgo his claim by ₹ 2,000.
(f) After making the above adjustments, the capital accounts of A and B should be adjusted on the basis of C’s
capital, by bringing cash or withdrawing cash as the case may be.
Show Revaluation Account, Partners’ Capital Account and the Balance Sheet of the new firm :
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Q4) Brick, Sand and Cement were partners in a firm sharing profits and losses in the ratio of 3:2:1
respectively. Following is their Balance Sheet as on 31st December, 2012.
Liabilities ₹ Assets ₹
Capital Accounts :
Brick 30,000 Land & Buildings 50,000
Sand 20,000 Furniture 15,000
Cement 10,000 Stock 20,000
Reserve 29,800 Bill Receivable 5,000
Creditors 6,200 Debtors 7,500
Bills Payable 4,000 Cash in hand and at Bank 2,500
1,00,000 1,00,000
Lime is to be admitted as a partner with effect from 1st January, 2013 on the following terms
(a) Lime will bring in ₹ 15,000 as Capital and ₹ 12,000 as premium for goodwill. Half of the premium will be
withdrawn by the partners.
(b) Lime will be entitled to : 1/6th share in the profits of the firm.
(c) The assets will be revalued as follows Land and Building— ₹ 56,000; Furniture — ₹ 12.000; Stock— ₹
16,000; Debtors — ₹ 7,000
(d) The claim of a creditor for ₹ 2,300 is paid at ₹ 2,000.
(e) Half of the Reserve is to be withdrawn by the partners.
Record the Journal entries (including cash transactions) in the books of the firm and show the opening
Balance Sheet of the new firm.

Q5) No alteration of book values of assets and liabilities

Baisakhi and Srabani are partners sharing profits and losses in proportion to their capitals. Their Balance
Sheet as on 31st March, 2013 is given below :
Liabilities ₹ Assets ₹
Creditors 15,000 Freehold Premises 10,000
General Reserve 2,100 Machinery 3,500
Capitals : 20,000 Furniture 1,750
Baisakhi 15,000 Office Equipments 550
Srabani Stock 14,100
Bill Receivable 3,060
Debtors 17,500
Bank 1,590
Cash 50
52,100 52,100
On 1st April, 2013 they admit Poushali on the following conditions :
(i) Poushali should bring in ₹ 10,000 as capital and to pay ₹ 3,500 for goodwill as she will get 1/4th share in
profits.
(ii) A provision of 2% to be raised against debtors, stock to be reduced by 5%, Freehold Premises to be
revalued at ₹ 12,650, Machinery at ₹ 2,800, Furniture at ₹ 1,540 and Office equipments at ₹ 495.
(iii) Partners agreed that the values of assets and liabilities should remain unaltered.
Show the necessary accounts and prepare the opening Balance Sheet of the new firm.
Points to be noted
1. The Partners have decided not to alter the book values of the assets and liabilities
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2. Calculation of net effects on Capital Accounts. New Profit Sharing Ratio : 12 : 9 : 7

Q6) K and L are two partners sharing profits and losses in the ratio of 5:3. Their Balance Sheet as at 30th
June, 2013 is a
follows :
Liabilities ₹ Assets ₹
Creditors 30,000 Furniture 40,000
Reserve 14,000 Patent 10,000
Capital Account : 90,000 Debtors 40000
K 40,000 Less : Reserve for Bad Debts 500 39,000
L 50,000 Stock 20,000
Cash in hand 25,000

On 1st July, 2013, they take M into partnership. M brings ₹ 25,000 as his capital and brings ₹ 3,600 as his
share of goodwill. The new profit sharing ratio of K, L and M is 2:4:1. Patent is written off from the books
and a reserve for Bad Debt is created at 5%. Reserve appears in the books of new firm at its original figure.
Show the necessary Journal entries to carry out the above transactions and prepare a Balance Sheet of the new
firm as at 1st July, 2013.

Q7) Red and White are partners in a firm sharing profits and losses is the ratio of 3:2. On 1st July 2013 the
positions of the firm as follows :
Liabilities ₹ Assets ₹
Capital Accounts : 2,48,000 Building 50,000
Red 150000 Machinery 2,50,000
White 98000 Furniture 40,000
General Reserve 84,000 Stock 60,000
Sundry Creditors 1,70,000 Debtors 90,000
Cash 12,000
5,02,000 5,02,000
Blue joined the firm as a partner from this date and the following terms and conditions were agreed upon :
(a) Red, White and Blue will share the future profits of the firm in the ratio 5:3:2, respectively.
(b) Blue would first pay ₹ 10,000 as his share of Goodwill and this sum is to be retained in the business.
(c) The value of Machinery is to be increased by ₹ 20,000 and stock is to be written down by 10%.
(d) Blue would introduce such an amount of Capital in Cash which should be proportionate to the combined
Capital accounts of Red and White after making all adjustments.
It was decided that the Capital Accounts of Red and White would be adjusted on the basis of
Blue’s Capital by opening Current Accounts.
Show the Capital Accounts of the partners and the Balance Sheet of the firm after Blue’s admission.

Q8) Quick and Slow are partners in a firm sharing profits and losses in the ratio of 3 : 2. The Balance Sheet of
the firm as on 31st March, 2013 was as under :
Liabilities ₹ Assets ₹
Capital Accounts Furniture & Fixtures 60,000
Quick 1,20,000 Office Equipments 30,000
Slow 77000 Motor Car 75,000

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General Reserve 30,000 Stock 50,000

Sundry Creditors 96,000 Sundry Debtors 90,000
Cash at Bank 18,000
3,23,000 3,23,000
Smooth was admitted as a new with effect from 1st April, 2013 and it was agreed that he would bring some
private furniture worth ₹ 10,000 and private stock costing ₹ 8,000 and in addition contribute ₹ 50,000 cash
towards capital.
He would also bring proportionate share of goodwill which is to be valued at two year’ purchase of the
average profits of the last three years.
The profits of the last three years were :
₹
2012-13 52,000
2011-12 32,000
2010-11 28,000
However, on a checking of the past records, it was noticed that on 1.4.2011 a new furniture costing ₹ 8,000
was purchased but wrongly debited to revenue, and in 2012-13 a purchase invoice for ₹ 4,000 dated 25.3.2013
has been omitted in the books. The firm charges depreciation on Furniture @ 10% p.a.
Your calculation of goodwill is to be made on the basis of correct profits.
On revaluation value of Stock is to be reduced by 5% and Motor car is worth ₹ 85,000. Smooth duly paid the
required amount for goodwill and cash towards capital.
It was decided that the future profits of the firm would be shared as Quick — 50%, Slow — 30% and Smooth
— 20%.
Assuming the above — mentioned arrangements were duly carried out, show the Capital
Accounts of the partners and the Balance Sheet of the firm after Smooth’s admission.

Q9) A and B are partners in a firm sharing profits and losses in the ratio 3 : 2. Their Balance Sheet as on
31.12.2012 stood as follows :
On 1.1.2013 they admit C as a partner on the following terms :
(a) The new profit sharing ratio of A, B and C becomes 5 :3 : 2.
(b) Agreed value of Goodwill is ₹ 20,000 and C brings the necessary premium for Goodwill in cash, half of
which is retained in the business. Book value of Goodwill should remain undisturbed.
(c) The Reserve for bad debts is to be raised to 10% of Sundry Debtors.
(d) Stock-in-trade is to be revalued at ₹ 12,000 but the effect is not be shown in the books.
(e) Fixture & Fittings are to be reduced to ₹ 150.
(f) C should bring further sum in cash in order to make his capital equal to 1/5 th of the combined adjusted
capital of A and B.
Show the necessary journal entries and the Capital Accounts of the partners and also prepare the Balance
Sheet of the new firm as at 1.1.2013.
Liabilities ₹ Assets ₹
Sundry Creditors 20,000 Goodwill 12,000
Capital Account Cash in hand 15,000
A 12000 Sundry Debtors 21000 20,000
B 12,000 30,000 Less : Reserve for Bad Debts 1000
Stock-in-trade 10,750
Fixture & Fittings 250
Profit and Loss Account 4,000
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62,000 62,000
Q10) The Balance Sheet of Baichung, Tausif and Vijayan who shared profits and losses in the ratio 3:3:2
respectively was as follows on 31st December, 2013 :
Liabilities ₹ Assets ₹
Capitals : Machinery 31,600
Baichung 24,000 Furniture 6,400
Tausif 10,000 Stock 8,500
Vijayan 8,000 Debtors 4,300
Reserve 4,800 Cash at Bank 4,700
Creditors 8,700
55,500 55,500
Baichung retired from the business on 1st January, 2013. Revaluation of assets were made as : Machinery ₹
34,000, Furniture ₹ 5,000, Stock ₹ 9,600, Debtors ₹ 4,000 and Goodwill ₹ 10,000.
Baichung was paid ₹ 4,225 immediately and the balance was transferred to a Loan Account for payment in 4
equal half-yearly installments together with interest @ 6% p.a.
Show the necessary accounts, the Balance Sheet of the firm immediately after Baichung’s retirement and his
Loan Account till finally paid off.

Q11) A, B and C were in partnership sharing profits in the proportion of 5:4:3. The Balance Sheet of the firm
as on 31st March, 2013 was as under :
Liabilities ₹ Assets ₹
Capital Accounts : Goodwill 40,000
A 1,35,930 Fixtures 8,200
B 95,120 Stock 1,57,300
C 61,170 Sundry Debtors 93,500
Sundry Creditors 41,690 Cash 34,910
3,33,910 3,33,910
A had been suffering from ill-health and gave notice that he wished to retire. An agreement was, therefore
entered into as on 31st March, 2013, the terms of which were as follows:
(i) The Profit & Loss Account for the year ended 31st March, 2013, which showed a net profit of ₹ 48,000
was to be reopened. B was to be credited with ₹ 4,000 as bonus, in consideration of the extra work which had
devolved upon him during the year. The profit sharing ratio was to be revised as from 1st April, 2012 to 3:4:4.
(ii) Goodwill was to be valued at two years’ purchase of the average profits of the preceding five years. The
Fixtures were to be revalued by an independent valuer. A provision of 2% was to be made for doubtful debts
and the remaining assets were to be taken at their book values.
(iii) The valuations arising out of the above agreement were Goodwill ₹ 56,800 and Fixture ₹ 10,980.
(iv) B and C agreed, as between themselves, to continue the business, sharing profits in the ratio of 3:2 and
decided to eliminate Goodwill from the Balance Sheet, to retain the Fixtures on the books at revised value,
and to increase the provision for doubtful debts to 6%.
You are required to submit the Journal Entries necessary to give effect to the above arrangement and to draw
up the Capital Accounts of the partners after carrying out all adjustment entries as stated above.

Q12) P, Q & R were equal partners. R retired on 31st March, 2013. The Balance Sheet of the firm as on 31st
December, 2012 was as follows :
Liabilities ₹ Assets ₹
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Capitals : Goodwill 18,900

P 30,000 Buildings 40,000
Q 20,000 Investments (at Cost) 5,000
R 20,000 70,000 Stock 10,000
Investment Fluctuation Fund 1,200 Debtors 10,000
Provision for Bad Debts 800 Cash at Bank 10,000
General Reserve 4,000
Trade Creditors 17,900
93,900 93,900
On 31.3.13 the following adjustments were considered : (a) Buildings were appreciated by ₹ 18,000; Book
Debts were considered good; Investments were considered worth ₹ 4,700 and Stock was valued at ₹ 9,400; (b)
Goodwill was considered equivalent to the average annual profits of the last three years; (c) R’s share of Profit
up to the date of his retirement was calculated on the basis of the average annual profits of the preceding three
years which were ₹ 8,000; ₹ 9,000 and ₹ 10,000.
Show the Journal Entries and prepare the Balance Sheet immediately after R’s retirement.

Q13) Compass, Cone and Circle are in partnership sharing profits and losses in the ratio of 3 : 2 : 1. The
Balance Sheet of the firm as on 31st December, 2012 was as follows :
Liabilities ₹ Assets ₹
Capital accounts : Machinery (at Cost) 50000 42,000
Compass 40,000 Less : Provision for Dep. 8000
Cone 60,000 Furniture 1,000
Circle 20,000 Sundry Debtors 80000 77,000
Reserve 30,000 Less : Prov. for Doubtful Debts 3000
Sundry Creditors 60,000 Stocks 50,000
Cash at Bank 40,000

2,10,000 2,10,000
On 31st Mardh 2013 Conre retired and Compass an Circle continued in partnership, sharing profits and losses
in the ratio of 3 : 2. It was agreed that adjustments were to be made in the Balance Sheet as on 31st March,
2013, in respect of the following :
(a) The Machinery was to be revalued at ₹ 45,000; (b) The Stock was to be reduced by 2%; (c) The Furniture
was to be reduced to ₹ 600; (d) The Provision for Doubtful Debts would be ₹ 4,000; (e) A provision of ₹ 300
was to be made for Outstanding Expenses.
The Partnership agreement provided that on the retirement of a partner, goodwill was to be valued at ₹ 24,000
and Cone’s share of the same was to be adjusted into the accounts of Compass and Circle. The profit up to the
date of retirement was estimated at ₹ 18,000.
Cone was to be paid off in full, Compass and Circle were to bring such an amount in cash so as to make their
capital in proportion to the new profit sharing ratio. Subject to the condition that a cash balance of ₹ 20,000
was to be maintained as working capital.
Pass the necessary journal entire to give effect to the above arrangements and prepare the partners’ Capital
Accounts on 31st March, 2013.

Q14) X, Y, & Z were equal partners. Their Balance Sheet as on 31.12.12 was as follows :
Liabilities ₹ Assets ₹
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Partners’ Capital 400000 Land & Freehold Property 1,00,000

X 1,00,000 Plant & Machinery 2,00,000
Y 1,00,000 Furniture & Equipment 50,000
Z 2,00,000 Stock in-trade 1,00,000
Partner’s Current A/c : 1,50,000 Sundry Debtors 1,00,000
X 50,000 Balance with Bankers 1,50,000
Y 75,000
Z 25,000
Sundry Creditors 1,50,000
7,00,000 7,00,000
On 1.1.13 X retired and it was agreed that he should be paid all his dues in full on that date. For this purpose,
goodwill was to be calculated on the basis of 3 years purchase of past 3 years profits which amounted to ₹
1,00,000, ₹1,40,000 and ₹ 1,20,000 respectively.
In order to meet his obligation, a bank loan was arranged on 1.1.13 for ₹ 2,00,000 pledging the fixed assets as
security. Further, to compensate a loyal manager Q, it was agreed between Y and Z that Q should be admitted
as a partner, who should bring in, over and above a capital of ₹ 1,00,000, his share of Goodwill in cash to
serve as working capital. Y and Z agreed to forego 1/3rd of their individual share of profits to Q.
Prepare the opening Balance Sheet of the firm as on 1.1.13.

Q15) P, Q and R were partners sharing Profits & Losses as 2 : 3 : 5. P retired on 31.3.13 and X joined as a
new partner on the same date, the new profit sharing ratio between Q, R and X being 2 : 3 : 1. The Balance
Sheet of P, Q & R on 31.3.2013 was as follows :
Liabilities ₹ Assets ₹
Sundry Creditors 50,000 Cash in hand 2,000
Loan from X 50,000 Cash at Bank 93,000
General Reserve 40,000 Sundry Debtors 30,000
Capitals : 45,000 Stock 20,000
P 10,000 Machinery 30,000
Q 15,000 Buildings 10,000
R 20,000
1,85,000 1,85,000
X was admitted on the following terms :
(1) Machinery was to be depreciated by ₹ 3,000 (2) Buildings were revalued at ₹ 30,000 (3) Stock was to be
written off by ₹ 5,000 (4) Provision of 5% was made against doubtful debts (5) General Reserve would be
apportioned among the partners (6) The firm’s Goodwill was to be valued at two years purchase of the
average profits of the last three years (7) The amount due to P was retained in the business as a loan but X’s
Capital contribution should be 1/5th of the combined adjusted capitals of Q and R. His capital would be
transferred from his Loan Account, (8) the Goodwill would be wiped off from the books after X’s admission.
(9) Partners decided not to alter the book values of assets & liabilities after admission.
The profits/losses during the last 3 years had been 31.3.11 ₹ 20,000 (Profit) 31.3.12 ₹ 15,000 (loss) and
31.3.13 ₹ 40,000(Profit).
Show the necessary Accounts and Balance Sheet of the firm.

Q16) Shukla, Grewal, Jain and Narang were partners sharing profits and losses as 4 : 3 : 2 : 1. Their Balance
Sheet as on 31.03.13 was as follows :
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Liabilities ₹ Assets ₹
Capital : Goodwiill 9,000
Shukla 7,000 Stock 2,000
Grewal 6,500 Debtors 11,000
Jain 5,000 Cash 5,000
Narang 4,000 22,500 Profit and Loss (Dr. Balance) A/c 3,000
Sundry Creditors 7,500
30,000 30,000

On that date Grewal retired and the amount due to him was paid privately by the other partners in their profit
sharing ratio. Chakraborty was then admitted as a new partner. The latter paid ₹ 5,000 as capital and ₹ 3,200
as his share of goodwill, his share being 1/5th of the future profits. Shukla, Jain and Narang resolved to share
the remaining profits as 3 : 3 : 2. It was also decided that the capitals of Shukla, Jain, Narang and Chakraborty
should be made proportionate to their new profit sharing ratio and for this they should bring in or withdraw
cash, as necessary.
Show necessary Journal Entries to give effect the above transactions.

Q17) X,Y and Z are partners sharing profits and losses in the proportion to 3:2:2, respectively. The Balance
Sheet of the firm as on 01.01.2013 was as follows:
Liabilities ₹ Assets ₹
Capital Accounts; Plant and Machinery 72,000
X 1,00,000 Furniture 28,000
Y 80,000 Stock 1,12,000
Z 70,000 2,50,000 Sundry Debtors 96,000
Bank overdraft 20,000 Cash at Bank 18,000
Sundry Creditors 56,000
3,26,000 3,26,000
X retired on 01.01.2013 on which date R is admitted as new partner. For the purpose of adjusting the rights as
between on partners’ goodwill to be valued at ₹ 84,000 and Sundry Debtors and Stock to be reduced by ₹
16,000 and to ₹ 1,00,000 respectively. X is to receive ₹ 44,000 in cash on the date of retirement and the
balance due to him is to remain as loan at 8% p.a. Repayment of loan to be made at the end of each year by
annual installments representing 25% of the future profit before charging interest on loan.
R is to bring in ₹ 1,00,000 in cash as his capital on the date of admission. The new partners are to share profits
and losses equally after paying the interest on X’s Loan.
The net profit for the year ended 31st December 2013, is ₹ 64,000 before taking into account the installment
payable to X.
You are required to show:
(a) Profit and Loss Appropriation Account for the year ended 31st December,2012.
(b) Capital Accounts of the new partners; and
(c) X’s Loan Account as on 31st Dec, 2013.

Q18) Gita and Mita are equal partners. Gita , by agreement, retires and Lata joins the firm on the basis of one
third share of profits on 01.04.2013. The balances of the books as on 31st March 2013 were:
Liabilities ₹ Assets ₹

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Creditors 20,000 Good will 10,000

Provision for Depreciation 12,000 Fixed Assets at Cost 1,20,000
Capital Accounts: Current Assets: 60,000
Gita 1,04,000 Stock 40,000
Mita 1,02,000 Debtors 8,000
Bank Balance
2,38,000 2,38,000
Goodwill and Fixed Assets valued at ₹ 30,000 and ₹ 1,40,000 respectively and it was agreed to be written up
accordingly before admission of Lata as partner. Sufficient money is to be introduced so as to enable Gita to
be paid off and leave ₹ 5,000 cash at Bank; Mita and Lata are to provide such sum as to make their Capitals
proportionate to their share of profit. Assuming the agreement was carried out, show the journal entries
required and prepare the Balance Sheet after admission of Lata.
All working should form part of your answer.

Q19) The following was the Balance Sheet of A, B and C who shared profits in the ratio of 1 : 2 : 2 as on 31st
December, 2012.
Liabilities ₹ Assets ₹
Sundry Creditors 10,000 Goodwill 15,000
Capital A/c : Debtors 10,000
A 10,000 Machinery 20,000
B 20,000 Buildings 30,000
C 20,000 50,000 Stock 10,000
General Reserve 5,000 Cash at Bank 5,000
Investment Fluctuation Fund 3,000 Investments 10,000
Bad Debts Reserve 2,000
Bank Loan 30,000
1,00,000 1,00,000
C died on 31st March, 2013. His account is to be settled under the following terms :
Goodwill is to be calculated at the rate of 2 years purchase on the basis of the average of 5 years profit or loss.
Profit for January to March’ 13 is to be calculated proportionately on the average profit of 3 years. The profits
were : 2008 ₹ 3,000, 2009 ₹ 7,000, 2010 ₹ 10,000, 2011 ₹ 14,000, 2012 loss ₹ 12,000. During 2012 a Moped
costing ₹ 4,000 was purchased and debited to Travelling Expenses Account on which depreciation is to be
calculated @ 25%. Other values agreed on assets are : Stock ₹ 12,000, Building ₹ 35,000, Machinery ₹ 25,000
and Investments ₹ 8,000. Debtors are considered good.
Prepare new Balance Sheet of the firm, necessary Journal entries and Ledger Accounts of the Partners.

Q20) A, B and C sharing profits in 3 : 1 : 1 agree upon dissolution. They each decide to take over certain
assets and liabilities and continue business separately.
Balance Sheet as on date of dissolution
Liabilities ₹ Assets ₹
Creditors 6,000 Cash at Bank 3,200
Loan 1,500 Sundry Assets 17,000
Capitals: 44,500 Debtors 24,200 23,000
A 27,500 Less: Bad Debts Provision 1,200

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B 10,000 Stock 7800

C 7,000 Furnitures 1,000
52,000 52,000
It is agreed as follows:
(1) Goodwill is to be ignored.
(2) A is to take over all the Fixtures at ₹ 800; Debtors amounting to ₹ 20,000 at ₹ 17, 200. The creditors of ₹
6,000 to be assumed by A at the figure.
(3) B is to take over all the stocks at ₹ 7,000 and certain of the sundry assets at ₹ 7,200 (being book value less
10%)
(4) C is take over the remaining sundry assets at 90% of book values less ₹ 100 allowances and assume
responsibility for the discharge of the loan, together with accruing interest of ₹ 30 which has not been
recorded in the books of the firm.
(5) The expenses of dissolution were ₹ 270. The remaining debtors were sold to a debt collecting agency for
50% of book values.
Prepare Realisation Account, partners’ Capital Accounts and Bank Account.

Q21) June 2019

X, Y and Z sharing profits & Losses in the ratio of 2 : 2: 1 agreed upon dissolution of their partnership on 31st
December, 2012 on which date their Balance Sheet was as under :
Liabilities ₹ Assets ₹
Capital : Fixed Assets 50,000
X 40,000 Joint Life Policy (at surrender Value) 10,000
Y 30,000 Debtors 10,000 9,500
Reserve Fund 10,000 Less : Provision for Bad Debts 500
Joint Life Policy Fund 10,000 Stock at Invoice Price 10,000 8,000
Creditors 19,000 18,500 Less: Price loading 2,000
Less: Prov 500 Investments 8,000 7,500
Salary Outstanding 2,000 Less: Fluctuation Fund 500
Capital Account –Z 2,000
Bank 23,500
1,10,500 1,10,500
Investments were taken over by X at ₹ 6,000, creditors of ₹ 10,000 were taken over by Y who has agreed to
settle account with them at ₹ 9,900. Remaining creditors were paid ₹ 7,500. Joint Life Policy was surrendered
and Fixed Assets realized ₹ 70,000, Stock and Debtors realized ₹ 7,000 and ₹ 9,000 respectively. One
customer, whose account, was written off as bad, now paid ₹ 800 which is not included in ₹ 9,000 mentioned
above. There was an unrecorded asset estimated at ₹ 3,000, half of which as handed over to an unrecorded
liability of ₹ 5,000 in settlement of claim of ₹ 2,500 and the remaining half was sold in the market which
realized ₹ 1,300.
Y took over the responsibility of completing the dissolution and he is granted a salary of ₹ 400 per month.
Actual expenses amounted to ₹ 1,100. Dissolution was completed and final payments were made on 30th
April, 2013.
You are required to prepare the Realization Account, Capital Account and Bank Account.

Q22) A, B and C are in partnership sharing profit and losses equally and agreed to dissolve the firm on
30.06.2012. On that date their Balance Sheet stood as follows:

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Liabilities ₹ Assets ₹
Capital A/c Sundry Asset 50,000
A 34,000 Profit & Loss A/c 12,000
B 24,000 58,000 C's Capital A/c 8,000
Creditors 12,000
70,000 70,000
The assets are realised at 50% of the book value. Realization expenses amounted to ₹ 5,000. C became
insolvent and received ₹ 2,000 from his estates.
Close the book of the firm under (i) Fixed Capital Method and (ii) Fluctuating Capital Method applying
Garner Vs. Murray principles.

Q23) Balance Sheet as at 30.10.13

Liabilities ₹ Assets ₹
Capitals
P 5,000 Fixed Assets 1,00,000
Q 3,000 Cash 10,000
R 2,000
Bank Loan 60,000
Sundry Creditors 40,000
1,10,000 1,10,000
All the partners were declared insolvent. Profit sharing ratio : 5 : 3 : 2. Assets realized ₹60,000. Prepare
necessary ledger accounts to close the books of the firm.

Q24) X and Y were in partnership in XY & Co. sharing profits in the proportions 3:2. On 31st March 2013,
they accepted an offer from P. Ltd. to acquire at that date their fixed assets and stock at an agreed price of ₹
7,20,000. Debtors, creditors and bank overdraft would be collected and discharged by the partnership firm.
The purchase consideration of ₹ 7,20,000 consisted of cash ₹ 3,60,000, debentures in P Ltd. (at par) ₹
1,80,000 and 12,000 Equity Shares of ₹ 10 each in P. Ltd. X will be employed in P. Ltd. but, since Y was
retiring X agreed to allow him ₹ 30,000 in compensation, to be adjusted through their Capital Accounts. Y
was to receive 1,800 shares in P. Ltd. and the balance due to him in cash. The Balance Sheet of the firm as on
31.03.2013 is in below :
Liabilities ₹ Assets ₹
X’s Capital Account 1,20,000 Fixed Assets 4,80,000
Loan from X 2,10,000 Stock 45,000
Bank overdraft 1,50,000 Debtors 75,000
Creditors 1,80,000 Y’s Capital Account 60,000
6,60,000 6,60,000
The sale of the assets to P. Ltd. took place as agreed; the debtors realised ₹ 60,000 and creditors were settled
for ₹ 1,71,000. The firm then ceased business. You are required to pass necessary Journal entries and show:
(a) Realisation Account (b) Bank Account (c) Partners’ Capital Accounts.

Q25) Ram, Rahim and Robert are partners in a firm sharing profit and losses in the proportion of 3:3:2. Their
Balance Sheet as on 31.03.2013 was as follows:
Liabilities ₹ Assets ₹
Part. Capital Accounts: Bank 55,000
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Ram 75,000 Stock 69,000

Rahim 75,000 Investments 6,000
Robert 1,00,000 Debtors 70,000
Part. Current Account: Land and Building 1,25,000
Ram 15,000 Goodwill 25,000
Rahim 25,000
Robert 12,500
Sundry Creditors 47,500
3,50,000 3,50,000

They decided to dissolve the firm on 01.04.2013. They report the result of realization as follows:
Land and Building 90,000 Realized in cash
Debtors 60,000 Realized in cash
Investments 5,500 Taken over by Ram
Stock 75,500 Taken over by Rahim
Goodwill 18,000 Taken over by Robert
The realization expenses amounted to ₹ 2,000. Close the accounts of the firm.
Answer:
[Loss transferred to current A/c —Ram — ₹ 18,000;Rahim — ₹ 18,000;Robert — ₹ 12,000.]

EXAM QUESTIONS

Q1) P, Q and R sharing profits and losses equally, had been trading for many years. R decided to retire
on 31.3.2017 on which date Balance Sheet of the firm is as follows.
capitals cash 36000
P 120000 debtor 74000
Q 85000 stock 60000
R 75000 plant & machiner 120000
Creditors 85000 Land & building 75000
365000 365000

Value of goodwill was agreed as ₹93,000. Land and building increased in value, it being agreed at ₹1,05,600,
plant and machinery was revalued at ₹1,00,500 and it was agreed to provide 6% in respect of debtors. Prepare
revaluation account, capital accounts and balance sheet.

Q2) (i) Why is goodwill considered to be an intangible asset and not a fictitious asset?
(ii) The Balance Sheet of a Partnership Firm had an Investment Fluctuation Reserve of
₹ 10,000. A new partner is admitted. Value of Investment is ₹ 60,000 against its book value of
₹ 70,000. What amount of the Investment Fluctuation Reserve will be distributed among
partners?
(iii) When does the Capital Account of a partner not show a debit balance in spite of regular losses
incurred by the firm?
(iv) At the time of dissolution of Partnership Firm realisation expenses amounted to

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₹ 3,000 paid by Nisha, a partner who was to bear these expenses. What entry is required in the Books of the
firm?

Q3) Snehal, Suchita and Sindhu were partners sharing profits and losses in the ratio of 3 : 2: 1. The firm was
dissolved on 31.03.2015. After transfer of assets and liabilities to Realisation A/c, the following transactions
took place.
Give journal entries in the books on dissolution of the firm.
(i) Suchita's Loan to the firm ₹ 30,000 was settled at ₹ 28,500.
(ii) A creditor for ₹ 50,000, took over Machinery of Book value ₹ 40,000 at ₹ 35,000. The balance
was settled in Cash.
(iii) Workmen Compensation Reserve - ₹ 40,000. A liability equal to 60% of the Reserve was
settled.
(iv) Sindhu was to receive 5% of the value of assets realised as remuneration for completing the
dissolution work and was to bear realization expenses. Realisation expenses were ₹ 5,500 that
was paid by Sindhu. Assets realised ₹ 60,000.
(v) The Balance Sheet disclosed a footnote, contingent liability for ₹ 5,000 in respect of a bill
discounted. The bill was received from Megha. On the date of dissolution Megha was declared
insolvent and was not able to pay the amount due. The bill had to be met by the firm.
Loss on realization amounted to ₹ 24,000.

Q4)A and B were partners of a firm sharing profits and losses in the ratio 2:1. The Balance Sheet of
the firm as at 31st March, 2017 was as under:

Liabilities Amount (₹) Assets Amount (₹)

Capital Accounts: Plant and Machinery 5,00,000
A 8,00,000
Building 9,00,000
B 4,00,000
Sundry Debtors 2,50,000
Reserves 5,25,000
Stock 3,00,000
Sundry Creditors 2,75,000
Cash 1,50,000
Bills Payable 1,00,000
21,00,000 21,00,000
They agreed to admit P and Q into the partnership on the following terms:
(i) The firm's goodwill to be valued at 2 years' purchase of the weighted average of the profits' of the
last 3 years. The relevant figures are:
Year ended 31.03.2014 - Profit ₹ 37,000 Year ended 31.03.2015 - Profit ₹ 40,000 Year
ended 31.03.2016 - Profit ₹ 45,000
(ii) The value of the stock and Plant & Machinery were to be reduced by 10%.
(iii) Building was to be valued at ₹ 10,11,000.
(iv) There was an unrecorded liability of ₹ 10,000.
(v) A, B, P & Q agreed to share profits and losses in the ratio 3 : 2 : 1 : 1 .
(vi) The value of reserve, the values of liabilities and the values of assets other than cash were not to
be altered.
(vii)P and Q were to bring capitals equal to their shares of Profit considering B's capital as base after
all adjustments.
You are required to prepare:
(1) Memorandum Revaluation Account,
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(2) Partner's Capital Accounts and

The Balance Sheet of the newly constructed firm.

Q5) A, B and C are partners in a firm sharing profits and losses as 3 : 2 : 1. Their Balance Sheet as on 31st
March, 2018 was as follows:
(Rs. in Lakh)
Liabilities Amount Assets Amount
Partners' Capital A/c: Land and Building 210
A 145 Plant and Machinery 255
B 110 Stock 125
C 75 Debtors 95
General Reserve 165 Bills Receivable 25
Partners' Loan: Cash in Hand 3
A 30 Cash at Bank 37
B 20
Sundry Creditors 205
750 750

B died on 1st August, 2018. His account is to be settled under the following terms:
 Goodwill will be valued at 3 years purchase of last four accounting years average profit.
Profits were : 2014-15 Rs. 135 Lakh, 2015-16 Rs. 145 Lakh, 2016-17 Rs. 131 Lakh and
2017-18 Rs. 165 Lakh.
 Land and Building will be valued at Rs. 250 Lakh and Plant and Machinery will be valued at
Rs. 240 Lakh.
 For the purpose of calculating B's share in the profits of 01.04.2018 to 31.07.2018, the
profits for the year 2017-18 will be taken as base.
 Interest on Partners' Loan will be calculated @ 6% per annum.
 A sum of Rs.50 Lakh to be paid immediately to B's Executor and the balance to be paid on
1st December, 2018 together with interest @ 10% per annum.
You are required to pass necessary journal entries to record the above transactions and amount payable
to B' s Executor's Account.

Q6) A, B and C were partners in a firm sharing profits & losses in the ratio of 3 : 1 : 1 agreed upon
dissolution of there partnership. They each decide to take over certain assets and liabilities and
continue business separately.

Balance Sheet as on date of dissolution

Liabilities Amount Assets Amount

(₹) (₹)

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Creditors Loan 6,000 Cash at Bank 3,200

Capitals: 1,500 Sundry Assets 17,000
A 27,500 Debtors 24,200
Less: Bad Debts Provision 1,200 23,000
B 10,000
7,800
C 7,000 44,500 Stock
Furniture 1,000
52,000 52,000

It is agreed as follows:
(i) Goodwill is to be ignored.
(ii) A is to take over all the Fixtures at ₹ 800; Debtors amounting to ₹ 20,000 at ₹ 17,200. The
creditors of ₹ 6,000 to be assumed by A at that figure.
(iii) B is to take over all the stocks at ₹ 7,000 and certain of the sundry assets at ₹ 7,200 (being
book value less 10%).
(iv) C takes over the remaining sundry assets at 90% of book values less ₹ 100 allowances and
assumes responsibility for the discharge of the loan, together with accruing interest of ₹ 30
which has not been recorded in the books of the firm.
(v) The expenses of dissolution were ₹ 270. The remaining debtors were sold to a debt collecting
agency for 50% of book values.
Prepare Realisation Account, partners' Capital Accounts and Bank Account.

16. ACCOUNTING STANDARDS

1

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10

11

12

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14

15

16

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19

20
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21

OBJECTIVES
1.

(i) Garner Vs. Murray case (A) AS-10

(ii) Repossession of goods (B) Computerized Accounting
System
(iii) Provision for unrealized profit (C) Insolvency of a partner
(iv) Property, Plant and Equipment (D) Royalty Accounts
(v) Automatic Financial Statements (E) Hire Vendor
(F) Inter-departmental transfer at
invoice price
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(G) Retirement of a Partner

2.
(i) Noting Charges (A) Branch Accounts
(ii) Stock and debtors Method ' (B) Piecemeal Distribution
(iii) Work certified (C) Not-for Profit Organization
(iv) Average clause (D) Royalty Accounts
(v) Maximum Loss Method (E) Bill of Exchange
(F) Construction Contract
(G) Insurance Claims
3.
(i) Receipt & Payment A/c (a) AS-10
(ii) Revaluation model of Asset (b) Consignment
(iii) Proforma Invoice (c) Not-for-Profit Organization
(iv) Stage of Completion Method (d) Hire Purchase
(v) Partial Repossession (e) AS-7
(f) AS-6

4.
-1 Highest Relative Capital Method (A) Departmental Accounts

-2 Basis of Apportionment of Expenses (B) Insurance Claim

-3 Partial Repossession (C) AS-9

-4 Indemnity Period (D) Piecemeal Distribution
-5 Revenue Recognition (E) Hire Purchase
5.
-1 Dead Rent (A) Bills Receivable
-2 Marshalling (B) Consignment
-3 Protesting (C) Liquidity Order
-4 Account Sales (D) Accounting Policies
-5 Substance over form (E) Royalty
Column ‘A’ Column ‘B’

1. Timing of recognition of Revenue A Income and Expenditure Account

2. Art of recording business transactions B Balance Sheet

3. Statement of financial position of the business C Account Sales

entity on a particular date

4. Periodical statement prepared D Book-keeping

by consignee

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5. It follows Nominal Account E AS 9

Column ‘A’ Column ‘B’

1. Noting charges A Construction Contract
2. Work certified B Hire vendor
3. Repossession of goods C Royalty
4. Valuation of Inventories D AS-2
5. Ground Rent E Bills of exchange

Column-I Column-II
(i) Revenue Receipts (A) AS - 7
(ii) Dissolution of Firm (B) Agent
(iii) Consignee (C) Abnormal Losses
(iv) Stock destroyed by fire (D) Realisation A/c
(v) Construction Contract (E) Recurring in Nature

Column ‘A’ Column ‘B’

1. Disclosure of Accounting Policies A Summarised cash book
2. Contra transaction B Nominal account
3. Income and expenditure A/ c C Charge against profit
4. Depreciation D Adverse balance
5. Receipts and payment account E AS 1

mcq

1) Creditors ledger adjustment account is opened in

(A) General Ledger
(B) Debtors Ledger
(C) Creditors Ledger
(D) Either (B) or (C)

2) Receipts and Payments account is a

(A) Nominal Account
(B) Real Account
(C) Personal Account
(D) Artificial Personal Account

3) A resource owned by the business with purpose of using it for generating future profit, is
known as
(A) Capital
(B) Asset
(C) Liability
(D) Surplus

4) Outward Invoice issued is a source document of

(A) Purchase Book
(B) Sales Book
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(C) Return Inward Book

(D) Return Outward Book

5) Which of the following is of capital nature?

(A) Commission on purchases
(B) Cost of repairs
(C) Rent of factory
(D) Wages paid for installation of machinery

6) If any stock is taken by a co-venturer, it will be treated as

(A) an income of the joint venture.
(B) an expense of the joint venture.
(C) to be ignored from joint venture.
(D) it will be treated in the personal books of the co-venturer.
7) Contingent liability would appear
(A) on the liability side of the Balance Sheet.
(B) on the assets side of the Balance Sheet.
(C) do not shown in the books of accounts.
(D) as a note in Balance Sheet.

8) Income statement of a Charitable Institution is known as

(A) Statement of profit and loss
(B) Receipts and Payments Account
(C) Income and Expenditure Account
(D) Profit and Loss Account

9) Which of the following account is mainly prepared at the time of dissolution of the firm
(A) Revaluation A/c
(B) Goodwill A/c
(C) Realization A/c
(D) Memorandum Revaluation A/c

10) Advertisement expenses are apportioned among departments in the proportion of

(A) sales of each department
(B) purchases of each department
(C) no. of units sold by each department
(D) cost of sales of each department
11) If an employee of the business files a legal suit on business, it is considered in the books as a
(A) Legal Expense
(B) Liability
(C)Contingent Asset
(D) Contingent Liability

12) At the end of the accounting year the capital expenditures are shown in the
(A) assets side of the Balance Sheet.
(B) liabilities side of the Balance Sheet.
(C)debit side of the Profit and Loss A/c.
(D) credit side of the Profit and Loss A/c.

13) Which of the following is not a method of charging depreciation?

(A) Sinking Fund Method
(B) Sum of years Digit Method
(C)Working hours Method
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(D) Asset's Life-cycle Method

14) If average inventory is `1,25,000 and closing inventory is `10,000 less than opening inventory
then the value of closing inventory will be
(A) ` 1,35,000
(B) ` 1,15,000
(C) ` 1,30,000
(D) ` 1,20,000

15) The Accommodation bill is drawn

(A) to finance actual purchase or sale of goods.
(B) to facilitate trade transmission.
(C)when both parties are in need of funds.
(D) None of the above

16) Balance of X's account in creditors ledger is transferred to X's account in debtors ledger, in this
case
(A) X's account in debtors ledger will be debited.
(B) X's account in creditors ledger will be debited.
(C)Suspense account will be debited.
(D) None of the above

17) Ground rent or surface rent means

(A) Minimum rent
(B) Maximum royalty payable
(C)Minimum royalty payable
(D) Fixed rent payable in addition to minimum rent

18) Accounting standard in India are issued by

(A) Government of India
(B) Reserve Bank of India
(C)The Institute of Chartered Accountants of India
(D) The Institute of Accounting Standard of India

19) As on 31st March, 2017 debtors; and additional bad debts are ` 8,00,000 and
` 10,000 respectively. If the provision for bad debts is made at 5% on debtors then amount of
such provision will be
(A) ` 40,000
(B) ` 50,000
(C) ` 39,500
(D) ` 40,500

20) Income and Expenditure Account is a

(A) Nominal Account
(B) Real Account
(C)Personal Account
(D) Artificial Personal Account
21) Which of the following is not a Qualitative Characteristics of Financial Statement?
(A) Cost Principle
(B) Understandability
(C) Relevance
(D) Reliability

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22) Name the book in which, entries are recorded on the basis of credit notes issued.
(A) Sales Book
(B) Purchase Book
(C) Sales Return Book
(D) Purchase Return Book
23) Exception to consistency principle is
(A) Cost Principle
(B) Going Concern Principle
(C) Matching Principle
(D) Prudence Principle
24) Interest charged by vendor in Hire Purchase System, is calculated on the basis of
(A) Outstanding hire purchase price
(B) Outstanding cash price
(C) Instalment amount
(D) Cost price of the asset
25) The balance in consignment account shows
(A) Amount receivable from consignee
(B) Amount payable to consignee
(C) Profit/ loss on consignment
(D) Closing stock with consignee
26) Provision for bad debts is
(A) Real Account
(B) Nominal account
(C) Personal account
(D) None of the above
27) The business is treated as distinct and separate from its owners on the basis of the
(A) Going concern concept
(B) Conservatism concept
(C) Matching concept
(D) Business entity concept
28) Due to retrospective effect on revision of salary of employees, the arrears of salary relating
to past years, payable in current year is
(A) Prior - period item
(B) Extra - ordinary item
(C) Ordinary item requiring separate disclosure
(D) Contingent item
29) Discount given in the Sales - Invoice itself is
(A) Cash discount
(B) Trade discount
(C) Rebate
(D) Allowance
30) Canteen expenses are apportioned among departments in the proportion of
(A) Departmental floor space
(B) Departmental direct wages
(C) Departmental sales
(D) Departmental No. of employees
31) Both cash and credit transactions are recorded, on the basis of
(A) Accounting Period Concept
(B) Going Concern Concept
(C) Business Entity Concept
(D) Accrual Concept
32) Which of the following book is both a journal and a ledger?
(A) Cash Book
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(B)Sales Day Book

(C)Bills Receivable Book
(D)Journal Proper
33) Interest received in advance account is a
(A) Nominal Account
(B) Real Account
(C) Artificial Personal Account
(D) Representative Personal Account
34) Shiva draws a bill on Sanat on 25th October, 2018 for 90 days, the maturity date of the bill
will be
(A) 27th January, 2019
(B) 26th January, 2019
(C) 25th January, 2019
(D) 28th January, 2019
35) Peeru and Simu are entered in the business of buy and sale of food grain for a period of
one year and sharing the profit in the ratio of 3 : 2, this agreement is a
(A) Partnership
(B) Consignment
(C) Joint-venture
(D) Lease
36) At the end of the year 2017-18, Prepaid Insurance Premium Rs. 7,500 appeared in the Trial
Balance, it will be shown
(A) only in Profit & Loss Account.
(B) only in Balance Sheet.
(C) both in Profit & Loss Account and in Balance Sheet.
(D) not in Both in Profit & Loss Account and in Balance Sheet.
37) Contingent Liability would appear
(A) on the liabilities side of the Balance Sheet.
(B) on the assets side of the Balance Sheet.
(C) as a note in the Balance Sheet.
(D) None of the above
38) Debtors Ledger Adjustment Account is opened in the
(A) Debtors Ledger
(B) Creditors Ledger
(C) General Ledger
(D) Both Creditors Ledger and General Ledger
39) Generally sacrifice ratio is concerned with the situation of
(A) Admission of a new partner
(B) Retirement of a partner
(C) Dissolution of firm
(D) Conversion of firm into company
40) KCS purchased a machine from JPS on hire purchase system, whose cash price was
Rs.8,64,000. Rs.2,16,000 being paid on delivery and balance in three annual instalments of
Rs.2,88,000 each. The amount of interest included in first installment would be
(A) Rs. 72,000
(B) Rs. 57,600
(C) Rs. 1,08,000
(D) Rs. 36,000
41) Which of the following is a resource owned by the business with the purpose of using it for
generating future profits?
(A) Loan from Bank
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(B) Owner's Capital

(C) Trade Mark
(D) All of the above
42) Chandu & Co.'s Account is a
(A) Real Account
(B) Nominal Account
(C) Representative Personal Account
(D) Artificial Personal Accounts
43) Purchase of a laptop for office use wrongly debited to Purchase Account. It is an error of
Omission
(A)
Commission
(B)
Principle
(C)
Misposting
(D)
44) Which of the following term is most suitable for writing off Patent?
(A) Depletion
(B) Amortization
(C) Depreciation
(D) All of the above
45) Memorandum Joint Venture Account is prepared when
(A) the separate set of books is maintained for Joint Venture.
(B) the each Co-venturer keeps records of all transactions.
(C) the each Co-venturer keeps records of their own transactions only.
(D) All of the above cases
46) Which of the following commission is allowed by the consignor to the consignee to
encourage the consignee for putting-up hard work in introducing new product in the
market?
(A) Del-credere Commission
(B) Over-riding Commission
(C) Hard work Commission
(D) Ordinary Commission
47) If Ram's acceptance which was endorsed by us in favour of Saleem is dishonoured, then
the amount will be debited in our books to
(A) Saleem
(B) Ram
(C) Bills Receivable Account
(D) None of the above
48) In case of a Club, the excess of expenditure over income is called as
(A) Surplus
(B) Deficit
(C) Capital Fund
(D) Investment in Fixed Assets
49) A Charitable Institution has 250 members with a annual subscription of ` 5,000 each. The
subscription received during 2018-19 were ` 11,25,000, which include
` 65,000 and ` 25,000 for the years of 2017-18 and 2019-20 respectively. Amount of
outstanding subscription for the 2018-19 will be
(A) ` 90,000
(B) ` 1,25,000
(C) ` 2,15,000
(D) ` 1,90,000
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50) The following are details of closing stock items in Aarvi Limited:

Items Historical Cost (` in Net Realisable Value (` in

Lakh) Lakh)
A 30 27
B 15 18
C 35 35
D 40 45

The value of Closing Stock will be

(A) ` 120 Lakh
(B) ` 125 Lakh
(C) ` 117 Lakh
(D) ` 128 Lakh

(i) liabilities represent proprietor’s equity, i.e. all those amount which are entitled to the
proprietor
(a) External;
(b) Debenture; (c)Internal;
(d) None of the above.

(ii) A transaction without immediate cash settlement is known as

(a) Cash Transaction
(b) Credit Transaction (c)Deferred
Transaction
(d) None of the above

(iii) The Accommodation bill is drawn

(a) to finance actual purchase or sale of goods
(b) to facilitate trade transmission (c)when both parties
are in need of funds
(d) None of the above

(iv) The Receipts and Payments Account generally begins with

(a) Credit Balance
(b) Debit Balance
(c) Both Debit and Credit Balance
(d) None of the above

(v) Goods are transferred from Department A to Department B at a price so as to include a profit of 33.33%
on cost. If the value of closing stock of Department B is
`90,000, then the amount of stock reserve on closing stock will be (a)
`30,000
(b) `22,500 (c)`45,000
(d) None of the above

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(vi) Ground Rent or Surface rent means

(a) Minimum Royalty payable
(b) Maximum Royalty payable
(c) Fixed rent payable in addition to minimum rent
(d) Rent recovered at the end of lease term

(vii) contains the transactions relating to goods that are returned by us to our
creditors
(a) Return Inward
(b) Return Outward (c)Sales
Daybook
(d) None of the above
(viii) The basic principles of concept is that business is assumed to exist for an indefinite
period
(a) Going Concern
(b) Business Entity (c)Money
Measurement
(d) None of the above

(ix) Capital Profit arises from which of the following?

(a) Sale of goods
(b) Premium received on issue of shares (c)Profit made on re-
issue of forfeited shares
(d) Both (b) and (c)

(x) Contingent liability would appear

(a) on the liability side of the Balance Sheet
(b) on the assets side of the Balance Sheet
(c) do not shown in the books of accounts
(d) as a note in Balance Sheet

(b) Income and Expenditure Account is a

(i) Nominal Account
(ii) Real Account
(iii) Personal Account
(iv) Artificial Personal Account

(c) Accounting standard in India are issued by

(i) Government of India
(ii) Reserve Bank of India
(iii) The Institute of Chartered Accountants of India
(iv) The Institute of Accounting Standard of India

(d) Creditors ledger adjustment account is opened in

(i) General Ledger
(ii) Debtors Ledger
(iii) Creditors Ledger
(iv) Either (B) or (C)

(e) If any stock is taken by a co-venturer, it will be treated as

(i) an income of the joint venture
(ii) an expense of the joint venture
(iii) to be ignored from joint venture

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(iv) it will be treated in the personal books of the co-venturer

(f) Which of the following is of capital nature?

(i) Commission on purchases
(ii) Cost of repairs
(iii) Rent of factory
(iv) Wages paid for installation of machinery

(g) If average inventory is `1,25, 000 and closing inventory is `10,000 less than opening inventory then the value of
closing inventory will be
(a) ` 1,35,000
(b) ` 1,15,000
(c) ` 1,30,000
(d) ` 1,20,000

(h) The cost of Fixed Assets of a business has to be written off over its
(i) Natural Life
(ii) Accounting Life
(iii) Physical Life
(iv) Estimated Economic Life

(i) Exception to consistency principle is

(i) Cost Principle
(ii) Going Concern Principle
(iii) Matching Principle
(iv) Prudence Principle

(j) Purchase of a laptop for office use wrongly debited to Purchase Account. It is an error of
(i) Omission
(ii) Commission
(iii) Principle
(iv) Misposting

(k) Canteen expenses are apportioned among departments in the proportion of

(i) Departmental floor space
(ii) Departmental direct wages
(iii) Departmental sales
(iv) Departmental No. of employees

(i) Which of the following is not part of financial statements?

(A) Fund Flow Statement
(B) Balance Sheet
(C) Trial Balance
(D) Both (A) and (C)

(ii) All credit sale of goods are recorded in

(A) Cash Book
(B) Purchase Book
(C) Sales Day Book
(D) Bills Receivable Book

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(iii) Which of the following is/are a part of inventory cost as per AS – 2?

(A) Cost of purchase
(B) Cost of conversion
(C) Selling and distribution cost;
(D) Both (A) and (B)

(iv) AS-9 is related to

(A) Revenue Recognition
(B) Cash Flow Statement
(C) Construction Contract
(D) Disclosure of Accounting policies

(v) Which of the following is/are the advantage/s of Computerised Accounting System?
(A) Requirement specifications are incomplete or ambiguous resulting in a defective or incomplete system
(B) Bugs may remain in the software because of Inadequate testing
(C) It provides many MIS reports as per the specification of the organisation
(D) None of the above

(vi) When a new partner is admitted, unless otherwise agreed, the profit sharing ratio between the existing
partners will
(A) Reduce
(B) Increase
(C) Remain same
(D) None of the above

(vii) Bad debts are apportioned among departments in the proportion of

(A) Sales of each department
(B) Number of units sold each department
(C) Cost of sales of each department
(viii) None of the abovehich of the following is an example of Capital Expenditure?
(A) Inventory of raw materials, work-in-progress and finished goods;
(B) Insurance premium;
(C) Taxes and legal expenses;
(D) None of the above.

(ix) Expense Account will always have

(A) Debit balance
(B) Credit balance
(C) Nil
(D) None of the above

(x) Which of the following is a function of journal:

(A) Analytical Function
(B) Recording Function
(C) Historical Function
(D) All of the above
(xi) The following account has a credit balance.
(A) Plant and Equipment A/c
(B) Purchase return A/ c
(C) Purchase A/c
(D) None of the above

(xii) AS-10 is not applicable on

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(A) Biological assets related to agricultural activity

(B) Produce on bearer plants
(C) Wasting assets
(D) All of the above

(xiii) Excess of minimum rent over royalty is known as

(A) Maximum rent
(B) Excess workings
(C) Short workings
(D) Deficiency of actual royalty

(xiv) Realization account is a

(A) Representative personal account
(B) Artificial personal account
(C) Real account
(D) Nominal account

(xv) An amount spent for replacement of worn out part of machine is

(A) Capital Expenditure
(B) Revenue Expenditure
(C) Deferred Revenue
(D) Capital Loss

(xvi) The additional commission payable to the consignee in order to cover the risk of collection from customer on
account of credit sales is known as
(A) Del Credere Commission
(B) Ordinary Commission
(C) Over-riding Commission
(D) None of the above

(xvii) Income statement of a charitable institute is known as

(A) Profit and loss A/c
(B) Receipts and payment A/ c
(C) Income and expenditure A/c
(D) Statement of Affairs

(xviii) Realisation account is opened at the time of

(A) Admission of a new partner
(B) Retirement of a partner
(C) Dissolution of a firm
(D) In all the situations

(xix) Goods are transferred from Department X to Department Y at a price so as to include a profit of 33.33% on
cost. If the value of closing stock of Department Y is
`18,000,then the amount of stock reserve on closing stock will be
(a) ` 6,000
(b) ` 4,500
(c) ` 9,000
(d) None of the above

(xx) In hire purchase system cash price plus interest is known as

(A) Capital value of asset

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(B) Book value of asset

(C) Hire purchase price of asset
(D) Hire purchase charges

TRUE FALSE

1. One of the objectives achieved by providing depreciation is saving cash resources for future
replacement of assets.
2. Royalty account is a real account in nature.
3. As per AS-7 expenses recognized in the period in which the work to which expenses relate is
performed.
4. Expenses incurred by branch out of petty cash balance are debited to branch account by the
head office.
5. In absence of partnership deed the profit or loss should be distributed among partners in their
capital ratio.
6. Memorandum joint venture account is prepared to find out amount due from co- venture.
7. Receipts and Payments Account is prepared by adopting cash principle of accounting.
8. As per AS-9 revenue from interest should be recognized on the time proportion basis.
9. Bad debts recovered is credited to debtor's personal account.
10. New-partner pays premium for goodwill, which will be shared by old partners in their new profit
sharing ratio.
11. Receipt & Payment Account only records the revenue nature of receipts and expenses.
12. Sales Book records both cash and credit sales.
13. Normal loss of goods sent on consignment is shown in Consignment Account.
14. In case of trading concern, cost of goods sold and cost of sales are same.
15. In Proprietorship business, Income-tax payable is shown as a liability in Balance Sheet.
16. Bank reconciliation statement is prepared to arrive at the bank balance.
17. Deferred revenue expenditure is current year's revenue expenditure to be paid in the later
years.
18. Reducing balance method for depreciation is followed to have a uniform charge for
depreciation and repairs and maintenance together.
19. Reserve for Discount on Creditors has a credit balance.
20. A promissory note can be made payable to the bearer.
21. All these items of revenue nature which received during the period of accounts, are only
shown in the Income and Expenditure Account.
22. When the capitalization of profits method is used then the value of goodwill on the basis of
future maintainable profits is more than that of on the basis of super profits.
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23. In case of transfer from Creditors Ledger to Debtors Ledger, the Debtors Ledger
Adjustment Account should be debited.
24. Unrecoupable short-workings should be charged to Profit and Loss Account.
25. In the Stock and Debtors Method of accounting, balance of Branch Stock Account shows
either Gross Profit or Gross Loss.
i.Depreciation indicates diminution in service potential.
ii.Shortworkings refer to the amount by which the actual royalty exceeds the minimum rent.
iii.Drawer is the seller or a creditor.
iv. Closing stock will be posted to Trading A/c as well as in the Balance Sheet as a liability.
v. Assets are classified into fixed and current assets as per cost principle .

(A) A credit balance in the pass book indicates excess of deposits over withdrawals.
(ii) Under straight line method the cost of the asset written off in equal proportion ,during its economic life.
(iii) According to AS-2 Inventories are held for sale in normal course of business.
(iv) Excess of hire purchase price over cash price is known as penalty imposed on hire purchaser by the vendor.
(v) Branch Stock Account is always prepared at cost price.

(xxi) When complete sequence of accounting procedure happens frequently and repeated in same directions during
an accounting period that is called an accounting cycle.
(xxii) Liability is a resource owned by the business with the purpose of using it for generating future profits.
(xxiii) Assets like brand value, copy rights, goodwill are intangible assets.
(xxiv) Event is a transaction or change recognized on the financial statements of an accounting entity.
(i) Depreciation on any particular asset is restricted to the working life of the asset. Business transaction are always
recorded at the actual cost at which they are actually undertaken.
(ii) Trade bill is drawn not to settle a trade transaction.
(iii) Ownership of installment sale passes at the time of sale.
(iv) The debts which cannot be realized at all are called bad debts.
(v) Single entry system is hard and tough to maintain.
(vi) __ __________ is the agent to whom goods are sent for selling.
(vii) Book-keeping is considered as __________ _ .
(viii) Bill of exchange must be properly ___________ _.
(ix) Inventories are valued at the lower of cost or .
(x) __ _____is usually market value which determined by appraisal.
The
1. discount is never entered in the books of accounts.
A bill of exchange drown on 12th April, 2017 for four months, the date of maturity will be .
2.
The parties of joint venture is called
3. .
Outstanding subscription is shown in the
4. side of Balance Sheet.
According to AS-2 inventories should be valued at lower of cost and ____value.
5.
The
6. discount is not recorded in the books of accounts.
Profit or Loss on revaluation is shared among the partners in
7. Ratio.
At the time of goods sent to consignee, the proforma invoice is prepared by .
8.
Memorandum revaluation account is prepared when the
9. of assets and liabilities are
not altered.
10. Realisation account is opened at the time of of firm.
11. The Bank A/c is a Account.
12. Assets are classified as non-current asset and current assets as per Principle.
13. Amount is the higher of asset's net selling price and its value in use.
14. The Loss is included in the valuation of inventories.
15. is the amount by which minimum rent exceeds the actual royalty.
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16. Net Worth is excess of over .

17. The Sales ` 180 Lakh, Purchases ` 129 Lakh and Opening Stock ` 33 Lakh. If the
rate of Gross Profit is 50% on cost, then the value of closing stock will be .
18. In case of Loss of Profit Policy, Gross Profit is the sum of Net Profit plus______ Standing
Charges.
19. Interest to be allowed @ 0.75 per cent per month on Partners Capital of ` 60 Lakh;
Manager's Commission @ 5 per cent of Net Profit before charging such
commission. If the Net Profit before charging interest on capital and manager's
commission amounted to ` 14.85 Lakh, then manager's commission will be .
20. A machinery was purchased on Hire Purchase System. Its cash price was
` 5,20,000 which was payable in annual instalments of ` 1,80,000 each including interest @ 15 per cent
per annum. The amount of interest included in 2nd instalment would be .

i. ……..While posting an opening entry in the ledger, in case of an Account having debit balance, in
‘Particulars’ column the words ........................................... are written on debit side.
ii. Depreciation Accounting is the process of ……………. and not …………..
iii. Finished goods are normally valued at cost or...................... whichever is lower.
iv. The relation between Consignee and Consignor is that of ……………..
v. The relationship between Co- venturers is that of ………………
b. The amount invested by owners into business is called_____ _ _ .
c. When Sales = `1,80,000, Purchase = `1,60, 000, Opening Stock = `34,000 and rate of the Gross Profit is 20%
on cost, the Closing Stock would be_ _____________________________ _.
d. is a person to whom the business owes money or money’s worth.
e. Depreciation account is _ _________ type of account .
i. Salary debited to Income and Expenditure Account for the year was `48,000. Outstanding salary paid
in the beginning of the year and the outstanding salary at the end of the year were `6,000 and `7,500
respectively. The amount of Salary to be shown in Receipts and Payments Account will be__ _ _

vi. are uncollectable or irrecoverable debt or debts.

vii. The discount is never entered in the books of accounts.
viii. Outstanding subscription is shown in the side of Balance Sheet.
ix. According to AS-2 inventories should be valued at lower of cost and value.
26. Realisation account is opened at the time of of firm
a. Transaction means exchange of money or money’s worth for .
b. Unexpired insurance premium means .
c. Income & Expenditure Account is similar to A/c.
d. Annual subscriptions are credited to Income & Expenditure Account on
basis.
e. Under , preparation of trial balance is possible whereas it is not possible to prepare a
trial balance in .

1 —(a) (C)
(i) c 1 26 1 TRUE 1 Trade
(ii) e 2 —(b) 27 (D) 2 False 2 14th August, 2017
(iii) f 3 —(b) 28 (C) 3 True 3 Co-venturers

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(iv) a 4 —(b) 29 (B) 4 False 4 Assets

(v) b 5 —(d) 30 (D) 5 False 5 Net realizable
6 —(a) 31 D 6 FALSE 6 Trade
2(i —(d)
) e 7 32 A 7 True 7 Old profit sharing
(ii) a 8 —(c) 33 D 8 True 8 Consignor
(iii) f 9 —(c) 34 C 9 False 9 Book value
(iv) g 10 —(a) 35 C 10 FALSE 10 Dissolution of the firm
(v) b 11 (D) 36 B 11 False 11 Personal
Fals
12 (A) 37 C 12 e 12 Going - Concern
3(i (D Fals Recoverable/ Fair
) c 13 ) 38 C 13 e 13 Value
(ii) a 14 (D) 39 A 14 False 14 Normal
(iii) b 15 (C) 40 C 15 False 15 Short - workings
Total assets, total
(iv) e 16 (B) 41 (C) 16 False 16 liabilities
(D
(v) d 17 (D) 42 ) 17 False 17 ` 42 Lakh
18 (C) 43 (C) 18 True 18 Insured
4.1 e 19 (C) 44 (B) 19 False 19 ` 47,250
2 c 20 (A) 45 (C) 20 False 20 ` 62,700
3 a 21 (A) 46 (B) 21 False 21 To Balance b/f
(C) Fals
4 b 22 47 (B) 22 e 22 allocation .valuation
(D) Fals
5 d 23 48 (B) 23 e 23 Net Realisable Value
24 (B) 49 (C) 24 True 24 Agent and Principal
5.1 d 25 (C) 50 (C) 25 True 25 Co-owners
2 a
3 e
4 b
5 c

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