CHAPTER 2 –ACCOUNTING FOR PARTNERSHIP: FUNDAMENTALS

CASE STUDY BASED QUESTIONS

CASE STUDY-I
[Link]. Read the passage given below and answer the following questions:

Arav and Bhart are partners in a firm sharing profits and losses. Their capitals on 1 April, 2015
were Rs.4,80,000 and Rs.5,40,000. On 1 October, 2015, they decided that the total capital of
the firm should be Rs.10,00,000 to be contributed equally by both of [Link] to the
Partnerhip Deed, interest on capital is allowed to the partners @6% p.a.

1. You are required to compute interest on capital for the year ending 31 March, 2016.
(A) Rs.29,400, Rs.31,200
(B) Rs.14,400, Rs.16,200
(C) Rs.15,000, Rs.15,000
(D) None of these

2. What would be the profit sharing ratio of Arun and Barun?

(A) 1 : 1
(B) 2 : 3
(C) 3 : 2
(D) 3 : 4
CASE STUDY 2

Read the following information carefully and answer the question number 43 to 46 on that
basis

Information: The profit for the last five years were:

Year Ended Profits (Rs.)

31st March,2017 2,00,000 (including gain of Rs. 25,00,000 from sale of fixed
assets

31st March,2018 1,70,000 (Including abnormal loss of Rs. 50,000)

31st March,2019 2,10,000

31st March,2020 2,30,000

31st March,2021 2,50,000

KVS ZIET BHUBANESWAR 12/10/2021 1

Q1. Capital employed in the firm is Rs. 15,00,000 and normal rate of return in similar
businesses is 10% What is the amount of Actual Average Profit

(a) Rs. 2,50,000

(b) Rs. 1,20,000

(c) Rs. 2,17,000

(d) None of the above

Q2. Value of Goodwill at 3 years' purchase by super profit method

(a) Rs. 2,00,000

(b) Rs. 2,01,000

(c) Rs. 2,50,000

(d) Rs. 1,50,000

Q3. Under super profit method, goodwill is calculated by

(a) Number of years' purchase × Average profit

(b) Number of years' purchase × super profit

(c) Super profit ÷ Normal rate of return

(d) Super profit - Normal profit

Q4. When goodwill is not a purchased goodwill, Goodwill

(a) is not shown in the balance sheet

(b) is shown in the balance sheet

(c) many or may not be shown in the balance sheet

(d) is partly shown in the balance sheet

CASE Anu and Baatish started a new business in partnership and decided to share profits and
STUDY 3 losses in the ratio of 3 : 1. They contributed Capitals of rs. 50,000 and rs.30,000
respectively on April 1 , 2018 .Anu is a sleeping partner whereas Baatish is a full time
working [Link] the year ended 31st March, 2019 they earned a net profit of rs.
50,000. The terms of partnership are:

KVS ZIET BHUBANESWAR 12/10/2021 2

(a) Interest on capital is to allowed @ 6% p.a.

(b) Anu will get a commission @ 2% on turnover.

(c) Baatish will get a salary of rs. 500 per month.

(d) Baatish will get commission of 5% on profits after deduction of all expenses including
such commission.

Partners’ drawings for the year were: Anurs. 8,000 and Baatishrs. 6,000. Turnover for the
year was rs. 3,00,000.

On the basis of the information given above , answer the following questions -

Q1. What will be Anu’sandBaatish’sCommission ?

a. Anurs.6,000 ,Baatish- rs.1,660

b. Anurs.30,000 ,Baatish- rs.1,660

c. Anurs.6,000 ,Baatish- rs.1,660

d. Anurs.6,000 ,Baatish- rs.1,581

Q2. How much share of profits will be given to Anu and Baatish?

a. Anurs.23714 , Baatishrs.7,905

b. Anurs.15809.5 ,Baatishrs. 15,809.5

c. Anurs.22,000 , Baatishrs.7,000

d. None of the above

Q3. What will be the balance in Partners’ Capital Account at the end of the year?

a. Anurs.74,000 ,Baatishrs. 43,000

b. Anurs.74,714 ,Baatishrs. 41,286
c. Anurs.74,147 ,Baatishrs. 41,826
d. Anurs.70,714 ,Baatishrs. 41,286

Q4. Baatish wants that his share in profits should be higher than Anu as he is putting
more efforts to carry on the business. Is he correct in saying so?

a. Yes

b. No

c. Can’t say

d. May or may not be

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CASE Rohit and Ronit are two partners into firm sharing profits equally. On 1st January 2020,
STUDY-4 they decided to admit Ajay as a new partner into the firm for 1/5 th share. Ajay brings
10,00,000 for his share to capital and premium of goodwill in cash. Half goodwill is
withdrawn by the old partners. Goodwill of the firm is valued on the basis of one year
purchase of profits or losses of preceding last 3 years. Profits of last four years are
₹6,00,000 in 2016, ₹7,00,000 in 2017, ₹8,00,000 in 2018 and ₹15,00,000 in 2019.

1) Which of the following is a right of Ajay?

(a) All of these
(b) Share profits of firm
(c) Inspect books of accounts
(d) Share assets in the firm
Ans:- (A) All of these

2) What was the value of goodwill of the firm?

(a) ₹9,00,000
(b) ₹8,00,000
(c) ₹7,00,000
(d) ₹10,00,000
Ans:- (d) ₹10,00,000
3) What was the amount of capital brought in by Ajay?
(a) ₹22,00,000
(b) ₹10,00,000
(c) ₹8,00,000
(d) Can't be determined
(e) Ans:- ₹8,00,000
CASE Abhishek and Aishwarya were partners in a fast food corner. They sold fast food items
STUDY 5 across the counter and did home delivery too. For this purpose they needed a delivery
van, a few scooties and an additional person to support. Their initial fixed capital
contribution was 3,50,000 and 2,00,000 respectively.

Abhishek spends twice time that of Aishwarya to the business. He wants a salary of Rs.
10,000 per month for extra time spend by him. Aishwarya has advanced 1,00,000 to the
firm and want 6% interest per annum. They both have withdrawn 20,000 from the
business for personal use for which Abhishek was asking to interest on drawing @ 5% to
the business. They earned annual profit of Rs. 2,00,000.

KVS ZIET BHUBANESWAR 12/10/2021 4

[Link] on drawing charged to Abhishek and Aishwarya are :

A) 5%

B) 6%

C) 1000 each

D) No interest on drawing will be charged

2. Profit shared by Abhishek and Aishwarya are :

A) 1,00,000 each
B) Equally
C) 50,000 each
D) None of these
3.“Abhishek spends twice time that of Aishwarya to the business”, for this purpose
Abhishek will be given a salary of :

A) 10,000 per month

B) Equal for both of them
C) No salary will be given
D) 5,000 per month
4. “Aishwarya has advanced 1,00,000 to the firm and want 6% interest per annum”,
interest received by Aishwarya on advances will be :

A) 6,000

B) 7,000

C) 8,000

D) 9,000

CASE Amar, Akbar and Anthony entered into partnership business on 1 st April 2020 with capital
STUDY 6 of Rs 3,00,000 , 2,00,000 and 1,00,000 respectively. In addition to capital Anthony has
advanced a loan of rs 1,00,000. Since they were good friends, they were not having any
explicit agreement of partnership. Akbar has worked hard to establish the business and
Amar was looking after the office work.

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At the end of the year , they earned a profit of Rs. 1,80,000. Amar and Akbar wanted
remuneration of their work for five thousand per month and Anthony ask for interest on
advance @ 10% per annum. Since Amar has given maximum capital so he wants interest
on capital @12%. You are required to help them.

[Link] is amount of the profit distributed to Amar, Akbar and Anthony respectively?

A) 50,000: 30,000: 20,0000

B) 80,000: 50,000: 20,0000
C) Profit will be distributed equally
D) None of these
2. Interest on advance given by Anthony to firm is:

A) 6%
B) 8%
C) 12%
D) 10%
3. Amar and Akbar will be given a remuneration of :

A) 5,000 per month each

B) 10,000 per month each

C) No remuneration will be given

D) Amar :5000 per month, Akbar :4000 per month

4. What will be the interest on capital given to Amar ?

A) 36,000

B) 46,000

C) 24,000

D) No interest on capital will be given

KVS ZIET BHUBANESWAR 12/10/2021 6

ANSWER KEY
CASE STUDY NO. [Link] ANSWER

C.S-I 1 A

2 A

1 C

2 B
C.S-2
3 B

4 A

1 D

2 A
C.S-3
3 B

4 B

1 A

C.S-4 2 D

3 C

1 D

2 B
C.S-5
3 C

4 A

1 C

2 A
C.S-6
3 C

4 D

KVS ZIET BHUBANESWAR 12/10/2021 7

CHAPTER 3:- CHANGE IN PROFIT SHARING RATIO AMONG
EXISTING PARTNERS

CASE STUDY BASED QUESTIONS:-

CASE STUDY NO.1
Bhavna and Rajiv were partners in a partnership firm carrying on a restaurant in
Kolkata. Bhavna noticed that a lot of food is left at the end of the day. To avoid
wastage, she suggested that it can be distributed to the needy. Rajiv wanted that
it should be mixed with the food being served in the next day. Rajiv then give a
CASE STUDY NO.1

proposal that if his share in the profit increased, he will not mind free distribution
of leftover food. Bhavna happily agreed. So, they decided to change their profit-
sharing ratio 1:2 with immediate effect. On that day revaluation of assets and
reassessment of liabilities was carried out that resulted into again of Ra. 18,000.
On that date the goodwill of the firm was valued at Rs.1,20,000.
Based on the above information, you are required to answer the following
questions:
1 Sacrifice/Gain of Bhavna and Rajiv will be
[Link] sacrifice 1/6,Rajiv Gain 1/6
B. Bhavn Gain 1/6,RajivSacrifice 1/6
[Link] Bhavna gains 1/6
[Link] Rajiv Sacrifice 1/6
2 At the time of change in Profit Sharing ratio , gaining partner capital account is
…………………… and sacrificing partner is…………………for adjustment of Goodwill.
[Link], Debited
[Link],Credited
[Link],Decrease
[Link] , Credited
CASE STUDY NO.2
Joseph and Monu were partners in a firm carrying on a tiffin service in Mumbai.
Joseph noticed that a lot of food is left at the end of the day. To avoid wastage,
she suggested that it should be distributed to the needy. Monu wanted that it
should be mixed with the food being served the next day. Monu then gave a
proposal that if his share in the profit is increased, he will not mind free
CASE distribution of left over food. Joseph happily agreed. So they decided to change
STUDY their profit sharing ratio to 2:3 with immediate effect. On that date, revaluation of
NO.2 assets and reassessment of liabilities was carried out that resulted into a profit of
₹8,000. On that date, the goodwill of the firm was valued as ₹30,000.

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1 Profit on revaluation will be
(A) Debited to capital account of partners in 2:3
(B) Debited to capital account of partners in 1:1
(C) Credited to capital account of partners in 2:3
(D) Credited to capital account of partners in 1:1
2 Sacrifice/ Gain of Joseph and Monu will be:
(A) Joseph sacrifice 1/10, Monu gains 1/10
(B) Monu sacrifice 1/10, Joseph gains 1/10
(C) Only Joseph gain 1/10
(D) Only Monu sacrifice 1/10
3 At the time of change in profit sharing ratio, gaining partner capital is ________
and Sacrificing partner is __________ for adjustment of goodwill.
(A) Credited, Debited
(B) Debited, Credited
(C) Increased, Decreased
(D) Decreased, Credited
4 The journal entry for adjustment of goodwill will be
(A) Monu’s capital A/c Dr. 30,000
To Joseph’s capital A/c 30,000
(B) Joseph’s capital A/c Dr. 15,000
To Monu’s capital A/c 15,000
(C) Monu’s capital A/c Dr. 3,000
To Joseph’s capital A/c 3,000
(D) Joseph’s capital A/c Dr. 27,000
To Monu’s capital A/c 27,000

CASE STUDY NO.3

Shabir, David and Charu were partners in a firm supplying school uniforms who
CASE shared profits in the ratio of [Link]. Shabir suggested to start supplying low cost
STUDY school uniforms to the students who belonged to low income group and admitted

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NO.3 to the private schools of the city as per the provisions of Right to Education Act
2009. On 1stApril, 2021 David requested to increase the share of profit of Charu, a
specially abled partner having good knowledge of cost-reduction methods. Shabir
agreed to it and the new profit sharing ratio was deci[Link]. For this purpose it
was agreed that the goodwill is valued at ₹76,000. The stock (book value
₹40,000) was to be depreciated by 8%. Creditors amounting to ₹900 not likely to
be claimed. Liability on account of workmen compensation amounted to ₹8,000.
Investments (book value ₹38,000) were revalued at ₹40,000.
1 Loss on revaluation will be
(A) ₹9,300
(B) ₹8,300
(C) ₹7,300
(D) ₹6,300
2 Shabir’s sacrificing ratio will be
(A) 4/5
(B) 3/10
(C) 2/10
(D) 1/10
3 David and Charu will compensate Shabir for adjustment for goodwill on account of
change in profit sharing ratio by
(A) ₹12,800
(B) ₹13,900
(C) ₹22,800
(D) ₹23,900
4 Decrease in value of stock by ₹3,200 will be
(A) Debited to revaluation A/c
(B) Credited to revaluation A/c
(C) Debited to goodwill A/c
(D) Credited to partner’s capital A/c

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CASE STUDY [Link].4
CASE Arman, Sharvan and Chintan are partners sharing profits and losses in the ratio of
STUDY [Link]. Arman is a marketing person and does not understand the accounting
[Link].4 issues. Therefore, when they discussed to share future profits and losses equally,
he wanted to understand in concrete terms the profit share he will have to forego
and whether he will be compensated for the loss in profit share or not. If he will
be compensated, what will be the amount of compensation and how it will be
calculated? He was clarified that for the loss of profit share, he will be paid
compensation in the form of goodwill calculated on an accepted principle of
goodwill valuation.
Goodwill was to be valued at 3 years’ purchase 5 years’ average profit. Profits for
the last 5 years were 1,20,000, 1,20,000 , 1,50,000 , 1,10,000 and
1,00,000. Based on the above information, choose the option to the questions.
1 Gain or sacrifice of Sharvan and Chintan due to change in the profit sharing will be

a. Sharvan’s gain = 1/30 ; Chitntan’s sacrifice = 4/30

b. Sharvan’s sacrifice = 1/30 ; Chitntan’s gain = 5/30
c. Sharvan’s gain = 1/30 ; Chitntan’s gain = 4/30
d. Sharvan’s gain = 5/30 ; Chitntan’s sacrifice = 5/30

2 Value of Goodwill is

a. 3,00,000 b. 3,60,000

c. 3,72,000 d. 3,50,000
3 Sharvan and Chintan will compensate Arman by paying goodwill as
a. . 12,000 and 48,000 respectively
b. 24,000 and 24,000 respectively
c. 30,000 each
d. 60,000 each

CASE STUDY [Link].5

CASE Read the passage below and answer the questions given:
STUDY Mohan and Sohan, two college friends started a restaurant business in partnership
[Link].5 sharing profit and loss in the ratio of 3:2 in the year 2019. Mohan also had a
family business of garments, which he took over after his father's death. As a
result, he devoted less time to the restaurant. Sohan, being his best friend
understood this and supported him fully.
However, in the year 2020, due to Covid-19, the restaurant business slowed
down Sohan approached Mohan and suggested that they share profits equally.
Mohan readily agreed to it.
The Goodwill of the firm was valued at Rs. 30,000. Also, there is a Workmen

KVS ZIET BHUBANESWAR 12/10/2021 Page 4

Compensation Reserve and General Reserve of Rs. 90,000 and Rs.
12,000respectively.
1 What single adjusting entry will be passed for goodwill adjustment?
(a) Debit Sohan and Credit Mohan by Rs 3.000
(b) Debit Mohan and Credit Sohan by Rs 3.000
(c) Debit Mohan and Credit Sohan with Rs. 300
(d) Debit Sohan and Credit Mohan with Rs. 300
2 What journal entry will be passed in case there is a claim on Workmen
Compensation Reserve of Rs. 45,000 ?
(a) Workmen Compensation Reserve A/c Dr. 90,000
To Mohan's capital A/c 54,000
To Sohan's capital A/c 36,000
(b) Workmen Compensation Reserve A/c Dr. 45,000
To claim on Workmen Compensation Reserve 45,000
(c) Sohan's capital A/c Dr. 9000
To Mohan's capital A/c 9000
(d) Workmen Compensation Reserve A/c Dr. 90,000
To claim on Workmen Compensation Reserve A/c 45,000
To Mohan's capital A/c 27,000
To Sohan's capital A/c 18,000
3 What journal entry will be used for General Reserve?
(a) General reserve A/c Dr. 12,000
To Mohan's capital A/c 6,000
To Sohan's capital A/C 6,000
(b) General reserve A/c Dr. 12,000
To Mohan's capital A/C 7,200
To Sohan's capital A/C 4,800
(c) Mohan's capital A/C Dr. 7,200
Sohan's capital A/c Dr. 4,800
To General reserve A/c 12,000
(d) Sohan's capital A/C Dr. 1200
To Mohan's capital A/C 1200

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ANSWER KEY
CASE STUDY NO.1
[Link] ANSWER
1 A
2 B
CASE STUDY NO.2
1
(D) Credited to capital account of partners in 1:1
2 (A) Joseph sacrifice 1/10, Monu gains 1/10
3 (B) Debited, Credited
4 (C) Monu’s capital A/c Dr. 3,000
To Joseph’s capital A/c 3,000

CASE STUDY NO.3

1
(B) ₹8,300
2 (B) 3/10
3 (C) ₹22,800
4 (A) Debited to revaluation A/c

CASE STUDY NO.4

1 C
2 B
3 A

CASE STUDY NO.5

1 A
2 D
3 B
PREPARED BY THE PGTs ( COMMERCE ) OF BHUBANESWAR, GUWAHATI,
KOLKATA, RANCHI, SILCHAR AND TINSUKIA REGIONS.

KVS ZIET BHUBANESWAR 12/10/2021 Page 6

Accountancy
Chapter Name: - Admission of a Partner
SOURCE BASED QUESTIONS
[Link]. Read the passage given below and answer the following questions..

I A and B started automobile business in the name of Saavan Ltd. They are
partners sharing profits and losses in the ratio of 3 : 2. Their capitals are
Rs. 30,000 and Rs. 20,000 respectively. On 31st March 2021, there is
balance of General Reserve of Rs. 10,000. On 1st April, 2021 C was
admitted for 1/3rd share who also brings Rs. 6,000 as share of goodwill.
On the date of his admission, furniture was reduced by Rs. 1,000,
Provision for Doubtful Debts increased by Rs. 1,000 and there is an
appreciation of Rs. 4,000 in stocks. Old partners decide that C’s capital
should be in accordance with his share of profit and capital of old
partner’s Saavan Ltd.
01
Capitals of A and B after all adjustments will be:
A. 50,000
B. 60,000
C. 62,000
D. 68,000
02
Profit on revaluation in the said case will be:
A. 4000
B. 3000
C. 2000
D. None of the above

II Read the following hypothetical text and answer the given questions :
A , B and C are partners sharing profit in the ratio [Link]. Their capital contribution
being Rs 40,000, 30,000 and 20,000 respectively. The partners wanted to expand their
business so they decided to double their capital. It was duly followed by A and B. But
due to financial problem C was unable to follow the decision. So the partners decided
to admit a new partner D who will bridge the shortfall of capital. The new partner will
get half of the share of C’s capital which will be sacrificed byC alone. The new
partner brings in The required capital and 10,000 for his share ofpremium.

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3. What will be the new profit sharing ratioa.
[Link]
b. [Link]
c. [Link]
d. None of these
4. What amount of capital bought in by the new partnera.
20.000
b. 40,000
c. 30,000
d. 10,000
5. What is the value of goodwill of the firma.
1,00,000
b. 1,50,000
c. 1,20,000
d. 50,000
6. What will be entry for distribution of premium.
a. Debit premium account, credit A.s capital, B’s capital c’s capital
b. Debit premium account , credit C’s capital
c. Debit D’s capital and credit C’s capital
d. Debit D’s capital , credit A.s capital, B’s capital c’s capital

III Read the following hypothetical text and answer the given questions :
A and B are partners sharing profit in the ratio 3:2. Their fixed capital being Rs
50,000 and 30,000 respectively. At the end of six month they wanted some additional
fund for which they C as a new partner with a certain conditions that C will get 1/5rd
share in the profit and will bring Rs 25,000 as capital and Rs 5,000 aspremium, apart
from that he will be Rs 2,000 as monthly salary. C also advanced aloan Rs 50,000 to
the firm.
7. At the end of the accounting period C’s salary account will be transferred to
...............Account
a. Current account
b. Capital account
c. Loan account
d. Revaluation account

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8. What is the value of the goodwill of the firma.
20,000
b. 25,000
c. 30,000
d. 40,000
9. What amount of salary is payable to C at the end of the accounting period.a.
24,000
b. 12,000
c. 10,000
d. 2,000
10. What amount of interest should be charged on C’s Loana.
1,500
b. 3,000
c. 5,000
d. None of these.
IV Mayank and Ayush are planning to manufacture stuffed toys for utilizing waste
material of one of their garment’s factories. They decided that this manufacturing
unit will be set up in a rural area, so that people living in rural areas can have job
opportunities. Their capital contributions were ₹ 5, 00,000 and ₹4, 00,000. Their
profit sharing ratio is 5:3.
For starting new venture they need of some additional fund. For meeting the
additional fund, they decided to admit Vishal as a new partner. Mayank and Ayush
sacrificed their share of profit in favour of Vishal. Mayank forgo ¼ th of his share and
Ayush forgo 2/5th of his share. Vishal is admitted as per the agreement and he
brought ₹200000 as his capital and₹40000 as goodwillpremium.

At the time of admission of Vishal the old balance sheet of Mayank and Ayush had
Advertisement Suspense A/c of ₹30,000 on the assets sideand Profit and Loss A/c
on liability side.
Based on above text answer the following
11. What will be the new ratio?
(A) [Link]
(B) [Link]
( C) [Link]

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( D) [Link]
12. Sacrificing ratio is calculated as
(A) New share – Old share
(B) Old share – New share
(C)Gaining Share – Old share
(D) New share – gaining share

13. What is the goodwill of the firm?

(A) ₹40,000
(B) ₹2,00,000
(C) ₹50,000
(D) ₹60,000
14. What is the entry of for treatment of goodwill?
(A) Vishal’s capital A/c Dr 40000
To Mayank’s capital A/c 25000
To Ayush’s capital A/c 15000
(B) Premium for goodwill A/c Dr 40000
To Mayank’s capital A/c 25000
To Ayush’s capital A/c 15000
(C) Premium for goodwill A/c Dr 40000
To Mayank’s capital A/c 20408
To Ayush’s capital A/c 19592

(D)No entry at the time of admission

V Given below is the balance sheet of A and B who are partners in a firm sharing
profits in the ratio of 3:2
Balance Sheet as at 1st April, 2020
On the same date, C is admitted as a partner on the following terms.

(i) A gives 1/3rd of his share , while B gives 1/10 th from his share to C
(ii) Goodwill is valued at 2 years purchase of the average profits of the last 5 years,
which were ₹ 50,000(loss); ₹ 1,20,000; ₹ 10,000(loss); ₹ 3,00,000 and ₹ 3,40,000
respectively. C does not bring his share of goodwill in cash.

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15. What was the sacrificing ratio of A and B?
(A) 1:1
(B) 3:10
(C) 3:2
(D) 2:1
16. What was the amount of firm’s goodwill?
(A) ₹ 84,000
(B) ₹ 1,40,000
(C) ₹ 1,64,000
(D) ₹ 2,80,000

17.
What was C’s share of goodwill?
(A) ₹ 84,000
(B) ₹ 1,40,000
(C) ₹ 1,64,000
(D) ₹ 2,80,000

Name the account which will be debited for adjustment of goodwill.

18.
(A) A’s and B’s capital a/c
(B) C’s capital a/c
(C) cash account
(D) premium and goodwill

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VI SWB enterprises is a partnership business with Brian, Williams and Sania as
partners engaged in production and sales of electrical items and equipment. The
capital contribution were 5 lakh, 5 lakh and 8 lakh respectively with the profit
sharing ratio of [Link]. Their Balance sheet showed machinery Rs. 100000; stock Rs.
50000; P/L A/C (Dr. balance) Rs.9000. As they are now looking forward to expand
their business it was decided that they would bring in sufficient cash to double their
respective capitals. This was duly followed by Brian and Williams but due to
unavoidable explanation Sania could not do so and ultimately it was agreed that to
the shortfall in the required capital, a new partner should be admitted who would
bring in the amount that Sonia could not bring; and that the new partner would get
share of profits equal to half of Sania share which would be sacrificed by Sania
only. Consequently to this agreement Ezaz was admitted and he brought in the
required capital and Rs.30000 as premium for goodwill. The machinery was
revalued at Rs. 120000 and Stock decreased by Rs.11000. Based on the above
information you are required to answer the following questions

19. How will the P/L A/C (dr. balance) be treated?

(A) Debited to revaluation account
(B) Credited to Revaluation Account
(C) Debited to Partner’s Capital Account
(D) Credited to Partner’s Capital Account
20. The amount of capital to be brought in by the new partner?
(A) Rs.500000
(B) Rs.50000
(C) Rs.800000
(D) Rs.80000
21. What is William’s share of Revaluation Profit or Loss ?
(A) Profit Rs.5000
(B) Loss Rs. 5000
(C) Profit Rs. 2500
(D) Loss Rs.2500
22. The admission of new partner will lead to
(A) Dissolution of Partnership
(B) Dissolution of Partnership firm.
(C) Reconstitution of Partnership Firm
(D) All of these.
VII [Link] are partners sharing profits and losses in the ratio of [Link]. D is admitted
with 1/4th share. He brings Rs. 100000 as his capital and 50000 as Goodwill. Their
was a general reserve of Rs. 30000 in the balance sheet before D’s admission. The
revaluation Loss came to Rs. 15000.

KVS ZIET BHUBANESWAR 12/10/2021 Page 6

23 What is the sacrificing Ratio of A, B and C.
(A) [Link]
(B) [Link]
(C) [Link]
(D) [Link]
24 The General Reserve will be distributed:
(A) Among all partners in new Ratio
(B) Among Old Partners in Sacrificing Ratio
(C) Among Old Partners in Old Ratio
(D) Will not be distributed.
25 A’s share of loss will be
(A) Rs. 10000
(B) Rs. 6000
(C) Rs. 5000
(D) Rs. 3000
26 What is the new profit sharing ratio?
(A) [Link]
(B) [Link]
(C) [Link]
(D) [Link]

VIII Sterling enterprises is a partnership business with Ryan, Williams and Sania as
partners engaged in production and sales of electrical items and equipment. Their capital
contributions were Rs.50,00,000, Rs.50,00,000 and Rs.80,00,000 respectively with the
profit the sharing ratio of [Link]. As they are now looking forward to expanding their
business, it was decided that they would bring in sufficient cash to double their respective
capitals. This was duly followed by Ryan and Williams but due to unavoidable reasons
Sania could not do so and ultimately it was agreed that to bridge the shortfall in the
required capital a new partner should be admitted who would bring in the amount that
Sania could not bring and that the new partner would get share of profits equal to half of
Sania’s share which would be sacrificed by Sania only. Consequent to this agreement Ejaz
was admitted and he brought in the required capital and Rs.30,00,000 as premium for
goodwill.
Based on the above information you are required to answer the following questions :
[Link] will be the new profit-sharing ratio of Ryan, Williams, Sania and Ejaz?
(A) [Link]
(B) [Link]
(C) [Link]
(d) None of the above

KVS ZIET BHUBANESWAR 12/10/2021 Page 7

[Link] is the amount of capital brought in by the new partner Ejaz?
(A) Rs.50,00,000
(B) Rs.80,00,000
(C) Rs.40,00,000
(D) Rs.30,00,000
29. What is the value of the goodwill of the firm?
(A) Rs.1,35,00,000
(B) Rs.30,00,000
(C) Rs.1,50,00,000
(D) Cannot be determined from the given data
[Link] will be correct journal entry for distribution of Premium for Goodwill brought in
by Ejaz?
(A) Ejaz Capital A/c ...................... Dr. 30,00,000

To Sania’s Capital A/c 30,00,000 (Being ....................................... )

(B) Premium for Goodwill A/c……Dr. 30,00,000

To Sania’s Capital A/c 30,00,000 (Being ....................................... )

(C) Premium for Goodwill A/c .......Dr 30,00,000

To Reyan’s Capital A/c 8,33,333

To William’s Capital A/c 8,33,333
To Ejaz’s Capital A/c 13,33,333 (Being ....................................... )
(D) Premium for Goodwill A/c .......Dr 30,00,000

To Reyan’s Capital A/c 10,00,000

To William’s Capital A/c 10,00,000
To Ejaz’s Capital A/c 10,00,000 (Being........................................)

IX Read the following hypothetical text and answer the given questions:

KVS ZIET BHUBANESWAR 12/10/2021 Page 8

Amit and Mahesh were partners in a fast-food corner sharing profits and losses in ratio
3:2. They sold fast food items across the counter and did home delivery too. Their initial
fixed capital contribution was ₹1,20,000 and ₹80,000 respectively. At the end of first
yeartheir profit was ₹ 1,20,000 before allowing the remuneration of ₹.3,000 per quarter
to Amit and ₹.2,000 per half year to Mahesh. Such apromising performance for first
year was encouraging, therefore, they decided to expand the area of operations. For this
purpose, they needed a delivery van, a few Scotties and an additional person to support.
Six months into the accounting year they decided to admit Sundaram as a new partner and
offered him 20% as a share of profits along with monthly remuneration of ₹2,500.
Sundaram was asked to introduce ₹1,30,000 for capital and ₹.70,000 for premium for
goodwill. Besides this Sundaram was required to provide Rs.1,00,000 as loan for two
years. Sundaram readily accepted the offer. The terms of the offer were duly executed and
he was admitted as a partner.
31. Remuneration will be transferred to of Amit and Mahesh at the end
of the accounting period.
A. Capital account.
B. Loan account.
C. Current account.
D. None of the above.
32. Upon the admission of Sundaram the sacrifice for providing his share of profits would
be done:
(A) by Amit only.
(B) by Mahesh only.
(C) by Amit and Mahesh equally.
(D) by Amit and Mahesh in the ratio of 3:2.
33. Sundaram will be entitled to a remuneration of at the end of the year.
34. While taking up the accounting procedure for this reconstitution the accountant of the
firm Mr. Suraj Marwaha faced a difficulty. Solve it be answering the following: For the
amount of loan that Sundaram has agreed to provide, he is entitled to interest thereon at
the rate of _.

KVS ZIET BHUBANESWAR 12/10/2021 Page 9

X A and B are partners. A new partner C is admitted for 1/5th share. The book value of
assets and liabilities are as below:
Liabilities Amt(₹) Assets Amt(₹)
Sundry Creditors 3,00,000 Land and Buildings 4,00,000
Profit and Loss A/C 1,00,000 Plant and Machinery 3,00,000
Capital A/Cs Stock 70,000
A 4,00,000 Debtors 1,80,000
B 2,00,000 6,00,000 Bank 50,000
10,00,000 10,00,000

The adjustments which were agreed upon: (a) Bad debts amounted to ₹3,000;
(b).Market value of Investments is ₹4,500; (c). Liability on account of
Workmen’s Compensation Reserve amounted to Rs.7,000. (d). Stock is
undervalued by 10%.
Based on the above information choose the correct option to the following
questions.
35 (i). How much amount will be credited to Revaluation Account to treat the
undervaluation of stock?
(a). ₹4,000 (b).₹6,000 (c). ₹5,400(d). None of these
36 (ii). How much amount of Bad debts will be transferred to Revaluation Account?
(a). ₹2,000(b). ₹3,000 (c). ₹1,000(d). None of the above
37 (iii). Which of the following is correct regarding profit/Loss of Revaluation:
(a). Loss ₹.6,000 (b).Profit ₹6,000(c). Profit ₹5,000 (d).Loss ₹5,000.
38 (iv). If B’s share of profit/Loss on Revaluation account is ₹2,500 what will be
B’sshare of profit?
(a).₹7,500(b). ₹3,000 (c). ₹2,500 (d).₹2,000.

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XI X and Y are partners in a firm sharing profits and losses in the ratio of 2:3. Their
balance sheet shows on 31st March, 2021 machinery at Rs.2,00,000, Stock at
Rs.80,000 and debtors at Rs.1,60,000. Z is admitted and new profit sharing ratio is
agreed at [Link]. Machinery is revalued at Rs.1,40,000 and a provision is made for
doubtful debts @5%. X’s share in loss on revaluation amount to Rs.20,000.
39 (i) What will be the revalued value of stock?
40 (ii) What amount will be made for provision for doubtful debts?
XII Atul and Vijay are the partners in a firm named Mahalaxmi Traders. They shared
their profits and losses equally. They have Rs.20,000 each as capital. They admit
Mohit as equal partner and goodwill was valued at Rs.30,000. Mohit is to bring in
Rs.30,000 as his capital and necessary cash towards his share of goodwill. Goodwill
account will not remain open in the books. If profit on revaluation is Rs.13,000.
41 (i) Find the closing balance of capital account.
42 (ii) What is the amount of Mohit’s goodwill in the firm?

KVS ZIET BHUBANESWAR 12/10/2021 Page 11

Read the following case study and answer the following questions:
XIII Simran and Rohit were partners in a JUNK-FOOD corner sharing profits and losses
in ratio 3:2. They sold delicious junk food items across the counter and also home delivery
. Their initial fixed capital contribution was ₹5,00,000 and ₹4,00,000 respectively. At
the end of first year their profit was ₹ 2,00,000 before allowing the remuneration of
₹.3,000per quarter to Simran and ₹.2,000 per half year to Rohit . Such a promising
performance forfirst year was encouraging, therefore, they decided to expand the area of
operations.
For this purpose, they needed delivery vans and an additional person to support. For Six
months into the accounting year they decided to admit Ramesh as a new partner and offered
him 1/5th as a share of profits along with monthly remuneration of ₹ 2,500. Ramesh was
asked to introduce ₹8,00,000 for capital and ₹.70,000 for premium for goodwill. Besides
this Ramesh was required to provide Rs.1,00,000 as loan for two years.

43) Remuneration will be transferred to of Amit

and Mahesh at the end of the accounting period.
a) Capital account.
b) Loan account
c) Current account.
d) None.

44) Upon the admission of Ramesh the sacrifice for providing his
share of profits would be done:
a) By Amit only.
b) By Amit and Mahesh equally.
c) By Mahesh only
d) By Amit and Mahesh in the ratio of 3:2.

KVS ZIET BHUBANESWAR 12/10/2021 Page 12

45) Ramesh will be entitled to a remuneration of ₹ at
the end of the year.
a) 40000
b) 15000
c) 10000
d) 30000

46) While taking up the accounting procedure for this reconstitution

the accountant of the firm faced a difficulty. Solve it by
answering the following:

For the amount of loan that Ramesh has agreed to provide, he is

entitled to interest thereon at the rate of:
a. 5%
b. 7%
c) 10%
d) 6%

Read the following case study and answer the given questions:

XIV Murari and Vohra were partners with capitals of ₹ 1,20,000 and₹ 1,60,000
respectively. On 1st April, 2010 they admitted Yadav as a partner for one forth share in
profit. Yadav brings his capital ₹ 2,00,000 and Goodwill for 1/4th share in cash.
Goodwillof the firm is valued at ₹ 3,60,000 on admission of Yadav.
On that date the creditors of Murari and Vohra were ₹ 60,000 and Bank Overdraft was₹
15,000. Their assets apart from cash included Stock ₹ 10,000; Debtors ₹ 40,000; Plant ₹
80,000 and Building ₹ 2,00,000. It was agreed that Stock should be depreciated by ₹
2,000; Plant to 80%; ₹5000 should be written off as Bad Debts; A Provision for Bad
Debtis to be kept at 5% of Debtors. Building should be appreciated by 25%.

47) What would be the new profit sharing ratio after Yadav‘s
admission?
a) [Link] b) [Link] c) [Link] d) [Link]
48) Yadav would bring ……. as his share of goodwill.

KVS ZIET BHUBANESWAR 12/10/2021 Page 13

a) 3,60,000 b) 90,000 c) 50,000 d) 80,000
49) What would be the amount of cash balance in firm before
admission of Yadav?
a) ₹ 25,000 b) ₹ 1,00,000 c) ₹ 3,55,000 d) ₹ 75,000
50) The amount Provision for Bad Debts would be ₹……………
a) 2,000 b) 1,250 c) 1,750 d) 5,000

ANSWER KEY
[Link]. Answer
01 D
02 C
I
3 A
4 B
5 C
6 B
II
7 A
8 B
9 B
10 A
11 (B) [Link]
12 (B) Old share – New share
13 (B) ₹2,00,000
14 (C) Premium for goodwill A/c Dr 40000
To Mayank’s capital A/c 20408
To Ayush’s capital A/c 19592
15 (D) 2:1
16 (D) ₹ 2,80,000
17 (A) ₹ 84,000
18 (B) C’s capital A/c
19 C
20 C
21 C
22 A

KVS ZIET BHUBANESWAR 12/10/2021 Page 14

23 A
24 C
25 B
26 D
27 (C)

28 (B)

29 (A)

30 (B)

31 (C)

32 (D)

33 Rs.15,000

34 6%

35 (b).₹6,000
36 (c). ₹1,000
37 (c). Profit ₹5,000
38 (c).₹2,500
39 (i) Rs.98,000
40 (ii) Rs.80,000
41 (i) Rs.31,500; Rs.31,500; Rs.30,000
42
(ii) Rs.10,000
43 c
44 d
45 b
46 d
47 d
48 b
49 a
50 c
PREPARED BY THE PGTs (COMMERCE) OF BHUBANESWAR, GUWAHATI, KOLKATA,
RANCHI, SILCHAR AND TINSUKIA REGIONS

KVS ZIET BHUBANESWAR 12/10/2021 Page 15

Accountancy
Chapter 5- Retirement & Death of a Partner
CASE/SOURCE BASED QUESTIONS
CASE 1 P and Q and R are partners in a firm sharing Profit in the Ratio of [Link]. Their capitals
were 1,50,000; 100,000 and 50,000 respectively.
Plant 140,000; Stock 90,000; Patents 18250; Cash 30750; Debtors 80,000
And provision for doubtful debt 4000 ;Creditors 55000 .R retires on the this date and P,Q
decided to share future profit and losses in the Ratio of 3:2
On the basis of above case .Give the answer of following questions.
Q.1 Stock to be reduced by Rs 82000 the new amount will shown in
(A) Debit side of revaluation A/C 8000
(B) Credit side of revaluation A/C 90000
(C) Credit side of partners capital A/C 8000
(D) None of the above
Q.2 If Patents are valueless then what will be the new amount of patent
(A)18,250
(B) zero
(C) Both amount to be consider
(D) None of the above

Q.3 Profit or loss on Revaluation A/c Transferred to

(A)Rs 60,000 Profit
(B) Rs 60,000 loss
(c) Rs 90,000 Profit
(D) Rs 90,000 loss
Q.4 How will you treat an amount of Rs 20,000 had to be paid to an employee injured in
accident?
(A) Bank a/c Credit side Of revaluation a/c
(B) Bank a/c Debit side Of revaluation a/c
(C) Bank a/c Credit side Of realization a/c a/c
(D) Bank a/c Debit side Of Realization a/c
CASE 2 P,Q,R are partners sharing profit in the ratio of [Link] Q retires and new Profit sharing ratio
Between P and R agreed at 2:[Link] also decided to record the effect of the following
without affect their book values:
General Reserve 120,000
Contingency reserve 70,000
Profit and Loss(Dr) 30,000
Advertisement suspense a/c 10,000
On the basis of above data give the answer of following questions
Q5 Calculate Sacrificing Ratio of P
(A) 1/20
(B) 1/10
(C) 2/10
(D) 2/15
Q 6 Contingency reserve will be
(A) Added to General reserve
(B) Subtracted to General Reserve
(C) Added to Advertisement Expenses
(D) No effect

KVS ZIET BHUBANESWAR 12/10/2021 Page 1

Q 7 What will be single Adjusting Entry
(A) R’s capital A/cDr. 60,000
To Q’s capital a/c 45,000
To P’s capital A/c 15,000
(B) Q’s capital A/cDr. 80,000
To R’s capital a/c 45,000
To A’s capital A/c 35,000
(C) R’s capital A/cDr. 60,000
To P’s capital a/c 45,000
To Q’s capital A/c 15,000
(D) P’s capital A/cDr. 80,000
To Q’s capital a/c 45,000
To R’s capital A/c 35,000
Q 8 What will be the net effect:
(A) 140,000
(B) 130,000
(C) 150,000
(D) 200,000
CASE 3 Analyse the case given below and answer the questions that follow:
A, K and S were partners in a firm sharing profits in the ratio of 5: 3: 2. Goodwill appeared
in their books at the value of Rs 60,000. ‘K’ decided to retire from the firm. On the date of
his retirement, goodwill of the firm was valued at Rs2,40,000. The new profit sharing ratio
decided among A and S was 2 : 3.

Q9 How much will be transferred to K’s Capital Account of the existing goodwill?

(A) Rs 18,000
(B) Rs30,000
(C) Rs 12,000
(D) Rs 72,000

Q 10
What is A’s gaining or sacrificing ratio:

A) 1/10 Gain B) 1/10 Sacrifice C) 4/10 Gain (D) 4/10 Sacrifice

Q 11 What amount of goodwill will be transferred to K’s capital account as compensated by A

and S?

(A) Rs96,000 (B) Rs 72,000 (C) Rs 24,000 (D) Rs18,000

CASE 4 Analyse the case given below and answer the questions that follow:
Rohit, Karan and Karim are partners sharing profits and losses in the ratio of 14 : 5 : 6
respectively. Karan retires and surrenders his entire 5/25th share in favour of Rohit. The
goodwill of the firm is valued at 2 years’ purchase of Super Profit based on average profits
of last three years. The profits for the last three years are Rs50,000, Rs 55,000 and Rs
60,000, respectively. The normal profits for the similar firm are 30,000. Goodwill already
appears in the books of the firm at 75,000.

KVS ZIET BHUBANESWAR 12/10/2021 Page 2

Q 12 Who is the gaining partner on retirement of Karan?

(A) Rohit
(B) Karim
(C) Both (A) and (B)
(D) Neither (A) nor (B)

Q 13 What is the value of goodwill determined by using super- profit method?

(A) Rs50,000 (B) Rs 10,000 (C) Rs 30,000 (D) Rs 75,000

Q 14 In which ratio, existing goodwill of Rs 75000 be written off :

(A) [Link]
(B) New ratio, after Karan retirement
(C) In gaining ratio
(D) None of these.

KVS ZIET BHUBANESWAR 12/10/2021 Page 3

ANSWER KEY
Q.1 (A) Debit side of revaluation A/C 8000

Q.2 (A)18,250

(B) Rs 60,000 loss

Q.3

Q.4 (A) Bank a/c Debit side Of revaluation a/c

Q5 (A) 1/10

Q6 (A) Added to General reserve

Q7 (A) R’s capital A/cDr. 60,000

To Q’s capital a/c 45,000
To P’s capital A/c 15,000

Q8 (A) 150,000

Q9 A
Q 10 B
Q 11 B
Q 12 A
Q 13 A
Q 14 A

PREPARED BY THE PGTs ( COMMERCE ) OF BHUBANESWAR, GUWAHATI, KOLKATA,

RANCHI, SILCHAR AND TINSUKIA REGIONS.

KVS ZIET BHUBANESWAR 12/10/2021 Page 4

CHAPTER=6
DISSOLUTION OF PARTNERSHIP FIRM

CASE/SOURCE BASED QUESTIONS

S.N Question
o.
[Link].5 to 8 are based on the hypothetical situation given below
A and B were partners in a firm sharing profits in the ratio of 3 : 2. On 31st
March, 2020, the balance sheet of the firm was as follows:
Balance Sheet
as at 31st March,2020
LIABILITIES AMOUNT ASSETS AMOUNT
CAPITAL : Building 2,40,000
A 3,00,000 Stock 75,000
B 2,00,000 5,00,000 Debtors 80,000
Creditors 1,17,000 Cash 47,000

Furniture 1,75,000
6,17,000 6,17,000

The firm was dissolved on 1st April, 2011 and the assets and liabilities were
settled
1 Building was taken over by creditors as their full and final payment. How much
amount will be debited to Realisation Account?
A) Rs.1,23,000
(B) NIL
(C) Rs. 1,33,000
(D) Rs. 1,43,000
2 Furniture was taken over by B for cash payment at 5% less than the book value.
The account Debited will be:
A) Realisation A/c
(B) B’s Capital A/c
(C) A’s Capital A/c
(D) CashA/c

KVS ZIET BHUBANESWAR 12/10/2021 Page 1

3 Debtors were collected by a debt collection agency at a cost of Rs 5,000. How
much amount will be credited to Realisation Account?
A) Rs.80,000

KVS ZIET BHUBANESWAR 12/10/2021 Page 2

(B) NIL
(C) Rs. 75,000
(D) Rs. 85,000
4 B agreed to bear all realisation expenses. For this service, B is paid Rs 500.
Actual expense on realisation amounted to Rs 1,000. Realisation A/c will be
debited with
A) Rs.1500
(B) Rs. 500
(C) Rs. 3,000
(D) Rs. 1,000
[Link].5 to 8 are based on the hypothetical situation given below
Raman and Suman were partners sharing profits in the ratio of 3 : 1. On 31st
March, 2019, their balance sheet was as follows:
Balance Sheet
as at 31st March,2019
LIABILITIES AMOUNT ASSETS AMOUNT
CAPITAL : Land & Building 70,000
Raman 1,00,000 Machinery 60,000
Suman 80,000 1,80,000 Debtors 80,000
Creditors 70,000 Bank 60,000
Profit & loss A/c 20,000
2,70,000 2,70,000

The firm was dissolved on 1st April, 2011 and the assets and liabilities were
settled.
5 Creditors of Rs 50,000 took over land and building in full settlement of their
claim. Remaining creditors were paid in cash. How much amount will be debited
to Realisation Account?
A) Rs.10,000
(B) NIL
(C) Rs. 20,000
(D) Rs. 40,000

KVS ZIET BHUBANESWAR 12/10/2021 Page 3

6 Machinery was sold at a depreciation of 30%. How much amount will be credited
to Realisation Account?
A) Rs.52,000
(B) Rs.62,000
(C) Rs. 42,000
(D) Rs. 72,000
7 Expenses on realisation were Rs 1,700. The account Credited will be:
A) Realisation A/c
(B) Partner’s Capital A/c
(C) Revaluation A/c
(D) BankA/c
8 Profit and Loss A/c appearing on the liabilities side of the Balance Sheet will be
transferred to
A) Realisation A/c
(B) Partner’s Capital A/c
(C) Revaluation A/c
(D) BankA/c
Read the following passage and answer any four questions given below:
The partnership firm of Vikram and Mohan located in Jorhat Assam a backward and
rural area of northeast. The firm is producing tea and producing the product with the
help of machinery and labour. This firm was dissolved on 1.3.2021 due to bad
financial position.. According to the agreement Mr. Vikram had agreed to undertake
the dissolution work for an agreed remuneration of Rs.2,000. Dissolution expenses
were paid by Vikram.
9 Who will bear the expenses of firm at dissolution?
A Vikram
B Mohan
C Firm
D None of the above

10 What will be the entry if payment made by partner Vikram?

i) Realisation A/c Dr
To Bank A/c
ii) Realisation A/c Dr
To Vikram’s Capital A/c
iii) No Entry
iv) Vikram’s Capital A/c Dr
To Bank A/c

KVS ZIET BHUBANESWAR 12/10/2021 Page 4

11 What will be the entry if expenses of dissolution if expenses is paid by firm Rs.
2500 ?

i) Realisation A/c Dr 2500

To Bank A/c 2500

ii) Realisation A/c Dr 2500

To Vikram’s Capital A/c 2500

iii) No Entry

iv) Vikram’s Capital A/c Dr 2500

To Bank A/c 2500

12 What will be the entry if expenses of dissolution if expenses is paid by mohan

Rs.2000?

i) Realisation A/c Dr 2000

To Bank A/c 2000

ii) Realisation A/c Dr 2000

To Vikram’s Capital A/c 2000

iii) Vikram’s Capital A/c Dr 2000

To Mohan’s Capital A/c 2000

iv) Vikram’s Capital A/c Dr 2000

To Bank A/c 2000

On the basis of the following case, answer the question number 1 to 4:

Gopal, Mohan and Sohan were partners in a firm sharing in [Link]. On 31st March
2021, they decided to dissolve the firm. On the date following was their position:
Balance Sheet
(as on 31.3.2021)
Liabilities ` Assets `
Creditors 50,000 Cash at bank 20,000
Gopal 1,10,000 S. Debtors 1,50,000
Mohan 90,000 Less: Provision 10,000 1,40,000
Sohan 70,000 2,70,000 Stock 60,000
Fixed Assets 1,00,000
3,20,000 3,20,000
The assets and liabilities of settled as follows:

KVS ZIET BHUBANESWAR 12/10/2021 Page 5

(i) One of the creditors for `20,000 agreed to accept half of the stock in full
settlement. Balance of the creditors were paid at a discount of 5%.
(ii) Remaining half of the stock was sold in the market at a profit of 331%.
3
(iii) All other assets realised at rupees `2,00,000.
(iv) Sohan was appointed to look after all the dissolution procedure and hence, he
was allowed a remuneration of 15% on the cash realised to from sale of
assets.

13 What is the amount paid to creditors at the time of dissolution?

(A) `48,500
(B) `30,000
(C) `58,500
(D) `28,500

14 State the amount realised from sale of stock.

(A) `33,333
(B) `40,000
(C) `30,000
(D) `33,000

15 What is the amount of remuneration payable to Sohan?

(A) `36,000
(B) `30,000
(C) `6,000
(D) `37,500

What is the amount of gain or loss on realisation?

16 (A) `76,000 Gain
(B) `76,000 Loss
(C) `74,500 Gain
(D) `74,500 Loss

On the basis of the following case, answer the question number 5 to 8:

X and Y were partners in a firm in equal ratio. Following was their balance sheet as
on 31st March 2021:
Balance Sheet
(as on 31.3.2021)
Liabilities ` Assets `
Provision for DD 5,000 Cash at Bank 15,000
Creditors 45,000 S. Debtors 80,000
Mrs. Y’s Loan 25,000 Stock 50,000
Capitals: Machinery 75,000
X 1,00,000 Profit & Loss A/C 20,000
Y 65,000 1,65,000
2,40,000 2,40,000
They dissolve the firm on the above date and following agreements were decided
upon:

KVS ZIET BHUBANESWAR 12/10/2021 Page 6

(i) X took over a part of the stock at `18,000 being 10% less than its book value.
Balance of the stock was taken over by Y at 75% of its book value less
`2,500.
(ii) One of the creditors of `20,000 agreed to accept a part of machine at an
agreed valuation of `25,000 being 25% more than its book value. Balance of
the creditors were paid in full.
(iii) Balance of the machine and the debtors were realised at `1,00,000.
17 State the amount at which stock was taken over by Y:
(A) `30,000
(B) `22,500
(C) `20,000
(D) `24,000

What is the book value of the machine which was taken over by one of the creditors?
18
(A) `20,000
(B) `25,000
(C) `31,500
(D) None of the above

19 State the treatment of balance in profit and loss account appears on the asset side.
(A) Transfer to the credit side of partners’ capital account
(B) Transfer to the debit side of partners’ capital account
(C) Transfer to the credit side of realisation account
(D) Transferred to the debit side of realisation account

20 State the total amount paid to various external liabilities at the time of dissolution.
(A) `25,000
(B) `55,000
(C) `50,000
(D) `20,000

KVS ZIET BHUBANESWAR 12/10/2021 Page 7

ANSWER KEY
[Link].1 (B) NIL
[Link].2 (D) CashA/c
[Link].3 (C) Rs. 75,000
[Link].4 B) Rs. 500
[Link].5 C) Rs. 20,000
[Link].6 (C) Rs. 42,000
[Link].7 (D) BankA/c
[Link].8 (B) Partner’s Capital A/c
Q9 VIKRAM
Q 10 NO ENTRY
Q 11 VIKRAM DR 2500
TO BANK ACCOUNT 2500
Q 12 VIKRAM DR 2000
TO MOHAN 2000
[Link].13 (D) `28,500
[Link].14 (B) `40,000
[Link].15 (A) `36,000
[Link].16 (D) `74,500 Loss
[Link].17 (C) `20,000
[Link].18 (A) `20,000
[Link].19 (B) Transfer to the debit side of partners’ capital account
[Link].20 (C) `55,000

PREPARED BY THE PGTs ( COMMERCE ) OF BHUBANESWAR, GUWAHATI,

KOLKATA, RANCHI, SILCHAR AND TINSUKIA REGIONS.

KVS ZIET BHUBANESWAR 12/10/2021 Page 8

CHAPTER -7 : CASE/SOURCE BASED QUESTIONS:

[Link]. Read the passage given below and answer the following questions……..
Case 1 Nidiya limited was incorporated on 1st April, 2021 with registered office in Mumbai.
The capital clause of memorandum of Association reflected a registered capital of
8,00,000 equity shares of ₹10 each and 1,00,000 preference shares of ₹50 each. Since
some large investments were required for building and machinery the company in
consultation with vendors, M/s VPS Enterprises, issued 1,00,000 equity shares and
20,000 preference shares at par to them in full consideration of assets acquired.
Besides this the company issued 2,00,000 equity shares for cash at par payable as ₹ 3
on application, ₹2 on allotment, ₹3 on first call and ₹2 on second call. Till date second
call has not yet been made and all the shareholders have paid except Mr. Ajay, who
did not pay allotment and calls on his 300 shares and Mr. Vipul, who did not pay first
call on his 200 shares.
1. Shares issued to vendors of building and machinery, M/s VPS Enterprises, would be
classified as:
A. Private placement
B. Employee Stock Option Plan (ESOP)
C. Issue of shares for consideration other than cash
D. Rights issue of shares
2. How many equity shares of the company have been subscribed?
A. 3,00,000
B. 2,99,500
C. 2,99,800
D. None of these
3. What is the amount of Securities Premium Reserve that will be reflected in the
balance sheet at the end of the year?
A. ₹200
B. ₹600
C. ₹400
D. Nil
4. What amount of Share Capital would be reflected in the balance sheet?
A. ₹39,90,000
B. ₹40,00,000
C. ₹39,97,900
D. ₹39,99,700
Case 2 To provide employment to the youth and to develop the Naxal affected backward
areas of Chattisgarh. X Ltd. decided to set-up a power plant. For raising funds the
company decided to issue 7,50,000 equity shares of ₹ 10 each at a premium of 50%.
The whole amount was payable on application. Application for 7,45,000 shares were
received.X Ltd. took over the assets of ₹ 14,00,000 and liabilities of ₹ 4,00,000 from
Z Ltd. for a purchase consideration of ₹ 9,19,000. X Ltd. issued a promissory note of
₹ 17,000 payable after 60 days in favour of Z Ltd. and the balance amount was paid
by issue of equity shares of ₹ 100 each at a premium of ₹ 25 per share.
5. Shares issued by X Ltd. to the public will be considered as _________.
A. Over subscription

KVS ZIET BHUBANESWAR 12/10/2021 Page 1

B. Under subscription
C. Issuing fully paid bonus shares to the members
D. Purchase of fixed assets
6. Name the account that is credited to the bank account at the time of receiving whole
amount on application.
A. Share Capital A/c
B. Share Application A/c
C. Share Application and allotment A/c
D. None of the above
7. Which account will be credited while issuing promissory note?
A. Bills Payable A/c
B. Bills Receivable A/c
C. Promissory Note Payable A/c
D. None of the above
8. Number of shares issued to Z Ltd. is ______ shares.
A. 7162
B. 7621
C. 7215
D. 7216
CASE-3 CASE STUDY QUESTIONS
OM Limited issued a prospectus of offering 2,000 equity shares of 10 each, at a
premium of 2 per share payable as follows:
On Application 2.50 per share; On Allotment 4.50 per share (including premium);
On First Call (three months from allotment), 2.50 per share and On Second Call
(three months after first call Rs 2.50 per share
Subscriptions were received for 3,17,00 shares on April 23,2021 and the allotment
made on April 30, 2021 was as under:
Categories Shares
alloted
Allotment in full (two applicants paid in full 38,000 full on 38,000
allotment in respect of 4,000 each.
Allotment of two shares for every 1,60,000 three shares applied 1,60,000
for
Allotment of one share for every 2,000 four shares applied for 2,000
Cash amounting to Rs 77,500 (being application money received with application
with application on 31,000 shares upon which on allotments were made) was
returned to application on May 6,2021.
The amounts called from the allottees were received on the due dates with the
exception of final call on 100 shares. These shares were forfeited on November 15,
2021 and reissued to Aman on November 16 for payment of Rs9 per share.

9. How much amount was received on allotment?

a. Rs 7,15,000
b. Rs 9,00,000
c. Rs 7,92,500

KVS ZIET BHUBANESWAR 12/10/2021 Page 2

d. Rs 6,91,000

10. How much total amount was credited to Share Forfeiture account on forfeiture
of shares?
a. Rs 250
b. Rs 750
c. Rs 650
d. Rs 1,000

11. .How much amount of excess application was adjusted towards first and Final
call?
a. Rs 5,000 and Rs 1,000 respectively
b. Rs 9,000 and Rs 5,000 respectively
c. Rs 9,000 and Rs 1,000 respectively
d. Rs 15,000 and Rs 9,000 respectively

12. How much amount will be transferred to Capital Reserve a/c after re-issue of
forfeited shares?
a. Rs 250
b. Rs 750
c. Rs 650
d. Rs 1000

Case-4. DF Ltd. invited application for issuing 50,000 shares of Rs 10 each at a

premium of Rs 2 per share. The amount was payable as follows:
On Application Rs 3 per share(including premium Rs 1)
On Allotment Rs 3 per share(including premium Rs 1)
On First call Rs 3 per share
On Second and Final call Balance Amount
Application for 70,000 shares were received. Allotment was made on the following
basis :
Application for 5,000 shares - full; Application for 50,000 shares – 90%
Balance of the application were rejected. Rs 1,30,200 were received on account of
allotment. The amount of the allotment due from the shareholder to whom shares
were allotted in full was fully received. A few shareholder to whom share were
allotted on pro-rata basis, failed to pay the allotment money. Rs 1,38,600 were
received on first call. The directors decided to forfeit all those shares on which
amount was due but was not received. The forfeited shares were re-issued @ Rs 8
per share fully paid up. Final call was not made.

13. .How much amount received on Allotment?

a. Rs 1,50,000
b. Rs 1,30,200
c. Rs 1,35,000
KVS ZIET BHUBANESWAR 12/10/2021 Page 3
d. Rs 2,10,000

14. .How much amount will be debited to Equity Share Capital A/c on forfeiture of
shares?
a. Rs 38,000
b. Rs 40,000
c. Rs 26,600
d. Rs 30,400
15. How much total amount was credited to Share Forfeiture A/c on forfeiture of
shares?
a. Rs 12,200
b. Rs 16,200
c. Rs 26,600
d. Rs 30,400

16. .How much amount will be transferred to Capital Reserve A/c after re-issue of
forfeited of shares?
a. Rs 7,600
b. Rs 4,600
c. Rs 1,800
d. Rs 11,400

Case-5
Read the passage given below and answer the following questions……..
Krishna Ltd issued 15,000 shares of Rs.100 each at a premium of Rs.10 per Share,
payable as follows:
On application Rs.30
On allotment Rs.50 [including premium]
On first and final call Rs.30
All the shares subscribed and the company received all the money due, with the
exception of the allotment and call money on 150 shares.
17. The amount of call in arrear on allotment will be-
A. Rs.7,500
B. Rs. 4,500
C. Rs. 6,000
D. Rs. 1,500
18. The amount of call in arrear on first and final call will be-
A. Rs. 5,000
B. Rs. 7,500
C. Rs. 4,500
D. Rs. 3,000
19. The amount received on allotment will be-
A. Rs. 7,50,000
B. Rs. 6,00,000

KVS ZIET BHUBANESWAR 12/10/2021 Page 4

C. Rs. 7,42,500
D. Rs. 7,44,000
20. The amount not received on 150 shares will be called-
A. Call in Advance
B. Call in Arrear
C. Forfeiture
D. None of the above
Case-6. X Ltd. purchased a running business from Y Ltd. for a sum of Rs.
48,00,000 payable by the issue of fully paid up equity shares of Rs. 20 each at a
premium of 20%. The assets and liabilioties consisted of the following-
Plant and Machinery- Rs. 25,00,000
Stock- Rs. 15,00,000
Debtors- Rs. 8,60,000
Sundry Creditors- Rs. 3,00,000
21. How many number of shares issued to Y Ltd. against purchase
consideration of Rs. 48,00,000.
A. 2,00,000 shares
B. 2,40,000 shares
C. 1,20,000 shares
D. 3,00,000 shares
22. The amount debited to goodwill account at the time of purchase of business
will be-
A. Rs. 2,00,000
B. Rs. 2,40,000
C. Rs. 3,00,000
D. None of the above
23. Goodwill raised in the books is -
A. Self generated goodwill
B. Purchased goodwill
C. Both (A) and (B)
D. None of the above
24. The amount of Security Premium Reserve will be-
A. Rs.4,00,000
B. Rs. 6,00,000
C. Rs. 5,00,000
D. Rs. 8,00,000

Case-7. Read the following text. Based on the information given, you are required
to answer [Link].(i) to Q No.(iv)
Rama Ltd. invited applications for issuing 2,00,000 equity shares of Rs.50 each.
The amount was payable as follows: On Application – Rs. 15 per share
On Allotment – Rs. 10 per share
On First and Final Call – Rs. 25 per share
Applications for 3,00,000 shares were received. Allotment was made to the
applicants as follows:

KVS ZIET BHUBANESWAR 12/10/2021 Page 5

Category No. of Shares Applied No. of Shares Allotted
I 2,00,000 1,50,000
II 1,00,000 50,000 Excess money received with
applications was adjusted towards sums due on allotment and calls. Sita, a
shareholder of Category I, holding 3,000 shares failed to pay the allotment money.
Her shares were forfeited immediately after allotment. Ravan, a shareholder of
Category II, who had applied for 1,000 shares failed to pay the first and final call.
His shares were also forfeited. All the forfeited shares were reissued at Rs.60 per
share fully paid up.
25. Excess application money adjusted towards allotment is
(a) Rs.5,00,000
(b) Rs.7,50,000
(c) Rs.12,50,000
(d) Rs.15,00,000
26. Amount unpaid by Sita on allotment is ----
(a) Rs. 3,000
(b) Rs. 15,000
(c) Rs. 30,000
(d) Rs. 60,000
27. Forfeited Shares were reissued at
(a) par
(b) discount
(c) premium
(d) loss
28. No of shares reissued is ----
(a) 3000
(b) 1000
(c) 4000
(d) 3500
Case-8. Read the following text. Based on the information given, you are required
to answer [Link].(i) to Q No.(iv)
X Ltd. invited applications for issuing 90,000 equity shares of Rs.100 each at a
premium of Rs.60 per share. The amount was payable as follows:
On Application–Rs.30 per share (including premium Rs.10)
On Allotment – Rs.70 per share (including premium Rs.50) On First and Final Call
– Balance amount
Applications for 1,00,000 shares were received. Shares were allotted on pro-rata
basis to all the applicants. Excess money received with application was adjusted
towards sums due on allotment. Sara, a shareholder holding 4,500 shares, failed to
pay the allotment money. Her shares were forfeited immediately after allotment.
Afterwards the first and final call was made. Shahid, a holder of 3,600 shares, failed
to pay the first and final call. His shares were also forfeited. All the forfeited shares
were re-issued for Rs.90 per share fully paid up.
29. Amount of application money transferred to share allotment is ---
(a) Rs.9,00,000
(b) Rs.30,00,000

KVS ZIET BHUBANESWAR 12/10/2021 Page 6

(c) Rs.3,00,000
(d) Rs.2,00,000
30. Amount of application money transferred to securities premium reserve is --
-
(a) Rs.9,00,000
(b) Rs.10,00,000
(c) Rs.54,00000
(d) Rs.60,00,000
31. Amount debited to securities premium reserve debited on forfeiture of
Sara’s shares is ---
(a) Rs.2,70,000
(b) Rs.2,25,000
(c) Rs.45,000
(d) Rs.3,00,000
32. Amount due on first and final call is ----
(a) Rs.54,00,000
(b) Rs.60,00,000
(c) Rs.51,30,000
(d) Rs.49,14,000

Read the following text. Based on the information given ,you are required to
answer [Link].1 to Q No.4:
Ram Dhani Ltd. had an authorized capital of 2,00,000 equity shares of ₹ 10 each. The
company offered to the public for subscription 1,00,000 shares. Applications were
received for 97,000 shares. The amount was payable as follows on application was
₹ 2 per share, ₹ 4 was payable each on allotment and first and final call. Shankar, a
shareholder holding 600 shares failed to pay the allotment money. His shares were
forfeited. The company did not make the first and final call

33. Name the type of share capital which is shown in the Memorandum of Association
of the company-
(A) Issued capital
(B) Subscribed Capital
(C) Authorised Capital
(D) Paid up capital
34. The amount forfeited on forfeiture of Shankar’s shares is ---
(A) ₹6,000
(B)₹1,200
(C)₹3,600
(D)₹2,400
35. Ram Dhani Ltd is---
(A)Private Company
(B)Public Company
(C)Government Company
(D)Public Corporation

KVS ZIET BHUBANESWAR 12/10/2021 Page 7

[Link] shares are forfeited, the Share Capital Account is debited with ___________
and the
Share Forfeiture Account is credited with ____________.

(A) Paid up capital of shares forfeited; Called up capital of shares forfeited

(B) Called up capital of shares forfeited; Calls in arrear of shares forfeited
(C) Called up capital of shares forfeited; Amount received on shares forfeited
(D) Calls in arrears of shares forfeited; Amount received on shares forfeited

READ THE FOLLOWING TEXT AND ANSWER THE QUESTIONS:

Bhawani Limited company has an Authorized capital of 1, 00,000 shares of ₹10 each
as per the Capital clause of the Memorandum of Association of the company.
The company issued 5,000 shares to the promoters of the company in consideration for
their services.
The company further issued 10,000 shares to the vendors for the purchase of
Machinery costing ₹1, 20,000. The remaining shares are issued at ₹10 each at a
premium of ₹2 and shares are fully subscribed.
A shareholder holding 500 shares failed to pay the first and final call. His shares were
forfeited and later on re issued at ₹8 per share fully paid up.

[Link] one of the following is the registered capital of the company?

a. Paid up capital
b. Uncalled capital
c. Authorized capital
d. Issued capital

The company issued ₹1,00,000 worth of shares towards the purchase price of
machinery costing ₹90,000. The excess of ₹20000 is transferred to
a. Share capital a/c
b. Capital reserve a/c
c. Securities premium reserve a/c
d. Cash a/c

[Link] entry you will pass if asset is purchased and shares are issued at premium.
a. Vendor a/c Dr To share capital
b. Assets a/c Dr To share capital To share premium
c. Vendor a/c Dr share premium a/c Dr To Share capital
d. Vendor a/c Dr To share capital To share premium

[Link] Shares are issued to promoters for their services then the account debited will be
a. Goodwill a/c
b. Promoters a/c
c. Asset a/c
d. Expenses a/c

READ THE FOLLOWING TEXT AND ANSWER THE QUESTIONS:

KVS ZIET BHUBANESWAR 12/10/2021 Page 8

Based on the information given , you are required to answer [Link].15 to Q
No.18

Ravi Industries Ltd. A company in the manufacture of computers decided to

issue for public subscription 40000 equity shares of ₹10 each at a premium
of ₹2 payable as :

On Application –₹2 per share On Allotment _ ₹ 5 per share(including

premium)

On first call _ ₹2 per share On Second and final call _ ₹3 per share,

Applications were received for 60000 shares. Allotment was made on pro
rata basis to the applicants for 48000 shares, the remaining applications
being refused. Money overpaid on applications was utilized towards sum
due on allotment. Ram applied for 2400 shares failed to pay the allotment
money due and shyam to whom 2000 shares were allotted filed to pay the
two calls.
These shares were subsequently forfeited after the second and final call
was
made. All the forfeited shares were reissued as fully paid at ₹8 per share.

Q40. The excess applications and application money adjusted towards

allotment is :

a. 8000, ₹16000
b. 12000,₹24000
c. 20000,₹40000
d. 16000,₹32000

41..How many applications are rejected and how much money is returned?

a. 12000, ₹24000
b. 8000,₹16000
c. 20000,₹40000
d. 16000,₹32000
42. How many shares are allotted to Ram?

a. 2000 shares

b. 2400 shares

KVS ZIET BHUBANESWAR 12/10/2021 Page 9

c. 600 shares

d. 1800 shares

READ THE FOLLOWING TEXT AND ANSWER THE QUESTIONS:

Based on the information given , you are required to answer Q.No19 to Q

22

Nitro Paints Ltd. Invited applications for issuing 1,60,000 equity shares of
₹10 each at a premium of ₹3 per share. The amount payable as follows:

On Application ₹6 per share (including premium ₹1)

On Allotment ₹3 per share (including premium ₹1);

The Balance on First and Final call.

Applications for 1,80,000 shares were received. Applications for 10,000

shares were rejected and pro rata allotment was made to the remaining
applications. Over payment received on application was adjusted towards
sum due on allotment and calls. All calls were made and duly received
except allotment and final call from Aditya who was allotted 3200 shares.
His shares were forfeited. Half of the forfeited shares were reissued for
₹43000 as fully paid up.

Q 43. How many shares were applied by Aditya to get 3200 shares
allotted?

a. 3400
b. 4300
c. 2300
d. 3400

44. How much allotment money is in arrears on Aditya’s default?

KVS ZIET BHUBANESWAR 12/10/2021 Page 10

a. ₹8400
b. ₹4800
c. ₹6400
d. ₹460

45. What amount of the forfeited shares is transferred to capital reserve?

a. ₹8600
b. ₹6800
c. ₹7800
d. ₹8700

46. Mention the total amount of premium to be shown in the Balance

sheet?

a. ₹500600
b. ₹600500

c. ₹650500

d. ₹560600
Read the passage given below and answer the following questions
ABC Ltd. invited applications for issuing 75,000 equity shares of 10 each. The
amount was payable as follows:
On application and allotment: 4 per share,
On first call: 3 per share,
On second and final call: BALANCE
Applications for 1,00,000 shares were received. Shares were allotted to all the
applicants on pro rata basis and excess money received with applications was
transferred towards sums due on first call. Vibha who was allotted 750 shares failed
to pay the first call. Her shares were immediately forfeited. Afterwards the second
call was made. The amount due on second call was also received except on 1,000
shares applied by Monika. Her shares were also forfeited. All the forfeited shares
were reissued to Mohit for 9,000 as fully paid-up.

47. What amount is received on share first call?

KVS ZIET BHUBANESWAR 12/10/2021 Page 11

a) Rs.2,25,000
b) Rs.1,25,750
c) Rs.1,23,750
d) None of the above

[Link] due on Share second and Final Call is:

a) Rs.2,27,750
b) Rs.1,23,750
c) Rs.2,25,000
d) None of the above

49. How many shares are allotted to Monika?

a) 750 b) 1000 c)1500 d) None of the above

Read the passage given below and answer the following questions
Amisha Ltd inviting application for 40,000 shares of Rs.100 each at a premium
of Rs.20 per share payable; on application Rs.40 ; on allotment Rs.40
(Including premium): on first call Rs.25 and Second and final call Rs.15.
Application were received for 50,000 shares and allotment was made on prorata
basis. Excess money on application was adjusted on sums due on allotment.
Rohit to whom 600 shares were allotted failed to pay the allotment money and
his shares were forfeited after allotment. Ashmita, who applied for 1000 shares
failed to pay the
Two calls and his shares were forfeited after the second call. Of the shares
forfeited, 1200 shares were sold to Kapil for Rs.85 per share as fully paid, the
whole of Rohit’s shares being included.

50. What kind of subscription is it?

a) Over subscription c) Under subscription

b) Full subscription d) None of the above
(c) 40% (d) 25%
51.,An amount of ___________ remains unpaid on allotment by Rohit.

a) 18,000 b)1,00,000 c)15,000 d) None

[Link]

KVS ZIET BHUBANESWAR 12/10/2021 Page 12

1. Kabir, Kishore and Kamath are partners had incorporated a company in the name
of hygiene India Ltd. To do the business of sanitising offices and homes with
registered capital of ₹5,00,000(1,00,000 Equity shares of ₹5 each).
The Promoters of the company took 500 equity shares each in terms of memorandum of
association. They purchased a running business of Ashutosh& co. for paying by issue of
shares at par so that they do not loose time on setting up the necessary infrastructure. The
assets and liabilities of Ashutosh& Co. were:
Plant and Machinery ₹5,00,000; Vans ₹7,00,000; Sanitising Machines ₹1,00,000 stock of
Chemicals ₹3,00,000 and Sundry Creditors ₹10,00,000.
They agreed to pay commission @5% of the net amount to Ajay, who deal possible by
issue of shares at par.
On the basis of above information, choose the correct option to the following questions.

52. Amount that will be credited to capital Reserve will be

a. ₹2,00,000
b. ₹1,50,000
c. ₹6,00,000
d. ₹4,00,000

53. Number of shares issued will be

a. ₹40,000
b. ₹60,000
c. ₹70,000
d. ₹80,000

54. Commission Payable to Ajay will be

a. ₹30,000
b. ₹40,000
c. ₹50,000
d. ₹60,000

2. Stock Market was rising ever since it reopened after lock down. Charnesh had
considerable experience of trading in stock market. He discussed with Harnesh and Bhupesh
about starting the business of trading in listed securities to which they agreed. They undertook to
invest ₹5,00,000 each and raise further capital by issuing shares for subscription. A NBFC in the
name of Moonlight Securities Ltd. With registered capital of ₹50,00,000 (5,00,000 shares of ₹10
each) was incorporated and after obtaining necessary permissions from authorities started the
business.

Soon they issued 3,00,000 shares to Public for subscription at a premium of ₹2 per share payable
₹3 on application, ₹5 on allotment, ₹2 as first call and balance as final call. Calls were made
except the final call and due amounts were duly received except the first call on 1,000 shares.
These shares were forfeited. Subsequently, 400 of these shares were reissued for ₹6 per share as
₹7 paid-up and 600 reissued at ₹8 per share fully paid.

KVS ZIET BHUBANESWAR 12/10/2021 Page 13

On the basis of above information, choose the correct option to the following questions.

55. Amount forfeited was

a. ₹3,000
b. ₹6,000
c. ₹3,500
d. ₹4,500
e.
56. Gain on reissue of shares transferred to
a. Profit and loss account
b. Reserve Capital
c. Capital redemption Reserve
d. Capital reserve

57. Gain on reissue of forfeited shares will be

a. ₹2,400
b. ₹5,000
c. ₹3,000
d. ₹4,400

Read the following information carefully and give the answer for the questions.+

(58) What the amount was called in first & final call per share?
(a) ₹ 20 per share (b) ₹ 40 per share (c) ₹ 30 per share (d) None of these

(59) Which of the following amount received on allotment of shares?

(a) ₹ 1,50,00,000 (b) ₹ 90,00,000 (c) ₹ 45,00,000 (d) ₹ 85,50,000

(60) Which of the following amount will be debited to calls-in arrears account on allotment?

(a) ₹ 6,00,000 (b) ₹ 4,50,000 (c) ₹ 3,00,000 (d) ₹ 7,50,000

61. Which of the following amount will be transferred to Capital Reserve Account?

(a) ₹ 7,50,000 (b) ₹ 6,00,000 (c) ₹ 4,50,000 (d) ₹ 2,25,000

KVS ZIET BHUBANESWAR 12/10/2021 Page 14

CASE STUDY- 2

Read the information given below and give the answer for the questions.
X Ltd issued 50,000 shares of ₹ 100 per share for public subscriptions at 20% premium. Amount
payable as under:
On Application :₹ 40 per share (including 10% premium)
On Allotment :₹ 40 per share (excluding 10% premium)
On First & Final Call :₹ Balance
Application received for 75,000 shares. Allotment was made to 60,000 share applicants. All due
money was duly received except from a shareholder (Ashok) allotted to whom 12,000 shares,
failed to pay allotment and calls. These shares were forfeited.

62) Which of the following Excess application money adjusted on allotment?

(a) 10,00,000 (b) 6,00,000 (c) 4,00,000 (d) None of these

63) What the amount received on allotment?

(a) ₹ 15,96,000 (b) ₹ 21,00,000 (c) ₹ 5,04,000 (d) ₹ 4,00,000

64) Which of the following amount did not receive on allotment?

(a) ₹ 15,96,000 (b) ₹ 21,00,000 (c) ₹ 5,04,000 (d) ₹ 4,00,000

65) What the amount forfeited on 12,000 shares?

(a) ₹ 5,76,000 (b) ₹ 4,56,000 (c) ₹ 5,04,000 (d) ₹ 4,00,000

Read the following statement carefully and give the answer for the question.
Golden Firework Ltd is authorized to issue shares 5,00,000 of ₹ 100 each. Company raised the
capital by issue of 2,00,000 shares through e-IPO. As per the decision of Managing Board of
Directors of company, company issued 75,000 shares to their parent company and 40,000 shares
issued to existing employees of company as per their choice and option at the below price than
the market price.
(66) “Company issued 75,000 shares to their parent company” is an example of ______.

(a) Public Issue (b) Private Placement

(c) ESOP (d) Issue other than cash

(67) “40,000 shares issued to existing employees of company as per their choice and option at
the below price than the market price.” Is an example of _______
(a) Public Issue (b) Private Placement (c) ESOP (d) Issue other than cash

KVS ZIET BHUBANESWAR 12/10/2021 Page 15

ANSWER KEY

1. C
2. A
3. D
4. C
5. C
6. C
7. A
8. D
9 A
10 C
11 C
12 B
13 A
14 B
15 B
16 D
17 D
18 B
19 C
20 D
21 C
22 A
23 B
24 C
25 A
26 C
27 A
28 C
29 A
30 D
31 A
32 B
33 D
34 D
35 A
36 B
37 B
38 C
39 D
40 A
41 A

KVS ZIET BHUBANESWAR 12/10/2021 Page 16

42 A
43 A
44 A
45 A
46 A
47 D
48 C
49 D
50 C
51 A
52 B
53 C
54 D
55 B
56 C
57 D
58 D
59 C
60 D
61 C
62 A
63 A
64 B
65 B
66 C
67 A

PREPARED BY THE PGTs ( COMMERCE ) OF BHUBANESWAR, GUWAHATI,

KOLKATA, RANCHI, SILCHAR AND TINSUKIA REGIONS.

KVS ZIET BHUBANESWAR 12/10/2021 Page 17

Chapter 8 - Issue of Debenture
CASE/SOURCE BASED QUESTIONS
I Read the passage given below and answer the following questions……..
Bee ltd purchased the following assets of See ltd.
Land and building of Rs55,00,000 at Rs 75,00,000; Furniture Rs20,00,000; and
Machinery Rs 30,00,000. The purchase consideration was Rs 1,00,00,[Link] of Rs
10,00,000 was made through cheque and remaining amount by issue of 9% debentures of
Rs100 each at a premium of 20%
1. According to Companies Act 2013,what is the maximum rate of premium at
which debentures can be issued ?
a. 10% b. 15% c. 20% d. maximum limit not specified
2. Amount credited to Capital Reserve A/c is
a.25,00,000 b. 20,00,000 c.15,00,000 d,10,00,000
3. What is the number of debentures to be issued?
a.65,000 b.70,000 c.75,000 d.80,000
4. Securities premium reserve A/c is to be credited with------
a.10,00,000 b.15,00,000 c.20,00,000 d.25,00,000
II Read the passage given below and answer the following questions……..
ABC decided to acquire the running business of Y ltd, so it took over the assets of Rs
6,60,000 and liabilities of Rs 80,000 of Y limited for a purchase consideration of
Rs5,85,000 payable by the issue of 12% debentures of Rs100 each at a discount of 10%.
5. Goodwill A/c will be debited with
a.10,000 b 15,000 c 5,000 d.8,000
6. Discount on issue of debenture is written off ,in the year debentures are allotted,
in the following sequence—
a. Securities premium reserve, capital reserve, statement of Profit and loss
b. Securities premium reserve, statement of Profit and loss, capital reserve
c. capital reserve, securities premium reserve, statement of Profit and loss
d. statement of Profit and loss, capital reserve, securities premium reserve
7. The number of debentures to be issued is:
a. 6600 b.6500 c.4500 d.5400.
8. 12% Debentures Account is credited with
a. 6,50,000 b.7,00,000 c. 6,00,000 d.7,50,000
III. CASE/SOURCE BASED QUESTIONS
[Link]. Read the passage given below and answer the following questions
Consider the following cases:
[Link] 2000, 12% debentures of Rs 100 each at a discount of 2%, redeemable at par
[Link] 2000, 12% debentures of Rs 100 each at par but redeemable at 5% premium
[Link] 2000, 12% debentures of Rs 100 each at a discount of 2%, redeemable at a
premium of 5%
[Link] 2000, 12% debentures of Rs 100 each at a premium of 5%, redeemable at a
premium of 10%
9 What is the amount debited to bank at the time of issue (case i)?

KVS ZIET BHUBANESWAR 12/10/2021 Page 1

(A) 200000
(B) 198000
(C) 197000
(D) 196000
10 The amount debited to “Loss on issue of debentures a/c” in case ii……….
(A) 10000
(B) 5000
(C) 15000
(D) 20000
11 The amount debited to “Loss on issue of debentures a/c” in case iii…….
(A) 10000
(B) 12000
(C) 14000
(D) 16000
12 The amount debited to “Loss on issue of debentures a/c” in case iv………
(A) 5000
(B)10000
(C) 15000
(D) 20000
IV. CASE/SOURCE BASED QUESTIONS
[Link]. Read the passage given below and answer the following questions
A company issued debentures of the face value Rs 10,00,000 at a discount of 6% on
1 April 2012. These debentures are redeemable by annual drawings of Rs 2,00,000
st

made on 31 march each year. The directors decided to write off discount based on
st

debentures outstanding each year.

13 Amount of discount to be written off on 31 march 2013
st

(A) 20000
(B) 15000
(C) 25000
(D) 10000
14 Amount of discount to be written off on 31 march 2014
st

(A)12000
(B) 14000
(C) 16000
(D) 18000
15 Amount of discount to be written off on 31 march 2015
st

(A) 8000
(B) 10000
(C) 12000
(D) 14000
16 Amount of discount to be written off on 31 march 2016
st

(A) 5000
(B) 6000
(C) 7000
(D) 8000

V. CASE STUDIES BASED QUESTIONS

[Link]. 17

KVS ZIET BHUBANESWAR 12/10/2021 Page 2

A company purchased sundry assets of rs.10,00,000 and liabilities of rs 50,000 from another
company for purchase consideration of 12,00,000. Amount transfer to vendor account will
be:
a.2,00,000 b.12,50,000
c.12,00,000 d. 8,50,000

sl. No. 18.

Laxmi Ltd took over assets of rs12,00,000 and creditors of rs.2,40,000 from apurva ltd.
Laxmi ltd. Issued 8% debenture of rs100 each at apremium of 20% as purchase consideration
the amount credited to debentures a/c will be rs._______
a.8,00,000 b.12,00,000
c.4,00,000 d.6,00,000
VI. Case/ Source based questions
Nandan Ltd.’ Is a manufacturer of heavy machines in a town of Telangana. It follows high
standards of environment safety in the process of manufacturing.
The company runs a school to provide quality education and a medical centre to address health
issues of the resident of the resident of that area.
The company is doing well and is going to start new manufacturing unit in Jharkhand creating
livelihood for people, especially those from disadvantage section of the society. To raise fund
company decided to issue 50,000 shares of ₹100 each at par and 80,000, 10% debentures of
₹100 at 95, repayable at ₹105.
Based on above text answer the questions no 15 to 18
19 Total Fund raised by the company:
A. 50,000
B. 1,30,00,000
C. 1,26,00,000
D. 80,00,000
20 When debentures are allotted, 10% debenture account is:
A. Debited with ₹ 80,00,000
B. Credited with ₹80,00,000
C. Debited With ₹ 76,00,000
D. Credited with ₹ 76,00,000

21 Loss on issue of debenture:

A. 4,00,000
B. 80,000
C. 8,00,000
D. None of the above
22 The values which the company wants to communicate to the society.
A. Welfare of employees
B. Environmental awareness
C. Employment in backward areas
D. All these
VII. Pranshu Ltd. Engaged in manufacturing of Lab equipment In Delhi, During COVID pandemic
demand of equipment rapidly
Increased and the company decided to take loan of ₹ 40,00,000 from IDBI Bank to provide sufficient

KVS ZIET BHUBANESWAR 12/10/2021 Page 3

supply of equipment in market. The company took loan from IDBI bank of ₹40,00,000 and placed
debentures for ₹ 50,00,000 as collateral security. The company provide free covid testing kit,
Sanitizers and masks for backward villages.
23 Entry for Recording of debentures as collateral Security:
A. Bank A/c Dr.
To debenture A/c
B. Bank Loan A/c Dr.
To Debenture A/c
C. Debenture suspense A/c Dr.
To Debentuer A/c
D. Bank A/c Dr,
To Bank Loan A/c
24 Entry for Loan obtained from IDBI Bank
A. IDBI Bank A/c Dr.
To Bank Loan A/c
B. Debenture A/c Dr.
To Bank Loan A/c
C. Bank Loan A/c Dr.
To IDBI Bank A/C
D. Bank Loan A/c Dr.
To Debenture A/c
25 In context of above case Bank loan from IDBI shown in balance sheet as:
A. Under head non-current liabilities and sub head long term borrowings
B. Under Head current assets and sub head cash and cash equivalents
C. Both (a) and (B)
D. None of the above
26 Which of following statement is not true about in context of above case:
A. Company empowering backward village
B. Debentures of ₹50,00,000 are shown in balance sheet as long-term borrowings
C. Debenture suspense account is shown as deduction from debenture account in Notes
to accounts of balance sheet
D. None of the above

[Link]/SOURCE BASED QUESTIONS:

[Link]. Read the passage given below and answer the following questions……..
Charan Ltd. took over Assets of ₹6,00,000 and Liabilities of ₹40,000 of Paras Ltd. at
an agreed value of ₹6,30,000. Charan Ltd. issued 10% Debentures of ₹100 each at a
discount of 10% to Paras Ltd. in full satisfaction of the price. Charan Ltd. writes off
any capital losses incurred during a year, at the end of that financial year.

In which account is the difference between the assets and liabilities taken over and
the payment made be transferred to?
27 a) General Reserve
b) Capital reserve

KVS ZIET BHUBANESWAR 12/10/2021 Page 4

c) Goodwill
d) DRR

28 As Charan Ltd. writes off the capital losses where will the discount on issue of
debentures be transferred to?

A) Statement of P/L
B) General Reserve
C) Capital Reserve
D) DRR
29 What is the amount of discount given to Paras Ltd. on the issue of debentures?

A) 60000
B) 70000
C) 75000
D) 50000
30 What is the Purchase consideration payable to paras Ltd.?

A) 700000
B) 600000
C) 630000
D) 560000
IX Nikhil Technologies Ltd. issued 5,000; 9% Debentures of ₹100 each at a premium
of ₹20 payable as follows:
(i) ₹40 including premium of ₹10 on application
(ii) ₹40 including premium of ₹10 on allotment
(iii) Balance as first and final call.
Applications were received for 5,000 debentures and allotment was made to all the
applicants. All the calls were made, and amounts received.
Q. What is the total interest payable on the debentures issued?

31 A) ₹120000
B) ₹ 45000
C) ₹ 450000
D) ₹ 4500
32 What amount of the money received in application is transferred to the securities
premium reserve account?
A) 500000
B) 50000
C) 100000
D) 5000
33 The amount of money received during application is:
A) ₹ 200000
B) ₹ 150000
C) ₹ 2000000
D) ₹ 250000
34 The is the balance amount per debenture to be received at the first and final
call is:
A) ₹20

KVS ZIET BHUBANESWAR 12/10/2021 Page 5

B) ₹40
C) ₹ 30
D) ₹10
X A Ltd. Took over the assets of ₹ 560000 and creditors of ₹ 80000 from S Ltd. A
Ltd issued 8% debentures of ₹ 20 each at a premium of 20% as purchase
35 consideration to S Ltd.
1. Calculate amount of purchase consideration
A. ₹ 580000
B. ₹380000
C. ₹ 680000
D. ₹480000
2. Calculate the number of debenture issued by A Ltd.
A. 20000
B. 30000
C. 40000
D. 10000

XI B Ltd. Purchased assets of the book value of ₹1045000 from C Ltd. It was agreed
36 that the purchase consideration be paid by issuing 14% debentures of ₹ 100 each.
Calculate no. of debentures issued if it is issued
1. At par
A. 11450
B. 12450
C. 10450
D. 15450
2. At a discount of 5%
A. 11000
B. 12000
C. 13000
D. 14000
[Link] a premium of 10%
(A) 7500
(B)8500
(C) 6500
(D) 9500
XII CASE/SOURCE BASED QUESTIONS;
Read the passage given below and answer questions.
X Ltd. was in need of short term requirement of funds .And there was depression
in the Capital market . Mr.Y the finance manager wanted to issue shares .But Z Sr.
manager finance advised him in place of issuing equity share, they should issue
debentures. Due to Capital market conditions .So company issued 10,000 ,8%
Debentures of Rs.100 each at a discount of 10% and redeemable at a premium of
Rs.10 per share amount was payable in along with application .Debenture
Applications received were for 11,000 ,8% Debentures.
37. State the amount of loss on issue of Debentures
A. Rs.1,00,000
B. Rs,2,00,000
C. Rs.1,50,000

KVS ZIET BHUBANESWAR 12/10/2021 Page 6

D. Rs,50,000

38. What type of securities investors prefer during depression

A. Preference Shares
B. Equity Shares
C. Debentures

39, Name the account from which loss on issue of debentures will be written off
A. Statement of Profit and Loss
B. Capital Reserve Account
C. Securities Premium Reserve Account
D. All of the above

XIII Varun Ltd. was a profit making organisation .They decided to expend their
business .So Varun Ltd. took over Assets of Rs. 10,00,000 and liabilities of Rs.
1,80,000 of Cayns Ltd. for Rs. 7,60,000 .Varun Ltd. issued 9% Debentures of Rs.100
each at a discount of 5% in full satisfaction of the purchase consideration in favour
of Cayns Ltd.
On the basis of above paragraph answer question no 18 to 20
40. What will be the amount of Capital Reserve
A. Rs.1,00,000
B. Rs.80,000
C. Rs.60,000
D. Rs. 40,000

41. What will be the number of Debentures to be issued to Cayns Ltd. ?

A. 7,600
B. 8,000
C. 10,000
D. None of the above

42. In the above case from where amount of discount on issue of Debentures will be
written off
A. Capital Reserve
B. Securities Premium Reserve
C. Statement of profit and Loss
D. None of the above

XIV
Commerce Academy Ltd issued 15,000 11% debentures of Rs. 200 each at
premium of 25% on 1 November 2018 redeemable after 6 years on premium of Rs.
10 each.
Give the answer of following question.

43 What journal entry will be passed for receipt of amount of the above debentures?
(a) Bank A/c Dr

KVS ZIET BHUBANESWAR 12/10/2021 Page 7

To 11% Debentures Application A/c
(b) Bank A/c Dr
To 11% Debenture Application & Allotment A/c
(c) Debenture Application A/c Dr
To Bank A/c
(d) Bank A/c Dr
To 11% Debenture Application & Allotment A/c
To Security Premium Reserve A/c
44Debentures are issued for:
(a) Cash
(b) Consideration other than cash
(c) Collateral security
(d) On the point of view of redemption
45How much amount will be debited on loss on issue of these debentures.
(a) Rs. 1,00,000/= (b) Rs. 1,50,000
(c) Rs. 2,00,000/= (d) Rs. 4,50,000
46 On which dates interest will be credited to debentures holders every yearagainst
these debentures?
(a) 31 March and 31 December
st st
(b) 30 April and 31 October
th st

(c) 30 June and 31 December

th st
(c) 1 May and 1 November
st st

XV XYZ Ltd. Issued 30,000 10% debentures of Rs. 500 each to public on 1 June 2018
st

for 10 years. The company had issued 10,000 9% debentures of Rs. 200 at premium
of 25% to AB Ltd against a machine purchased from him. The company had taken a
loan of Rs. 20,00,000 for which 15,000 8% debentures of Rs. 100 was issued to
bank as collateral security.
Give the answers of following questions:

47 Which of the following journal entry will be made for issue of debentures as
collateral security
(a) Loan A/c Dr (b) Bank A/c Dr
To 8% Debentures A/c To 8% Debentures A/c
(c) Debentures Suspense A/c Dr (d) Bank A/c Dr
To 8% Debentures A/c To Loan A/c
48 On which date the above debentures will be redeemed?
(a) 31 December, 2028
st
(b) 31st March 2028
(c) 31 May, 2028
st
(d) 31 July 2028
st

49 What is the cost of Machine purchased from AB Ltd.

(a) Rs, 15,00,00/= (b) Rs 20,00,000/=
(c) Rs. 25,00,000/= (d) Rs. 30,00,000/=
50 As per the case above, which method of issue of debentures was not undertaken by
XYZ Ltd.
(a) Issue of debentures for cash
(b) Issue of debentures for consideration other than cash
(c) Issue of debentures as collateral security
(d) Issue of debentures on the point of view of redemption

KVS ZIET BHUBANESWAR 12/10/2021 Page 8

ANSWR KEY
I
1 d
2 a
3 c
4 b
II
5 c
6 a
7. b
8. A

Case Study Questions(I)

9 (D) 196000
10 (A) 10000
11 (C) 14000
12 (D) 20000

Case Study Questions (II)

13 (A) 20000
14 (C) 16000
15 (C) 12000
16 (D) 8000

CASE STUDY QUESTIONS

17. c
18 a

Case/ Source based questions

19 1,26,00,000
20 Credited with ₹80,00,000
21` 8,00,000
22 All these
23 Debenture suspense A/c Dr.
To Debentuer A/c
24 IDBI Bank A/c Dr.
To Bank Loan A/c
25 Under head non-current liabilities and sub head long term borrowings
26 Debentures of ₹50,00,000 are shown in balance sheet as long-term borrowings

KVS ZIET BHUBANESWAR 12/10/2021 Page 9

Case Study Questions
27 C
28 A
29 B
30 C
31
B
32 B
33 A
34 B

35 1. D
2. A
36 1. C
2. A
3. D

37. B. Rs,2,00,000

38. (C) Equity Share

39. (D) All of the above
40 ( C) 60,000
41 (B) 8,000
42. (A) capital Reserve
43 (b) Bank A/c Dr
To 11% Debenture Application & Allotment A/c
44 (a) Cash
45 (d) Rs. 4,50,000
46 (b) 30 April and 31 October
th st

47 (c) Debentures Suspense A/c Dr

To 8% Debentures A/c
48 (c) 31 May, 2028
st

49 (c) Rs. 25,00,000/=

50 (d) Issue of debentures on the point of view of redemption

PREPARED BY THE PGTs ( COMMERCE ) OF BHUBANESWAR, GUWAHATI, KOLKATA,

RANCHI, SILCHAR AND TINSUKIA REGIONS.

KVS ZIET BHUBANESWAR 12/10/2021 Page 10

PART – B (FINANCIAL STATEMENT ANALYSIS)

NAME OF THE CHAPTER: - ANALYSIS OF FINANCIAL STATEMENT

CASE BASE/ SOURCE BASE QUESTIONS

From the given hypothetical statement of profit and loss account for the year ended 31March 2018 and
31March 2019, You are required to answer the following questions,TAKING PREVIOUS YEAR
FIGURE AS BASE.
31-03-2018 31-03–2019
Revenue from operations 10,00,000 5,00,000
Purchase of stock in trade 6,50,000 2,00,000
Change in inventories of stock in trade 60,000 50,000
Other Expenses 10% of cost 20% of cost
of revenue of revenue
from from
operations operations
Tate of tax 40% 30%
Q1 Cost of Revenue from operations for the year ended 31-03-2018 amounted to:
A、₹1,50,000
B、₹-2,50,000
C、₹-3,50,000
D、₹-7,10,000
Q2 Net Profit before tax during the year ended 31-03-2018 was:
A、₹-7,00,000
B、₹-2,50,000
C、₹-150,000
D、₹-2,00,000
Q3 What is the amount of other expenses for the year 2019:
A、₹-50,000
B、₹-71,000
C、₹-45,000
D、₹-60,000
Q4 What is the percentage change in net profit before tax?
A、9.50
B、4.70%
C、6.70%
D、4.5 0%
Q5 Amount of tax to payable during the year 31-03-2019.
A、₹-65,000
B、₹-60,000
C、₹-87,600
D、₹-8,0000
From the given hypothetical statement of profit and loss account for the year ended 31March 2018 You
are required to answer the following questions, TAKING Revenue from operations (NET SALES) AS
A COMMON BASE.
31-03-2018
Revenue from operations 2,50,000
Purchase of stock in trade 1,80,000
Changes in inventory of stock in trade 7,500
Employee benefit expenses 5,000
Interest on long term borrowings 7,500
Tax 40%
Q6 Amount of cost of revenue from operations is equal to:
A、₹-1,87,5000
B、₹-1,72,500
C、₹-2,57,500
D、₹-70,000
Q7 What is the amount of total expenses to be deducted from total revenue.
A、₹-2,50,000
B、₹-1,80,000
C、₹-2,00,000
D、₹-1,87,500
Q8 What is percentage of total expenses to total revenue:
A) 80%. B) 70%. C). 60%. D) 85%
Q9 Identify which of the following is a finance cost:
A、Changes in inventory
B、Employees benefit expenses
C、Changes in inventory
D、Interest on long term borrowings
Q10 What is the percentage of net profit after tax:
A) 12%. B). 8 %. C) 20%. D). 25%
Q11 ABC Ltd. Is a newly established business firm that deals in the manufacturing of cars. It was
established in the year 2019 in pre Covid times. Due to outbreak of pandemic, their sales went down at
first as a result of nationwide lockdown but eventually it got increased due to preference of people for
use of personal vehicles for commuting. The entity is perplexed about its performance in the past two
years and is therefore not able to provide relevant financial information to its users. As a senior
accountant of the company, you need to provide solutions to their following problems:

Based on the above case study question choose the correct alternative for question (1 – 4)
1. All of the following tools can be used by the company to compare it’s performances in the past two
years, except:
(a). Cash flow analysis
(b). Ratio analysis
(c). Common size statements
(d). Trial balance summary
2. The document through which the company can make its users fully understand its financial
statements is referred to as:
(a). Audit notes
(b). Notes to accounts
(c). Working notes
(d). Clarifications

3. The question talks about the users of accounting information. Whom amongst the following, would
you classify as an internal user of accounting information?
(a). Managers
(b). Government
(c). Suppliers
(d). Public
4. Which of the following documents will exhibit the financial position of ABC Ltd.?
(a). Statement of Profit and Loss
(b). Notes to accounts
(c). Balance sheet
(d). Statement of affairs

Q12 M Limited is a company listed on recognized stock exchange in India having its registered office in
New Delhi. The Company is engaged in sale, purchase, maintenance, of Auto mobile related products
and also provide consultancy services in India
M Ltd. Is in the process of preparing its Balance Sheet as per Schedule III, Part I of the Companies
Act, 2013 and provides its true and fair view of the financial position.
Based on the above case study question choose the correct alternative for question (5 – 8)
5. Under which head and sub-head will the company show ‘Stores and Spares’ in its Balance Sheet?
(a). Head: Fixed Assets Sub head ; tangible Assets
(b). Head: Non-Current Assets Sub head ; other non-current asset
(c). Head: Current Assets Sub head ; Inventories
(d). Head: Current Assets Sub head ; other current asset

6. What is the accounting treatment of ‘Stores and Spares’ when the Company will calculate its
Inventory Turnover Ratio?

(a). While calculating Inventory Turnover Ratio it is included in Inventories.

(b). While calculating Inventory Turnover Ratio it is not included in Inventories.
(c). While calculating Inventory Turnover Ratio it is not included in Net sales.
(d). While calculating Inventory Turnover Ratio it is included in purchase.

7. The management of M Ltd. wants to analyze its Financial Statements. The main objective of such
analysis.
(a). To know the financial strength
(b). To make the comparative study with other firms.
(c). To know the efficiency of the management.
(d). All of the above.
8. Under which major headings and sub-heading will “Provision for employee benefits “shown in the
Balance Sheet of a company as per Schedule III of Companies Act, 2013?
(a). Head: Non-current liability Sub head ; Deferred provision
(b). Head: Non-current liability Sub head ; Long term provision
(c). Head: Current liability Sub head ; Current liability
(d). Head: Current liability Sub head ; Short term provision

Q13 The managing director of XL Ltd. Company wants to measure the performance of its own and to judge
the company performance has decreased or increased in respect to previous year. The company hires an
expert for the same. He asked the company to give two years information of statement of profit and loss.
The company is provided the same which are as follows-
Particulars 2018-19 2017-18
Amount (₹) Amount (₹)
Revenue from Operation 25,00,000 20,00,000
Other income 100000 500000
Expenses :-
a) Employee Benefit Expenses: 60% of total revenue 50% of total revenue

b) Other Expenses 10% of Employee 20% of Employee Benefit

Benefit expenses expenses
Tax Rate
40% 40%

1 What is the percentage change of Total Revenue ?

a. 5 %
b. 4%
c. 6%
d. 7%

2 Is Net profit after tax increased or decreased ?

a. Increased
b. Decreased
c. No change
d. Non of these

3 What is the percentage change of Total Revenue from operation ?

a. 20%
b. 25%
c. 28%
d. 30%

Q14 The Balance Sheet ofExcel Ltd and MS Word Ltd is given as on 31st March 2019 .Now you have to
judge the financial position of these two company on the basis of one tools of financial statement where
the individual figure are converted into percentage to some common base.
Particulars Note Excel Ltd MS Word 31.3.2018
no. 31.3.2019 (₹) (₹)
I. EQUITY AND LIABILITIES
1. Shareholder’s Fund
a. Share Capital 5,00,000 4,00,000
b. Reserve and Surplus 1,60,000 1,20,000
2. Current Liabilities
a. Trade Payable 1,40,000 80,000
Total 8,00,000 6,00,000
II. ASSETS
1. Non – Current Assets:
a. Fixed Assets
i. Tangible Assets 3,20,000 2,40,000
ii. Intangible Assets 40,000 60,000
2. Current Assets
a. Inventories 1,60,000 60,000
b. Trade Receivable 2,40,000 2,00,000
c. Cash and Cash Equivalent
40,000 40,000

Total 8,00,000 6,00,000

1 What is the percentage of Share capital of these two company ?
a. 66.67 and 62.5
b. 66.67 and 65
c. 65 and 64
d. 60 and 50

2 Which company have more reserve and surplus?

a. Excel Ltd
b. MS Word Ltd
c. Both equal
d. None of these

3 Which company is enjoying more Cash and Cash Equivalent ?

a. Excel Ltd
b. MS Word Ltd
c. Both equal
d. None of these

Q15 Kajal and Shafa are students of class XII commerce. They want to make their career in field of finance
as fund manager. Kajal says to Shafa that to be a successful fund manager we must have ability to
understand the financial position and profitability of a company by going through its financial
statements. Shafa agrees with Kajal but she warns her stating that we cannot fully rely upon the
information provided in financial statements due to various reasons.
Q1) The financial statement of a company can be understood by:
(A) Analysis
(B)Reading
(C)Keeping safely
(D)Preparing nicely
Q2) Which aspect of financial statements is disclosed by Shafa?
(A) Needs
(B)Limitations
(C)Objectives
(D)None of the above
Q3) Which of the following is not an essential for financial statements?
(A) Comparable
(B)Timeliness
(C)Historical
(D)Relevant
Q4) Which of the following might stop Shafa to fully rely upon the information provided in financial
statements
(A) Factual Information
(B)Different accounting practices
(C)Understandability
(D)Verifiability
Q16 Khushi is analyzing the balance sheet of Demon Ltd. and on-going through the notes to accounts, she
found that a loan obtained by company for two years is shown under the subhead short term
borrowings. There is a capital reserve of Rs.1,00,000 which is shown in share capital. Amount due to
Mr. Tiwari, a supplier is shown under the subheading other current liabilities. One of her friend Aditi
asks her that she is not able to understand on what basis assets are divided into two parts.
Q1) The sub head for ‘loan obtained by company for two years’will be:
(A) short term borrowings
(B)long term borrowings
(C) short term investment
(D)long term investments
Q2) What will be the correct answer for Aditi’s query?
(A) Term basis
(B)Cost basis
(C) Objective basis
(D) None of these
Q3) Capital reserve of Rs.1,00,000 which is shown in share capital is:
(A) Correct
(B)Incorrect
(C)Partially correct
(D)Partially incorrect
Q4) Which of the following will be the suitable head for Amount due to Mr. Tiwari:
(A) other current liabilities
(B)other current assets
(C)trade receivables
(D)trade payables
Q17 Read the passage given below and answer the following questions……..

Bright Future Ltd is interested to forecast and plan for its future profitability . For this purpose , the
company decided to compare its statement of profit and loss of the current year ( 2020-21 ) with that of
the previous year ( 2019-2020 ) . This would help it to draw conclusions about the operating
performance and efficiency . It would also help in comparing the firm's performance with the average
performance of the industry . The information related to Statement of Profit and Loss for two years is
given below:

Particulars Note. 2020-21 Rs. 2019-20 Rs.

No.

Revenue from operation 3,50,000 2,00,000

Purchase of stock in trade 2,00,000 1,00,000

cost of revenue from 70% of 60% of

operations revenue from revenue
operations from
operations

Employee benefit expenses 7,350 4,000

Income tax 45% 45%

on the basis of the above data answer the following questions

i) what will be the bsolute and percentage change in the revenue from operations?

a) Rs. 1,50,000 and 75%

b) Rs. 1,50,000 and 65%
c) Rs. 1,50,000 and 50%
d) Rs 50,000 and 15%
ii) what is the percentage change of profit after tax?

a) 28.15%
b) 28.04%
c) 28.6%
d) 28.49%
Q18 Deep limited is interested to analyse the trend of changes in the figures related to financial position for
last 2 years. This would help the company to assess its financial soundness and facilitate forecasting
and planning for the future. The information related to business balance sheet for the last two years its
given below.

Particulars Note. 2021 Rs. 2020 Rs.

No.

[Link] & LIABILITIES

Share Capital 25,00,000 25,00,000

Reserve and surplus 6,00,000 5,00,000

Long term loans 15,00,000 15,00,000

Trade Payables 5,50,000 5,00,000

TOTALS 51,50,000 50,00,000

[Link]

Fixed Assets 36,00,000 30,00,000

Current Assets 10,50,000 15,00,000

Non Current Investments 5,00,000 5,00,000

TOTAL 51,50,000 50,00,000

i) what is the absolute and percentage change in the value of trade payables?
a) 40,000; 25%
b) 50,000; 10%
c) 5,00,000; 15%
d) 60,000; 20%
ii) State the absolute change in the value of current assets and its percentage change also.

a) 4,50,000; 30%
b) 3,50,000; 23.3%
c) (4,50,000); 30%
d) 4,50,000; 25%
ANSWER KEY

CASE BASE / SOURCE BASE QUESTIONS

Q.N ANSWE ANSWER ANSWER ANSWE Q.N ANSWER

O R KEYS [Link] KEYS [Link] KEYS [Link] R KEYS O KEYS
1 D 11 13 15 17
2 D 1 D 1 B 1 A 1 A
3 B 2 B 2 B 2 B 2 D
4 A 3 A 3 B 3 C 18
5 C 4 C 14 4 A 1 B
6 A 12 1 A 16 2 C
7 C 5 C 2 B 1 B
8 A 6 A 3 A 2 A
9 D 7 D 3 B
10 A 8 B 4 D
NAME OF THE CHAPTER :- RATIO ANALYSIS

CASE BASE / SOURCE BASE QUESTIONS

Q1 1 ABC Ltd. wants to analyse its liquidity position along the assessment of inventory
position from the given information:
Inventory Turnover Ratio: 4 Times
Inventory in the beginning was Rs. 20,000 less than Inventory at the end,
Revenue from Operations Rs. 6,00,000; Current Liabilities Rs. 60,000
Gross Profit Ratio 25%; Quick Ratio 0.75:1
Answer the following questions on the basis of above information
I. State the amount of Cost of Revenue from operation.
(a) Rs. 4,50,000 (b) Rs. 4,90,000
(c) Rs. 4,80,000 (d) Rs. 3,50,000
II. Calculate the amount of Average inventory.
(a) Rs. 1,25,000 (b) Rs. 1,12,500
(c) Rs. 2,50,000 (d) Rs.1,52,000
III. What will be the amount of closing inventory?
(a) Rs. 1,12,000 (b) Rs. 1,12,500
(c) Rs. 1,67,500 (d) Rs. 1,22,500
IV. Calculate the current ratio of ABC Ltd.
(a) 2.4: 1 (b) 2.5: 1 (c) 2.79 : 1 (d) 2.6: 1

Q2 Read the following hypothetical extract of Ace Ltd. and answer the given questions
on the basis of the same:
YEAR 2020 2019
Fixed Assets 75,00,000 60,00,000
Current Assets 40,00,000 20,00,000
Current Liabilities 27,00,000 14,00,000
12% Debenture 80,00,000 60,00,000
Net profit before Interest Tax and Dividend 14,50,000 6,50,000

I. Return on Investment for the year 2020 will be ________ (Choose the correct
alternative)
(a) 16.47 % (b) 15 % 1 (c) 17.21 % (d) 13.1 %
II. Total Assets to Debt Ratio for the year 2020 will be ________ (Choose the correct
alternative)
(a) 0.63 : 1 (b) 1.44 : 1 (c) 0.81 :1 (d) 0.72 : 1
III Return on Investment for the year 2019 will be ________ (Choose the correct
alternative)
(a) 11 % (b) 8.8 % (c) 9.84 % (d) 10 %
IV. Total Assets to Debt Ratio for the year 2019 will be ________ (Choose the correct
alternative)
(a) 0.33 : 1 (b) 1.44 : 1 (c) 1.33 :1 (d) 0.22 : 1

Q3. 'Venus Industries Ltd.' is wanting to expand its operations. For this it decides to
issue10,000 shares of Rs. 10 each at par. Before this issue its Debt Equity ratio was 1:1
and Total Assets to Debt ratio was 3:1. Its total assets before issue was Rs. 3,00,000. On
the basis of this information, answer the following questions:
1. Shareholders’ fund before issue was:
(a) Rs. 3,00,000
(b) Rs. 1,00,000
(c) Rs. 2,00,000
(d) Rs. 4,00,000
2. Proprietary Ratio before issue was:
(a) 0.5:1
(b) 0.33:1
(c) 2:1
(d) 3:1
3. Current liabilities before issue was:
(a) Rs. 3,00,000
(b) Rs. 1,00,000
(c) Rs. 2,00,000
(d) Rs. 4,00,000
4. After issue of shares its Debt Equity ratio will be:
(a) .5:1
(b) 2:1
(c) .4:1
(d) 3:1
Q4 Dispur Paints Ltd. is interested to analysis the profitability in their company. The company
is also interested to know what portion of the total assets have been financed through
Long-term Debts.
Net profit after interest and tax 1,00,000; Current assets 4,00,000; Current liabilities
2,00,000; Tax rate 20%; Fixed assets 6,00,000; 10% Long term debt ₹ 4,00,000. Revenue
from operation was Rs. 5,00,000.
On the basis of the above information, answer the following questions:
1. State the amount of Capital Employed
(a) Rs.10,00,000
(b) Rs.6,00,000
(c) Rs.8,00,000
(d) Rs.12,00,000
2. State the amount of Net Profit before Interest and Tax
(a) Rs.1,25,000
(b) Rs.1,60,000
(c) Rs.1,65,000
(d) Rs.1,90,000
3. The Return on Investments is_____________.
(a) 20.62%
(b) 21%
(c) 21.62%
(d) 19.62%
4. Find Total Asset to Debt Ratio.
(a) 2.4 times
(b) 2.5 times
(c) 3 times
(d) 4 times
Q5 Read the passage given below and answer the following questions from question
number (1) to (4)
Following are the information obtained from the books of Krishna Ltd.
2019-20
2020-21
Inventory on 31st March Rs. 7,00,000
Rs. 17,00,000
Revenue from operations Rs. 50,00,000
Rs. 75,00,000
(Gross Profit is 25% on cost of revenue from operations)
In the year 2019-20 Inventory increased by Rs. 2,00,000
Based on above information you are required to answer the following questions:
Sl. Question
No
1 What will be the Inventory Turnover Ratio for the year
2020-21?
(A) 4 times
(B) 2 times
(C) 3 times
(D) 5 times
2 What will be the Cost of Revenue from operations for year
2019-20?
(A) Rs. 10,00,000
(B) Rs. 40,00,000
(C) Rs. 20,00,000
(D) Rs. 30,00,000

3 What will be the average inventory for the year 2020-21?

(A) Rs. 1,00,000
(B) Rs. 30,00,000
(C) Rs. 6,00,000
(D) Rs. 1,50,000
4 What will be the Inventory Turnover Ratio for the year
2019-20?
(A) 4.57 times
(B) 4.00 times
(C) 6.67 times
(D) 8.87 times
Q6 Read the passage given below and answer the following questions from question
number (5) to (8)
The following data are available of a manufacturing company:
Working Capital Rs. 2,50,000
Total Debts Rs. 4,00,000
Long – term Debt Rs. 3,20,000
Inventory Rs. 2,00,000
Prepaid Expenses. Rs. 10,000
Based on above information you are required to answer the following questions:
Sl. No Question
1 What is the amount of Current Liabilities?
(A) Rs. 80,000
(B) Rs. 90,000
(C) Rs. 1,00,000
(D) Rs. 70,000
2 By which amount the Current Assets are more than Current Liabilities.
(A) Rs. 1,50,000
(B) Rs. 2,50,000
(C) Rs. 3,50,000
(D) Rs. 2,75,000
3 The amount of quick asset will be?
(A) Rs. 1,80,000
(B) Rs. 1,45,800
(C) Rs. 1,20,000
(D) None of the above
4 The Quick Ratio is………..
(A) Above the set rule of thumb of 1:1
(B) Below the set rule of thumb of 1:1
(C) Equal to the set rule of thumb of 1:1
(D) None of the above.
Q7 Shyam Ltd. is interested to know the return on their total investment made in their
company. The company is also interested to know what portion of total assets have been
financed through Long-term Debts. 10%Long-term Debts Rs.400,000 ,Current Liabilities
Rs.200,000 , Land Rs.200,000 , Building Rs.200,000 , Fixed Assets Rs.200,000 , Debtors
Rs.200,000 , Current Assets Rs.200,000 , Net Profit After Interest & Tax Rs.100,000 , Tax
Rate 20% . Amount of Fixed Assets & Current Assets does not include Land, Building, &
Debtors. Based on the above case study question choose the correct alternative for
question 1 and 2
(i). Calculate Total Assets – Debt Ratio.
A. 2.4 Times
B. 4.0 Times
C. 3.3 Times
D. 2.5 Time
(ii) State the amount of Net Profit Before Interest & Tax.
A. Rs.1,25,000
B. Rs.2,80,000
C. Rs.2,00,000
D. Rs.1,00,000
Q8 Star Ltd provides the following information as on 31st March,2021: Share capital ₹
1,00,000; Reserve & Surplus ₹ 1,50,000;Current Liabilities ₹ 4,00,000;Current assets ₹
5,50,000 ;Loans @10% ₹ 4,00,000 and 12% Debenture ₹ 2,00,[Link] profit for the year
ended 31st March,2021 after interest & tax ₹ 96,[Link] rate is 50%.
1 The Debt-Equity ratio for that year will be

(A)2.4:1
(B) 3.4:1
(C) 4.4:1
(D) 5.4:1
2 The Proprietary ratio will be
(A) 17%
(B) 18%
(C) 19%
(D) 20%
3 If the share Capital is increased to ₹ 2,00,000 what will be the effect on Interest coverage
ratio-
(A) Increase
(B) Decrease
(C) No effect
(D) Any of them depending upon the situation
4 Will it be possible to find Debt to Total assets Ratio from the given information?
(A) Yes, Possible
(B) No, Not possible due to lack of information
(C) Possible on a rational assumption.
(D) Any of them depending upon the capacities of calculation
Q9 Fatima Ltd provides the following information for the year 2020-2021.
Purchases ₹ 18,30,000;Direct expenses ₹ 4,10,000;Opening inventory ₹ 3,60,000;Closing
Inventory ₹ 4,40,000;operating Expenses 5% of sales; Revenue from operation ₹
30,00,000.
1 The Gross Profit Ratio will be
(A) 26%
(B) 27%
(C) 28%
(D) 30%
2 The operating Profit ratio will be –
(A) 20%
(B) 21%
(C) 22%
(D) 23%
3 Will it be possible to find out Working Capital from the above information-
(A) Yes, Possible
(B) No, Not possible due to lack of information
(C) Possible on a rational assumption.
(D) Any of them depending upon the capacities of calculation
4 If the closing Inventory is increased to ₹ 4, 00,000, it will affect Gross Profit ratio &
Operating profit Ratio.
If the share Capital is increased to ₹ 2,00,000 what will be the effect on Interest coverage
ratio-
(A) Increase
(B) Decrease
(C) No effect
(D) Any of them depending upon the situation
Q10. Read the following hypothetical extract of Arihant Limited and answer the given questions on the
basis of the same:
YEAR 2021 2020 2019
AMOUNT (IN ₹) (IN ₹) (IN ₹)
Outstanding Expenses 50,000 40,000 25,000
Prepaid Expenses 3,00,000 2,50,000 3,50,000
Trade Payables 18,00,000 16,00,000 14,00,000
Inventory 12,00,000 10,00,000 11,00,000
Trade Receivables 11,00,000 8,00,000 10,00,000
Cash in hand 17,00,000 12,00,000 15,00,000
Revenue from operations 24,00,000 18,00,000 20,00,000
Gross Profit Ratio 12% 15% 18%
i. Current Ratio for the year 2021 will be_______________ (a) 2:1 (b) 1.8:1 (c)
2.32:1 (d) 2.4:1
ii Quick Ratio for the year 2019 will be______________ (a) 1.75:1 (b) 1.8:1 (c) 0.94:1 (d)
1.25:1
iii Inventory turnover ratio for the year 2021 will be_______________ (a) 1.62times (b) 1.82
times (c) 1.55times (d) 1.92 times
iv Cost of Revenue from Operations for the year 2021 would be __________ (a) ₹21,12,000 (b)
₹21,13,000 (c) ₹21,15,000 (d) ₹21,17,000
ASWER KEYS CASE BASED QUESTIONS
[Link] ANSWER [Link] ANSWER
1 5 ASWER KEYS CASE BASED QUESTIONS
[Link] ANSWER [Link] ANSWER
1 A 1 D
9
2 B 2 B
1 C
3 A 3 C
2 D
4 C 4 C
3 B
2 6
1 A 1 A 4 A
10
2 B 2 B
1 C
3 A 3 C
2 A
4 C 4 A
3 D
3 7
4 A
1 B 1 A
2 B 2 A
3 B 8
4 A 1
4 8
1 C 1 A
2 C 2 D
3 C 3 C
4 B 4 C
Chapter Name :- CASH FLOW STATEMENT
CASE BASED / SOURCE BASED QUESTIONS

Q1 Kaveri Ltd. A financing company obtained loans and advances of 5,00,000 during the year @ 12% p.a
it will be included in which of the following activities while preparing the cash flow statement ?
a) Investing Activities
b) Financing Activities
c) Both Investing and Financing Activities
d) Operating Activities
Q2 Fine Garments Ltd. is engaged in the export of readymade garments. The company purchased a
Q2 machinery of ₹10,00,000 for the use in packaging of such garments. Cash flow due to the purchase of
machinery will be cash flow from:
(A) Cash Flow from Operating Activities
(B) Cash Flow from Investing Activities
(C) Cash Flow from Financing Activities
(D) Cash Equivalent
Q3 1. Following is the Balance sheet of Moon Ltd. read and answer the question that follows:
Particulars Not 31-3-20 (`) 31-3-19
e (`)
No.
I. EQUITY AND LIABILITIES
(1) Shareholder’s Funds
(a) Share Capital 4,50,000 3,50,000
(b) Reserves and Surplus 1 1,25,000 50,000
(2) Non-current Liabilities
Long-term borrowings 2 2,25,000 1,75,000
(3) Current Liabilities
(a) Short-term borrowings 3 75,000 37,500
(b) Short-term provisions 4 1,00,000 62,500
Total 9,75,000 6,75,000
II. ASSETS
(1) Non-current Assets
(a) Fixed Assets
(i) Tangible 5 7,32,500 4,52,500
(ii) Intangible 6 50,000 75,000
(b) Non-current Investments 75,000 50,000
(2) Current Assets
(a) Current Investments 20,000 35,000
(b) Inventories 7 61,000 36,000
(c) Cash and Cash Equivalents 36,500 26,500
Total 9,75,000 6,75,000

Notes to Accounts:

Note Particulars 31.3.2020 (`) 31.3.2019 (`)

No.
1. Reserves and Surplus
Surplus (balance in Statement of Profit and Loss) 6,00,000 4,00,000
6,00,000 4,00,000
2. Tangible Assets
Machinery 25,40,000 20,00,000
Less: Accumulated Depreciation (4,00,000) (3,00,000)
21,40,000 17,00,000
3. Intangible Assets
Goodwill 80,000 2,24,000
80,000 2,24,000

Additional Information:
During the year a piece of machinery costing Rs.48,000 on which accumulated depreciation
was Rs.32,000 was sold for Rs.12,000.
1(a) How much Machinery is purchased?
(i)Rs. 5,88,000
(ii)Rs. 5,00,000
(iii)Rs. 5,08,000
(iv)Rs. 88,000
1 (b) What is depreciation charged during the year:
(i)Rs. 1,32,000
(ii)Rs. 32,000
(iii)Rs. 12,000
(iv)Rs. 1,00,000
1(c) Money raised from long-term borrowings __________________
(i)Rs. 1,40,000
(ii)Rs. 40,000
(iii)Rs. 1,32,000
(iv)Rs. 1,00,000

Q4 Welprint Ltd. has given you the following information: Machinery as on April 01, 2016 50,000
Machinery as on March 31, 2017 60,000, Accumulated Depreciation on April 01, 2016 25,000
Accumulated Depreciation on March 31, 2017 15,000 During the year, a Machine costing Rs. 25,000
with Accumulated Depreciation of Rs. 15,000 was sold for Rs. 13,000.
2a. What will be the cash flow from Investing Activities on the basis of the above information?
(i)Net Cash used in Investing Activity Rs.22,000
(ii)Net cash flow from Investing Activity Rs.22,000
(iii) Both (i) and (ii)
(iv) None of the above
Q5 Read the passage given below and answer the following questions…

Particulars 31/3/2021 ( Rs.) 31/3/2020( Rs.)

Machinery 3300000 2500000
Less: Accumulated Depreciation (600000) (500000)
During the year machinery costing Rs. 800000 on which accumulated depreciation was Rs. 320000 was
sold for Rs. 640000.

I. Outflow due to purchase of Machinery will be:

(A) 1600000
(B) 1100000
(C) 700000
(D) 1900000
II. Depreciation on Machinery will be:
(A) 240000
(B) 402000
(C) 420000
(D) 220000
Q6 Read the passage given below and answer the following question:

X Ltd incorporated in January 2015. It started business in April 2015.

It has the following information for the year 2020-21.

31st March- 31st March-2021

Particulars
2020 Rs. Rs.
Surplus (i.e. balance in the statement of
Profit and Loss) 71,000 89,000
Inventory 12,000 4,000
Trade receivables 58,000 45,000
Outstanding expenses 14,600 10,000
Goodwill 57,000 27,000
Cash in hand 9,000 12,000
Machinery 82,000 56,000

(i) A piece of machinery costing ₹.50,000 on which depreciation of Rs.20,000 had been
charged was sold for ₹.10,000. Depreciation charged during the year was ₹.18,000.
(ii) Income tax Rs.23,000 was paid during the year.
(iii) Dividend paid during the year was ₹36,000.

I. What is the value of Operating profit before working capital changes in the year 2020-21?

A) ₹18,000
B) ₹66,000
C) ₹86,000
D) ₹ 145,000
II. Loss/profit on sale of machinery is :
A) ₹10,000 Loss
B) ₹20,000 Loss
C) ₹30,000 Profit
D) ₹40,000 Loss
III. What is the amount of cash flow from operation activity?
A) ₹161,400
B) ₹138,400
C) ₹153,000
D) ₹166,000
Q7 Read the passage given below and answer the following question:
RAJARAM Textile LTD, provides you the following information:

Particulars 31st March, 31st

2020 March,
2021
Proposed dividend Rs.20,000
Additional information :
Equity share capital Rs.3,00,000 of
raised during the year at a premium of
20%.
10% bank loan Rs.1,00,000 was repaid
with interest.
Dividend received during the year was
Rs.15,000.

I. What is the proceeds from issue of shares to be included in financing activity?

A) ₹3,00,000
B) ₹60,000
C) ₹3,60,000
D) ₹2,40,000

II. How the amount of interest paid will be treated in Cash Flow Statement?
A) ₹10,000 as outflow in financing activity.
B) ₹90,000 as inflow in financing activity.
C) ₹10,000 as outflow in operating activity.
D) ₹. 1,10,000 as outflow in operating activity.
III. Calculate the amount of Cash Flow from Financing Activity:
A) ₹ 2,40,000
B) ₹230,000
C) ₹2,60,000
D) ₹2,55,000
Q8 Read the question carefully and answer the following:
BALANCE SHEET (Extract)
As on 31st March 2017 & 2018
Equity and Liabilities 31.03.2018 31.03.2017
(Rs.) (Rs.)
Equity Share Capital 6,00,000 4,00,000
8% Preference Share Capital 3,50,000 2,00,000
Surplus,[Link] in Statement of
Profit and Loss 4,00,000 1,50,000
Dividend Payable 10,000 …………

Additional Information:
(i) Dividend was proposed @10% for the year 2016-17 and 15% for the year 2017-18.
(ii) An interim dividend of Rs 30,000 on equity shares was paid on 31 st December 2017.
Answer the following questions:
(I A) The above items will be considered under which activity?
a. Operating activity
b. Investing activity
c. Financing activity
d. cash and Cash equivalent

(I B) Which one will give correct result while calculating Net profit before tax and extraordinary items:
A. Net profit earned during the year -Dividend paid of previous year + Dividend paid on Preference
Share + Interim dividend paid during the year.
B. Net profit earned during the year + Dividend paid of previous year -Dividend paid on Preference
Share + Interim dividend paid during the year.
C. Net profit earned during the year + Dividend paid of previous year + Dividend paid on Preference
Share - Interim dividend paid during the year.
D. Net profit earned during the year + Dividend paid of previous year + Dividend paid on Preference
Share + Interim dividend paid during the year.

(I C)What is the total amount of dividend paid to Preference Share holder which will be used while
calculation of Net profit before tax and extraordinary items.
a. Rs. 28,000
b. Rs. 16,000
c. Rs. 40,000
d. Rs. 10,000

(I D) The amount of ‘Net Profit before tax and extraordinary items’ will be:
a. Rs. 1,30,000
b. Rs. 2,46,000
c. Rs. 3,36,000
d. Rs. 3,30,000
Q9 When Depreciation is given in additional information as :
BALANCE SHEET (Extract)
As on 31st March 2020 & 2021
Assets 31.03.2020 31.03.2021
(Rs.) (Rs.)
Plant 40,000 50,000

Additional Information:
(i) Plant costing Rs. 25,000 (accumulated Depreciation Rs 8,000) was sold for Rs 12,000.
(ii) Depreciation on Plant charged during the year was Rs.25, 000.
Answer the following on the basis of above information:
(II A) The above activity will be classified as:
a. Operating activity
b. Investing activity
c. Financing activity
d. None of the above
(II B) What will be the final cash flow/used from the activity classified in above question:
a. Rs. 52, 000
b. Rs. 12,000
c. Rs. 40,000
d. Rs. 64,000
(II C) While preparing working note, The Depreciation charged during the year will be shown on:
a. Dr. side of plant A/c
b. Cr. Side of plant A/c
c. It will get not be shown any where
d. The difference of ‘Depreciation charged during the year’ and ‘Accumulated depreciation’ will be
shown on Dr. side of Plant A/c.
(II D)What is the amount of Profit/Loss on sale of Plant and where will it be shown?
a. Profit of Rs. 5,000, Add in Operating activity
b. Loss of Rs. 5,000, Less in Operating activity
c. Profit of Rs. 5000, Less in Operating activity
d. Loss of Rs. 5,000, Add in Operating activity
Q10 I. From the following Balance Sheet as on 31.03.2021 and 31.03.2020 answer the following questions:

PARTICULARS NOT 31ST 31ST

E MARCH,202 MARCH,202
NO. 1(RS) 0(RS)
I. EQUITY AND LIABILITIES
1. Shareholder's Funds
(a) Share capital 2,00,000 2,00,000
(b) Reserves and Surplus: Surplus, I.e.,
Balance Statement of Profit & Loss 1,83,000 82,000
2. Non-Current Liabilities
Long-term borrowings:
12% Debentures 1,30,000 50,000
3. Current Liabilities
(a) Trade Payables 1,50,000 1,10,000
(b) Other Current Liabilities 12,000 20,000
TOTAL 6,75,000 4,62,000
II. ASSETS
1. Non-Current Assets
(a) Property, Plant and Equipment (Fixed
Assets)-Tangible 2,74,000 1,17,000
(b) Non-Current Investments 68,000 55,000
2. Current Assets
(a) Inventories 2,06,000 1,50,000
(b) Trade Receivables 32,000 70,000
(c ) Cash and Cash Equivalents 95,000 70,000

TOTAL 6,75,000 4,62,000

1. Refer to question no.1 and calculate the cash Flow from operating Activities.
A. 1,32,500
B. 1,22,500
C. 1,70,000
D. 72,500

2. Refer to question no.1 and calculate the cash Flow from Investing Activities.

A. 132,500
B. 1,22,500
C.1,70,000
C. 72,500
3. Refer to question no.1 and calculate the cash Flow from financing Activities.
A. 1,32,500
B. 1,22,500
C.1,70,000
D. 72,500
4. Refer to question no.1 and calculate the Net increase in cash and Cash equivalents.

A. 25,000
B. 52,500
C. 35,000
D. 52,500
Answer Key

CASE BASED QUESTIONS

Q NO 1 2 3 4 5 6
[Link] D B 1- a (1) 1- b (1) 1-c(1) 2- a(1) 1- A 2-C I-D II-B III- B
Q NO 7 8 9
II-
[Link] I-C A III-B IA-C IB-D IC-B ID-C IIA- B IIB- C IIC- A IID-A
Q NO 10
[Link] I-B 2-C 3-D 4-A