CA.

Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org

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AoA
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 (1) (2)

Contents
CA. Naresh Aggarwal’s Illustration-1: A and B form a partnership without any partnership agreement. After


ACADEMY of ACCOUNTS
Preparation of Profit and Loss Appropriation Account
Preparation of Profit & Loss Appropriation A/c and Partners Capital A/cs
the end of first year of partnership, A draw the following Profit and Loss Appropriation
Account:
 Accounting Costing
Calculation of •Interest • Taxation • Financial Management
on Drawings Dr. Profit and Loss Appropriation Account Cr.
 Calculation
West of Interest
Patel Nagar, onPh:8800215448.
New Delhi. Capital and Capital
Website:Ratios
www.academyofaccounts.org Particulars Amount Particulars Amount
 Adjustment Entry
 Guarantee in Partnership To Salary to : By Profit & Loss A/c 24,000
 Theoretical Questions A 4,800 (Net Profit)
B 3,000 7,800 By Interest on Drawings :
To Interest on Capital @ 6% A 250
What is Partnership ? A 2,400 B 150 400
Partnership is the relation between persons who have agreed to share profits of a B 1,200 3,600
business carried on by all or any of them acting for All. To Commission to A 3,000
To Profit transferred to :
Essentials of Partnership : A 6,000
1. Minimum Two and Maximum 50 Members B 4,000 10,000
2. Carrying on a Business (i.e. vocation with profit motive)

AoA
3. Sharing of Profits 24,400 24,400
4. Agreement You are required to point out any contravention of the law, found in above account and
5. Legal Objects draw it in proper manner.
Ans: As there is no any partnership deed, the above mentioned Profit and Loss
What is Partnership Agreement / Deed ? Appropriation Account contains the following errors:
Partnership agreement is the mutual understanding on which some people decide to 1. There should not be any salary to any partner.
do a legal business to earn profits. It may be oral or written. The written and registered 2. There should not be any interest on capital.
version of the agreement is also called partnership deed. 3. Commission should not be allowed to partner
The Partnership Agreement / Deed may contains basically two type of matters: 4. No interest on drawings should be charged.
1. Management Related Matters: e.g. Name of the business, nature of the business, 5. Profit sharing ratio should be equal.
responsibilities and duties of partners, way of settlement of disputes etc. If all the above mentioned errors are eliminated, then correct account will appear as
2. Money Related Matters: e.g. Capitals of Partners, Profit sharing Ratios, Interest given bellow:
on Capital and Drawings, Interest on Loans, Remunerations to partners, Method Dr. Profit and Loss Appropriation Account Cr.
of valuation of Goodwill and Method of maintaining Books of Accounts etc.
For accounting purpose, only money related matters are considered. Particulars Amount Particulars Amount
If an agreement is made then that is always followed. To Profit transferred to: By Profit & Loss A/c 24,000
A: 12,000 (Net Profit)
What happens if there is no agreement ? B: 12,000 24,000
If there is no agreement at all then following provisions of Law will apply.
1. Profit sharing ratio of all partners will be equal (irrespective of any factor) 24,000 24,000
2. Interest on loan will be 6% p.a. (whether loan is given to firm or taken from firm) Illustration-2: Hema and Jaya started business on 1st January 2018 with capitals of
3. Interest on capitals is not allowed. Rs.20,000 and Rs.15,000 respectively. Due to further need of money Jaya gave a
4. Interest on drawings is not charged. loan of Rs.10,000 to the firm on 1st July 2018. At the end of year 2018 they earned a
5. Any remuneration (e.g.. salary or commission) is not allowed to any partner. net profit of Rs.4,000. You are required to draw their Profit and Loss Appropriation
If, there is an agreement which is silent on a specific matter then foronly that particular Account to show allocation of the profit.
matter above rules will apply.
 (3) (4)

Date Particulars L.F. Debit Credit

CA. Naresh Aggarwal’s ____________________________________________________________________

ACADEMY of ACCOUNTS (i) Partner’s Salary A/c

To Ram’s Capital A/c
Dr. 12,000
12,000
Accounting • Costing • Taxation • Financial Management (Being salary allowed to Ram)
___________________________________________
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
(ii) Partner’s Commission A/c Dr. 5,000
Solution: To Shyam’s Capital A/c 5,000
Dr. Profit and Loss Appropriation Account Cr. (Being commission allowed to Shyam)
___________________________________________
Particulars Amount Particulars Amount
(iii) Interest on Capital A/c Dr. 7,000
To Profit transferred to : By Profit & Loss A/c 3,700 To Ram’s Capital A/c 5,000
Hema 1,850 (Net Profit) To Shyam’s Capital A/c 2.000
Jaya 1,850 3,700 (Being interest on capital allowed to partners)
___________________________________________
3,700 3,700
(iv) Profit and Loss Appropriation A/c Dr. 24,000
Working Notes: To Partner’s Salary A/c 12,000

AoA
Interest on Loan @ 6% = 10,000 x 6 x 6 . To Partner’s Commission A/c 5,000
(for 6 months only) 100 12 To Interest on Capital 7,000
= Rs. 300 (Being remuneration of partner transferred to
Net Profit = Rs.4,000 - Rs.300 = Rs.3,700 Profit and Loss Appropriation A/c)
___________________________________________
Illustration-3: Ram and Shyam start business on 1st January 2018 with capital of (v) Profit and Loss Appropriation A/c Dr. 26,000
Rs.1,00,000 and Rs.40,000 respectively. According to the deed Ram is entitled to To Ram’s Capital A/c 13,000
salary of Rs.1,000 p.m. and Shyam is to be allowed a commission at the rate of 10% To Shyam’s Capital A/c 13,000
of net profit. Interest on capital is also allowed @ 5% p.a. During the first year of (Being remaining profit distributed to partners)
partnership they earn a net profit of Rs.50,000. You are to show a Profit and Loss
Appropriation Account to allocate the profit and necessary Journal Entries. Illustration-4: Seeta and Geeta are partners with capital of Rs.15,000 and Rs.10,000
Solution: respectively. The terms of partnership deed is as follows:
Dr. Profit and Loss Appropriation Account Cr. (i) Interest on capital is allowed at the rate of 6% p.a.
Particulars Amount Particulars Amount (ii) Salary is allowed to Seeta at Rs.500 p.a.
(iii) Commission to Geeta at the rate of 10% on net profit.
To Salary to Ram 12,000 By Profit & Loss A/c 50,000 (iv) Remaining profits is to be shared by Seeta and Geeta in the ratio of 3 : 2.
To Commission to Shyam 5,000 (Net Profit) During the year they earned a profit of Rs.7,000 after charging Seeta’s salary but
To Interest on Capitals: before making other adjustments.
Ram 5,000 Prepare an account showing distribution of profits. Show calculations clearly.
Shyam : 2,000 7,000 Solution:
To Profit transferred to: Dr. Profit and Loss Appropriation Account Cr.
Ram (1/2) 13,000
Particulars Amount Particulars Amount
Shyam (1/2) 13,000 26,000
To Interest on Capital to : By Profit & Loss A/c (Profit) 7,500
50,000 50,000
Seeta 900
Geeta 600 1,500
 (5) (6)

Dr. Profit and Loss Appropriation Account Cr.

CA. Naresh Aggarwal’s
Particulars Amount Particulars Amount
ACADEMY of ACCOUNTS To Salary to : By Profit & Loss A/c (Profit) 80,000
Accounting • Costing • Taxation • Financial Management A 12,000 By Interest on Drawings:
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org B 18,000 30,000 A 1,000
To Commission to B 4,000 B 1,500 2,500
To Interest on Capital to :
To Commission to Geeta 750 A 9,000
To Salary to Sita 500 B 6,000 15,000
To Profit transferred to :
Seeta (3/5) : 2,850 To Profit transferred to:
Geeta (2/5) : 1,900 4,750 A ( 3/ 5) 20,100
B (2 / 5 ) 13,400 33,500
7,500 7,500
82,500 82,500
Working Notes:
Net profit = Profit after Seeta’s Salary + Seeta’s Salary (i) When capitals are fluctuating :

AoA
= 7,000 + 500 Dr. Partner’s Fluctuating Capital Accounts Cr.
= 7,500
Particulars A B Particulars A B
Geeta’s Commission = 7,500 x 10 = Rs. 750
100 To Cash (Drawings) 20,000 30,000 By Cash 90,000 60,000
 ‘Net profit’ is the profit earned by the business after debiting all expenses. To Interest on Drawings 1,000 1,500 By Salaries 12,000 18,000
Any remuneration (e.g. salary, commission etc.) given to partner is not an To Balance c/d 1,10,100 69,900 By Commission - 4,000
expenses but it is an appropriation of profit. Therefore, if any calculation is By Interest on Capital 9,000 6,000
based on ‘Net Profit’ then such remuneration (if already given to partners) should By P&L App A/c (Profit) 20,100 13,400
be added back to determine the real ‘Net Profit’.
1,31,100 1,01,400 1,31,100 1,01,400
Illustration-5: A and B started a partnership business on 01.04.2017. They contributed (ii) When capitals are Fixed :
Rs.90,000 and Rs.60,000 respectively, as their capitals. The terms of the partnership Dr. Partner’s Fixed Capital Accounts Cr.
agreement are as under :
Particulars A B Particulars A B
(i) A and B to get a monthly salary of Rs.1,000 and Rs.1,500 respectively
(ii) B is allowed a commission at the rate of 5% on Net Profit. To Balance c/d 90,000 60,000 By Cash 90,000 60,000
(iii) Interest on capital and drawings will be at the rate of 10% p.a.
90,000 60,000 90,000 60,000
(iv) Sharing of profit or loss will be in the ratio of their capital contribution.
The profit for the year ended 31.03.2018, before making the above appropriations was Dr. Partner’s Current Capital Accounts Cr.
Rs.80,000. The drawings of A and B were Rs.20,000 and Rs.30,000 respectively.
Particulars A B Particulars A B
Interest on drawings amounted to Rs.1,000 for A and Rs.1,500 for B.
Prepare Profit and Loss Appropriation Account and Partners Capital Accounts To Cash (Drawings) 20,000 30,000 By Salaries 12,000 18,000
assuming that their capitals are : To Interest on Drawings 1,000 1,500 By Commission - 4,000
(i) fluctuating (ii) Fixed To Balance c/d 20,100 9,900 By Interest on Capital 9,000 6,000
Solution: By P&L App A/c (Profit) 20,100 13,400
As Capital Ratio is the Profit Sharing ratio of the partners and Capitals are in proportions
41,100 41,400 41,100 41,400
of 90,000 : 60,000 it may be simplified as 3 : 2.
 (7) (8)

Dr. Partner’s Fluctuating Capital Accounts Cr.

CA. Naresh Aggarwal’s
Particulars A B Particulars A B
ACADEMY of ACCOUNTS To Cash (Drawings) 12,000 9,000 By Balance b/d 1,00,000 60,000
Accounting • Costing • Taxation • Financial Management To Balance c/d 1,02,340 65,160 By Interest on Capital 6,000 3,600
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org By Salaries - 5,000
By P&L App A/c (Profit) 8,340 5,560

1,14,340 74,160 1,14,340 74,160

 When ‘Fluctuating Capital A/c’ is prepared then all transactions related
with partners are transferred in that Account only. Working Notes:
 When ‘Fixed Capital A/c’ and ‘Current Capital A/c’ is prepared then all Profit for manager’s commission = Profit after B’s Salary + B’s Salary
transactions from Profit & Loss Appropriation A/c and ordinary drawings are = 25,000 + 5,000= 30,000
transferred to Current Account and only capital contribution of partner and Manager’s Commission = 30,000 x 5 = Rs.1,500
capital withdrawal (not ordinary drawings) of partners are shown in the Fixed 100
Capital A/c. Net Profit = Profit before manager’s commission - Manager’s Commission
 Difference between ‘Ordinary Drawings’ and ‘Capital Drawings’ : ‘Capital = 30,000 - 1,500 = Rs.28,500
Drawings’ are the drawings from the contributions (i.e. capital invested to run  Manager is an employee of the business, therefore his salary or commission

AoA
business) of partners, while ‘Ordinary Drawings’ are withdrawn from the profits should be shown in Profit and Loss Account itself. His remuneration can not
in regular intervals. In the normal circumstances owner of business never makes be called as appropriation of the profits. Therefore, we should not show his
‘Capital Drawings’, therefore unless the question specifically recognize it, we commission in the Profit and Loss Appropriation A/c.
should always assume that drawings given are ‘Ordinary Drawings’.
INTEREST ON DRAWINGS
Illustration-6: A and B are partners sharing profits in the ratio of 3 : 2 with capitals of Interest on drawings is calculated only when it is specifically mentioned in the
Rs.1,00,000 and Rs.60,000 respectively. Interest on capital is allowed at the rate of Partnership Deed. It may be calculated by using following methods:
6% p.a. B is to be allowed an annual salary of Rs.5,000. During 2018, the profits of the 1. Product Method : In this method, first we generate a statement indicating the date
year prior to calculation of interest on capital but after charging B’s Salary amounted to of drawings, amount, months (between date of drawings and ending date of financial
Rs.25,000. A provision of 5% of Net Profit is to be made in respect of manager’s year) and product of drawings and months.
commission. Drawings of partners are Rs.12,000 and Rs.9,000 respectively. Prepare Then amount of interest is determined by the following formula :
Profit & Loss Appropriation A/c and Partners Capital A/c. Interest on Drawings = Total of Products x Rate x 1 .
Solution: 100 12
Dr. Profit and Loss Appropriation Account Cr. Illustration-7: Ajay is a partners in a firm. During the year, Ajay has withdrawn
Rs.1,000 at the beginning of each month. Calculate his interest on drawings, if the
Particulars Amount Particulars Amount
rate of interest is 6% p.a.
To Salary to B 5,000 By Profit & Loss A/c 28,500 Solution:
To Interest on Capital to : (Net Profit) Date Amount Months Product
A 6,000 1st January 1,000 12 12,000
B 3,600 9,600 1st February 1,000 11 11,000
To Profit transferred to : 1st March 1,000 10 10,000
A ( 3/ 5) 8,340 1st April 1,000 9 9,000
B ( 2/ 5) 5,560 13,900 1st May 1,000 8 8,000
1st June 1,000 7 7,000
28,500 28,500
1st July 1,000 6 6,000
1st August 1,000 5 5,000
1st September 1,000 4 4,000
 (9) (10)

= 12,000 x 6 x 6.5 .
CA. Naresh Aggarwal’s 100 12
ACADEMY of ACCOUNTS = Rs. 390

Accounting • Costing • Taxation • Financial Management Illustration-8: Bimal is a partner in a firm. During the year, Bimal has withdrawn Rs.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org 1,000 at the end of each month. Calculate interest on drawings, if the rate of interest
is 6% p.a.
Solution: By Product method:
1st October 1,000 3 3,000
Date Amount Months Product
1st November 1,000 2 2,000
31st January 1,000 11 11,000
1st December 1,000 1 1,000
28th February 1,000 10 10,000
12,000 78 78,000
31st March 1,000 9 9,000
30th April 1,000 8 8,000
Interest on Drawings = Total of Products x Rate x 1 .
31st May 1,000 7 7,000
100 12
30th June 1,000 6 6,000
= 78,000 x 6 x 1 .
31st July 1,000 5 5,000
100 12
31st August 1,000 4 4,000

AoA
= Rs.390
30th September 1,000 3 3,000
2. Direct Method (Short-cut Method) : This method can calculate interest in relatively
31st October 1,000 2 2,000
very low time. But this method can not be used always. The conditions for applicability
30th November 1,000 1 1,000
of this method is that amount are constantly withdrawn in similar amounts and in
31st December 1,000 0 0
similar interwals during the year.
12,000 66 66,000
Interest on drawings may be calculated by using following formulae which depends
upon the time schedule of the drawings : Interest on Drawings = Total of Products x Rate x 1 .
100 12
Interest on Drawings = Total Drawings x Rate x Average Months 6 1 .
100 12 = 66,000 x x
100 12
Average Months will be counted by adding months from first and last drawings and
= Rs.330
dividing by two.
If amount withdrawn at the beginning of every month, then average months are :
By Direct Method:
12 + 1 = 6.5 Months
2 Interest on Drawings = Total Drawings x Rate x 5.5 .
100 12
If amount withdrawn at the end of every month, then average months are :
= 12,000 x 6 x 5.5 .
11 + 0 = 5.5 Months
100 12
2
= Rs. 330
If amount withdrawn at the Middle of every month, then average months are :
11.5 + 0.5 = 6 Months
Illustration-9: X and Y are partner in a firm. During the year, X has withdrawn
2
Rs.2,000 per month and Y has withdrawn as follows:
If amount withdrawn at the beginning of every quarter, then average months are:
Feb.1: Rs.4,000; April 1: Rs.2,000; June1: Rs.6,000; Aug.30: Rs.5,000;
12 + 3 = 7.5 Months
Nov.1: Rs.4,000.
2
Calculate interest on drawings, if the rate of interest is 12% p.a.
If we continue the previous illustration then we could have found the interest by using
Solution:
the following alternative method :
As X has withdrawn similar drawings in regular manner in every month of the year,
Interest on Drawings = Total Drawings x Rate x 6.5 . therefore his interest on drawings may be calculated byDirect method in the following
100 12
way:
 (11) (12)

Calculate interest on capital to be allowed at the end of year 2018 to each partner
CA. Naresh Aggarwal’s assuming that B kept his promise and rate of interest is 6% p.a.
ACADEMY of ACCOUNTS Solution:
As A’s Capital is constant throughout the year, his interest may be calculated as
Accounting • Costing • Taxation • Financial Management follows:
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Interest = Capital x Rate
100
Interest on Drawings = Total Drawings x Rate x 6 . Interest = 80,000 x 6 = Rs.4,800
100 12 100
= 24,000 x 12 x 6 . As B’s Capital is changing throughout the year, his interest may be calculated by
100 12 product method in the following way:
= Rs.1,440 Date Amount Months Product
As Y has neither withdrawn money in similar figures, nor continuity of every month is 1st January 20,000 12 2,40,000
maintained, therefore his interest may be calculated only by product method: 31st March 20,000 9 1,80,000
Date Amount Months Product 30th June 20,000 6 1,20,000
1st February 4,000 11 44,000 30th September 20,000 3 60,000
1st April 2,000 9 18,000 6,00,000

AoA
1st June 6,000 7 42,000
Interest = Total of Products x Rate x 1 .
30th August 5,000 4 20,000 100 12
1st November 4,000 2 8,000 6 1
= 6,00,000 x x = Rs.3,000
1,32,000 100 12
Interest on Drawings = Total of Products x Rate x 1 .
100 12 Illustration-11: Silver and Gold start business on 1st January with capital of Rs.75,000
= 1,32,000 x 12 x 1 . and Rs.30,000 respectively. They agree to share profits in the proportion to their
100 12 capital after allowing interest on capital at 10% p.a.
= Rs.1,320 You are to show proper accounts to allocate the net profit of Rs.50,000, taking into
consideration the following further information:
INTEREST ON CAPITAL / CAPITAL RATIOS Silver Gold
Interest on capital is calculated only when it is specifically mentioned in the partnership Date Introduced Withdrawn Introduced Withdrawn
deed. The formulae to calculate it is given as under : April-1 - 10,000 12,000 -
(i) If there is no change in the Capital throughout the period: June-30 8,000 - 13,000 -
Interest = Capital x Rate Aug.-1 10,000 - 12,000 -
100 Sept.-30 - 5,000 - -
(ii) If there are frequent changes in the Capital throughout the period: Dec.-1 7,000 - - 6,000
Interest = Total of Products x Rate x 1 . Solution:
100 12 Calculations for Silver:
(This is the same formula which we had used for calculating interest on Drawings. Date Amount Months Product
The way of calculating products for interest on Capital is also similar to the way of 1st January 75,000 12 9,00,000
calculating products in case of interest on drawings.) 1st April (-) 10,000 9 (-) 90,000
30th June 8,000 6 48,000
Illustration-10: A and B start business as equal partners on 1st January 2018. On 1st August 10,000 5 50,000
that date A brings Rs.80,000 but B could arrange only Rs.20,000. B, then promise to 30th September (-) 5,000 3 (-) 15,000
bring balance of his capital in 3 equal installments at the end of each quarter of the 1st December 7,000 1 7,000
year. 9,00,000
 (13) (14)

Solution:
CA. Naresh Aggarwal’s Calculations for Opening Capital of the Partners :
ACADEMY of ACCOUNTS Capital at the end of the current year
A
93,000
B
81,000
Accounting • Costing • Taxation • Financial Management Add : Drawings 9,000 9,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org 1,02,000 90,000
Less : Further Capital - 12,000
1,02,000 78,000
Calculations for Gold:
Less : Profits 27,000 18,000
Date Amount Months Product
Capital at the beginning of year 2018 75,000 60,000
1st January 30,000 12 3,60,000
1st April 12,000 9 1,08,000
Now interest on capital may be calculated as given bellow :
30th June 13,000 6 78,000
1st August 12,000 5 60,000 A’s Interest = 75,000 x 10 = Rs. 7,500
100
1st December (-) 6,000 1 (-) 6,000
6,00,000 B’s Interest = 60,000 x 10 + 12,000 x 10 x 6 = Rs. 6,600
100 100 12
Capital ratio of Silver and Gold :
Alternative solution by product method for calculating B’s Interest on Capital:

AoA
Total of products of Silver’s Capital : Total of products of Gold’s Capital
Date Amount Months Product
i.e. 9,00,000 : 6,00,000 or 3 : 2
1st January 60,000 12 7,20,000
Interest on Capitals:
1st July 12,000 6 72,000
Interest = Total of Products x Rate x 1 . 7,92,000
100 12
Interest = Total of Products x Rate x 1 .
Silver’s Interest = 9,00,000 x 10 x 1 . = Rs.7,500 100 12
100 12
= 7,92,000 x 10 x 1 = Rs. 6,600
Gold’s Interest = 6,00,000 x 10 x 1 . = Rs.5,000 100 12
100 12
Dr. Profit and Loss Appropriation Account Cr.
 If we are given closing balance of capital then first of all we will have to
Particulars Amount Particulars Amount determine its opening balance by simply reversing the effects of all the
transactions which took place in Capital A/c during that year. Thereafter interest
To Interest on Capital to : By Profit & Loss A/c (Profit) 50,000
can be calculated on the opening capital in simple way or by product method(if
Silver 7,500
there are frequent changes in capitals).
Gold 5,000 12,500
To Profit transferred to:  For finding the opening balance of capital a statement in following way
may be drawn:
Silver (3/5) 22,500
Capital at the end of the current year xxxxx
Gold (2/5) 15,000 37,500
Add : Drawings xxxx
50,000 50,000 Less : Further Capital xxxx
Less : Salary or other remuneration to Partners xxxx
Illustration-12: A and B are partners in a firm sharing profits in the ratio of 3 : 2. Their
(only if it was already given to them)
capital at the end of the year 2018, were Rs.93,000 and Rs.81,000 respectively. During
Add : Losses xxxx
the year partners withdrawn Rs.9,000 each. Further capital introduced by B during
Less : Profits xxxx
the middle of the year was Rs.12,000. The profit earned and distributed between the
Capital at the beginning of year xxxxx
partners was Rs.45,000.
Calculate interest on capital to be allowed at the end of the year @ 10% p.a.
 (15) (16)

Date Particulars L.F. Debit Credit

CA. Naresh Aggarwal’s ____________________________________________________________________

ACADEMY of ACCOUNTS Y’s Capital A/c

Z’s Capital A/c
Dr.
Dr.
1,000
2,000
Accounting • Costing • Taxation • Financial Management To X’s Capital A/c 3,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org (Being adjustment entry recorded for omission of
interest on capital, salary and commission)
ADJUSTMENT ENTRY
Adjustment entry is made in accounts when some errors or omissions is noticed after Illustration-14: Ravi and Vijay are partners in a firm sharing profit and loss equally.
closing the accounts of that year. It may also be required if a change occurred in the During the Last three years they were distributed following profits :
partnership agreement with retrospective effect. Year 2018: Rs.60,000; Year 2017: Rs.40,000; Year 2016: Rs.20,000.
A single adjustment entry may adjust many errors, omissions and changes. For this, Now all partner decide to share profits in their capital ratios with retrospective effect
we have to make a statement to find out the amounts which are to be filled in Adjustment for last two completed years.
Journal Entry. In this statement some mathematical calculations is done to give effect From the capital accounts of the partners, ratio for Ravi and Vijay are ascertained as
to rectifications and changes. If a partner’s capital increases by rectification it is added follows : Year 2018:- 2 : 1, Year 2017:- 2 : 3, Year 2016:- 4 : 1.
in his column but at the same time firm gets a loss therefore it is subtracted in firm’s Show a journal entry to make adjustment in capital accounts.
column. Similarly if a partner’s capital decreases by rectification it is subtracted from Solution:

AoA
his column but at the same time firm gets a profit therefore it is added in firm’s column. Calculations for Adjustment Entry :
After all adjustments are done the total of firm’s profit or loss is divided in all the partners Particulars Ravi Vijay Firm
as per their profit sharing ratios. Now if partner’s balance is negative then it will be Profit of year 2018 and year 2017 taken back in old ratio (1 : 1)- 50,000 - 50,000 + 1,00,000
debited and if partner’s balance is positive then it will be credited in Adjustment Profit Adjustment for year 2018 in ratio (2 : 1) + 40,000 + 20,000 - 60,000
Journal Entry. Profit Adjustment for year 2017 in ratio (2 : 3) + 16,000 + 24,000 - 40,000
Balance + 6,000 - 6,000 Nil
Illustration -13: X, Y and Z started a business with capital of Rs.1,00,000; Rs.60,000 Journal Entry :
and Rs.40,000 respectively. During the year they earned a profit of Rs.54,000 which Date Particulars L.F. Debit Credit
____________________________________________________________________
was distributed among them in their profit sharing ratio without taking into consideration
the following matters of the Deed. Vijay’s Capital A/c Dr. 6,000
(i) Interest on Capital at the rate of 5% p.a. To Ravi’s Capital A/c 6,000
(ii) Salary to Y and Z Rs.4,000 each. (Being adjustment entry recorded for change in
(iii) Special commission to X Rs.6,000. profit sharing ratio with retrospective effect)
You are asked to prepare a single journal entry to rectify the above mistake. Working
notes should also be shown clearly. Illustration-15: A, B and C were partners in a firm sharing profits in the ratio of
1 : 2 : 2. After the division of the profits for the year ended 31.03.2018 their capitals
Solution: were:
Calculations for Adjustment Entry : A: Rs.75,000; B: Rs.90,000; C: Rs.1,05,000
Particulars X Y Z Firm During the year 2018-11 they withdrew Rs.10,000 each and the profit of the year was
Interest on capital + 5,000 + 3,000 + 2,000 - 10,000 Rs.30,000. The Partnership Deed provided that interest on capital will be allowed @
Salary to partners - + 4,000 + 4,000 - 8,000 10% p.a. and a salary of Rs.5,000 p.a. to each partner. While preparing the final
Commission to X + 6,000 - - - 6,000 accounts, interest on Partner’s Capital and salary was not allowed. You are required
Total + 11,000 + 7,000 + 6,000 - 24,000 to pass the necessary adjustment entry for providing interest on capitals. Show your
Loss Adjustment (1 : 1 : 1) - 8,000 - 8,000 - 8,000 + 24,000 working clearly.
Balance + 3,000 - 1,000 - 2,000 Nil Solution:
Journal Entry : As we are given closing capital of partner for the year 2018-11, therefore to calculate
interest on capital first of all we will have to determine Opening Capitals of partners:
 (17) (18)

CA. Naresh Aggarwal’s beginning and similar to other partners, his capital will carry interest @ 6% p.a.
ACADEMY of ACCOUNTS Record the necessary Journal Entries to give effect to the above arrangement.
[Adapted SSC (Delhi)]
Accounting • Costing • Taxation • Financial Management Solution:
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org C’s total remunerations as a manager :
Interest on loan @ 10% on Rs. 30,000 for 3 years (3,000 x 3) 9,000
Calculations for Opening Capital :
Salary Rs. 4,500 p.a. for 3 years 13,500
Particulars A B C
Total (a) 22,500
Capital at the end (as on 31.03.2018) 75,000 90,000 1,05,000
C’s total remunerations (except share in profits) as a partner :
Add : Drawings 10,000 10,000 10,000
Interest on Capital @ 6% on Rs. 30,000 for 3 years (1,800 x 3) 5,400
85,000 1,00,000 1,15,000
Salary Rs. 3,500 p.a. for 3 years 10,500
Less : Profit 6,000 12,000 12,000
Total (b) 15,900
Capital at the beginning (as on 01.04.2017)79,000 88,000 1,03,000
Total profits of the firm of 3 years when C was manager :
Interest on Capital @ 10% p.a. 7,900 8,800 10,300
Year 2016 40,000
Year 2017 - 20,000
Calculations for Adjustment Entry :
Year 2018 60,000
Particulars A B C Firm

AoA
Total (c) 80,000
Interest on capital + 7,900 + 8,800 + 10,300 - 27,000
Revised Total profits of the firm for last 3 years after C is admitted as a partner with
Salary to partners +5,000 +5,000 +5,000 -15,000
retrospective effect = c + a - b
Total +12,900 +13,800 +15,300 -42,000
= 80,000 + 22,500 - 15,900
Loss Adjustment (1 : 2 : 2) - 8,400 - 16,800 - 16,800 + 42,000
= Rs. 86,600
Balance + 4,500 - 3,000 - 1,500 Nil
C’s Share in profit i.e. 1/5 = 86,600 x 1 .
5
Journal Entry :
= Rs.17,320 (d)
Date Particulars L.F. Debit Credit Net increase in C’s profit = b+d-a
____________________________________________________________________
= 15,900 + 17,320 - 22,500
B’s Capital A/c Dr. 3,000
= Rs.10,720
C’s Capital A/c Dr. 1,500
As C’s profit has been increased by Rs.10,720 therefore it will be sacrificed by old
To A’s Capital A/c 4,500
partners A and B in their profit sharing ratio i.e. 3 : 2.
(Being adjustment entry recorded for omission
of interest on capital and salary) Therefore,
A’s sacrifice = 10,720 x 3 = Rs.6,432
5
Illustration-16: A and B are partners sharing profits and losses in the ratio of
3 : 2. At the end of the year on 31.12.2018 they decided to take their manager C into B’s sacrifice = 10,720 x 2 = Rs.4,288
5
partnership for past three years. As a manager C was getting an annual salary of
Rs.4,500. He had also advanced Rs.30,000 to the firm by way of a loan on which he Date Particulars L.F. Debit Credit
____________________________________________________________________
was getting interest @ 10% p.a. During the three years, firm’s profits after adjusting
A’s Capital A/c Dr. 6,432
salary to C, interest on loan and interest on capital of partners were :
B’s Capital A/c Dr. 4,288
2016 Profit 40,000
To C’s Capital A/c 10,720
2017 Loss 20,000
(Being adjustment entry for change in agreement)
2018 Profit 60,000
According to the new agreement, C is to be given annual salary of Rs.3,500 and
1/5th share in the profits of the firm. C’s loan shall be treated as his capital from the
 (19) (20)

(i) For the year 2017

CA. Naresh Aggarwal’s Dr. Profit and Loss Appropriation Account Cr.

ACADEMY of ACCOUNTS Particulars Amount Particulars Amount

Accounting • Costing • Taxation • Financial Management To A : 20,000 By Profit & Loss A/c 40,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org less: for C 1,000 19,000 (Net Profit)
To B : 16,000
To C : 4,000
GUARANTEE IN PARTNERSHIP
Add: from A 1,000 5,000
Sometimes a partner is admitted in a firm with a guarantee of a minimum amount of
profit. In such case if the partner gets less than minimum amount then other partners 40,000 40,000
have to contribute for him as per the guarantee agreement. Guarantee may be of
(ii) For the year 2018
following types:
Dr. Profit and Loss Appropriation Account Cr.
1. Partner to Firm (when a partner promise to earn a minimum amount for firm)
2. Firm to Partner (when all remaining partners give guarantee to a partner) Particulars Amount Particulars Amount
3. Partner to partner (when one partner gives guarantee to another partner)
To Profit transferred to : By Profit & Loss A/c 60,000
If more than one type of guarantee are involved in a partnership deed then they all are
A: 30,000 (Net Profit)
done in the same sequence as stated above.

AoA
B: 24,000
C: 6,000
Illustration-17: X, Y and Z were in partnership sharing profit and losses in the ratio of
4 : 2 : 1 respectively. It was provided that in no case Z’s share in profit should be less 60,000 60,000
than Rs.15,000. The profits for the year 2018 amounted to Rs.63,000. You are required Illustration-19: A, B and C are partners in the ratio of 3 : 2 : 1. A gives guarantee to
to show the appropriation amongst the partners. the firm that his contribution in firm’s profit would not be less than Rs.48,000 in any
Solution: year. The partnership deed also provides that C’s share of profit will not be less than
Dr. Profit and Loss Appropriation Account Cr. Rs.20,000. Further, A has personally guaranteed B that his share of profit including
Particulars Amount Particulars Amount his salary and interest on capital will not be less that Rs.40,000. Terms of the deed
provides for Rs.200 p.m. to each partner as salary and interest on capital was calculated
To X : 36,000 By Profit & Loss A/c 63,000 as Rs.2,400 for A; Rs.1,600 for B and Rs.1,200 for C.
less: for Z 4,000 32,000 (Net Profit) The profit after charging partner’s salary and interest on capital is determined as
To Y : 18,000 Rs.84,000 in which A contributed to extent of Rs.36,000 only.
less: for Z 2,000 16,000 Solution:
To Z : 9,000 Dr. Profit and Loss Appropriation Account Cr.
Add: from X 4,000 Particulars Amount Particulars Amount
Add: from Y 2,000 15,000
To A : 48,000 By Balance b/d 84,000
63,000 63,000 less: for C 2,400 (Divisible Profit)
less: for B 5,600 40,000 By A’s Capital A/c 12,000
Illustration-18: A, B and C are partners sharing profit and losses in the ratio of
To B : 32,000 (Deficiency)
5 : 4 : 1. C is guaranteed that his share of profit will not be less than Rs. 5,000 in any less: for C 1,600
year. It is further decided that any loss arising from the guarantee will be borne by A 30,400
only. Add: from A 5,600 36,000
You are required to allocate the profit though proper accounts for the two years : To C : 16,000
(i) The profit for the year 2017 amounted to Rs.40,000. Add: from A 2,400
(ii) The profit for the year 2018 amounted to Rs.60,000. Add: from B 1,600 20,000
Solution:
96,000 96,000
 (21) (22)

CA. Naresh Aggarwal’s Q-2*: X, Y and Z are in partnership where no partnership agreement is made. You
ACADEMY of ACCOUNTS are required to draw a correct Profit and Loss Appropriation Account form the wrong
Profit and Loss Appropriation Account given as :
Accounting • Costing • Taxation • Financial Management Dr. Profit and Loss Appropriation Account Cr.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Particulars Amount Particulars Amount

Note: B has been given a composite guarantee of Rs.40,000 including his salary and To Profit & Loss A/c (Profit) 10,500 By Loss transferred to:
interest on capital, therefore we will have to determine his only profit guarantee. To Interest on Capital X ( 3/ 6) 11,850
This may be calculated by following way : X 2,500 Y ( 2/ 6) 7,900
B’s Profit + Salary + Interest on Capital = 40,000 Y 2,000 Z (1/ 6) 3,950 23700
Therefore, B’s Profit = 40,000 - Salary - Interest on Capital Z 1,500 6,000
= 40,000 - 2,400 - 1,600 To Commission to X 1,200
= Rs.36,000 To Interest on Z’s Loan 3,000
(At the rate of 6% p.a.)
To Salary to Y 3,000

AoA
23700 23700
Excercise [Divisible Profit: Rs.7,500]

PREPARATION OF PROFIT AND LOSS APPROPRIATION ACCOUNT Q-3: Kapil and Dev are partners in a firm without any agreement. After the end of first
Q-1: A and B form a partnership without any partnership agreement. After the end of year of partnership Kapil presents the following Profit and Loss Appropriation Account
first year of partnership A draw the following Profit and Loss Appropriation A/c : to his partner Dev :
Dr. Profit and Loss Appropriation Account Cr. Dr. Profit and Loss Appropriation Account Cr.
Particulars Amount Particulars Amount Particulars Amount Particulars Amount

To Salary to: By Profit & Loss A/c 14,000 To Remunerations to: By Profit & Loss A/c 6,800
A 2,400 (Net Profit) Kapil 2,000 (Net Profit)
B 1,500 3,900 By Interest on Drawings: Dev 1,500 3,500 By Interest on Drawings:
To Interest on Capital @ 6% A 125 To Interest on Dev’s Loan 900 Kapil 200
A 1,200 B 75 200 (At the rate of 9% p.a.) Dev 100 300
B 600 1,800 To Profit transferred to:
To Interest on B’s Loan 2,000 Kapil (2/3) 1,800
(At the rate of 6% p.a.) Dev (1/3) 900 2,700
To Commission to A 1,500
7,100 7,100
To Profit transferred to:
A 3,000 You are required to point out any contravention of the law, found in above account and
B 2,000 5,000 draw it in proper manner.
[Correct Interest on Loan: Rs.600; Divisible Profit: Rs.6,200]
14,200 14,200
You are required to point out any contravention of the law found in above account and Q-4: A and B are partners in a firm without any agreement. A presents the following
draw it in proper manner. Profit and Loss Appropriation Account to his partner B.
[Divisible Profit: Rs.12,000]
 (23) (24)

respectively. They are also allowed interest on capital @ 6% p.a. Remaining profits is
CA. Naresh Aggarwal’s to be distributed in the ratio of 3 : 2.
ACADEMY of ACCOUNTS You are required to distribute the total profit of Rs.38,000 which is earned during the
current financial year. Show proper accounts.
Accounting • Costing • Taxation • Financial Management [Divisible Profit: Rs.25,000]
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Q-8*: A and B are partners with capital of Rs.30,000 and Rs.20,000 respectively.
Dr. Profit and Loss Appropriation Account Cr. The terms of partnership deed is as follows:
(i) Interest on capital is allowed at the rate of 6% p.a.
Particulars Amount Particulars Amount (ii) Salary is allowed to A at Rs.1,000 p.a.
To Salary to A 6,000 By Profit & Loss A/c 96,000 (iii) Commission to B at the rate of 10% on net profit.
To Interest on Capital to : (Net Profit) (iv) Remaining profits is to be shared by A and B in the ratio of 3 : 2.
A 3,500 By Interest on Drawings: During the year they earned a profit of Rs.14,000 after charging A’s salary but before
B 1,500 5,000 A 2,000 making other adjustments.
To Interest on A’s Loan 8,000 B 1,000 3,000 Prepare an account showing distribution of profits. Show calculations clearly.
(At the rate of 8% p.a.) [B’s Commission: Rs.1,500; Divisible Profit: Rs.9,500]
To Profit transferred to:

AoA
A (5/8) 50,000 Q-9: P and Q are partners sharing profits in proportion of 3 : 2 with capitals of Rs.40,000
B (3/8) 30,000 80,000 and Rs.30,000 respectively. Interest on capital is agreed at 5% p.a. Q is to allowed an
annual salary of Rs.3,000 which has not been withdrawn. During 2018 the profits for
99,000 99,000 the year prior to calculation of interest on capital but after charging Q’s salary amounted
You are required to point out any contravention of the law, found in above account and to Rs.12,000. A provision of 5% of this amount is to be made in respect of the manager’s
draw it in proper manner. commission.
[Correct Interest on Loan: Rs.6,000; Correct Profit: A- Rs.45,000; B- Rs.45,000] Prepare an account showing the allocation of profits.
[Adopted CBSE (Delhi)]
Q-5: X and Y started business on 1st January 2018 with capital of Rs.40,000 and [Manager’s Commission: Rs.600; Divisible Profit: Rs.7,900]
Rs.30,000 respectively. Due to further need of money Y gave a loan of Rs.20,000 to
the firm on 1st July 2018. At the end of year 2018 they earned a net profit of Rs.8,000. Q-10: A and B are partners in a firm. A’s capital is Rs.10,000 and B’s capital is
You are to draw their Profit and Loss Appropriation Account to show allocation of the Rs.6,000. Interest is payable @ 6% p.a. B is entitled to a salary of Rs.300 p.m. Profit
profit. for the current year before interest and salary to B is Rs.8,000. Distribute the profit
[Interest on Y’s Loan Rs.600; Divisible Profit: Rs.7,400] between A and B.
[CBSE (Delhi)] [Divisible Profit: Rs.3,440; A’s Share: Rs.1,720; B’s Share: Rs.1,720]
Q-6: Ram and Mohan start business on 01.04.2017 with capital of Rs.50,000 and
Rs.20,000 respectively. According to the deed Ram is entitled to salary of Rs.500 Q-11: X, Y and Z are partners in a firm sharing profits in the ratio of 2 : 2 : 1. The fixed
p.m. and Mohan is to be allowed a commission at the rate of 10% ofnet profit. Interest capitals of the partners were: X Rs.4,00,000; Y Rs.3,00,000; and Z Rs.2,00,000. The
on capital is also allowed @ 5% p.a. During the first year of partnership they earn a net partnership deed provides that interest on capital should be allowed at the rate of 5%
profit of Rs.25,000. You are to show a Profit and Loss Appropriation Account to allocate p.a. and that Z should be allowed a salary of Rs.2,500 p.m. The profit of the firm for the
the profit for the year ended 31.03.2018. year ended 31.03.2018 after debiting Z’s salary were Rs.2,95,000. Prepare Profit &
[Mohan’s Commission: Rs.2,500; Divisible Profit: Rs.13,000] Loss Appropriation A/c.
[Divisible profit: Rs.2,50,000]
Q-7: A and B are partners in a business for last three years. The balance in their
capital accounts at he beginning of current year was Rs.60,000 and Rs.40,000 Q-12*: Amit and Vijay started a partnership business on 01.04.2017. Their capital
respectively. A and B are allowed an annual remuneration of Rs.4,000 and Rs.3,000 contributions were Rs.2,00,000 and Rs.1,50,000 respectively. The partnership deed
provided that :
 (25) (26)

together with a commission of 10% of Net Profit after charging all commission and
CA. Naresh Aggarwal’s partners salaries. Net Profit before providing for partners salaries and commission for
ACADEMY of ACCOUNTS the year 2018 was Rs.8,40,000. Show the distribution of profit.
[A's commission Rs.55,000; B's commission Rs.45,000;
Accounting • Costing • Taxation • Financial Management Net Profit Rs.4,50,000; A's and B's share Rs.2,25,000 each]
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Q-17*: Ravi and Vijay are partners sharing profits and losses in the ratio of 3 : 1. On
1st April, 2017, their capitals were: Ravi Rs.2,00,000 and Vijay Rs.1,20,000. During
(i) Interest on capital at 10% p.a.
the year ended 31st March, 2018 they earned a Net profit of Rs.2,00,000. The terms
(ii) Amit to get salary of Rs.2,000 p.m. and Vijay Rs.3,000 p.m.
of partnership are as follows:
(iii) Profits are to be shared in the ratio of 3 : 2.
(a) Interest on capital is to be allowed @ 6% per annum.
The profits for the year ended 31.03.2018 before making above appropriations were
(b) Ravi will get a commission of 2% on turnover.
Rs.2,16,000. Interest on drawings amounted to Rs.2,200 for Amit and Rs.2,500 for
(c) Vijay will get a salary of Rs.24,000 per annum.
Vijay. Prepare Profit and Loss Appropriation Account
(d) Vijay will get a commission of 5% on profit after deduction of all expenses including
[CBSE (Delhi)]
such commission.
[Divisible Profit: Rs.1,25,700; Amit’s: Rs.75,420; Vijay’s: Rs. 50,280]
Partners drawings for the year were: Ravi Rs.32,000 and Vijay Rs.24,000. Turnover
for the year was Rs.12,00,000.
Q-13: Mahesh and Ramesh are partners with capitals of Rs.50,000 and Rs.60,000

AoA
After considering the above facts, you are required to prepare the Profit and Loss
respectively. On 1st January, 2018, Mahesh gives a loan of Rs.10,000 and Ramesh
Appropriation Accounts.
introduced Rs.20,000 as additional capital. Profit for the year ending 31st March 2018
[Commission of Vijay Rs.6,324; Divisible Profit: Ravi Rs.94,857; Vijay Rs.31,619]
was Rs.15,200. There is no partnership deed. Both Mahesh and Ramesh expect interest
@ 10% p.a. on the loan and additional capital advanced by them. Show how the profits
Preparation of Profit & Loss Appropriation A/c and Partners Capital A/cs
would be divided ? Give reasons.
Q-18: X and Y started a partnership business on 01.01.2018. They contributed
[Delhi, 2001 Compt.] [Divisible Profit: Rs.15,050; Interest on Loan: Rs.150; Interest on Capital: Nil]
Rs.80,000 and Rs.60,000 respectively as their capitals. The terms of the partnership
agreement are as under :
Q-14: X and Y contribute Rs.50,000 and Rs.30,000 respectively. They decide to
(i) Interest on capital and drawings will be allowed @ 12% p.a.
allow interest on capital @ 6% per annum. Their respective share of profits is 3 : 2 and
(ii) X and Y to get a monthly salary of Rs.2,000 and Rs.3,000 respectively.
the business profit (before interest) for the year is Rs.4,000. Show the distribution of
(iii) Sharing of profit or loss will be in the ratio of their capital contribution.
profits if :
The profit for the year ended 31.12.2018, before making the above appropriations was
(i) There is no agreement except for interest on capitals.
Rs.1,00,300. The drawings of X and Y were Rs.40,000 and Rs.50,000 respectively.
(ii) There is a clear agreement that the interest on capitals will be allowed even if it
Interest on drawings amounted to Rs.2,000 for X and Rs.2,500 for Y.
involves the firm in loss.
Prepare Profit and Loss Appropriation Account and Partners Capital Accounts
[(i): Interest on capitals: A- Rs.2,500; B- Rs.1,500;
assuming that their capitals are fluctuating.
(ii): Interest on capitals: A- Rs.3,000; B- Rs.1,800; Loss: A- Rs.480; B Rs.320]
[Divisible Profit: Rs.28,000; Profit Sharing Ratio 4 : 3; X’s Capital: Rs.87,600; Y’s Capital: Rs.62,700]
Q-15: A, B and C are partners sharing profits and losses equally. As per partnership
Q-19: A and B are partners in a firm sharing profits and losses in the ratio 3 : 2. The
deed, C is entitled to a commission of 10% on net profit after charging such commission.
balances standing to the credit of their capital accounts as on 01.04.2017 were :
Net profit before charging commission is Rs.66,000. Show Profit and Loss Appropriation
A - Rs.1,00,000; B - Rs.80,000.
A/c.
The terms of the partnership deed provide for the following :
[C’s Commission: Rs.6,000; Divisible Profit: Rs.60,000]
(i) That the partners will be paid interest on their capitals @ 15% p.a.
(ii) Both the partners to get a monthly salary of Rs.2,000 each.
Q-16: A and B are partners in a firm. A is entitled to a salary of Rs.2,40,000 per
The profits of the firm for the year ended 31.03.2018, before making the above
annum together with a commission of 10% of Net Profit after partners salaries but
appropriations and charging interest on capital were Rs.2,00,000. The drawings of A
before charging any commission. B in entitled to a salary of Rs.12,500 per quarter
and B were Rs.30,000 and Rs.40,000 respectively. The firm decided to charge interest
 (27) (28)

Q-23*: A and B are partners in a firm sharing profits and losses as 3 : 2. Their Capital
CA. Naresh Aggarwal’s Accounts, as on 01.01.2018 stand as A: Rs.50,000 and B: Rs.30,000. The partners
ACADEMY of ACCOUNTS are allowed 5% p.a. by way of interest on capitals. The drawings of the partners during
the year ended 31.12.2018 amounted to Rs.7,000 and Rs.6,000 respectively. The
Accounting • Costing • Taxation • Financial Management profit during the year, before charging interest on capital and annual salary of B at the
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org rate of Rs.6,000; amounted to Rs.50,000. 10% of this profit is to be kept in a Reserve
Account. You are required to prepare Profit & Loss Appropriation A/c and Partners
on drawings from the partners as follows: Capital A/cs.
A - Rs.3,000; B - Rs.4,000. [Divisible profit: Rs.35,000; A’s Capital: 66,500; B’s Capital: 45,500]
Prepare Profit and Loss Appropriation Account and Partners Capital Accounts
assuming that their capitals are fluctuating. Q-24*: A, B and C are partners sharing profits and losses in the ratio of 2 : 2 : 1 after
[Adopted All India] [Divisible Profit: 1,32,000; A’s Capital: Rs.1,85,200; B’s Capital: Rs.1,24,800] providing for interest at 5% on their respective capitals and allowing B and C a salary
of Rs.10,000 each p.a. Capital of A is Rs.1,00,000; B is Rs.60,000 and C is Rs.40,000.
Q-20: A and B are partners sharing profits in the ratio of 3 : 2 with capitals of Rs.50,000 During the year 2018, A has drawn Rs.15,000 and B and C in addition to their salaries
and Rs.30,000 respectively. Interest on capital is agreed @ 6% p.a. B is to be allowed have drawn Rs.3,000 and Rs.2,000 respectively. The Profit and Loss Account for the
an annual salary of Rs.2,500. During 2018, the profits of the year prior to calculation of year ended 31.12.2018 showed a net profit of Rs.90,000. On 01.01.2018, the balances
interest on capital but after charging B’s Salary amounted to Rs.12,500. A provision of in the Current Account of the partners were:

AoA
5% of the net profit is to be made in respect of manager’s commission. Prepare Profit A Rs.7,500 (Cr.); B Rs.4,500 (Cr.) and C Rs.1,000 (Dr.). Show the Partners Capital
& Loss Appropriation A/c and Partners Capital A/c. and Current Accounts after division of profits in accordance with the partnership
[CBSE] [Commission: Rs.750; Profit: Rs.6,950; Capitals: A- Rs.57,170; B- Rs.37,080] agreement.
[Divisible Profit: Rs.60,000; Current Alcs: A Rs.21,500(Cr.); B Rs.28,500(Cr.); C Rs.11,000(Cr.)]
Q-21: A and B are partners with capital of Rs.20,000 and Rs.15,000 respectively, on
01.01.2018. The trading profit earned during the year 2018, before considering the Q-25: A and B are partners sharing profits in the ratio of 3 : 2. Their capitals at the
provisions of the deed is Rs.13,350. According to the deed Interest on capital is to be beginning was Rs.1,50,000 and Rs.1,00,000 respectively. Prepare Profit and Loss
allowed @ 10% p.a. and B is entitled to a salary of Rs.200 p.m. Interest on drawings is Appropriation Account, Fixed Capital Accounts and Current Capital Accounts from
also charged which is calculated as Rs.300 for A and Rs.250 for B. Total drawings of the information given as under :
A and B were Rs.3,000 and Rs.2,000 respectively. Partners are agreed to share (i) Profit shown by Profit and Loss Account is Rs.1,80,000.
profits in the proportion of 7/10 for A and 3/10 for B. (ii) B will get 5% commission on trading profit.
You are required to show profit and loss Appropriation Account and Partners Fixed (iii) Allow interest on capital @ 10% p.a.
and Current Capital Accounts. (iv) A and B are to get salaries of Rs.2,000 p.m. and Rs.1,000 p.m. respectively.
[Divisible Profit: 8,000; Fixed Capital: A- 20,000; B- 15,000; Current Capital: A- 4,300; B- 4,050] (iv) Charge interest on drawings as A- Rs.2,000 and B- Rs.1,000.
(v) Drawings of A and B were Rs.20,000 and Rs.10,000 respectively.
Q-22: A and B are partners sharing profits in the ratio of 3 : 2. Their capitals at the [Commission of B: Rs.9,000; Fixed Capital: A- Rs.1,50,000; B- Rs.1,00,000;
beginning was Rs.75,000 and Rs.50,000 respectively. Prepare Profit and Loss Current Capital: A- Rs.84,800; B- Rs.65,200; Divisible Profit: Rs.1,13,000]
Appropriation Account, Fixed Capital Account and Current Capital Account from the
information given as under : Q-26*: A, B and C are in partnership and as on 1st April, 2017 their respective capitals
(a) Profit shown by Profit and Loss Account is Rs.90,000. were: Rs.1,20,000, Rs.90,000 and Rs.90,000. B is entitled to a salary of Rs.18,000
(b) B will get 5% commission on trading profit. and C Rs.12,000 per annum, payable before division of Profit. Interest is allowed on
(c) Allow interest on capital @ 10% p.a. capital at 5% per annum and is not charged on drawings. Of the divisible Profits A is
(d) Charge interest on drawings as Rs.1,000 for A and Rs.500 for B. entitled to 50% of the first Rs.30,000; B to 30% and C to 20%, over that amount of
(e) Drawings of A and B were Rs.10,000 and Rs.5,000 respectively. Profits are shared equally. The profit for the year ended 31st March 2018, after debiting
[Commission of B: Rs.4,500; Fixed Capital: A- Rs.75,000; B- Rs.50,000 partner's salaries, but before charging interest on capital was Rs.63,000 and the partners
Current Capital: A- Rs.41,200; B- Rs.33,800; Divisible Profit: Rs.74,500] had drawn Rs.30,000 each on account of salaries, interest and profit.
 (29) (30)

Q-31: Ram and Mohan are partners in a firm. The drawings of partners during the
CA. Naresh Aggarwal’s current year were Rs.8,400 of Ram and Rs.6,000 of Mohan. Calculate interest on
ACADEMY of ACCOUNTS drawings, if the rate of interest is 10% p.a.
[Ram: Rs.420; Mohan: Rs.300]
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Q-32: Reena and Meena are in partnership with profit ratio of 3 : 2. At the end of year
2018 it is ascertained that Reena had withdrawn regularly Rs.500 at the end of every
Prepare Profit and Loss Appropriation Account showing the distribution of profit and month upto 30th June but she did not withdraw anything after that date, while Meena
the Capital Accounts of partners. did not made any drawings upto 30th June and after that she started a monthly drawing
[Net Divisible Profit: Rs.48,000; A Rs.21,000; B Rs.15,000 and C Rs.12,000 of Rs.500 at the beginning of the each month.
Closing Balance of Capital A/cs : A Rs.1,17,000; B Rs.97,500 and C Rs.88,500] Calculate interest on drawings for both the partners, to be charged at the end of the
year 2018, if the rate of interest is 12% p.a.
INTEREST ON DRAWINGS [Reena: Rs.255; Meena: Rs.105]
Q-27: Ajay, Bimal and Chandan are partners in a firm. During the year, Ajay has
withdrawn Rs.1,000 at the beginning of each month; Bimal has withdrawn Rs.500 at Q-33*: P, Q, R, S and T are partners having following drawings :
the end of each month and Chandan has withdrawn Rs.1,500 each month Calculate ‘P’ has withdrawn Rs.1,000 at the beginning of each month.
interest on drawings, if the rate of interest is 6% p.a. ‘Q’ has withdrawn Rs.2,000 at the end of each month.

AoA
[Ajay: Rs.390; Bimal: Rs.165; Chandan: Rs.540] ‘R’ has withdrawn Rs.1,000 in each month.
‘S’ has withdrawn total Rs.24,000 in complete year.
Q-28: Chander and Dhanesh are partner in a firm. During the year ending 31st ‘T’ has withdrawn as follows :
December, Chander has withdrawn Rs.1,000 per month and Dhanesh has withdrawn Feb-1: Rs.5,000; May-31: Rs.5,000; Sept-30: Rs.10,000; Dec-31: Rs.7,000
as follows : Calculate interest on drawings, if the rate of interest is 12% p.a.
Feb.1: Rs.2,000; April 30: Rs.1,000; June1: Rs.3,000; [P- Rs.780; Q- Rs.1,320; R- Rs.720; S- Rs.1,440; T- Rs.1,200]
Aug.31: Rs.2,500; Nov.1: Rs.2,000.
Calculate interest on drawings, if the rate of interest is 12% p.a. INTEREST ON CAPITAL AND CAPITAL RATIO
[Chander: Rs.720; Dhanesh: Rs.650] Q-34: Amar and Akber start business on 1st January 2018 with capitals of Rs.25,000
and Rs.20,000 respectively. On 1st July 2018 Akber brings more money to make his
Q-29: X and Y are partners in a firm. During the year ending 31st March, X has capital equal to Amar.
withdrawn Rs.24,000 while Y has withdrawn in the following manner: Calculate interest on capital to be allowed at the end of the year 2018, if the rate of
May-1: Rs.5,000; Aug.-31: Rs.5,000; Dec.-31: Rs.10,000; March-31: Rs.4,000 interest is 10% p.a.
Calculate interest on drawings, if the rate of interest is 9% p.a. [Amar: Rs.2,500; Akber: Rs.2,250]
[X: Rs.1,080; Y: Rs.900]
Q-35: A and B start business as equal partners on 1st January 2018. On that date A
Q-30: Vinod and Mohan were partners in a firm. The partnership agreement provided brings Rs.40,000 but B could arrange only Rs.10,000. B, then promise to bring balance
that interest on drawings was to be charged @ 12% p.a. Vinod had withdrawn the of his capital in three equal installments at the end of the each quarter of the year.
following amounts during the year ended 31.12.2018. Calculate interest on capital to be allowed at the end of the year 2018 to each partner
Date Amount (Rs.) assuming that B kept his promise and the rate of interest is 6% p.a.
01.01.2018 10,000 [A: Rs. 2,400; B: 1,500]
31.03.2018 16,000
01.07.2018 20,000 Q-36: A and B started business on 01.01.2018 with capitals of Rs.60,000 and
31.12.2018 4,000 Rs.40,000 respectively. During the year, A introduced Rs.10,000 to the firm as additional
Calculate interest on Vinod’s drawings. capital on 01.07.2018. Interest on capital is to be allowed @ 10% per annum. Calculate
[Rs.3,840] the interest payable to A and B for the year ending 31.12.2018.
[CBSE Delhi] [Interest on A’s Capital: Rs.6,500; Interest on B’s Capital: Rs.4,000]
 (31) (32)

During the year partners withdrawn Rs. 3,000 each. Further capital introduced by
CA. Naresh Aggarwal’s Monu during the middle of the year was Rs.4,000. The profit earned and distributed
ACADEMY of ACCOUNTS between the partners was Rs.15,000.
Calculate interest on capital to be allowed at the end of the year @ 10% p.a.
Accounting • Costing • Taxation • Financial Management [Sonu- Rs.2,500; Monu- Rs.2,200]
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Q-41: Ajay and Vijay are partners sharing profits in the ratio of 3 : 2. Their capitals at
the end of the year after division of profits were Rs.50,000 and Rs.30,000 respectively.
Q-37*: From the following information related with A and B whose capital as on
During the year Ajay and Vijay were got total salaries of Rs.2,000 and Rs.1,000
01.04.2017 were Rs.20,000 and Rs.10,000 respectively. You are required to calculate
respectively. The drawings of Ajay was Rs.5,000 and of Vijay was Rs.3,000. Vijay
their capital ratio and interest on capital, if the rate of interest is 6% p.a.
had also introduced Rs.5,000 as new capital after the expiry of six months of the
A B
financial year. Divisible profit of the year was Rs.15,000.
Date Introduced Withdrawn Introduced Withdrawn
Calculate interest on capital at the rate of 10% p.a.
June-1 6,000 - - 2,000
[Ajay- Rs.4,400; Vijay- Rs.2,350]
Aug.-31 7,000 - 8,000 -
Oct.-31 - - 6,000 -
Q-42*: Ram and Mohan are partners sharing profits and losses in the ratio of 3 : 2
Dec.-1 - 3,000 - 3,000
respectively. Their capitals at the end of the year were Rs.50,000 and Rs.30,000
Jan.-31 4,000 - 10,000 -

AoA
respectively. The profit of the year distributed to them in their profit sharing ratio was
March.-1 5,000 - 6,000 -
Rs.15,000. Ram had got an annual salary of Rs.2,000 and Mohan had got an annual
[Capital Ratio- 7 : 4; Interest: A- Rs.1,750; B- Rs.1,000]
salary of Rs.1,000. During the year Ram’s drawings were Rs.5,000 and Mohan’s
drawings were Rs.3,000. In the exact middle of the year Mohan had also invested
Q-38: A and B start business on 1st April with capital of Rs.37,500 and Rs.15,000
Rs.5,000 as further capital in the firm.
respectively. They agree to share profits in the proportion to their capital after allowing
You are required to calculate interest on capital @ 10% p.a. in the following cases:
interest on capital at 12% p.a.
(i) If the closing capital given in the above question is of fluctuating Capital A/c
You are to show proper accounts to allocate the net profit of Rs.30,000 taking into
(ii) If the closing capital given in the above question is of Fixed Capital A/c
consideration the following further information:
[(i) : Ram’s Interest - Rs.4,400; Mohan’s Interest - Rs.2,350;
A B
(ii) : Ram’s Interest - Rs.5,000; Mohan’s Interest - Rs.2,750]
Date Introduced Withdrawn Introduced Withdrawn
July-1 - 5,000 6,000 -
ADJUSTMENT ENTRY
Sept.-30 4,000 - 6,500 -
Q-43*: A, B and C started a business with capital of Rs.50,000; Rs.30,000 and
Nov.-1 5,000 - 6,000 -
Rs.20,000 respectively. During the year they earned a profit of Rs.27,000 which was
Dec.-31 - 2,500 - -
distributed among them in their profit sharing ratio without taking into consideration the
March-1 3,500 - - 3,000
following matters of the Deed.
[Ratio- 3 : 2; Interest: A- Rs.4,500; B- Rs.3,000; Divisible Profit Rs.22,500]
(i) Interest on Capital at the rate of 5% p.a.
(ii) Salary to B and C Rs.2,000 each.
Q-39: A and B are partners in equal ratio. Their capital at the end of the year are
(iii) Special commission to A Rs.3,000.
Rs.48,000 and Rs.36,000 respectively. A is entitled to an annual Salary of Rs.4,000.
You are asked to prepare a single journal entry to rectify the above mistake. Working
During the year A has withdrawn Rs.8,000 and B Rs.6,000. The profit distributed after
notes should also be shown clearly.
charging A’s Salary was Rs.24,000.
[B- Rs.500 (Dr.); C- Rs.1,000 (Dr.); A- Rs. 1,500 (Cr.)]
You are required to calculate interest on capital @ 5% p.a.
[A- Rs.2,000; B- Rs.1,500]
Q-44: A, B and C were partners in a firm. On 01.01.2018 their capitals stood at
Rs.50,000; Rs.25,000 and Rs.25,000 respectively. As per the provisions of the
Q-40: Sonu and Monu are partners in a firm sharing profits in the ratio of
partnership deed :
3 : 2. Their capital at the end of the year were Rs.31,000 and Rs.27,000 respectively.
 (33) (34)

Year 2018 - 2 : 1, Year 2017 - 2 : 3, Year 2016 - 4 : 1.

CA. Naresh Aggarwal’s Show a journal entry to make adjustment in capital accounts.
ACADEMY of ACCOUNTS [Ram- Rs.1,500 (Cr.); Mohan- Rs. 1,500 (Dr.)]

Accounting • Costing • Taxation • Financial Management Q-48*: Jagdish, Ashish and Deepak are partners sharing profits in the ratio of 3 : 2 :
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org 1. The firm has been in existence for many years. Now the partners decide to share
profits in the ratio of 2 : 2 : 1. They also decided that the change shall be carried out
(a) C was entitled for a salary of Rs.1,000 p.m. with retrospective effect from 2015. The profit and loss during the last few years have
(b) Partners were entitled to interest on capital at 5% p.a. been: 2014 - Rs.16,000; 2015 - Rs.12,000; 2016 - Rs.14,000; 2017 - Rs.19,000;
(c) Profits were to be shared in the ratio of capitals. 2018 - Rs.15,000 (Loss). Show the adjustment of profits for the last four years by
The net profit for the year 2018 of Rs.33,000 was divided equally without providing for means of a single journal entry.
the above terms. Pass an adjustment entry to rectify the above error. [CBSE Compt. (Delhi) 2001]
[AlI India 1999] [Jagdish- Rs.3,000 Dr.; Ashish- Rs.2,000 Cr.; Deepak- Rs. 1,000 Cr.]
[A: Rs.500 (Dr.); B: Rs.5,750 (Dr.); C: Rs.6,250 (Cr.)]
Q-49*: P, Q and R were partners in a firm sharing profits in the ratio of 1 : 2 : 2. After
Q-45*: X and Y are partners. At the end of the year 2018, their fixed capital accounts the division of the profits for the year ended 31.3.2018 their capitals were:
shows the balance of Rs.50,000 and Rs.30,000 respectively. After crediting the profit P: Rs.1,50,000; Q: Rs.1,80,000; R: Rs.2,10,000

AoA
of Rs.25,000 in their current capital account, they noticed the following errors: During the year they withdrew Rs.20,000 each. The profit for the year was Rs.60,000.
(i) Commission was given to X and Y as Rs.3,000 and Rs.1,000 respectively; instead The Partnership Deed provided that interest on capital will be allowed @ 10% p.a.
of Rs.1,000 and Rs.2,000 respectively. While preparing the final accounts, interest on Partner’s Capital was not allowed. You
(ii) There was an agreement for allowing Y an annual salary of Rs.2,000 which is not are required to calculate the capitals of P, Q and R on 01.04.2017 and pass the
yet provided. necessary adjustment entry for providing interest on capitals. Show your working
(iii) Interest on drawings of Rs.500 for X and Rs.300 for Y has not been recorded. clearly.
(iv) Interest on capital was allowed to them @ 5% p.a., though no agreement was [CBSE (Delhi) 2002] [Q- Rs.4,000 (Dr.); R- Rs.1,000 (Dr.); P- Rs. 5,000 (Cr.)]
made in the partnership deed.
You are asked to prepare a single journal entry to rectify the above mistakes. Working Q-50: After including the profits for the year ended 31.03.2018 the capital accounts of
notes should also be shown clearly. A, B and C stood at Rs.20,000, Rs.15,000 and Rs.10,000 respectively. Subsequently,
[X- Rs.3,100 (Dr.); Y- Rs.3,100 (Cr.)] it was discovered that interest on capitals at 10% p.a. had inadvertently been ignored.
The profits for the year in arriving at the above figures of capitals amounted to Rs.10,000.
Q-46: X, Y and Z are partners for the last three years and till now they were sharing They shared profits and losses in the ratio of
profits or losses in the ratio of 3 : 2 : 1 respectively. During the 1st year of partnership 2 : 1 : 1 respectively. Give the necessary journal entry to rectify the above.
they got a loss of Rs.3,000 but during 2nd and 3rd year they earned profits of Rs.9,000 [Modified Foreign 2003]
and Rs.18,000 respectively. [A: Rs.250 (Dr.); B: Rs.375 (Cr.); C: Rs.125 (Dr.)]
Now they decide to share profit or losses in equal proportions with effect form the
beginning of the partnership. Q-51: On 31.12.2018 after closing the capital accounts, capitals of X, Y and Z stood
You are required to pass a single journal entry to give effect to new agreement. at Rs.80,000; Rs. 60,000 and Rs.40,000 respectively. It was subsequently discovered
[X- Rs.4,000 (Dr.); Z- Rs. 4,000 (Cr.)] that interest @ 5% p.a. on capitals at the beginning of the year was left out. Their
drawings during the year were Rs.20,000; Rs.15,000 and Rs.9,000 respectively. Profit
Q-47: Ram and Mohan are partners in a firm sharing profit and loss equally. During for the year was Rs.1,20,000. Partners share profits as 3 : 2 : 1. Give necessary
the Last three years they were distributed following profits : adjustment entry and show the working notes.
Year 2018: Rs.15,000; Year 2017: Rs.10,000; Year 2016: Rs.5,000. [All India 1999]
Now all partner decide to share profits in their capital ratios with retrospective effect [Opening Capital of X, Y and Z are: Rs.40,000; Rs.35,000 and Rs.29,000 respectively;
for last two completed years. From the capital accounts of the partners, ratio for Ram Adjustment entry:- X: Rs.600 (Dr.); Y: Rs.17 (Cr.); Z: Rs.583 (Cr.)]
and Shyam are ascertained as under:
 (35) (36)

Q-57*: Mohan, Vijay and Anil are partners, the balance on their capital accounts
CA. Naresh Aggarwal’s being Rs.30,000; Rs.25,000 and Rs.20,000 respectively. In arriving at these figures,
ACADEMY of ACCOUNTS the profits for the year ended 31.03.2018, Rs.24,000 had already been credited to
partners in the proportion in which they shared profits. Their drawings were Rs.5,000
Accounting • Costing • Taxation • Financial Management (Mohan); Rs.4,000 (Vijay) and Rs.3,000 (Anil) in 2018-2017. Subsequently the following
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org omissions were noticed and it was decided to bring them into account:
(i) Interest on capital at 10% p.a.
(ii) Interest on drawings (Mohan Rs.250; Vijay Rs.200; Anil Rs.150).
Q-52: A and B had been sharing profits and losses equally. After dividing the profits
Make the necessary corrections through Profit and Loss Adjustment Account and
for the year 2018, Rs.60,000 it was agreed that they would share profits and losses
through a journal entry.
from 01.01.2018 in the ratio of 3 : 2. At that time it was also found that while preparing
[CBSE] [Anil- Rs.550 (Dr.); Mohan- Rs.550 (Cr.); Correct profit: Rs.18,300]
accounts for 2018 interest on capitals @ 5% p.a. was ignored. The fixed capitals of A
and B were Rs.1,00,000 and Rs.80,000 respectively.
Q-58*: A and B are partners sharing profits and losses in the ratio of 3 : 2. They
Pass a single adjustment entry to adjust the accounts of the partners.
employed C as their manager to whom they paid a salary of Rs.750 p.m. C had
[A: Rs.5,600 (Cr.); B: Rs.5,600 (Dr.)]
deposited Rs.20,000 on which interest was payable @ 9% p.a. At the end of 2018
(after division of the year’s profit), it was decided that C should be treated as partner
Q-53: Ram and Mohan are equal partners with capital of Rs.5,000 and Rs.9,000
with effect from 1st January 2015 with 1/6 share of profits, his deposit being considered

AoA
respectively. After accounts of the year are prepared, it is discovered that interest at
as capital carrying interest at 6% p.a. like capitals of other partners. The firms’s profits
7% p.a. has not been credited to capital account before distribution of profits. It is
and losses after allowing interest on capitals were as follows:
decided to make an adjustment entry at the beginning of next year.
2015 Profit 59,000
Give the necessary journal entry.
2016 Profit 62,600
[All India 2003] [Ram: Rs.140 (Dr.); Mohan: Rs.140 (Cr.)]
2017 Loss 4,000
2018 Profit 78,000
Q-54: A, B and C are partners in a firm with capitals of Rs.40,000; Rs.60,000 and
Record the necessary Journal Entries to give effect to the above.
Rs.80,000 respectively. After the accounts of the firm for the year have been closed,
[Adapted SSC (All India)] [A- Rs.360 (Dr.); B- Rs.240 (Dr.); C- Rs.600 (Cr.)]
it is discovered that interest @ 8% p.a. was allowed to each partner although no such
agreement was made in the partnership agreement. It is decided to make an adjustment
Q-59: X and Y are partners sharing profits and losses in the ratio of 3 : 2. At the end
entry at the beginning of the next year. Pass necessary journal entry.
of the year, i.e., on 31.12.2018 they decided to take their manager Z into partnership.
[AlI India 2004 Compartment]
As manager Z was getting annual salary of Rs.9,000. He had also advanced Rs.60,000
[A: Rs.1,600 (Cr.); C: Rs.1,600 (Dr.)]
to the firm by way of a loan on which he is getting interest @ 10% p.a. During the three
years, firm’s profits after adjusting salary to Z, interest on loan and interest on capital
Q-55: Ram, Shyam and Mohan are partners in a firm sharing profits in the ratio of 2
of partners were :
: 1 : 2. Their fixed capitals were Rs.3,00,000; Rs.1,00,000 and Rs.2,00,000 respectively.
2016 Profit 80,000
Interest on capital for the year 2018 was credited to them @ 9% instead of 10% p.a.
2017 Loss 40,000
Showing your working notes clearly, pass the necessary adjustment journal entry.
2018 Profit 1,20,000
[CBSE Outside] [Shyam- Rs.200 (Dr.); Mohan- Rs.400 (Dr.); Ram- Rs. 600 (Cr.)]
According to the new agreement, Z is to be given annual salary of Rs.7,000 and
1/5th share in the profits of the firm. Z’s loan shall be treated as his capital from the
Q-56: Ram and Mohan were partners in a firm sharing profits in 3 : 2 ratio. Their fixed
beginning and similar to other partners, his capital will carry interest @ 6% p.a.
capitals were : Ram- Rs.1,20,000 and Mohan- Rs.90,000. For the year 2018, interest
Record the necessary Journal Entries to give effect to the above arrangement.
on capital was credited to them at the rate of 6% instead 5%. Give necessary adjusting
[X- Rs.12,864 (Dr.); Y- Rs.8,576 (Dr.); Z- Rs.21,440 (Cr.)]
entry for the rectification of the error. Show also the working notes clearly.
[Delhi 2000 Compartment]
GUARANTEE IN PARTNERSHIP
[Ram: Rs.60 (Cr.); Mohan: Rs.60 (Dr.)]
Q-60: A, B and C were in partnership sharing profit and losses in the ratio of
4 : 2 : 1 respectively It was provided that in no case C’s share in profit should be less
 (37) (38)

in the ratio of 4 : 3 : 3. A, however personally guaranteed that C’s share of profit after
CA. Naresh Aggarwal’s charging interest on capitals @ 5% p.a. would not be less than Rs.40,000 in any year.
ACADEMY of ACCOUNTS The capital contributions were :
A- Rs.3,00,000; B- Rs.2,00,000 and C- Rs.1,50,000.
Accounting • Costing • Taxation • Financial Management The profit for the year ended on 31.03.2018 amounted to Rs.1,60,000.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Show the Profit and Loss Appropriation Account.
[CBSE (Delhi)] [Profits: A- Rs.49,250; B- Rs.38,250; C- Rs.40,000]
than Rs.7,500. The profits for the year 2018 amount to Rs.31,500. You are required to
Q-66: A, B and C entered into a partnership on 01.04.2017 to share profits and losses
show the appropriation amongst the partners. Profit and Loss Appropriation Account
in the ratio of 4 : 3 : 3. A, however, personally guaranteed that C’s share of profit after
is not required.
charging interest on capitals at 5% p.a. would not be less than Rs.40,000 p.a. The
[CBSE (Delhi)] [Profits: A- Rs.16,000; B- Rs.8,000; C- Rs.7,500]
capital contributions were A- Rs.3,00,000, B- Rs.2,00,000 and C- Rs.1,00,000. The
profits for the year ended 31.03.2018 were Rs.1,20,000. Show the distribution of profits.
Q-61*: A, B and C are partners sharing profits in the ratio of 16 : 12 : 7 with a minimum
[Delhi 2001 Compartment ; All India 2002 Compartment]
profit of Rs.10,000 for C. The profit for the year ended December 31, 2018 amounted
[Share of Profits: A- Rs.23,000; B- Rs.27,000; C- Rs.40,000]
to Rs.39,500. Pass the journal entries in the books of the partnership firm for distributing
the profit.
Q-67: A, B and C are partners sharing profit and losses in the ratio of 5 : 4 : 1. C is
[Adopted CBSE (Compt.)]

AoA
given a guaranteed that his share of profit in any year would not be less than Rs.5,000.
[Deficiency met by: A- Rs.1,200; B- Rs.900; Profit of A Rs.16,857; B Rs.12,643; C Rs.10,000]
Deficiency, if any would be borne by A and B equally. The profits for the year 2018
amounted to Rs.40,000. Pass Journal Entries in the Books of the firm.
Q-62: X, Y and Z are partners sharing profit and losses in the ratio of 5 : 3 : 2. Z is
[CBSE (Delhi) 2002] [Profits: A- Rs.19,500; B- Rs.15,500; C- Rs.5,000]
given a guarantee that his share of profit in any year will not be less than Rs.10,000.
During the year 2018, firm earns a profit of Rs.40,000. You are required to show Profit
Q-68: A and B are partners in a firm sharing profits in the ratio of 2 : 1. On 01.04.2017
and Loss Appropriation Account to allocate the profits.
they decided to admit C for 1/5 share in profits with a guaranteed amount of Rs.25,000
[X- Rs.18,750; Y- Rs.11,250; Z- Rs.10,000]
p.a. A undertook to meet the liability arising out of the guaranteed amount to C. The
firm earned a profit of Rs.75,000 for the year ended 31.03.2018. Prepare Profit and
Q-63*: P, Q and R are partners sharing profit and losses in the ratio of 3 : 2 : 1. R is
Loss Appropriation Account.
guaranteed that his share of profit including his salary will not be less than Rs.12,000
[Delhi 2004 Compartment] [Share of Profits: A- Rs.30,000; B- Rs.20,000; C- Rs.25,000]
in any year. It is further decided that any loss arising from the guarantee will be borne
by other partners in equal proportions. The profit, after charging R’s salary Rs.3,000;
Q-69*: A and B sharing profits and losses in the ratio of 3 : 2 admit C for 1/10 share in
amounted to Rs.48,000.
the firm. He is guaranteed a minimum of Rs.15,000 profits. Any deficiency arising due
You are required to allocate the profit though proper accounts.
to gaurantee to be contributed by A and B in the ratio of 4 : 1. Calculate profits of A, B
[P- Rs.23,500; Q- Rs.15,500; R- Rs.9,000]
and C. Profits of the firm for the year are Rs.1,00,000.
[Share of Profits: A Rs.50,000; B Rs.35,000; C Rs.15,000]
Q-64*: A, B and C are partners sharing profit and losses in the ratio of 5 : 4 : 1. C is
guaranteed that his share of profit will not be less than Rs.10,000 in any year. It is
Q-70: P, Q and R are partners in a firm. Their profit sharing ratio is 3 : 2 : 1. However,
further decided that any loss arising from the guarantee will be borne by A only.
R is guaranteed a minimum amount of Rs.10,000 as share of profit every year. Any
You are required to allocate the profit though proper accounts, if :
deficiency arising on that account shall be met by P only. The profits for two years
(i) The profit for the year amounted to Rs.80,000.
ending December 31, 2017 and 2018 were Rs.45,000 and Rs.75,000 respectively.
(ii) The profit for the year amounted to Rs.1,20,000.
Prepare Profit and Loss Appropriation Account for the two years.
[(i): A’s Profit - Rs.38,000; B’s Profit - Rs.32,000; C’s Profit - Rs.10,000]
[Delhi 2002 Compartment]
[(ii): A’s Profit - Rs.60,000; B’s Profit - Rs.48,000; C’s Profit - Rs.12,000]
[Share of Profits(2017): P- Rs.20,000; Q- Rs.15,000; R- Rs.10,000
Share of Profits(2018): P- Rs.37,500; Q- Rs.25,000; R- Rs.12,500]
Q-65: A, B and C entered into partnership on 01.04.2017 to share profits and losses
 (39) (40)

salary. Prepare the Appropriation Account showing the division of the profits of the
CA. Naresh Aggarwal’s year.
ACADEMY of ACCOUNTS [Share of Profit: A- Rs.21,500, B- Rs.16,000, C- Rs.12,500]

Accounting • Costing • Taxation • Financial Management Q-75: X, Y and Z are partners in a firm. X and Y sharing profits in the ratio of 5 : 3 and
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Z receiving a salary of Rs.12,000 p.a. plus a commission of 5% on the profits after
charging such salary and commission or 1/5th of the profits of the firm, whichever is
larger. Any excess of the later over the former is, under the partnership agreement, to
Q-71: A, B and C are partners sharing profits in the ratio of 3 : 2 : 1. The terms of
be borne personally by X.
partnership is as follows :
The profits for the year ended 31.03.2018 amounted to Rs.84,000 after charging Z’s
(i) C’s share of profit will not be less than Rs.12,000 in any year.
salary. Prepare the Appropriation Account showing the division of the profits of the
(ii) A’s contribution in firm’s profit will not be less than Rs.30,000 in any year.
year.
During the year, firm earns a total profit of Rs.60,000 (including A’s contribution
[Share of Profit: X- Rs.46,800, Y- Rs.30,000, Z- Rs.19,200]
Rs.27,000. You are required to show firm’s Profit & Loss Appropriation Account.
[A’s Deficiency: Rs.3,000; Profit: A- Rs.30,600; B- Rs.20,400; C- Rs.12,000]

Q-72*: A, B and C are partners sharing profit and losses in the ratio of 3 : 2 : 1. C is

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guaranteed by the firm that his share of profit including his salary of Rs.2,000; will not
be less than Rs.10,000 in any year. It is further decided that any loss arising from this
guarantee will be borne by A and B in equal proportions. Another guarantee is given
by B to the firm that he will earn at least Rs.7,000 for the firm’s profits.
The profit (after charging C’s salary and including B’s contribution Rs.4,000) amounted
to Rs.33,000.
You are required to allocate the profit though proper accounts.
Theoretical Questions
[A- Rs.17,000; B- Rs.11,000; C- Rs.8,000; Deficiency of B: Rs.3,000]
Q-1*: What is meant by partnership ?
or
Q-73: X, Y and Z are partners in the ratio of 3 : 2 : 1. X gives guarantee to the firm that
Define Partnership.
his contribution in firm’s profit would not be less than Rs.24,000 in any year. The
partnership deed also provides that Z’s share of profit will not be less than Rs.10,000. Q-2*: What is meant by partnership deed ?
Further, X has personally guaranteed Y that his share of profit including his salary and
interest on capital will not be less that Rs.20,000. Terms of the deed provides for Q-3*: List any four contents of a partnership deed.
Rs.100 p.m. to each partner as salary and interest comes to Rs.1,200 for X; Rs.800
Q-4*: Distinguish between fixed capital and fluctuating capital.
for Y and Rs.600 for Z.
The profit after charging partner’s salary and interest on capital is determined as Q-5*: State the main provisions of the Partnership Act related to accounting, if there
Rs.42,000 in which X contributed to extent of Rs.18,000 only. is no Partnership deed.
[X- Rs.20,000; Y- Rs.18,000; Z- Rs.10,000; Deficiency of X: Rs.6,000]
Q-6*: Name any six items which are shown in Profit & Loss Appropriation Account.
Q-74*: A, B and C are partners in a firm. A and B sharing profits in the ratio of 3 : 2 and
C receiving a salary of Rs.6,000 p.a. plus a commission of 10% on the profits after Q-7: Why is Profit & Loss Appropriation Account prepared by partnership firm ?
charging such salary and commission or 1/4 th of the profits of the firm,
Q-8: State any three items that may be included in the partnership agreement from
whichever is larger. Any excess of the later over the former is, under the partnership
accounting point of view.
agreement, to be borne personally by A.
The profits for the year ended 31.03.2018 amounted to Rs.44,000 after charging C’s Q-9: List any four essential elements of Partnership.
 (41)

CA. Naresh Aggarwal’s

ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org

Q-10: If the Partners capital Accounts are fixed, where will you record the following:
(a) Salary payable to a partner.
(b) Drawings made by a partner.
(c) Fresh capital introduced by a partner.
(d) Share of profit earned by a partner.

Q-11: List any two circumstances under which the fixed capital of partners may change.

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Q-12: Give two items appearing on the credit side of partners’ capital accounts when
capitals are fixed.

Q-13: List the items that may appear on the debit side of a partner’s fixed capital
account.

Q-14: List any two items appearing on the debit side of a partner’s current account.

Q-15: List any two items appearing on the credit side of a partner’s current account.

Q-16: List any three items appearing on the credit side of a partner’s capital account,
when capitals are fluctuating.

Q-17: List any three items appearing on the debit side of a partner’s capital account,
when capitals are fluctuating.

* Very Important Questions

••••••••••••••••••••••
 CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org

For Eenquiries
Call or whatsapp: 8800215448

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(Whatsapp anytime, Calls only between 3.00 pm to 8.00 pm)
Reconstitution & Email: ca.naresh.vc@gmail.com

Admission of Partner Website: academyofaccounts.org

Watch us on

https://www.youtube.com/CaNareshAggarwal
 (1) (2)

Q-8: Prakash and Subhash are partners sharing profits and losses in the ratio of 7
CA. Naresh Aggarwal’s : 3. Prakash surrenders 1/7th of his share and Subhash surrenders 1/3 of his share in
ACADEMY of ACCOUNTS favour of Manohar, a new partner. Calculate the new profit sharing ratio.
[New Ratio 3 : 1 : 1; Sacrificing Ratio 1 : 1]
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Q-9*: Singh, Gupta and Lal are partners in a firm sharing profits in the ratio of
3 : 2 : 3. They admitted Jain as a new partner. Singh surrendered 1/3rd of his share in
favour of Jain. Gupta surrendered 1/4th of his share in favour of Jain andLal
Calculation of New Ratio surrendered 1/5th of his share in favour of Jain. Calculate the new ratio.
[20 : 15 : 24 : 21]
Q-1: A and B share profits in the ratio of 7 : 3. They admit C for 3/7 share which he
takes 2/7 from A and 1/7 from B. Calculate new profit sharing ratio. Q-10: R and S are partners in a firm sharing profits and losses in the ratio of 3 : 2.
[New Ratio 29 : 11 : 30; Sacrificing Ratio 2 : 1] They admit T as a new partner. R surrenders 1/5th share of his profit in favour of T and
S surrenders 2/5th of his share in favour of T. Calculate their new ratio.
Q-2: A and B are partners sharing profits and losses in the proportion of 7 : 5. They [12 : 6 : 7]
agree to admit C, their manager, into partnership who is to get 1/6 share in the profits.
He acquires this share 1/24 from A and 1/8 from B. Calculate new ratio. Q-11: Kamal and Vimal are partners in a firm sharing profit and losses equally. Nirmal

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[New Ratio 13 : 7 : 4; Sacrificing Ratio 1 : 3] is admitted as a partner. Kamal gave 1/4th of his share and Vimal gave 1/3rd of
his share to Nirmal. Calculate new profit sharing ratio of the partners.
Q-3: A and B are partners sharing profits in the ratio of 3 : 2. They admit C for 3/ [9 : 8 : 7]
7 profit which he acquires 2/7 from A and 1/7 from B calculate new ratio.
[New Ratio 11 : 9 : 15; Sacrificing Ratio 2 : 1] Q-12: X and Y shared profits in the ratio of 5 : 3. Z was admitted as partner. X
surrendered 1/5 of his share and Y 1/6 of his share in favour of Z. Calculate the new
Q-4*: A and B are partners sharing profits and losses in the proportion of 7 : 5. They ratio.
agree to admit C, their manager, into partnership who is to get 1/6 th share in the [8 : 5 : 3]
profits. He acquires this share as 1/24 from A and 1/8 from B. Calculate new profit
sharing ratio. Q-13: X and Y are partners in a firm sharing profits and losses in there ratio of
[New Ratio 13 : 7 : 4; Sacrificing Ratio 1 : 3] 9 : 6. A new partner Z is admitted. X surrenders 3/15 share of his profit in favour of Z
and Y 6/15 of his share in favour of Z. Calculate new profit sharing ratio.
Q-5: Anita and Sunita are partners sharing profits as 9 : 5. They admit Kavita as a [12 : 6 : 7]
new partner who is to get 1/8 share in the profits. She acquires this share as 1/12 from
Anita and 1/24 from Sunita. Calculate new profit sharing ratio. Q-14: A, B and C are partners sharing in the ratio of 5 : 3 : 2. They admit D as a new
[New Ratio 94 : 53 : 21; Sacrificing Ratio 2 : 1] partner. He gets his share as 1/10 from A and 1/3 of B. C refuse to sacrifice anything.
Calculate new ratio and sacrificing ratio of the partners.
Q-6: X and Y are partners sharing profits and losses in the proportion of 7 : 3. They [New Ratio 2 : 1 : 1 : 1; Sacrificing Ratio of A and B 1 : 1]
agree to admit Z, their manager, into partnership who is to get 1/5 share in the profits.
He acquires this share 3/20 from X and 1/20 from Y. Calculate new ratio. Q-15*:R, S and T are partners sharing in the ratio of 3 : 2 : 1. They admit W as a new
[New Ratio 11 : 5 : 4; Sacrificing Ratio 3 : 1] partner. He gets his share as 1/12 from R and 1/3 of S. Calculate new ratio and
sacrificing ratio of the partners.
Q-7: Ajay and Vijay are partners in a firm sharing profits as 2 : 3. A new partner [New Ratio 15 : 8 : 6 : 7; Sacrificing Ratio of R and S 3 : 4]
Sanjay is admitted. Ajay surrenders 1/5 of his share and Vijay surrenders 2/5 of his
share in favour of Sanjay. Calculate new profit sharing ratio. Q-16: A and B are partners sharing profit in the ratio of 3 : 2. C is admitted to the
[New Ratio 8 : 9 : 8; Sacrificing Ratio 1 : 3] partnership for 1/6 share of future profits. Calculate new ratio and sacrificing ratio.
[New Ratio 3 : 2 : 1; Sacrificing Ratio 3 : 2]
 (3) (4)

Q-25*:A, B, C and D are in partnership sharing profits and losses in the ratio of
CA. Naresh Aggarwal’s 9 : 6 : 5 : 5 respectively. E joins the partnership for 20% share. A, B, C and D would in
ACADEMY of ACCOUNTS future share profits among themselves as 3 : 4 : 2 : 1. Calculate new and sacrificing
ratio after E’s Admission.
Accounting • Costing • Taxation • Financial Management [New Ratio 6 : 8 : 4 : 2 : 5
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Sacrificing Ratio of A, C and D 3 : 1 : 3; Gain of B is 2/25]

Q-26: P, Q and R are in partnership sharing profits and losses in the ratio of
Q-17: A and B were the partners sharing profits in the ratio of 5 : 3. C was admitted for 5 : 3 : 2 respectively. S joins the partnership for 10% share. P, Q and R would in future
1/9th share in the profits. Calculate new ratio and the sacrificing ratio. share profits among themselves as 2 : 2 : 1. Calculate new and sacrificing ratio of the
[New Ratio 5 : 3 : 1; Sacrificing Ratio 5 : 3] partners.
[New Ratio 18 : 18 : 9 : 5
Q-18: Ram and Shyam are partners sharing profit in the ratio of 5 : 2. Mohan is admitted Sacrificing Ratio of P and R 7 : 1; Gain of Q is 3/50]
to the partnership for 1/8 share of future profits. Calculate the new profit sharing ratio
and the sacrificing ratio. Q-27: A and B standing in partnership, share profits in the ratio of 3/5 and 2/5. C is
[New Ratio 5 : 2 : 1; Sacrificing Ratio 5 : 2] admitted as partner for 1/4 share of profits. A and B decide to share equally in future.
Find the sacrificing ratio and new profit sharing ratio.

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Q-19: A and B are old partners sharing profits in the ratio of 3 : 2. C comes in with [Sacrificing Ratio 9 :1; New Ratio 3 : 3 : 2]
1/7 share of the profits. Calculate the new profit sharing ratios of the partners.
[New Ratio 18 : 12 : 5; Sacrificing Ratio 3 : 2] Q-28: A and B are partners. They admit C for 1/4 share. In future, the ratio between A
and B would be 2 : 1. Calculate new ratio of the partners.
Q-20*:A and B were the partners sharing profits in the ratio of 21 : 9. C was admitted [2 : 1 : 1]
on 9/21 share in the profits. Calculate new ratio of the partners.
[14 : 6 : 15; Sacrificing Ratio 7 : 3] Q-29: K, L and M are partners sharing in the ratio of 3 : 2 : 1. They admit N for 1/6
share. M would retain his original share. Calculate new ratio of the partners.
Q-21: A and B are partners sharing profit in the ratio of 5 : 3. C is admitted to the [12 : 8 : 5 : 5]
partnership for 1/4 share of future profits. Calculate new ratio and sacrificing ratio.
[New Ratio 15 : 9 : 8; Sacrificing Ratio 5 : 3] Q-30: P, Q and R are partners sharing in the ratio of 5 : 3 : 2. They admit S for 1/5
share. R refuse to sacrifice. Calculate new and sacrificing ratio of the partners.
Q-22: X and Y are sharing profits in the ratio of 4 : 3. Z joins and the new ratios of X, [Sacrificing Ratio of P and Q 5 : 3; New Ratio 15 : 9 : 8 : 8]
Y and Z will be 7 : 4 : 3. Calculate sacrificing ratio.
[1 : 2] Q-31: Radha, Meera and Sudha are partners sharing in the ratio of 3 : 2 : 1. They
admit Neha as a new partner for 1/5 share. Share of Sudha also increased so that she
Q-23: A and B are partners sharing profits in the ratio of 3 : 2 C is admitted as a will share profits equal to Neha. Calculate new ratio and sacrificing ratio.
partner. The new profit sharing ratio among A, B and C is 4 : 3 : 2. Find out the sacrificing [New Ratio 9 : 6 : 5 : 5
ratio. Sacrificing Ratio of Radha and Meera 3 : 2; Gain of Sudha 1/30]
[7 : 3]
Q-32*:A and B are in partnership sharing profits and losses in the ratio of 5 : 3. C is
Q-24*:A and B are in partnership sharing profits and losses as 3 : 2. C is admitted for admitted as a partner for 1/10 share which he takes equally from A and B. Find the
1/4 share. Afterwards D enters for 20 paise in the rupee. Compute the profit sharing sacrificing ratio and new profit sharing ratio.
ratio of A, B, C and D after D’s admission. [Sacrificing Ratio 1 : 1; New Ratio 23 : 13 : 4]
[9 : 6 : 5 : 5]
Q-33: Ram and Shyam are in partnership sharing profits and losses in the ratio of 7 :
3. Mohan is admitted as a partner for 1/5 share which he takes from Ram and Shyam
 (5) (6)

in 2 : 1. Find the sacrificing ratio and new profit ratio. Valuation of Goodwill
CA. Naresh Aggarwal’s [Sacrificing Ratio 2 : 1; New Ratio 17 : 7 : 6]
ACADEMY of ACCOUNTS
Q-34: A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2.
Q-1*: Calculate goodwill at three years purchase of average super profits of the past
five years from the following information:
Accounting
They admitted C into Costing
• the • Taxation
partnership and decided• toFinancial
give him 1/5Management
share of the future 1st - Rs 7,000, 2nd- Rs 6,500, 3rd - Rs 8000, 4th - Rs 7,500 and 5th - Rs 6,000.
profits
Westwhich
Patel was toNew
Nagar, be sacrificed by A and B in
Delhi. Ph:8800215448. the ratio
Website: of 1 : 2. Calculate sacrificing
www.academyofaccounts.org The Capital Investment of the firm is Rs 40,000. A fair return on Capital in the market
ratio and new profit ratio. is 12%.
[Sacrificing Ratio 1 : 2 ; New Ratio 8 : 4 : 3] [6,600]

Q-35: X and Y are partners in a firm sharing profits and losses in the ratio of 4 : 3. Q-2: A partnership firm earned net profits during last three years as follows:
They admitted Z into the partnership and decided to give him 1/7 share of the future Year Net Profit
profits which was to be sacrificed by X and Y in the ratio of 3 : 2. Calculate sacrificing 2010 17,000
ratio and new profit ratio. 2011 20,000
[Sacrificing Ratio 3 : 2; New Ratio 17 : 13 : 5] 2012 23,000
The capital investment in the firm throughout the above mentioned period has been Rs
Q-36*:X and Y are partners sharing in the ratio of 3 : 2. They admit Z as a new partner. 80,000. Having regard to the risk involved. 15% is considered to be a fair return on the
Z gets his share as 1/2 of Y from X and 1/6 of X from Y. Calculate new ratio and capital.

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sacrificing ratio of the partners. Calculate the value of goodwill on the basis of 2 years purchase of average Super
[New Ratio 4 : 3 : 3; Sacrificing Ratio 2 : 1] Profits earned during the above-mentioned three years.
[16,000]
Q-37: Sun and Moon are partners sharing in the ratio of 7 : 3. They admit Earth as a
new partner. Earth gets her share as 1/6 of Moon from Sun and 1/7 of Sun from Moon. Q-3: A firm earned profits of Rs 8,000, Rs 10,000, Rs 12,000 and Rs 16,000 during
Calculate new ratio and sacrificing ratio of the partners. 2010, 2002, 2011 and 2012 respectively. The firm has capital investment of Rs. 50,000.
[New Ratio 13 : 4 : 3; Sacrificing Ratio 1 : 2] A fair rate of return on investment is 15% p.a. Calculate goodwill of the firm based on
three years purchase of average super profits of last four years.
Q-38*:A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. [12,000]
They admitted C into the partnership and decided that ratio between B and C shall be
the same as existing between A and B. Calculate sacrificing ratio and new profit ratio. Q-4: A and B are partners in a firm where they had invested Rs 80,000 and average
[Sacrificing Ratio 3 : 2; New Ratio 9 : 6 : 4] profits are Rs 20,000 where as expected rate of return in the industry of similar type is
15%. Goodwill is to be valued at 2 years purchase of super profits. Calculate the value
Q-39: X and Y are partners in a firm sharing profits and losses in the ratio of 5 : 3. of Goodwill.
They admitted Z into the partnership and decided that ratio between Y and Z shall be [16,000]
the same as existing between X and Y. Calculate sacrificing ratio and new profit ratio.
[Sacrificing Ratio 5 : 3; New Ratio 25 : 15 : 9] Q-5*: Calculate the amount of Goodwill from the following information :
The average Net Profits expected in the future by ABC Firm are Rs 36,000 per year.
Q-40: A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. The average capital employed in the business by the firm is Rs 2,00,000. The rate of
They admitted C into the partnership and decided that ratio between A and C shall be interest expected from capital invested in this class of business is 10%. The
5 : 3. Calculate sacrificing ratio and new profit ratio. remuneration of the partners is estimated to be Rs 6,000 per annum. Find out the
[Sacrificing Ratio 3 : 2; New Ratio 15 : 10 : 9] value of goodwill on the basis of two years purchase of Super Profits.
[20,000]
••••••••••••••••••••••
Q-6: A partnership firm earned net profits during last three years as follows:
 (7) (8)

Year Net Profit Q-12: Calculate the amount of goodwill at two years purchase of the last four years
2010 CA. Naresh Aggarwal’s 27,000 average profits. The profits and losses for the last four years are :
ACADEMY of ACCOUNTS
2011
2012
30,000
33,000
Year
2009
Amount
16,000
TheAccounting • Costing
capital investment Taxation
in the firm •throughout • Financial
the above mentionedManagement
period has been Rs 2010 20,000
1,40,000. Having
West Patel regard
Nagar, to thePh:8800215448.
New Delhi. risk involved. 15% is considered
Website: to be a fair return on
www.academyofaccounts.org 2011 13,000
the capital. 2012 17,000
Calculate the value of goodwill through Capitalisation Method. [33,000]
[60,000]
Q-13: Calculate the amount of goodwill at three years purchase of the last four years
Q-7*: A firm earned profits of Rs 18,000, Rs 19,000, Rs 22,000 and Rs 21,000 during average profits. The profits and losses for the last four years are :
2009, 2010, 2011 and 2012 respectively. The firm has capital investment of Rs. 1,50,000. Year Amount
A fair rate of return on investment is 10% p.a. 2009 6,000
Calculate the value of goodwill through Capitalisation Method. 2010 10,000
[50,000] 2011 3,000 (Loss)
2012 7,000
Q-8: X and Y are partners in a firm where they had invested Rs 1,00,000 and average [15,000]

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profits are Rs 18,000 where as expected rate of return in the industry of similar type is
15%. Q-14*: Calculate the amount of goodwill at three years purchase of the last four
Calculate the value of goodwill through Capitalisation Method. years average profits. The profits and losses for the last four years are as follows :
[20,000] Year Amount
2009 16,000 (Including Rs.6,000 profit from sale of Land)
Q-9: Calculate the amount of Goodwill from the following information : 2010 14,000 (Including loss on sale of machine Rs.5,000)
The average Net Profits expected in the future by PQR Firm are Rs 24,000 per year. 2011 (Loss) 3,000 (Including loss by fire Rs.23,000)
The average capital employed in the business by the firm is Rs 1,50,000. The rate of 2012 20,000 (Including abnormal gain of Rs.5,000)
interest expected from capital invested in this class of business is 12%. [48,000]
Calculate the value of goodwill through Capitalisation Method.
[50,000] Q-15: Calculate the amount of goodwill at three years purchase of the last four years
average profits. The profits and losses for the last four years are :
Q-10*: Calculate the amount of Goodwill at three year’s purchase of the last four Year Amount
years average profit. The profit & losses for the last four years are as follows: 2009 15,000 (Including loss on sale of Furniture Rs.7,000)
1st year - Rs.5,000, 2nd year - Rs.7,000, 3rd Year - Rs.2,000 (Loss), and 4th year - 2010 18,000 (Including Rs.4,000 profit from sale of Land)
Rs.6,000. 2011 (Loss) 4,000 (Including loss by fire Rs.16,000)
[12,000] 2012 17,000 (Including abnormal gain of Rs.3,000)
[46,500]
Q-11: Calculate the amount of goodwill at three year’s purchase of the last five years
average profits. The profits for the last five years are: Q-16: The profits and losses for the last four years are as follows:
Year Amount Year Amount
2008 Rs.5,000 2009 15,000
2009 Rs.4,000 2010 20,000
2010 Rs.7,500 2011 22,000
2011 Rs.3,500 (Loss) 2012 25,000
2012 Rs.7,000 Calculate goodwill at three years of purchase of weighted average profits.
[12,000] [66,300]
 (9) (10)

Q-17: The profits and losses for the last four years are as follows: (b) Comprehensive extension to Plant and Machinery worth Rs.2,00,000 were done
Year CA. Naresh Aggarwal’s
Amount in the middle of year 2017, but were wrongly considered as normal repairs. The
ACADEMY of ACCOUNTS
2009
2010
11,000
12,000
firm charges depreciation on Plant and Machinery @ 10% p.a. under diminishing
balance method.
Accounting2011 • Costing • Taxation • Financial Management
15,000 (c) Closing stock of the year 2018 was found overvalued by Rs.12,000
West Patel2012
Nagar, New Delhi. Ph:8800215448. 20,000
Website: www.academyofaccounts.org [Rs.4,64,400]
Calculate goodwill at 2.5 years of puchase of weighted average profits.
[40,000] Q-22: Calculate the goodwill on the basis of three years purchase of (i) Super profits
method and (ii) Weighted average profit method, with the help of below mentioned
Q-18*: A firm earned profits of Rs.11,000, Rs.15,000, Rs.18,000, Rs.20,000 and information of last four years.
Rs.22,000 during 2008, 2009, 2010, 2011 and 2012 respectively. The firm has capital (a) Average capital employed by the firm during the last four years were Rs.6,00,000
investment of Rs. 1,50,000. A fair rate of return on investment is 10% p.a. and the firm expect normal return at the rate of 12% p.a.
Calculate goodwill at 3 years of puchase of weighted average profits. (b) Profit for the year 2016, 2017, 2018 and 2019 were Rs.1,45,000; Rs.2,00,000;
[57,000] Rs.1,90,200 and Rs.2,16,380 respectively.
(c) On scrutiny of books the following further information revealed:
Q-19: The profits and losses for the last four years are as follows: (i) A loss of Rs.15,000 incurred in the year 2016 due to earthquake. Although
Year Amount it was not insured but a compensation of Rs.12,000 was received next year

AoA
2009 16,000 by the government and treated as income
2010 18,000 (ii) Normal repairs to Plant and Machinery worth Rs.20,000 were done in the
2011 21,000 beginning of year 2017, but were wrongly considered as plant extension.
2012 25,000 The firm charges depreciation on Plant and Machinery @ 10% p.a. under
Calculate goodwill at three years of purchase of annuity at the rate of 10% of average diminishing balance method.
profits. The annuity table shows the value at 2.4869. (iii) Closing stock of the year 2018 was found undervalued by Rs.8,000
[49,738] (d) Firm is planning to appoint a manager to look out affairs of the firm. His
remuneration is expected to be Rs.20,000 p.a.
Q-20: The profits and losses for the last five years are as follows: [Super Profit Method: Rs.2,79,000; Weighted Average Profit Method: Rs.5,22,000]
Year Amount
2008 6,000 ••••••••••••••••••••••
2009 8,000
2010 10,000
2011 11,000
2012 15,000
Calculate goodwill at four years of purchase of annuity at the rate of 8% of average Treatment of Goodwill
profits. The annuity table shows the value at 3.3121.
[33,121] Q- 1*: A and B were partners in a firm sharing profits and losses in the ratio of 3 : 2.
The goodwill of the firm is valued at Rs. 60,000 but it was appearing at Rs. 25,000
Q-21: Calculate the goodwill on the basis of three years purchase of average profits only. On that date they admitted C in the firm for 1/6 share in the profits. He brings
of last five years. Profit / (Loss) for the year 2015, 2016, 2017, 2018 and 2019 were 35,000 for capital and necessary amount of goodwill half of which is withdrawn by old
Rs.80,000; Rs.1,20,000; (Rs.50,000); Rs.2,00,000 and Rs.2,60,100 respectively. partners. Give the necessary journal entries.
On scrutiny of books the following further information revealed:
(a) A loss of Rs.25,000 incurred in the year 2016 due to earthquake. Although it Q-2: A and B are partners sharing profits equally. They admit C into partnership, C
was not insured but a compensation of Rs.15,000 was received later in the year paying only Rs 1,200 for premium out of his share of premium of Rs 2,000 for 1/4th
2018 by the government and treated as income share of profit. Goodwill account was appearing in the books at Rs 5,000. Give the
necessary journal entries.
 (11) (12)

Q-8: A and B sharing profits and losses in the ratio of 3 : 2 admit C into partnership. C
CA. Naresh Aggarwal’s is to pay Rs.2,000 as goodwill for 1/4th share and Rs.10,000 as capital. He brings
ACADEMY of ACCOUNTS Furniture of Rs.7,000 and Stock of Rs.1,500 and Cash of Rs.3,500. Partners withdraw
the amount of goodwill. Give journal entries to record these transactions.
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Q-9*: A, B and C are three partners sharing profits and losses in the ratio of 4 : 3 : 2.
D is admitted and the goodwill of the firm is valued at Rs 10,800. No goodwill appears
Q-3: A and B are partners with capital of Rs 8,000 and Rs 6,000 respectively. They as yet in the books of the firm. The Partners decide to share profits in the future in the
admit C as partner with 1/5th share in the profits of the firm. C brings Rs 8,000 as his ratio of 5 : 3 : 2 : 2. New partner brings necessary amount of goodwill. Pass necessary
share of goodwill which is withdrawn by old partners. Give Journal Entries to record Journal Entries.
goodwill. [Sacrificing Ratio 1 : 3 : 2]

Q- 4: X and Y were partners in a firm sharing profits and losses in the ratio of 4 : 3. Q-10: A and B are partners sharing profits in ratio of 3 : 2. They admit C into partnership.
The goodwill of the firm is valued at Rs. 70,000 but it was appearing at Rs. 21,000 C pays a premium of Rs. 1,000 for 1/4th share of profits. The new ratio is 3 : 3 : 2.
only. On that date they admitted Z in the firm for 1/5 share. Z brings 50,000 for capital Goodwill account appears in the books at Rs.1,000.
and necessary amount of goodwill which is withdrawn by old partners. [Sacrificing Ratio 9 : 1]
You are asked to pass all the necessary Journal Entries to record the transactions.

AoA
Q-11: X and Y are partners sharing profit and losses in the ratio of 3 : 2. They admit Z
Q-5: Ajay and Vijay are sharing profits in the ratio of 2 : 1. Their capital are Rs 50,000 as a partner for 1/6 share who is unable to bring goodwill in cash but pays Rs.15,000
and Rs 40,000 respectively. They admit Sanjay to one-fourth share in the profits of the as his capital. The goodwill of the firm is to be valued at two year’s purchase of last
firm. He bringing Rs 9,000 for goodwill and Rs 40,000 as his capital. three years profits which were Rs.5,000, Rs.6,000 and Rs.7,000.
[Goodwill: Rs.12,000]
Q-6*: X and Y are partners in a firm with capital of Rs. 80,000 and Rs. 60,000 and
sharing profits in the ratio of 3 : 2. Goodwill of the firm is valued Rs. 60,000. Z is Q-12: Ram and Shyam were partners in a firm sharing profits in the ratio of 1 : 3. They
admitted as new partner and new ratio decided to be 5 : 3 : 2. Z brings Rs. 40,000 as admitted Mohan as a new partner for 1/5th share in the profits. Mohan brings his share
capital and goodwill as per the following cases: of goodwill Rs.10,000 in cash. Ram withdraws his share of goodwill. Pass the
(a) If new partner brings premium for goodwill. necessary journal entry for the treatment of goodwill on Mohan’s admission.
(b) If new partner does not bring goodwill.
(c) If new partner brings only Rs. 10,000 for goodwill. Q-13*: Priya and Ritu are partners sharing profits in the ratio 7 : 3. They admit Seema
(d) If new partner brings goodwill but it was earlier appearing at Rs.40,000. as a new partner, paying Rs.4,000 as premium for 1/5th share. Priya withdraws her
(e) If new partner brings goodwill and old partner decide to withdraw half of it. share of goodwill. The new ratio being 5 : 3 : 2. Pass journal entries.
(f) If new partner pays goodwill privately.
[Sacrificing Ratio 1 : 1] Q-14: X and Y are partners sharing profits in the ratio of 5 : 4. They admit Z in the firm
for 1/3 profit which he takes 2/9 from X and 1/9 from Y. He brings Rs. 4,500 as
Q-7: A and B are partners in a firm with capital of Rs. 50,000 and Rs. 45,000 and premium. Pass the necessary journal entries on Z’s admission.
sharing profits in the ratio of 7 : 3. Goodwill of the firm is valued Rs. 35,000. C is
admitted as new partner and new ratio decided to be 3 : 1 : 1. C brings Rs. 40,000 as Q-15: A and B, sharing profit as 5 : 4 admit C for 1/10 share. C pays Rs.30,000 for
capital and goodwill as per the following cases: capital and Rs.10,000 as premium for goodwill which he acquires equally from A and
(a) If new partner brings premium for goodwill which is withdrawn by the partners. B. Half of the premium is withdrawn by A and B. Show Journal Entries.
(b) If new partner does not bring goodwill.
(c) If new partner brings only Rs. 5,000 for goodwill. Q-16: A and B are partners sharing profits in the ratio of 3 : 2. They admit C into
(d) If new partner brings goodwill but it was earlier appearing at Rs.20,000. partnership for 1/4th share. C is unable to bring his share of goodwill in cash. The
(e) If new partner pays goodwill privately. goodwill of the firm is valued at Rs.20,000. Give journal entries.
[Sacrificing Ratio 1 : 1]
 (13) (14)

Q-17: A and B, sharing profits as 5 : 4, admit C for 2/9 share. C pays Rs.30,000 for admit D as a partner and the new profits and losses ratio of A, B, C and D has been
CA. Naresh
capital and Rs.9,000 for goodwill which heAggarwal’s
acquires equally from A and B. Give journal decided to be 4 : 3 : 2 : 1. D brings Rs.30,000 as premium for goodwill.
ACADEMY of ACCOUNTS
entries. [Sacrifice of A is 1/5; B’s gain is 1/10; C’s sacrifice is Nil]

Accounting
Q-18: Costing
A and B are•partners Taxation
in a•firm • Financial
sharing profits and losses Management
in the ratio of 3 : 2. Q-26*: A, B and C are partners in a firm sharing profits and losses in 3 : 2 : 1. They
They admit
West PatelCNagar,
into partnership for 1/3rd shareWebsite:
New Delhi. Ph:8800215448. in profits.www.academyofaccounts.org
C brings capital of Rs.25,000 admit D as a partner and the new profits and losses ratio of A, B, C and D has been
and his share of goodwill. Goodwill is valued at Rs.45,000. Show what entries shall be decided to be 4 : 3 : 2 : 1. D brings Rs 12,000 as premium for goodwill.
made in the following cases : Draft the Journal Entries showing the appropriation of the premium for goodwill.
(i) Goodwill does not appear in the books. [Sacrificing Ratio of A & B is 3 : 1; C’s gain is 1/30]
(ii) Goodwill appears in the books at Rs.10,000.
Q-27: A and B are in partnership sharing profits and losses as 3 : 1. The Goodwill
Q-19: A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. Account was appearing in the books at Rs.12,000. They admit C into the firm. C
They admit C into partnership for 1/5th share. C brings Rs.30,000 as capital and paying a premium of Rs 15,000 for one-third share of the profits. As between themselves,
Rs.10,000 as goodwill. At the time of admission of C, goodwill appears in the balance A and B agree to share future profits and losses equally.
sheet of A and B at Rs.5,000. New profit sharing of the partners shall be Draft necessary Journal Entries to record goodwill.
5 : 3 : 2. Pass necessary entries. [Sacrifice of A is 5/12; B’s gain is 1/12]
[Sacrificing Ratio 1 : 1]

AoA
Q-28: X and Y are partners in a firm sharing profits in the ratio of 7 : 3. On April 1, 2018
Q-20*: A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. A they admitted Z as a new partner. The new profit sharing ratio will be 4 : 3 : 2. Z brought
new partner C is admitted. A surrenders 1/5th of his share and B 2/5th of his share in in Rs. 1,00,000 in cash as his share of capital but could not bring any amount for
favour of C. For purpose of C’s admission, goodwill of the firm is valued at Rs.75,000 goodwill in cash. The firm’s goodwill on Z’s admission was valued at Rs. 1,80,000. At
and C brings his share of goodwill in cash which is retained in the firm’s books. the time of Z’s admission goodwill existed in the books of the firm at Rs. 2,00,000.
Journalize the above transactions. Pass necessary journal entries.
[Sacrificing Ratio 3 : 4] [Sacrifice of X is 23/90; Y’s gain is 1/30]

Q-21: A and B are partners sharing profits in the ratio of 3 : 2. They admit C as a new Q-29: A and B are partners with capitals of Rs. 26,000 and Rs. 22,000 respectively.
partner. C pays a premium of Rs.3,000 for 3/10 share of profits, which he acquires They admit C as a partner with 1/4th share in the profits of the firm. C brings Rs.
from A and B in the ratio 2 : 1. Journalize the above transactions. 26,000 as his share of capital. Give journal entries to record goodwill.
[Hidden Goodwill Rs.30,000]
Q-22: A and B are partners sharing profits equally. They admit C into partnership. C
paying only Rs.1,000 for premium out of his share premium of Rs.1,800 for 1/4th Q-30: A and B are partners sharing profits and losses in the ratio of 3 : 2 with capitals
share of profit. Goodwill account appears in the books at Rs.6,000. All the partners of Rs. 50,000 and Rs. 40,000 respectively. They admit C as a partner with 1/6th share
have decided that goodwill should not appear in the new firm’s books. in the profits of the firm. C brings Rs. 30,000 as his share of capital. Give journal
entries to record goodwill.
Q-23: A and B are partners sharing profits and losses equally. They admit C for [Hidden Goodwill Rs.60,000]
1/4 share by paying Rs.5,000 out of his share of Rs.9,000 of goodwill. Goodwill already
appears at Rs.30,000. Give journal entries to record the above transactions. Q-31*: Radha and Meera are partners sharing profits and losses in the ratio of
Q-24: A and B are partners sharing profits and losses as 3 : 2. C and D are admitted 4 : 3 with capitals of Rs.40,000 and Rs.30,000 respectively. They had Rs.25,000 in
and profit sharing ratio becomes 4 : 3 : 2 : 1. Goodwill is valued at Rs.30,000. C and D General Reserve A/c and Rs.10,000 in Profit and Loss Account. They admit Sudha
bring required goodwill. They also bring capital of Rs.40,000 and Rs.25,000 respectively. as a partner with 1/8th share in the profits of the firm. Sudha brings Rs.25,000 as her
Show the necessary journal entries. share of capital. Give journal entry to record goodwill on C’s admission.
[Sacrificing Ratio of A & B is 2 : 1] [Hidden Goodwill Rs.70,000]

Q-25*: A, B and C are partners in a firm sharing profits and losses in 3 : 1 : 1. They ••••••••••••••••••••••
 (15) (16)

CA. Naresh Aggarwal’s Outstanding Expenses 500 Bills Receivables 50,000

General Reserve 10,000 Stock 30,000
ACADEMY of ACCOUNTS Bank Loan 80,000 Building 1,00,000
Accounting • Costing • Taxation • Financial Management Capitals Land 1,00,000
A 1,50,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
B 50,000 2,00,000

Preparation of Revaluation A/c and Balance Sheet 3,15,500 3,15,500

On 1.04.2012 they admitted C as a new partner on the following terms:
Q-1*: X and Y are partners in a business sharing profits and losses in the ratio of 3 :
(a) C will get 1/5th share in the profits of the firm.
2. Their Balance Sheet as on 31.12.2012 is given as follows:
(b) C’s will bring Rs.80,000 for his capital.
Balance Sheet
(c) The goodwill of the firm was valued at Rs 2,00,000 and C brought his share of
Liabilities Amount Assets Amount premium in cash.
(d) Provision for bad debts was to be made equal to 5% on debtors.
Bank Loan 8,000 Cash 2,000
(e) Stock was to be depreciated by 5%.
Bills Payable 2,000 Debtors 5,000
(f) Land was to be appreciated to Rs.1,20,000
Creditors 30,000 Stock 13,000

AoA
(g) Building was to be depreciated to Rs. 90,000
Capitals: Furniture 20,000
(h) Creditors amounted to Rs. 1,000 are not likely to arise, therefor written off.
X- 50,000 Machinery 30,000
You are required to show Journal Entries and Prepare Revaluation Account, Capital
Y- 30,000 80,000 Building 40,000
Accounts and New Balacne Sheet.
Bank 10,000
[Revaluation Profit: Rs.8,500; Cash: Rs.1,35,500; Balance Sheet: Rs.4,43,000
1,20,000 1,20,000 A’s Capital: Rs.1,90,950; B’s Capital: Rs.67,550; C’s Capital: Rs.80,000]

On 01.01.2013 Z is admitted for 1/5 th share on the following conditions:

Q-3: Following is the Balance Sheet of A and B sharing profit as 3 : 2.
(1) Z will bring Rs. 20,000 for capital and Rs. 5,000 for goodwill.
Balance Sheet
(2) Machinery is valued at Rs. 20,000 and Building is valued at Rs. 60,000.
(3) Furniture is depreciated by Rs.2,000 and stock is appreciated by Rs.3,000. Liabilities Amount Assets Amount
(4) A provision of 10% is required on debtors.
Creditors 18,000 Debtors 15,000
(5) Creditors amounted to Rs. 1,500 are not likely to arise, therefor written off.
General Reserve 15,000 Bills Receivables 6,000
(6) There is an unrecorded liability for outstanding salary of Rs.4,000 and an
Bills Payable 25,000 Land & Buildings 18,000
unrecorded investments are worth Rs.6,000.
Capitals : Plant & Machinery 12,000
You are required to show Journal Entries and Prepare Revaluation Account, Capital
A 15,000 Bank 21,000
Accounts and New Balacne Sheet.
B 10,000 25,000 Stock 11,000
[Revaluation Profit: Rs.14,000; Cash: Rs.27,000; Balance Sheet: Rs.1,61,500
A’s Capital: Rs.61,400; B’s Capital: Rs.37,600; C’s Capital: Rs.20,000] 83,000 83,000
On admission of C for 1/6th share in the profits it was decided that :
Q-2: A and B were partners in a firm sharing profits in the ratio of 7 : 3. Their Balance
(a) Provision for doubtful debts to be created by Rs 1,500.
Sheet on 31.03.2012 was as follows:
(b) Value of land and building to be increased to Rs 21,000.
Balance Sheet
(c) Value of stock to be increased by Rs 2,500.
Liabilities Amount Assets Amount (d) Creditors amounted to Rs. 3,000 are not likely to arise.
(e) There is an unrecorded liability for Outstanding Expenses of Rs.2,000 and an
Creditors 10,000 Cash 15,500
unrecorded Typewriter worth Rs.4,000.
Bills Payable 15,000 Debtors 20,000
(f) C brought in as his share of goodwill Rs 10,000 and Rs 25,000 for his capital.
 (17) (18)

proportion of three-fourths and one-fourth, on 31st December 2012.

CA. Naresh Aggarwal’s Balance Sheet
ACADEMY of ACCOUNTS Liabilities Amount Assets Amount
Accounting • Costing • Taxation • Financial Management Creditors 37,500 Cash at Bank 21,500
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Bills Payable 4,000 Bills Receivable 4,000
Capital Accounts Debtors 16,000
A 30,000 Stock 20,000
You are required to show Journal Entries and Prepare Revaluation Account.
B 16,000 46,000 Office Furniture 1,000
[Revaluation Profit: Rs.9,000; Bank: Rs.56,000; Balance Sheet: Rs.1,26,000
Land & Buildings 25,000
A’s Capital: Rs.35,400; B’s Capital: Rs.23,600; C’s Capital: Rs.25,000]
87,500 87,500
Q-4: A and B were partners in a firm sharing profits in the ratio of 3 : 2. Their Balance
They agreed to take C into partnership on 1st January, 2013 on the following terms:
Sheet was as follows:
(a) That C pays Rs 15,000 as his capital for one-fifth share in the future profits.
Balance Sheet
(b) C was unable to bring his share of goodwill. The goodwill of the firm valued at
As on 31.03.2012
Rs.20,000.
Liabilities Amount Assets Amount (c) That stock and furniture be reduced by 10%.

AoA
(d) Land and Buildings appreciated by 20%.
Creditors 30,000 Debtors 30,000
(e) 5% provision doubtful debts be created on debtors and Bills Receivables.
Bills Payable 7,000 Bills Receivables 12,000
(f) Creditors of Rs. 2,500 should be written off and Bills Payable are valued at
Bank Loan 10,000 Stock 30,000
Rs.5,000.
Outstanding Salary 3,000 Land and Buildings 40,000
(g) Unexpired Insurance was Rs. 1,000.
Bank Overdraft 7,000 Furniture 7,000
You are required to show Journal Entries and Prepare necessary accounts.
Capitals: Patents 4,000
[Revaluation Profit: Rs.4,400; Bank: Rs.36,500; Balance Sheet: Rs.1,05,400
A 60,000 Machinery 10,000
A’s Capital: Rs.36,300; B’s Capital: Rs.18,100; C’s Capital: Rs.11,000]
B 20,000 80,000 Cash 4,000

1,37,000 1,37,000 Q-6: A and B are partners in a business sharing profits and losses in the ratio of
3 : 2. Their Balance Sheet as on 31.12.2012 is given as follows:
They admitted C as a new partner on this date. New profit sharing ratio is agreed as 3
Balance Sheet
: 2 : 1.
(a) C brings Rs 6,000 as his share of goodwill and Rs. 25,000 as his capital. Liabilities Amount Assets Amount
(b) Provision for doubtful debts is to be created at the rate of 5% on debtors and Bills
Profit and Loss A/c 10,000 Goodwill 5,000
Receivables.
Creditors 40,000 Cash 5,000
(c) There is an old typewriter valued at Rs 2,400. It does not appear in the books of
Bills Payable 10,000 Stock 20,000
the firm. It is now to be recorded.
Capitals: Furniture 15,000
(d) Patents are valueless.
A- 60,000 Plant & Machinery 70,000
(e) Land and Buildings are appreciated by 20% and Machinery is depreciated by
B- 50,000 1,10,000 Sundry Debtors 30,000
10%
Land and Buildings 20,000
(f) Value of the stock reduced by Rs.5,000 and Furniture depreciated to Rs.5,000.
Investment 5,000
You are required to show Journal Entries and Prepare necessary accounts.
[Revaluation Loss: Rs.3,700; Cash: Rs.35,000; Balance Sheet: Rs.1,64,300 1,70,000 1,70,000
A’s Capital: Rs.61,380; B’s Capital: Rs.20,920; C’s Capital: Rs.25,000]
On 1.1.2013 C is admitted for 1/5 th share on the following conditions:
(a) C will bring Rs. 40,000 for capital and Rs. 15,000 for goodwill.
Q-5: The following is the Balance Sheet of A and B who had been sharing profits in
 (19) (20)

Q-8: Following is the Balance Sheet of A and B sharing profit as 3 : 2.

CA. Naresh Aggarwal’s Balance Sheet
ACADEMY of ACCOUNTS As on 31.03.2012

Accounting • Costing • Taxation • Financial Management Liabilities Amount Assets Amount

West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Creditors 18,000 Debtors 22,000
General Reserve 25,000 Less: Provision 1,000 21,000
(b) Partners agreed to share future profits in the ratio of 5 : 3 : 2. Workmen's Comp. Fund 20,000 Land & Buildings 18,000
(c) Furniture is depreciated by 10% and Investments are appreciated by 20%. A’s Capital 15,000 Goodwill 5,000
(d) One customer who owed the firm Rs. 2,000 become insolvent and nothing could B’s Capital 10,000 Plant & Machinery 12,000
be realized from him therefor should be written off. Bank 21,000
(e) Creditors will be written off by Rs. 2,000. Stock 11,000
(f) Outstanding bill for repair Rs. 1,000 will be provided for.
(g) Interest accrued on investment Rs. 2,000. 88,000 88,000
You are required to show Journal Entries and Prepare necessary accounts. On admission of C for 1/6th share in the profits it was decided that :
[Revaluation Profit: Rs.500; Balance Sheet: Rs.2,19,500; Sacrificing Ratio 1 : 1 (a) Provision for doubtful debts to be increased by Rs 1,500.
Cash: Rs.60,000; A’s Capital: Rs.70,800; B’s Capital: Rs.59,700; C’s Capital: Rs.40,000] (b) Value of land and building to be increased to Rs 21,000.

AoA
(c) Value of stock to be increased by Rs 2,500.
Q-7*: A and B were partners in a firm sharing profits in equal ratio. Their Balance (d) The liability of workmen’s compensation fund was determined to be Rs.12,000.
Sheet on 31.03.2012 was as follows: (e) C brought in as his share of goodwill Rs 10,000 in cash.
Balance Sheet (f) C was to bring further cash of Rs 15,000 for his capital.
Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm
Liabilities Amount Assets Amount
[Revaluation Profit: Rs.4,000; Balance Sheet: Rs.1,12,000
Workers Comp. Fund 8,000 Cash 15,500 A’s Capital: Rs.40,200; B’s Capital: Rs.26,800; C’s Capital: Rs.15,000]
Bills Payable 15,000 Debtors 21,500
Outstanding Expenses 2,500 Less: Provision 1,500 20,000 Q-9: Ajay and Vijay are partners in a firm sharing profits and losses in the ratio of 5 :
General Reserve 10,000 Stock 30,000 3. They admit Sanjay into the firm on 1st April 2012, when their Balance Sheet was as
Creditors 8,000 Goodwill 6,000 follows:
Bank Loan 80,000 Building 1,00,000 Balance Sheet
Capitals Land 1,50,000 As on 31.03.2012
A 1,20,000 Profit and Loss A/c 2,000
B 80,000 2,00,000 Liabilities Amount Assets Amount
Ajay’s Capital 30,000 Goodwill 8,000
3,15,500 3,15,500
Vijay’s Capital 36,000 Machinery 38,000
On 1.04.2012 they admitted C as a new partner on the following terms: Profit and Loss A/c 8,000 Furniture 5,000
(a) C will get 1/5 share in the profits of the firm Bank Loan 6,000 Debtors 23,000
(b) Provision for doubtful debts to be increased to Rs 2,000. Creditors 6,000 Stock 7,000
(c) Value of stock to be increased by Rs 5,000. Bank 5,000
(d) The liability of workmen’s compensation fund was determined to be Rs.5,000.
86,000 86,000
(e) C brought in as his share of goodwill Rs 10,000 in cash and Rs. 50,000 as his
capital. Terms of Sanjay’s admission were as follows:
Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm (a) Sanjay will bring Rs 30,000 through cheque as his share of capital and will be
[Revaluation Profit: Rs.4,500; Cash: Rs.75,500; Balance Sheet: Rs.3,80,000 entitled to 1/3 share in the profits.
A’s Capital: Rs.1,29,750; B’s Capital: Rs.89,750; C’s Capital: Rs.50,000] (b) Sanjay is not to bring goodwill in cash. Goodwill is valued on the basis of two
 (21) (22)

Balance Sheet
CA. Naresh Aggarwal’s As on 31.12.2012
ACADEMY of ACCOUNTS Liabilities Amount Assets Amount
Accounting • Costing • Taxation • Financial Management Worker compensation fund 8,000 Cash 2,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Bills Payable 2,000 Building 40,000
Creditors 23,000 Bank 2,400
years purchase of the average profits of the last three years. General Reserve 10,000 Stock 10,000
(c) Average profits of the last three years are Rs 6,000. Capitals: Furniture 20,000
(d) Machinery and stock are revalued at Rs 45,000 and Rs 8,000. X- 50,000 Machinery 30,000
Prepare Revaluation Account, Partners Capital Accounts incorporating the above Y- 30,000 80,000 Debtors 9,000
adjustments, and also the Balance Sheet of the firm after the above adjustment. Less: Provision 400 8,600
[Revaluation Profit: Rs.8,000; Bank: Rs.35,000; Balance Sheet: Rs.1,16,000] Goodwill 10,000
Goodwill: 12,000; Ajay’s Capital: 37,500; Vijay’s Capital: 40,500; Sanjay’s Capital: 26,000]
1,23,000 1,23,000
Q-10: Jain and Gupta were partners in a firm sharing profits and losses in the ratio of On 1.1.2013 Z is admitted for 1/5th share on the following conditions:
4 : 3. The following is the Balance Sheet of the firm as on 31 st December 2012. (1) Z will bring Rs. 20,000 for capital and Rs. 5,000 for goodwill half of which is with-

AoA
Balance Sheet drawn by X and Y.
As on 31.12.2012 (2) Machinery is valued at Rs. 20,000 and Building is valued to Rs. 60,000.
Liabilities Amount Assets Amount (3) Furniture is depreciated by 10% and stock is appreciated by 30%.
(4) A provision of 10% is required on debtors.
Sundry Creditors 20,000 Cash 15,300 (5) Creditors amounted to Rs. 1,500 are not likely to arise, therefor written off.
Bills Payable 3,000 Debtors 20,000 (6) Liability for workers compensation fund is determined at Rs. 3,000.
Bank Overdraft 17,000 Less: Provision 300 19,700 (7) There is an unrecorded liability for outstanding salary of Rs. 4,000 and an
Capitals: Stock 20,000 unrecorded investments are worth Rs. 6,000.
Jain 70,000 Plant 33,000 [Profit: Rs.14,000; Cash Balance: Rs.24,500; Balance Sheet: Rs.1,52,000
Gupta 60,000 1,30,000 Buildings 75,000 X’s Capital: Rs.62,900; Y’s Capital: Rs.38,600; Z’s Capital: Rs.20,000]
Profit and Loss A/c 7,000

1,70,000 1,70,000 Q-12*: A and B are partners in a firm. Their Balance Sheet as on 31.12.2012 is given
as follows:
They agreed to admit Mishra as partner w.e.f. 1st January, 2013 with 1/4 share in Balance Sheet
profits on the following terms:
(a) Mishra will bring in capital to the extent of Rs.40,000 but was unable to bring Liabilities Amount Assets Amount
Rs.14,000 for his share of goodwill. Provident Fund 10,000 Cash 11,000
(b) Provision for doubtful debts to be created to extent of 5% of debtors. Outstanding Expenses 2,000 Debtors 40,000
(c) Value of stock to be decreased to Rs 15,000. Creditors 5,000 Less: Provision 2,000 38,000
(d) The liability of workmen’s compensation fund was determined to be Rs.3,500. Bills Payable 3,000 Stock 12,000
(e) Creditors amounted to Rs. 1,500 are not likely to arise, therefor written off. Capitals: Investments 4,000
[Revaluation Loss: Rs.7,700; Cash: Rs.55,300; Balance Sheet: Rs.1,97,300] A- 40,000 Machinery 21,000
Jain’s Capital: 69,600; Gupta’s Capital: 59,700; Mishra’s Capital: 26,000] B- 50,000 90,000 Furniture 10,000
Loan 20,000 Building 30,000
Q-11*: X and Y are partners in a business sharing profits and losses in the ratio of Profit and Loss A/c 4,000
3 : 2. Their Balance Sheet as on 31.12.2012 is given as follows:
1,30,000 1,30,000
 (23) (24)

hence should be written back.

CA. Naresh Aggarwal’s The profit sharing ratio between A and B has not changed. Prepare Revaluation Account
ACADEMY of ACCOUNTS and the new Balance Sheet of the firm on the admission of C.
[Revaluation Profit: Rs.1,600; Cash: Rs.29,000; Balance Sheet: Rs.1,04,950
Accounting • Costing • Taxation • Financial Management A’s Capital: Rs.36,075; B’s Capital: Rs.18,025; C’s Capital: Rs.10,000]
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Q-14*: V and N were partners in a firm sharing profits in the ratio of 7 : 3. Their
Balance Sheet on 31.03.2012 was as follows:
On 1.1.2013 C is admitted for 1/5th share on the following conditions:
Balance Sheet
(1) C will bring 25,000 of capital and his share in goodwill.
(2) Goodwill of the firm is valued at Rs. 45,000. Liabilities Amount Assets Amount
(3) Provision for doubtful debts is found excess by Rs. 600 and a provision on
Creditors 10,000 Cash 15,500
creditors will be created @ 8%.
Bills Payable 15,000 Debtors 20,000
(4) Furniture is found undervalued by Rs. 4,000 and Machinery is found
Provision for Bad debts 500 Bills Receivables 50,000
overvalued by Rs. 6,000.
General Reserve 10,000 Stock 30,000
(5) A dispute with customer was pending claiming Rs. 5,000; now settled at
P's Loan 80,000 Building 1,00,000
Rs. 3,000 but not yet paid.
Capitals Land 1,00,000

AoA
(6) Investments are valued at Rs. 5,000.
V 1,50,000
[Loss: Rs.3,000; Cash: Rs.45,000; B/S: Rs.1,59,600]
N 50,000 2,00,000
A’s Capital: Rs.41,000; B’s Capital: Rs.51,000; C’s Capital: Rs.25,000]
3,15,500 3,15,500
Q-13: A and B share profits in the ratio of 3 : 1. Their Balance Sheet on 31st December
On 01.04.2012 they admitted P as a new partner on the following terms:
2012 was as follows:
(i) P will get 1/5th share in the profits of the firm.
Balance Sheet
(ii) P's loan will be converted into his capital.
Liabilities Amount Assets Amount (iii) The goodwill of the firm was valued at Rs 2,00,000 and P brought his share of
goodwill premium in cash.
Sundry Creditors 41,500 Cash at Bank 16,500
(iv) Provision for bad debts was to be made equal to 4% on debtors.
Profit and Loss A/c 4,000 Bills Receivable 3,000
(v) Stock was to be depreciated by 5%.
Capital Accounts: Debtors 16,000
(vi) Land was to be appreciated by 10%.
A 30,000 Stock 20,000
Prepare Revaluation Account, Capital accounts of V, N and P and the Balance Sheet
B 16,000 46,000 Fixtures 11,000
of the new firm as on 1.4.2005.
Land & Buildings 25,000
[Revaluation Profit: 8,200; Cash: 55,500; Balance Sheet: 3,64,000 or 3,63,200;
91,500 91,500 V’s Capital: Rs.1,90,740; N’s Capital: Rs.67,460; P’s Capital: Rs.80,000]

On 1st Jan. 2013 C was admitted into partnership on the following terms:
Q-15: The Balance Sheet of X and Y who share profits in proportion to capital, as at
(a) That C pay Rs 10,000 as his capital.
31.03.2012 is as follows:
(b) That C pays Rs 5,000 for goodwill. Half of this sum is to be withdrawn by the old
Balance Sheet
partners.
(c) That stock and fixtures be reduced by 10% and 5% provision for doubtful debts Liabilities Amount Assets Amount
be created on sundry debtors and bills receivable.
Creditors 19,000 Freehold Premises 20,000
(d) That the value of land and buildings be appreciated by 20%.
Bills Payable 16,000 Plant and Machinery 13,500
(e) There being a claim against the firm for damages, a liability to the extent of Rs.1000
Capitals: Fixtures and Fittings 1,750
should be created.
X 30,000 Motor Lorries 1,350
(f) An item of Rs. 1,650 included in sundry creditors is not likely to be claimed and
Y 20,000 50,000 Stock 14,100
 (25) (26)

CA. Naresh Aggarwal’s On the above date, they decided to admit Anshu as a partner on the following terms:
(i) The new profit sharing ratio of Deepika, Rajshree and Anshu will be 5 : 3 : 2
ACADEMY of ACCOUNTS respectively.
Accounting • Costing • Taxation • Financial Management (ii) Anshu shall bring Rs 32,000 as his capital.
(iii) Anshu is unable to bring in cash for his share of goodwill; partners, decide to
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
calculate goodwill on the basis of Anshu’s share in the profits and the capital
contribution made by him to the firm.
Current Accounts: Bills Receivable 13,060 (iv) Plant and machinery is to be valued at Rs 60,000, stock at Rs 40,000 and the
X 7,000 Debtors 27,500 reserve for doubtful debts is to be maintained at Rs 4,000. Value of land and
Y 1,800 8,800 Bank 1,590 buildings has appreciated by 20%. Furniture has depreciated by 10%.
Cash 950 (v) There is an additional liability of Rs 8,000 being outstanding salary payable to
employees of the firm. This liability is not included in the outstanding liabilities,
93,800 93,800 stated in the above balance sheet.
On 1st April, 2013 they admitted Z to the partnership on the following terms: Prepare Revaluation Account, Partner’s Capital Accounts and new Balance Sheet.
(a) Z to bring in Rs 20,000 as capital and 6,600 for goodwill, which amount (Rs.6,600) [Hidden Goodwill: 22,200; Revaluation Profit: 17,800; Balance Sheet: 2,30,800]
is to be left in the business, and he is to receive fourth share of the profits. Cash: 33,200; Capitals: Deepika-60,900; Rajshree-49,340; Anshu: Rs.27,560; Secrificing Ratio 1:1]

AoA
(b) Reserve to be raised equal to 2% on debtors as provision for bad debts.
(c) Value of stock to be written down by 10%. Q-17: A and B are partners in a business sharing profits and losses in the ratio of
(d) Freehold premises are to be taken over at valuation of Rs 22,400; Plant and 3 : 2. Their Balance Sheet as on 31.12.2012 is given as follows:
Machinery Rs 11,800; Fixtures and Fittings Rs 1,560; and Motor and Lorries Rs Balance Sheet
800. Liabilities Amount Assets Amount
You are required to make the necessary adjusting entries in the firm. Also give the
Balance Sheet of the new firm as at 1.04.2012 and give the proportions in which the Bank Loan 10,000 Goodwill 5,000
partners will share profits; the proportions of X and Y being remain unchanged. Creditors 50,000 Cash 25,000
[Revaluation Loss: 2,000; Fixed Capitals: X-30,000; Y-20,000; Z-20,000 Capitals: Furniture 15,000
Cash: 27,550; Balance Sheet: 1,18,400; Current Capitals: X-9,760; Y-3,640] A- 60,000 Plant & Machinery 70,000
B- 50,000 1,10,000 Sundry Debtors 30,000
Q-16*: Deepika and Rajshree are partners in a firm sharing profits and losses in the Land and Buildings 20,000
ratio of 3 : 2. On 31.12.2012 their Balance Sheet was as under : Investment 5,000
Balance Sheet 1,70,000 1,70,000
Liabilities Amount Assets Amount On 01.01.2013 C is admitted for 1/5th share on the following conditions:
Sundry Creditors 16,000 Cash in hand 1,200 (a) C will bring Rs. 40,000 for capital and Rs. 15,000 for premium of goodwill. Old
Public Deposit 61,000 Cash at Bank 2,800 partners decide to withdraw goodwill.
Bank Overdraft 6,000 Stock 32,000 (b) Partners agreed to share future profits in the ratio of 5 : 3 : 2.
Outstanding Liabilities 2,000 Prepaid Insurance 1,000 (c) Furniture is depreciated by 10%.
Capital Accounts Sundry Debtors 28,800 (d) Outstanding bill for repair Rs. 2,500 will be provided for.
Deepika 48,000 Less: Provision 800 20,000 (e) Investment taken by B at market value of Rs. 8,000.
Rajshree 40,000 88,000 Plant and Machinery 48,000 (f) Bank loan would be paid off together with outstanding interest Rs.500 not recorded
Land & Buildings 50,000 in the above Balance Sheet.
Furniture 10,000 Prepare Revaluation Account, Partner’s Capital Accounts and new Balance Sheet.
[Revaluation Loss: Rs.1,500; Cash: Rs.54,500; Balance Sheet: Rs.1,88,000
1,73,000 1,73,000 A’s Capital: Rs.56,100; B’s Capital: Rs.39,400; C’s Capital: Rs.40,000; Secrificing Ratio 1 : 1]
 (27) (28)

CA. Naresh Aggarwal’s Capital Adjustment

ACADEMY of ACCOUNTS Q-19*: L and M were partners in a firm sharing profits in equal ratio. Their Balance
Sheet on 31.03.2012 was as follows:
Accounting • Costing • Taxation • Financial Management Balance Sheet
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Liabilities Amount Assets Amount
Contingency Reserve 6,000 Cash 15,500
Q-18*: A and B were partners in a firm sharing profits in equal ratio. On 31.03.2012 Provident Fund 17,000 Debtors 21,000
their Balance Sheet was as under : General Reserve 5,000 Less: Provision 1,000 20,000
Balance Sheet Bills Payable 7,500 Stock 30,000
Creditors 8,000 Goodwill 6,000
Liabilities Amount Assets Amount Bank Loan 80,000 Building 1,00,000
Workers Comp. Fund 8,000 Cash 15,500 Capitals Land 1,30,000
Bills Payable 25,000 Debtors 21,500 L 1,10,000 Profit and Loss A/c 2,000
Outstanding Expenses 12,500 Less: Provision 1,500 20,000 M 70,000 1,80,000
General Reserve 10,000 Stock 55,000

AoA
2,95,500 2,95,500
Creditors 18,000 Investments 16,000
Bank Loan 20,000 Building 90,000 On 01.04.2012 they admitted N as a new partner on the following terms:
Capitals Land 95,000 (a) N will get 1/5 share in the profits of the firm
A 1,20,000 Profit and Loss A/c 2,000 (b) All the debtors are good.
B 80,000 2,00,000 (c) Value of stock to be increased by Rs 5,000.
(d) Value of Building depreciated to Rs.90,000.
2,85,500 2,85,500 (e) N brought in as his share of goodwill Rs.10,000 and Rs.50,000 as his capital.
On 01.04.2012 they admitted C as a new partner on the following terms: (f) All the partners decide to maintain their capital in their profit sharing ratio, necessary
(a) C will get 1/5 share in the profits of the firm adjustments are made in cash.
(b) C brought in as his share of goodwill Rs 15,000 and Rs. 50,000 as his capital. Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm.
(c) Provision for doubtful debts to be increased by Rs 2,000. [Revaluation Loss: 4,000; Cash: 86,500; Balance Sheet: 3,62,500; New Ratio 2 : 2 : 1
(d) Value of Investments to be increased by Rs 4,000 and half of the Investments is Capitals: L-1,00,000; M-1,00,000; N-50,000; L receive: 14,500; M bring: 25,500]
taken by A and B in the ratio of 3 : 2.
(e) Bank loan would be paid off together with outstanding interest Rs.1,000 not provided Q-20: Following is the Balance Sheet of A and B sharing profit as 3 : 2.
in the above Balance Sheet. Balance Sheet
Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm
Liabilities Amount Assets Amount
[Revaluation Profit: 1,000; Cash Balance: 59,500; Balance Sheet: 3,27,500
A’s Capital: Rs.1,30,000; B’s Capital: Rs.92,000; C’s Capital: Rs.50,000] Creditors 18,000 Debtors 22,000
Reserve Fund 25,000 Less: Provision 1,000 21,000
Contingency Fund 10,000 Land & Buildings 60,000
Provident Fund 20,000 Furniture and Fixtures 10,000
A’s Capital 45,000 Goodwill 5,000
B’s Capital 40,000 Plant & Machinery 32,000
Bank 9,000
Stock 21,000

1,58,000 1,58,000
 (29) (30)

[Revaluation Profit: 6,000; Bank: 41,000; Balance Sheet: 1,40,000; New Ratio 5 : 3 : 2
CA. Naresh Aggarwal’s Capitals: Radha-65,000; Meera-39,000; Sudha-26,000; Radha bring: 7,500; Meera receive: 3,500]
ACADEMY of ACCOUNTS Q-22: X and Y are partners in a business sharing profits and losses in the ratio of 3
Accounting • Costing • Taxation • Financial Management : 2. Their Balance Sheet as on 31.12.2012 is given as follows:
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Balance Sheet
As on 31.12.2012
On admission of C for 1/6th share in the profits it was decided that :
Liabilities Amount Assets Amount
(a) Provision for doubtful debts to be increased by Rs 1,500.
(b) Value of land and building to be increased to Rs 70,000. Contingency Fund 8,000 Cash 3,400
(c) Value of stock to be increased by Rs 6,500. Bills Payable 2,000 Building 40,000
(d) C brought in as his share of goodwill Rs 10,000 in cash. Creditors 8,000 Bills Receivable 6,000
(e) C was to bring further cash of Rs 30,000 for his capital. Reserves and Surplus 10,000 Stock 10,000
(f) All the partners decide to maintain their capital in their profit sharing ratio, necessary Capitals: Furniture 20,000
adjustments are made through bank. X- 50,000 Machinery 30,000
Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm. Y- 45,000 95,000 Debtors 9,000
[Revaluation Profit: 15,000; Bank: 59,000; Balance Sheet: 2,18,000; New Ratio 3 : 2 : 1 Less: Provision 400 8,600

AoA
Capitals: A-90,000; B-60,000; C-30,000; A bring: 12,000; B receive: 2,000] Goodwill 5,000

1,23,000 1,23,000
Q-21*: Radha and Meera are partners in a firm sharing profits and losses in the ratio
of 5 : 3. They admit Sudha into the firm on 1st April 2012, when their Balance Sheet On 01.01.2013 Z is admitted for 1/6th share on the following conditions:
was as follows: (a) Z will bring Rs. 25,000 for capital and Rs. 5,000 for goodwill.
Balance Sheet (b) Capitals of all the partners should be adjusted in their profit sharing ratio, necessary
As on 31.03.2012 adjustments are made through current accounts.
(c) Machinery is valued at Rs. 20,000 and Building is valued to Rs. 60,000.
Liabilities Amount Assets Amount (d) Furniture is depreciated by 10% and stock is appreciated by 30%.
Radha’s Capital 50,000 Goodwill 6,000 (e) All the debtors are good but a provision on Bills Receivable is required @ 5%.
Meera’s Capital 38,000 Machinery 58,000 (f) Liability for Contingency is determined at Rs. 3,000.
Profit and Loss A/c 8,000 Furniture 10,000 (g) There is an unrecorded liability for outstanding salary of Rs.1,100.
Bank Loan 6,000 Debtors 18,000 Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm.
Creditors 4,000 Stock 7,000 [Revaluation Profit: 10,000; Cash: 33,400; Balance Sheet: 1,69,100; New Ratio 3 : 2 : 1
Bank 7,000 Capitals: X-75,000; Y-50,000; Z-25,000; Current A/c: X-10,000(Dr.); Y-5,000(Cr.)]

1,06,000 1,06,000 Q-23: Sun and Moon were partners in a firm sharing profits and losses in the ratio of
Terms of Sudha’s admission were as follows: 2 : 1. The following is the Balance Sheet of the firm as on 31st December 2012.
(a) Sudha will bring Rs 30,000 through cheque as her share of capital and will be Balance Sheet
entitled to 1/5 share in the profits. Liabilities Amount Assets Amount
(b) Sudha does not bring goodwill. Goodwill of the firm is valued at Rs.20,000
(c) Machinery and stock are revalued at Rs 65,000 and Rs 8,000. Sundry Creditors 20,000 Cash 7,800
(d) Furniture is found excess by Rs.2,000. Bills Payable 11,000 Debtors 20,000
(e) Capitals of all the partners should be adjusted in their profit sharing ratio, necessary Bank Overdraft 9,000 Less: Provision 300 19,700
adjustments are made through bank. Capitals: Stock 20,000
Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm. Sun 75,000 Plant 40,000
Moon 55,000 1,30,000 Buildings 75,000
 (31) (32)

(d) Provision for bad and doubtful debts to be increase by Rs.4,000.

CA. Naresh Aggarwal’s (e) Machinery is revalued at Rs 50,000 and building is revalued at Rs 1,00,000.

ACADEMY of ACCOUNTS (f) Capitals of all the partners should be adjusted by opening current accounts.
Prepare necessary accounts and Balance Sheet of the firm after D’s admission.
Accounting • Costing • Taxation • Financial Management [Rev. Profit:6,000; Capitals: A-75,000; B-75,000; C-50,000; D-50,000; Secrifice 6/30, 1/30; Gain1/
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org 30
Current A/c: A-31,400(Cr.); B-11,600(Dr.); C-5,400(Dr.); Bank: 68,400; Balance Sheet: 3,31,400]
Profit and Loss A/c 7,500
Q-25: Following is the Balance Sheet of A and B sharing profit as 3 : 2.
1,70,000 1,70,000
Balance Sheet
They agreed to admit Earth as partner w.e.f. 01.01.2013 on the following terms:
Liabilities Amount Assets Amount
(a) New ratio of the partners will be 5 : 3 : 2. Capitals of all the partners should be
adjusted in their profit sharing ratio, necessary adjustments are made through Creditors 18,000 Debtors 16,000
current accounts. Profit and Loss A/c 15,000 Bills Receivables 6,000
(b) Earth will bring in capital to the extent of Rs.40,000 and Rs.12,000 for her share of Bills Payable 25,000 Land & Buildings 18,000
goodwill. Capitals : Plant & Machinery 12,000
(c) Value of stock to be decreased to Rs 15,000. A 16,000 Bank 21,000

AoA
(d) The liability for Contingencies were determined to be Rs.1,300. B 10,000 26,000 Stock 11,000
(e) Creditors amounted to Rs. 1,000 are not likely to arise, therefor written off.
84,000 84,000
(f) Provision for doubtful debts to be created to extent of 5% of debtors.
Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm. On admission of C for 1/4th share in the profits it was decided that :
[Revaluation Loss: 6,000; Cash: 59,800; Balance Sheet: 2,40,300; Secrificing Ratio 5 : 1 (a) Provision for doubtful debts to be created by Rs 1,500.
Capitals: Sun-1,00,000; Moon-60,000; Earth-40,000; Current A/c: Sun-24,000(Dr.); Moon-7,500(Dr.)] (b) Value of land and building to be increased to Rs 21,000.
(c) Value of stock to be increased by Rs 2,500.
Q-24*: Balance Sheet of A, B and C sharing profits in the ratio of 3 : 2 : 1 is given (d) Creditors amounted to Rs. 3,000 are not likely to arise.
bellow: (e) There is an unrecorded liability for Outstanding Expenses of Rs.2,000 and an
Balance Sheet unrecorded Equipments worth Rs.4,000.
As on 31.03.2012 (f) C brought in as his share of goodwill Rs 10,000 and sufficient capital.
You are required to show Revaluation A/c, Capital A/c and Balance Sheet.
Liabilities Amount Assets Amount
[Revaluation Profit: Rs.9,000; Bank: Rs.51,000; Balance Sheet: Rs.1,22,000
A’s Capital 80,000 Bank 10,000 A’s Capital: Rs.36,400; B’s Capital: Rs.23,600; C’s Capital: Rs.20,000]
B’s Capital 50,000 Debtors 46,000
C’s Capital 40,000 Less: Provision 2,000 44,000 Q-26: X and Y were partners in a firm sharing profits and losses in the ratio of
Contingency Reserve 30,000 Stock 30,000 4 : 3. The following is the Balance Sheet of the firm as on 31st December 2012.
Trade Creditors 50,000 Furniture 26,000 Balance Sheet
Machinery 60,000 As on 31.12.2012
Land & Building 80,000
Liabilities Amount Assets Amount
2,50,000 2,50,000
Creditors 7,000 Cash 15,300
It was decided to admit D into partnership on the following terms and conditions: Bills Payable 16,000 Debtors 20,000
(a) New profit sharing ratio between A, B, C and D will be 3 : 3 : 2 : 2. Bank Overdraft 17,000 Less: Provision 300 19,700
(b) Goodwill of the firm is valued at Rs 42,000. D brings his share of goodwill in cash Capitals: Stock 20,000
and Rs. 50,000 for his capital. X 63,000 Plant 33,000
(c) Contingency reserve is not required any more. Y 60,000 1,23,000 Buildings 75,000
 (33) (34)

(g) Interest accrued on investment Rs. 2,000.

CA. Naresh Aggarwal’s You are required to show Journal Entries and Prepare necessary accounts.
ACADEMY of ACCOUNTS [Revaluation Profit/Loss: Nil; Cash: Rs.52,500; Balance Sheet: Rs.2,12,000
A’s Capital: Rs.70,500; B’s Capital: Rs.59,500; C’s Capital: Rs.32,500; Secrificing Ratio 1 : 1]
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Q-28: Following is the Balance Sheet of A and B sharing profit as 3 : 2.
Balance Sheet

Liabilities Amount Assets Amount

General Reserve 7,000 Profit and Loss A/c 7,000
Creditors 18,000 Debtors 22,000
1,70,000 1,70,000 Reserve 25,000 Less: Provision 1,000 21,000
They agreed to admit Z as partner w.e.f. 01.01.2013 on the following terms: Workmen's Comp. Fund 20,000 Land & Buildings 18,000
(a) Z will bring in capital to the extent of 1/6 of the total capital and bring Rs.14,000 for A’s Capital 15,000 Goodwill 5,000
his share of goodwill. B’s Capital 10,000 Plant & Machinery 12,000
(b) Provision for doubtful debts to be created to extent of 5% of debtors. Bank 21,000
(c) Value of stock to be decreased to Rs 15,000. Stock 11,000
(d) The liability of workmen’s compensation fund was determined to be Rs.2,800.

AoA
88,000 88,000
(e) Creditors amounted to Rs. 1,500 are not likely to arise, therefor written off.
[Revaluation Loss: Rs.7,000; Cash: Rs.55,300; Balance Sheet: Rs.1,97,300] On admission of C it was decided that :
X’s Capital: 67,000; Y’s Capital: 63,000; Z’s Capital: 26,000] (a) Provision for doubtful debts to be increased by Rs 1,500.
(b) Value of land and building to be increased to Rs 21,000.
Q-27: A and B are partners in a business sharing profits and losses in the ratio of (c) Value of stock to be increased by Rs 2,500.
3 : 2. Their Balance Sheet as on 31.12.2012 is given as follows: (d) The liability of workmen’s compensation fund was determined to be Rs.12,000.
Balance Sheet (e) New ratio of the partners will be 2 : 2 : 1. C brought in as his share of capital and
Rs.3,000 for goodwill.
Liabilities Amount Assets Amount (f) Capital of all partners should be in their profit sharing ratio.
Creditors 40,000 Cash 5,000 Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm.
Bills Payable 10,000 Stock 20,000 [Revaluation Profit: 4,000; Bank: 39,000; Balance Sheet: 1,05,000; Combined Capital: 60,000
Contingency Reserve 10,000 Goodwill 5,000 Capitals: A-30,000; B-30,000; C-15,000; A will receive: 7,200; B will bring: 7,200]
Capitals: Furniture 15,000
A- 60,000 Plant & Machinery 70,000 Q-29*: A and B were partners in a firm sharing profits in the ratio of 2 : 1. Their
B- 50,000 1,10,000 Sundry Debtors 30,000 Balance Sheet on 31.03.2012 was as follows:
Land and Buildings 20,000 Balance Sheet
Investment 5,000
Liabilities Amount Assets Amount
1,70,000 1,70,000 Creditors 10,000 Cash 15,500
On 01.01.2013 C is admitted for 1/5th share on the following conditions: Bills Payable 17,000 Debtors 70,000
(a) C will bring necessary amount for capital and Rs.15,000 for goodwill. Reserve 9,000 Stock 30,000
(b) Partners agreed to share future profits in the ratio of 5 : 3 : 2. Bank Loan 80,000 Building 1,00,000
(c) Furniture is depreciated by 10% and Investments are appreciated by 20%. Capitals Land 1,00,000
(d) One customer who owed the firm Rs. 2,000 become insolvent and nothing could A 1,49,500
be realized from him therefor should be written off. B 50,000 1,99,500
(e) Creditors will be written off by Rs. 1,000.
3,15,500 3,15,500
(f) Outstanding bill for repair Rs. 500 will be provided for.
 (35) (36)

Q-31: A and B are partners in a firm. Their Balance Sheet as on 31.12.2012 is given
CA. Naresh Aggarwal’s as follows:
ACADEMY of ACCOUNTS Balance Sheet

Accounting • Costing • Taxation • Financial Management Liabilities Amount Assets Amount

West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Bank Overdraft 10,000 Cash 11,000
Investment Fluctuation Fund 2,000 Debtors 40,000
On 1.04.2012 they admitted C as a new partner on the following terms: Creditors 8,000 Less: Provision 2,000 38,000
(a) C will get 1/6th share in the profits, wholly from A. Capitals: Investments 16,000
(b) C will bring his share of capital on the basis of total capital of the firm and Rs.15,000 A- 40,000 Machinery 21,000
for goodwill. B- 50,000 90,000 Furniture 10,000
(c) Provision for bad debts was to be made equal to 5% on debtors. Loan 20,000 Building 30,000
(d) Land was to be appreciated to Rs.1,25,000 Profit and Loss A/c 4,000
(e) Building was to be depreciated to Rs. 95,000
(f) Capital of the partners will be adjusted through cash. 1,30,000 1,30,000
You are required to Prepare Revaluation A/c, Capital A/c and New Balance Sheet.
[Revaluation Profit: 16,500; Cash: 78,500; Balance Sheet: 3,95,000; Combined Capital: 2,40,000 On 01.01.2013 C is admitted for 1/5th share on the following conditions:

AoA
Capitals: A-1,44,000; B-96,000; C-48,000; A will receive: 37,500; B will bring: 37,500; New Ratio (a) C will bring 25,000 of capital and his share in goodwill.
3:2:1] (b) Goodwill of the firm is valued at Rs. 25,000.
(c) Provision for doubtful debts is found excess by Rs. 800.
Q-30*: Ram and Shyam are partners in a firm sharing profits and losses in the ratio of (d) Expense on revaluation came to Rs.1500 which are paid by A.
5 : 3. They admit Mohan into the firm on 1st April 2012, when their Balance Sheet was (e) Investments are valued at Rs.13,000.
as follows: (f) Firm had taken a Joint Life Policy of Rs. 90,000. Premium of Rs.45,000 had been
Balance Sheet paid so far, now has a surrender value of Rs.30,000.
Prepare Revaluation Account, Partner’s Capital Accounts and new Balance Sheet.
Liabilities Amount Assets Amount
[Revaluation Profit: Rs.28,300; Balance Sheet: Rs.1,83,800
Ram’s Capital 50,000 Goodwill 4,000 Cash: Rs.41,000; Capitals- A: Rs.56,150; B: Rs.64,650; C: Rs.25,000]
Shyam’s Capital 38,000 Machinery 58,000
General Reserve 8,000 Furniture 10,000 Q-32: A and B are partners in a business sharing profits and losses in the ratio of
Bank Loan 6,000 Debtors 20,000 3 : 2. Their Balance Sheet as on 31.12.2012 is given as follows:
Creditors 5,000 Stock 7,000 Balance Sheet
Bank 8,000
Liabilities Amount Assets Amount
1,07,000 1,07,000
Creditors 43,000 Cash 5,000
Terms of Mohan’s admission were as follows: Investment Fluctuation Fund 7,000 Stock 20,000
(a) Mohan will bring Rs 24,000 through cheque as his share of goodwill and 1/4th of Contingency Reserve 10,000 Goodwill 5,000
combined capital of Ram and Shyam. Capitals: Furniture 15,000
(b) Machinery and stock are revalued at Rs 65,000 and Rs 8,000. A- 60,000 Plant & Machinery 50,000
(c) Furniture is found excess by Rs.3,000. B- 50,000 1,10,000 Sundry Debtors 30,000
(d) A provision @10% on debtors is provided out of General Reserve. Land and Buildings 20,000
(e) Creditors of Rs. 1,000 are not likely to arise, therefore written off. Investment 25,000
Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm.
[Revaluation Profit: 6,000; Balance Sheet: Rs.1,60,000; Combined Capital: 1,20,000 1,70,000 1,70,000
Bank: 62,000; Capitals: Ram-70,000; Shyam-50,000; Mohan-30,000]
 (37) (38)

had been paid but now has a surrender value of Rs.20,000. Partners do not want
CA. Naresh Aggarwal’s to show value of Joint Life Policy in their new Balance Sheet.
ACADEMY of ACCOUNTS Prepare Revaluation Account, Partner’s Capital Accounts and new Balance Sheet.
[Revaluation Profit: 3,500; Balance Sheet: 2,14,500
Accounting • Costing • Taxation • Financial Management Cash: 50,000; Capitals- A: 72,100; B: 60,400; C: 31,000; Secrificing Ratio 1 : 1]
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org [Hint: When surrender value of Joint Life Policy should not appear in books effects are taken
similar to treatment of goodwill. You can refer Question 35 and 36 for the same]
On 01.01.2013 C is admitted for 1/5th share on the following conditions:
Q-34: A and B were partners in a firm sharing profits and losses in the ratio of
(a) C will bring Rs.40,000 for capital and Rs.15,000 for goodwill.
2 : 1. The following is the Balance Sheet of the firm as on 31 st December 2012.
(b) Partners agreed to share future profits in the ratio of 5 : 3 : 2.
Balance Sheet
(c) Furniture is depreciated by 10% and value of Investments are decreased by 20%.
As on 31.12.2012
(d) One customer who owed the firm Rs. 2,000 become insolvent and nothing could
be realized from him therefor should be written off. Liabilities Amount Assets Amount
(e) Creditors will be written off by Rs.1,000.
Sundry Creditors 20,000 Cash 15,400
(f) Expense on revaluation came to Rs.500
Bills Payable 3,000 Debtors 20,000
(g) Firm had taken a Joint Life Policy of Rs. 50,000. Premium of Rs.25,000 had been
Bank Overdraft 17,000 Less: Provision 400 19,600
paid so far, now has a surrender value of Rs.18,000.

AoA
Investment Fluctuation Fund 3,000 Stock 20,000
Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm.
Capitals: Investments 25,000
[Revaluation Profit: Rs.15,000; Balance Sheet: Rs.2,29,000
A 70,000 Plant 34,000
Bank: Rs.47,000; Capitals- A: Rs.80,700; B: Rs.66,300; C: 40,000; Sacrificing Ratio 1 : 1]
B 60,000 1,30,000 Buildings 50,000
Q-33: A and B are partners in a business sharing profits and losses in the ratio of Profit and Loss A/c 9,000
3 : 2. Their Balance Sheet as on 31.12.2012 is given as follows: 1,70,000 1,70,000
Balance Sheet
They agreed to admit C as partner w.e.f. 1st January, 2013 with 1/4 share in profits on
Liabilities Amount Assets Amount the following terms:
Investment Fluctuation Fund 10,000 Goodwill 5,000 (a) C will bring in capital to the extent of Rs.40,000 but was unable to bring Rs.6,000
Creditors 40,000 Cash 5,000 for his share of goodwill.
Bills Payable 10,000 Stock 20,000 (b) Provision for doubtful debts to be created to extent of 5% of debtors.
Capitals: Furniture 15,000 (c) Value of stock to be decreased to Rs 17,000.
A- 60,000 Plant & Machinery 70,000 (d) The liability of workmen’s compensation fund was determined to be Rs.2,000.
B- 50,000 1,10,000 Sundry Debtors 30,000 (e) Creditors amounted to Rs. 1,400 are not likely to arise, therefor written off.
Land and Buildings 20,000 (f) Firm had taken a Joint Life Policy of Rs. 1,50,000. So far premium of Rs.20,000
Investment 5,000 had been paid but now has a surrender value of Rs.12,000. Partners do not want
to show value of Joint Life Policy in their new Balance Sheet.
1,70,000 1,70,000 Prepare Revaluation Account, Partner’s Capital Accounts and new Balance Sheet.
On 01.01.2013 C is admitted for 1/5th share on the following conditions: [Revaluation Loss: 4,200; Balance Sheet: 2,00,400
(a) C will bring Rs. 35,000 for capital and Rs. 10,000 for goodwill. Cash: 55,400; Capitals- A: 69,200; B: 59,600; C: 31,000]
(b) Partners agreed to share future profits in the ratio of 5 : 3 : 2.
(c) Furniture is depreciated by 10% and Land and Building are appreciated by 20%. Q-35*: X and Y are partners in a business sharing profits and losses in the ratio of
(d) Investments are found undervalued by Rs. 2,000. 3 : 2. Their Balance Sheet as on 31.12.2012 is given as follows:
(e) Outstanding bill for repair Rs. 1,000 will be provided for.
(f) Firm had taken a Joint Life Policy of Rs. 1,00,000. So far premium of Rs.30,000
 (39) (40)

Balance
CA. Naresh Sheet
Aggarwal’s (c) The goodwill of the firm was valued at Rs 1,50,000 and C brought his share of
premium in cash.
ACADEMY
Liabilities
of ACCOUNTS
Amount Assets Amount
(d) Creditors amounted to Rs. 1,000 are not likely to arise.
Capitals: Furniture 20,000 (e) Provision for doubtful debts was equal to 5% on debtors.
Accounting • Costing • Taxation • Financial Management
X- 50,000 Machinery 30,000 (f) Stock was depreciated by 10%.
West
Y - Patel Nagar, New Delhi. Ph:8800215448.
30,000 Website: www.academyofaccounts.org
80,000 Building 40,000 (g) Land was appreciated to Rs.1,20,000
Bills Payable 2,000 Debtors 5,000 (h) Building was depreciated to Rs. 90,000
Creditors 25,000 Stock 13,000 Prepare Memorandum Revaluation A/c, Capital accounts and Balance Sheet of the
Bank Loan 8,000 Cash 2,000 new firm.
Reserve Fund 5,000 Bank 10,000 [Revaluation Profit: 7,000; Cash: 95,000; Balance Sheet: 3,95,000
1,20,000 1,20,000 Capitals- A: 1,78,980; B: 62,420; C: 48,600; New Ratio 14 : 6 : 5]

On 01.01.2013 Z is admitted for 1/6 share on the following conditions:

(a) Z will bring Rs. 20,000 for capital and Rs. 5,000 for goodwill.
(b) Partners do not want to change the values of assets and liabilities in the new Theoretical Questions
Balance Sheet of the firm.
(c) Machinery is valued at Rs. 20,000 and Building is valued at Rs. 60,000.

AoA
(d) Furniture is depreciated by Rs.2,000 and stock is appreciated by Rs.3,000. Q-1*: What is meant by Goodwill ?
(e) Debtors amounted to Rs. 500 are doubtful.
(f) Creditors amounted to Rs. 1,500 are not likely to arise. Q-2*: State any four factors which influence the valuation of goodwill of a partnership
Prepare Memorandum Revaluation A/c, Capital accounts and Balance Sheet of the firm.
new firm. or
[Revaluation Profit: 12,000; Balance Sheet: 1,45,000 What are the factors effecting value of the goodwill.
Cash: 27,000; Capitals- X: 57,200; Y: 34,800; Z: 18,000; New Ratio 3 : 2 : 1]
Q-3*: On what occasions does the need for valuation of goodwill arise ?
Q-36: A and B were partners in a firm sharing profits in the ratio of 7 : 3. Their Balance or
Sheet on 31.03.2012 was as follows: Mention circumstances when goodwill of a partnership firm may have to be
Balance Sheet valued.

Liabilities Amount Assets Amount Q-4*: What are the adjustments required on admission of a partner in the firm ?
Creditors 10,000 Cash 15,000 Q-5: Briefly explain the following methods of valuation of goodwill.
Bills Payable 15,000 Debtors 20,000 (a) Average Profit Method
Bank Loan 80,000 Bills Receivables 50,000 (b) Super Profit Method
General Reserve 10,000 Stock 30,000 (c) Capitalisation Method
Capitals Building 1,00,000
A 1,50,000 Land 1,00,000 Q-6: What is sacrificing ratio ?
B 50,000 2,00,000
Q-7: Why is there need for revaluation of assets and liabilities of a firm, at the time of
3,15,000 3,15,000 admission of a partners ?
On 01.04.2012 they admitted C as a new partner on the following terms:
Q-8: Why is it necessary to distribute all accumulated profits and losses among old
(a) Partners do not want to change the values of assets and liabilities in the new
partners at the time of admission ?
Balance Sheet of the firm. General Reserve will not be continued.
(b) C will get 1/5th share in the profits of the firm and bring Rs.50,000 for his capital. ••••••••••••••••••••••
 CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org

For Eenquiries
Call or whatsapp: 8800215448

AoA
Retirement and (Whatsapp anytime, Calls only between 3.00 pm to 8.00 pm)

Email: ca.naresh.vc@gmail.com
Death of Partner Website: academyofaccounts.org

Watch us on

https://www.youtube.com/CaNareshAggarwal
 (1) (2)

CA. Naresh Aggarwal’s Q-6: Seeta, Geeta and Meeta were partners in a firm sharing profits in the ratio of

ACADEMY of ACCOUNTS 3 : 2 : 1. Geeta retired and her share was divided equally between Seeta and Meeta.
Calculate new and gaining ratio of Seeta and Meeta.
Accounting • Costing • Taxation • Financial Management [New Ratio 2 : 1; Gaining Ratio 1 : 1]
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Q-7: Ajay, Vijay and Sanjay were partners in a firm sharing profits in the ratio of
2 : 2 : 1. Ajay retired and his share was divided between Vijay and Sanjay in 3 : 1.
Calculation of New Ratio & Gaining Ratio Calculate new and gaining ratio of Vijay and Sanjay.
[New Ratio 7 : 3; Gaining Ratio 3 : 1]

Q-1: Ram, Shyam and Mohan are partners sharing profit in the ratio of 3 : 2 : 1.
Q-8: A, B and C are partners with capital of Rs. 1,00,000, Rs. 75,000 and Rs. 50,000
Calculate new and gaining ratio after retirement of a partner as per the following
respectively. On C’s retirement, his share is acquired by A and B in the ratio of 2 : 1
situations:
respectively. Ascertain the new profit sharing ratio and gaining ratio.
(a) If Ram retires.
[New Ratio 5 : 4; Gaining Ratio 2 : 1]
(b) If Shyam retires.
(c) If Mohan retires.
Q-9: X, Y and Z were partners in a firm. Y retired and his share was taken over by X
[If Ram retires- New Ratio 2 : 1; Gaining Ratio 2 : 1]

AoA
and Z in the ratio of 6 : 4. Calculate new and gaining ratio of X and Z.
[If Shyam retires- New Ratio 3 : 1; Gaining Ratio 3 : 1]
[New Ratio 8 : 7; Gaining Ratio 3 : 2]
[If Mohan retires- New Ratio 3 : 2; Gaining Ratio 3 : 2]
Q-10: A, B, C and D are partners in the ratio of 4 : 3 : 2 : 1. On B’s retirement, his
Q-2: A, B and C are partners sharing profit in the ratio of 1/2, 3/10 and 1/5 respectively.
share is taken by C and D in the ratio of 1 : 2. Ascertain the new profit sharing ratio and
Calculate new and gaining ratio after retirement of a partner as per the following
gaining ratio.
situations:
[New Ratio 4 : 3 : 3; Gaining Ratio of C & D 1 : 2]
(a) If A retires.
(b) If B retires.
Q-11: P, Q, R and S are partners in the ratio of 5 : 4 : 2 : 1. On Q’s retirement, his
(c) If C retires.
share is taken by R and S in equal ratio. Ascertain the new profit sharing ratio and
[If A retires- New Ratio of B and C will be 3 : 2; Gaining Ratio 3 : 2]
gaining ratio.
[If B retires- New Ratio of A and C will be 5 : 2; Gaining Ratio 5 : 2]
[New Ratio 5 : 4 : 3; Gaining Ratio of R & S 1 : 1]
[If C retires- New Ratio of A and B will be 5 : 3; Gaining Ratio 5 : 3]
Q-12: K, L and M are three partners sharing profits in the ratio of 4: 3 : 2. K retires, L
Q-3: A, B and C are partners sharing profit in the ratio of 5 : 3 : 2. B retires and his
and M decided to share profits in future in the ratio of 5 : 3. Calculate gaining ratio.
share is taken up by A and C in the ratio of 2 : 1. Find out the new and gaining ratio.
[Gaining Ratio 21 : 11]
[New Ratio 7 : 3; Gaining Ratio 2 : 1]
Q-13: X, Y and Z are partners sharing profits in the ratio of 5: 3 : 2. X retires and other
Q-4: X, Y and Z were partners in a firm sharing profits in the ratio of 8 : 7 : 5. Y retired
partners decided to share profits in future in the ratio of 2 : 1. Calculate gaining ratio.
and his share was taken over by X and Z in the ratio of 1 : 2. Calculate new and
[Gaining Ratio 11 : 4]
gaining ratio of X and Y.
[New Ratio 31 : 29; Gaining Ratio 1 : 2]
Q-14: A, B and C are partners in a business and divide profit and loss in the ratio of 15
: 9 : 8 respectively, C retires. A and B decide to share profits in equal proportion.
Q-5: L, M and N were partners in a firm sharing profits in the ratio of 8 : 7 : 5. N retired
Calculate the gaining ratio.
and his share was taken over by L and M in the ratio of 3 : 2. Calculate new and
[Gaining Ratio 1 : 7]
gaining ratio of L and M.
[New Ratio 11 : 9; Gaining Ratio 3 : 2]
 (3) (4)

CA. Naresh Aggarwal’s Q-19: M, N and O who are partners in a firm share profits in the ratio of 3 : 2 : 1.
ACADEMY of ACCOUNTS Goodwill has been valued at Rs. 60,000. On N’s retirement M and O agree to take his
share equally. Goodwill Account is appearing in the books at Rs.24,000. Pass
Accounting • Costing • Taxation • Financial Management necessary journal entry for treatment of N’s share of goodwill.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org [Hint: Gaining Ratio 1 : 1]

Q-20: A, B and C were partners sharing profits in the ratio of 3 : 2 : 1. B retired and the
new profit sharing ratio between A and C was 2 : 1. The goodwill of the firm was valued
Q-15: Anita, Babita and Sunita were partners in a business. Sunita retires, Anita and at Rs. 90,000. Goodwill was not appearing in the books. Pass necessary journal entry
Babita decide to share profits in the proportion of 3 : 2 in future. Calculate the gaining for the treatment of goodwill on B’s retirement.
ratio. [Hint: Gaining Ratio 1 : 1]
[Gaining Ratio 4 : 1]
Q-21: Ravi, Mukesh, Dinesh and Yogesh are partners in a firm sharing profits in the
ratio of 2 : 2 : 1 : 1. On Mukesh’s retirement, the goodwill of the firm is valued at Rs.
90,000. Ravi, Dinesh and Yogesh decided to share future profits equally. Pass the
necessary journal entry for the treatment of goodwill.

AoA
•••••••••••••••••••••• [Hint: Gaining Ratio of Ravi, Dinesh and Yogesh is 0 : 1 : 1]

Q-22: X, Y and Z were partners in a firm sharing profits in the ratio of 8 : 7 : 5. Y retired
and his share was taken over by X and Z in the ratio of 1 : 2. Goodwill of the firm is
valued at Rs.45,000. Pass the necessary journal entry for the treatment of goodwill.
[Hint: Gaining Ratio 1 : 2]

(Treatment of Goodwill) Q-23: A, B and C are partners with capital of Rs. 1,00,000, Rs. 75,000 and Rs.
50,000 respectively. On C’s retirement, goodwill of the firm is valued at Rs.18,000.
Q-16: A, B and C are partners sharing profits in the ratio of 2 : 2 : 1. On 01.01.2012, His share is acquired by A and B in the ratio of 2 : 1 respectively. Goodwill was
Goodwill of the firm was valued at Rs. 45,000. Goodwill does not appear in books. On appearing in the books at Rs.30,000. Pass the necessary journal entry for the treatment
this date A retires. Calculate gaining ratio and pass Journal Entry regarding goodwill. of goodwill.
[Gaining Ratio 2 : 1] [Hint: Gaining Ratio 2 : 1]

Q-17: X, Y and Z are partners sharing profits in the ratio of 3 : 2 : 1. On 31.03.2012, Q-24: A, B, C and D are partners in the ratio of 4 : 3 : 2 : 1. On B’s retirement, his
Goodwill of the firm was valued at Rs. 60,000. Goodwill does not appear in books. On share is taken by C and D in the ratio of 1 : 2. Goodwill of the firm is valued at
this date Y retires. Calculate gaining ratio and pass Journal Entry for treatment of Rs.40,000. Pass the necessary journal entry for the treatment of goodwill.
goodwill. [Hint: Gaining Ratio of A, C & D is 0 : 1 : 2]
[Gaining Ratio 3 : 1]
Q-25: P, Q, R and S are partners in the ratio of 5 : 4 : 2 : 1. On Q’s retirement, his
Q-18: L, M and O are partners sharing profits and losses in the ratio of 4 : 3 : 2. M share is taken by R and S in equal ratio. Goodwill of the firm is valued at Rs.45,000.
retires and the goodwill is valued at Rs. 72,000 but it was already appearing in the It was appearing in books at Rs.36,000. Pass the necessary journal entry for the
books at Rs.45,000. L and O decided to share future profits and losses in the ratio of treatment of goodwill.
5 : 3. Calculate M’s share of goodwill and pass necessary journal entry for the same. [Hint: Gaining Ratio of Q, R & S is 0 : 1 : 1]
[Hint: Gaining Ratio 13 : 11]
Q-26: A, B, C and D are partners in the ratio of 4 : 3 : 2 : 1. B retires from the firm and
 (5) (6)

CA. Naresh Aggarwal’s Preparation of Revaluation A/c and Balance Sheet

ACADEMY of ACCOUNTS Q-1: Balance Sheet of A, B and C sharing profits in the ratio of 3 : 2 : 1 is given below:
Accounting • Costing • Taxation • Financial Management Balance Sheet
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Liabilities Amount Assets Amount
A’s Capital 80,000 Bank 13,000
new ratio of all the partners decided to be equal. Goodwill of the firm is valued at B’s Capital 50,000 Debtors 46,000
Rs.33,000. Pass the necessary journal entry for the treatment of goodwill. C’s Capital 40,000 Less: Provision 2,000 44,000
[Hint: A’s Sacrifice 1/15; Gaining Ratio of C & D is 4 : 7] General Reserve 18,000 Stock 12,000
Workers Comp. Fund 10,000 Machinery 60,000
Q-27: Ram, Shyam, Mohan and Dinesh are partners in the ratio of 5 : 4 : 2 : 1. On Trade Creditors 52,000 Furniture 26,000
Mohan’s retirement, future ratio of the remaining partners decided to be equal. Goodwill Land & Building 80,000
of the firm is valued at Rs.36,000. No goodwill was appearing. Pass the necessary Goodwill 15,000
journal entry for the treatment of goodwill.
[Hint: Ram’s Sacrifice 1/12; Shyam’s Gain is Nil; Dinesh’s Gain 3/12] 2,50,000 2,50,000

AoA
On that date, C decides to retire from the firm and following adjustments are made:
Q-28: K, L and M are three partners sharing profits in the ratio of 4: 2 : 1. M retires, K (a) Goodwill of the firm is valued at Rs.30,000.
and L decided to share profits in future in the equal ratio. Goodwill was valued at (b) Provision for bad and doubtful debts to be increase by Rs.3,000.
Rs.28,000 and it was appearing at Rs.35,000. Pass the necessary journal entry for (c) Machinery is revalued at Rs. 50,000 and Land & building is revalued at Rs 1,00,000.
the treatment of goodwill. (d) Creditors amounted to Rs. 2,000 are not likely to arise, therefor written off.
[Hint: K’s Sacrifice 1/14; L’s Gain 3/14] (e) There is an unrecorded liability for outstanding salary of Rs.2,000 and an
unrecorded Typewriter is worth Rs.5,000.
(f) Liability for workers compensation determined at Rs.4,000.
Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm.
[Revaluation Profit: Rs.12,000; Balance Sheet: Rs.2,47,000
Capitals: A-Rs.87,500; B-Rs.55,000; C’s Loan: Rs.48,500]

•••••••••••••••••••••• Q-2: A, B and C are partners in a business sharing profits and losses in the ratio of
5 : 3 : 2. Their Balance Sheet as on 31.12.2012 is given as follows:
Balance Sheet

Liabilities Amount Assets Amount

Profit and Loss A/c 8,000 Goodwill 20,000
Bills Payable 2,000 Debtors 5,000
Creditors 30,000 Stock 13,000
Capitals: Furniture 20,000
A- 50,000 Machinery 30,000
B- 30,000 Building 40,000
C- 20,000 1,00,000 Bank 12,000

1,40,000 1,40,000
 (7) (8)

(e) Land and Buildings are appreciated by 20% and Machinery is depreciated by
CA. Naresh Aggarwal’s 10%.
ACADEMY of ACCOUNTS (f) Value of the stock reduced by Rs.4,300 and Furniture depreciated to Rs.5,000.
Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm.
Accounting • Costing • Taxation • Financial Management [Revaluation Loss: Rs.4,800; Balance Sheet: Rs.1,42,200
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Capitals: A-Rs.40,100; C-Rs.21,700; B’s Loan: Rs.35,400]

On 01.01.2013, C is retired and following adjustments are made: Q-4: The following is the Balance Sheet of Ajay, Vijay and Sanjay on 31.12.2012.
(a) Goodwill of the firm is valued at Rs.40,000. Balance Sheet
(b) Machinery is valued at Rs. 25,000 and Building is valued at Rs. 50,000.
Liabilities Amount Assets Amount
(c) Furniture is depreciated by Rs.2,000 and stock is appreciated by Rs.3,000.
(d) A provision of 10% is required on debtors. Creditors 37,500 Cash at Bank 21,500
(e) Creditors amounted to Rs. 1,500 are not likely to arise, therefor written off. Bills Payable 4,000 Bills Receivable 4,000
(f) There is an unrecorded liability for outstanding salary of Rs.4,000 and Capital Accounts Debtors 16,000
unrecorded investments are worth Rs.2,000. Ajay 30,000 Stock 20,000
Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm. Vijay 25,000 Office Furniture 1,000
[Revaluation Profit: Rs.5,000; Balance Sheet: Rs.1,27,500 Sanjay 20,000 75,000 Plant & Machinery 20,000

AoA
Capitals: A-Rs.41,500; B-Rs.24,900; C’s Loan: Rs.26,600] Workers Comp. Fund 6,000 Land & Buildings 25,000
Goodwill 15,000
Q-3: A, B and C were partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their
1,22,500 1,22,500
Balance Sheet was as follows:
Balance Sheet On 01.01.2013, Ajay decides to retire and following adjustments are made:
As on 31.03.2012 (a) Stock to be reduced by 10%.
(b) Land and Buildings appreciated by 20%.
Liabilities Amount Assets Amount
(c) 5% provision doubtful debts be created on debtors and Bills Receivables.
Capitals: Patents 4,000 (d) Creditors of Rs. 2,500 should be written off and Bills Payable are valued at
A 50,000 Machinery 32,000 Rs.5,000.
B 30,000 Furniture 7,000 (e) Unexpired Insurance was Rs. 1,000.
C 25,000 1,05,000 Land and Buildings 40,000 (f) Goodwill of the firm is valued at Rs.18,000.
Bank Overdraft 7,000 Cash 15,700 Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm.
Creditors 30,000 Debtors 30,000 [Revaluation Profit: Rs.4,500; Balance Sheet: Rs.1,10,500
Bills Payable 8,000 Stock 14,300 Capitals: Vijay-Rs.20,500; Sanjay-Rs.15,500; Ajay’s Loan: Rs.34,500]
Contingency Reserve 9,000 Bills Receivables 4,000
Profit and Loss A/c 12,000 Q-5: A, B and C are partners in a business sharing profits and losses in the ratio of
4 : 3 : 2. Their Balance Sheet as on 31.12.2012 is given as follows:
1,59,000 1,59,000
Balance Sheet
On 01.04.2012, B retired and following adjustments are made:
Liabilities Amount Assets Amount
(a) Goodwill of the firm is valued at Rs.24,000.
(b) Provision for doubtful debts is to be created at the rate of 5% on debtors and Bills Profit and Loss A/c 9,000 Goodwill 3,600
Receivables. Creditors 40,000 Cash 16,400
(c) There is an old typewriter valued at Rs 2,400. It does not appear in the books of Bills Payable 11,000 Stock 20,000
the firm. It is now to be recorded. Capitals: Furniture 15,000
(d) Patents are valueless. A- 50,000 Plant & Machinery 70,000
 (9) (10)

CA. Naresh Aggarwal’s

ACADEMY of ACCOUNTS (1) B and C agreed to share future profits in the ratio of 3 : 2.
(2) Goodwill of the firm is valued at Rs. 30,000.
Accounting • Costing • Taxation • Financial Management (3) Provision for doubtful debts is found excess by Rs. 600 and a provision on
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org creditors will be created @ 8%.
(4) Furniture is found undervalued by Rs. 2,000 and Machinery is found
overvalued by Rs. 6,000.
B- 40,000 Sundry Debtors 30,000 (5) A dispute with customer was pending claiming Rs. 4,000; now settled at
C- 30,000 1,20,000 Land and Buildings 20,000 Rs. 1,000. This liability is not provided in the above Balance Sheet.
Investment 5,000 (6) Investments are valued at Rs. 5,000.
1,80,000 1,80,000 [Loss: Rs.3,000 Balance Sheet: Rs.1,21,600
Capitals: B-Rs.24,000; C-Rs.25,000; A’s Loan: Rs.52,000; Gaining Ratio 4 : 1]
On 01.01.2013, A decides to retire and following adjustments are made:
(a) Remaining partners agreed to share future profits in equal ratio. Q-7: Ram, Shyam and Mohan are partners in a firm sharing profits and losses in the
(b) Goodwill of the firm is valued at Rs.45,000. ratio of 5 : 3 : 2. On 31st March, 2012, their Balance Sheet was as follows:
(c) Furniture is depreciated by 10% and Investments are appreciated by 20%. Balance Sheet

AoA
(d) One customer who owed the firm Rs. 2,000 become insolvent and nothing could
be realized from him therefor should be written off. Liabilities Amount Assets Amount
(e) Creditors will be written back by Rs. 2,000. Ram’s Capital 30,000 Goodwill 10,000
(f) Outstanding bill for repair Rs. 1,000 will be provided for. Shyam’s Capital 25,000 Machinery 30,000
(g) Interest accrued on investment is Rs. 2,400. Mohan’s Capital 20,000 Land & Building 40,000
You are required to show Journal Entries and Prepare necessary accounts. Contingency Reserve 8,000 Furniture 5,000
[Revaluation Profit: Rs.900 Balance Sheet: Rs.1,76,300 Bank Loan 25,000 Debtors 20,000
Capitals: B-Rs.34,600; C-Rs.18,900; A’s Loan: Rs.72,800; Gaining Ratio 3 : 5] Creditors 10,000 Stock 8,000
Bank 5,000
Q-6: A, B and C are partners in a firm. Their Balance Sheet as on 31.12.2012 is
given as follows: 1,18,000 1,18,000
Balance Sheet On 01.04.2012, Ram decides to retire and following adjustments are made:
Liabilities Amount Assets Amount (a) Goodwill is valued on the basis of three years purchase of the average profits of
the last three years. Average profit worked out is Rs. 5,000.
Capitals: Investments 4,000 (b) Machinery and stock are revalued at Rs 25,000 and Rs 10,000.
A- 45,000 Machinery 21,000 (c) A reserve of probable bad debts is required at the rate of 5%.
B- 35,000 Furniture 10,000 (d) Ram will be paid Rs.15,000 and other partner bring the same amount in their profit
C- 30,000 1,10,000 Building 30,000 sharing ratio.
Bank Overdraft 10,000 Cash 11,000 Prepare Revaluation A/c, Partners Capital A/c and Balance Sheet of the firm new.
Outstanding Expenses 2,000 Debtors 40,000 [Revaluation Loss: Rs.4,000; Bank: Rs.5,000; Balance Sheet: Rs.1,04,000
Creditors 5,000 Less: Provision 2,000 38,000 Capitals: Shyam-Rs.27,700; Mohan-Rs.21,800; Ram’s Loan: Rs.19,500]
Bills Payable 3,000 Stock 10,000
Profit and Loss A/c 6,000 Q-8: P, Q and R were partners in a firm sharing profits and losses in the ratio of
4 : 3 : 2. The following is the Balance Sheet of the firm as on 31st December 2012.
1,30,000 1,30,000

On 01.01.2013, A decides to retire and following adjustments are made:

 (11) (12)

B 25,000 Fixtures 10,000

CA. Naresh Aggarwal’s
C 20,000 75,000 Land & Buildings 51,000
ACADEMY of ACCOUNTS 1,10,000 1,10,000
Accounting • Costing • Taxation • Financial Management On 01.01.2013, B decides to retire and following adjustments are made:
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org (a) B’s Share will be taken by A and C in equal proportion.
(b) Goodwill of the firm is valued at Rs.30,000.
Balance Sheet (c) That stock and fixtures be reduced by 10% and 5% provision for doubtful debts
Liabilities Amount Assets Amount be created on sundry debtors and bills receivable.
(d) There being a claim against the firm for damages, a liability to the extent of Rs.1000
Sundry Creditors 20,000 Cash 15,300 should be created.
Bills Payable 3,000 Debtors 20,000 (e) An item of Rs. 1,600 included in sundry creditors is not likely to be claimed and
Bank Overdraft 17,000 Less: Provision 300 19,700 hence should be written back.
Capitals: Stock 20,000 (f) B will be paid Rs.20,000 and partners decide to utilise available cash and balance
P 70,000 Plant 62,000 brought by them in their profit sharing ratio.
Q 60,000 Buildings 75,000 Prepare Revaluation Account and the new Balance Sheet of the firm.
R 40,000 1,70,000 Profit and Loss A/c 18,000 [Revaluation Loss: Rs.3,600; Cash: Nil; Balance Sheet: Rs.1,00,800; New Ratio 2 : 1;

AoA
2,10,000 2,10,000 Capitals: A-Rs.35,200; C-Rs.20,067; B’s Loan: Rs.15,133; Gaining Ratio 1 : 1]

On 01.01.2013, Q decides to retire and following adjustments are made: Q-10: X, Y and Z share profits in the ratio of 5 : 3 : 2. Their Balance Sheet on 31st
(a) Share of Q’s Goodwill determined at Rs.12,000 which is to be adjusted from the December 2012 was as follows:
capital of P and R. Balance Sheet
(b) Provision for doubtful debts to be created to extent of 5% of debtors.
(c) Value of stock to be decreased to Rs 16,000 and Building is increased to Rs.85,000. Liabilities Amount Assets Amount
(d) The liability of workmen’s compensation fund was determined to be Rs.2,300. Creditors 18,000 Debtors 22,000
(e) Creditors amounted to Rs. 1,500 are not likely to arise, therefor written off. General Reserve 10,000 Less: Provision 1,000 21,000
(f) At the time of retirement Q will get Rs.50,000 which is brought by P and R in the Workmen's Comp. Fund 5,000 Land & Buildings 40,000
ratio of 2 : 3. X’s Capital 35,000 Goodwill 5,000
Prepare Revaluation Account, Partners Capital Accounts incorporating the above Y’s Capital 30,000 Plant & Machinery 25,000
adjustments, and also the Balance Sheet of the firm after the above adjustment. Z’s Capital 25,000 Bank 15,000
[Revaluation Profit: Rs.4,500; Cash: Rs.15,300; Balance Sheet: Rs.1,97,300 Stock 17,000
Capitals: P-Rs.76,000; R-Rs.63,000; Q’s Loan: Rs.17,500]
1,23,000 1,23,,000
Q-9: A, B and C share profits in the ratio of 3 : 2 : 1. Their Balance Sheet on 31st On 01.01.2013, Y decides to retire and following adjustments are made:
December 2012 was as follows: (a) Y’s Share will be taken by X and Z in the proportion of 1 : 2.
Balance Sheet (b) Goodwill of the firm is valued at Rs.40,000.
Liabilities Amount Assets Amount (c) Provision for doubtful debts to be increased by Rs 1,500.
(d) Value of land and building to be increased to Rs 45,000.
Sundry Creditors 31,000 Cash 5,000 (e) Value of stock to be increased by Rs 2,500.
Reserve Fund 4,000 Bills Receivable 8,000 (f) The liability of workmen’s compensation fund was determined to be Rs.7,000.
Capital Accounts: Debtors 16,000 (g) Y will be paid Rs.25,000 and partners decide to utilise available Bank balance and
A 30,000 Stock 20,000 balance brought by them in their new profit sharing ratio.
Prepare Revaluation Account and the new Balance Sheet of the firm.
 (13) (14)

Q-12: R, S and T were partners in a firm sharing profits in equal ratio. Their Balance
CA. Naresh Aggarwal’s Sheet on 31.03.2012 was as follows:
ACADEMY of ACCOUNTS Balance Sheet

Accounting • Costing • Taxation • Financial Management Liabilities Amount Assets Amount

West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Creditors 8,000 Goodwill 6,000
Bank Loan 80,000 Building 1,00,000
Capitals Land 1,30,000
[Revaluation Profit: Rs.4,000; Balance Sheet: Rs.1,09,000; New Ratio 3 : 2; R 90,000 Furniture 56,000
Capitals: X-Rs.41,500; Z-Rs.22,800; Y’s Loan: Rs.19,700; Bank: Nil] S 80,000 Stock 30,000
T 70,000 2,40,000 Cash 15,000
Q-11: A, B and C are partners in a firm sharing profits and losses in the ratio of General Reserve 9,000 Debtors 22,000
3 : 3 : 2. On 01.04.2012 B decided to retire from the firm. Their Balance Sheet on that Provident Fund 13,000 Less: Provision 2,000 20,000
date stood as under: Bills Payable 7,000
Balance Sheet
as on 01.04.2012 3,57,000 3,57,000

Liabilities Amount Assets Amount On 01.04.2012, R decides to retire and following adjustments are made:

AoA
(a) The new profit sharing ratio of S and T will be 3 : 2.
Capital Accounts Goodwill 8,000 (b) All the debtors are good.
A 50,000 Plant and Machinery 27,000 (c) Value of stock to be increased by Rs 5,000.
B 50,000 Furniture 15,000 (d) Value of Building depreciated to Rs.90,000.
C 40,000 1,40,000 Land and Building 65,000 (e) Goodwill of R is determined to Rs.20,000.
General Reserves 10,000 Investments 20,000 (f) All of R’s Due will be paid. Partners do not want to utilise available cash. They
Sundry Creditors 50,000 Stock 20,000 took a loan from the bank for the money needed.
Sundry Debtors 30,000 Prepare Revaluation Account and the new Balance Sheet of the firm.
Cash in hand 15,000 [Revaluation Loss: Rs.3,000; Cash: Rs.15,000; Balance Sheet: Rs.3,48,000; Gaining Ratio 4 : 1;
2,00,000 2,00,000 Capitals: S-Rs.64,000; T-Rs.66,000; Paid to R-Rs.1,10,000; Loan Taken: Rs.1,10,000]

The terms of retirements were as follows: Q-13: Following is the Balance Sheet of A, B and C sharing profit as 3 : 2 : 1.
(a) B’s Share will be taken by A and C in the proportion of 1 : 2. Balance Sheet
(b) Goodwill of the firm is valued at Rs.24,000.
(c) Investments will be appreciated by 25% and furniture depreciated by 10%. Liabilities Amount Assets Amount
(d) One customer who owed the firm Rs. 1,900 become insolvent and nothing could Creditors 18,000 Debtors 22,000
be realized from him. Bills Payable 13,000 Less: Provision 1,000 21,000
(e) All of B’s Due will be paid. Partners do not want to utilise available cash. They Contingency Fund 12,000 Land & Buildings 60,000
took a loan from the bank for the needed money. Provident Fund 20,000 Furniture and Fixtures 10,000
Prepare Revaluation Account and the new Balance Sheet of the firm. A’s Capital 40,000 Goodwill 6,000
[Revaluation Profit: Rs.1,600; Cash: Rs.15,000 Balance Sheet: Rs.1,93,600; New Ratio 1 : 1; B’s Capital 30,000 Plant & Machinery 32,000
Capitals: A-Rs.48,350; C-Rs.34,900; Paid to B: Rs.60,350; Loan Taken: Rs.60,350] C’s Capital 25,000 Bank 10,000
Stock 19,000

1,58,000 1,58,000
On 01.01.2013, C decides to retire and following adjustments are made:
(a) The new profit sharing ratio of A and B will be 3 : 2.
 (15) (16)

Q-15: Radha, Meera and Sudha are partners in a firm sharing profits and losses in
CA. Naresh Aggarwal’s the ratio of 5 : 3 : 2. On 31st March, 2012, their Balance Sheet was as follows:
ACADEMY of ACCOUNTS Balance Sheet
As on 31.03.2012
Accounting • Costing • Taxation • Financial Management
Liabilities Amount Assets Amount
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Radha’s Capital 50,000 Goodwill 6,000
(b) Value of land and building to be increased to Rs 70,000. Meera’s Capital 30,000 Machinery 58,000
(c) Provision for doubtful debts to be increased by Rs 1,500. Sudha’s Capital 25,000 Investments 10,000
(d) Value of stock to be increased by Rs 6,500. General Reserve 8,000 Furniture 10,000
(e) Rs. 7,500 will be paid to C immediately and balance transferred to his loan Account Bank Loan 6,000 Debtors 18,000
to be paid in three equal annual installments with interest @ 10% p.a. Creditors 4,000 Stock 7,000
Prepare Revaluation Account, Capital accounts, Balance Sheet of the new firm and Cash 14,000
C’s Loan Account till it is fully paid.
1,23,000 1,23,000
[Revaluation Profit: 15,000; Bank: Rs.2,500; Gaining Ratio 3 : 2;
Capitals: A-Rs.50,500; B-Rs.37,000; C’s Loan: Rs.21,000; B/S: Rs.1,59,500] On 01.04.2012, Sudha decides to retire and following adjustments are made:
(a) The new profit sharing ratio of Radha and Meera will be 2 : 1.

AoA
Q-14: X, Y and Z were partners in a firm sharing profits in equal ratio. On 31.12.2012 (b) Machinery and stock are revalued at Rs 65,000 and Rs 8,000.
their Balance Sheet was as under : (c) Furniture is found excess by Rs.2,000.
Balance Sheet (d) Rs. 6,600 will be paid to Sudha immediately and balance transferred to his loan
Account to be paid in four equal half yearly installments with interest at the rate of
Liabilities Amount Assets Amount
10% p.a.
Workers Comp. Fund 6,000 Cash 35,500 Prepare Revaluation Account, Capital accounts, Balance Sheet of the new firm and
Bills Payable 25,000 Debtors 21,500 Sudha’s Loan Account till it is fully paid.
Outstanding Expenses 12,500 Less: Provision 1,500 20,000 [Revaluation Profit: 6,000; Cash: Rs.7,400; Gaining Ratio 5 : 1; B/S: Rs.1,16,400]
General Reserve 12,000 Stock 55,000 Capitals: Radha-Rs.54,000; Meera-Rs.32,400; Sudha’s Loan: Rs.20,000]
Creditors 18,000 Investments 12,000
X’s Capital 80,000 Building 70,000 Q-16: Balance Sheet of A, B and C sharing profits in the ratio of 3 : 2 : 1 is given
Y’s Capital 70,000 Land 95,000 below:
Z’s Capital 70,000 Bills Receivables 6,000 Balance Sheet
As on 31.12.2012
2,93,500 2,93,500 Liabilities Amount Assets Amount
On 01.01.2013, Y decides to retire and following adjustments are made: A’s Capital 80,000 Bank 15,000
(a) The new profit sharing ratio of X and Z will be 3 : 2. B’s Capital 50,000 Debtors 46,000
(b) Goodwill of firm is determined to Rs.30,000. C’s Capital 40,000 Less: Provision 2,000 44,000
(c) Provision for doubtful debts to be increased to Rs 2,500. Contingency Reserve 30,000 Stock 25,000
(d) Value of Investments to be increased by Rs 4,000; taken by Y. Trade Creditors 50,000 Furniture 26,000
(e) Rs. 11,000 will be paid to Y immediately and balance transferred to his loan Account Machinery 60,000
to be paid in three equal annual installments with interest @ 6% p.a. Land & Building 80,000
Prepare Revaluation Account, Capital accounts, Balance Sheet of the new firm and
2,50,000 2,50,000
Y’s Loan Account till it is fully paid.
[Revaluation Profit: Rs.3,000; Cash: Rs.24,500; Gaining Ratio 4 : 1] On 01.01.2013, C decides to retire and following adjustments are made:
Capitals: X-Rs.79,000; Z-Rs.75,000; Y’s Loan: Rs.60,000; B/S: Rs.2,69,500] (a) Goodwill of the firm is valued at Rs.18,000 and Joint Life Policy had a surrender
 (17) (18)

Prepare Revaluation Account, Capital accounts, Balance Sheet of the new firm and
CA. Naresh Aggarwal’s Y’s Loan Account till it is fully paid.
ACADEMY of ACCOUNTS [Revaluation Loss: Rs.9,000; Balance Sheet: Rs.1,46,300; New Ratio 5 : 4;
Capitals: X-Rs.35,000; Z-Rs.28,000; Y’s Loan: Rs.40,000]
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Q-18: Ram, Shyam and Mohan are partners in a firm sharing profits and losses in the
ratio of 5 : 3 : 2. On 31st March, 2012, their Balance Sheet was as follows:
value of Rs.12,000. Both will be adjusted with the capitals of the partners without Balance Sheet
raising their Accounts. As on 31.03.2012
(b) Contingency reserve is not required any more.
(c) Provision for bad and doubtful debts to be increase by Rs.4,000. Liabilities Amount Assets Amount
(d) Machinery is revalued at Rs 50,000 and building is revalued at Rs 1,00,000. Ram’s Capital 50,000 Goodwill 4,000
(e) Rs. 11,000 will be paid to C immediately and balance transferred to his loan Account Shyam’s Capital 40,000 Machinery 60,000
to be paid in four equal quarterly installments with interest @ 12% p.a. Mohan’s Capital 30,000 Investments 10,000
Prepare Revaluation Account, Capital accounts, Balance Sheet of the new firm and General Reserve 8,000 Furniture 10,000
C’s Loan Account till it is fully paid. Bank Loan 6,000 Debtors 20,000
[Revaluation Profit: 6,000, Bank: Rs.4,000; Balance Sheet: Rs.2,45,000; Creditors 5,000 Stock 7,000

AoA
Capitals: A-Rs.95,000; B-Rs.60,000; C’s Loan: Rs.40,000] Bank 28,000

Q-17: X, Y and Z were partners in a firm sharing profits and losses in the ratio of 1,39,000 1,39,000
4 : 3 : 2. The following is the Balance Sheet of the firm as on 31st December 2012. On 01.04.2012, Ram decides to retire and following adjustments are made:
Balance Sheet (a) Goodwill of the firm valued at Rs.12,000 and Joint Life Policy had a surrender
As on 31.12.2012 value of Rs.8,000. Both will be adjusted with capitals without raising their A/cs.
Liabilities Amount Assets Amount (b) Machinery and stock are revalued at Rs 65,000 and Rs 9,000.
(c) Furniture is found excess by Rs.3,000.
Creditors 7,000 Cash 15,300 (d) A provision @10% on debtors is provided out of General Reserve.
Bills Payable 16,000 Debtors 20,000 (e) Creditors of Rs. 1,000 are not likely to arise, therefore written off.
Bank Overdraft 17,000 Less: Provision 300 19,700 (g) Rs. 18,500 will be paid to Ram immediately and balance transferred to his loan
Capitals: Stock 20,000 Account to be paid in three equal semi-annual installments with interest at the rate
X 50,000 Plant 33,000 of 10% p.a.
Y 40,000 Buildings 64,000 Prepare Revaluation Account, Capital accounts, Balance Sheet of the new firm and
Z 40,000 1,30,000 Profit and Loss A/c 18,000 Ram’s Loan Account till it is fully paid.
1,70,000 1,70,000 [Revaluation Profit: 5,000, Bank: Rs.9,500; Balance Sheet: Rs.1,18,500;
Capitals: Shyam-Rs.36,100; Mohan-Rs.27,400; Ram’s Loan: Rs.45,000]
On 01.01.2013, Y decides to retire and following adjustments are made:
(a) Y’s share will be taken by X and Z in the ratio of 1 : 2. Q-19: Balance Sheet of A, B and C sharing profits in the ratio of 3 : 2 : 1 is given
(b) Goodwill of the firm valued at Rs.18,000 and Joint Life Policy had a surrender below:
value of Rs.9,000. Both will be adjusted with capitals without raising their A/cs. Balance Sheet
(c) Provision for doubtful debts to be created to extent of 5% of debtors. As on 31.03.2012
(d) Value of stock to be decreased to Rs 15,000.
(e) The liability of workmen’s compensation was determined to be Rs.4,800. Liabilities Amount Assets Amount
(f) Creditors amounted to Rs. 1,500 are not likely to arise, therefor written off. A’s Capital 80,000 Cash 13,000
(g) Balance of Y is be transferred to his loan Account to be paid in four equal quarterly B’s Capital 50,000 Debtors 46,000
installments with interest at the rate of 8% p.a. C’s Capital 40,000 Less: Provision 2,000 44,000
 (19) (20)

CA. Naresh Aggarwal’s (a) Goodwill of the firm is valued at Rs.40,000.

ACADEMY of ACCOUNTS (b)
(c)
Machinery is valued at Rs. 25,000 and Building is valued at Rs. 50,000.
Furniture is depreciated by Rs.2,000 and stock is appreciated by Rs.1,000.
Accounting • Costing • Taxation • Financial Management (d) A provision of 10% is required on Bills Receivables.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org (e) Creditors amounted to Rs. 1,500 are not likely to arise, therefore written off.
(f) Capital of the firm is fixed at Rs.80,000 to be invested in by the partners in their
profit sharing ratio.
General Reserve 18,000 Stock 12,000 Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm.
Contingency Reserve 10,000 Machinery 60,000 [Revaluation Profit: Rs.5,000; Bank: Rs.25,600; Balance Sheet: Rs.1,37,100;
Trade Creditors 52,000 Furniture 26,000 Capitals: A-50,000; B-30,000; C’s Loan: 26,600; A will bring: 8,500; B will bring: 5,100]
Land & Building 80,000
Deferred Revenue Expenditure 15,000 Q-21: A, B and C are partners in a business sharing profits and losses in the ratio of
4 : 3 : 2. Their Balance Sheet as on 31.12.2012 is given as follows:
2,50,000 2,50,000
Balance Sheet
C decides to retire from the firm and following adjustments are made:
Liabilities Amount Assets Amount
(a) Goodwill of the firm is valued at Rs.30,000.

AoA
(b) Provision for bad and doubtful debts to be increased to Rs.3,000. Retained Earnings 9,000 Advertisement Expenditure 3,600
(c) Machinery is revalued at Rs. 50,000 and Land & building is revalued at Rs 1,00,000. Creditors 40,000 Cash 16,400
(d) There is an unrecorded liability for outstanding salary of Rs.2,000 and an Bills Payable 11,000 Stock 20,000
unrecorded Typewriter is worth Rs.5,000. Capitals: Furniture 15,000
(e) Liability for Contingencies determined at Rs.4,000. A- 40,000 Plant & Machinery 70,000
(f) Capital of the firm is fixed at Rs.1,50,000 to be invested in by the partners in their B- 40,000 Sundry Debtors 30,000
profit sharing ratio. C- 40,000 1,20,000 Land and Buildings 20,000
Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm. Investment 5,000
[Revaluation Profit: Rs.12,000; Cash: Rs.20,500; Balance Sheet: Rs.2,56,500;
1,80,000 1,80,000
Capitals: A-90,000; B-60,000; C’s Loan: 48,500; A will bring: 2,500; B will bring: 5,000]
On 01.01.2013, A decides to retire and following adjustments are made:
Q-20: A, B and C are partners in a business sharing profits and losses in the ratio of (a) Remaining partners agreed to share future profits in equal ratio.
5 : 3 : 2. Their Balance Sheet as on 31.12.2012 is given as follows: (b) Goodwill of the firm is valued at Rs.45,000.
Balance Sheet (c) Furniture is depreciated by 10% and Investments are appreciated by 20%.
(d) Outstanding bill for repair Rs. 3,000 will be provided for.
Liabilities Amount Assets Amount
(e) Interest accrued on investment is Rs. 4,400.
Reserve & Surplus 8,000 Goodwill 20,000 (f) Advertisement Expenditure will be written off.
Bills Payable 2,000 Bills Receivables 5,000 (g) The total capital of the firm is decided to be Rs.60,000 and will be in the maintained
Creditors 30,000 Stock 13,000 in the profit sharing ratio of the partners.
Capitals: Furniture 20,000 You are required to show Journal Entries and Prepare necessary accounts.
A- 50,000 Machinery 30,000 [Revaluation Profit: Rs.900; Cash: Rs.12,900; Balance Sheet: Rs.1,76,800; Gaining Ratio 3 : 5;
B- 30,000 Building 40,000 Capitals: B-Rs.30,000; C-Rs.30,000; A’s Loan: 62,800; B will receive: 4,600; C will bring: 1,100]
C- 20,000 1,00,000 Bank 12,000
Q-22: X, Y and Z are partners in a firm sharing profits and losses in the ratio of
1,40,000 1,40,000
5 : 3 : 2. On 31st March, 2012, their Balance Sheet was as follows:
On 01.01.2013, C is retired and following adjustments are made:
 (21) (22)

On 01.01.2013, B decides to retire and following adjustments are made:

CA. Naresh Aggarwal’s (a) B’s Share will be taken by A and C in equal proportion.
ACADEMY of ACCOUNTS (b) Goodwill of the firm is valued at Rs.30,000.
(c) A provision of 5% will be created for doubtful debts on Debtors and Bills
Accounting • Costing • Taxation • Financial Management Receivables.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org (d) There being a claim against the firm for damages, a liability to the extent of Rs.1,200
should be created.
Balance Sheet
(e) All of B’s due will be paid off.
Liabilities Amount Assets Amount (f) Partners decide to fix their capital at Rs.90,000 in the profit sharing ratio.
Prepare Revaluation Account and the new Balance Sheet of the firm.
X’s Capital 30,000 Goodwill 10,000
[Revaluation Loss: 2,400; Bank: 10,400; Balance Sheet: Rs.1,14,200; New Ratio 2 : 1;
Y’s Capital 25,000 Machinery 30,000
Capitals: A-60,000; C-30,000; Paid to B: 38,200; A will bring: 30,200; C will bring: 13,400]
Z’s Capital 20,000 Land & Building 40,000
Reserve Fund 8,000 Investments 5,000
Q-24: A, B and C are partners in a firm sharing profits and losses in the ratio of
Bank Loan 25,000 Debtors 20,000
3 : 3 : 2. On 01.04.2012 B decided to retire from the firm. Their Balance Sheet on that
Creditors 10,000 Stock 8,000
date stood as under:
Cash 5,000
Balance Sheet

AoA
1,18,000 1,18,000 as on 01.04.2012

On 01.04.2012, X decides to retire and following adjustments are made: Liabilities Amount Assets Amount
(a) Goodwill is valued at Rs.15,000.
Capital Accounts Deferred Expenditure 8,000
(b) Machinery and stock are revalued at Rs 25,000 and Rs 10,000.
A 50,000 Plant and Machinery 27,000
(c) A reserve of probable bad debts is required at the rate of 5%.
B 50,000 Furniture 15,000
(d) X will be paid Rs.20,000 immediately.
C 40,000 1,40,000 Land and Building 70,000
(e) Capital of the firm is fixed at Rs.60,000 and will be contributed by the partners in
Retained Earnings 10,000 Investments 20,000
their new ratio. Necessary adjustment is made in cash.
Sundry Creditors 50,000 Stock 20,000
Prepare Revaluation Account, Partners Capital Accounts incorporating the above
Sundry Debtors 30,000
adjustments, and also the Balance Sheet of the firm after the above adjustment.
Cash in hand 10,000
[Revaluation Loss: Rs.4,000; Cash: Rs.10,500; Balance Sheet: Rs.1,09,500;
Capitals: Y-Rs.36,000; Z-Rs.24,000; X’s Loan: Rs.14,500; Y will bring: 17,300; Z will bring: 8,200] 2,00,000 2,00,000
The terms of retirements were as follows:
Q-23: A, B and C share profits in the ratio of 3 : 2 : 1. Their Balance Sheet on 31st
(a) B’s Share will be taken by A and C in the proportion of 1 : 2.
December 2012 was as follows:
(b) Goodwill of the firm is valued at Rs.24,000.
Balance Sheet
(c) Investments will be appreciated by 25% and furniture depreciated by 10%.
Liabilities Amount Assets Amount (d) Goods purchased for Rs.1,900 on credit were omitted to be recorded in the
Supplier’s Account.
Sundry Creditors 23,000 Bank 5,000
(e) All of B’s Due will be paid off.
Reserve Fund 12,000 Bills Receivables 10,000
(f) Remaining partners decide to maintain their capital at Rs.1,50,000 in the new
Capital Accounts: Debtors 14,000
profit sharing ratio.
A 30,000 Stock 20,000
Prepare Revaluation Account and the new Balance Sheet of the firm.
B 25,000 Fixtures 10,000
[Revaluation Profit: Rs.1,600; Cash: Rs.16,400 Balance Sheet: Rs.2,01,900; New Ratio 1 : 1;
C 20,000 75,000 Land & Buildings 51,000
Capitals: A-Rs.75,000; C-Rs.75,000; Paid to B: Rs.60,350; A will bring: 26,650; C will bring: 40,100]
1,10,000 1,10,000
 (23) (24)

CA. Naresh Aggarwal’s Y 80,000 Stock 30,000

Z 70,000 2,40,000 Cash 15,000
ACADEMY of ACCOUNTS Workers Comp. Fund 9,000 Debtors 22,000
Accounting • Costing • Taxation • Financial Management Provident Fund 13,000 Less: Provision 2,000 20,000
Creditors 15,000 Goodwill 6,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
3,57,000 3,57,000
Q-25: Balance Sheet of A, B and C sharing profits in the ratio of 3 : 2 : 1 is given On 01.04.2012, X decides to retire and following adjustments are made:
bellow: (a) The new profit sharing ratio of Y and Z will be 3 : 2.
Balance Sheet (as on 31.03.2012) (b) Goodwill of X is determined to Rs.20,000.
(c) All the debtors are good, therefor no provision is required anymore.
Liabilities Amount Assets Amount
(d) Value of stock to be increased by Rs 5,000 and value of Building depreciated to
A’s Capital 40,000 Bank 7,500 Rs.90,000.
B’s Capital 25,000 Debtors 23,000 (e) Rs. 50,000 will be paid to X immediately and balance transferred to his loan Account.
C’s Capital 20,000 Less: Provision 1,000 22,000 (f) Remaining partners want to maintain same Cash Balance after X’s retirement
Contingency Reserve 15,000 Stock 12,500 and also want to adjust their capital in their profit sharing ratio.
Trade Creditors 25,000 Furniture 13,000

AoA
Prepare Revaluation Account and the new Balance Sheet of the firm.
Machinery 30,000 [Revaluation Loss: Rs.3,000; Cash: Rs.15,000; Balance Sheet: Rs.3,48,000; Gaining Ratio 4 : 1;
Land & Building 40,000 Capitals: Y-Rs.1,08,000; Z-Rs.72,000; X’ Loan: Rs.60,000; Y will bring: 44,000; Z will bring: 6,000]

1,25,000 1,25,000
Q-27: The following is the Balance Sheet of X, Y and Z on 31.12.2012.
On 01.04.2012, C decides to retire and following adjustments are made: Balance Sheet
(a) Goodwill of the firm is valued at Rs 15,000. It will be adjusted with the capitals of
Liabilities Amount Assets Amount
the partners without raising Goodwill Account.
(b) Contingency reserve is not required any more. Creditors 75,000 Cash 43,000
(c) Provision for bad and doubtful debts to be increase by Rs.2,000. Bills Payable 8,000 Bills Receivable 8,000
(d) Machinery is revalued at Rs 25,000 and building is revalued at Rs 50,000. Capital Accounts Debtors 32,000
(e) Rs. 5,500 will be paid to C immediately and balance transferred to his loan Account. X 60,000 Stock 40,000
(f) Remaining partners want to maintain a Bank Balance of Rs.4,500 after C’s Y 50,000 Office Furniture 2,000
retirement and also want to adjust their capital in their profit sharing ratio. Z 40,000 1,50,000 Plant & Machinery 40,000
Prepare Revaluation Account, Capital accounts, Balance Sheet of the new firm. Accident Fund 12,000 Land & Buildings 50,000
[Revaluation Profit: 3,000, Bank: Rs.4,500; Balance Sheet: Rs.1,25,000; Goodwill 30,000
Capitals: A-48,000; B-32,000; C’s Loan: 20,000; A will bring: 500; B will bring: 2,000]
2,45,000 2,45,000
Q-26: X, Y and Z were partners in a firm sharing profits in equal ratio. Their Balance On 01.01.2013, X decides to retire and following adjustments are made:
Sheet on 31.03.2012 was as follows: (a) Stock to be reduced by 15%.
Balance Sheet (b) Land and Buildings appreciated by 20%.
(d) Creditors of Rs. 5,000 should be written off.
Liabilities Amount Assets Amount
(e) Goodwill of the firm is valued at Rs.36,000.
Bank Loan 80,000 Building 1,00,000 (f) All of X’s dues are be paid off.
Capitals Land 1,30,000 (g) Remaining partners want to maintain a Cash Balance of Rs.12,000 and also want
X 90,000 Furniture 56,000 to adjust their capital in their profit sharing ratio.
 (25) (26)

Balance Sheet
CA. Naresh Aggarwal’s
Liabilities Amount Assets Amount
ACADEMY of ACCOUNTS Reserve & Surplus 16,000 Goodwill 40,000
Accounting • Costing • Taxation • Financial Management Bills Payable 4,000 Bills Receivables 10,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Creditors 60,000 Stock 26,000
Capitals: Furniture 40,000
A- 90,000 Machinery 60,000
Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm.
B- 70,000 Building 80,000
[Revaluation Profit: Rs.9,000; Balance Sheet: Rs.1,88,000; Paid to X: 69,000;
C- 40,000 2,00,000 Bank 24,000
Capitals: Y-55,000; Z-Rs.55,000; Y will bring: 14,000; Z will bring: 24,000]
2,80,000 2,80,000
Q-28: A, B and C are partners in a business sharing profits and losses in the ratio of
On 01.01.2013, C is retired and following adjustments are made:
4 : 3 : 2. Their Balance Sheet as on 31.12.2012 is given as follows:
(a) Goodwill of the firm is valued at Rs.80,000.
Balance Sheet
(b) Machinery is depreciated by 1/6 and Building is appreciated by 1/4.
Liabilities Amount Assets Amount (c) Stock is appreciated by Rs.2,000.
(d) A provision of 5% is required on Bills Receivables.

AoA
Profit and Loss A/c 4,500 Goodwill 1,800
(e) Remaining partners want to adjust their capital in their profit sharing ratio.
Creditors 20,000 Cash 8,150
Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm.
Bills Payable 5,500 Stock 10,000
[Revaluation Profit: Rs.11,500; Bank: Rs.24,000; Balance Sheet: Rs.2,51,500;
Capitals: Furniture 7,500
Capitals: A-83,750; B-50,250; C’s Loan: 53,500; A will bring: 10,000; B will receive: 10,000]
A- 25,000 Plant & Machinery 35,000
B- 20,000 Sundry Debtors 15,050
Q-30: A, B and C share profits in the ratio of 3 : 2 : 1. Their Balance Sheet on 31st
C- 15,000 60,000 Land and Buildings 10,000
December 2012 was as follows:
Investment 2,500
Balance Sheet
90,000 90,000
Liabilities Amount Assets Amount
On 01.01.2013, A decides to retire and following adjustments are made:
Sundry Creditors 11,500 Bank 2,500
(a) Remaining partners agreed to share future profits in equal ratio.
Reserve Fund 6,000 Bills Receivables 5,500
(b) Goodwill of the firm is valued at Rs.22,500.
Capital Accounts: Debtors 12,000
(c) Furniture is depreciated by 10% and Investments are appreciated by 20%.
A 15,000 Stock 10,000
(d) Outstanding bill for repair Rs. 500 will be provided for.
B 12,500 Fixtures 5,000
(e) Interest accrued on investment is Rs. 1,200.
C 10,000 37,500 Land & Buildings 20,000
(f) All of A’s dues are be paid off.
(g) Remaining partners want to maintain a Cash Balance of Rs.5,000 and also want 55,000 55,000
to adjust their capital in their profit sharing ratio.
On 01.01.2013, B decides to retire and following adjustments are made:
You are required to show Journal Entries and Prepare necessary accounts.
(a) B’s Share will be taken by A and C in equal proportion.
[Revaluation Profit: Rs.450; Cash: Rs.5,000; Balance Sheet: Rs.86,000; Paid to A: 36,400;
(b) Goodwill of the firm is valued at Rs.18,000.
Capitals: B-30,000; C-30,000; Gaining Ratio 3 : 5; B will bring: 12,700; C will bring: 20,550]
(c) A provision of 5% will be created for doubtful debts on Debtors.
(d) There being a claim against the firm for damages, a liability to the extent of Rs.600
Q-29: A, B and C are partners in a business sharing profits and losses in the ratio of
should be created.
5 : 3 : 2. Their Balance Sheet as on 31.12.2012 is given as follows:
(e) Remaining partners want to adjust their capital in their profit sharing ratio.
Prepare Revaluation Account and the new Balance Sheet of the firm.
[Revaluation Loss: 1,200; Bank: 2,500; Balance Sheet: Rs.54,400; New Ratio 2 : 1;
 (27) (28)

B’s Capital 25,000 Patents 11,000

CA. Naresh Aggarwal’s C’s Capital 15,000 Debtors 8,000
ACADEMY of ACCOUNTS Cash 8,000

Accounting • Costing • Taxation • Financial Management 87,000 87,000

West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org A retired on 1st October 2012. It was agreed between him and the remaining partners
that:
Capitals: A-Rs.14,800; C-Rs.7,400; B’s Loan: 20,100; A will bring: 400; C will receive: 400] (a) Goodwill to be valued at 2.5 years purchase of the average profits of the previous
four years, which were Rs.13,000; Rs.12,000; Rs.20,000 and Rs.15,000 for
Q-31: A, B and C were partners in a firm share profits in the ratio of 3 : 2 : 1. Their years 2009-2010; 2010-2011; 2011-2012 and 2012-2013 respectively.
Balance Sheet on 31st December 2012 was as follows: (b) Profit for the year 2012-2013 be taken as having accrued at the same rate as that
Balance Sheet of the previous year.
(c) Interest on Capital be provided at 10% p.a.
Liabilities Amount Assets Amount
(d) Half of the amount due to A to be paid immediately and the balance transferred to
Creditors 4,000 Goodwill 6,000 his Loan Account
Workers Compensation Fund 3,000 Building 20,000 Prepare A’s Capital A/c as on 1st October, 2012.
Reserves 9,000 Plant and Machinery 16,000 [A’s Loan: 28,500; Interest on Capital: 1,500; Share in profit: 3,750]

AoA
A’s Capital 24,000 Stock 5,100
B’s Capital 12,000 Debtors 6,000 Q-33: Ram, Shyam and Mohan were partners sharing profits and losses in the ratio
C’s Capital 8,000 Cash 6,900 of 4 : 3 : 2. On 31st December 2012, their balance sheet stood as follows :
Balance Sheet
60,000 60,000
A retired on 30.06.2013. The retiring partner were entitled to: Liabilities Amount Assets Amount
(a) Amount standing to the credit of his Capital A/c and accumulated profits. Creditors 4,000 Goodwill 3,600
(b) Interest on capital at 12% per annum. General Reserve 9,000 Plant & Machinery 14,000
(c) Share of goodwill on the basis of four years purchase of last three years average Capitals Stock 4,000
profit. Ram 10,000 Sundry Debtors 6,000
(d) Share of profit from the closing of the last financial year to the date of retirement Shyam 9,000 Cash at Bank 11,400
on the basis of last year’s profit. Mohan 7,600 26,000
Profits for the year 2010, 2011 and 2012 were Rs. 8,000, Rs. 12,000 and Rs. 7,000
39,000 39,000
respectively. Prepare A’s Capital Account.
[A’s Loan: Rs.48,190; Interest on Capital: Rs.1,440; Share in profit: Rs.1,750] Shyam retires on 15.3.2013. According to the Partnership Deed, retiring partner was
entitled to:
Q-32: A, B and C were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On 31st (a) Balance his Capital A/c and his share of the accumulated reserves.
March, 2012 their Balance Sheet was as under: (b) Interest on capital @ 5% p.a.
Balance Sheet (c) Share of goodwill calculated on the basis of twice the average profits of the past
As on 31.03.2012 three completed years.
(d) Share of profit from the closure of the last accounting year till the date of retirement/
Liabilities Amount Assets Amount
death on the basis of the average profits of the 3 completed years before death/
Creditors 11,000 Buildings 20,000 retirement.
Reserves 8,000 Machinery 30,000 (e) Rs. 5,000 was to be paid to Shyam and the balance due to him was to be kept in
Profit and Loss A/c 3,000 Goodwill 5,000 his loan account.
A’s Capital 30,000 Stock 10,000 Profits for the three years 2010, 2011 and 2012 were Rs.9,600, Rs.12,800 and
 (29) (30)

Balance Sheet
CA. Naresh Aggarwal’s
Liabilities Amount Assets Amount
ACADEMY of ACCOUNTS Sundry Creditors 18,000 Tools 2,000
Accounting • Costing • Taxation • Financial Management Reserve Fund 9,000 Furniture 20,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Capitals: Stock 18,000
X 30,000 Debtors 35,000
Y 25,000 Cash at Bank 17,000
Z 25,000 80,000 Cash in hand 15,000
Rs.10,000 respectively.
Pass the necessary journal entries and prepare Shyam’s Capital Account after the 1,07,000 1,07,000
above adjustments are made.
Y decide to retire on 31.03.2013. Under the partnership agreement, retiring partner or
[Shyam’s Loan: Rs.13,844; Interest on Capital: Rs.94; Share in profit: Rs.750]
the executor of the deceased partner was entitled to:
(a) Amount standing to the credit of his Capital A/c and accumulated profits.
Q-34: A, B and C were partners in a firm sharing profits and losses in the ratio of their
(b) Interest on capial which amounted to Rs. 750.
capitals. Their Balance Sheet on 31.12.2012 was as follows:
(c) His share of Goodwill Rs. 15,000.
Balance Sheet
(d) Remuneration at the rate of Rs.2,000 p.m.

AoA
Liabilities Amount Assets Amount (e) His share of profit from the closing of last financial year to the date of his retirement/
death which amounted to Rs. 5,250.
Creditors 3,000 Furniture 8,000
Y was paid Rs. 19,000 at the time of his retirement and the balance in three equal half
Reserve Fund 3,200 Stock 6,000
yearly instalments starting from 30.9.2012 with interest @ 12% p.a.
Capitals: Debtors 6,000
Pass the necessary journal entries and draw up Y account till it is finally paid.
A 10,000 Bills Receivable 1,000
[Y’s Loan: Rs.36,000]
B 5,000 Cash 5,200
C 5,000 20,000
Q-36: X, Y and Z were partners sharing profits in the ratio of 2 : 3 : 5. On 31.12.2012,
26,200 26,200 their Balance Sheet stood as under:
Balance Sheet
A decide to retire on 01.04.2013. Under the terms of the partnership deed, the retiring
partner / executors of a deceased partner were entitled to: Liabilities Amount Assets Amount
(a) Amount standing to the credit of partner’s capital A/c and accumulated profits.
Capitals Cash 20,000
(b) Interest on capital @ 5% p.a. and salary @ 1,000 p.m.
X 75,000 Buildings 50,000
(c) Share of goodwill on the basis of twice the average of past three years profits.
Y 62,500 Patents 15,000
(d) Share of profit from the last financial year to the date of retirement on the basis of
Z 37,500 1,75,000 Stock 25,000
last year’s profits.
Creditors 27,500 Debtors 20,000
Profits for 2010, 2011 and 2012 were Rs.6,000, Rs.8,000 and Rs.7,000 respectively.
General Reserve 15,000 Machinery 75,000
A was paid Rs.1,600 on 01.04.2013 and the balance in three equal instalments with
Goodwill 12,500
interest @ 10% p.a.
Pass the necessary jourrial entries and draw up A’s account till it is fully paid. 2,17,500 2,17,500
[A’s Loan: Rs.21,000; Interest on Capital: Rs.125; Share in profit: Rs.875]
Z retires on 01.04.2013 and it was agreed that:
(a) Goodwill was valued at two years purchase of the average profits of the last four
Q-35: The following was the Balance Sheet of X, Y and Z as on 31.12.2012:
years, which were 2009: Rs.32,500; 2010: Rs.30,000; 2011: Rs.40,000 and 2012:
Rs.41,500.
(b) Machinery is valued at Rs. 70,000, Patents at Rs. 20,000 and Buildings at Rs.
62,500.
 (31) (32)

CA. Naresh Aggarwal’s Death of Partner

ACADEMY of ACCOUNTS Q-37: A, B and C were partners in a firm share profits in the ratio of 3 : 2 : 1. Their
Accounting • Costing • Taxation • Financial Management Balance Sheet on 31st December 2012 was as follows:
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Balance Sheet

Liabilities Amount Assets Amount

Creditors 8,000 Building 40,000
(c) For the purpose of calculating Z’s share of profit for the year 2013, it was agreed Reserves 12,000 Plant and Machinery 32,000
that the same may be calculated based on the average profit of the last four
A’s Capital 48,000 Stock 10,200
years.
B’s Capital 24,000 Debtors 12,000
(d) A sum of Rs. 10,500 was paid in cash to Z and the balance in three equal annual
C’s Capital 16,000 Cash 13,800
instalments together with interest @ 10% p.a.
Give necessary journal entries to record the above transactions and prepare Z’s 1,08,000 1,08,000
Account till it is finally closed
A died on 30.04.2013. Under the partnership agreement the deceased partner was
[Z’s Loan: Rs.75,000; Share in profit: Rs.4,500; Revaluation Profit: Rs.12,500]
entitled to:

AoA
(a) Amount standing to the credit of his Capital Account.
(b) Interest on capital and drawings at 12% per annum.
(c) Share of goodwill on the basis of two years purchase of last three years average
profit.
(d) Share of profit from the last financial year to the date of death on the basis of last
•••••••••••••••••••••• three years average profit.
(e) Drawings of A before death were Rs.8,000 and interest thereon was Rs.400.
(f) Rs.15,000 will be paid to A’s executors immediately.
Profits for the year 2010, 2011 and 2012 were Rs.16,000, Rs.15,500 and Rs.22,500
respectively. Prepare A’s Executor Account.
[Bal. of A’s Executor: 53,520; Int. on Cap: 1,920; Share in profit: 3,000; Share in goodwill: 18,000]

Q-38: A, B and C were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On 31st
March, 2012 their Balance Sheet was as under:
Balance Sheet

Liabilities Amount Assets Amount

Creditors 22,000 Buildings 40,000
Reserves 12,000 Machinery 60,000
A’s Capital 60,000 Stock 20,000
B’s Capital 50,000 Patents 22,000
C’s Capital 30,000 Debtors 16,000
Cash 16,000
1,74,000 1,74,000

A died on 1st October 2012. It was agreed between him and the remaining partners
that:
 (33) (34)

(f) Rs. 10,000 was to be paid to Vijay’s executor immediately and the balance due to
CA. Naresh Aggarwal’s him was to be kept in his loan account.
ACADEMY of ACCOUNTS Profits for the three years 2010, 2011 and 2012 were Rs.19,200, Rs.25,600 and
Rs.20,000 respectively.
Accounting • Costing • Taxation • Financial Management Pass the necessary journal entries and prepare Shyam’s Executor Account after the
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org above adjustments are made.
[Bal. of Vijay’s Executor: 20,450; Int. on Cap: 450; Share in profit: 3,000; Share in goodwill: 14,400]

(a) Goodwill to be valued at 2.5 years purchase of the average profits of the previous Q-40: A, B and C were partners in a firm sharing profits and losses in the ratio of their
four years, which were Rs.26,000; Rs.24,000; Rs.40,000 and Rs.30,000 for capitals. Their Balance Sheet on 31.12.2012 was as follows:
years 2009-2010; 2010-2011; 2011-2012 and 2012-2013 respectively. Balance Sheet
(b) Profit for the year 2012-2013 be taken as having accrued at the same rate as that
Liabilities Amount Assets Amount
of the previous year.
(c) Interest on Capital and drawings will be provided at 10% p.a. Creditors 6,000 Furniture 16,000
(d) A’s drawings before death were Rs.10,000 and interest thereon was Rs.500. Reserve Fund 6,400 Stock 12,000
(e) Rs.20,000 will be paid immediately and the balance transferred to his executor’s Capitals: Debtors 12,000
account. A 20,000 Bills Receivable 2,000

AoA
Prepare A’s Executor Account as on 1st October, 2012. .
B 10,000 Cash 10,400
[Bal. of A’s Executor: 83,500; Int. on Cap: 3,000; Share in profit: 7,500; Share in goodwill: 37,500] C 10,000 40,000
52,400 52,400
Q-39: Ajay, Vijay and Sanjay were partners sharing profits and losses in the ratio of
4 : 3 : 2. On 31st December 2012, their balance sheet stood as follows : C died on 31.03.2013. Under the terms of the partnership deed, executors of a
Balance Sheet deceased partner were entitled to:
(a) Amount standing to the credit of partner’s capital account.
Liabilities Amount Assets Amount
(b) Interest on capital @ 5% p.a. and remuneration @ 1,500 p.m.
Creditors 8,000 Goodwill 7,200 (c) Share of goodwill on the basis of twice the average of past three years profits.
General Reserve 18,000 Plant & Machinery 28,000 (d) Share of profit from the last financial year to the date of death on the basis of ratio
Capitals Stock 8,000 of turnover. Turnover of the last year was Rs.70,000 and during the current year,
Ajay 20,000 Sundry Debtors 12,000 before death it was Rs.40,000.
Vijay 18,000 Cash at Bank 22,800 Profits for 2010, 2011 and 2012 were Rs.12,000, Rs.10,000 and Rs.14,000
Sanjay 14,000 52,000 respectively. Rs.6,225 was paid on death and the balance in three equal installments
with interest @ 10% p.a.
78,000 78,000
Pass the necessary journal entries and draw up C’s executors account till it is fully
Vijay died on 31.03.2013. According to the Partnership Deed, executor of the deceased paid.
partner was entitled to: [Bal. of C’s Executor: 18,000; Int. on Cap: 125; Share in profit: 2,000; Share in goodwill: 6,000]
(a) Balance of his Capital A/c and his share of the accumulated reserves.
(b) Interest on capital @ 10% p.a. and monthly salary of Rs.2,000. Q-41: X, Y and Z share profits in the ratio of 5 : 3 : 2. Their Balance Sheet on 31st
(c) Share of goodwill calculated on the basis of twice the average profits of the past December 2012 was as follows:
three completed years. Balance Sheet
(d) Share of profit from the last financial year to the date of death on the basis of ratio
Liabilities Amount Assets Amount
of turnover. Turnover of the last year was Rs.1,00,000 and during the current
year, before death it was Rs.45,000. Creditors 18,000 Debtors 22,000
(e) Vijay’s drawings before death were Rs.15,000. General Reserve 10,000 Less: Provision 1,000 21,000
Workmen's Comp. Fund 5,000 Land & Buildings 40,000
 (35) (36)

(a) Goodwill is to be calculated on the basis of 3 years' purchase of the five year's
CA. Naresh Aggarwal’s average profits. The profits were: 2012-Rs.24,000; 2011-Rs.16,000; 2010-
ACADEMY of ACCOUNTS Rs.20,000; 2009-Rs.10,000; 2008-Rs.5,000.
(b) The deceased partner to be given share of profits upto the Date of Death on the
Accounting • Costing • Taxation • Financial Management basis of profits for the previous year.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org (c) The Assets have been revalued as under:
Stock Rs 10,000; Debtors Rs. 15,000; Furniture Rs 1,500; Plant & Machinery Rs
X’s Capital 35,000 Goodwill 5,000 5,000; Building Rs. 35,000. A bill for Rs 600 was found worthless.
Y’s Capital 30,000 Plant & Machinery 25,000 (d) They also agreed that goodwill should not appear in Books of new firm.
Z’s Capital 25,000 Bank 15,000 (e) A sum of Rs.3,880 was paid immediately to C's executors and the balance to be
Stock 17,000 paid in four equal half yearly instalments together with interest at 10% p.a. on the
1,23,000 1,23,,000 amount outstanding.
Give Journal entries and show the C's Executor's Account till it is finally settled.
On 01.04.2013, Y died and following adjustments are made: [Profit on Revaluation Rs 2,400; C,s Executor’s A/c: Rs.20,000;
(a) Y’s Share will be taken by X and Z in the proportion of 1 : 2. Total Goodwill: Rs.45,000; C’s Share in 3 months profit: Rs.1,200]
(b) Goodwill of the firm is valued at Rs.40,000.
(c) Provision for doubtful debts to be increased by Rs 1,500. Q-43: A, B and C are partners sharing profits in the ratio of 3 : 1 : 1 and their Balance

AoA
(d) Value of land and building to be increased to Rs 45,000. Sheet on 31st December 2012 stood as follows:
(e) Value of stock to be increased by Rs 2,500. Balance Sheet
(f) The liability of workmen’s compensation fund was determined to be Rs.7,000. (as on 31.12.2012)
(g) Share of profit from the closure of the last accounting year till the date of retirement/
death on the basis of the average profits of the 3 completed years before death. Liabilities Amount Assets Amount
Average profit was calculated as Rs.20,000. Bills Payable 13,000 Goodwill 6,000
Prepare Y’s Executor Account. Creditors 10,000 Joint Life Policy 2,000
[Bal. of Ys Executor: 46,200; Share in profit: 1,500; Rev. Profit: 4,000; Share in goodwill: 12,000] Employees' Provident Fund 4,000 (Sum Assured Rs 20,000)
Workmen Compensation Res. 6,000 Buildings 13,000
Q-42: The Balance Sheet of A, B, C as on 31st December, 2012 was as follows: Contingency Reserve 3,000 Cash in Hand 13,000
Balance Sheet General Reserve 9,000 Bank 13,700
(as on 31.12.2012) Fixed Capital Accounts: Debtors 13,250
Liabilities Amount Assets Amount A 20,000 Bills Receivable 4,300
B 12,000 Stock 1,750
Bills Payable 2,000 Cash at Bank 5,800 C 8,000 40,000 Investments 18,000
Employees' Provident Fund 5,000 Bills Receivable 800
Workmen Compensation Res. 6,000 Stock 9,000 85,000 85,000
General Reserve 6,000 Sundry Debtors 16,000
Loans 7,100 Furniture 2,000 B died on 30th April, 2013 and according to the deed of the partnership his executors
Capitals: Plant & Machinery 6,500 are entitled to be paid as under:
A 22,750 Building 30,000 (a) The capital to his credit at the time of his death and interest @ 6% per annum.
B 15,250 Advertisement Suspense A/c 6,000 (b) His proportionate share of reserve.
C 12,000 50,000 (c) His share of profits for the period based on the figure of the previous year.
76,100 76,100 (d) Goodwill according to his share of profits to be calculated by taking twice the
amount of the average profits of the last three years. The profits of the previous
The profit sharing ratio was 2 : 2 : 1. C died on 1st April, 2013. The Partnership deed years were:- 2010 Rs 7,000; 2011 Rs 10,200; 2012 Rs 9,800.
provides that: The investments were sold for Rs 16,200 and his executors were paid out.
 (37) (38)

CA. Naresh Aggarwal’s Vijay’s legal representatives were to be paid the amount due. Ajay and Sanjay continued
ACADEMY of ACCOUNTS as partners by taking over Vijay’s share equally.
Work out the amount payable to Vijay’s legal representatives.
Accounting • Costing • Taxation • Financial Management [Amount due to Vijay’s legal representatives: Rs.59,892; Interest on Capital: Rs.625;
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Share in Goodwill: Rs.9,600; Share in Profit: Rs.667]

Q-45: X and Y were partners. The partnership deed provides inter alia:
Before death B had withdrawn Rs. 3,000 as drawings.
(i) That the accounts be balanced on 31st December each year.
Pass the necessary journal entries and write the account of the executors of B.
(ii) That the profits be divided as follows:
[Amount payable to B’s executor: Rs.19,133; Interest on Capital: Rs.240;
X one-half, Y one-third and carried to Reserve account one-sixth.
Revaluation Loss: Rs.1,800; Share in Profit: Rs.653; Share in Goodwill: Rs.3,600]
(iii) That in the event of death of a partner, his executor will be entitled to the following:
(a) The capital to her credit at the date of death.
Q-44: You are given the Balance Sheet of Ajay, Vijay and Sanjay who are partners
(b) Her proportion of profit to date of death based on the average profits of the
sharing profits in the ratio of 3 : 1 : 1 as on 31st March 2012:
last three completed years.
Balance Sheet
(c) Her share of Goodwill based on three years' purchases of the average
(as on 31.03.2012)
profits for the three preceding completed years.

AoA
Liabilities Amount Assets Amount On 31st December 2012 the Trial Balance was as under:
Creditors 40,000 Goodwill 30,000 Particulars Dr. Amt. Cr. Amt.
Reserve Fund 25,000 Fixed Assets 60,000
X’s Capital .................................................. - 90,000
Capitals: Stock 10,000
Y’s Capital .................................................. - 60,000
Ajay 30,000 Sundry Debtors 20,000
Reserves .................................................. - 30,000
Vijay 25,000 Cash at Bank 15,000
Bills Receivable .................................................. 50,000 -
Sanjay 15,000 70,000
Investments .................................................. 40,000 -
Cash .................................................. 1,10,000 -
1,35,000 1,35,000
Creditors .................................................. - 20,000

Vijay died on 15 June 2012. According to the Deed, his legal representatives were
2,00,000 2,00,000
entitled to:
(i) Balance in Capital Account.
Y died on 1st May 2013.
(ii) Share of goodwill valued on the basis of thrice the average of the past 4 years'
The profits for the three years were: 2010-Rs.42,000; 2011-Rs.39,000 and 2012-
profits.
Rs.45,000.
(iii) Share in profits upto the date of death on the basis of average profits for the past
Show the calculation of Y’s :
4 years. Interest on Capital at the rate of 12% p.a.
(i) Share of Profits
Profits for the years ending on 31 March of 2009, 2010, 2011 and 2012 respectively
(ii) Share of Goodwill
were Rs. 15,000, Rs. 17,000, Rs.19,000 and Rs. 13,000.
(iii) draw up Y’s Executor’s Account as would appear in firm's ledger transferring the
The firm had taken Insurance Policies on the lives of the partners, premium being
amount to his Loan Account.
charged to profits every year. The policy amount and surrender value on 15.6.2012
[Y’s share of Profit: Rs.5,600; Y share of Goodwill: Rs.50,400; Y's Executor: Rs.1,28,000]
were as follows:
Partner Policy Amount Surrender Value
Q-46: A, B and C were partners in a firm sharing profits and losses in in the ratio of
Ajay 70,000 30,000
5 : 3 : 2 respectively. A died on 28th February, 2012. The Balance Sheet on that date
Vijay 70,000 30,000
was as follows:
Sanjay 60,000 25,000
 (39) (40)

Capitals :
CA. Naresh Aggarwal’s A 10,000
ACADEMY of ACCOUNTS B
C
6,000
5,000 21,000
Accounting • Costing • Taxation • Financial Management
31,500 31,500
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
(a) Interest on capital is allowed @ 6% p.a. A and B are entitled to salaries at Rs.300
Balance Sheet (As on 28.02.2012) and Rs.250 p.m.
(b) In the event of death of a partner, goodwill was to be valued at two years’ purchase
Liabilities Amount Assets Amount
of the average profits of three completed years preceding the death. The net
Capital Goodwill 6,000 profits for the year 2010, 2011 and 2012 were Rs.5,500; Rs.4,800 and Rs.6,500
A 12,000 Machinery 35,000 respectively.
B 16,000 Furniture 6,000 (c) Firm had taken a Joint Life Policy (with profit policy) of Rs.10,000. The insurance
C 12,000 40,000 Stock 9,000 company admitted a claim of Rs.12,600 including bonus.
General Reserve 12,000 Debtors 15,000 (d) A’s share was paid to his executor. B and C continued the firm.
Creditors 22,000 Cash 3,000 Prepare Partner’s Capital A/c and Balance Sheet of the new firm.
[A.I.S.S.C. 1992 (Outside)]
74,000 74,000

AoA
[Amount paid to A’s Executor: Rs.19,500; Balance Sheet: Rs.17,000;
The firm had a joint life policy in the names of the partners, for insured value of Rs.60,000. B’s Capital: Rs.7,360; C’s Capital: Rs.5,850; Cash Balance: Rs.500]
The premium paid on the policy was debited to Profit & Loss Account. The Partnership
Deed provided that on the death of a partner, the assets and liabilities are to be revalued.
The assets and liabilities were revalued as follows:
(a) Machinery at Rs.45,000 and furniture at Rs.7,000
(b) A provision of 10% was credited for doubtful debts.
(c) A provision of Rs. 15,000 was made for taxation. Theoretical Questions
(d) The Goodwill of the firm was valued at Rs.21,000.
(e) Death claim for policy was realised in full.
The amount payable to A was transferred to his executor’s account. You are required Q-1*: What are the adjustments required on retirement of a partner from the firm ?
to prepare Revaluation Account, Capital Accounts and Balance Sheet of B and C.
[Revaluation Loss: Rs.5,500; Cash: Rs.63,000; Balance Sheet: Rs.1,37,500; Q-2*: Distinguish between sacrificing ratio and gaining ratio.
A’s Executor: Rs.52,750; B’s Capital: Rs.27,850; C’s Capital: Rs.19,900]
Q-3: Why is it necessary to distribute all accumulated profits and losses among old
Q-47: A, B and C were partners in a firm share profits in the ratio of 2 : 1 : 1. They partners at the time of retirement of a partner ?
closed their books on 31st December each year. A died on 28th February 2012, when
Q-4: What is the meaning of gaining ratio ? How is it calculated ?
their Balance Sheet was as follows:
Balance Sheet Q-5: How will you deal with the amount due to an outgoing partner in case it is not
Liabilities Amount Assets Amount paid immediately ?

Creditors 3,790 Cash 20,000

J.L.P. Reserve 3,600 Sundry Debtors 3,900 ••••••••••••••••••••••
Profit for two months 3,110 Loan to A 4,000
(before Interest and Salaries) Joint Life Policy 3,600
 CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org

For Eenquiries
Call or whatsapp: 8800215448

AoA
Reconstitution of (Whatsapp anytime, Calls only between 3.00 pm to 8.00 pm)

Email: ca.naresh.vc@gmail.com
Partnership Firm Website: academyofaccounts.org
(Change in Ratio)

Watch us on

https://www.youtube.com/CaNareshAggarwal
 (1) (2)

CA. Naresh Aggarwal’s Treatment of Goodwill

ACADEMY of ACCOUNTS Q-8: X and Y were partners sharing profits in the ratio of 2 : 1. With effect from
Accounting • Costing • Taxation • Financial Management 1.1.2016, they decided to share profits in the ratio of 3 : 1. For this purpose the
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org goodwill of the firm is valued at Rs.90,000. Give the necessary journal entry.
[Debit X and Credit Y: Rs. 7,500]

Calculation of Secrificing and Gaining Ratio Q-9: A, B and C shared profits and losses in the ratio of 3 : 2 : 1 respectively. With
effect from 1st January, 2016, they agreed to share profits equally. The goodwill of the
Q-1: X and Y were partners in a firm sharing profits in the ratio of 5 : 3. With effect firm was valued at Rs.90,000. Make the necessary Journal entry.
from 1st April, 2016 they agreed to share profits equally. Calculate the individual [Debit C and Credit A: Rs.15,000]
partner’s gain or sacrifice due to change in ratio.
[X sacrifices and Y gains: 1/8]
Q-10: X, Y and Z are partners sharing profits and losses in the ratio of 4 : 3 : 2.
Goodwill was appears in the books at Rs.45,000 but it is now valued worth of
Q-2: A and B were in partnership. With effect from 1st April, 2016 they agreed to
Rs.72,000. The partners decide to share future profits in equal proportions. Give a
share profits in the ratio of 4 : 3. Calculate the individual partner’s gain or sacrifice
journal entry to record the above change. Also indicate the individual partner’s gain

AoA
due to change in ratio.
or loss due to change in the ratio. Show your working clearly.
[A sacrifices and B gains: 1/14]
[{1} Goodwill (Cr.) 45,000; X (Dr.) 20,000; Y (Dr.) 15,000; Z (Dr.) 10,000;
{2} Debit Z and Credit X: Rs.8,000]
Q-3: A, B and C were in partnership sharing profits in the ratio of 4 : 3 : 1. The
partners agreed to share future profits in the ratio of 5 : 4 : 3. Calculate each
Q-11: P, Q and R are partners sharing profits equally decided that in future R will get
partner’s gain or sacrifice due to change in ratio.
1/5th share in profits and remaining profit would be shared by P and Q equally. On the
[A sacrifices: 2/24; B sacrifices: 1/24; C gains: 3/24]
day of change, Goodwill was appears in the books at Rs.90,000 but it is now valued
worth of Rs.1,50,000. Give journal entries arising on account of change in profit-sharing
Q-4: X, Y and Z were partners sharing profits in the ratio of 2 : 3 : 4. With effect from
ratio.
01.04.2016 they agreed to share profits in the ratio of 1 : 2 : 3. Calculate each
[{1} Goodwill (Cr.) 90,000; P (Dr.) 30,000; Q (Dr.) 30,000; R (Dr.) 30,000;
partner’s gain or sacrifice due to change in ratio.
{2} P (Dr.)- Rs.10,000; Q (Dr.)- Rs.10,000; R (Cr.)- Rs.20,000]
[X sacrifices and Z gains: 1/18]
Q-5: A, B and C were partners since 01.04.2011 and sharing profits and losses in the
Q-12: A and B are partners sharing profits and losses in the ratio of 3 : 1. It was
ratio of 3 : 2 : 1. On 01.04.2016, they decided that in future they will share profits in the
decided that with effect from 1.1.2016 the profit sharing ratio will be 5 : 3. Goodwill is
ratio of 2 : 2 : 3. Calculate sacrificing and gaining shares of the partners.
to be valued at 4 years purchase of average of 3 years profits. The profits for 2013,
[Secrifice of A: 9/42; Secrifice of B: 2/42; Gain of C: 11/42]
2014 and 2015 were Rs.72,000, Rs.64,000 and Rs.80,000 respectively.
Pass the necessary journal entry for the treatment of goodwill.
Q-6: P, Q and R are partners sharing profits equally decided that in future R will get 1/
[Value of Goodwill: Rs.2,88,000; Debit B and Credit A: Rs.36,000]
5th share in profits and remaining profit would be shared by P and Q equally. Calculate
new, sacrificing and gaining shares of the partners.
Q-13: A, B and C were partners sharing profits and losses in the ratio of 7 : 3 : 2.
[New Ratio of P, Q, R = 2 : 2 : 1; Gain of P: 1/15; Gain of Q: 1/15; Secrifice of R: 2/15]
From 1.1.2016, they decided to share profits and losses in the ratio of 8 : 4 : 3.
Goodwill is to be valued at the average of three years profits preceding the date of
Q-7: A, B and C are partners sharing profits equally decided that in future C will get 1/
change in profit sharing ratio. The profits for 2012, 2013, 2014 and 2015 were
6th share in profits and remaining profit would be shared by A and B in the ratio of 3 :
Rs.1,04,000, Rs.96000, Rs.1,20,000 and Rs.1,80,000 respectively. Give the
2. Calculate new, sacrificing and gaining shares of the partners.
necessary journal entry.
[New Ratio of A, B, C = 3 : 2 : 1; Gain of A: 1/6; Secrifice of C: 1/6]
[Value of Goodwill: Rs.1,32,000; B (Dr.)- Rs.2,200; C (Dr.)- Rs.4,400; A (Cr.)- Rs.6,600]
 (3) (4)

Q-18: X, Y and Z shared profits and loss equally. They mutually decided to change
Q-14: A, B and C are partners
CA. in a business.
Naresh From 01.01.2016, they decided to
Aggarwal’s their ratio to 5 : 3 : 2 respectively. On the date of the change in ratio, Goodwill is valued
share profit and loss in the ratio of 5 : 3 : 2. The partnership deed provides that in
ACADEMY of ACCOUNTS
the event of any change in profit sharing ratio, the goodwill should be valued at two
at Rs.60,000 and they had the following undistributed profits, which need to be adjusted
because of the change in their ratio.
years purchase of theCosting
Accounting • average profits of the preceding
• Taxation five years.Management
• Financial The profits and
General Reserve Rs.80,000
losses of the preceding years are as follows :
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Profit and Loss A/c (Debit) Rs.30,000
Year Result Rs.
Contingency Reserve Rs.50,000
2011 Loss 25,000
Workmen compensation Fund Rs.20,000
2012 Profit 70,000
Give one Journal entry for all reserve to make the necessary adjustments.
2013 Profit 45,000
[X (Dr.)- Rs.30,000; Y (Cr.)- Rs.6000; Z (Cr.)- Rs.24,000]
2014 Profit 90,000
2015 Profit 1,20,000
Give a journal entry to record the above change. Q-19: A, B and C are sharing profits and losses in the ratio of 5 : 3 : 2. They decide to
[Value of Goodwill: Rs.1,20,000; A (Dr.)- Rs.20,000; B (Cr.)- Rs.4000; C (Cr.)- Rs.16,000] share future profits and losses in the ratio of 2 : 3 : 5 with effect from 01.04.2016. On
that date goodwill of the firm is valued at Rs.50,000. They also decide to record the
Q-15: X, Y and Z are partners sharing profit and loss in the ratio of 5 : 3 : 2. From effect of the following accumulated profits, losses and reserves without affecting their
01.04.2016, they decided to share profit and loss equally. The Partnership Deed book figures, by passing a single entry:
General Reserve 30,000

AoA
provides that in the event of any change in profit-sharing ratio, the goodwill should be
valued at three years purchase of the average profits of the preceding five years. The Contingency Reserve 40,000
average profit calulated is Rs.20,000. Give journal entry for treatment of Goodwill. Profit and Loss A/c 70,000
Workmen compensation Fund 10,000
[Value of Goodwill: Rs.60,000; A (Cr.)- Rs.10,000; B (Dr.)- Rs.2000; C (Dr.)- Rs.8,000]
Give one Journal entry for all reserve to make the necessary adjustments.
[Debit C and Credit A: Rs.60,000]
Treatment of Reserves and Accumulated Profits / Losses
Q-20: A, B and C are partners sharing profits and losses in the ratio of 7 : 5 : 4. Their
Q-16: Anju, Manju and Sanju are partners in a firm sharing profits in the ratio of Balance Sheet as on 31.03.2016 stood as follows:
3 : 2 : 1. On 31.03.2016, their Balance Sheet showed a general reserve of Rs.90,000. Balance Sheet
On that date they decided to change their ratio. The new profit-sharing ratio between Liabilities Amount Assets Amount
Anju, Manju and Sanju will be 4 : 3 : 2. Record the necessary Journal entry in the
books of the firm under the following circumstances. Capital A/cs: Fixed Assets 12,50,000
(a) When they want to transfer the General Reserve in their capital accounts. A 4,20,000 Current Assets 4,00,000
(b) When they don’t want to transfer General Reserve in their capital accounts and B 3,00,000 Advertisement Suspense50,000
C 2,40,000 9,60,000
[{a} Reserve (Dr.) 90,000; Anju (Cr.) 45,000; Manju (Cr.) 30,000; Sanju (Cr.) 15,000;
General Reserve 1,30,000
[{b} Anju (Cr.) 5,000; Sanju (Dr.) 5,000]
Profit and Loss A/c 50,000
Creditors 2,60,000
Q-17: Sonu and Monu are in partnership sharing profits in the ratio of 2 : 3. With effect
from 01.04.2016 they agreed to share profits in the ratio of 1 : 2. For this purpose the 7,00,000 7,00,000
goodwill of the firm is to be valued at Rs.75,000. Reserves appear in the books at Partners decided that with effect from 01.04.2016, they will share profits and losses in
Rs.45,000. Partners neither want to show goodwill in the books nor want to distribute the ratio of 3 : 2 : 1. For this purpose goodwill of the firm was valued at Rs.1,10,000.
the reserves. You are required to give effect to the change by passing a single Journal The partners do not want to record the goodwill and also do not want to distribute
entry. General Reserve and profits. Pass a single Journal entry to record the change and
[Debit Monu and Credit Sonu: Rs.8,000] prepare a revised balance sheet.
[A (Dr.)- Rs.15,000; B (Dr.)- Rs.5,000; C (Cr.)- Rs.20,000]
 (5) (6)

Q-23: X, Y and Z are partners in a firm sharing profits and losses as 5 : 4 : 3. Their
CA.
Accounting for Naresh Aggarwal’s
Revaluation of Assets and Liabilities Balance Sheet as on 31.03.2016 was as follows:
ACADEMY of ACCOUNTS
Q-21: X, Y and Z share profits as 5 : 3 : 2. They decide to share their future profits as
Balance Sheet

4 : Accounting Costing
3 : 3 with effect •from • Taxation
April 1, 2016. • Financial
On this date the followingManagement
revaluations have Liabilities Amount Assets Amount
taken place.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Sundry Creditors 20,000 Cash at Bank 20,000
Particulars Book Value Revised Value Outstanding Expenses 7,500 Sundry Debtors 1,05,000
Investments 22,000 25,000 General Reserve 37,500 Stock 1,50,000
Plant and Machinery 25,000 20,000 Capital A/cs: Furniture 30,000
Land and Buildings 40,000 50,000 X 2,00,000 Plant and Machinery 2,10,000
Outstanding Expenses 5,600 6,000 Y 1,50,000
Sundry Debtors 60,000 50,000 Z 1,00,000 4,50,000
Trade Creditors 70,000 60,000
Give necessary adjustment entry to be made because of the above change in the 5,15,000 5,15,000
values of assets and liabilities. However, old values will continue in the books. From 01.04.2016, they agree to alter their profit sharing ratio as 4 : 3 : 2. It is also
[Z-Debit Rs. 760 and X-Credit Rs. 760] decided that :
(a) Furniture be taken at 80% of its value.

AoA
Q-22: A and B are partners sharing profits in the ratio of 4 : 3. Their Balance Sheet as (b) Stock be appreciated by 20%.
on 31.03.2016 stood as follows: (c) Plant and Machinery be valued at Rs.2,00,000.
Balance Sheet (d) Outstanding expenses be increased by Rs.6,500.
Liabilities Amount Assets Amount Partners agreed that altered values are not to be recorded in the books and they also
do not want to distribute the general reserve.
Sundry Creditors 56,000 Cash 40,000 You are required to post a single Journal entry to give effect to the above. Also prepare
Reserve 84,000 Sundry Debtors 2,40,000 the revised Balance Sheet.
Capital A/cs: Stock 2,80,000 [Adj. entry for Revaluation and Reserve: X(Dr) and Z(Cr): Rs.1,250; Balance Sheet: Rs.5,15,000
A 4,80,000 Fixed Assets 3,00,000 Profit on Revaluation: Rs.7,500; Capitals: X- Rs.1,98,750; Y- Rs.1,50,000; Z- Rs.1,01,250]
B 2,40,000 7,20,000
Q-24: X, Y and Z are partners in a firm. Their Balance Sheet as on 31.03.2016 was as
8,60,000 8,60,000 follows:
Balance Sheet
They decided that with effect from 1st April, 2016, they will share profits and losses in
the ratio of 2 : 1. For this purpose they decided that: Liabilities Amount Assets Amount
(a) Fixed assets are to be depreciated by 10%. Creditors 29,000 Bank 4,000
(b) A provision of 6% be made on debtors for doubtful debts. Reserve and Surplus 21,000 Debtors 37,500
(c) Stock be valued at Rs. 3,80,000. Capital A/cs: Less: Provision 1,500 36,000
(d) An amount of Rs. 7,400 included in creditors is not likely to be claimed. X 1,00,000 Stock 90,000
(e) Goodwill of the firm valued at Rs.42,000 Y 50,000 Fixed Assets 1,10,000
Partners decided to record the revised values in the books. However, they do not Z 40,000 1,90,000
want to disturb the reserves. You are required to prepare Journal entries, Capital
Accounts of the partners and the revised balance sheet.
[Profit on Revaluation Rs. 63,000; Adjustment for Reserve and Goodwill: A (Dr) and B (Cr) 2,40,000 2,40,000
Rs.12,000; The partners decided that with effect from 01.04.2016, they will share profits and losses
Capitals: A- Rs.5,04,000; B- Rs.2,79,000; Balance Sheet: Rs. 9,15,600] in the ratio of 4 : 2 : 1. For this purpose goodwill is valued at Rs.42,000.
They further agreed that:
 (7) (8)

Adjustment of Capitals
(a) Provision for doubtfulCA.
debtsNaresh
be increased by Rs.1,000.
Aggarwal’s
(b) Stock be appreciated by 20% and fixed assets be depreciated by 10%.
ACADEMY of ACCOUNTS
(c) Creditors be taken at Rs.24,500.
Q-26: A, B and C are partners in a business sharing profits and losses in the ratio of
4 : 3 : 2. Their Balance Sheet as on 31.03.2016 is given as follows:
Partners do not desireCosting
Accounting • to revised•values
Taxationof assets and liabilities Management
• Financial in the books. They
Balance Sheet
also desire to leave the reserve and surplus undisturbed.
YouWest
are Patel Nagar,
required New Delhi.
to give effectPh:8800215448.
to the change in Website: www.academyofaccounts.org
profit sharing ratio by passing a single Liabilities Amount Assets Amount
Journal entry. Also prepare the Reconstituted Balance Sheet.
Retained Earnings 9,000 Advertisement Expenditure 3,600
[Adjustment entry: X (Dr.)- Rs.17,500; Y (Cr.)- Rs.3,500; Z (Cr.)- Rs.14,000
Creditors 40,000 Cash 16,400
Profit on Revaluation Rs.10,500; Balance Sheet: Rs.2,40,000
Bills Payable 16,000 Stock 20,000
Capitals: A- Rs.82,500; B- Rs.53,500; C- Rs.54,000]
Capitals: Furniture 15,000
A- 50,000 Plant & Machinery 70,000
Q-25: A, B and C are partners in a firm sharing profits and losses in the ratio of
B- 40,000 Sundry Debtors 30,000
2 : 2 : 1. Their Balance Sheet as on 31.03.2016 was as follows:
C- 25,000 1,15,000 Land and Buildings 20,000
Balance Sheet
Investment 5,000
Liabilities Amount Assets Amount
1,80,000 1,80,000

AoA
Creditors 55,000 Land 2,00,000
On 01.04.2016, they decides to share equally in future and following adjustments are
Bills Payable 17,000 Building 80,000
made:
General Reserve 48,000 Plant 1,60,000
(a) Goodwill of the firm is valued at Rs.45,000.
Capitals : Cash 10,000
(b) Furniture is depreciated by 10% and Investments are appreciated by 20%.
A 2,40,000 Stock 2,10,000
(c) Outstanding bill for repair Rs. 3,000 will be provided for.
B 2,00,000 Debtors 60,000
(d) Interest accrued on investment is Rs.4,400.
C 1,60,000 6,00,000
(e) Advertisement Expenditure will be written off.
7,20,000 720,000 (f) The total capital of the firm is decided to be Rs.1,20,000 and will be maintained in
the profit sharing ratio of the partners.
From 01.04.2016 the partners decided to share the profits equally. For this purpose
Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm.
following adjustments were agreed upon:
[Revaluation Profit: Rs.900; A Received: Rs.17,800; B Received: Rs.2,100; C paid: Rs.18,600
(a) The goodwill of the firm should be valued at Rs.60,000.
Cash Balance: Rs.15,100; Balance Sheet: Rs.1,79,000; Capital of partners: Rs.40,000 each]
(b) Land should be valued at Rs.3,00,000.
(c) Building and Plant should be depreciated by 5%.
Q-27: A, B and C are partners in a business sharing profits and losses in the ratio of
(d) Stock be valued at Rs.2,25,000.
5 : 3 : 2. Their Balance Sheet as on 31.03.2016 is given as follows:
(c) Creditors amounting to Rs.2,000 were not likely to be claimed and hence should
Balance Sheet
be written off.
You are required to: Liabilities Amount Assets Amount
(i) Record the necessary Journal entries to give effect to the above agreement,
Reserve & Surplus 8,000 Goodwill 20,000
without opening revaluation account.
Bills Payable 2,000 Bills Receivables 5,000
(ii) Prepare the capital accounts of the partners.
Creditors 30,000 Stock 13,000
(iii) Prepare the balance sheet of the firm after reconstitution.
Capitals: Furniture 20,000
[Capital Balances: A Rs. 2,70,200; B Rs. 2,30,200 and C Rs. 1,47,600
A- 50,000 Machinery 30,000
Balance Sheet: Rs. 7,20, 000; Revaluation Profit: Rs.1,05,000;
B- 30,000 Building 40,000
Adjustment Entry: A (Cr)- Rs.11,000; B (Cr)- Rs.11,000; C (Dr)- Rs.22,000]
C- 20,000 1,00,000 Bank 12,000
{Note: General Reserve is transferred to Capital Accounts}
1,40,000 1,40,000
 (9) (10)

On 01.04.2016, they decides CA.toNaresh

share in the ratio of 2 : 2 : 1 in future and following
Aggarwal’s Q-29: Balance Sheet of A, B and C sharing profits in the ratio of 3 : 2 : 1 is given
adjustments are made:
ACADEMY of ACCOUNTS
(a) Goodwill of the firm is valued at Rs.40,000.
follows:
Balance Sheet (as on 31.03.2016)
(b) Machinery is valued at Rs. 25,000 and Building is valued at Rs. 50,000.
Accounting • Costing • Taxation • Financial Management
(c) Furniture is depreciated by Rs.2,000 and stock is appreciated by Rs.1,000. Liabilities Amount Assets Amount
(d)West Patel Nagar,
A provision New isDelhi.
of 10% Ph:8800215448.
required Website: www.academyofaccounts.org
on Bills Receivables.
A’s Capital 40,000 Bank 10,000
(e) Creditors amounted to Rs. 1,500 are not likely to arise, therefore written off.
B’s Capital 25,000 Debtors 23,000
(f) Capital of the firm is fixed at Rs.1,00,000 to be invested in by the partners in their
C’s Capital 20,000 Less: Provision 1,000 22,000
profit sharing ratio.
Contingency Reserve 10,000 Stock 10,000
Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm.
General Reserve 5,000 Furniture 13,000
[Revaluation Profit: Rs.5,000; A Received: Rs.10,500; B paid: Rs.16,100; C paid: Rs.1,400
Trade Creditors 25,000 Machinery 30,000
Bank Balance: Rs.19,000; Balance Sheet: Rs.1,30,500; A sacrifices and B gains: 1/10
Land & Building 40,000
Capital Balance: A- Rs.40,000; B- Rs.40,000; C- Rs.20,000]
1,25,000 1,25,000
Q-28: The following is the Balance Sheet of A, B and C on 31.03.2016.
On 01.04.2016, they decides to share in the ratio of 2 : 2 : 1 in future and following
Balance Sheet
adjustments are made:

AoA
Liabilities Amount Assets Amount (a) Goodwill of the firm is valued at Rs.15,000.
(b) No contingent liability found on that date.
Creditors 65,000 Cash 40,000
(c) Probable bad debts are estimated at Rs.3,000.
Bills Payable 20,000 Bills Receivable 11,000
(d) Machinery is valued at Rs 25,000 and building is valued at Rs 50,000.
Capital Accounts Debtors 32,000
(e) Partners do not desire to revised values of assets and liabilities, and also desire
A 60,000 Stock 40,000
to leave the reserves undisturbed.
B 50,000 Office Furniture 7,000
(f) Partners want to maintain a Bank Balance of Rs.25,000 and also want to adjust
C 40,000 1,50,000 Plant & Machinery 40,000
their capital in their profit sharing ratio.
Workers Comp. Reserve 10,000 Land & Buildings 50,000
Prepare Revaluation Account, Capital accounts, Balance Sheet of the new firm.
Goodwill 25,000
[Revaluation Profit: Rs.3,000; A Received: Rs.3,300; B Paid: Rs.17,200; C Paid: Rs.1,100
2,45,000 2,45,000 Balance Sheet: Rs.1,40,000; A sacrifices: 3/30; B gain: 2/30; C gains: 1/30
Adjustment entry: A (Cr.)- Rs.3,300; B (Dr.)- Rs.2,200; C (Dr.)- Rs.1,100
On 01.04.2016, they decides to share in the ratio of 2 : 2 : 1 in future and following
Capital Balance: A- Rs.40,000; B- Rs.40,000; C- Rs.20,000]
adjustments are made:
(a) Value of stock reduced by 15%.
(b) Land and Buildings found undervalued by Rs.10,000.
(c) Creditors of Rs. 5,000 not likely to arise.
(d) Goodwill of the firm is valued at Rs.36,000.
••••••••••••••••••••••
(e) Partners do not desire to revised values of assets and liabilities, and also desire
to leave the goodwill and reserves undisturbed.
(f) Remaining partners want to maintain a Cash Balance of Rs.15,000 and also want
to adjust their capital in their profit sharing ratio.
Prepare Revaluation A/c, Capital accounts and Balance Sheet of the new firm.
[Revaluation Profit: Rs.9,000; A Received: Rs.12,000; B Received: Rs.2,000; C Received: Rs.11,000
Balance Sheet: Rs.2,20,000; A gains: 1/15; B gains: 1/15 and C sacrifices: 2/15
Adjustment entry: A (Dr.)- Rs.2,000; B (Dr.)- Rs.2,000; C (Cr.)- Rs.4,000
Capital Balance: A- Rs.50,000; B- Rs.50,000; C- Rs.25,000]
 CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org

For Eenquiries
Call or whatsapp: 8800215448

AoA
Dissolution of (Whatsapp anytime, Calls only between 3.00 pm to 8.00 pm)

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Partnership Firm Website: academyofaccounts.org

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 (1) (2)

Balance Sheet
CA. Naresh Aggarwal’s
Liabilities Amount Assets Amount
ACADEMY of ACCOUNTS Creditors 60,000 Cash 22,000
Accounting • Costing • Taxation • Financial Management Bills Payable 25,000 Debtors 50,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Provident Fund 12,000 Stock 36,000
Reserve Fund 6,000 Investments 15,000
Q-1: Following is the Balance Sheet of A and B sharing profits and losses in the ratio Capitals: Land and Buildings 40,000
of 3 : 2. A 80,000 Plant and Machinery 50,000
Balance Sheet B 50,000 1,30,000 Profit and Loss A/c 20,000
As on 31.12.2012 2,33,000 2,33,000
Liabilities Amount Assets Amount The firm was dissolved on that date and the following transaction were occurred:
Sundry Creditors 30,000 Goodwill 10,000 (a) Assets were sold and realised as follows:
Bills Payable 10,000 Buildings 25,000 Land & Buildings 55,000
Bank Loan 12,000 Plant & Machinery 25,000 Plant and Machinery 32,000
Mrs. A’s Loan 18,000 Investments 24,000 Debtors 40,000

AoA
General Reserve 6,000 Debtors 15,000 Goodwill 5,000
Capitals: Stock 10,000 (b) A took Investments at Rs 10,000 and B took Stock at Rs.30,000.
A 30,000 Cash 13,000 (c) Sundry Creditors were paid at 10% discount.
B 20,000 50,000 Profit and Loss A/c 4,000 (d) B agreed to pay Bills Payable at book value.
(e) Realisation expenses amounted to Rs.1,000.
1,26,000 1,26,000 Prepare Realisation Account, Partner’s Capital Accounts and Bank Account.
The firm was dissolved on that date and the following transaction were occurred: [Loss: Rs.14,000; A will get: Rs.53,200; B will get: Rs.33,800; Total of Cash: Rs.1,54,000]
(a) Assets were sold and realised as follows:
Goodwill 6,000 Q-3: The following is the Balance Sheet of X and Y as at 31st December, 2012.
Buildings 50,000 The profit sharing ratios of the partners are 3 : 2
Plant and Machinery 20,000 Balance Sheet
Debtors 10,000 Liabilities Amount Assets Amount
Typewriter 2,000
(b) A took stock at Rs 8,000 and B took Investments at Rs.15,000. Creditors 97,500 Land & Buildings 30,000
(c) Sundry Creditors and Bills Payable were paid at 5% discount. Bills Payable 10,000 Motor Vehicles 18,300
(d) A agreed to pay his wife’s loan. X’s Capital 85,000 Stock 72,800
(e) Realisation expenses amounted to Rs.2,000. Y’s Capital 63,000 Debtors 1,10,750
Prepare Realisation Account, Partner’s Capital Accounts and Bank Account. Bank 10,000
[Profit: Rs.2,000; A will get: Rs.42,400; B will get: Rs.6,600; Total of Cash: Rs.1,01,000] Cash 13,650

2,55,500 2,55,500
Q-2: A and B were partners in a firm and sharing profits in the ratio of 3 : 2. On 31st
December, 2012 their Balance Sheet was as follows: The partners decided to dissolve the firm on and from the date of Balance Sheet.
Motor Vehicles and Stock were sold for cash at Rs.16,950 and Rs.77,600 respectively
and all debtors were realised in full. X took over the land and Buildings at an agreed
valuation of Rs.43,500. Creditors were paid off subject to discount amounting to
Rs.1,700. Expenses of realisation were Rs.1,250.
Prepare Realisation Account, Cash Account and Partner’s Capital Account to close
 (3) (4)

The firm was dissolved on 30.06.2012. Plant and machinery realised Rs.9,000 and
CA. Naresh Aggarwal’s stock Rs.2,500. Rs.8,000 were collected from the debtors. Investments were sold for
ACADEMY of ACCOUNTS Rs.7,000. Unrecorded B/R realised Rs.1,000.
Creditors were paid Rs. 28,500 in full settlement and realisation expenses were
Accounting • Costing • Taxation • Financial Management Rs.1,500.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Prepare Realisation Account, Capital Accounts of Anju and Manju and Bank Account
to close the books of the firm.
the books of the firm. [Loss: 4,500; Anju will get: 1,550; Manju will get: 1,700; Total of Bank: 33,250]
[Profit: Rs.17,400; X will get: Rs.51,940; Y will get: Rs.69,960; Cash: 2,28,950]
Q-6: The following is the Balance Sheet of X, Y and Z as at 31st December, 2012.
Q-4: A, B and C are partners in a firm sharing profits in the ratio of 2 : 1 : 1. Their The profit sharing ratios of the partners are 3 : 2 : 1.
Balance Sheet as on 31.03.2012 was as under: Balance Sheet
Balance Sheet
Liabilities Amount Assets Amount
Liabilities Amount Assets Amount
Creditors 17,000 Bank 3,500
Creditors 50,000 Goodwill 30,000 Bills Payable 12,000 Stock 19,800
A’s Capital 80,000 Land & Buildings 80,000 Bank Loan 5,300 Debtors 14,000

AoA
B’s Capital 80,000 Plant & Machinery 56,000 General Reserve 12,000 Investments 8,000
C’s Capital 60,000 Motor Car 54,000 Capitals : Joint Life Policy 4,000
Debtors 48,000 X 25,000 Furniture 10,000
Cash 2,000 Y 11,000 Machinery 25,000
Z 8,000 44,000 Deferred Revenue Expenditure 6,000
2,70,000 2,70,000
90,300 90,300
The firm was dissolved on that date. The assets realised as follows:
Goodwill Rs. 20,000; Land & Buildings Rs. 1,00,000; Plant & Machinery Rs. 50,000; The firm was dissolved on that date and the following transaction were occurred:
Motor Car Rs. 28,000 and Debtors 50% of the book value. (a) The Joint Life Policy is taken over by X at Rs. 5,000.
Realisation Expenses were Rs. 2,000. (b) Other assets are realised as follows :
Prepare Realisation Account, Capital Accounts of Partners and Cash Account to close Stock Rs.17,500; Debtors Rs.14,500; Furniture Rs.6,800; Investments Rs.7,000;
the books of the firm. Unrecorded Equipments Rs.3,300 and Machinery Rs.20,000.
[Loss: 48,000; A will get: 56,000; B will get: 68,000; C will get: 48,000; Total of Cash: 2,24,000] (c) Expenses on realisation amounted to Rs.2,000.
Close the books of the firm giving relevant ledger accounts.
Q-5: Following is the Balance Sheet of Anju and Manju who are partners in a firm [Loss: 8,700; X will get: 18,650; Y will get: 10,100; Z will get: 7,550; Total of Bank: 72,600]
sharing profits in the ratio of 3 : 2 as at 30.06.2012.
Balance Sheet Q-7: Following is the Balance Sheet of A and B on 31.12.2012
Balance Sheet
Liabilities Amount Assets Amount
Liabilities Amount Assets Amount
Creditors 31,500 Plant and Machinery 15,000
General Reserves 1,250 Stock 3,000 Sundry Creditors 60,000 Cash 26,000
Anju’s Capital 5,000 Debtors 9,500 Mrs. A’s Loan 10,000 Stock 10,000
Manju’s Capital 4,000 Investments 6,000 General Reserve 20,000 Investments 20,000
Bank 5,750 Investment Fluctuation Fund 2,000 Debtors 40,000
Profit and Loss A/c 2,500 A’s Capital 20,000 Less: Provision 4,000 36,000
B’s Capital 20,000 Plant 40,000
41,750 41,750
1,32,000 1,32,000
 (5) (6)

Q-9: A, B and C are partners sharing profits and losses in the ratio of 3 : 2 : 1. On
CA. Naresh Aggarwal’s 31.03.2012, their Balance Sheet was as follows :
ACADEMY of ACCOUNTS Balance Sheet

Accounting • Costing • Taxation • Financial Management Liabilities Amount Assets Amount

West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Creditors 40,200 Cash at Bank 12,500
Bills Payable 16,800 Stock 57,400
The firm was dissolved on that date on the following terms : X’s Loan 57,000 Debtors 57,000
(a) A promised to pay Mrs. A’s Loan and took over stock at Rs.8,000. Capitals Less : Provision 3,000 54,000
(b) Debtors realised Rs.38,000. A 80,000 Plant & Machinery 1,31,100
(c) Creditors payable after one month were paid immediately at 6% p.a. discount. B 12,000
(d) Plant realised Rs.50,000 and investments Rs.19,000. C 40,000 1,32,000
(e) Old typewriter completely written off, estimated to realise Rs.600 is taken over by Profit and Loss A/c 9,000
B.
2,55,000 2,55,000
(f) Realisation expenses, Rs.2,000 paid by A.
Prepare necessary ledger accounts to close books of the firm. The firm was dissolved on 1.04.2012:
[Profit: 9,900; A will get: 38,950; B will get: 34,350; Total of Cash: 1,33,000] (a) There was a joint life policy of Rs. 60,000. The policy was surrendered for

AoA
Rs.15,000.
Q-8: Seeta, Geeta and Meeta are partners sharing profits and losses in the ratio of 5 (b) The assets were realised as follows:
: 3 : 2. They decided to dissolve their firm on 31.12.2012, the date on which their Stock Rs. 47,000; Goodwill Rs. 12,000; Debtors 60% of the book value; Machinery
Balance Sheet stood as under: Rs. 90,000.
Balance Sheet (c) Liabilities were paid in full.
(d) A bill for Rs. 90,000 under discount was dishonored and had to be taken up by the
Liabilities Amount Assets Amount
firm.
Creditors 19,000 Bank 3,500 (e) The expenses on realisation were amount to Rs.400, paid by C.
Bills Payable 12,000 Stock 19,800 You are required to prepare Realisation A/c, Partners’ Capital A/cs and Bank A/c.
Loan from Priya 7,300 Debtors 15,000 [Delhi 1996, Modified]
Joint Life Policy Reserve 4,000 Less: Provision 1,000 14,000 [Loss: 1,34,700; A will get: 17,150; B will bring: 29,900; C will get: 19,450; Total of Bank: 2,40,600]
Capitals : Joint Life Policy 4,000
Seeta 25,000 Investment 10,000 Q-10: The Balance Sheet of A, B and C sharing profits and losses 3 : 2 : 1 respectively
Geeta 10,000 Furniture 12,000 stood as follows on 30.06.2012
Meeta 9,000 44,000 Machinery 30,000 Balance Sheet
Less: Prov. for Dep. 7,000 23,000
Liabilities Amount Assets Amount
86,300 86,300
Creditors 50,400 Cash at Bank 3,700
The following additional information is given: Investment Fluctuation Fund 10,000 Stock 20,100
(a) The Joint Life Policy is taken by Seeta at Rs. 5,000. Reserve Fund 15,000 Debtors 62,600
(b) Investments are taken by Geeta at 10% discount. Capital Accounts: Investments 16,000
(c) Other assets are realised as follows : A 30,000 Furniture 6,500
Stock Rs.16,500; Debtors Rs.14,500; Furniture Rs.7,800; Machinery Rs.20,500. B 20,000 Building 23,500
(d) Expenses on realisation amounting to Rs. 500 which are paid by Meeta. C 10,000 60,000 Advertisement Suspense A/c 3,000
Close the books of the firm giving relevant ledger accounts.
1,35,400 1,35,400
[Loss: 6,000; Seeta will get: 17,000; Geeta will bring: 800; Meeta will get: 8,300; Total Bank: 63,600]
 (7) (8)

Q-12: The following is the Balance Sheet of A and B as on 30.06.2012, sharing

CA. Naresh Aggarwal’s profits and losses in the ratio of 3 : 2.
ACADEMY of ACCOUNTS Balance Sheet

Accounting • Costing • Taxation • Financial Management Liabilities Amount Assets Amount

West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Creditors 38,000 Bank 11,500
Mrs. A’s Loan 10,000 Stock 6,000
The firm was dissolved as on that date. For the purpose of dissolution, the investments Mrs. B’s Loan 15,000 Debtors 19,000
were valued at Rs.18,000 and stock at Rs.17,500. A agreed to take over the Reserve 5,000 Furniture 4,000
investments and B to take over the stock. C took over the furniture at book value. Capitals Plant 28,000
Debtors and Building realised for Rs.57,000 and Rs.25,000 respectively. Expenses A 10,000 Investment 10,000
of realisation amounted to Rs.450. B 8,000 18,000 Profit and Loss Account 7,500
Prepare Realisation Account, Capital Accounts and Bank Account. 86,000 86,000
[Profit: Rs.4,850; A, B and C will get: Rs.20,425; Rs.8,117; Rs.6,308; Total of Cash: Rs.85,700]
The firm was dissolved on 30.06.2012, on the following terms:
Q-11: Sonu and Monu were sharing profits of a partnership firm in the ratio of (i) B will dispose off the assets and pay the liabilities. For which he will get a
2 : 1. They decided to dissolve their firm on 31.03.2012, when their Balance Sheet remuneration of Rs.600.

AoA
was as follows : (ii) A agreed to take the investments at Rs. 8,000 and to pay off Mrs. A’s Loan.
Balance Sheet (iii) Other assets were realised as follows:
Stock Rs. 5,000, Debtors Rs. 18,500, Furniture Rs. 4,500, Plant Rs. 25,000.
Liabilities Amount Assets Amount (iv) Expenses on realisation amounted to Rs. 1,000.
Creditors 16,000 Building 20,000 (v) Creditors agreed to accept Rs. 37,000.
General Reserve 6,000 Machinery 15,000 You are required to prepare Realisation A/c, Partners’ Capital A/cs and Bank A/c.
Loan from Radha 2,000 Stock 6,000 [Loss: 6,600; A will get: 6,540; B will get: 4,960; Total of Bank: 64,500]
Loan from Meera 6,000 Debtors 19,000
Capitals: Less : Provision 1,000 18,000 Q-13: Following is the Balance Sheet of Rahul and Rohit as on 30th June, 2012.
Sonu 22,000 Cash in Hand 11,000 Balance Sheet
Monu 18,000 40,000 Liabilities Amount Assets Amount
70,000 70,000 Sundry Creditors 20,000 Goodwill 10,000
The firm was dissolved on 31.03.2012. As a result: Bills Payable 20,000 Buildings 25,000
(i) Sonu will dispose off the assets and pay the liabilities. For which he will get a Bank Overdraft 10,000 Plant & Machinery 25,000
remuneration of Rs.300. Mrs. Rahul’s Loan 20,000 Investments 15,300
(ii) Monu took over stock at an agreed value of Rs. 5,200 and agreed to pay off Rohit’s Loan 10,000 Stock 8,700
Meera’s loan. General Reserve 2,000 Bills Receivable 10,000
(iii) Expenses of realisation amounted to Rs. 200 Investment Fluctuation Fund 2,800 Debtors 17,000
(iv) Creditors allowed a discount of Rs. 300. Employees Provident Fund 1,200 Less: Provision 2,000 15,000
(v) Assets realised as follows: Capitals: Cash at Bank 13,000
Buildings Rs. 28,000, Machinery Rs. 13,000, Debtors Rs. 18,100. Rahul 20,000 Profit and Loss Account 4,000
Prepare the Realisation Account, Partners Capital Accounts and Bank Account for Rohit 20,000 40,000
closing the books of the firm. 1,26,000 1,26,000
[Profit: 5,100; Sonu will get: 29,700; Monu will get: 22,500; Total of Cash: 70,100]
The firm was dissolved on 30th June, 2012 and the following was agreed upon:
 (9) (10)

Q-15: J, S, and R were in partnership sharing profits and losses in the ratio of
CA. Naresh Aggarwal’s 3 : 2 : 1. Their Balance Sheet as on 31st December, 2012 was as follows:
ACADEMY of ACCOUNTS Balance Sheet

Accounting • Costing • Taxation • Financial Management Liabilities Amount Assets Amount

West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Capital Accounts Buildings 10,000
J 12,000 Plant 22,000
(i) Debtors realised Rs.12,000 S 8,600 Stock 6,000
(ii) Rohit took away all Investments at Rs.12,000 R 10,400 Joint Life Policy 6,200
(iii) Other assets realised as follows: Reserve Fund 3,000 Debtors 5,000
Plant and Machinery 20,000 Employees Provident Fund 3,000 Accrued Interest 1,000
Buildings 50,000 Depreciation Reserve 5,000 Cash 2,800
Goodwill 6,000 Creditors 11,000
(iv) Rahul agreed to pay off his wife’s Loan.
53,000 53,000
(v) Sundry Creditors and Bills Payable were settled at 5% discount.
(vi) Rahul accepted stock at Rs 8,000 and Rohit took over Bills Receivable at 20% It, was agreed to dissolve the firm and the terms of dissolution were :
discount. (i) J took over buildings at book value and agreed to pay off creditors.

AoA
(vii) Realisation expenses amounted to Rs 2,000. (ii) Accrued interest was not collected where as there was a contingent liability of Rs
Prepare Realisation Account, Partner’s Capital Accounts and Bank Account. 600 which was met.
[Profit: 9,800; Rahul will get: 35,900; Rohit will get: 13,900 (including Loan); Cash: 1,01,000] (iii) Other assets realised Plant Rs 25,000, Stock 5,000, Debtors Rs 4,600.
(iv) J was appointed to dissolve the firm. For his services he will be given Rs.600 and
Q-14: Following was the Balance Sheet of A, B and C on 31.12.2012: he will bear realisation expenses, which came to Rs.800.
Balance Sheet Prepare Realisation Account, Capital Accounts and Cash Account.
[Profit: 4,400; J will get: 17,300; S will get: 11,067; R will get: 11,633; Cash: 43,600]
Liabilities Amount Assets Amount
Hint: Joint life policy will realise at book value, in the absence of any information.
Creditors 50,000 Bank 20,000
Bills Payable 10,000 Debtors 30,000 Q-16: A, B and C are, partners sharing profits in the ratio of 5 : 3 : 2.
B’s Loan 8,000 Stock 20,000 Balance Sheet
X’s Loan 12,000 Furniture 15,000
Liabilities Amount Assets Amount
General Reserve 20,000 Land and Building 2,45,000
A’s Capital 1,00,000 B’s Capital 20,000 A’s
.
Capital 2,00,000 Bank 70,000
C’s Capital 1,50,000 B’s Capital 1,50,000 Debtors 50,000
C’s Capital 1,50,000 Stock 60,000
3,50,000 3,50,000
A’s Current A/c 30,000 Furniture 25,000
The firm was dissolved on the above date on the following terms : B’s Current A/c 20,000 Patents 35,000
(i) Debtors realised Rs. 28,000; and creditors and bills payable were paid at a discount P&L A/c 50,000 Machinery 1,50,000
of 10%. Trade Creditors 70,000 Buildings 3,20,000
(ii) Stock was taken over by C for Rs. 15,000 and furniture was sold to Y for Rs.12,000. Provision for Depreciation50,000C’s Current A/c 10,000
(iii) Land and Building was sold for Rs. 2,80,000.
7,20,000 7,20,000
(iv) X’s loan was paid by a cheque for the same amount.
(v) The firm had a joint life policy for Rs. 5,00,000 with a surrender value of Rs.1,00,000. Partners decided to dissolve the firm and the following transactions took place at the
The policy was surrendered at its surrender value. time of dissolution:
Prepare Realisation Account, Bank Account and Capital Accounts of A, B and C. (a) B took over stock Rs 55,000 and C took over Buildings for Rs 4,00,000.
[Profit: 1,31,000; A will get: 1,50,333; B will get: 30,333; C will get: 1,85,334; Total of Bank: 4,40,000]
 (11) (12)

You are required to give journal entries and ledger accounts to close the books.
CA. Naresh Aggarwal’s [Profit: 6,000; A will get: 34,000; B will get: 42,000; C will get: 23,000; Total of Bank: 1,33,000]
ACADEMY of ACCOUNTS Q-18: X, Y and Z were partners in a firm sharing profits in the ratio of 2 : 1 : 1. Their
Accounting • Costing • Taxation • Financial Management Balance Sheet on 31st December, 2012 was as follows:
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Balance Sheet

Liabilities Amount Assets Amount

(b) Other assets realised as follows:
Accounts Payable 10,000 Land & Buildings 30,000
Debtors Rs 48,000, Furniture Rs 17,000 and Machinery Rs 80,000.
Bank Overdraft 15,000 Office Equipments 5,000
(c) Patents didn’t realise anything and trade creditors were settled in full by paying
Y’s Loan 25,000 Stock 20,000
them Rs 65,000.
J.L.P. Reserve 15,000 Accounts Receivable 30,000
(d) Realisation expenses were to be fully borne by A for which he is to get a credit of
Capitals Joint Life Insurance Policy 15,000
Rs 10,000. Actual realisation expenses paid out of firm, Bank A/c, amounted to
X 20,000 Bank 5,000
Rs 12,000.
Y 10,000
Prepare Realisation A/c, Partner’s Capital A/cs and Bank A/c.
Z 10,000 40,000
[Profit: Rs.5,000; A will get: Rs.2,55,500; B will get: Rs.1,31,500;
C will pay: Rs.2,49,000; Total of Bank: Rs.4,64,000]

AoA
1,05,000 1,05,000

Partners agreed to dissolve the firm on that date. You are given the following informations
Q-17: A, B and C were in partnership whose Balance Sheet as on 31.12.2012, stood
about dissolution:
as follows :
(a) Y was given responsibility to dispose off the assets and pay the liabilities. For
Balance Sheet
which he will get a remuneration of Rs.800.
Liabilities Amount Assets Amount (b) Office Equipment was accepted by a creditor for Rs. 3,000. Remaining creditors
were paid in full by cheques.
Creditors 16,000 Land & Buildings 70,000
(c) Assets were realised as follows:
Bills Payable 19,000 Investments 30,000
Land & Buildings Rs.1,50,000; Stock Rs.15,000; Accounts Receivable Rs.23,000.
Capital Accounts Sundry Debtors 10,000
(d) The Joint Life Insurance Policy was surrendered for Rs. 10,000.
A 28,000 Stock 15,000
(e) Other liabilities were paid in full.
B 37,000 Bank 30,000
(f) A Bills Receivable of Rs.5,000 discounted from the bank was dishonored due to
C 44,000 1,09,000
insolvency of the customer, who could pay only Rs.2,000.
Currents Accounts
(g) Dissolution expenses amounted to Rs. 1,200.
A 2,000
You are required to prepare Realisation Account, Bank Account and Capital Accounts
B 3,000
of the Partners.
C 6,000 11,000
[Foreign 1996, Modified]
1,55,000 1,55,000 [Profit: 1,11,000; Final payments: X-75,500; Y-38,550 (excluding loan); Z-37,750; Bank: 2,05,000]
The firm was dissolved on the above date on the following terms :
Q-19: M, N and O were partners in a firm sharing profits and losses in the ratio of
(a) C will take the investments on an agreed value of Rs. 29,000.
3 : 2 : 1 respectively. They agreed to dissolve their firm on 31st December 2012. On
(b) Other assets to be disposed off as follows :
which date, their Balance Sheet was as under:
Land & Buildings: Rs.80,000; Debtors: Rs.9,000; Stock: Rs.14,000.
(c) The creditors to be paid Rs. 15,000 in full settlement of account.
(d) Bills payable were paid in full.
(e) Expenses of realisation amounting to Rs. 2,000 were met by A.
 (13) (14)

Mrs. A’s loan 10,000 Debtors 9,300

CA. Naresh Aggarwal’s Creditors 18,500 Less : Provision 600 8,700
ACADEMY of ACCOUNTS Joint Life Policy Reserve
Investment Fluctuation Fund
14,000 Cash in hand
6,000
16,920

Accounting • Costing • Taxation • Financial Management

1,08,500 1,08,500
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
(a) The Joint life policy was surrendered for Rs. 12,000.
Balance Sheet (b) The investments were taken over by A for Rs. 17,500. A agreed to discharge his
wife’s loan.
Liabilities Amount Assets Amount (c) B took over the stock at Rs. 7,000 and debtors amounting to Rs. 5,000 at Rs.4,000.
Capital Accounts Machinery 1,21,500 (d) Machinery was sold for Rs. 55,000. The remaining debtors realised 50% of book
M 1,20,000 Stock 22,650 value. An investment not recorded in the books was sold for Rs. 8,000.
N 60,000 1,80,000 Investments 44,490 (e) During the course of dissolution, a liability was settled for Rs.7,500 for which only
Creditors 55,500 Debtors 27,900 Rs.2,500 were provided in the books.
Joint Life Policy Fund 42,000 Less: Provision 1,800 26,100 (f) The expenses of realisation amounted to Rs. 600.
Mrs. M’s Loan 30,000 Joint Life Policy 42,000 Prepare Realisation A/c, Partners’ Capital A/c and Bank A/c.
O’s capital 34,500 [Profit: 28,470; A will get: 23,888; B will get: 20,388; C will get: 25,694; Total of Cash: 94,070]

AoA
Cash at Bank 16,260
Q-21: A, B and C were partners sharing profits in the ratio of 2 : 2 : 1. They decided
3,07,500 3,07,500 to dissolve their firm on 31.12.2012, when their Balance Sheet was as follows:
(a) The Life Policy is surrendered for Rs 36,000. Balance Sheet
(b) The Investments are taken over by M for Rs.52,500 and agrees to discharge the Liabilities Amount Assets Amount
loan of his wife.
(c) N takes over all the stock at Rs. 21,000 and debtors amounting to Rs.15,000 at Creditors 40,000 Cash 40,000
Rs.12,000. Bills Payable 46,000 Debtors 70,000
(d) Machinery is sold for Rs.1,65,000. The remaining debtors realise 50% of their Employees’ Provident Fund 32,000 Less : Provision 6,000 64,000
book value. Mrs. A’s Loan 38,000 Stock 50,000
(e) The Investments of the value of Rs 9,000 were not recorded in the books. These C’s Loan 30,000 Investments 60,000
were taken over by the creditors. Investment Fluctuation Fund 16,000 Furniture 42,000
(f) The expenses of realisation amounted to Rs 1,800. Capitals Machinery 1,36,000
Prepare the Realisation A/c, Bank Account and Partner’s Capital accounts to close A 1,20,000 Land 1,00,000
the books of the firm. B 1,00,000 Goodwill 30,000
[Profit: 85,410; M will get: 1,40,205; N will get: 55,470; O will bring: 20,265; Bank: 2,43,975] C 1,00,000 3,20,000
5,22,000 5,22,000
Q-20: A, B and C sharing profits in the proportion of 2 : 2 : 1 agreed to dissolve of the
firm on 31.12.2012, on which date their Balance Sheet was as under: Following transactions were took place :
Balance Sheet (a) A took over stock at Rs. 36,000. He also took over his wife’s loan.
(b) B took over half of debtors at Rs. 28,000.
Liabilities Amount Assets Amount (c) C took over investments at Rs. 54,000 and half of creditors at their book value.
Capital Accounts Machinery 40,500 (d) Remaining debtors realised 60% of their book value. Furniture sold for Rs.30,000;
A 20,000 Stock in trade 7,550 Machinery Rs.82,000 and Land Rs.1,20,000. Joint Life Policy was surrendered
B 20,000 Investments 20,830 for Rs.30,000.
C 20,000 60,000 Joint Life Policy 14,000 (e) During the course of dissolution, a liability was settled for Rs.13,000 against
 (15) (16)

Q-23: A, B and C were partners in a firm and sharing profits in the ratio of
CA. Naresh Aggarwal’s 3 : 2 : 1. On 31st December, 2012 their Balance Sheet was as follows:
ACADEMY of ACCOUNTS Balance Sheet

Accounting • Costing • Taxation • Financial Management Liabilities Amount Assets Amount

West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Creditors 65,000 Cash 22,500
Bills Payable 20,000 Debtors 52,300
Provident Fund 12,000 Stock 36,000
Rs.5,000 were provided in the books.
Investments Fluctuation Fund 6,000 Investments 15,000
(f) Realisation expenses were amounted to Rs.4,000.
Advance Commission 8,000 Plant 91200
Prepare necessary ledger accounts to close the books of the firm.
Capitals: Profit and Loss A/c 36,000
[Loss: 77,000; Final Payment: A-91,200; B-41,200; C-50,600 (excluding loan); Total Cash: 3,23,000]
A 80,000 Deferred Revenue Expenditure 18,000
B 50,000 C’s Loan 10,000
Q-22: Anju, Manju and Sanju were partners in a firm sharing profits in the ratio of 2 :
C 40,000 1,70,000
2 : 1. On 31.03.2012, their Balance Sheet was as follows :
Balance Sheet 2,81,000 2,81,000
Liabilities Amount Assets Amount On this date the firm was dissolved.

AoA
(a) A was appointed to realise the assets and he was to receive 5% commission on
Creditors 50,000 Cash 80,000
the sale of assets (except cash and partner’s loan) and was to bear all expenses
Bank Loan 35,000 Debtors 75,000
of realisation.
Provident Fund 15,000 Stock 40,000
(b) A realised the assets as follows:
Investment Fluctuation Fund 10,000 Investments 20,000
Debtors 30,000
Advance Commission 8,000 Plant 30,000
Stock 26,000
Capitals Profit & Loss A/c 3,000
Plant 42,750
Anju 50,000 Sanju’s Loan 20,000
Investments 75% of book value
Manju 50,000
(c) Commission received in advance was returned after deducting Rs.3,000.
Sanju 50,000 1,50,000
(d) Firm had to pay Rs 7,200 for outstanding salary and Compensation to employees
2,68,000 2,68,000 amounted to Rs 9,800. These liabilities were not provided for in the above Balance
Sheet.
On this date, the firm was dissolved. Anju was appointed to realise the assets. Anju
(e) Rs 25,000 had to be paid for provident fund.
was to receive 5% commission on the sale of assets (except cash and partner’s loan)
(f) Expenses of realisation were Rs 4,100.
and was to bear all expenses of realisation.
Prepare Realisation Account, Capital Accounts and Cash Account.
(a) Anju realised the assets as follows :
[Loss: Rs.1,11,000; Cash: Rs.1,37,500; A’s Commission: Rs.5,500;
Debtors Rs. 60,000, Stock Rs. 35,500, Investments Rs. 16,000, Plant 90% of the
A and C will get: Rs.3,000 and 2,500; B will pay: Rs.5,000]
book value.
(b) Commission received in advance was returned to the customers after deducting
Q-24: K, L and M were partners in a firm sharing profits and losses in the ratio of 2 :
Rs. 1,000. Rs.20,000 had to be paid for provident fund.
2 : 1. They decided to dissolve the firm on 31.12.2012. The Balance Sheet of the firm
(c) Firm had to pay Rs. 8,500 for outstanding salary and compensation paid to
on the date of dissolution was as follows :
employees amounted to Rs. 17,000. These liabilities were not provided for in the
Balance Sheet
above Balance Sheet.
(d) Expenses of realisation amounted to Rs. 7,500. Liabilities Amount Assets Amount
Prepare Realisation Account, Capital Accounts of Partners and Cash Account.
Creditors 1,07,000 Machinery 1,08,000
[Loss: 52,925; Final Payments: Anju- 34,555; Manju- 27,630; Sanju- 18,815;
Joint Life Policy Reserve 12,000 Joint Life Policy 30,000
Total of Cash: 2,18,500; Anju’s Commission: 6,925]
Provident Fund 18,000 Investments 25,000
 (17) (18)

Rs.100 as discount and assume the responsibility for the discharge of the loan
CA. Naresh Aggarwal’s together with accrued interest of Rs.30 which has not been recorded in books.
ACADEMY of ACCOUNTS (iv) The remaining debtors were sold to a debt collecting agency for 50% of the book
value.
Accounting • Costing • Taxation • Financial Management (v) The expenses of dissolution were Rs.270.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Prepare necessary accounts to close the books of the firm.
[Haryana Board 1987, Delhi 1990]
[Loss: 6,800; A will get: 11,420; B will bring: 5,560; C will bring: 830; Total Cash: 11,690]
Capitals : Stock 60,000
K 1,05,000 Debtors 36,000 Q-26: X, Y and Z are partners sharing profits and losses in the ratio of 2 : 2 : 1. On
L 42,000 1,47,000 M’s capital 25,000 31st March 2012, their Balance Sheet was as follows:
2,84,000 2,84,000 Balance Sheet
As on 31.03.2012
(a) They appointed L to realise the assets and pay the liabilities. For this purpose, he
was to be paid Rs. 5,000. Liabilities Amount Assets Amount
(b) Joint Life Policy was surrendered for Rs. 20,000. Bad debts amounted to Rs. Capitals: Cash 18,000
5,000. Stock realised Rs. 40,000 and Machinery realised Rs. 80,000. X - 80,000 Bills Receivable 30,000

AoA
(c) There was an unrecorded asset which was sold for Rs. 3,000. Y - 50,000 Furniture 24,000
(d) One of the creditors took over the investments at Rs. 23,000 and remaining Z - 30,000 1,60,000 Stock 54,000
creditors were paid at a discount of Rs. 4,000. Creditors 55,000 Debtors 32,000
Prepare Realisation account, Capital accounts and Cash account. Y’s Loan 15,000 Less: Provision 2,000 30,000
[Delhi 2000C] Mrs. X’s Loan 5,000 Z’s Loan 12,000
[Loss: 51,000; K will get: 84,600; B will get: 26,600; C will bring: 35,200; Total of Cash: 2,09,200] Investment Fluctuation Fund 3,000 Joint Life Policy 8,000
Bill Payable 25,000 Investments 52,000
Q-25: A, B and C are three partners sharing profits in the ratio of 3 : 1 : 1. On 31st General Reserve 10,000 Machinery 40,000
March, 2012, they decided to dissolve their firm. On that date their balance sheet was Joint Life Policy Fund 8,000 Goodwill 20,000
as under : Employee’s Provident Fund 12,000 Profit and Loss Account 5,000
Balance Sheet
2,93,000 2,93,000
Liabilities Amount Assets Amount
The firm is dissolved on that date and assets realised as follows:
Creditors 6,000 Cash 3,200 (i) Creditors accepted all the investment, Machinery and Rs. 2,000 in full
Loan 1,500 Debtors 24,200 settlement of their claim.
Capitals : Less : Provision 1,200 23,000 (ii) X agrees to take 50% of the B/R at 12,000 and agree to pay his wife’s Loan.
A 27,500 Stock-in-trade 7,800 (iii) Remaining B/R are sold to a debt collecting agency at 40% discount.
B 10,000 Furniture 1,000 (iv) Joint Life Policy is surrendered for Rs. 10,000; Furniture for Rs. 20,000; an
C 7,000 44,500 Sundry Assets 17,000 unrecorded Equipments Rs. 2,500.
52,000 52,000 (v) Y took stock at the book value and will also pay an unrecorded liability of
Rs.4,000 in respect of outstanding Expenses.
It is agreed that: (vi) Z agrees to pay Bills payable and also dispose other assets and liabilities of the
(i) A is to take over Furniture at Rs.800 and Debtors amounting to Rs.20,000 at firm for his services he will be given Rs. 1,500 and he will bear all expenses
Rs.17,200. The Creditors of Rs.6,000 to be paid by him at this figure. himself.
(ii) B is to take over all the Stock-in-trade at Rs.7,000 and some of the Sundry Assets (vii) Expense of dissolution comes to Rs. 2,800.
at Rs.7,200 (being 10 % less than book value). [Loss: Rs.92,000; X will receive Rs.38,200 and Z will receive Rs.27,100 (after adjusting Loan);
(iii) C is to take over the remaining Sundry Assets at 90 % of the book value, less Y will pay Rs.19,800 (after adjusting Loan); Cash: 79,300]
 (19) (20)

respectively. Rs.1,20,000 were due to creditors and Rs.50,000 were due for Bank
CA. Naresh Aggarwal’s Loan and Reserve has been maintained for Rs. 28,000. X and Y shared profits in the
ACADEMY of ACCOUNTS ratio of 4 : 1. Cash balance of Rs. 18,000 was also kept in the firm. Assets realised
Rs. 3,00,000. Prepare Memorandum Balance Sheet, Realisation Account, Partner’s
Accounting • Costing • Taxation • Financial Management Capital Accounts and Cash Account.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org [Sundry Assets: 3,40,000; Realisation Loss: 40,000;
Partners will get: A-90,400; B-57,600; Total of Cash: 3,18,000]
Q-27: Radha and Meera were partners in a business. On 1.1.2012 They decided
to dissolve the firm. On that date Capitals of partners were Rs. 60,000 and Rs. Q-32: A and B dissolve their partnership. Their position as at 31.12.2012 was as
40,000 respectively. Creditors were Rs. 15,000 and Cash Balance was Rs. 2,000. follows :
Radha had taken a loan from the firm of Rs. 10,000 and Meera has given a loan of A’s Capital 30,000
Rs. 6,000 to the firm. Assets realised Rs. 92,500 (except Radha’s Loan). Expense B’s Capital 20,000
of dissolution were Rs. 1,500. Prepare necessary accounts. Sundry Creditors 12,500
[Sundry Assets: 1,09,000; Loss: 18,000; Radha will receive 41,000; Cash at Bank 1,000
Meera will receive Rs.37,000 (Including Loan)] The balance of A’s Loan Account to the firm stood at Rs. 10,000. The realisation
expenses amounted to Rs. 400. Stock realised Rs. 20,000 and Debtors Rs. 15,000, B
Q-28: X and Y were partners in a business. On 1.1.2012 They decided to took a machine at the agreed valuation of Rs. 10,000. Other fixed assets realised Rs.

AoA
dissolve the firm. On that date Capitals of partners were Rs. 30,000 and Rs. 50,000 30,000. Prepare necessary accounts to dissolve the firm.
respectively. Creditors were Rs. 12,500 and Cash Balance was Rs. 1,500. X had [Sundry Assets: 71,500; Realisation Profit: 3,100;
taken a loan from the firm of Rs. 5,000. Assets realised Rs. 85,000 (except X’s Partners will get: A-41,550 (including loan); B-11,550; Total of Bank: 66,000]
Loan). Expense of dissolution came to Rs. 2,000.
You are required to show relevant Accounts and Journal Entries for dissolution. Q-33: A, B and C were partners in a firm sharing profits in the ratio of 4 : 3 : 3. On
[Sundry Assets: Rs.86,000; Loss: Rs.3,000; X & Y will receive Rs.23,500 and Rs.48,500] 01.04.2012 they decided to dissolve the firm. On that date A’s capital was Rs.1,25,000;
B’s capital was Rs.45,000 and C’s capital was Rs.15,000 (Dr.) The creditors amounted
Q-29: M and N were partners sharing profits in the ratio of 3 : 2. On the date of to Rs.23,150 and cash in hand was Rs.4,520. The assets realised Rs.1,44,910 and
dissolution their capitals were M: Rs. 7,650, N: Rs. 4,300. The creditors amounted to the expenses of dissolution were Rs.1,860.
Rs. 27,500. The balance of cash was Rs. 760. The assets realised Rs. 25,430, the Prepare Realisation Account and show your workings clearly.
expenses on dissolution were Rs. 540. All partners were solvent. [All India 2009]
Close the books of the firm showing the Realisation, Capital and Cash accounts. [Sundry Assets: Rs.1,73,630; Realisation Loss: Rs.30,580]
[All India 1999]
[Sundry Assets: 38,690; Loss: 13,800; M will bring: 630; N will bring: 1,220; Total of Cash: 28,040] Q-34: Ram and Shyam were in partnership sharing profits in the ratio of 3 : 1. They
agreed to dissolve the firm. The assets (other than cash of Rs.4,000) of the firm
Q-30: A, B and C were partners in a firm sharing profits in the ratio of 5 : 3 : 2. On realised Rs.2,20,000. The liabilities and other particulars of the firm on the date of
31.03.2012 they decided to dissolve the firm. On that date A’s Capital was Rs.3,00,000; dissolution were as follows :
B’s Capital was Rs.15,000 (Dr.) and C’s Capital was Rs.37,500 (Dr.). The Creditors Ram’s Capital 2,00,000
amounted to Rs.1,20,000 and Cash balance was Rs. 18,000. The assets realised Shyam’s Capital 20,000 (Dr.)
Rs.3,00,000; Creditors were paid at a discount of 10% and the expenses of dissolution Creditors 80,000
were Rs.1,860. Profit and Loss A/c 16,000 (Dr.)
Prepare realisation account, partner’s capital accounts and the cash account. Realisation Expense 2,000
[Sundry Assets: 3,49,500; Realisation Loss: 39,360; Total of Cash: 3,90,180; Creditors were settled at 10% discount.
A will get: 2,80,320; B will bring: 26,808; C will bring: 45,372] Prepare Partners’ Capital Accounts, Realisation Account and Cash Account to close
the books of the firm.
Q-31: The partnership between X and Y was dissolved on March 31, 2012. On that [Sundry Assets: Rs.2,40,000; Realisation Loss: Rs.14,000; Total of Cash: Rs.2,51,500;
date their respective credits to the Capitals were Rs.1,00,000 and Rs.60,000 Ram will get: Rs.1,77,500; Shyam will bring: Rs.27,500]
 (21) (22)

ratio of 3 : 2 : 1. Interest on Capital was to be allowed at the rate of 5% p.a. and interest
CA. Naresh Aggarwal’s on drawings charged at the rate 6% p.a. Firm earned profits of Rs.60,000 in 2011 and
ACADEMY of ACCOUNTS Rs.48,000 in 2012, before charging interest on capital and drawings. The drawings of
each partner were Rs. 24,000 per year.
Accounting • Costing • Taxation • Financial Management The firm was dissolved on 31.12.2012. On that date creditors were amounted to
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Rs.80,000. Assets realised Rs.4,80,000; other than cash of Rs. 8,000.
Prepare necessary accounts to dissolve the firm.
[Sundry Assets: 3,96,000; Realisation Profit: 84,000;
Q-35: A, B and C were partners from 1st April, 2010 with capitals of Rs.60,000;
Capitals as on 31.12.2012: A-1,65,288; B-1,08,000; C-50,712;
Rs.40,000 and Rs.30,000 respectively. They shared profits in the ratio of 2 : 2 : 1.
Partners will get: A-2,07,288; B-1,36,000; C-64,712; Total of Cash: 4,88,000]
They carried on business for two years. In the first year ending on 31st March, 2011,
they made a profit of Rs.40,000 but in the second year ending on 31st March, 2012, a
Q-39: A, B and C started business on 1st January, 2012. They shared profit and loss
loss of Rs.12,000 was incurred. As the business was no longer profitable they
in the ratio of 2 : 2 : 1. Capitals contributed by them were A Rs.80,000; B Rs.60,000
dissolved the firm on 31st March, 2012. Creditors on that date were Rs.15,000. The
and C Rs.40,000. The partners were entitled to interest on capital at the rate of 6% p.a.
partners withdrew for personal use Rs. 8,000 per partner per year. The assets realised
During the year the firm earned a profit (before interest) of Rs. 50,000. The partners
Rs. 80,000. The expenses of realisation were Rs. 1,000.
had withdrawn A Rs.20,000; B Rs.16,000 and C Rs.10,000.
Prepare Realisation Account and show your workings clearly.
On 31st December, 2012 the firm was dissolved. The assets realised Rs. 2,00,000.

AoA
[Sundry Assets: 1,25,000; Capitals as on 01.04.2012: A-55,200; B-35,200; C-19,600;
The creditors of Rs. 30,000 were paid at a discount of 3%. Expenses incurred on
Realisation Loss: 46,000; Partners will get: A-36,800; B-16,800; C-10,400; Total of Cash: 80,000]
realisation were Rs. 2,900.
Prepare Partners’ Capital Accounts, Realisation Account and Cash Account to close
Q-36: P, Q and R commenced business on 1st April 2010 with Capitals of Rs.1,20,000;
the books of the firm.
Rs.1,00,000 and Rs.80,000 respectively. Profit for the first year was Rs. 96,000 while
[Sundry Assets: 2,14,000; Capitals as on 31.12.2012: A-80,480; B-63,280; C-40,240;
losses in the second year amounted to Rs.24,000. Drawings per partner were Rs.
Realisation Loss: 16,000; Partners will get: A-74,080; B-56,880; C-37,040; Total of Cash: 2,00,000]
14,000 per annum.
The firm was dissolved on 1st April 2012. Creditors on that day were Rs.28,000 who
Q-40: X and Y were partners in a firm sharing profits and losses in the ratio of
were paid Rs. 25,000 in full and final settlement. Cash in hand was Rs.10,000 on that
5 : 3 on 31.12.2012, their firm was dissolved. Pass necessary journal entries for the
date. Other assets realised Rs.3,24,000. Expenses of dissolution were amounted to
following transactions in connection with the dissolution of the firm :
Rs.6,000.
(i) The firm had a debit balance of Rs.16,000 in the Profit & Loss Account on the date
Prepare the Realisation Account and Cash Account.
of dissolution.
[Sundry Assets: 3,06,000; Capitals as on 01.04.2012: P-1,16,000; Q-96,000; R-76,000;
(ii) Y agreed to pay the dissolution expenses for which he had allowed Rs.1,000.
Real. Profit:15,000; Partners will get: P-1,21,000; Q-1,01,000; R-81,000; Total of Cash: 3,34,000]
(iii) The firm had a Joint Life Policy which was not shown in its books. The surrender
value of the policy on the date of dissolution was Rs.4,000.
Q-37: A and B were partners from 1.4.2010 with capitals of Rs.90,000 and Rs.50,000
(iv) An unrecorded typewriter realised Rs.2,000.
respectively. They shared profits and losses in the ratio of 5 : 3. They carried on
(v) Loss on Dissolution was Rs.12,000.
business for 2 years. The first year they made a profit of Rs.60,000 and in the 2nd
year ending 31st March 2012, they incurred a loss of Rs.30,000. As the business was
Q-41: A firm, under dissolution has already transferred assets (other than cash) and
no longer profitable they decided to wind up. Creditors on that date were Rs.15,000.
outside liabilities to the Realisation Account. What entries will be passed for the following
The partners withdrew Rs.5,000 each per year for their personal expenses. The assets
transactions taking place subsequently
realised Rs.1,00,000. The expenses on realisation was Rs.2,000. Prepare Realisation
(a) Rs.1,400 were paid for realisation expenses.
Account and show your workings clearly.
(b) Creditors were paid Rs.32,000.
[Sundry Assets: 1,65,000; Capitals as on 01.04.2012: A-98,750; B-51,250; Realisation Loss: 67,000]
(c) An unrecorded asset realised Rs.800.
(d) Stock worth Rs.1,600 was taken over by a partner B at Rs.1,200.
Q-38: A, B and C entered into partnership on 01.01.2011. They contributed capitals
(e) Profits on realisation amounting to Rs.3,500 were shared between partners A and
of Rs.1,60,000; Rs.1,20,000 and Rs. 80,000 respectively. They shared profits in the
B in the ratio of 5 : 2.
 (23) (24)

Rs.45,000. On that date, the capital account of Ram Lal showed a credit balance of
CA. Naresh Aggarwal’s Rs.35,000 and the capital account of Shyam Lal showed a credit balance of Rs.40,000.
ACADEMY of ACCOUNTS There was a cash balance of Rs. 30,000. Pass necessary journal entries for :
(i) Transfer of loss to the capital accounts of the partners, and
Accounting • Costing • Taxation • Financial Management (ii) Making final payments to the partners.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Q-47: P and Q are partners in a firm sharing profits in the ratio of 3 : 2.
On 01.01.2012 their capital balances stood at Rs.15,000 and Rs.20,000 respectively.
Q-42: What journal entries would be passed for the following transactions on the
The books also showed a Profit & Loss A/c (Dr. balance) of Rs.30,000. The firm
dissolution of a firm, after various assets (other than cash) and third party liabilities
had taken a Joint Life Policy in the names of the partners for Rs.3,00,000. The annual
have been transferred to Realisation Account
premium of Rs.15,000 was payable on 15th February each year. The surrender value
(i) Bank Loan Rs.12,000 is paid.
of the policy on 01.01.2012 was Rs.90,000. The firm was dissolved on 01.01.2012
(ii) Deferred revenue advertising expenditure appeared at Rs.35,000.
and the Joint Life policy surrendered. The insurance company paid Rs. 1,00,000
(iii) An unrecorded liability Rs.6,000.
including bonus.
(iv) Loss on Realisation Rs.10,000 was to be distributed between A and B.
Pass necessary journal entries for distribution of profit & Loss A/c and realisation of
Joint Life Policy.
Q-43: Ramesh and Rakesh are partners. What journal entries would you make in
following cases on dissolution of the firm :

AoA
(i) Expenses on realisation Rs.1,500 paid by firm but borne by Rakesh.
(ii) Expenses on realisation Rs.1,600 paid by Ramesh and borne by Rakesh.
(iii) Realisation Expenses amounted to Rs.1,700.
(iv) Realisation Expenses amounted to Rs.1,800 and the partner has to bear realisation
expenses.
Theoretical Questions
Q-44: L and M were partners in a firm sharing profits in the ratio of 4 : 3. The firm was
dissolved on 28.02.2012. Pass necessary journal entries for the following transactions
Q-1*: Distinguish between dissolution of partnership and dissolution of partnership
(i) Debtors of Rs.20,000 were taken over by L for Rs.18,000.
firm.
(ii) Creditors of Rs.15,000 were paid at a discount of 5%.
(iii) Expenses of dissolution Rs.1,000 were paid by M. Q-2*: Distinguish between revaluation account and realisation account.
(iv) Loss on realisation was Rs.7,000.
Q-3: Explain the provisions of Section 48 of Partnership Act, dealing with the
Q-45: Pass necessary journal entries for the following transactions at the time of settlement of accounts at the time of dissolution of firm.
dissolution of the firm :
(a) Loan of Rs.10,000 advanced by a partner to the firm was refunded.
(b) X, a partner takes over an unrecorded asset (Typewriter) at Rs.300. ••••••••••••••••••••••
(c) Undistributed Balance (debit) of Profit & Loss A/c Rs.30,000. The firm has three
partners X, Y and Z.
(d) The assets of the firm realised Rs.1,25,000.
(e) Y who undertakes to carry out the dissolution proceedings is paid Rs.2,000 for
the same.
(f) Creditors paid Rs.28,000 in full settlement of their account of Rs.30,000.

Q-46: Ram Lal and Shyam Lal were partners in a firm sharing profits in the ratio of
2 : 1. On 28th February 2012, their firm was dissolved. Dissolution resulted in a loss of
 CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org

For Eenquiries
Call or whatsapp: 8800215448

AoA
Issue & Forfeiture (Whatsapp anytime, Calls only between 3.00 pm to 8.00 pm)

Email: ca.naresh.vc@gmail.com
of Shares Website: academyofaccounts.org

Watch us on

https://www.youtube.com/CaNareshAggarwal
 (1) (2)

Q-5: Rich Ltd. has been incorporated with authorized capital of Rs.4,00,000 divided
CA. Naresh Aggarwal’s
into 40,000 shares of Rs.10 each. It offers its 20,000 shares for public subscription on
ACADEMY of ACCOUNTS the following conditions:
Application - Rs.2 per share 1st Call - Rs.2 per share
Accounting • Costing • Taxation • Financial Management Allotment - Rs.3 per share Balance - When required
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Company could receive only 18,000 applications. Pass necessary journal entries.
[Application: Rs.36,000; Allotment: Rs.54,000; 1st Call: Rs.36,000]

Shares Issued at Par Q-6: Diamond Ltd. has been incorporated with authorized capital of Rs.3,00,000 divided
Q-1: XYZ Ltd. was registered with a capital of Rs.3,00,000 divided in 30,000 shares into 6,000 shares of Rs.50 each. It offers its 5,000 shares for public subscription on
of Rs.10 each payable as follows: the following conditions:
Application - Rs.2 per share 1st Call - Rs.2 per share Application - Rs.10 per share 1st Call - Rs.5 per share
Allotment - Rs.3 per share 2nd Call - Rs.3 per share Allotment - Rs.20 per share Balance - When required
All the applications and money duly received. Pass necessary journal entries. Company could receive only 4,000 applications. Pass necessary journal entries.
[Application: Rs.60,000; Allotment: Rs.90,000; 1st Call: Rs.60,000; 2nd Call: Rs.90,000] [Application: Rs.40,000; Allotment: Rs.80,000; 1st Call: Rs.20,000]

Q-2: Amar Ltd. was registered with a capital of Rs.6,00,000 divided in 30,000 shares Q-7: World Ltd. invited applications for 1,00,000 Equity shares and 50,000;

AoA
of Rs.20 each payable as follows: 12% Preference shares of Rs.10 and Rs.20 per share respectively payable as follows:
Application - Rs.5 per share 1st Call - Rs.6 per share Equity Shares (Rs.) Preference Shares (Rs.)
Allotment - Rs.4 per share 2nd Call - Rs.5 per share On Application 2 5
All the applications and money duly received. Pass necessary journal entries. On Allotment 5 6
[Application: Rs.1,50,000; Allotment: Rs.1,20,000; 1st Call: Rs.1,80,000; 2nd Call: Rs.150,000] On First Call 3 4
On Second Call - 5
Q-3: ABC Ltd. has been incorporated with authorized capital of Rs.5,00,000 divided Applications were received for all the equity shares and 40,000 preference shares.
into 50,000 shares of Rs.10 each. It offers its 20,000 shares for public subscription on Pass journal entries for both kind of shares.
the following conditions: [Equity = Application: Rs.2,00,000; Allotment: Rs.5,00,000; 1st Call: Rs.3,00,000
Application - Rs.2 per share Preference = App: Rs.2,00,000; Allot: Rs.2,40,000; 1st Call: Rs.1,60,000; 2nd Call: Rs.2,00,000]
Allotment - Rs.3 per share
1st and Final Call - Rs.5 per share Q-8: Karma Ltd. invited applications for 50,000 Equity shares and 75,000;
Company received all the applications and money . 10% Preference shares of Rs.20 and Rs.50 each respectively payable as follows:
You are required to pass necessary journal entries for the transactions took place. Equity Shares (Rs.) Preference Shares (Rs.)
[Application: Rs.40,000; Allotment: Rs.60,000; 1st Call: Rs.1,00,000] On Application 5 10
On Allotment 6 25
Q-4: Kalinga Ltd. has been incorporated with authorized capital of Rs.3,00,000 divided On First Call 4 15
into 3,000 shares of Rs.100 each. It offers its 2,500 shares for public subscription on On Second Call 5 -
the following conditions: Applications were received for 40,000 of the equity shares and all the preference
Application - Rs.25 per share shares. Pass journal entries for both kind of shares.
Allotment - Rs.35 per share [Equity = App: Rs.2,00,000; Allot: Rs.2,40,000; 1st Call: Rs.1,60,000; 2nd Call: Rs.2,00,000
1st and Final Call - Rs.40 per share Preference = Application: Rs.7,50,000; Allotment: Rs.18,75,000; 1st Call: Rs.11,25,000]
Company received all the applications and money .
You are required to pass necessary journal entries for the transactions took place. Q-9: India Ltd. has been incorporated with authorized capital of Rs.2,00,000 divided
[Application: Rs.62,500; Allotment: Rs.87,500; 1st Call: Rs.1,00,000] into 20,000 shares of Rs.10 each. It offers its 15,000 shares for public subscription on
the following conditions:
 (3) (4)

Application - Rs.2 per share 1st Call - Rs.2 per share

Application - Rs.3Naresh
CA. per shareAggarwal’s
Allotment - Rs.3 per share Final Call - Rs.3 per share
Allotment - Rs.2 per share
ACADEMY of ACCOUNTS
1st and Final Call - Rs.5 per share
Company received applications for 50,000 and allotted as per following scheme:
10,000 applicants - Full
Company received all the applications and shares duly allotted but when allotment is
Accounting • Costing • Taxation • Financial Management 30,000 applicants - Remaining Shares
made a shareholder could not pay on his holding of 100 shares and on 1st call another
West Patel holding
Nagar, New 10,000 applicants - Nil
shareholder 200Delhi.
sharesPh:8800215448.
also failed toWebsite:
pay. www.academyofaccounts.org
Money overpaid on application had been utilized toward allotment and money returned
You are required to pass necessary journal entries for the transactions took place.
on rejected shares. Pass necessary journal entries for the above issue.
[Application: Rs.45,000; Allotment Receipts: Rs.29,800; 1st Call Receipts: Rs.73,500]
[Application Refund: Rs.20,000; Surplus used for Allotment: Rs.20,000
Allotment Receipts: Rs.70,000; 1st Call Receipts: Rs.60,000; 2nd Call Receipts: Rs.90,000]
Q-10: K Ltd. has been incorporated with authorized capital of Rs.3,00,000 divided
into 3,000 shares of Rs.100 each. It offers its 2,500 shares for public subscription on
Q-14: Fortune Ltd. was registered with a capital of Rs.8,00,000 divided in 40,000
the following conditions:
shares of Rs.20 each payable as follows:
Application - Rs.20 per share
Application - Rs.5 per share
Allotment - Rs.50 per share
Allotment - Rs.4 per share
1st and Final Call - Rs.30 per share
1st Call - Rs.6 per share
Company received all the applications and shares duly allotted but when allotment is
2nd and Final Call - Rs.5 per share
made a shareholder could not pay on his holding of 50 shares and on 1st call another

AoA
Company received applications for 60,000 and alloted as per following scheme:
shareholder holding 100 shares also failed to pay.
10,000 applicants - Full
You are required to pass necessary journal entries for the transactions took place.
40,000 applicants - Remaining Shares
[Application: Rs.50,000; Allotment Receipts: Rs1,22,500; 1st Call Receipts: Rs.70,500]
10,000 applicants - Nil
Money overpaid on application had been utilized toward allotment and money returned
Q-11: Ameer Ltd. has been incorporated with authorized capital of Rs.10,00,000 divided
on rejected shares. Pass necessary journal entries for the above issue.
into 1,00,000 shares of Rs.10 each. It offers its 50,000 shares for public subscription
[Application Refund: Rs.50,000; Surplus used for Allotment: Rs.50,000
on the following conditions:
Allotment Receipts: Rs.1,10,000; 1st Call Receipts: Rs.2,40,000; 2nd Call Receipts: Rs.2,00,000]
Application - Rs.2 per share 1st Call - Rs.2 per share
Allotment - Rs.3 per share 2nd Call - Balance
Q-15: ROX Ltd. has been incorporated with authorized capital of Rs.5,00,000 divided
Company could receive 40,000 applications and allotted shares. All the money duly
into 50,000 shares of Rs.10 each. It offers its 20,000 shares for public subscription on
received with exception of 200 shares on allotment, 300 shares on 1st call and 500
the following conditions:
shares on 2nd call. Pass journal entries and show cash book for the above transactions.
Application - Rs.2 per share
[Allotment Receipts: Rs.1,19,400; 1st Call Receipts: Rs.79,400; 2nd Call Receipts: Rs.1,18,500]
Allotment - Rs.3 per share
1st and Final Call - Rs.5 per share
Q-12: Gareeb Ltd. has been incorporated with authorized capital of Rs.3,00,000 divided
Company received applications for 50,000 and allotted as per following scheme:
into 6,000 shares of Rs.50 each. It offers its 5,000 shares for public subscription on
5,000 applicants - Full
the following conditions:
25,000 applicants - Remaining Shares
Application - Rs.10 per share 1st Call - Rs.10 per share
Money overpaid on application had been utilized toward allotment and money returned
Allotment - Rs.20 per share 2nd Call - Balance
on rejected shares. All money duly received except 1st call on 400 shares. Pass
Company could receive 4,000 applications and allotted shares. All the money duly
necessary journal entries for the above issue.
received with exception of 50 shares on allotment, 150 shares on 1st call and 250
[Application Refund: Rs.40,000; Surplus used for Allotment: Rs.20,000
shares on 2nd call. Pass journal entries and show cash book for the above transactions.
Allotment Receipts: Rs.40,000; 1st Call Receipts: Rs.98,000]
[Allotment Receipts: Rs.79,000; 1st Call Receipts: Rs.38,500; 2nd Call Receipts: Rs.37,500]

Q-16: ABC Ltd. has been incorporated with authorized capital of Rs.3,00,000 divided
Q-13: Delhi Ltd. was registered with a capital of Rs.3,00,000 divided in 30,000 shares
into 3,000 shares of Rs.100 each. It offers its 2,500 shares for public subscription on
of Rs.10 each payable as follows:
the following conditions:
 (5) (6)

Application - Rs.25 per share 1st Call - Rs.6 per share

CA. Naresh Aggarwal’s 2nd and Final Call - Rs.5 per share
Allotment - Rs.35 per share
ACADEMY of ACCOUNTS
1st and Final Call - Rs.40 per share
Company received applications for 8,000 and allotted as per following scheme:
Company received applications for 50,000 and allotted as per following scheme:
8,000 applicants - 6,000 Shares
Accounting
1,000 applicants • Costing
- Full •
Taxation • Financial Management 20,000 applicants - 14,000 Shares
West
5,000Patel Nagar, New Delhi.
applicants Ph:8800215448.
- Remaining SharesWebsite: www.academyofaccounts.org Remaining applicants - Balance Shares
Money overpaid on application had been utilized toward allotment and calls whereas Money overpaid on application had been utilized toward allotment and calls.
money returned on rejected shares. Pass necessary journal entries. Pass necessary journal entries for the above issue.
[Application Refund: Rs.50,000; Advance for Allotment: Rs.52,500; Advance for 1st Call: Rs.35,000 [Advance for Allotment: Rs.80,000; Advance for 1st Call: Rs.20,000
Allotment Receipts: Rs.35,000; 1st Call Receipts: Rs.65,000] Allotment Receipts: Rs.40,000; 1st Call Receipts: Rs.1,60,000; 2nd Call Receipts: Rs.1,50,000]

Q-17: TAJA Ltd. has been incorporated with authorized capital of Rs.4,00,000 divided Shares Issued at Premium
into 40,000 shares of Rs.10 each. It offers its 20,000 shares for public subscription on
the following conditions: Q-20: K Ltd. has been incorporated with authorized capital of Rs.5,00,000 divided
Application - Rs.2 per share 1st Call - Rs.2 per share into 50,000 shares of Rs.10 each. It offers its 20,000 of its shares at a premium of
Allotment - Rs.3 per share Balance - When required Rs.2 per share on the following conditions:
Company received applications for 40,000 and allotted as per following scheme: Application - Rs.2 per share

AoA
10,000 applicants - Full Allotment - Rs.5 per share (including premium)
Remaining applicants - Remaining Shares 1st and Final Call - Rs.5 per share
Money overpaid on application had been utilized toward allotment and calls whereas Company received all the applications and money .
money returned on rejected shares. Pass necessary journal entries. You are required to pass necessary journal entries for the transactions took place.
[Advance for Allotment: Rs.30,000; Advance for 1st Call: Rs.10,000 [Application Receipts: Rs.40,000; Allotment Receipts: Rs.1,00,000; 1st Call Receipts: Rs.1,00,000]
Allotment Receipts: Rs.30,000; 1st Call Receipts: Rs.30,000]
Q-21: Apex Ltd. has been incorporated with authorized capital of Rs.3,00,000 divided
Q-18: Gold Ltd. has been incorporated with authorized capital of Rs.3,00,000 divided into 3,000 shares of Rs.100 each. It offers its 2,500 shares at a premium of Rs.10 per
into 6,000 shares of Rs.50 each. It offers its 5,000 shares for public subscription on share on the following conditions:
the following conditions: Application - Rs.25 per share
Application - Rs.10 per share 1st Call - Rs.10 per share Allotment - Rs.35 per share
Allotment - Rs.20 per share Balance - When required 1st and Final Call - Rs.50 per share (including premium)
Company received applications for 12,000 and allotted as per following scheme: Company received all the applications and money .
2,000 applicants - 1,500 Shares You are required to pass necessary journal entries for the transactions took place.
5,000 applicants - 2,500 Shares [Application Receipts: Rs.62,500; Allotment Receipts: Rs.87,500; 1st Call Receipts: Rs.1,25,000]
3,500 applicants - Balance Shares
Remaining applicants - Rejected Q-22: R Ltd. has been incorporated with authorized capital of Rs.4,00,000 divided
Money overpaid on application had been utilized toward allotment and calls. into 40,000 shares of Rs.10 each. It offers its 20,000 shares at a premium of Rs.4 per
Pass necessary journal entries for the above issue. share on the following conditions:
[Application Refund: Rs.15,000; Advance for Allotment: Rs.50,000; Advance for 1st Call: Rs.5,000 Application - Rs.2 per share
Allotment Receipts: Rs.50,000; 1st Call Receipts: Rs.45,000] Allotment - Rs.5 per share (including Rs.2 premium)
1st Call - Rs.6 per share (including Rs.2 premium)
Q-19: Lucky Ltd. was registered with a capital of Rs.6,00,000 divided in 30,000 shares Balance - when required
of Rs.20 each payable as follows: Company received 25,000 applications, excess being rejected. You are required to
Application - Rs.5 per share pass necessary journal entries.
Allotment - Rs.4 per share [Application Receipts: Rs.40,000; Allotment Receipts: Rs.1,00,000; 1st Call Receipts: Rs.1,20,000]
 (7) (8)

Money overpaid on application had been utilized toward allotment and calls.
CA. Naresh Aggarwal’s You are required to pass journal entries and cash book for the above transactions.
ACADEMY of ACCOUNTS [Advance for Allotment: Rs.37,500; Allotment Receipts: Rs.62,500; 1st Call Receipts: Rs.1,00,000]

Accounting • Costing • Taxation • Financial Management Q-26: Bhagwan Ltd. has been incorporated with authorized capital of Rs.5,00,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org divided into 50,000 shares of Rs.10 each. It offers 20,000 of its shares at a premium of
Re. 1 per share on the following conditions:
Application - Rs.2 per share
Allotment - Rs.3 per share
Q-23: Silver Ltd. has been incorporated with authorized capital of Rs.3,00,000 divided 1st and Final Call - Rs.5 per share
into 6,000 shares of Rs.50 each. It offers 5,000 of its shares at a premium of Rs.8 per Company received applications for 25,000 shares and allotted on pro rata basis.
share on the following conditions: Money overpaid on application had been utilized toward allotment and calls.
Application - Rs.10 with premium of Rs.2 per share Pass necessary journal entries.
Allotment - Rs.20 with premium of Rs.2 per share [Advance for Allotment: Rs.10,000; Allotment Receipts: Rs.70,000; 1st Call Receipts: Rs.1,00,000]
1st Call - Rs.15 with premium of Rs.2 per share
2nd Call - Rs.5 with premium of Rs.2 per share
Company received 8,000 applications, excess being rejected. All money duly received Issue of shares for consideration other then cash

AoA
with exception of 150 shares on 1st call and 200 shares on final call. Q-27: ABC Ltd bought sundry assets worth Rs.50,000 with laibilites of Rs.10,000 at
You are required to pass necessary journal entries. settled amount of Rs.35,000 from XYZ to be paid by issue of equity shares of Rs.10
[Application Refund: Rs.36,000; Allotment Receipts: Rs.1,10,000 each at par. Record necessary journal entries.
1st Call Receipts: Rs.82,450; 2nd Call Receipts: Rs.33,600] [Capital Reserve: Rs.5,000; Number of shares issued: 3,500]

Q-24: Kolkata Ltd. was registered with a capital of Rs.3,00,000 divided in 30,000 shares Q-28: SUN Ltd bought Machine of Rs.50,000; Furniture of Rs.30,000 and Land of
of Rs.10 each to be issued at a premium of Rs.3 per share, payable as follows: Rs.60,000 with sundry laibilites of Rs.25,000 at settled price of Rs.1,10,000 from
Application - Rs.2 with premium of Rs.2 per share MOON Ltd. to be paid by issue of equity shares of Rs.10 each.
Allotment - Rs.5 with premium of Rs.1 per share Record necessary journal entries as per following situations :
1st Call - Rs.3 per share (i) Shares are issued at par.
Company received applications for 50,000 and allotted as per following scheme: (ii) Shares are issued at 10% premium
10,000 applicants - Full [Capital Reserve: Rs.5,000; (i): 11,000 Shares; (ii): 10,000 Shares]
30,000 applicants - Remaining Shares
10,000 applicants - Nil Q-29: Rich Ltd bought Machine of Rs.55000; Furniture of Rs.45,000 and Land of
Money overpaid on application had been utilized toward allotment and money returned Rs.90,000 with sundry laibilites of Rs.15,000 at settled price of Rs.1,65,000 from Poor
on rejected shares. All money duly received except 1st call on 400 shares. Ltd. to be paid by issue of equity shares of Rs.10 each.
You are required to pass journal entries and cash book for the above transactions. Record necessary journal entries as per following situations :
[Application Refund: Rs.40,000; Advance for Allotment: Rs.40,000 (i) Shares are issued at par
Allotment Receipts: Rs.1,40,000; 1st Call Receipts: Rs.88,800] (ii) Shares are issued at 10% premium
[Capital Reserve: Rs.10,000; (i): 16,500 Shares; (ii): 15,000 Shares]
Q-25: USA Ltd. has been incorporated with authorized capital of Rs.3,00,000 divided
into 3,000 shares of Rs.100 each . The company offers 2,500 of its shares at a premium Q-30: Ameer Ltd bought the business of Gareeb Ltd. at an agreed price of Rs.1,05,000
of Rs.5 per share on the following conditions: consisting of Debtors Rs.25,000; Furniture Rs.20,000; Bank Balance Rs.30,000; Land
Application - Rs.25 per share and Building Rs.50,000; Creditors Rs.32,000 and O/s Expenses Rs.5,000.
Allotment - Rs.40 per share The consideration has been to be paid by issue of equity shares of Rs.100 each.
1st and Final Call - Rs.40 per share Record necessary journal entries as per following situations :
Company received applications for 4,000 shares and allotted on pro rata basis.
 (9) (10)

(i) The company issued 5,000 shares at par to its promoters as the remuneration of
CA. Naresh Aggarwal’s the services rendered by them at par.
ACADEMY of ACCOUNTS (ii) Company also issued shares at 10% premium to Mr. Mukesh for the purchase of
Land and Building of Rs.5,50,000 from him.
Accounting • Costing • Taxation • Financial Management Pass the necessary journal entries.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org [(ii): Number of equity shares to be issued 50,000]

Q-37: K Ltd. purchased furniture costing Rs.1,75,000 from ‘Furniture Mart’. Payment
(i) Shares are issued at par
was made as under:
(ii) Shares are issued at 5% Premium
(i) Rs.65,000 in cash
[Goodwill: Rs.17,000; (i): 1,050 Shares; (ii): 1,000 Shares]
(ii) Balance was payable by way of issuing Equity shares of Rs.100 each at a premium
of Rs.10.
Q-31: India Ltd bought sundry assets worth Rs.1,40,000 from USA Ltd. to be paid by
Pass the necessary journal entries.
issue of equity shares of Rs.10 each.
[Number of shares issued 1,000]
Record necessary journal entries as per following situations :
(i) Shares are issued at par.
Q-38: P Ltd. purchased Machinery worth Rs.1,75,000 from ABC & Co. for an agreed
(ii) Shares are issued at Rs.4 per share as premium.
price of Rs.1,40,000 Payment was made as under:

AoA
[(i): 14,000 Shares; (ii): 10,000 Shares]
(i) Rs.30,000 in cash
(ii) Balance was payable by way of issuing 12% Preference shares of Rs.100 each
Q-32: A Ltd bought sundry assets worth Rs.2,50,000 from B Ltd. to be paid by issue
at premium of Rs.10.
of equity shares of Rs.20 each.
Pass the necessary journal entries.
Record necessary journal entries as per following situations :
[Capital Reserve: Rs.35,000; Number of shares issued 1,000]
(i) Shares are issued at par.
(ii) Shares are issued at a premium of Rs.2 per share.
Q-39: A limited company purchased machine worth Rs.1,15,000 from Indian
[(i): 12,500 Shares; (ii): 11,363 Shares]
TradeRs.Payment was made as to Rs.10,000 by a crossed cheque and remaining
amount by issue of equity shares of the face value of Rs.10 each fully paid at an issue
Q-33: Ajay Ltd bought sundry assets worth Rs.70,000 from Vijay Traders to be paid
price of Rs.10.50 each.
by issue of equity shares of Rs.100 each.
Make entries in company’s journal.
Record necessary journal entries as per following situations :
[Number of shares issued 10,000]
(i) Shares are issued at par.
(ii) Shares are issued at a premium of Rs.10 per share.
Q-40: A limited company issued 1,000 equity shares of Rs.100 each as fully paid up
[(i): 700 Shares; (ii): 636 Shares]
in consideration of the purchase of Land and Building worth Rs.99,000. Make entries
in company’s Journal.
Q-34: Rohit Ltd. purchased assets from Rohan & Co., for Rs.3,50,000. A sum of
[Goodwill Rs.1,000]
Rs.75,000 was paid by the means of a bank draft and for the balance due Rohit Ltd.
issued Equity Shares of Rs.10 each at a premium of 10%. Journalize the above
transactions in the books of the company.
[Number of equity shares to be issued 25,000]

Q-35: Bharat Ltd. issued 500 equity shares of Rs.100 each to its promotors in
consideration of the services rendered by them at par.

Q-36: Bharat Ltd. was formed on 1.4.2012 with an authorized capital of Rs.40,00,000
divided in equity shares of Rs.10 each.
 (11) (12)

Application - Rs.15 per share 1st Call - Rs.10 per share

CA. Naresh
ForfeitureAggarwal’s
of Shares Allotment - Rs.15 per share 2nd Call - Balance
ACADEMY of ACCOUNTS
Q-41: Charm Ltd. has been incorporated with authorized capital of Rs.2,00,000 divided
Company could receive 4,000 applications and allotted shares. All the money duly
received with exception of 50 shares on allotment, 1st call and 2nd call. Finally directors
intoAccounting
20,000 shares of Rs.10 each. ItTaxation
• Costing • offers its 15,000 shares for public
• Financial subscription on
Management decided to forfeit these shares and later reissued at Rs.45 per share.
the following conditions:
West Patel Nagar, New Delhi. Ph:8800215448. You are required to pass necessary journal entries for the above transactions.
Application - Rs.3 per share Website: www.academyofaccounts.org
[Allotment Receipts: Rs.59,250; 1st Call Receipts: Rs.39,500; 2nd Call Receipts: Rs.39,500
Allotment - Rs.2 per share
Forfeited Amount: Rs.750; Capital Resarve: Rs.500]
1st and Final Call - Rs.5 per share
Company received all the applications and shares duly allotted but when allotment is
Q-45: Bareli Ltd. has been incorporated with authorized capital of Rs.6,00,000 divided
made a shareholder could not pay on his holding of 100 shares and on his subsequent
into 60,000 shares of Rs.10 each. It offers its 50,000 shares for public subscription on
failure to pay first call his shares were forfeited and reissued for Rs.9 per share as
the following conditions:
fully paid up. Pass necessary journal entries for the transactions took place.
Application - Rs.3 per share 1st Call - Rs.2 per share
[Allotment Receipts: Rs.29,800; 1st Call Receipts: Rs.74,500
Allotment - Rs.2 per share 2nd Call - Rs.3 per share
Forfeited Amount: Rs.300; Capital Resarve: Rs.200]
Company received all the applications and shares duly allotted but when allotment is
made a shareholder could not pay on his holding of 200 shares and directors forfeited
Q-42: Shah Ltd. has been incorporated with authorized capital of Rs.3,00,000 divided
his shares immediately. After 1st call 150 from the forfeited share reissued for Rs.6

AoA
into 3,000 shares of Rs.100 each. It offers its 2,500 shares for public subscription on
per share. Final call also made on shares and duly received.
the following conditions:
You are required to pass necessary journal entries for the transactions took place.
Application - Rs.20 per share
[Allotment Receipts: Rs.99,600; 1st Call Receipts: Rs.99,600; 2nd Call Receipts: Rs.1,49,850
Allotment - Rs.50 per share
Forfeited Amount: Rs.600; Capital Resarve: Rs.300]
1st and Final Call - Rs.30 per share
Company received all the applications and shares duly allotted but when allotment is
Q-46: Bhagwan Ltd. has been incorporated with authorized capital of Rs.5,00,000
made a shareholder could not pay on his holding of 50 shares and on his subsequent
divided into 5,000 shares of Rs.100 each. It offers its 4,000 shares for public
failure to pay first call his shares were forfeited and reissued for Rs.95 per share as
subscription on the following conditions:
fully paid up. Pass necessary journal entries for the transactions took place.
Application - Rs.30 per share 1st Call - Rs.10 per share
[Allotment Receipts: Rs.1,22,500; 1st Call Receipts: Rs.73,500
Allotment - Rs.20 per share 2nd Call - Rs.40 per share
Forfeited Amount: Rs.1,000; Capital Resarve: Rs.750]
Company received all the applications and shares duly allotted but when allotment is
made a shareholder could not pay on his holding of 50 shares and directors forfeited
Q-43: Sarvodaya Ltd. has been incorporated with authorized capital of Rs.10,00,000
his shares immediately. After 1st call 40 from the forfeited share reissued for Rs.55
divided into 1,00,000 shares of Rs.10 each. It offers its 50,000 shares for public
per share. Final call also made on shares and duly received.
subscription on the following conditions:
You are required to pass necessary journal entries for the transactions took place.
Application - Rs.3 per share 1st Call - Rs.2 per share
[Allotment Receipts: Rs.79,000; 1st Call Receipts: Rs.39,500; 2nd Call Receipts: Rs.1,59,600
Allotment - Rs.2 per share 2nd Call - Balance
Forfeited Amount: Rs.1,500; Capital Resarve: Rs.1,000]
Company could receive 40,000 applications and allotted shares. All the money duly
received with exception of 200 shares on allotment, 1st call and 2nd call. Finally directors
Q-47: Micro Ltd. was registered with a capital of Rs.3,00,000 divided in 30,000 shares
decided to forfeit these shares and later reissued at Rs.8 per share.
of Rs.10 each payable as follows:
You are required to pass necessary journal entries for the above transactions.
Application - Rs.2 per share 2nd Call - Rs.2 per share
[Allotment Receipts: Rs.79,600; 1st Call Receipts: Rs.79,600; 2nd Call Receipts: Rs.1,19,400
Allotment - Rs.2 per share 3rd Call - Rs.2 per share
Forfeited Amount: Rs.600; Capital Resarve: Rs.200]
1st Call - Rs.2 per share
Applications received for all the desired shares and duly allotted but money could not
Q-44: Ghansyam Ltd. has been incorporated with authorized capital of Rs.3,00,000
received on allotment on 300 shares which were forfeited on their subsequent failure
divided into 6,000 shares of Rs.50 each. It offers its 5,000 shares for public subscription
to pay 1st call. Later, 250 of these shares reissued after 2nd call for Rs.9 per share as
on the following conditions:
 (13) (14)

received with exception of 100 shares on allotment, 250 shares on 1st call and 300
CA. Naresh Aggarwal’s shares on 2nd call. The directors forfeited all the defaulting shares and later reissued
ACADEMY of ACCOUNTS at the rate of Rs.18 each as fully paid up.
You are required to pass necessary journal entries for the transactions took place.
Accounting • Costing • Taxation • Financial Management [Allotment Receipts: Rs.79,600; 1st Call Receipts: Rs.1,18,500; 2nd Call Receipts: Rs.98,500
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Forfeited Amount: Rs.2,600; Capital Resarve: Rs.2,000]

Rs.8 paid up. Final call also made on shares and duly received. Q-51: Ram Ltd. has been incorporated with authorized capital of Rs.5,00,000 divided
Pass necessary journal entries. into 10,000 shares of Rs.50 each. It offers 8,000 of its shares at a premium of Rs.8 per
[Allot Receipts: 59,400; 1st Call Receipts: 59,400; 2nd Call Receipts: 59,400; 3rd Call Receipt: share on the following conditions:
59,900 Forfeited Amount: Rs.600; Securites Premium on reissue: Rs.250; Capital Resarve: Rs.500] Application - Rs.10 with premium of Rs.2 per share
Allotment - Rs.20 with premium of Rs.2 per share
Q-48: Krishna Ltd. was registered with a capital of Rs.10,00,000 divided in 50,000 1st Call - Rs.10 with premium of Rs.2 per share
shares of Rs.20 each payable as follows: 2nd Call - Rs.10 with premium of Rs.2 per share
Application - Rs.4 per share 2nd Call - Rs.4 per share Company received 7,500 applications and shares allotted to all of them. But when
Allotment - Rs.4 per share 3rd Call - Rs.4 per share allotment was made a shareholder holding 100 shares failed to pay and on his
1st Call - Rs.4 per share subsequent failure to pay 1st call his shares were forfeited. After final call is made 60

AoA
Applications received for all the desired shares and duly allotted but money could not of his shares reissued at the rates given below :
received on allotment on 500 shares which were forfeited on their subsequent failure (i) Rs.45 each (ii) Rs.50 each (iii) Rs.55 each
to pay 1st call. Later, 400 of these shares reissued after 2nd call for Rs.17 per share [Allotment Receipts: Rs.1,62,800; 1st Call Receipts: Rs.88,800; 2nd Call Receipts: Rs.88,800
as Rs.16 paid up. Final call also made on shares and duly received. Forfeited Amount: Rs.1,000; Capital Resarves: (i) 300; (ii) 600; (iii) 600]
Pass necessary journal entries.
[Allot Receipt:198,000; 1st Call Receipt:1,98,000; 2nd Call Receipt:1,98,000; 3rd CallReceipt:1,99,600 Q-52: Kargil Ltd. has been incorporated with authorized capital of Rs.6,00,000 divided
Forfeited Amount: Rs.2,000; Securites Premium on reissue: Rs.400; Capital Resarve: Rs.1,600] into 60,000 shares of Rs.10 each. It offers all of its shares at a premium of Rs.4 per
share on the following conditions:
Q-49: Char Minar Ltd. has been incorporated with authorized capital of Rs.6,00,000 Application - Rs.2 with premium of Rs.1 per share
divided into 60,000 shares of Rs.10 each. It offers its 50,000 shares for public Allotment - Rs.3 with premium of Rs.1 per share
subscription on the following conditions: 1st Call - Rs.2 with premium of Rs.1 per share
Application - Rs.3 per share 1st Call - Rs.2 per share 2nd Call - Rs.3 with premium of Rs.1 per share
Allotment - Rs.2 per share 2nd Call - Rs.3 per share Company received 50,000 applications and shares allotted to all of them. But when
Company received all the applications and shares duly allotted. All the money duly allotment was made a shareholder holding 300 shares failed to pay and on his
received with exception of 200 shares on allotment, 300 shares on 1st call and 500 subsequent failure to pay 1st call his shares were forfeited. After final call is made 200
shares on 2nd call. The directors forfeited all the defaulting shares and later reissued of his shares reissued at the rates given bellow :
at the rate of Rs.8 each as fully paid up. (i) Rs.9 each (ii) Rs.10 each (iii) Rs.11 each
You are required to pass necessary journal entries for the transactions took place. [Allotment Receipts: Rs.1,98,800; 1st Call Receipts: Rs.1,49,100; 2nd Call Receipts: Rs.1,98,800
[Allotment Receipts: Rs.99,600; 1st Call Receipts: Rs.99,400; 2nd Call Receipts: Rs.1,48,500 [Forfeited Amount: Rs.600; Capital Resarve: (i) 200; (ii) 400; (iii) 400]
Forfeited Amount: Rs.2,500; Capital Resarve: Rs.1,500]
Q-53: Kalyan Ltd. has been incorporated with authorized capital of Rs.5,00,000 divided
Q-50: Lal Quila Ltd. has been incorporated with authorized capital of Rs.5,00,000 into 50,000 shares of Rs.10 each. It offers its 30,000 of its shares at a premium of
divided into 25,000 shares of Rs.20 each. It offers its 20,000 shares for public Rs.2 per share on the following conditions:
subscription on the following conditions: Application - Rs.2 per share
Application - Rs.5 per share 1st Call - Rs.6 per share Allotment - Rs.5 per share (including premium)
Allotment - Rs.4 per share 2nd Call - Rs.5 per share 1st and Final Call - Rs.5 per share
Company received all the applications and shares duly allotted. All the money duly Company received applications for 35,000 shares and all the shares allotted on the
 (15) (16)

pro rata basis. A shareholder holding 150 shares failed to pay on 1st and final call and Give necessary journal entries regarding forfeiture and re-issue of shares.
CA.reissued
his shares forfeited and later Naresh Aggarwal’s
40 shares for Rs.9 each 60 shares for Rs.10 [Forfeited Amount: Rs.2,250; Capital Reserve Rs.1,350]
ACADEMY of ACCOUNTS
each and balance shares for Rs.12 each.
You are required to pass necessary journal entries for the transactions took place. Q-59: X Ltd. forfeited 400 shares of Rs.20 (Rs.18 called up) each issued to Mahesh
Accounting • Costing
[Allotment Receipts: • Taxation
Rs.1,40,000; • Financial
1st Call Receipts: Management
Rs.1,49,250; Forfeited Amount: Rs.750 on which he did not pay first call of Rs.4. Of these 300 shares ,were reissued at the
CapitalWebsite:
West Patel Nagar, New Delhi. Ph:8800215448. Resarve: Rs.160 + Rs.300 + Rs.250 = Rs.710]
www.academyofaccounts.org rate of Rs.16 per share as Rs.18 paid-up. Give the necessary Journal entries relating
to forfeiture and re-issue of shares.
Q-54: Bride Ltd. has been incorporated with authorized capital of Rs.7,00,000 divided [Forfeited Amount: Rs.5,600; Capital Reserve: Rs.3,600]
into 70,000 shares of Rs.10 each. It offers its 50,000 of its shares at a premium of Re.
1 per share on the following conditions: Q-60: Y Ltd., forfeited 100 shares of Rs.10 each issued at a premium of Rs.2 per
Application - Rs.3 per share share to Ashok (Rs.8 called-up) on which he did not pay allotment of Rs.5 (including
Allotment - Rs.6 per share (including premium) premium) and 1st Call of Rs.3. Give Journal Entries for forfeiture and re-issue in the
1st and Final Call - Rs.2 per share following cases :
Company received applications for 60,000 shares and all the shares allotted on the (i) 50 shares were re-issued at Rs.7 per share as Rs.8 paid up
pro rata basis. A shareholder holding 300 shares failed to pay on 1st and final call and (ii) 30 shares as fully paid-up for Rs.8 per share
his shares forfeited and later reissued 100 shares for Rs.8 each 120 shares for Rs.10 (iii) 20 shares as fully paid-up for Rs.11 per share
each and balance shares for Rs.11 each. [Forfeited Amount: Rs.200; Capital Reserves (i) Rs.50; (ii) Nil; (iii) Rs.40]

AoA
You are required to pass necessary journal entries for the transactions took place.
[Allotment Receipts: Rs.2,70,000; 1st Call Receipts: Rs.99,400; Forfeited Amount: Rs.2,400 Q-61: Z Limited forfeited 500 shares of Rs.20 each (Rs.15 called-up) issued at a
Capital Resarve: Rs.600 + Rs.960 + Rs.640 = Rs.2,200] premium of Rs.3 per share to Mr. Ram, for non payment of allotment money of Rs.8
per share (including premium). Out of these 300 shares were re-issued to Mr. Shekhar
Q-55: ABC Ltd. forfeited 100 shares of Rs.10 each issued at par on which first call as Rs.18 called up for Rs.15 per share.
Give the necessary Journal entries relating to forfeiture and re-issue of shares.
money of Rs.3 was not received; the final call money of Rs.2 is not yet called. These
[Forfeited Amount: Rs.5,000; Capital Reserve Rs.2,100]
shares were subsequently re-issued at Rs.7 per share as fully paid-up.
Give necessary journal entries regarding forfeiture and re-issue of shares.
Q-62: A Ltd. forfeited 80 shares of Rs.10 each issued at 40% premium (half premium
[Forfeited Amount: Rs.500; Capital Reserve: Rs.200]
to be paid at the time of allotment balance on final call) for non-payment of a final call of
Rs.3 per share. Out of these, 60 shares were re-issued as fully paid-up for Rs.12 per
Q-56: XYZ Ltd. forfeited 200 shares of Rs.20 each issued at par on which allotment
share. Journalize.
money of Rs.4 and first call money of Rs.3 was not received, the final call money of
[Forfeited Amount: Rs.720; Capital Reserve: Rs.540]
Rs.5 is not yet called. 150 of these shares were re-issued as fully paid for Rs.16 per
share. Give necessary journal entries regarding forfeiture and re-issue of shares.
Q-63: B Ltd. forfeited 50 shares of Rs.10 each issued at Rs.2 premium (half premium
[Forfeited Amount: Rs.1,600; Capital Reserve Rs.600]
to be paid at the time of allotment balance on first call) for non-payment of the first call
of Rs.3 per share and final call of Rs.2 per share. Out of these, 30 shares were
Q-57: Z Ltd. forfeited 150 shares of Rs.100 each, issued at a premium of 30% to
re-issued as fully paid-up for Rs.9 per share. Journalise.
Dinesh on which he had paid application money of Rs.30 per share and allotment
[Forfeited Amount: Rs.300; Capital Reserve Rs.150]
money of Rs.50 per share (including premium), for non-payment of a first call of Rs.10
per share. Out of these, 100 shares were re-issued as fully paid for Rs.105 per share. Q-64: A share of Rs.10, on which Rs.7 has been called and Rs.5 have been paid, is
Give necessary journal entries regarding forfeiture and re-issue of shares. forfeited. It is reissued for Rs.8 as fully paid. Give Journal entries.
[Forfeited Amount: Rs.7,500; Capital Reserve: Rs.5,000] [Forfeited Amount: Rs.5; Capital Reserve Rs.3]

Q-58: PQR Ltd. forfeited 250 shares of Rs.20 each, issued at a premium of 20% to Q-65: A share of Rs.50, on which Rs.40 has been called and Rs.25 have been paid,
Ashok on which he had paid application money of Rs.3 per share and allotment money is forfeited. It is reissued for Rs.45 as fully paid. Give Journal entries.
of Rs.10 per share (including premium), for non-payment of a first call of Rs.5 pe r [Forfeited Amount: Rs.25; Capital Reserve Rs.20]
share. Out of these, 150 shares were re-issued as fully paid for Rs.21 per share.
 (17) (18)

application money was transferred to allotment.

CA. Naresh Aggarwal’s A llthe m oney w ere duly received exceptfrom ‘R adha’applied for 160 shares, who

ACADEMY of ACCOUNTS failed to pay, allotment and first call money. Her shares were forfeited and reissued to
‘Meera’ at Rs.45 per share as Rs.40 paid up. Final Call has not been made.
Accounting • Costing • Taxation • Financial Management Pass necessary Journal Entries and show Cash Book of Best Ltd.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org [Application Refund: Rs.10,000; Advance for Allotment: Rs.20,000; Allotment Receipts: Rs.156,800
1st Call Receipts: Rs.58,800; Forfeited Amount: Rs.1,600; Capital Resarve: Rs.1,600]
Forfeiture of Shares (Pro-rata Based)
Q-69: MAX Ltd. has been registered with an authorized capital of Rs.4,00,000 divided
Q-66: Dharmender Ltd. offered to the public 20,000 shares of Rs.100 each at a premium
into 4,000 shares of Rs.100 each of which 2,500 shares were offered for public
of Rs.20 payable as follows :
subscription at a premium of Rs.10 per share payable as under :
Application - Rs.20 per share 1st Call - Rs.25 per share
Application - Rs.10 per share 1st Call - Rs.40 per share
Allotment - Rs.50 per share 2nd Call - Rs.25 per share
Allotment - Rs.30 per share 2nd Call - Rs.30 per share
Applications were received for 35,000 shares out of which those for 10,000 shares
Application were received for 4,000 shares, of which applications for 500 shares were
were rejected outright; full allotment was made to the applicants for 5,000 shares and
rejected, the rest of the applicants were allotted shares on pro-rata basis. Excess
pro-rata allotment was made to balance.
application money was transferred to allotment.
Final Call was not made and a shareholderholding 300 shares to whom allotment was
All the money were duly received except from Pyare Lal, applied for 350 shares, who

AoA
made on pro-rata basis failed to pay the allotment and first call money. His shares
failed to pay, allotment and first call money. His shares were forfeited and reissued to
were forfeited. All the forfeited shares were reissued at Rs.70 per share as Rs.75 paid
Dulare Lal at Rs.60 per share as Rs.70 paid up. Final Call has not been made.
up. Pass Journal entries and prepare the Balance Sheet of the company.
Pass necessary Journal Entries and show Cash Book of MAX Ltd.
[Application Refund: Rs.2,00,000; Adv. for Allotment: Rs.1,00,000; Allotment Receipts: Rs.8,87,000
[Application Refund: Rs.5,000; Advance for Allotment: Rs.10,000; Allotment Receipts: Rs.58,500
1st Call Receipts: Rs.4,92,500; Forfeited Amount: Rs.8,000; Capital Resarve: Rs.6,500]
1st Call Receipts: Rs.90,000; Forfeited Amount: Rs.3,500; Capital Resarve: Rs.1,000]

Q-67: Hero Ltd. offered to the public 30,000 shares of Rs.100 each at a premium of
Q-70: Best Limited issued a prospectus inviting applications for 4,000 Equity shares
Rs.5 payable as follows :
of Rs.10 each at a premium of Rs.2 per share, payable as follows:
Application - Rs.25 per share 1st Call - Rs.25 per share
Application - Rs.3 per share 1st Call - Rs.2 per share
Allotment - Rs.40 per share 2nd Call - Rs.15 per share
Allotment - Rs.4 per share 2nd Call - Rs.3 per share
Applications were received for 45,000 shares out of which those for 5,000 shares
Applications were received for Rs.7,000 shares and allotment was made pro-rata to
were rejected outright; full allotment was made to the applicants for 10,000 shares and
the applicants of 4,800 shares. The remaining applications been refunded. Money
pro-rata allotment was made to balance.
received in excess on the applications was used towards the amount due to allotment.
Final Call was not made and a shareholderholding 200 shares to whom allotment was
Amit, to whom 300 shares were allotted failed to pay allotment money and on his
made on pro-rata basis failed to pay the allotment and first call money. His shares
failure to pay the first call his shares were forfeited. Vijay the holder of 240 shares,
were forfeited. All the forfeited shares were reissued at Rs.70 per share as Rs.85 paid
failed to pay the two calls and so his shares were also forfeited. All these shares were
up. Pass Journal entries and prepare the Balance Sheet of the company.
sold to Dinesh credited as fully paid for Rs.8 per share.
[Application Refund: Rs.1,25,000; Adv. for Allotment: Rs.2,50,000; Allotment Receipts: Rs.9,44,500
Pass necessary journal entries to record the above issue of shares by the company.
1st Call Receipts: Rs.7,45,000; Forfeited Amount: Rs.7,500; Capital Resarve: Rs.4,500]
[Application Refund: Rs.6,600; Advance for Allotment: Rs.2,400; Allotment Receipts: Rs.12,580
1st Call Receipts: Rs.10,380; Forfeited Amount: Rs.1,080 + Rs.1,200; Capital Resarve: Rs.1,200]
Q-68: Best Ltd. has been registered with an authorized capital of Rs.5,00,000 divided
into 10,000 shares of Rs.50 each of which 6,000 shares were offered for public
Q-71: Ganga Limited issued a prospectus inviting applications for 4,000 Equity shares
subscription at a premium of Rs.10 per share payable as under :
of Rs.10 each at a premium of Rs.2 per share, payable as follows:
Application - Rs.10 per share 1st Call - Rs.10 per share
Application - Rs.2 per share 1st Call - Rs.3 per share
Allotment - Rs.30 per share 2nd Call - Rs.10 per share
Allotment - Rs.5 per share 2nd Call - Rs.2 per share
Application were received for 9,000 shares, of which applications for 1,000 shares
Applications were received for Rs.6,000 shares and allotment was made pro-rata to
were rejected, the rest of the applicants were allotted shares on pro-rata basis. Excess
the applicants of 4,800 shares. The remaining applications been refunded. Money
 (19) (20)

received in excess on theCA. applications

Naresh wasAggarwal’s
used towards the amount due to allotment. Miscellaneous Questions
Ram, to whom 150 shares were allotted failed to pay allotment money and on his
ACADEMY of ACCOUNTS
failure to pay the first call his shares were forfeited. Mohan the holder of 120 shares,
Q-74: New Delhi Ltd. invited applications for issuing 1,00,000 shares of Rs.10 each at
a premium of Re. 1 per share payable as follows :
failed to pay the two calls and so hisTaxation
Accounting • Costing • shares were•also forfeited. AllManagement
Financial these shares were
Application - Rs.2 per share
sold to Shyam credited as fully paid for Rs.8 per share.
West Patel Nagar, New entries
Delhi. Ph:8800215448. Website: www.academyofaccounts.org Allotment - Rs.5 per share
Pass necessary journal to record the above issue of shares by the company.
1st Call - Rs.4 per share
[Application Refund: Rs.2,400; Advance for Allotment: Rs.1,600; Allotment Receipts: Rs.17,710
Applications were received for 1,50,000 shares and pro-rata allotment was made to all
1st Call Receipts: Rs.11,190; Forfeited Amount: Rs.360 + Rs.600; Capital Resarve: Rs.420]
applicants as follows :
(i) Applicants for 80,000 shares were allotted 60,000 shares.
Q-72: S. Ltd. invited applications from public for 50,000 equity shares of Rs.10 each
(ii) Applicants for 50,000 shares were allotted 40,000 shares.
issued at Rs.11 per share. The payment was to be made as follows :
‘X’ who belonged to the first category and was allotted 300 shares failed to pay the
Application - Rs.3 per share
allotment and call money.
Allotment - Rs.4 per share
‘Y’ who belonged to the second category and whoapplied for 750 shares also failed to
1st Call - Rs.4 per share
pay the allotment and call money. Their shares were forfeited and all the forfeited
Applications for 65,000 shares were received. Allotment was made as follows :
shares were reissued @ Rs.9.50 per share as fully paid.
(i) 100% shares to applicants of 35,000 shares.
Prepare Journal entries and Cash Book.

AoA
(ii) 75% shares to applicants of 20,000 shares.
[Application Refund: Rs.40,000; Advance for Allotment: Rs.60,000; Allotment Receipts: Rs.4,36,000
(iii) No allotment to applicants of 10,000 shares.
1st Call Receipts: Rs.3,96,400; Forfeited Amount: Rs.2,300; Capital Resarve: Rs.1,850]
A shareholder who applied for 400 shares under category (ii) could not pay on allotment
and call. Another shareholder from category (i) holding 600 shares also failed to pay
Q-75: Mumbai Ltd. invited applications for issuing 60,000 shares of Rs.20 each at a
the amount due allotment and call. Their shares were forfeited and subsequently
premium of Rs.2 per share payable as follows :
reissued as fully paid up for Rs.8 per share.
Application - Rs.5 per share
Pass the journal entries and give Balance Sheet of the company.
Allotment - Rs.8 per share
[Application Refund: Rs.30,000; Advance for Allotment: Rs.15,000; Allotment Receipts: Rs.1,81,700
1st Call - Rs.9 per share
1st Call Receipts: Rs.1,96,400; Forfeited Amount: Rs.3,000; Capital Resarve: Rs.1,200]
Applications were received for 1,00,000 shares and pro-rata allotment was made to all
applicants as follows :
Q-73: PQR Ltd. invited applications from public for 30,000 equity shares of Rs.50
(i) Applicants for 60,000 shares were allotted 40,000 shares.
each issued at Rs.55 per share. The payment was to be made as follows :
(ii) Applicants for 25,000 shares were allotted 20,000 shares.
Application - Rs.15 per share
‘A’ who belonged to the first category and was allotted 200 shares failed to pay the
Allotment - Rs.25 per share
allotment and call money.
1st Call - Rs.15 per share
‘B’ who belonged to the second category and whoapplied for 500 shares also failed to
Applications for 45,000 shares were received. Allotment was made as follows :
pay the allotment and call money. Their shares were forfeited and all the forfeited
(i) 100% shares to applicants of 18,000 shares.
shares were reissued @ Rs.19 per share as fully paid.
(ii) 60% shares to applicants of 20,000 shares.
Prepare Journal entries and Cash Book in the books of the company.
(iii) No allotment to applicants of 7,000 shares.
[Application Refund: Rs.75,000; Advance for Allotment: Rs.1,25,000; Allotment Receipts:
A shareholder who applied for 300 shares under category (ii) could not pay on allotment
Rs.3,51,200
and call. Another shareholder from category (i) holding 250 shares also failed to pay
1st Call Receipts: Rs.5,34,600; Forfeited Amount: Rs.4,000; Capital Resarve: Rs.3,400]
the amount due allotment and call. Their shares were forfeited and subsequently
re-issued as fully paid up for Rs.44 per share.
Q-76: ABC Ltd. issued 50,000 shares of Rs.10 each at 20% premium payable on
Pass the journal entries and give Balance Sheet of the company.
application. The amount payable on allotment was fixed at Rs.4 and an equivalent
[Application Refund: Rs.1,05,000; Adv. for Allotment: Rs.1,20,000; Allotment Receipts: Rs.6,21,050
amount was payable on first and final call. Total applications were received for 1,00,000
1st Call Receipts: Rs.4,43,550; Forfeited Amount: Rs.8,250; Capital Resarve: Rs.5,670]
shares. After consulting the stock exchang authorities the following scheme of allotment
 (21) (22)

was decided upon : Sanjay to whom 200 shares were allotted failed to pay allotment and call money.
CA. Naresh Aggarwal’s Their shares were forfeited and afterwards re-issued for Rs.8 per share.
Category Share Applied Shares Allotted
ACADEMY of ACCOUNTS
A (1-100)
B (101-500)
50,000
30,000
30,000
15,000
Show the Journal Entries and Balance Sheet in the books of Hindustan Ltd.
[Surplus used for Allotment: Rs.1,50,000; Allotment Receipts: Rs.1,47,000
Accounting
C (Over 500) • Costing • 20,000 Taxation • Financial Management 5,000 1st Call Receipts: Rs.98,000; Capital Reserve: Rs.5,000; Balance Sheet: Rs.7,03,000]
West Patel
It wasNagar, Newthat
decided Delhi. Ph:8800215448.
excess application Website:
moneywww.academyofaccounts.org
received on applications
would be utilised in payment of allotment money and surplus, if any, would Q-79: Suvidha Ltd. issued a prospectus, inviting applications for 50,000 shares
be refunded to applicants. of Rs 10 each. These shares were issued at par on the flowing terms:
Five applicants belonging to category A and applied for 100 shares each, defaulted in Application - Rs.3 per share
payment of allotment and call money. Mr. X, who belonged to category C, and had Allotment - Rs.4 per share
been allotted 500 shares failed to pay the call money. Afterwards all the shares were 1st Call - Rs.3 per share
forfeited and reissued at the rate of Rs.8 per share fully paid up. Applications were received for 70,000 shares. Allotments were made on the
Pass journal entries to record above transactions and prepare balance following basis :
sheet. (i) Applicants for 10,000 shares - Full
[Application Refund: Rs.40,000; Surplus used for Allotment: Rs.1,60,000; Unpaid Allotment: Rs.400 (ii) Applicants for 20,000 shares - 15,000 shares
1st Call Receipts: Rs.1,96,800; Capital Reserve: Rs.2,800; Balance Sheet: Rs.6,02,800] (iii) Applicants for 30,000 shares - 25,000 shares
All excess amount paid on application is to be adjusted against amount due on

AoA
Q-77: Star Ltd. issued 40,000 shares of Rs.10 each at a premium of Re.1 per allotment.
share payable as follows : The shares ware fully called and paid up except amounts on allotment and call not
Application - Rs.2 per share paid by those who applied for 2,000 shares out of the group applying for 20,000
Allotment - Rs.5 per share shares. All the shares on which money were not paid were forfeited by the Board of
1st Call - Rs.4 per share Directors. 1,000 forfeited shares were re-issued as fully paid on receipt of Rs 8 per
By the date of closing of subscription list, applications for 90,000 shares had been share. Show the Journal Entries and Balance Sheet in the books of Suvidha Ltd.
received. Allotment was made as follows : [Application Refund: Rs.30,000; Surplus used for Allotment: Rs.30,000
List A - Applicants for 10,000 shares were allotted in full Amount Forfeited: Rs.6,000; Allotment Receipts: Rs.1,65,500; 1st Call Receipts: Rs.1,45,500
List B - Applicants for 20,000 shares were allotted 10,000 shares Capital Reserve: Rs.2,000; Balance in Forfeiture: Rs.2,000; Balance Sheet: Rs.4,99,000]
List C - Applicants for 60,000 shares were allotted 20,000 shares
All excess amount paid on application is to be adjusted against amount due on Q-80: Apex Ltd. invited applications for 20,000 shares of Rs.10 each at a premium
allotment. All the shareholders paid the amounts due on allotment and call except of Rs.2 per share, payable as follows :
Ajay (applied 1,000 shares under List B) and Vijay (allotted 400 shares under List C). Their Application - Rs.3
shares were duly forfeited and were re-issued at Rs.8 per share fully paid. Pass Allotment - Rs.6 (including premium)
journal entries to record above transactions and prepare balance sheet. 1st Call - Rs.3
[Surplus used for Allotment: Rs.1,00,000; Allotment Receipts: Rs.98,100 The issue was over subscribed by 65,000 shares, out of which applications for
1st Call Receipts: Rs.1,56,400; Capital Reserve: Rs.2,600; Balance Sheet: Rs.4,41,700] 5,000 shares were rejected and money refunded to them. The allotment was made
pro-rata to the remaining applicants. Money over paid on application was used
Q-78: Hindustan Ltd. invited applications for 50,000 equity shares of Rs 10 each at against allotment money due, excess being refunded.
a premium of Rs.4 per share. The amount was payable as follows : Sonu to whom 1,000 shares were allotted failed to pay the call money, his shares
Application - Rs.6 (including premium Rs 2) were forfeited. Of the forfeited shares, 800 shares we re-issued at the rate of Rs.15
Allotment - Rs.6 (including premium Rs 2) per share credited as fully paid.
1st Call - Balance Show necessary Journal entries and Balance Sheet in the books of the company.
Applications for 75,000 shares were received. Allotment was made to all the [Application Refund: Rs.15,000; Surplus used for Allotment: Rs.1,20,000
applicants on pro-rata basis. Allotment Receipts: Nil; 1st Call Receipts: Rs.57,000; Capital Reserve: Rs.5,600
Ajay to whom 500 shares were allotted failed to pay allotment and call money. Vijay Application Refund: Rs.75,000; Balance in Forfeiture: Rs.1,400; Balance Sheet: Rs.2,49,000]
to whom 300 shares were allotted failed to pay allotment and call money.
 (23) (24)

sum due on allotment. All the calls were made.

CA. Naresh Aggarwal’s ‘Bheem’ to whom 200 shares were allotted failed to pay allotment and his
ACADEMY of ACCOUNTS subsequent failure to pay first call, all his shares forfeited.
‘Nakul’ who applied for 180 shares failed to pay first and second call, his shares
Accounting • Costing • Taxation • Financial Management also forfeited.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org 300 from these shares were subsequently reissued to ‘Sehdev’ as fully paid for
Rs.17 per share as fully paid up, as per following situations
(a) reissue includes all of Bheem’s shares.
Q-81: Mangal Ltd. has authorized capital of Rs.5,00,000 divided into 50,000 (b) reissue includes all of Nakul’s shares
shares of Rs.10 each. The Company issued a prospectus inviting applications [Application Refund: Rs.75,000; Advance for Allotment: Rs.25,000
for 30,000 shares of Rs.10 each at a premium of Rs.3 per share, payable as Allotment Receipts: Rs.1,48,800; 1st Call Receipts: Rs.1,47,900; 2nd Call Receipts: Rs.1,23,250
follows : Forfeited Amount: Rs.1,000 + Rs.1,350; Capital Resarves: (a) Rs.1,000 (b) Rs.1,200]
Application - Rs.4 per share (including premium Re. 1)
Allotment - Rs.5 per share (including premium Rs.2) Q-83: Mahadev Ltd. invited applications for 50,000. Equity shares of Rs 10 each.
1st Call - Rs.2 per share shares were issued at a premium of Rs.4 per share. The amount was payable as
2nd Call - Rs.2 per share follows:
The company received applications for 55,000 shares and pro-rata allotment Application and Allotment - Rs.8 (including premium Rs.2)

AoA
was made in respect of applications for 40,000 shares and the remaining First and Final Call - Balance
applications were rejected. Money overpaid on applications was employed for Applications for 75,000 shares were received. Applications for 5,000 shares were
sum due on allotment. All the calls were made. rejected and pro-rata allotment was made to the remaining applicants the following
‘Ram’ to whom 150 shares were allotted failed to pay allotment and his basis :
subsequent failure to pay first call, all his shares forfeited. (i) Applicants for 40,000 shares were allotted 30,000 shares
‘Laxman’ applied for 160 shares failed to pay first and second call, his shares (ii) Applicants for 30,000 shares were allotted 20,000 shares
also forfeited. Sohan who belonged to the first category and was allotted 300 shares, failed to pay
200 from these shares were subsequently reissued to ‘Hanuman’ for Rs.9 per the first call money. Mohan who belonged to the second category and was applied
share as fully paid up, as per following situations for 300 shares also failed to pay the first call money. Their shares were forfeited.
(a) reissue includes all of Ram’s shares. Out of the forfeited shares, 400 shares were re-issued at the rate of Rs.12 per
(b) reissue includes all of Laxman’s shares share fully paid up including whole of the Sohan’s forfeited shares.
Pass the necessary journal entries in the books of the company. Pass Show Cash Book and Journal Entries.
[Application Refund: Rs.60,000; Advance for Allotment: Rs.40,000 [Application Refund: Rs.40,000; Surplus used for 1st Call: Rs.1,60,000
Allotment Receipts: Rs.1,09,450; 1st Call Receipts: Rs.59,460; 2nd Call Receipts: Rs.59,460 1st Call Receipts: Rs.1,38,600; Sohan’s Forfeiture: Rs.2,600; Mohan’s Forfeiture: Rs.2,000
Forfeited Amount: Rs.650 + Rs.720; Capital Resarves: (a) Rs.750 (b) Rs.867] Capital Reserve: Rs.3,600; Balance in Forfeiture: Rs.1,000]

Q-82: Arjun Ltd. has authorized capital of Rs.6,00,000 divided into 30,000 shares Q-84: Swaraj Ltd. invited applications for 40,000 shares of Rs.20 each at a premium
of Rs.20 each. The Company issued a prospectus inviting applications for of Rs.5 per share, payable as follows :
25,000 shares at a premium of Rs.3 per share, payable as follows : Application - Rs.6
Application - Rs.5 per share (including premium Re. 1) Allotment - Rs.9 (including premium)
Allotment - Rs.7 per share (including premium Rs.2) 1st Call - Balance
1st Call - Rs.6 per share Applications were received for 85,000 shares, out of which applications for 5,000
2nd Call - Rs.5 per share shares were rejected and money refunded to them. The allotment was made pro-rata
The company received applications for 45,000 shares and pro-rata allotment to the remaining applicants. Money over paid on application was used against
was made in respect of applications for 30,000 shares and the remaining allotment money due.
applications were rejected. Money overpaid on applications was employed for Sonu to whom 1,000 shares were allotted failed to pay the allotment money and on
 (25) (26)

his subsequent failure to CA. pay the first call, his

Naresh shares were forfeited. All the forfeited
Aggarwal’s Preparation of Balance Sheet
shares, were re-issued at the rate of Rs.17 per share credited as fully paid.
ACADEMY of ACCOUNTS
Show necessary Journal entries and Balance Sheet in the books of the company.
Q-87: ABC Ltd. has an authorised capital of Rs.8,00,000 divided into 50,000 equity
shares of Rs.10 each and 3,000 Preference Shares of Rs.100 each. It issued 15,000
[Application Refund: Rs.30,000; Surplus used for Allotment: Financial
Accounting • Costing • Taxation • Rs.2,40,000; Capital Reserve: Rs.7,000
Management Equity shares and also all of Preference Shares at par. All shares offered were
Allotment Receipts: Rs.1,17,000; 1st Call Receipts: Rs.3,90,000; Amount Forfeited: Rs.10,000]
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org subscribed for and the money was duly received except final call of Rs.2 per equity
shares on 750 shares.
Q-85: Moon Ltd. has a nominal capital of Rs.10,00,000 in Rs.20 shares. Of these
How will be Share Capital shown in the Balance Sheet of the company ?
10,000 shares were issued as fully paid in payment of Land and Building purchased
[Authorised Capital: Rs.8,00,000; Issued Capital: Rs.4,50,000; Subscribed Capital : Rs.4,48,500]
and 40,000 share were subscribed for by the public, and during the First year Rs.16
per share were called up payable as follows :
Q-88: XYZ Ltd. has an authorised capital of Rs.7,50,000 divided into 75,000 equity
Application - Rs.4 per share 1st Call - Rs.4 per share
shares of Rs.10 each. The company has existing issued and fully paid 22,500 shares
Allotment - Rs.6 per share 2nd Call - Rs.2 per share
of Rs.10 each, which were issued as consideration for purchase of land and building.
The amounts received in respect of these shares were as follows:
It further issued 15,000 equity shares of Rs.10 each at par. The money called was
On 33,000 shares - full amount called.
Rs.8 per share. All shares were subscribed for and the money was duly received
On 4,000 shares - Rs.14 per share.
except final call of Rs.2 per share on 1,500 shares.
On 2,000 shares - Rs.10 per share.
How will be Share Capital shown in the Balance Sheet of the company ?

AoA
On 1,000 shares - Rs.4 per share.
[Authorised Capital: Rs.7,50,000; Issued Capital: Rs.3,75,000; Subscribed Capital : Rs.3,42,000]
The Directors forfeited the 3,000 shares on which less than Rs.14 had been paid. The
shares were subsequently reissued at Rs.12 per share.
Q-89: PQR Ltd. is registered with the capital: 1,50,000, Equity Shares of Rs.10 each;
You are required to pass journal entries and cash book for the above transactions.
and 75,000, Preference Shares of Rs.10 each. It issued 1,00,000 Equity Shares and
[Allotment Receipts: Rs.2,34,000; 1st Call Receipts: Rs.1,48,000; 2nd Call Receipts: Rs.66,000
50,000 Preference Shares for subscription. 90,000 Equity Shares were subscribed
Forfeited Amount: Rs.24,000; Capital Resarve: Rs.12,000]
on which the company had called Rs.8. It did not receive first call of Rs.2 on 3,000
shares, out of which 2,000 allotted to Ajay were forfeited. Out of the forfeited shares
Q-86: Star Ltd. has a nominal capital of Rs.3,50,000 in Rs.10 shares. Of these 5,000
1,500 shares were reissued to Vijay at Rs.6, Rs.8 paid up. Preference Shares were
shares were issued as fully paid in payment of Machinery purchased and 15,000
fully paid up.
share were subscribed for by the public, and during the First year Rs.8 per share
How will it be shown in balance sheet as per Revised Schedule VI ?
were called up payable as follows :
[Authorised Capital: Rs.22,50,000; Issued Capital: Rs.15,00,000; Subscribed Capital : Rs.12,17,000]
Application - Rs.2 per share 1st Call - Rs.2 per share
Allotment - Rs.3 per share 2nd Call - Rs.1 per share
Q-90: ABC Ltd. has an authorised capital of Rs.10,00,000 divided into 50,000 equity
The amounts received in respect of these shares were as follows:
shares of Rs.20 each. It issued 20,000 Equity Shares of Rs.20 each at par. All the
On 11,500 shares - full amount called.
shares were subscribed for and the due amount was received.
On 2,000 shares - Rs.7 per share.
How will be Share Capital shown in the Balance Sheet of the company ?
On 1,000 shares - Rs.5 per share.
[Authorised Capital: Rs.10,00,000; Issued Capital: Rs.4,00,000; Subscribed Capital : Rs.4,00,000]
On 500 shares - Rs.2 per share.
The Directors forfeited the 1,500 shares on which less than Rs.7 had been paid. The
Q-91: Rich Ltd. is registered with an authorised capital of Rs.10,00,000 divided into
shares were subsequently reissued at Rs.6 per share.
1,00,000 equity shares of Rs.10 each. It issued 80,000 equity shares of Rs.10 each at
You are required to pass journal entries and cash book for the above transactions.
par. Final call of Rs.2 per share was yet to be called. All shares offered were subscribed
[Allotment Receipts: Rs.43,500; 1st Call Receipts: Rs.27,000; 2nd Call Receipts: Rs.11,500
for and the money was duly received.
Forfeited Amount: Rs.6,000; Capital Resarve: Rs.3,000]
How will be Share Capital shown in the Balance Sheet of the company ?
[Authorised Capital: Rs.10,00,000; Issued Capital: Rs.8,00,000; Subscribed Capital : Rs.6,40,000]

Q-92: Moon Ltd. is registered with an authorised capital of Rs.10,00,000 divided into
 (27) (28)

1,00,000 equity shares of Rs.10CA. each.

Naresh Aggarwal’s
It issued 75,000 equity shares of Rs.10 each at
-: Points to Remember :-

ACADEMY of ACCOUNTS
par. Calls were made of Rs.8 per share. All shares offered were subscribed for and
the money was duly received except final call of Rs.3 on 1,000 shares. 1. Capital of a company is divided into small fractions which are called shares.
HowAccounting • Costing
will be Share Capital shown in•the Taxation
Balance Sheet• Financial Management
of the company ? 2. A compnay can not issue more than its authorised capital during the whole life.
[Authorised Capital: Rs.10,00,000; Issued Capital: Rs.7,50,000; Subscribed Capital : Rs.5,97,000] 3. A campany can issue less capital than its authorised capital.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
4. Any amount received over the paid up value of the share is called ‘Securities
ESOP Premium’ and recoreded separately in ‘Securites Premium A/c’.

Q-93: ABC Company has its shares divided into shares of Rs.10 each. On01.04.2014 5. Any amount received by the company on account of securities premium will never
it grant 5,000 employees stock option at Rs.40 for Rs.10 equity share, when the market be added in share forfeiture account. Share forfeiture includes amount received
price was Rs.140. The maximum exercised period is one year after 31.03.2016. The by company for capital portion only.
employees exercised their options on 31.12.2016 for 4,000 shares only and remaining 6. A company can not issue shares at discount (less than face value). It can issue
option were lapsed. The company closes its books of accounts on 31st March every shares only at par or at premium.
year. Show journal entries in the books of the company. 7. Forfeited shares can be re-issued at price below the paid up value of the the
[Value of Options Outstanding: Rs.5,00,000] shares only upto the extent amount forfeited at the time of forfeiture of those shares.
8. Rate of interest on calls in arrears can be upto 5% p.a., and in case of calls in

AoA
Q-94: ABC Company has its shares divided into shares of Rs.10 each. On01.04.2014
advance it can be upto 6% p.a.
it grant 200 employees stock option to each of its 100 employees at Rs.50 for Rs.10
equity share, when the market price was Rs.150. The maximum exercised period is 9. As per the SEBI guidelines, if a company does not receive 90% of the issue
one year after 31.03.2016. only 80 employees exercised their options in full on amount from the public subscription including development from underwriters within
31.12.2016 and remaining option were lapsed. The company closes its books of 120 days from the date of the issue, the amount of subscription received is required
accounts on 31st March every year. Show journal entries in the books of the company. to be refunded to the applicants.
[Value of Options Outstanding: Rs.20,00,000]
Employees Stock Schemes (ESOP / ESOS / ESPS)
Q-95: XYZ Ltd. grants 100 employees stock option to each of its 50 employees on It is a scheme under which the company grants option (a right but not an obligation)
01.04.2014 at Rs.40 for Rs.10 equity share, when the market price is Rs.160. The to an employee to apply for shares of the company at a pre-determined price. This
vesting period is 2.5 years and the maximum exercise period is one year. 500 unvested right is exercisable by the employee, during the specified period.
options lapse on 31.03.2016. 3,000 options are exercised on 30.06.2017 and remaining
Accounting for ESOP: The option discount granted to employees during the
lapse at he end of exercise period. The company closes its books of accounts on 31st
accounting period should be treated as compensation to employees. Option
March every year. Show journal entries in the books of the company.
discount means the excess of the market value of the share at the date of grant of
[Value of Options Outstanding: Rs.6,00,000]
the option under ESOS over the exercise price of the option. The option discount
should be amortised on a straight-line basis over the vesting period. The journal
Q-96: XYZ Ltd. grants 2,000 employees stock options on 01.04.2014 at Rs.40 for
entries are as follows :
Rs.10 equity share, when the market price is Rs.160. The vesting period is 2.5 years
and the maximum exercise period is one year. 600 unvested options lapse on (i) At the time of grant of option :
31.03.2016. 1,200 options are exercised on 30.06.2017 and remaining lapse at he end Deferred Employee Compensation Expenses A/c (Fair Value _ Exercise price) Dr.
of exercise period. The company closes its books of accounts on 31st March every To Employees Stock Options Outstanding A/c
year. Show journal entries in the books of the company.
[Value of Options Outstanding: Rs.2,40,000] (ii) At the time of amortisation of option discount (at the end of every year)
Employee Compensation Expense A/c (Option discount ÷ period) Dr.
To Deferred Employee Compensation Expenses A/c
•••••••••••••••••••••••••
 (29) (30)

(iii) At the time of exercise of option

CA. Naresh Aggarwal’s Utilisation of money received on rejected shares of pro-rata allotment
Bank A/c (Amount received from employee) Dr.
ACADEMY of ACCOUNTS
Employee Stock Option Outstanding A/c (Option discount) Dr. When a company issues share on pro-rata bases, some portion of applications get
rejected. In this case company has to either refund or adjust the money received on
To Equity Share Capital A/c (Face value of shares issued)
Accounting • Costing • Taxation • Financial Management
To Securities Premium Reserve A/c (Fair value _ Face value) those rejected shares. A company can adjust the money on allotment and calls, if
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org article of association permits. Surplus money, if remains must be refunded.
(iv) If options are lapsed With the help of following formula maximum number of rejected shares, whose money
Employees Stock Options Outstanding A/c (Value of lapse options) Dr. can be used on allotment stage or call stage (as per case) may be calculated:
To Deferred Employee Compensation Expenses A/c (Unamortised portion) Allotment or Call Rate Per Share x Shares Allotted to Group
To Employee Compensation Expense A/c (Amortised or Balance portion) Application Rate Per Share
If company rejects share more than that, then there will be a surplus which will be
Journal Entries for Forfeiture and Re-issue of Shares either adjusted to next calls till share is fully paid (if articles permit) or refunded.
1a. Forfeiture of those shares which are issued at par
Share Capital A/c (Called up value upto time of forfeiture) Dr. Journal Entries for Issue of Shares for consideration other then cash
To Share Allotment / Calls A/c (Amount due but remain unpaid upto time of forfeiture) 1 When sundry assets are purchased

AoA
To Share Forfeiture A/c (Amount received by the company)
Sundry Assets A/c (Fair or Market Value) Dr.
Goodwill A/c (Balancing Figure, If required) Dr.
1b. Forfeiture of those shares which are issued at premium
To Sundry Liabilites A/c (Payable value, If any)
Share Capital (Called up value upto time of forfeiture) Dr. To Vendors A/c (Purchase Consideration or Settled Price)
Securites Premium Reserve A/c (Called up but remain unpaid upto time of forfeiture*) To Capital Reserve A/c (Balancing Figure, If required)
To Share Allotment / Calls A/c (Amount due but remain unpaid upto time of forfeiture)
To Share Forfeiture A/c (Amount received by the company for capital only) 2 When account settled with vendors (payment is made)
[* Any amount of securites premium, if paid, will never be shown in above journal entry and will Vendors A/c (Purchase Consideration or Settled Price) Dr.
not be forfeited] To Share Capital A/c (Paid up value of shares issued to them)
To Securites Premium Reserve A/c (If shares issued over paid up value)
2. Re-issue of shares To Bank A/c (If some portion of purchase consideration paid in cash)
Bank A/c (Amount received for resale of shares) Dr.
Share Forfeiture A/c (Discount amount, if any) Dr. 3. When shares are issued to promoters without consideration
To Share Capital (Paid up value of shares at the time of re-issue) Goodwill A/c (Value of shares issued to them) Dr.
To Securites Premium Reserve (Amount received over paid up value of shares, if any) To Share Captial A/c (Paid up value of shares issued to them)

3. Profit on Re-issue of shares (Creation of captial reserve)

Share Forfeiture A/c (Amount forfeited _ Discount amount, if any) Dr. No. of shares issued = Amount to be paid in form of Shares .
To Capital Reserve A/c Share Issue Price

Individually allotted shares if Shares Allotted to Group x Individually Applied

Shares =
Applied No. of shares is given Shares Applied by Group

Individual Amount of Advance = Group Advance x Individually allotted shares .

Group Alloted Shares
 (31) (32)

CA. Naresh Aggarwal’s

PART I – Form of BALANCE SHEET
ACADEMY of ACCOUNTS
Name of the Company …………………….
Balance Sheet as at ………………………
Presentation of Notes of Balance Sheet

Accounting • Costing • Taxation • Financial Management Note - 1 : Share Capital

Particulars
West Patel Nagar, New Delhi. Ph:8800215448.Note Figures
Website: as at the Figures as at the
www.academyofaccounts.org Current Previous
Particulars
No. end of current end of previous Year Year
reporting period reporting period
Authorised Capital
(I) EQUITY AND LIABILITIES ............... Shares of Rs...... each xx xx
(1) Shareholders funds
(a) Share capital xxx xxx Issued Capital
(b) Reserves and surplus xxx xxx ............... Shares of Rs...... each xx xx
(c) Money received against share warrants xxx xxx
(2) Share application money pending allotment xxx xxx Subscribed Capital
(3) Non-current liabilities (a) Subscribed and fully paid up
(a) Long-term borrowings xxx xxx ............... Shares of Rs...... each xx xx
(b) Deferred tax liabilities (Net) xxx xxx

AoA
(b) Subscribed but not fully paid up
(c) Other Long term liabilities xxx xxx
(d) Long-term provisions xxx xxx ............... Shares of Rs...... each, Rs..... Called up xx xx
(4) Current liabilities Less : Calls in arrears (xx) (xx)
(a) Short-term borrowings xxx xxx Add : Amount paid up on forfeited shares (but not yet reissued) xx xx
(b) Trade payables xxx xxx xxxx xxxx
(c) Other current liabilities xxx xxx
(d) Short-term provisions xxx . xxx . Note - 2 : Reserve and Surplus

TOTAL xxxx . xxxx . Current Previous

Particulars
Year Year
(II) ASSETS
(1) Non-current assets General reserve xx xx
(a) Fixed assets xxx xxx Securities Premium xx xx
(i) Tangible assets xxx xxx Capital Reserve xx xx
(ii) Intangible assets xxx xxx Debenture redemption reserve / Sinking Fund xx xx
(iii) Capital work-in-progress xxx xxx Other reserves (give details) xx xx
(iv) Intangible assets under development xxx xxx Surplus / (Deficit) xx xx
(b) Non-current investments xxx xxx
xxxx xxxx
(c) Deferred tax assets (Net) xxx xxx
(d) Long-term loans and advances xxx xxx
Note - 3 : Cash and Cash Equivalents
(e) Other non-current assets xxx xxx
(2) Current assets Current Previous
Particulars
(a) Current investments xxx xxx Year Year
(b) Inventories xxx xxx
(c) Trade receivables xxx xxx Cash in Hand xx xx
(d) Cash and cash equivalents xxx xxx Cash at Bank xx xx
(e) Short-term loans and advances xxx xxx Foreign Exchange xx xx
(f) Other current assets xxx . xxx . xxxx xxxx
TOTAL xxxx . xxxx .
 (33)

CA. Naresh Aggarwal’s

Theoretical Questions
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
WestWhat
Q-1*: PatelisNagar,
meant New
by Delhi.
minimumPh:8800215448. Website:
subscription? Whatwww.academyofaccounts.org
are the implications if minimum
subscription is not received ?

Q-2*: Distinguish between over subscription and under subscription.

Q-3*: What is meant by ‘forfeiture of shares’? What can be the maximum amount of
discount at which the forfeited shares can be issued ?

Q-4*: Give differences between an equity share and preference share.

Q-5*: Distinguish between reserve capital and capital reserve.

Q-6*: Distinguish between calls-in-advance and calls-in-arrears.

AoA
Q-7*: What are the alternatives available to a company for the allotment of shares
when there is over subscription ?

Q-8: What are the main categories in which the share capital of a company is divided
?

Q-9: What is meaning by over subscription and under subscription of shares ?

Q-10: What do you mean by ‘calls-in-advance’ ?

Q-11: What is employee stock option plan ?

Q-12: What do you mean by issuing shares at premium? State the provisions of
section 78 of the Companies Act, 1956 regarding the utilisation of securities
premium account.

Q-13: State the provisions of the Companies Act 1956 for the issue of shares at a
premium.

Q-14: What is meant by ‘Escrow Account’.

•••••••••••••••••••••••••
 CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org

For Eenquiries
Call or whatsapp: 8800215448

AoA
Issue & Redemption (Whatsapp anytime, Calls only between 3.00 pm to 8.00 pm)

of Email: ca.naresh.vc@gmail.com
Website: academyofaccounts.org
Debentures

Watch us on

https://www.youtube.com/CaNareshAggarwal
 (1) (2)

CA. Naresh Aggarwal’s

Q-6: Rama Ltd. issued 1,40,000 8% Debentures of Rs.100 each at a discount of
ACADEMY of ACCOUNTS 10%, redeemable after 3 years payable as :
Accounting • Costing • Taxation • Financial Management On application Rs.20
On allotment Rs.40
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
On 1st and Final Call Rs.30
The company could receive applications for 1,20,000 Debentures and were duly
Issue of Debentures allotted. The company could not received 1st call from 200 debentures. Pass
necessary journal entries for issue of debentures.
Q-1: Kalinga Ltd. had been issued 5,000 10% Debentures of Rs.100 payable as
follows:
Q-7: Best Ltd. issued 50,000 10% Debentures of Rs.100 each at a discount of 5%,
Application - Rs. 25 per share
redeemable after 4 years payable as :
Allotment - Rs. 35 per share
On application Rs.25
1st and Final Call - Rs. 40 per share
On allotment Rs.40
Company received all the applications and money .
On 1st and Final Call Rs.30
You are required to pass necessary journal entries for the transactions took place.
The company could receive applications for 40,000 Debentures and were duly

AoA
allotted. 1st call not received from 150 debentures. Pass necessary journal entries.
Q-2: Bright Ltd. issued 2,00,000 10% Debentures of Rs.100 payable as follows:
On application Rs.30
Q-8: On 01.02.2016 ‘A Ltd.’ invited applications for issue of 1,00,000 9% debentures
On allotment Rs.50
of Rs.100 each at a discount of 6%, redeemable at par after 3 years. The full
On 1st and Final Call Rs.20
amount was payable on application and the debentures were issued on 15.3.2016.
The debentures were fully subscribed and all the money was duly received. As per
Pass the journal entries for the issue of debentures.
terms of the prospectus, the debentures are redeemable at the end of 5th year.
Give necessary entries regarding issue of debentures in the books of company.
Q-9: On 01.01.2016 ‘Moon Ltd.’ invited applications for issue of 50,000 8%
Debentures of Rs.100 each at a discount of 10%, redeemable at par after 5 years.
Q-3: X Ltd. issued 1,200; 11% Debentures of Rs.100 each payable at Rs.40 per
The full amount was payable on application and the debentures were issued on
debenture on application and Rs.60 per debenture on allotment. 1,000 debentures
01.02.2016. Pass the journal entries for the issue of debentures.
were subscribed for and all money as duly received. Pass Journal entries.
Issue of Debentures to Vendors
Q-4: XYZ Limited issued 10,000, 10% Debentures of Rs.100 each at a premium of
Q-10: X Ltd. purchased the assets of Y Ltd. for Rs. 2,00,000. It also agreed to
Rs.5 per debenture, payable as follows :
takeover the liabilities of Y Ltd. amounting to Rs.50,000 for a purchase consideration
On Application Rs. 40 (including premium)
of Rs.1,60,000. The payment to Y Ltd. was made by issue of 9% Debentures of
On Allotment Rs. 65
Rs.100 each at par. Pass the necessary journal entries in the books of X Ltd.
All debentures were subscribed for and the money was duly received.
[Goodwill Rs.10,000; Numbers of Debentures issued 1,600]
Pass necessary journal entries to record the above issue of debentures.

Q-11: A Ltd. took over the assets of B Ltd. of Rs. 2,00,000. It also agreed to
Q-5: ABC Limited issued 2,000, 8% Debentures of Rs.100 each at a premium of
takeover the liabilities of B Ltd. amounting to Rs.50,000 for a purchase consideration
Rs.10 per debenture, payable as follows :
of Rs.1,30,000. The payment of B Ltd. was made by issue of 13% debentures of
On Application Rs. 50 (including premium)
Rs.100 each. Pass necessary journal entries in the books of A Ltd.
On Allotment Rs. 60
[Capital Reserve Rs.20,000; Numbers of Debentures issued 1,300]
All debentures were subscribed for and the money was duly received.
Pass necessary journal entries to record the above issue of debentures.
 (3) (4)

CA. Naresh Aggarwal’s Q-18: Radha Ltd. purchased machinery worth Rs.4,00,000 from Krishana Ltd. on
ACADEMY of ACCOUNTS 01.04.2013. Rs.1,00,000 was paid immediately and the balance was paid by issue
of Rs.2,80,000 15% debentures in Radha Ltd. Pass necessary journal entries to
Accounting • Costing • Taxation • Financial Management record these transactions in the books of Radha Ltd.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org [Capital Reserve Rs.20,000]

Q-12: Suvidha Ltd. purchased a building worth Rs.1,41,000. It issued 10% debentures Q-19: Best Ltd. purchased machinery for Rs.90,000. Half the amount was paid in
of Rs.100 each at a discount of 6% in satisfaction of the purchase price. Give journal cash and the remaining half by issue of 12% debentures of Rs.100 each at a
entries. discount of Rs.10 each. Pass necessary journal entries.
[Numbers of Debentures issued 1,500] [Numbers of Debentures issued 500]

Q-13: Mars Ltd. issues debentures of Rs.100 each at a discount of Rs.10 per Q-20: Akber Ltd. purchased assets of Birbal Ltd. as under
debenture for satisfying the purchase price of machinery at Rs.45,000. Pass the Plant and Machinery Rs.17,00,000
journal entries for the same. Land and Building Rs.60,00,000
[Numbers of Debentures issued 500] The purchase consideration was Rs.80,00,000. Rs.20,00,000 were paid through

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cheque and the remaining by issue of 8% debentures of Rs. 100 each at a premium
Q-14: P Ltd. took over assets of Rs.10,00,000 and creditors of Rs.1,00,000 from Q of 20%. Pass necessary journal entries in the books of X Ltd.
Ltd. and issued 6% debentures of Rs. 100 each at a premium of 25%. [Goodwill Rs.3,00,000; Numbers of Debentures issued 50,000]
Pass necessary journal entries in the books of A Ltd.
[Numbers of Debentures issued 7,200] Q-21: Radha Ltd. purchased assets of Meera Ltd. as under :
Plant & machinery at Rs.1,80,000; and
Q-15: XYZ Ltd. purchased machinery for Rs.2,97,000 from ABC Ltd. The payment Land and Building at Rs.6,20,000
was made by issue of 8% Debentures of Rs.100 each. The purchase consideration was Rs.7,50,000 and paid Rs.1,50,000 in cash,
Pass necessary journal entries for the purchase of machinery and issue of remaining by issue of 10% Debentures of Rs.100 each at a premium of 20%.
debentures when : Record necessary entries in the books of Radha Ltd.
(a) Debentures are issued at par [Capital Reserve Rs.50,000; Numbers of Debentures issued 5,000]
(b) Debentures are issued at 10% discount
(c) Debentures are issued at 10% premium. Q-22: A Ltd. bought sundry assets worth Rs. 2,50,000 from B Ltd. to be paid by
[(a): 2,970 Debentures; (b): 3,300 Debentures; (c): 2,700 Debentures] issue of 8% Debenture of Rs. 10 each.
Record necessary journal entries as per following situations :
Q-16: Make journal entries for the following transactions : (i) Debentures are issued at par.
ZEE Limited purchased Plant & Machinery for Rs.2,00,000 payable as to Rs.65,000 (ii) Debentures are issued at a premium of Rs. 2 per share.
in cash and the balance by an issue of 6% debentures of Rs.1,000 each at a (iii) Debentures are issued at a discount of Rs. 1 per share.
discount of 10 percent. [(i): 25,000 Debentures; (ii): 20,833 Debenture; (iii): 27,777 Debenture]
[Numbers of Debentures issued 150]
Q-23: Radha Ltd. bought sundry assets worth Rs. 5,00,000 from Meera Traders to
Q-17: Raja Ltd. purchased Machinery worth Rs.2,00,000 from Rani Ltd. on be paid by issue of 10% Debenture of Rs. 100 each.
01.01.2013. Rs.50,000 were paid immediately and the balance was paid by issue Record necessary journal entries as per following situations :
of Rs.1,60,000, 12% debentures in Raja Ltd. (i) Debentures are issued at par.
Pass the necessary journal entries for recording the transactions. (ii) Debentures are issued at a premium of Rs. 10 per share.
[Goodwill Rs.10,000]
 (5) (6)

Q-30 Journalise the following transactions at the time of issue and redemption of
CA. Naresh Aggarwal’s debentures:
ACADEMY of ACCOUNTS (i) Issue of debenture of Rs.100 at 10% premium, redeemable at par.
(ii) Issue of debenture of Rs.100 at par, redeemable at par.
Accounting • Costing • Taxation • Financial Management (iii) Issue of debenture of Rs.100 at 10% discount, redeemable at 5% premium.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Q-31: Pass the necessary journal entries in the books of the company in the
(iii) Debentures are issued at a discount of Rs. 10 per share. following cases :
[(i): 5,000 Debenture; (ii): 4,545 Debenture; (iii): 5,555 Debenture] (a) 1,000, 8% Debentures of Rs.100 each have been issued at par and are
redeemable at par.
Issue of Debentures as Collateral Securities (b) 1,000, 8% Debentures of Rs.100 each have been issued at 5% discount and
are redeemable at par.
Q-24: Issued to bank for a loan of Rs.8,00,000 as a collateral security 10,000
(c) 1,000, 8% Debentures of Rs.100 each have been issued at 5% premium and
Debentures of Rs.100 each. Pass journal entry.
are redeemable at par.
(d) 1,000, 8% Debentures of Rs.100 each have been issued at par and are
Q-25: Rich Ltd. took a for a loan of Rs.5,00,000 from ICICI Bank and issued 6,000
redeemable at 5% premium.
Debentures of Rs.100 each as a collateral security. Pass journal entry.

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(e) 1,000, 8% Debentures of Rs.100 each have been issued at 5% discount and
are redeemable at 10% premium.
Q-26: Ultra Ltd. took a for a loan of Rs.1,50,000 from a Bank and issued 4,000
(f) 1,000, 8% Debentures of Rs.100 each have been issued at 10% premium and
Debentures of Rs.50 each as a collateral security. Pass journal entry.
are redeemable at 5% premium.
Q-27: Aman Ltd. has entered into an agreement with a Bank whereby it obtained
Q-32: Pass the necessary journal entries in the books of the company in the
a Loan of Rs.10,00,000 for 3 years. The loan is secured by a mortgage of Land &
following cases :
Building and Machinery worth Rs.7,00,000. The Bank also asked for additional
(a) Rs.1,00,000; 10% Debentures of Rs.100 each have been issued at par and
security. For this purpose the company issued 6,000 9% Debentures of Rs.100
are redeemable at par.
each as collateral security. Record these transactions in the books of the company.
(b) Rs.1,00,000; 10% Debentures of Rs.100 each have been issued at 5% discount
and are redeemable at par.
Q-28: Sun Ltd. has entered into an agreement with a Bank whereby it obtained a
(c) Rs.1,00,0000; 10% Debentures of Rs.100 each have been issued at 5%
Loan of Rs.6,00,000 for five years. The loan is secured by a mortgage of Machinery
premium and are redeemable at par.
of Rs.4,00,000. The Bank also asked for additional security. For this purpose the
(d) Rs.1,00,000; 10% Debentures of Rs.100 each have been issued at par and
company issued 3,000 10% Debentures of Rs.100 each as collateral security.
are redeemable at 5% premium.
Record these transactions in the books of the company.
(e) Rs.1,00,000; 10% Debentures of Rs.100 each have been issued at 5% discount
and are redeemable at 10% premium.
Issue and Redemption of Debentures
(f) Rs.1,00,000; 10% Debentures of Rs.100 each have been issued at 5% premium
Q-29: Journalise the transactions given below for a Debenture of Rs.100 each :
and are redeemable at 10% premium.
(i) A debenture issued at Rs. 100, repayable at Rs. 100.
(ii) A debenture issued at Rs. 100, repayable at Rs. 110.
Q-33: Vinod Limited issued 10,000, 7% Debentures of Rs.100 each at a discount
(iii) A debenture issued at Rs. 95, repayable at Rs. 100.
of 5%. Pass necessary journal entries for the issue of debentures in the following
(iv) A debenture issued at Rs. 95, repayable at Rs. 110.
cases :
(v) A debenture issued at Rs. 105, repayable at Rs. 100.
(i) When the debentures were redeemable at par
(vi) A debenture issued at Rs. 105, repayable at Rs. 110.
(ii) When the debentures were redeemable at a premium of 6%.
 (7) (8)

Q-39: Payal Ltd. issued 5,000 9% debentures of Rs.100 each at a discount of 5% to

CA. Naresh Aggarwal’s be redeemed at par in four equal installments from the end of the first year. Show the
ACADEMY of ACCOUNTS discount on the Issue of Debentures Account for the period of 4 years.
[1st Year: Rs.10,000; 2nd Year: Rs.7,500; 3rd Year: Rs.5,000; 4th Year: Rs.2,500]
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Q-40: Ram Ltd. issued Rs.3,00,000, 10% debentures at a discount of 6%. The
debentures were redeemable in three equal installments. Prepare discount on
issue of debentures account for the three years.
Q-34: Give journal entries for issuing of 5,000, 10% debentures of Rs.100 each in
[1st Year: Rs.9,000; 2nd Year: Rs.6,000; 3rd Year: Rs.3,000]
the following cases :
(i) Issued at Rs.100 and redeemable at Rs.110.
Q-41: X Ltd. issued debentures amounting to Rs.8,00,000 at a discount of 5%,
(ii) Issued at Rs.95 and redeemable at Rs.105.
repayable by annual drawings of Rs.2,00,000 each year, beginning with the end
(iii) Issued at Rs. 95 and redeemable at Rs.100.
of first year. The directors decided to write off discount based on debentures
(iv) Issued at Rs. 105 and redeemable at Rs.100.
outstanding at the end of each year. Calculate the amount of discount to be written
(v) Issued at Rs. 100 and redeemable at Rs.100.
off each year.
(vi) Issued at Rs. 110 and redeemable at Rs.105.
[1st Year: Rs.16,000; 2nd Year: Rs.12,000; 3rd Year: Rs.8,000; 4th Year: Rs.4,000]

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Interest and Tax Deducted at Source
Q-42: On 1st April, 2011 a limited company issued Rs.3,00,000 debentures at par
Q-35: A Ltd., issued 4,000; 12% debentures of Rs.100 each on 01.04.2015 at a
repayable at 6% premium, by draw of lots at the end of every year starting from 31st
discount of 5% redeemable at a premium of 10%. Interest is payable half yearly on
March, 2014 of face value of Rs. 75,000. Show Loss on Issue of Debentures
September 30 and March 31. Tax deducted at source is 10%. Company’s
account till all debentures are redeemed.
accounting year closes on 31st March every year.
[2011-12: Rs.4,000; 2012-13: Rs.4,000; 2013-14: Rs.4,000;
Give journal entries relating to the issue of debentures and debenture interest for
2014-15: Rs.3,000; 2015-16: Rs.2,000; 2016-17: Rs.1,000]
the period ending 31.03.2016.

Q-36: B Ltd., issued 6,000; 10% debentures of Rs.100 each on 01.04.2015 at a Q-43: On 01.04.2011 Anamika Ltd. issued 8,000, 8% Debentures of Rs. 100 each
discount of 10% redeemable at a premium of 5%. Interest is payable half yearly on at par redemable at 7% premium. Debentures were payable in annual installments
September 30 and March 31. Tax deducted at source is 10%. Company’s for 2,000 Debentures, starting from 31.03.2013. Show Loss on Issue of Debentures
accounting year closes on 31st March every year. Accounts.
Give journal entries relating to the issue of debentures and debenture interest for [2011-12: Rs.16,000; 2012-13: Rs.16,000; 2013-14: Rs.12,000; 2014-15: Rs.8,000; 2015-16: Rs.4,000]
the period ending 31.03.2016.
Q-44: A company issued 10% Debentures of Rs.10,00,000 at 8% discount,
Q-37: PQR Ltd. had 50,000; 12% debentures of Rs.100 each outstanding on redeemable at par. Assume further that debentures are to be redeemed by drawings
01.04.2016. Interest is payable annually on March 31. Tax deducted at source is method in following manner :
10%. Company’s accounting year also closes on 31st March every year. Year end Face value in Rs.
Give journal entries relating to interest on debentues for the year 2016-17. 2 1,00,000
3 2,00,000
Writting off Discount / Loss on Issue of Debentures 4 3,00,000
Q-38: On 01.04.2011, a limited company has issued Rs.1,00,000; 9% Debentures 5 4,00,000
at a discount of 6%. These debentures are to be redeemed in equal instalment Prepare the discount on Issue of Debentures account for five years.
spread over 5 years. Show Discount on Issue of Debentures A/c for five years. [1st Year: Rs.20,000; 2nd Year: Rs.20,000; 3rd Year: Rs.18,000;
[2011-12: Rs.2,000; 2012-13: Rs.1,600; 2013-14: Rs.1,200; 2014-15: Rs.800; 2015-16: Rs.400] 4th Year: Rs.14,000; 5th Year: Rs.8,000]
 (9) (10)

Q-49: Mohan Ltd. issued 60,000 10% Debentures of Rs.100 each at a discount of 5%
CA. Naresh Aggarwal’s on 01.04.2011. Debentures are repayable in 4 equal installments starting from
ACADEMY of ACCOUNTS 31.03.2012. Securities premium account showed balance of Rs.1,00,000.
The company prepares its final accounts on 31st March every year.
Accounting • Costing • Taxation • Financial Management Give the necessary journal entries and prepare discount on issue of debentures
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org account in the books of the company.
[2011-12: Rs.80,000; 2012-13: Rs.60,000; 2013-14: Rs.40,000; 2014-15: Rs.20,000]
Q-45: A company issued 12% Debentures of Rs.5,00,000 at 6% discount, redeemable
at par. Assume further that debentures are to be redeemed by drawings method in Q-50: Mars Ltd. issued 10% Debentures of Rs.50,000 at 6% discount on 01.07.2011
following manner : to be repayable by five equal annual drawings of Rs.10,000 each. The company
Year end Face value in Rs. prepares its final accounts on 31st March each year.
2 50,000 Calculate the amount of discount to be written of each year assuming that the
3 1,00,000 company decides to write off the discount during the life of the debentures.
4 1,50,000 [2011-12: Rs.750; 2012-13: Rs.850; 2013-14: Rs.650;
5 2,00,000 2014-15: Rs.450; 2015-16: Rs.250; 2016-17: Rs.50]
Prepare the discount on Issue of Debentures account for five years.

AoA
[1st Year: Rs.7,500; 2nd Year: Rs.7,500; 3rd Year: Rs.6,750; Q-51: Jupiter Ltd. issued 8% Debentures at 94% of Rs.1,00,000 on 01.07.2011 to
4th Year: Rs.5,250; 5th Year: Rs.3,000] be repayable by five equal annual drawings of Rs.20,000 each. The company
prepares its final accounts on 31st March each year.
Q-46: Ujala Ltd. issued 4,500 9% Debentures of Rs.100 each at a discount of 3% Calculate the amount of discount to be written of each year assuming that the
to be redeemed at 2% premium. Debentures are redeemed at the end of the company decides to write off the discount during the life of the debentures.
following years by the bellow mentioned face values : [2011-12: Rs.1,500; 2012-13: Rs.1,700; 2013-14: Rs.1,300;
1st year: Nil; 2nd year: Nil ; 3rd year: Rs.3,00,000; 4th year: Rs.1,50,000. 2014-15: Rs.900; 2015-16: Rs.500; 2016-17: Rs.100]
Show Loss on Issue of Debentures Account for the period of 4 years.
[1st Year: Rs.6,750; 2nd Year: Rs.6,750; 3rd Year: Rs.6,750; 4th Year: Rs.2,250] Q-52: Earth Ltd. issued 12% Debentures at 95.5% of Rs.1,00,000 on 01.06.2011
to be repayable by five equal annual drawings of Rs.20,000 each. The company
Q-47: Manish Ltd. issued 10,000 10% debentures of Rs. 100 each at a discount of prepares its final accounts on 31st March each year.
4% to be redeemed at 2% premium. Debenturs are redeemed at the end of the Calculate the amount of discount to be written of each year assuming that the
following years by the bellow mentioned face values : company decides to write off the discount during the life of the debentures.
1st Year: Nil; 2nd Year: Rs.5,00,000; 3rd Year: Nil; 4th Year: Rs.5,00,000. [2011-12: Rs.1,250; 2012-13: Rs.1,250; 2013-14: Rs.950;
Show Loss on Issue of Debentures Account for the period of 4 years. 2014-15: Rs.650; 2015-16: Rs.350; 2016-17: Rs.50]
[1st Year: Rs.20,000; 2nd Year: Rs.20,000; 3rd Year: Rs.10,000; 4th Year: Rs.10,000]
Q-53: Krishna Ltd. issued 10% Debentures of Rs.1,00,000 at 6% discount on
Q-48: Azad Ltd. issued 20,000, 9% Debentures of Rs.100 each at a discount of 01.08.2011 to be repayable by four equal annual drawings of Rs.25,000 each.
6% on 1st April, 2011 redeemable as under : The company prepares its final accounts on 31st March each year.
8,000 debentures on 31st March 2013 Calculate the amount of discount to be written of each year assuming that the company
4,000 debentures on 31st March 2015, and decides to write off the discount during the life of the debentures.
Remaining debentures on 31st March, 2017 [2011-12: Rs.1,600; 2012-13: Rs.2,000; 2013-14: Rs.1,400; 2014-15: Rs.800; 2015-16: Rs.200]
Find out the amount of discount to be written off in each of years till the debentures are
paid if the company prepares its final accounts on 31st March every year. Q-54: Radha Ltd. issued 10% Debentures at 94% of Rs.40,000 on 01.08.2011 to be
[2011-12: Rs.30,000; 2012-13: Rs.30,000; 2013-14: Rs.18,000; repayable by four equal annual drawings. The company prepares its final accounts on
2014-15: Rs.18,000; 2015-16: Rs.12,000; 2016-17: Rs.12,000] 31st March each year.
 (11) (12)

CA. Naresh Aggarwal’s Redemption of Debentures

ACADEMY of ACCOUNTS Lump-sum payment at the end of the fixed period
Accounting • Costing • Taxation • Financial Management Q-1: Amar Ltd. issued 50,000, 10% Debentures of Rs.100 each at par on 01.10.2012
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org redeemable on 30.09.2016. The board of directors transferred the required amount
to Debenture Redemption Reserve on 31.03.2016. Debentures were redeemed
Calculate the amount of discount to be written of each year assuming that the company on due date. Record necessary entries for issue and redemption of debentures.
decides to write off the discount during the life of the debentures. [DRR created: Rs.12,50,000; DRI made: Rs.7,50,000]
[2011-12: Rs.640; 2012-13: Rs.800; 2013-14: Rs.560; 2014-15: Rs.320; 2015-16: Rs.80]
Q-2: Ujala Ltd. issued 20,000, 9% Debentures of Rs.100 each at par on 01.07.2012
redeemable on 31.12.2016. The board of directors transferred the required amount
•••••••••••••••••••••• to Debenture Redemption Reserve on 31.03.2016. Debentures were redeemed
on due date. Record necessary entries for issue and redemption of debentures.
[DRR created: Rs.5,00,000; DRI made: Rs.3,00,000]

Q-3: Diamond Ltd, issued 25,000, 8% debentures of Rs. 100 each on 01.04.2012

AoA
redeemable at par on 31.12.2016. The company received applications for 30,000
debentures and the allotment was made to all the applicants on pro rata basis.
Necessary amount was transferred to Debenture Redemption Reserve on
31.03.2016. Debentures were redeemed on due date.
Record necessary journal entries.
[DRR created: Rs.6,25,000; DRI made: Rs.3,75,000]

Q-4: Gold Ltd, issued 50,000, 10% debentures of Rs. 100 each on 01.07.2012
redeemable at par on 31.10.2016. The company received applications for 60,000
debentures and the allotment was made to all the applicants on pro rata basis.
Necessary amount was transferred to Debenture Redemption Reserve on
31.03.2016. Debentures were redeemed on due date.
Record necessary journal entries.
[DRR created: Rs.12,50,000; DRI made: Rs.7,50,000]

Q-5: Kuber Ltd. issued 60,000; 9% debentures of Rs.100 each on 01.04.2013

redeemable at a premium of 10% on 31.12.2016. The Board of Directors have
decided to transfer out of profits Rs.4,00,000 to Debenture Redemption Reserve
on 31.03.2014; Rs.5,00,000 on 31.03.2015 and balance on 31.03.2016.
Record necessary journal entries regarding issue and redemption of debentures.
Ignore entries relating to writing off of the loss on issue and interest paid thereon.
[Balance of DRR created: Rs.6,00,000; DRI made: Rs.9,00,000
DRR transfered to General Reserve: Rs.15,00,000]

Q-6: Best Ltd. issued 80,000; 10% debentures of Rs. 100 each at premium of 5%
on 01.07.2014, redeemable on 30.06.2016. The Board of Directors decided to
 (13) (14)

decided to transfer Rs.6,00,000 to Debenture Redemption Reserve on 31.03.2013

CA. Naresh Aggarwal’s and balance on 31.03.2014.
ACADEMY of ACCOUNTS Record necessary journal entries for the above transactions till completion of
redemption.
Accounting • Costing • Taxation • Financial Management [On 31.03.2014 DRR created: Rs.4,00,000 ; On 30.04.2014 DRI made: Rs.1,50,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org On 30.06.2017 DRR transfered to General Reserve A/c: Rs.10,00,000]

transfer Rs.7,50,000 to Debenture Redemption Reserve on 31.03.2015 and balance Q-12: Silver Ltd. issued Rs.60,00,000; 10% debentures of Rs.100 each on
on 31.03.2016. Record necessary entries for the issue as well as at the time of 01.10.2013 redeemable in three equal annual instalments starting with 30.09.2015.
redemption of debentures. Ignore entries for payment of interest. It was decided to transfer Rs.8,00,000 to Debenture Redemption Reserve on
[Balance of DRR created: Rs.12,50,000; DRI made: Rs.12,00,000 31.03.2014 and balance on 31.03.2015.
DRR transfered to General Reserve: Rs.20,00,000] Record necessary journal entries for the above transactions till completion of
redemption.
Q-7: Sun Ltd. has 80,000, 6% debentures of Rs.100 each due for redemption on [On 31.03.2015 DRR created: Rs.7,00,000 ; On 30.04.2015 DRI made: Rs.3,00,000
31.03.2017. By the end of 2015-16, Rs.15,00,000 of Debenture Redemption On 30.09.2017 DRR transfered to General Reserve A/c: Rs.15,00,000]
Reserve was already created. Debentures were redeemed on due date.
Record necessary entries for redemption of debentures for the year 2016-17. Q-13: Earth Ltd. has Rs.30,00,000, 8% debentures of Rs.100 each due for

AoA
[On 31.03.2017 Rs.5,00,000 to DRR A/c and Rs.20,00,000 to General Reserve A/c redemption in three equal annual instalments starting from 31.03.2015. Debenture
On 30.04.2016 DRI made: Rs.12,00,000] Redemption Reserve has a balance of Rs.5,00,000 on 31.03.2014.
Record necessary journal entries since 01.04.2015 till completion of redemption.
Q-8: Moon Ltd. has 50,000, 9% debentures of Rs.100 each due for redemption on [On 31.03.2015 DRR created: Rs.2,50,000 ; On 30.04.2015 DRI made: Rs.1,50,000
31.03.2017. By the end of 2015-16, Rs.10,00,000 of Debenture Redemption On 31.03.2017 DRR transfered to General Reserve A/c: Rs.7,50,000]
Reserve was already created. Debentures were redeemed on due date.
Record necessary entries for redemption of debentures for the year 2016-17. Q-14: ABC Exports Ltd. has Rs.45,00,000, 10% debentures of Rs.100 each due
[On 31.03.2017 Rs.2,50,000 to DRR A/c and Rs.12,50,000 to General Reserve A/c for redemption in three equal annual instalments starting from 31.03.2015.
On 30.04.2016 DRI made: Rs.7,50,000] Debenture Redemption Reserve has a balance of Rs.8,00,000 on 31.03.2014.
Record necessary journal entries since 01.04.2015 till completion of redemption.
Q-9: India Ltd. (a banking company) issued 40,000, 10% Debentures of Rs.200 [On 31.03.2015 DRR created: Rs.3,25,000 ; On 30.04.2015 DRI made: Rs.2,25,000
each on 01.04.2014 redeemable on 31.12.2016. How much amount of Debenture On 31.03.2017 DRR transfered to General Reserve A/c: Rs.11,25,000]
Redemption Reserve is required before the redemption of debentures? Also record
journal entries for issue and redemption of debentures. Q-15: Fast Auto Ltd. has Rs.50,00,000, 10% Debentures of Rs.100 each to be
[No Debenture Redemption Reserve is required to be created in case of a banking company] redeemed at a premium of 10% as under :
On 31.03.2015 Rs.15,00,000 Debentures
Q-10: Hindustan Ltd. (a banking company) issued 60,000; 12% Debentures of On 31.03.2016 Rs.15,00,000 Debentures
Rs.100 each on 01.07.2014 redeemable on 31.12.2016. How much amount of On 31.03.2017 Rs.20,00,000 Debentures
Debenture Redemption Reserve is required before the redemption of debentures? The company had created debenture redemption reserve to extent of Rs.9,00,000
Also record journal entries for issue and redemption of debentures. by the end of 31.03.2014.
[No Debenture Redemption Reserve is required to be created in case of a banking company] You are required to record necessary journal entries since 01.04.2014 till
completion of redemption, ignoring interest on debentures.
Redemption of Debentures in Installments by Drawing of Lots [On 31.03.2015 DRR created: Rs.3,50,000 ; DRI made on 30.04.2014 : Rs.2,25,000
DRI made on 30.04.2016 : Rs.75,000; DRI sold on 31.03.2017: Rs.3,00,000
Q-11: Gold Ltd. issued Rs.40,00,000; 12% debentures of Rs.100 each on 1.07.2012
On 31.03.2017 DRR transfered to General Reserve A/c: Rs.12,50,000]
redeemable in four equal annual instalments starting with 30.06.2014. It was
 (15) (16)

(b) Debentures redeemed at a premium of 5% by conversion into equity shares of

CA. Naresh Aggarwal’s Rs.20 each, issued at par.
ACADEMY of ACCOUNTS (c) Debentures redeemed at a premium of 5% by conversion into equity shares or
Rs.10 each, issued at a premium of 20%.
Accounting • Costing • Taxation • Financial Management [(i) 8,000 Preference Shares; (ii) 21,000 Equity Shares; (iii) 35,000 Equity Shares]
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Q-22: On 1st April, 2012 a company issued 5,000, 10% Debentures of Rs.1,000
each at par repayable at 5% premium. Holders of these debentures had an option
Redemption by Conversion
to convert their debentures into 12% Preference Shares of Rs.100 each at a
Q-16: India Ltd. issued 20,000, 9% debentures of Rs.100 each redeemable after
premium of Rs.20 per share. On 31st March, 2016 a years interest had accr ued on
5 years by converting them into equity, shares of Rs.20 each.
the debentures but remained unpaid and a holder of 80 debentures notified his
Record journal entries for issue and redemption of debentures.
intention to exercise his option. Pass the necessary journal entries.
[No. of shares issued: 1,00,000]
[No. of Preference Shares issued: 700]

Q-17: Suvidha Ltd. redeemed 50,000 10% debentures of Rs.50 each at a premium
Q-23: On 01.04.2012 a company issued 6,000, 8% Debentures of Rs.500 each at
of 10% on 01.04.2014 redeemable by conversion of debentures into shares of
par repayable at 10% premium. Holders of these debentures had an option to
Rs.10 each at a premium of Re.1 per share on 31.03.2016.
convert their debentures into Equity Shares of Rs.100 each at a premium of Rs.10

AoA
Record necessary entries for issue and redemption of debentures.
per share. On 31.03.2016 a years interest had accrued on the debentures but
[No. of shares issued: 2,50,000]
remained unpaid and a holder of 70 debentures notified his intention to exercise
his option. Pass the necessary journal entries.
Q-18: Delhi Ltd. have an outstanding balance of Rs.50,00,000, 9% debentures of
[No. of Shares issued: 350]
Rs.100 each redeemable at a premium of 5%. According to the terms of redemption
the Company redeemed 20% of the above debentures by converting them into
Q-24: On 01.04.2012, Y Ltd. issued 2,500; 11% Debentures of Rs.100 each at
shares of Rs.10 each at a premium of Rs.4 per share.
Rs.105 and offered the holders to convert their holdings into equity shares of
Record journal entries for redemption of debentures.
Rs.10 each at par after 31.12.2012. On 01.02.2013, 60% of the debenture holders
[No. of shares issued: 75,000]
exercised their option. Give journal entries for conversion.
[No. of shares issued: 15,000]
Q-19: Hind Motors Ltd. issued 5,000, 8% debentures of Rs.200 each at a discount
of 5% redeemable after 5 years by conversion into shares of Rs.10 each at Rs.16
Q-25: On 01.04.2012, D Ltd. issued 5,000; 12% Debentures of Rs.100 each at
per share. Record necessary entries for issue and redemption of debentures by
Rs.105 and offered the holders to convert their holdings into equity shares of
conversion.
Rs.20 each at Rs.25 per share after 31.03.2016. On 01.06.202013, 40% of the
[No. of shares issued: 59,375]
debenture holders exercised their option. Give journal entries on 01.06.2013,
assuming that the debentures were converted before the date of redemption.
Q-20: Journalise the following transactions :
[No. of shares issued: 8,000]
(i) A Ltd. redeemed 5,000, 10% Debentures of Rs.100 each by converting them
into equity shares of Rs.20 each at par.
Q-26: On 01.10.2012, K Ltd. issued 20,000, 13% Debentures of Rs.100 each at
(ii) B Ltd. redeemed 4,000, 9% Debentures of Rs.50 each by converting them into
110% and offered the holders an option to convert their holdings into 14%
equity shares of Rs.10 each at a premium of 25%.
preference shares of Rs.50 each at par. 25% of the debenture holders exercised
[(i) 25,000 Equity Shares; (ii) 16,000 Equity Shares]
their option. Give journal entries for conversion.
[No. of shares issued: 10,000]
Q-21: Pass necessary Journal entries in the books of the company in the following
cases for redemption of 4,000; 12% Debentures of Rs.100 each issued at par:
Q-27: On 01.01.2016 a limited company gave notice of its intention to redeem its
(a) Debentures redeemed at par by conversion into 15% Preference Shares of
outstanding Rs.20,00,000, 10% debentures on 30.06.2016 at par and offered the holders
Rs.50 each.
the following options:
 (17) (18)

Q-33: B Ltd. purchased for cancellation its 5,000, 10% Debentures of Rs.100 each at
CA. Naresh Aggarwal’s Rs.98. from the open market for immediate cancellation. Pass necessary journal entries
ACADEMY of ACCOUNTS [Profit on Redemption: Rs.10,000]

Accounting • Costing • Taxation • Financial Management Q-34: C Ltd. redeemed 10,000, 10% debentures of Rs.100 each by purchasing
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org from open market for immediate cancellation at Rs.98 per debenture. Expense on
purchase were Rs.3,000. Give journal entries.
(i) 12% Preference shares of Rs.100 each at Rs.105 per share (accepted by the [Profit on Redemption: Rs.17,000]
holders of Rs.5,25,000 debentures)
(ii) 11% debentures of Rs.100 at 96% (accepted by the holders of Rs.4,80,000 Q-35: XYZ Ltd. had issued 11% Debentures of Rs.100 each amounting to
debentures) Rs.4,00,000 redeemable at the option of the company by drawing at par or by
(iii) To have their holding redeemed for cash if neither of the options (i) and (ii) was purchase in the open market. It decides to redeem Rs.50,000 debentures by the
accepted. purchase of Rs.30,000 debentures in the open market at Rs.96 each and draw
Show the journal entries necessary to record the redemption allotments under all Rs.20,000 debentures. Show the necessary journal entries in the books of the
the options and how much of the Debenture Redemption Reserve is required to be company.
made. Ignore entries of Debenture Redemption Reserve and Debenture [Profit on Redemption: Rs.1,200]
Redemption Investment.

AoA
[(i) 5,000 Preference Shares; (ii) 5,000 Debentures; (iii) Cash paid Rs.9,95,000 Q-36: D Ltd. purchased for cancellation 700 of its own debentures of Rs.100 each
Debenture Redemption Reserve will be made for Rs.2,48,750; DRI: Rs.1,49,250] for Rs. 65,500 and 300 Debentures for Rs.27,500. Expenses of purchase amounted
to Rs.2,000. Pass journal entries.
Q-28: On 01.04.12 East India Ltd. issued 5,000; 8% Debentures of Rs.100 each. [Profit on Redemption: Rs.5,000]
One of the conditions of issue was that the debentures could be redeemed by
giving six month’s notice at any time after three years at 5% premium, either by Q-37: On 01.04.2012, a Company made an issue of 10,000; 8% Debentures of
payment in cash or by allotment of Equity Shares or other debentures according to Rs.100 each. The terms of issue provided for the redemption of Rs.1,00,000
the wish of the debenture holders. Debentures annually commencing from 01.04.2016 either by drawing at par or by
On 01.01.2016 the Company informed the debenture holders to redeem the purchase in the market at the Company’s option.
debentures on 30.06.2016 either by payment in Cash or by allotment of Equity During 2016-17 the Company purchased for cancellation 500 of its debentures at
Shares of Rs. 10 each at Rs.15 per share or 11% 2nd Debentures of Rs.100 each Rs.95 and 300 at Rs.96 each. The expenses of purchase amounted to Rs.1,500.
at Rs. 90 per debenture. Record the above transactions in the books of the company.
Holders of 2,000 debentures accepted the offer of Equity shares. Holders of 1,500 [Profit on Redemption: Rs.2,200]
debentures accepted 11% 2nd Debentures and the rest accepted the offer of cash
payment. Q-38: On 01.04.2012, X Ltd. made an issue of 5,000; 10% debentures of Rs.100
Show the journal entries necessary to record the redemption allotments under all each. According to the terms of issue, debentures of the face value of Rs.1,00,000
the options and how much of the Debenture Redemption Reserve is required to be are to be redeemed annually commencing from 01.04.2016, either by drawings at
made. Ignore entries of Debenture Redemption Reserve and Debenture par or by purchase in the open market.
Redemption Investment. During 2016-17, the Company purchased for cancellation Rs.50,000 debentures
[Issued 14,000 Equity Shares and 1,750 Debentures; Cash paid Rs.1,57,500 at Rs.96 and Rs.30,000 debentures at Rs.95. The expenses on purchase amounted
Debenture Redemption Reserve will be made for Rs.37,500; DRI: Rs.22,500] to Rs.1,500.
[Profit on Redemption: Rs.2,000]
Redemption of Debentures by Purchase in the open market
Q-32: A Ltd. purchased its own Debentures of the face value of Rs.80,000 from the Q-39: On 01.04.2012, a company made an issue of 5,000; 9% debentures of
open market for immediate cancellation at Rs.95 each. Pass Journal entries. Rs.100 each at Rs.90 per debenture. The terms of issue provided for the redemption
[Profit on Redemption: Rs.4,000]
 (19) (20)

Remaining debentures were sold on 15.10.2016 at the the rate of Rs.95. Record
CA. Naresh Aggarwal’s necessary journal entries for above mentioned transactions in the books of the
ACADEMY of ACCOUNTS company.
[Profit on 1st sale: Rs.3,000; Loss on 2nd sale: Rs.1,500]
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Q-44: Anmol Ltd. had 50,000, 12% debentures of Rs.100 each outstanding on
01.04.2016. On 1 st May, 2016 Company purchased 10,000 debentures at Rs.97
of Rs.1,00,000 debentures every year commencing from 01.04.2016 either by purchase for investment purpose. On 01.10.2016 it sold 6,000 of them at Rs.99. Record
or by drawings at par at the company’s option. journal entries.
During 2016-17, the company purchased for cancellation debentures of the face [Profit on sale: Rs.12,000]
value of Rs.60,000 at Rs.92 per debenture and of Rs.25,000 at Rs.95 per debenture.
The expenses of purchase amounted to Rs.1,250. Journalise the above Q-45: Bhola Ltd. had 40,000, 12% debentures of Rs.100 each outstanding on
transactions. Ignore entries relating to Debenture Redemption Reserve. 01.04.2016. On 1 st July, 2016 Company purchased 10,000 debentures at Rs.101
[Profit on Redemption: Rs.4,800] for investment purpose. On 1 st November, 2016 it sold 6,000 of them at Rs.100.
Record journal entries for purchase and sale of debentures.
Purchase of Own Debentures as an Investment [Loss on sale of investment: Rs.6,000]

AoA
Q-40: Malamaal Ltd. has an outstanding balance of 20,000; 10% debentures of
Put and Call Option
Rs.100 each and sufficient funds in Debenture Redemption Reserve to meet legal
requirements. The Board of Directors decided to purchase 5,000 debentures at a Q-46: On 01.04.2013, Sharma Textiles Ltd. issued 50,000, 10% debentures of
price of Rs.96 for investment purpose. But after few months they took decision to Rs.100 each at par to be redeemed at par after four years. Debentures are callable
sell them at Rs.99 in the market. Record entries to show above transactions. after two years at an exercise price of Rs.105. On 01.04.2016 the company invoked
[Profit on sale of investment: Rs.15,000] the call option for redemption of Rs.10,00,000 debentures. Record necessary
journal entries for issue of debentures, interest paid on debentures and redemption
Q-41: Dum-Dum Ltd. has an outstanding balance of 50,000; 8% debentures of of debentures. Ignore entries relating to Debenture Redemption Reserve.
Rs.100 each and sufficient funds in Debenture Redemption Reserve to meet legal [Loss on Redemption: Rs.50,000]
requirements. The Board of Directors decided to purchase 10,000 debentures at a
price of Rs.92 for investment purpose. But after few months they took decision to Q-47: On 01.04.2013, Speed Auto Ltd. issued 20,000, 9% debentures of Rs.100
sell them at Rs.96 in the market. Record entries to show above transactions. each redeemable after four years. Debenture holders are given the option to get
[Profit on sale of investment: Rs.40,000] their debentures redeemed at Rs.102 per debenture at any time after two years. on
01.04.2016, debenture holders holding Rs.5,00,000 debentures exercised their
Q-42: On 01.04.2016 Good India Ltd. had outstanding Rs.5,00,000 12% debentures option to get their debentures redeemed. Record necessary journal entries for
of Rs.100 each. On 15.04.2016 It buys 1,000 debentures at the rate of Rs.97 for issue of debentures, interest paid on debentures and redemption of debentures.
investment purpose and on 31.07.2016, it sold 800 of them at the rate of Rs.99. Ignore entries relating to Debenture Redemption Reserve.
Remaining debentures were sold on 15.09.2016 at the the rate of Rs.96. Record [Loss on Redemption: Rs.10,000]
necessary journal entries for above mentioned transactions in the books of the
company.
[Profit on 1st sale: Rs.1,600; Loss on 2nd sale: Rs.200] ••••••••••••••••••••••

Q-43: On 01.04.2016 Silver Ltd. had outstanding Rs.20,00,000 12% debentures of

Rs.100 each. On 15.05.2016, It buys 2,000 debentures at the rate of Rs.98 for
investment purpose and on 01.08.2016, it sold 1,500 of them at the rate of Rs.100.
 (21) (22)

3. Debentures are issued at Discount (Rs.95) AND redemable at Par (Rs.100)

-:CA.
Points to Remember
Naresh Aggarwal’s:- At the time of issue : At the time of redemption :

1. ACADEMY of debt
A debenture is a medium to long-term ACCOUNTS
instrument used by companies to
Bank A/c
To % Debentures App. A/c
Dr. 95
95
% Debentures A/c
To Debenture Holders A/c
Dr. 100
100
borrow money,• atCosting
Accounting a fixed rate
• of interest. • Financial Management
Taxation ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2. West
A debenture is New
like Delhi.
a certificate of loan. Website: www.academyofaccounts.org % Debentures App. A/c Dr. 95 Debenture Holders A/c Dr. 100
Patel Nagar, Ph:8800215448. Discount on Issue of Deb. Dr. 5 To Bank A/c 100
3. A company can issue debentures at par, premium or discount and can be To % Debentures A/c 100
redeemed at par or premium.
4. Holder of debentures is called debenture holder and entitled to receive interest 4. Debentures are issued at Discount (Rs.95) AND redemable at Premium (Rs.110)
at the rate mentioned on debentures till the redemption of debentures. At the time of issue : At the time of redemption :
Bank A/c Dr. 95 % Debentures A/c Dr. 100
5. Redemption on debenture can be in any of the following means :
To % Debentures App. A/c 95 Premium on Red. of Deb. Dr. 10
(a) Lump-sum payment (Redemption in one go)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ To Debenture Holders A/c 110
(b) Drawing of lots (Redemption in instalments) % Debentures App. A/c Dr. 95 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(c) Purchase in open market Loss on Issue of Debentures Dr. 15 Debenture Holders A/c Dr. 110
(d) Conversion of debentures (Conversion into shares or new debentures) To % Debentures A/c 100 To Bank A/c 110
6. Non banking and non financial companies are required to create ‘Debenture To Premium on Red. of Deb. 10

AoA
Redemption Reserve’ at least 25% of the amount raised through the debenture
issue before the debenture redemption commences. 5. Debentures are issued at Premium (Rs.105) AND redemable at Par (Rs.100)
At the time of issue : At the time of redemption :
7. Companies that are required to create DRR should also set aside 15% of the Bank A/c Dr. 105 % Debentures A/c Dr. 100
amount of debentures maturing during the financial year in bank deposits or To % Debentures App. A/c 105 To Debenture Holders A/c 100
certain other specified securities, before 30 th April of the financial year. ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

% Debentures App. A/c Dr. 105 Debenture Holders A/c Dr. 100
To % Debentures A/c 100 To Bank A/c 100
Journal entries for Issue and Redemption of Debentures To Securities Premium Reserve 10
1. Debentures are issued at Par (Rs.100) AND redemable at Par (Rs.100)
6. Debentures are issued at Premium (Rs.105) AND redemable at Premium (Rs.110)
At the time of issue : At the time of redemption :
At the time of issue : At the time of redemption :
Bank A/c Dr. 100 % Debentures A/c Dr. 100
Bank A/c Dr. 105 % Debentures A/c Dr. 100
To % Debentures App. A/c 100 To Debenture Holders A/c 100
To % Debentures App. A/c 105 Premium on Red. of Deb. Dr. 10
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ To Debenture Holders A/c 110
% Debentures App. A/c Dr. 100 Debenture Holders A/c Dr. 100
% Debentures App. A/c Dr. 105 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
To % Debentures A/c 100 To Bank A/c 100
Loss on Issue of Debentures Dr. 10 Debenture Holders A/c Dr. 110
To % Debentures A/c 100 To Bank A/c 110
2. Debentures are issued at Par (Rs.100) AND redemable at Premium (Rs.110)
To Securities Premium Reserve 5
At the time of issue : At the time of redemption :
To Premium on Red. of Deb. 10
Bank A/c Dr. 100 % Debentures A/c Dr. 100
To % Debentures App. A/c 100 Premium on Red. of Deb. Dr. 10 [*Above mentioned journal entries are illustrated by taking face value of debenture as Rs.100]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ To Debenture Holders A/c 110
% Debentures App. A/c Dr. 100 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Loss on Issue of Debentures Dr. 10 Debenture Holders A/c Dr. 110 Journal entries for interest on debentures
To % Debentures A/c 100 To Bank A/c 110
To Premium on Red. of Deb. 10 1. When interest is due
Debenture Interest A/c (Interest Amount) Dr.
To TDS Payable A/c (TDS Amount, If any)
To Debenture Holders A/c (Balance Amount)
 (23) (24)

2. For payment of interest to debentureholders 3. When debenture are issued as collateral security
CA. Naresh Aggarwal’s
Debentureholders A/c (Amount of interest paid to debentureholders) Dr. Option-1 (Recommended) : Option-2 :
ACADEMY
To Bank A/c of ACCOUNTS Debenture Suspense A/c (Debenture amount) Dr. No Entry
Accounting Costing Taxation • GovernmentFinancial Management To % Debentures A/c
3. On payment of• tax deducted• at source to the
West
TDSPatel Nagar,
Payable A/cNew
(TDSDelhi. Ph:8800215448. Website: www.academyofaccounts.orgDr.
Amount)
To Bank A/c Creation of Debenture Redemption Reserve (DRR)

4. On transfer debenture Interest Account to statement of Profit and Loss Type of companies Type of debentures DRR %
Statement of Profit and Loss (Interest Amount) Dr.
To Debenture Interest A/c Banking companies Any Nil

Non Banking Financial Co. Publicly issued debentures 25

Journal Entries for Issue of debentures for consideration other then cash (NBFC) Privately placed debentures Nil
1 When sundry assets are purchased
Other companies Any 25
Sundry Assets A/c (Fair or Market Value) Dr.

AoA
Goodwill A/c (Balancing Figure, If required) Dr.
To Sundry Liabilites A/c (Payable value, If any)
Thus, Non banking and non financial companies are required to create ‘Debenture
To Vendors A/c (Purchase Consideration or Settled Price)
Redemption Reserve’ at least 25% of the amount raised through the debenture
To Capital Reserve A/c (Balancing Figure, If required)
issue before the debenture redemption commences.
2 When account settled with vendor (payment is made) Accounting for Debenture Redemption Reserve : Following journal entries are
recorded in the books of accounts of the company from time to time in relation with
Vendors A/c (Purchase Consideration or Settled Price) Dr.
debenture redemption reserve :
Discount on Issue of Debentures A/c (If debentures are issued below paid up value) Dr.
To % Debentures A/c (Paid up value of debentures issued to them) 1. Whenever debenture redemption reserve (DRR) is ceated (One or many times)
To Securites Premium Reserve A/c (If debentures are issued over paid up value) Statement of Profit and Loss / Surplus Dr.
To Bank A/c (If some portion of purchase consideration paid in cash) To Debenture Redemption Reserve A/c

2. When debenture are redeemed and DRR A/c is closed

No. of Debentures issued = Amount to be paid in form of Debentures .
Debenture Issue Price Debenture Redemption Reserve A/c (Total of DRR A/c) Dr.
To General Reserve A/c

Debenture redemption fund Investment

Journal entries for debentures issued as collateral securities
Companies that are required to create DRR should also set aside 15% of the
1. When Loan is taken
amount of debentures maturing during the financial year in bank deposits or certain
Bank A/c (Loan amount) Dr. other specified securities, before 30 April of the financial year.
To Bank / Other Loan A/c
Thus, the companies that are not required to create DRR might not be required to
set aside the amount of 15% of the amount of debentures maturing during the
2. When assets are mortgaged for security
financial year as well.
No Entry
Accounting for Debenture Redemption Investment : Following journal entries are
 (25) (26)

recorded in the books of accounts of the company from time to time in relation with 2. Debenture Holders A/c (Total amount)
CA. Naresh
debenture redemption investment : Aggarwal’s To Share Capital A/c (Paid up value of new share)
1. ACADEMY
Whenever debenture redemptionof ACCOUNTS
investment (DRI) is made (before 30th April)
To Securities Premium Reserve A/c (If shares are issued over paid up value)

Accounting • Costing
Debenture Redemption • Taxation
Investment A/c • Financial Management
Dr.
To Bank A/c No. of Shares / Debentures issued = Amount to be paid in form of Debentures .
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Share / Debenture Issue Price
2. Whenever interest on debenture redemption investment is received
Bank A/c Dr.
Journal entries for redemption by purchase in open market
To Interest on Debenture Redemption Investment A/c
1. Own Debentures A/c (Cost of Debentures + Expense on purchase) Dr.
3. Whenever debenture redemption investment is sold To Bank A/c
Bank A/c Dr.
To Debenture Redemption Investment A/c 2. % Debentures A/c (Paid up value) Dr.
To Own Debentures A/c (Cost of Debentures + Expense on purchase)
To Profit on Redemption / Cancellation of Debentures A/c (Balancing figure)
Journal entries for converion of Debentures

AoA
Type-1: When debentures are converted after maturity : 3. Profit on Redemption / Cancellation of Debentures A/c (Above mentioned amount) Dr.
1. % Debentures A/c (Paid up value) Dr. To Capital Reserve A/c
Premium on Redemption of Debentures A/c (If any) Dr.
To Debenture Holders A/c (Total amount)
Journal entries for debentures purchased as an Investment
2. Debenture Holders A/c (Total amount)
Discount on Issue of New Debentures (If new debentues are issued below paid up value) 1. When own debentures are purchased
To Share Capital / New Debentures A/c (Paid up value of shares / new debentures) Own Debentures A/c (Cost of Debentures + Expense on purchase) Dr.
To Securities Premium Reserve A/c (If shares / debentures are issued over paid up value) To Bank A/c
To Bank A/c (If some portion of debenture paid in cash)
2. When own debentures are sold
Type-2: When debentures are converted before maturity into new debentures : Bank A/c Dr.
1. % Debentures A/c (Paid up value) Dr. To Own Debentures A/c
Premium on Redemption of Debentures A/c (If any) Dr.
To Debenture Holders A/c (Total amount) 3a. If Debentures are sold above cost (at profit)
Own Debentures A/c (Profit amount) Dr.
2. Debenture Holders A/c (Total amount) To Statement of Profit and Loss
Discount on Issue of New Debentures (If new debentues are issued below paid up value)
To New Debentures A/c (Paid up value of new debentures) 3b. If Debentures are sold below cost (at loss)
To Securities Premium Reserve A/c (If debentures are issued over paid up value) Statement of Profit and Loss (Loss amount) Dr.
To Bank A/c (If some portion of debenture paid in cash) To Own Debentures A/c

Type-3: When debentures are converted before maturity into shares :

1. % Debentures A/c (Paid up value) Dr. ••••••••••••••••••••••
Premium on Redemption of Debentures A/c (If any) Dr.
To Discount / Loss on Issue of Debentures A/c (If any)
To Debenture Holders A/c (Balance amount)
 (27)

Theoretical Questions
CA. Naresh Aggarwal’s
ACADEMY of
Issue of ACCOUNTS
Debentures
Accounting
Q-1*: Costing
• by
What is meant • Taxation
debentures ? • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Q-2*: Distinguish between a shareholder and a debentureholder.

Q-3*: Distinguish between a share and a debenture.

Q-4*: What is meant by issue of debentures as collateral security ?

Q-5: Give main characteristics of a debenture.

Q-6: What is meant by convertible debentures ?

Q-7: State the meaning of ‘non-convertible debentures’.

Q-8: State the meaning of ‘Partly’ and ‘Fully’ convertible debentures.

AoA
Q-9: What is meant by secured debentures ?

Q-10: What is meant by simple or unsecured debentures ?

Q-11: What do you mean by ‘trust deed’ in context of debentures ?

Q-12: Who can be trustees of ‘trust deed’ ?

Q-13: Show ‘debentures issued as collateral security’ treatment in the balance sheet
of a company.

Redemption of Debentures

Q-1*: Explain the term redemption of debentures.

Q-2*: List any four modes of redemption of debentures.

Q-3*: State the meaning of redemption of debentures out of profits ?

Q-4*: What do you mean by cum-interest and ex-interest ?

Q-5: What is ‘Debenture Redemption Fund’ ?

Q-6: Write a short note on purchase of debentures through open market operations.

Q-7: What is meant by call option and put option ?

••••••••••••••••••••••
 CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org

For Eenquiries
Call or whatsapp: 8800215448

AoA
Balance Sheet of Companies (Whatsapp anytime, Calls only between 3.00 pm to 8.00 pm)

& Email: ca.naresh.vc@gmail.com

Website: academyofaccounts.org
Comparative Statements

Watch us on

https://www.youtube.com/CaNareshAggarwal
 (1) (2)

Practical Questions
PART I – Form of BALANCE SHEET
CA. Naresh Aggarwal’s
Name of the Company …………………….
ACADEMY of ACCOUNTS
Balance Sheet as at ……………………… Q-1: Give the format of the Balance Sheet of a Company (main headings only) as per
the requirement of Schedule VI of the Companies Act, 2003.
Accounting • Costing • Taxation
Particulars Financial
Note• Figures Management
as at the Figures as at the
No. end
West Patel Nagar, New Delhi. Ph:8800215448. Website: of current end of previous
www.academyofaccounts.org Q-2: Under what broad headings will you show the following items in the Balance
reporting period reporting period Sheet of a limited company :
(i) Securities Premium, (ii) Preliminary Expenses, (iii) Bills Receivable,
(I) EQUITY AND LIABILITIES (iv) Goodwill, (v) Authorised Share Capital.
(1) Shareholders funds
(a) Share capital xxx xxx Q-3: How would you disclose the following items in the Balance Sheet of a limited
(b) Reserves and surplus xxx xxx company ?
(c) Money received against share warrants xxx xxx (i) Furniture, (ii) Securities Premium Account, (iii) Provision for Tax,
(2) Share application money pending allotment xxx xxx (iv) Loose Tools, (v) Share Forfeited Account.
(3) Non-current liabilities
(a) Long-term borrowings xxx xxx Q-4: Give the headings under which of the following items will be shown in a company’s
(b) Deferred tax liabilities (Net) xxx xxx Balance Sheet:
(c) Other Long term liabilities xxx xxx (i) Proposed dividend, (ii) Sundry debtors, (iii) Debentures,

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(d) Long-term provisions xxx xxx (iv) Bills Payable, (v) Work in progress.
(4) Current liabilities
(a) Short-term borrowings xxx xxx
Q-5: The following balances were extracted from the trial balance of a company:
(b) Trade payables xxx xxx
Rs.
(c) Other current liabilities xxx xxx
Share capital 10,000 equity shares of Rs. 10 each fully called up 1,00,000
(d) Short-term provisions xxx . xxx .
Loan from I.D.B.I. 20,000
xxxx . xxxx . 12% Loan 10,000
(II) ASSETS Creditors 15,000
(1) Non-current assets Calls in Arrears 2,000
(a) Fixed assets xxx xxx You are required to show the liabilities side of the Balance Sheet according to the
(i) Tangible assets xxx xxx requirements of the Companies Act.
(ii) Intangible assets xxx xxx
(iii) Capital work-in-progress xxx xxx Q-6: The following figures were extracted from the Trial Balance of X Ltd.
(iv) Intangible assets under development xxx xxx Share Capital 10,000 equity shares of Rs.10 each fully paid
(b) Non-current investments xxx xxx Securities premium Rs.10,000
(c) Deferred tax assets (Net) xxx xxx 12% debentures Rs.50,000
(d) Long-term loans and advances xxx xxx Fixed deposits Rs.25,000
(e) Other non-current assets xxx xxx Creditors Rs.5,000
(2) Current assets You are required to draw up the liabilities side of the Balance Sheet, according to the
(a) Current investments xxx xxx requirements of the Companies Act.
(b) Inventories xxx xxx
(c) Trade receivables xxx xxx Q-7: Prepare a Balance Sheet of a Company as per provisions of Schedule VI of
(d) Cash and cash equivalents xxx xxx Companies Act, 2003: Rs.
(e) Short-term loans and advances xxx xxx Preliminary Expenses 1,40,000
(f) Other current assets xxx . xxx .
10% Debentures 1,90,000
xxxx . xxxx . Stock in trade 40,000
Goodwill 20,000
Provision for Taxation 6,000
 (3) (4)

Motor Truck 75,000

CA. Naresh Aggarwal’s Provision for Taxation 6,000
ACADEMY of ACCOUNTS Bank Overdraft 30,000

Accounting • Costing • Taxation • Financial Management Q-11: Prepare a Balance Sheet of V.T. Ltd. as on March 31, 2017 as per provision of
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Part-1, Schedule VI, under Section 211 of the Companies Act 2003 from the following
information :
Rs.
Q-8: Prepare a Balance Sheet of VI Ltd. as on 31st March, 2017 on the basis of General Reserve 3,000
following information as per Part 1, Schedule VI. Debentures 3,000
Rs. Profit & Loss A/c (Cr.) 1,200
Goodwill 4,00,000 Depreciation on Fixed Assets 700
Share Capital (Equity) 15,00,000 Gross Fixed Assets 9,000
General Reserve 3,00,000 Current Liabilities 2,500
Current Liabilities 5,60,000 Preliminary Expenses 300
Cash at Bank 3,50,000 Preference Share Capital 5,000
(Totalling of Balance Sheet is not required) Current Assets 6,100

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Q-9: Rearrange the following data of Sun Ltd. in the form of Company’s Balance Q-12: The following balances appear in the books of R. Publications
Sheet as per Schedule VI, Part I of the Companies Act, 2003. Rs.
Rs. Goodwill 20,000
Bills Payable 30,000 Plant and Machinery 1,60,000
Unclaimed dividend 12,000 Building 1,45,000
Account Payable 11,000 Cash in hand 10,000
Shares in NTPC Ltd. 20,000 Stock in trade 70,000
Bank Balance 50,000 Share capital (Authorised) 1000 Equity shares of Rs.100;
Securities Premium 75,000 Rs. 80 called up and paid 80,000
Prepaid Rent 1,000 8% Debentures 2,50,000
Underwriting commission 1,500 Preliminary Expenses 5,000
Stores and spares 6,000 Creditors 55,000
Patents 2,000 Dividends Payable 25,000
You are required to show that major heads under which the above items will appear in
Q-10: Under which of the major heads will the following items be shown while preparing the Balance Sheet as per the format given in Schedule VI of Part 1, Section 211 of the
the Balance Sheet of a company, as per provisions of Companies Act, 2003, as Companies Act, 2003. Prepare a balance sheet of the company.
contained in Schedule VI. [Total of Balance Sheet: Rs.4,10,000]
Rs.
Preliminary Expenses 1,40,000 Q-13: The following balances were extracted from the books of Raman Ltd. on 31st
Discount on Issue of Debentures 10,000 December, 2017 :
10% Debentures 1,90,000 Land Rs.10,00,000; Immovable Properties Rs.10,00,000; Loose Tools Rs.10,000; Bills
Stock-in-trade 40,000 Receivable Rs.2,30,000; Profit & Loss A/c (Debit Balance) Rs.1,20,000; Share Capital
Cash at Bank 35,000 Rs.18,00,000; 12% Debentures Rs.4,00,000; Short-term Loan from Bank Rs.1,00,000;
Bills Receivable 12,000 Sundry Creditors Rs.50,000; and Provision for Taxation Rs.10,000. Prepare Balance
Goodwill 20,000 Sheet of the company as per Schedule VI, Part I.
Loose Tools 12,000 [Total of Balance Sheet: Rs.23,60,000]
Plant and Machinery 22,000
 (5) (6)

CA. Naresh Aggarwal’s Comparative Statements

ACADEMY of ACCOUNTS Q-1: From the following Balance Sheets of ABC Ltd. prepare Comparative Statement and
Accounting • Costing • Taxation • Financial Management Common Size Statement.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Particulars 31.03.2017 31.03.2016
(I) EQUITY AND LIABILITIES
Q-14: The following items appeared in the trial balance of XYZ Ltd. Prepare a Balance (1) Shareholders funds
Sheet from the items according to the provisions of the Companies Act. (a) Share capital 7,50,000 5,00,000
Trial Balance (as on 31.12.2017) (b) Reserves and surplus 5,00,000 3,00,000
(2) Current liabilities
Particulars Dr. Amt. Cr. Amt.
(a) Short-term borrowings 1,00,000 -
Share Capital : (b) Trade payables 1,50,000 2,00,000
5,000 equity shares of Rs.10 each fully paid up 50,000 15,00,000 10,00,000
Livestock 40,000 (II) ASSETS
Mortgage 10,000 (1) Non-current assets
Debtors 10,000 (a) Fixed assets 9,00,000 5,00,000

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Preliminary Expenses 10,000 (b) Non-current investments 3,00,000 1,00,000
(2) Current assets
60,000 60,000 (a) Inventories 1,00,000 1,00,000
(b) Trade receivables - 2,00,000
[Total of Balance Sheet: Rs.60,000]
(c) Cash and cash equivalents 2,00,000 1,00,000
Q-15: The following ledger balances were extracted from the books of Varun Limited 15,00,000 10,00,000
on 31.03.2017 :
Land and Building Rs.2,00,000; 12% Debentures Rs.2,00,000; Share Capital: 1,00,000
Q-2: From the following Balance Sheets of XYZ Ltd. prepare Comparative Statement and
Equity shares of Rs.10 each fully paid up; Plant and Machinery Rs.8,00,000; Goodwill
Common Size Statement.
Rs.2,00,000; Investments in Shares of Raja Ltd. Rs.2,00,000; General Reserve
Rs.2,00,000; Stock in Trade Rs.1,00,000; Bills Receivable Rs.1,00,000; Debtors Particulars 31.03.2017 31.03.2016
Rs.1,50,000; Creditors Rs.1,00,000; Bank Loan (Unsecured) Rs.1,00,000; Provision (I) EQUITY AND LIABILITIES
for taxation Rs.55,000; Discount on issue of 12% Debentures Rs.5,000; Proposed (1) Shareholders funds
dividend Rs.1,00,000. (a) Share capital 6,00,000 4,50,000
You are required to prepare the Balance Sheet of the company as per Schedule VI,
(b) Reserves and surplus 1,20,000 1,50,000
Part I of the Companies Act, 2003. (2) Non-current liabilities
[Total of Balance Sheet: Rs.17,55,000] (a) Long-term borrowings 3,00,000 3,00,000
(3) Current liabilities
Q-16: The following balances have been extracted from the books of Mittal Ltd. on (a) Trade payables - 1,50,000
31.12.2017 : (b) Short-term provisions 4,80,000 1,50,000
Share Capital Rs.5,00,000; Sinking Fund Rs.1,00,000; 15% Debentures Rs.3,00,000;
Creditors Rs.1,00,000; Outstanding Salary Rs.10,000; Profit & Loss Account (Dr.) 15,00,000 12,00,000
Rs.10,000; Plant and Machinery Rs.6,00,000; I.F.C.I. Bonds Rs.2,00,000; Raw (II) ASSETS
Materials Rs.1,75,000; Discount on issue of 15% Debentures Rs.25,000. (1) Non-current assets
Prepare the Balance Sheet of the Company as per Schedule VI, Part I. (a) Fixed assets
[Total of Balance Sheet: Rs.10,10,000] (i) Tangible assets 6,00,000 7,50,000
(ii) Intangible assets 4,50,000 -
••••••••••••••••••••••
 (7) (8)

(2) Current assets (2) Current assets

(a) Inventories CA. Naresh Aggarwal’s 1,50,000 3,00,000 (a) Inventories 1,00,000 1,00,000
ACADEMY of ACCOUNTS
(b) Trade receivables
15,00,000 12,00,000
3,00,000 1,50,000 (b) Trade receivables
(c) Cash and cash equivalents
50,000
1,50,000
-
1,00,000
Accounting • Costing • Taxation • Financial Management 10,00,000 8,00,000
Q-3:West Patel
From theNagar, New
following Delhi. Ph:8800215448.
Balance Website:
Sheets of Asha Ltd. www.academyofaccounts.org
prepare Comparative Statement and
Common Size Statement. Q-5: From the following Balance Sheets of PQR Ltd. prepare Comparative Statement and
Common Size Statement.
Particulars 31.03.2017 31.03.2016
Liabilities 2017 2016 Assets 2017 2016
(I) EQUITY AND LIABILITIES
(1) Shareholders funds Share Capital 3,00,000 2,50,000 Fixed Assets 3,00,000 3,00,000
(a) Share capital 2,00,000 1,50,000 Long term loans 2,00,000 1,00,000 Currents Assets 3,00,000 2,00,000
(b) Reserves and surplus 40,000 50,000 Current Liabilities 1,00,000 1,50,000
(2) Non-current liabilities
(a) Long-term borrowings 1,00,000 1,00,000 6,00,000 5,00,000 6,00,000 5,00,000
(3) Current liabilities
(a) Trade payables - 50,000 Q-6: From the following Balance Sheets of ABC Ltd. prepare Comparative Statement and

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(b) Short-term provisions 1,60,000 50,000
Common Size Statement.
5,00,000 4,00,000
Liabilities 2017 2016 Assets 2017 2016
(II) ASSETS
(1) Non-current assets Share Capital 1,50,000 1,50,000 Machinery 2,00,000 1,50,000
(a) Fixed assets General Reserve 90,000 60,000 Debtors 1,00,000 50,000
(i) Tangible assets 2,00,000 2,50,000 Debentures 40,000 50,000 Stock 80,000 1,00,000
(ii) Intangible assets 1,50,000 1,00,000 Creditors 80,000 25,000 Cash Balance 20,000 50,000
(2) Current assets Provision for Tax 40,000 15,000
(a) Trade receivables 1,50,000 50,000
4,00,000 3,00,000 4,00,000 3,00,000
5,00,000 4,00,000

Q-7: From the following information, prepare a Comparative and Common Size Income Statements
Q-4: From the following Balance Sheets of Best Ltd. prepare Comparative Statement and
:
Common Size Statement.
Particulars 2016 2017
Particulars 31.03.2017 31.03.2016 Revenue from Operations 6,00,000 8,00,000
(I) EQUITY AND LIABILITIES Cost of Purchased 2,50,000 4,00,000
(1) Shareholders funds Indirect Expenses 90,000 1,20,000
(a) Share capital 5,00,000 4,00,000 Provision for Tax 60,000 80,000
(b) Reserves and surplus 2,50,000 2,00,000
(2) Current liabilities
(a) Short-term borrowings 1,00,000 1,00,000 Q-8: From the following information, prepare a Comparative and Common Size Income Statement:
(b) Trade payables 1,50,000 1,00,000
10,00,000 8,00,000 Particulars 2016 2017
(II) ASSETS Revenue from Operations 1,47,000 1,74,000
(1) Non-current assets
Less: Cost of Goods Sold 87,000 1,04,000
(a) Fixed assets 4,00,000 5,00,000
Less: Other expenses 25,000 30,000
(b) Non-current investments 3,00,000 1,00,000
Net Profit 35,000 40,000
---------------- -----------------
 (9) (10)

Particulars 2016 2017

CA. Naresh Aggarwal’s Revenue from Operations (Gross Sales) 1,20,200 1,35,800
ACADEMY of ACCOUNTS Sales Returns
Cost of Material Consumed
5,200
80,000
3,800
84,000
Accounting • Costing • Taxation • Financial Management Employee’s Benefits 12,000 9,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Income Tax 50% 50%

Q-14: Prepare a Comparative and Common Size Income Statement of X. Ltd., with the help of
Q-9: Prepare a Comparative and Common Size Income Statement from the following : the following Information:
Particulars 2016 2017 Particulars 2016-17 2015-16
Revenue from Operations 2,00,000 2,50,000 Revenue from Operations (Gross Sales) 2,00,000 1,00,000
Less: Cost of Purchase 1,00,000 1,25,000 Cost of goods sold 70% of Sales 60% of Sales
Less: Other Expenses 10,000 10,000 Other Expenses 10% of Gross Profit
90,000 1,15,000 Rate of Income Tax 50% of Net Profit before Tax
----------------- -----------------
Q-10: From the following information, prepare a Comparative and Common Size Income Q-15: From the following information, prepare a Comparative and Common Size Income Statement
Statement: of Soma Ltd.

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Particulars 2016 2017 Particulars 2016-17 2015-16
Revenue from Operations 10,00,000 8,00,000 Revenue from Operations (Gross Sales) 5,00,000 8,00,000
Other Incomes 40,000 20,000 Purchase of stock in trade 90% of Sales 70% of Sales
Purchase of stock in trade 6,00,000 4,00,000 Other Expenses 15,000 25,000
Employes Benefits 2,00,000 1,40,000 Rate of Income Tax 50% of Net Profit before Tax
Income Tax 1,20,000 1,40,000
Q-16: From the following information, prepare a Comparative and Common Size Income Statement
Q-11: From the following information, prepare a Comparative and Common Size Income of Nasa Ltd.
Statement: Particulars 2016-17 2015-16
Particulars 2016 2017 Revenue from Operations 200% of cost of goods sold 150% of cost of goods sold
Revenue from Operations 4,00,000 5,00,000 Cost of Purchase (Rs.) 8,00,000 10,00,000
Purchase of stock in trade 2,00,000 3,00,000 Other Expenses 10% of gross profit 5% of gross profit
Finance Cost 75,000 1,00,000 Rate of Income Tax 50% of net profit before tax
Provision for tax 50,000 65,000
Q-17: Prepare a Comparative Income Statement with the help of the following information :
Q-12: Prepare a Comparative and Common Size Income Statements of Ahmed Ltd. with the Particulars 2016-17 2015-16
help of the following information : Revenue from Operations (Rs.) 2,00,000 3,00,000
Particulars 2016 2017 Cost of Purchase 60% of Sales 70% of Sales
Revenue from Operations 5,00,000 8,00,000 Other Expenses 50% of Gross Profit 40% of Gross Profit
Cost of Material Consumed 3,00,000 5,00,000 Income Tax 50% of Net Profit before Tax
Other Expenses 30,000 40,000
Income Tax 40% 50%
Q-18: Prepare a ‘Comparative Income Statement’ and ‘Common Size Income Statement’ with
Q-13: Prepare a Comparative and Common Size Income Statement of A Ltd. with the help of the help of the following infort-nation :
the following :
 (11) (12)

CA. Naresh Aggarwal’s COMPARATIVE INCOME STATEMENT

ACADEMY of ACCOUNTS Particulars Last Year’s Current Year’s Absolute Percentage
Accounting • Costing • Taxation • Financial Management Figures Figures Change* of Change#

West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org I. Revenue from operations
II. Other income
Particulars 2016-17 2015-16 III. Total Revenue (I + II)
Revenue from Operations (Rs.) 8,00,000 5,00,000 IV. Expenses:
Cost of Purchase 70% of Sales Cost of materials consumed
Other Expenses 5% of Sales Purchases of Stock-in-Trade
Rate of Income Tax 50% of Net Profit before Changes in inventories
tax Employee benefits expense
Finance costs
Q-19: Prepare a ‘Comparative Income Statement’ and ‘Common Size Income Statement’ with
Depreciation and amortization exp.
the help of the following infort-nation :
Other expenses

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INCOME STATEMENT of M/s ABC Ltd. Total expenses
Particulars 2017-18 2016-17 V. Profit before tax (III - IV)
VI. Tax
I. Revenue from operations 15,00,000 10,00,000 VII. NET PROFIT (V - VI)
II. Other income 3,00,000 2,50,000
III. Total Revenue (I + II) 18,00,000 12,50,000
IV. Expenses: * Absolute Change = Current Year’s Figure - Last Year’s Figure
Cost of materials consumed 3,00,000 1,50,000
#
Percentage of Change = Absolute Change .x 100
Purchases of Stock-in-Trade 4,50,000 3,00,000 Last Year’s Figure
Changes in inventories 1,00,000 (50,000)
Employee benefits expense 1,50,000 1,00,000
Finance costs 1,00,000 1,00,000
Depreciation and amortization exp. 50,000 1,25,000
Other expenses 50,000 25,000
Total expenses 12,00,000 7,50,000
V. Profit before tax (III - IV) 6,00,000 5,00,000
VI. Tax 2,40,000 2,00,000
VII. NET PROFIT (V - VI) 3,60,000 3,00,000

••••••••••••••••••••••
 (13) (14)

CA. Naresh Aggarwal’s COMPARATIVE BALANCE SHEET

ACADEMY of ACCOUNTS Particulars Last Year Current Year Absolute

Figures Figures Change*
Percentage
of Change*
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
(I) EQUITY AND LIABILITIES
(1) Shareholders funds
COMMON SIZE INCOME STATEMENT
(a) Share capital
Particulars Last Year’s Current Year’s Percentage Percentage (b) Reserves and surplus
Figures Figures of Last of Current (2) Non-current liabilities
Year* Year# (a) Long-term borrowings
(b) Other Long term liabilities
I. Revenue from operations (3) Current liabilities
II. Other income (a) Short-term borrowings
(b) Trade payables
III. Total Revenue (I + II)
(c) Other current liabilities
IV. Expenses:

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(d) Short-term provisions
Cost of materials consumed
Purchases of Stock-in-Trade
Changes in inventories (II) ASSETS
Employee benefits expense (1) Non-current assets
(a) Fixed assets
Finance costs
(i) Tangible assets
Depreciation and amortization exp. (ii) Intangible assets
Other expenses (b) Non-current investments
Total expenses (c) Other non-current assets
V. Profit before tax (III - IV) (2) Current assets
(a) Current investments
VI. Tax
(b) Inventories
VII. NET PROFIT (V - VI) (c) Trade receivables
(d) Cash and cash equivalents
(e) Short-term loans and adv.
* Percentage of Last Year = Last Years Individual Figure .x 100 (f) Other current assets
Last Year’s Revenue from Operations

#
Percentage of Current Year= Current Years Individual Figure .x 100
Current Year’s Revenue from Operations
* Absolute Change = Current Year’s Figure - Last Year’s Figure

#
Percentage of Change = Absolute Change .x 100
Last Year’s Figure
 (15) (16)

CA. Naresh
COMMON Aggarwal’s
SIZE BALANCE SHEET Theoritical Questions
ACADEMY
Particulars ofLast ACCOUNTS
Year
Figures
Current Year Percentage Percentage
Figures of Last of Current
Accounting • Costing • Taxation • Financial Management
Year* Year# Balance Sheet of Companies
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Q-1*: State the major heads in the required serial order on the liabilities side of the
(I) EQUITY AND LIABILITIES
(1) Shareholders funds balance sheet of a company as per Schedule VI, Part I of Indian Companies
(a) Share capital Act, 2013.
(b) Reserves and surplus
(2) Non-current liabilities Q-2*: How is share capital shown in a company’s balance sheet ?
(a) Long-term borrowings
(b) Other Long term liabilities Q-3*: What is a contingent liability ? Where is it shown in the Balance Sheet ?
(3) Current liabilities
Q-4: Mention any four items under the sub-heading ‘current assets’ and any three
(a) Short-term borrowings
items under the sub heading ‘loans and advances’ of the major heading ‘Current
(b) Trade payables
(c) Other current liabilities Assets, Loan and Advances’ as per the provisions of Schedule VI, Part I of the
(d) Short-term provisions Companies Act, 2013.

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Q-5: State any four items which are shown under the heading ‘Miscellaneous
(II) ASSETS Expenditure’ in the Balance Sheet of a Company as per Schedule VI, Part I of
(1) Non-current assets Companies Act, 2013.
(a) Fixed assets
(i) Tangible assets Q-6: State any five items which are shown under the heading ‘Reserves and Surplus’
(ii) Intangible assets in the Balance Sheet of a Company as per Schedule VI, Part I of Companies
(b) Non-current investments Act 2013.
(c) Other non-current assets
(2) Current assets Q-7: Mention any four items under the sub-heading ‘current liabilities’ and any two
(a) Current investments items under the sub-heading ‘provisions’ of the major heading ‘Current liabilities
(b) Inventories and provisions’ as per Schedule VI, of the Companies Act, 2013.
(c) Trade receivables
(d) Cash and cash equivalents Q-8: What are contingent liabilities ? Mention any two items of this.
(e) Short-term loans and adv.
(f) Other current assets
Comparative Statements

Q-1*: What do you understand by comparative financial statements ?

* Percentage of Last Year = Last Years Individual Figure .x 100
Last Year’s Revenue from Operations
Q-2*: State the objects of comparative financial statements.
#
Percentage of Current Year= Current Years Individual Figure .x 100
Current Year’s Revenue from Operations Q-3*: Explain the meaning of common size statements.

Q-4: State how Common Size Balance Sheet and Common Size Profit & Loss
Account are prepared?

•••••••••••••••••••••••••
 CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org

For Eenquiries
Call or whatsapp: 8800215448

AoA
Ratio Analysis (Whatsapp anytime, Calls only between 3.00 pm to 8.00 pm)

Email: ca.naresh.vc@gmail.com
Website: academyofaccounts.org

Watch us on

https://www.youtube.com/CaNareshAggarwal
 (1) (2)

Bank Balance 45,000

CA. Naresh Aggarwal’s Stock 70,000
ACADEMY of ACCOUNTS Long-term loan
General Reserve
1,00,000
20,000
Accounting • Costing • Taxation • Financial Management [Quick Ratio: 2 : 1; Current Ratio: 3 : 1]
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Q-5: The following is the Balance Sheet of X Ltd. as on 31 December 2005 :
Q-1: The following is the balance sheet of Bheem Manufacturing Co. Ltd, as on 31 Liabilities Amount Assets Amount
December 2005:
Equity Share Capital 2,00,000 Land and Buildings 1,50,000
Liabilities Amount Assets Amount Reserves 90,000 Plant and Machinery 80,000
Equity capital 50,000 Plant & Machinery 90,000 Profit for the year 60,000 Stock 1,40,000
Profit & Loss A/c 10,000 Sundry Debtors 8,000 Bank Overdraft 30,000 Debtors 80,000
13% Debentures 30,000 Stock 24,000 Trade Creditors 1,00,000 Cash 30,000
Sundry Creditors 46,800 Cash at Bank 14,560 4,80,000 4,80,000
Provision for Taxation 1,200 Prepaid insurance 1,440
You are required to calculate :

AoA
1,38,000 1,38,000 (a) Quick Ratio
From the above data calculate Current ratio and Quick Ratio. (b) Current Ratio
[Current Ratio 1 : 1 & Quick Ratio 0.47:1] [(a): 11: 13; (b): 25: 13]

Q-2: Compute the Current Ratio and Quick Ratio from the following information : Q-6: From the following Balance Sheet of Y Ltd. for the year ended 31 December
Goodwill Rs.80,000; Land and Buildings Rs.60,000; Stock Rs.13,640; Sundry Debtors 2005 calculate :
Rs.26,150; Cash Rs.2,430; Payments in Advance Rs.3,100; Bills Receivable Rs.1,130; (a) Current Ratio (b) Quick Ratio
Advance Income Tax Paid Rs.5,000; Sundry Creditors Rs.20,300; Bills Payable (c) Working Capital Turnover Ratio (d) Fixed Assets Turnover Ratio
Rs.900; Bank Overdraft Rs.2,600; Proposed Dividend Rs.4,300; Provision for Income (e) Current Assets Turnover Ratio
Tax Rs.6,200; Liabilities Amount Assets Amount
[Current Ratio 1.5 : 1 & Quick Ratio 0.85 : 1]
Equity Share capital 75,000 Fixed Assets 40,000
Q-3: From the following information, calculate Current Ratio: Profit for the year 50,000 Stock 90,000
Stock Rs.15,000; Debtors (good) Rs.13,500; Cash in hand Rs.7,000; Bank Balance Reserves 25,000 Debtors 93,000
Rs.8,000; Bills Receivable Rs.6,000; Plant and Machinery Rs.60,000; Creditors Trade Creditors 76,000 Cash 7,000
Rs.15,500; Bills Payable Rs.8,000; Accrued Interest on Debentures Rs.350, Prepaid Bills Payable 14,000 Underwriting Commission 10,000
Expenses Rs.500; Debentures Rs.25,000; Provision for taxation Rs.1,150. 2,40,000 2,40,000
[2 : 1]
Sales of the year amounted to Rs.3,00,000.
Q-4: From the following information, calculate Quick Ratio and Current Ratio: [(a) 2.1 : 1; (b) 1.1 : 1; (c) 3 times; (d) 7.5 times; (e) 1.58 times]
Particulars Rs.
Share Capital 1,50,000 Q-7: From the following particulars, you are required to compute :
Bills Payable 13,000 (i) Current Ratio, (ii) Quick Ratio, (iii) Working Capital Turnover Ratio
Creditors 57,000 (iv) Fixed Assets Turnover Ratio, (v) Current Assets Turnover Ratio
Debentures 2,75,000 Particulars Rs. Particulars Rs.
Debtors 95,000 Stock 70,000 Creditors 10,000
Debtors 40,000 Bills Payable 40,000
 (3) (4)

Particulars Rs.
CA. Naresh Aggarwal’s Opening Stock 29,000
ACADEMY of ACCOUNTS Closing Stock
Sales
31,000
3,00,000
Accounting • Costing • Taxation • Financial Management Gross Profit Ratio 20% of Sales
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org [Cost of Goods Sold: Rs.2,40,000; Stock Turnover Ratio: 8 Times]

Bills Receivables 20,000 Bank Overdraft 50,000 Q-12: Calculate Stock turnover Ratio from the following information :
Advances Paid 10,000 Net Sales 5,60,000 Particulars Rs.
Cash in Hand 30,000 Gross Block 140,000 Fixed Assets (original Cost) 4,00,000
Cost of Goods Sold 4,20,000 Accumulated Depreciation 28,000 Opening Stock 58,000
[(i) 1.7 : 1; (ii) 0.9 : 1; (iii) 8 Times; (iv) 5 Times; (v) 3.3 Times] Purchases 4,84,000
Sales 6,40,000
Q-8: On the basis of following information, calculate Gross Profit Ratio 25% on Sales.
(i) Stock Turnover Ratio (ii) Working Capital Turnover Ratio [Cost of Goods Sold Rs. 4,80,000; Closing stock Rs. 62,000; Stock Turnover Ratio: 8 times]
(iii) Fixed Assets Turnover Ratio (iv) Current Assets Turnover Ratio
Particulars Rs. Particulars Rs. Q-13: Calculate Stock turnover Ratio from the following information :

AoA
Total Sales 31,00,000 Current Liabilities 2,00,000 Particulars Rs.
Cost of Goods sold 20,00,000 Fixed Assets 5,00,000 Opening Stock 40,000
Current Assets 6,00,000 Stock 2,50,000 Purchases 4,20,000
Sales Returns 1,00,000 Loan 1,25,000 Sales 6,00,000
[(i): 8 Times; (ii): 7.5 Times or 5 Times; (iii): 6 Times or 4 Times; (iv): 5 Times or 3.33 Times] Gross Profit Ratio 331/3% on Sales
[Cost of goods sold Rs. 4,00,000; Closing stock Rs. 60,000; Stock Turnover Ratio: 8 times]
Q-9: From the following information, calculate Stock Turnover Ratio and Gross Profit
Ratio. Q-14: From the following information, calculate Stock Turnover Ratio, Gross Profit
Opening Stock 18,000 Ratio and Net Profit Ratio :
Closing Stock 22,000 Particulars Rs. Particulars Rs.
Purchases 72,000 Opening Stock 18,000 Wages 14,000
Wages 24,000 Closing Stock 22,000 Sales 80,000
Sales 1,25,000 Purchases 46,000 Carriage Inward 4,000
Carriage Inward 8,000 Indirect Expenes 7,000 Income Tax 5,000
[Stock Turnover Ratio: 5 times; Gross Profit Ratio: 20%] [Stock Turnover Ratio: 3 Times, Gross Profit Ratio: 25%, Net Profit Ratio: 10%]

Q-10: From the following information, calculate Stock Turnover Ratio and Gross Profit Q-15: From the following information, calculate Stock Turnover Ratio, Gross Profit
Ratio : Ratio and Net Profit Ratio :
Particulars Rs. Particulars Rs. Particulars Rs. Particulars Rs.
Opening Stock 18,000 Purchases 46,000 Opening Stock 24,000 Wages 20,000
Closing Stock 22,000 Carriage Inwards 4,000 Closing Stock 26,000 Sales 1,20,000
Wages 14,000 Sales 80,000 Purchases 73,000 Carriage Inward 9,000
[Stock Turnover Ratio: 3 Times; Gross Profit Ratio: 25%] Indirect Expenes 10,000 Income Tax 4,000
[Stock Turnover Ratio 4 Times, Gross Profit Ratio 16.67%, Net Profit Ratio: 5%]
Q-11: Calculate Stock Turnover Ratio from the following :
Q-16: From the following details, calculate Debtors Turnover Ratio:
 (5) (6)

Q-21: From the following information, calculate Debtors Turnover Ratio and Average
CA. Naresh Aggarwal’s Collection Period :
ACADEMY of ACCOUNTS Particulars
Opening Debtors
Rs.
37,000
Accounting • Costing • Taxation • Financial Management Closing Debtors 43,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Total Sales 6,00,000
Cash sales 80,000
Particulars Rs. [Debtors Turnover Ratio: 13 Times; Collection Period: 4 Weeks]
Total Sales for the year 1,75,000
Cash Sales 20% of total sales Q-22: Calculate Debtors Turnover Ratio and Average Collection Period from the
Sales Returns out of Credit Sales 10,000 following information :
Opening balance of Sundry Debtors 8,000 Particulars Rs.
Closing balance of Sundry Debtors 12,000 Total Sales 2,80,000
[13 Times] Cash Sales 40,000
Debtors at the beginning of the year 20,000
Q-17: Calculate Debtors Turnover Ratio and Average Collection Period in terms of Debtors at the end of the year 60,000
months from the following : Bills receivable at the beginning of the year 25,000

AoA
Credit sales for the year 60,000 Bills receivable at the end of the year 15,000
Debtors 5,000 [Debtors Turnover Ratio: 4 Times; Collection Period: 3 Months]
Bills Receivable 5,000
[Delhi 1998] Q-23: From the following details, calculate Creditors Turnover Ratio and Average
[Debtors Turnover Ratio: 6 Times; Average Collection Period: 2 Months] Payment Period :
Particulars Rs.
Q-18: Compute the Debtors turnover ratio from the following figure. Total Purchases for the year 3,50,000
Particulars 2004 2005 Cash Purchases 20% of Total Purchases
Gross Sales 9,00,000 8,50,000 Purchases Returns out of Credit Purchases 40,000
Debtors in the beginning of year 83,000 ? Opening balance of Sundry Creditors 16,000
Debtors at the end of the year 1,17,000 43,000 Closing balance of Sundry Creditors 24,000
Sales Returns 1,00,000 50,000 [Creditors Turnover Ratio: 12 Times; Average Payment Period: 1 Month]
[Year 2004: 8 Times; Year 2005: 10 Times]
Q-24: Calculate Creditors Turnover Ratio and Average Payment Period from the
Q-19: Compute the Debtors turnover ratio from the following figure. following information :
Particulars 2004 2005 Credit Purchases for the year 90,000
Gross Sales 4,40,000 7,20,000 Creditors 10,000
Debtors in the beginning of year 54,000 56,000 Bills Payable 5,000
Debtors at the end of the year ? 44,000 [Creditors Turnover Ratio: 6 Times; Average Payment Period: 2 Month]
Sales Returns 30,000 50,000
Cash Sales 1,10,000 70,000 Q-25: From the following information, calculate Creditors Turnover Ratio and Average
[Year 2004: 5.45 Times; Year 2005: 12 Times] Payment Period :
Opening Creditors 74,000
Q-20: Calculate Debtors Turnover Ratio and Average collection period if Credit sales Closing Creditors 86,000
for the year was Rs.60,000; Debtors were Rs.5,000 and Bills Receivable were Total Purchases 12,00,000
Rs.5,000. Cash Purchases 1,60,000
[Debtors Turnover Ratio: 6 Times; Collection Period: 2 Months] [Creditors Turnover Ratio: 13 Times; Payment Period: 4 Weeks]
 (7) (8)

Q-29: The following information is given about a company :

CA. Naresh Aggarwal’s Particulars Rs.
ACADEMY of ACCOUNTS Sales
Sales Returns
1,54,000
4,000
Accounting • Costing • Taxation • Financial Management Gross Profit 30,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Cost of Goods sold 1,20,000
Opening Stock 35,000
Q-26: Calculate Creditors Turnover Ratio and Average Payment Period from the Closing Stock 45,000
following information : Office Expenses 12,000
Particulars Rs. Selling Expenses 6,000
Total Purchases 1,40,000 Loss on Sale of Fixed Assets 2,500
Cash Purchases 20,000 Interest Paid 1,500
Creditors at the beginning of the year 10,000 Income Tax Paid 500
Creditors at the end of the year 30,000 Debtors 25,000
Bills Payble at the beginning of the year 12,500 Net Fixed Assets 1,10,000
Bills Payble at the end of the year 7,500 From the above information Calculate:
[Creditors Turnover Ratio: 4 Times; Payment Period: 3 Months] (i) Operating Ratio (ii) Gross Profit Ratio

AoA
(iii) Debtors Turnover Ratio (iv) Stock Turnover Ratio
Q-27: From the following particulars, you are required to compute : (v) Average Collection Period (vi) Net Profit Ratio
(i) Current Ratio (ii) Operating Expenses Ratio (vii) Operating Profit Ratio
(iii) Gross Profit Ratio (iv) Net Profit Ratio [(i) 92%, (ii) 20%, (iii) 6 Times; (iv) 3 Times; (v) 2 Months; (vi) 5%; (vii) 8%]
Particulars Rs. Particulars Rs.
Stock 2,000 Non Operating Expenes 2,100 Q-30: From the following information, calculate :
Debtors 4,500 Bills payable 4,000 (i) Operating Ratio, (ii) Stock Turnover Ratio, (iii) Quick Ratio, (iv) Current Ratio
Bills Receivable 2,500 Sales (Gross) 72,000 Sales Rs.15,00,000; Cost of goods sold Rs.9,00,000; Operating Expenses Rs.2,40,000;
Cash in hand 1,000 Sales Returns 2,000 Profit before Tax Rs.2,70,000; Current Assets Rs.4,87,500; Current Liabilities
Gross Profit 4,900 Operating Expenses 1,400 Rs.3,00,000; Fixed Assets Rs.2,62,500; Opening Stock Rs.2,50,000; Closing Stock
Creditors 4,000 Outstanding Expenses 2,000 Rs.3,50,000.
[(i): 1 : 1; (ii): 95%; (iii): 7%; (iv): 2%] [(i): 76%; (ii): 3 Times; (iii): 0.46 : 1, (iv): 1.63 : 1]

Q-28: From the following data, calculate : Q-31: Following figures have been extracted from the books of Elite Electricals:
(i) Gross Profit Ratio (ii) Operating Ratio Particulars Rs.
(iii) Current Ratio (iv) Operating Profit Ratio Net Sales 30,00,000
Particulars Rs. Cost of Goods Sold 20,00,000
Sales 40,000 Operating Expenses 4,00,000
Cost of Sales 24,000 Current Assets 6,00,000
Office and Administration Expenses 7,000 Current Liabilities 2,00,000
Selling and Distribution Expenses 5,000 Paid up Share Capital 5,00,000
Current Assets 6,000 Debentures 2,50,000
Stock 1,000 Compute following ratios based on above figures :
Current Liabilities 2,000 (a) Gross Profit Ratio (b) Operating Ratio;
Paid up Share Capital 5,000 (c) Working Capital Turnover ratio (d) Operating Profit Ratio
Debentures 2,500 [(a) 33.33%, (b) 80%, (c) 7.5 times; (d) 20%]
[(i) 40%, (ii) 90%, (iii) 3 : 1; (iv) 10%]
 (9) (10)

Liabilities Amount Assets Amount

CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS Equity Capital (10/- each)
Reserves
2,00,000
1,00,000
Land and Buildings
Plant and Machinery
1,50,000
90,000
Accounting • Costing • Taxation • Financial Management Profit for the year 60,000 Stock 1,40,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Bank Overdraft 30,000 Debtors 80,000
Trade Creditors 10,000 Cash 30,000

Q-32: Calculate Stock Turnover Ratio and Gross Profit Ratio from the following : 4,90,000 4,90,000

Particulars Amount Particulars Amount An interim dividend of 15% was paid on equity shares. Market Price of a share is
Rs.18. Calculate :
Opening Stock 75,000 Sales 3,00,000
(a) Return on Investment
Purchases 1,00,000 Less : Returns 50,000 2,50,000
(b) Earning Per Share
Carriage Inward 4,000 Closing Stock 10,000
(c) Dividend Per Share
Wages 11,000
(d) Price Earning Ratio
Manufacturing Expenses 9,000
Gross Profit 61,000
[(a): 30%; (b): Rs.4.50; (c): Rs. 1.50; (d): 4 Times]

AoA
2,60,000 2,60,000
Q-35: Calculate Return on Investment, Earning Per Share, Return on Equity and
[Stock Turnover Ratio 4.45 Times; Gross Profit Ratio 24.4%]
Dividend Per Share from the following informations:
Particulars Rs.
Q-33: Calculate Operating Ratio, Operating Profit Ratio, Gross Profit Ratio and Net
Equity Share Capital (Rs.10 each) 5,00,000
Profit Ratio from the following Trading and Profit & Loss A/c of M/s Sudha Ltd.
12% Preference Share Capital 1,00,000
Trading and Profit & Loss Account
Reserves 2,00,000
for the year ending 31.12.2005
15% Loan 2,40,000
Particulars Amount Particulars Amount 10% Debentures 1,20,000
Current Liabilities 75,000
To Stock (1.1.2005) 45,000 By Sale (Less: Sales Returns) 3,00,000
Preliminary Expenses 10,000
To Purchases 1,10,000 By Stock (31.12.2005) 55,000
Income Tax Paid 50,000
To Wages 15,000
Net Profit (after interest but before tax) 1,82,000
To Gross Profit c/d 1,85,000
Equity Dividend Paid 20%
3,55,000 3,55,000 [Return on Investment: 20%; Earning Per Share: Rs. 2.40; Dividend Per Share: Rs.2; ROE: 17.4%]

To Administrative Expenses 6,000 By Gross Profit b/d 1,85,000

Q-36: Calculate Return on Capital employed (ROI), Earning Per Share (EPS) and
To Selling Expenses 8,000 By Rent Received 10,000
Dividend Per Share from the following details:
To Interest Paid 16,000
Gross Profit Rs.2,70,000; Administration expenses Rs.60,000; Selling Expenses
To Net Profit 1,65,000
Rs.30,000; 15% Debentures Rs.2,00,000; Rate of Income Tax 40%; Fixed Assets
1,95,000 1,95,000 Rs.6,00,000; Current Assets Rs.2,00,000; Current Liabilities Rs.50,000; Dividend Paid
Rs.50,000; Equity Share Capital Rs.5,00,000 of Rs.20 each.
[Operating Ratio: 43%; Operating Profit Ratio: 57%;
[Return on Investment: 24%; Earning Per Share: Rs. 3.60; Dividend Per Share: Rs.2]
Gross Profit Ratio: 61.67%; Net Profit Ratio: 55%]
Q-37: The Return on Investment of a company is 20%. Tax is paid by the company
Q-34: The following is the Balance Sheet of X Ltd. as on 31 December 2005 :
at the rate of 40%. The company had taken a loan of Rs.30 lakhs as a part of capital
employed on which interest was paid at the rate of 12%. Calculate the amount of
 (11) (12)

Particulars Rs.
CA. Naresh Aggarwal’s Equity Capital (Rs.10 each) 2,00,000
ACADEMY of ACCOUNTS 12% Preference Capital
General Reserve
1,50,000
50,000
Accounting • Costing • Taxation • Financial Management 10% Debentures 2,00,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Net Profit before interest & Tax 1,20,000
Rate of Tax 40%
shareholders gain due to the inclusion of loan in the capital employed. Total Dividend Paid (Including Prefance Dividend) 75% of Net Profit
[Rs.1,44,000] Market Price per Equity Share 31.50
[EPS: Rs. 2.10; Dividend Per Share: Rs.1.35; ROE: 16.8%; ROI: 20%; Price Earing Ratio: 15]
Q-38: A company has taken a loan of Rs.20,00,000 as part of its Capital employed.
The interest payable on the loan is 15% and ROI of the Company is 25%. The rate of Q-42: Calculate Return on Investment and Earning Per Share from the following:
income tax is 40%. Calculate the gain to the shareholders due to the loan raised by the Particulars Rs.
Company. Equity Capital (50/- each) 5,00,000
[Rs.1,20,000] 10% Loan 3,00,000
Reserves 2,00,000
Q-39: Calculate Return on Investment, Return on Equity, Earning per share, Dividend Plant and Machinery 1,80,000

AoA
Per Share and Price Earning Ratio from the following information : Net Profit for the year (after charging 40% Income Tax) 72,000
Particulars Rs. Stock 2,80,000
Equity Capital (Rs.10 per share) 8,00,000 Bank Overdraft 60,000
10% Preference Capital 1,00,000 Trade Creditors 20,000
8% Debentures 2,00,000 [Return on Investment: 15%; Earning Per Share: Rs.7.20]
Reserves 2,30,000
Profit & Loss Account 3,00,000 Q-43: Calculate Return on Investment and Earning Per Share from the following:
Net Profit for the current Year 2,50,000 Particulars Rs.
Tax Paid 60,000 Equity Capital (25/- each) 1,00,000
Total Dividend Paid (Including Prefance Dividend) 1,70,000 10% Loan 60,000
Market Price per Equity Share 24 Reserves 40,000
[ROI: 20%; ROE: 18%; Earning Per Share: Rs.3; Dividend Per Share: Rs.2; Price Earing Ratio: 8] Plant and Machinery 36,000
Net Profit for the year (after charging 30% Income Tax) 16,800
Q-40: Calculate Return on Equity, Earning Per Share, Dividend Per Share and Price Trade Creditors 20,000
Earing Ratio from the following information : [Return on Investment: 15%; Earning Per Share: Rs.4.20]
Particulars Rs.
7% Debentures 1,50,000 Q-44: Calculate Debt Equity Ratio, Proprietary Ratio and Total Assets to Debt Ratio
10% Prefrance Share Capital 1,00,000 :
16,000 equity shares of Rs.10 each fully paid up 1,60,000 Particulars Rs.
Reserve and surplus 6,40,000 Equity Share Capital 2,00,000
Net profit after tax 1,38,000 General Reserve 70,000
Total Dividend Paid (Including Prefance Dividend) 60% of Net Profit Accumulated Profits 50,000
Market Price per Equity Share 60 10% Debentures 1,50,000
[ROE: 16%; Earning Per Share: Rs.8; Dividend Per Share: Rs.4.55; Price Earing Ratio: 7.5] Current liabilities 75,000
Preliminary Expenses 20,000
Q-41: Calculate Earning Per Share, Dividend Per Share, Price Earning Ratio Return [Debt Equity Ratio 0.5 : 1; Proprietary Ratio 0.57 : 1; Total Assets to Debt Ratio: 3.5 Times]
on Equity (ROE) and Return on Investment (ROI) from the following :
 (13) (14)

Long-term Loan 1,10,000

CA. Naresh Aggarwal’s General Reserve 50,000
ACADEMY of ACCOUNTS [Debt Equity Ratio 1.3 : 1; Current Ratio 1.5 : 1]

Accounting • Costing • Taxation • Financial Management Q-48: Calculate Debt Equity Ratio, Total Asset to Debt Ratio and Proprietary Ratio
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org from the following data:
Particulars Rs.
Q-45: Calculate the Debt Equity Ratio and Total Assets to Debt Ratio : Equity Share Capital 75,000
Particulars Rs. Reserve and Surplus 20,000
Share Capital 1,50,000 Debentures 40,000
Bills Payable 21,000 Loan from ICICI 30,000
Creditors 30,000 Current Liabilities 15,000
Debentures 2,75,000 Fixed Assets 1,30,000
Debtors 95,000 Goodwill 48,000
Bank Balances 45,000 Current Assets 50,000
Long Term Loans 1,00,000 [Debt Equity Ratio 0.74 : 1; Total Assets to Debt Ratio 2.57 : 1; Proprietary Ratio 0.53 : 1]
General Reserve 19,000

AoA
Q-49: On the basis of following information, calculate :
[Debt Equity Ratio 2.2 : 1; Total Assets to Debt Ratio 1.59 : 1] (i) Gross Profit Ratio, (ii) Working Capital Turnover Ratio, (iii) Debt Equity Ratio
Particulars Rs.
Q-46: From the following information calculate the Debt Equity Ratio, Total Assets to Net Sales 30,00,000
Debt Ratio, Proprietary Ratio and Current Ratio : Cost of Goods Sold 20,00,000
Particulars Rs. Current Assets 6,00,000
Debentures 1,40,000 Current Liabilities 2,00,000
Long Term Loans 70,000 Paid up share capital 5,00,000
Bank Balances 30,000 Debentures 2,50,000
Debtors 70,000 Loan 1,25,000
General Reserve 40,000 [(i): 33.33%; (ii): 5 Times; (iii): 0.75 : 1]
Creditors 6,000
Share Capital 1,35,000 Q-50: With the help of the given information calculate the following ratios :
Bills Payable 44,000 (i) Operating Ratio (ii) Quick Ratio
Preliminary Expenses 15,000 (iii) Stock Turnover Ratio (iv) Proprietary Ratio
[Debt Equity Ratio 21 : 16; Total Assets to Debt Ratio 2 : 1; Particulars Rs.
Proprietary Ratio 0.38 : 1; Current Ratio 2 : 1] Sales 5,00,000
Opening Stock 40,000
Q-47: Calculate the Debt Equity Ratio and Current Ratio : Purchases 2,30,000
Particulars Rs. Carriage Inwards 10,000
Share Capital 2,50,000 Closing Stock 60,000
Bills Payable 15,000 Equity Share Capital 4,00,000
Creditors 45,000 Securities Premium 30,000
Debtors 60,000 General Reserve 10,000
12% Debentures 2,80,000 Other Current Assets 1,10,000
Bank Balance 30,000 Current Liabilities 1,80,000
 (15) (16)

Purchases 5,00,000
CA. Naresh Aggarwal’s Wages 30,000
ACADEMY of ACCOUNTS Closing Stock
Selling and Distribution Expenses
52,000
6,000
Accounting • Costing • Taxation • Financial Management Other Current Assets 2,00,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Current Liabilities 1,50,000
[(i): 66.5%; (ii): 1.68 : 1; (iii): 10.5 : 1; (iv): 0.25 : 1]

Fixed Assets 3,50,000

Q-54: From the following information calculate the following ratios :
Operating Expenses 25,000
(i) Debt Equity Ratio (ii) Return on Investments
[(i): 49%; (ii): 0.61 : 1; (iii): 4.4 Times; (iv): 0.85 : 1]
(iii) Return on Equity (iv) Interest Coverage Ratio
Particulars Amount
Q-51: From the following information, calculate the following ratios :
Share Capital 1,60,000
(i) Gross Profit Ratio (ii) Working Capital Turnover Ratio
General Reserve 60,000
(iii) Total Assets to Debt Ratio (iv) Proprietary Ratio
Profit & Loss Account 1,00,000
Particulars Rs.
15% Loan 2,00,000
Net Sales 20,00,000
Sales for the year 5,60,000

AoA
Cost of Goods Sold 12,00,000
Tax paid during the year 20,000
Current Assets 6,00,000
Profit for the current year after Interest and Tax 80,000
Current Liabilities 3,00,000
[(i) 1 : 1.6; (ii) 25%; (iii) 25%; (iv) 4.33 Times]
Paid up Share Capital 8,00,000
12% Debentures 4,00,000
Q-55: From the following information calculate :
[(i): 40%; (ii): 4 Times; (iii): 3.75 : 1; (iv): 0.53 : 1]
(i) Stock Turnover Ratio (ii) Operating Ratio Ratio
(iii) Operating Profit Ratio
Q-52: Calculate any two of the following ratios from the given information :
Particulars Amount
(i) Gross Profit Ratio (ii) Stock Turnover Ratio
Opening stock 28,000
(iii) Proprietary Ratio (iv) Operating Ratio
Closing stock 22,000
Net Sales Rs.4,00,000; Cost of goods sold Rs.2,00,500; Administration expenses
Purchases 46,000
Rs.45,000; Selling expenses Rs.57,000; Share capital Rs.8,50,000; Reserves and
Sales 90,000
Surplus Rs.3,00,000; Long-term loans Rs.8,20,000; Fixed assets (net) Rs.4,62,000;
Sales Returns 10,000
Investments Rs.2,42,500; Debtors Rs.72,000; Opening stock Rs.2,40,000; Closing
Carriage inwards 4,000
stock Rs.2,10,000; Bank Balance Rs. 3,00,000.
Office expenses 4,000
[(i): 49.88%; (ii): 0.89 Times; (iii): 0.89 : 1; (iv): 75.63%]
Selling & Distribution Expenses 2,000
[(i) 2.24 times; (ii) 77.5 %; (iii) 22.5%]
Q-53: With the help of the given information calculate the following ratios:
(i) Operating Ratio (ii) Current Ratio
Q-56: From the following information, calculate Stock Turnover ratio, Operating ratio
(iii) Stock Turnover Ratio (iv) Debt Equity Ratio,
and Gross Profit ratio :
Particulars Rs.
Particulars Rs.
Equity Share Capital 5,00,000
Opening stock 28,000
9% Preference Share Capital 4,00,000
Closing stock 22,000
12% Debentures 2,40,000
Purchases 46,000
General Reserve 60,000
Sales 90,000
Sales 8,00,000
Sales Returns 10,000
Opening Stock 48,000
 (17) (18)

Q-58: Current Liabilities of a company are Rs.1,50,000. Its Current Ratio is 3 : 1 and
CA. Naresh Aggarwal’s Quick Ratio is 1 : 1. Calculate the value of stock in trade.
ACADEMY of ACCOUNTS [Rs. 3,00,000]

Accounting • Costing • Taxation • Financial Management Q-59: Current Liabilities Rs.60,000; Liquid Ratio is 1.5 ; Current Ratio is 2.5. Calculate
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org stock in trade.
[Rs . 60,000]
Carriage inward 4,000
Q-60: Current Assets of a company are Rs.2,50,000. Its Current Ratio is 2.5 : 1 and
Office expenses 4,000
Quick Ratio is 1 : 1. Calculate Stock.
Selling & Distribution Expenses 2,000
[Rs. 1,50,000]
Capital Employed 2,00,000
[Stock Turnover Ratio: 2.24 Times; Operating Ratio: 77.57%; Gross Profit Ratio: 30%]
Q-61: A firm has a Current Ratio of 3 : 1. Its net Working Capital is Rs.3,00,000. Its
Quick Ratio is 2.5 : 1. Calculate Stock.
Q-57: The following are the summarised Profit and Loss account of Hindustan Products
[Rs. 75,000]
for the year ended 31.03.2006 and the Balance Sheet of the company as on that date:
Trading and Profit & Loss Account
Q-62: A business has Current Ratio 3 : 1 and Quick Ratio 1.2 : 1. If the Working

AoA
Particulars Amount Particulars Amount Capital is Rs.90,000. Calculate Stock.
[Rs. 81,000]
To Opening Stock 1,00,000 By Sales 8,00,000
To Purchases 4,50,000 By Stock 1,80,000
Q-63: X Ltd. has a Liquid (Acid Test) Ratio 2 : 1. If its stock is Rs.20,000 and its total
To Direct Expenses 1,90,000
current liabilities are Rs.50,000; find out its Current Ratio.
To Gross Profit c/d 2,40,000 .
[Current Ratio 2.4 : 1]
9,80,000 9,80,000
Q-64: X Ltd. has a Current Ratio of 4.5 : 1 and Acid Test Ratio of 3 : 1. If its inventory
To Selling and Distribution Exp. 1,00,000 By Gross Profit b/d 2,40,000
is Rs.24,000, find out its total current liabilities.
To Loss on sale of Fixed Assets 60,000
[Rs.16,000]
To Net Profit 80,000
2,40,000 2,40,000 Q-65: Working Capital of a company is Rs.1,80,000. Total Debts are Rs.3,90,000
and Long-Term Debt are Rs.3,00,000. Calculate Current ratio.
Balance Sheet
[ 3 : 1]
Liabilities Amount Assets Amount Hint: Current Liabilities or Short Term Debt = Total Debts - Long Term Debts
Equity Share Capital 2,90,000 Land 2,20,000
Q-66: Working capital of ABC Pvt. Ltd. is Rs.60,000. Total Debts are Rs.1,30,000
Profit and Loss A/c 60,000 Stock 1,80,000
and Long-term Debts are Rs.1,00,000. Stock is of Rs.25,000, Prepaid Expenses are
Creditors 1,15,000 Debtors 50,000
Rs.5,000. Calculate Current Ratio & Quick Ratio.
Outstanding Expenses 15,000 Cash 30,000
[Current Ratio: 3 : 1; Quick Ratio: 2 : 1]
4,80,000 4,80,000
Q-67: India Ltd. has Current Ratio of 4.5 : 1 and Quick Ratio of 3 : 1. Its inventory is
Calculate the following ratios:
of Rs.72,000. Find out its Current Assets, Current Liabilities and Quick Assets.
(i) Current Ratio (ii) Stock Turnover Ratio
[Current Assets: Rs.2,16,000; Current Liabilites: Rs. 48,000; Quick Assets: Rs. 1,44,000]
(iii) Gross Profit Ratio (iv) Operating Ratio
(v) Operating Profit Ratio
Q-68: Bharat Ltd. has a Current Ratio of 4 : 1 and its Liquid Ratio is 3 : 1. If its
[(i): 2 : 1; (ii): 4 Times; (iii): 30%; (iv): 82.5%; (v) 17.5%]
inventory is Rs.36,000 Find the value of total current assets; total quick assets and
 (19) (20)

Sales : Rs.1,80,000
CA. Naresh Aggarwal’s Closing Stock is Rs 15,000 in excess of Opening Stock
ACADEMY of ACCOUNTS [Opening Stock: Rs.16,500; Closing Stock: Rs.31,500]

Accounting • Costing • Taxation • Financial Management Q-76: Calculate the amount of the Opening Debtors and Closing Debtors from the
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org following figures:
Debtors Turnover Ratio 4 Times
Cost of Goods sold Rs.6,40,000
total current liabilities.
Gross Profit Ratio 20%
[Current Liabilities: Rs.36,000; Current Assets: Rs.1,44,000; Quick Assets: Rs.1,08,000]
Cash Sales 331/3% of Credit Sales
Closing Debtors were Rs.20,000 more than at the beginning.
Q-69: A Ltd. has a Current Ratio of 3 : 1. Its Quick Ratio is 1 : 1. The value of Stock
[Opening Debtors: Rs.1,40,000; Closing Debtors: Rs.1,60,000]
is Rs.30,000. Calculate the total current liabilities.
[Rs.15,000]
Q-77: Following Figures have been extracted from the Shivalika Mills Limited :
Stock in the beginning of the year Rs.60,000
Q-70: A firm has a Current Ratio of 4.5 : 1 and a Quick Ratio of 3 : 1. If its inventory
Stock at the end of the year Rs.1,00,000
is Rs. 36,000, find its total current assets and total current liabilities.
Stock turnover ratio 8 times
[Current Liabilities Rs. 24,000; Current Assets Rs. 1,08,000]

AoA
Selling Price 25% above cost.
Compute the amount of gross profit and sales.
Q-71: Calculate Current Liabilities, Current Assets and Quick Assets, if inventories
[Gross Profit: Rs.1,60,000; Sales: Rs.8,00,000]
are Rs.1,50,000. Current Ratio is 4 times and Liquid Ratio is 2.5 times.
[Current Liabilities: Rs.1,00,000; Current Assets: Rs.4,00,000; Quick Assets: Rs.2,50,000]
Q-78: Average stock carried by a trader is Rs. 60,000. Stock Turnover Ratio is 10
times. Goods are sold at a profit of 10% on cost. Find out the profit.
Q-72: A trader carries an average stock Rs. 40,000 (cost). His Stock Turnover is 8
[Rs. 60,000]
times. If he sells goods at a profit of 20% on sales, find out his profit.
[Rs. 80,000]
Q-79: Find out the value of sales if:
Average Stock Rs.1,60,000
Q-73: From the following information determine the opening and closing stock.
Gross Profit Rs.1,20,000
Stock Turnover Ratio 5 times
Stock Turnover Ratio 6 Times
Total Sales Rs. 2,00,000
[Rs. 10,80,000]
Rate of Gross Profit 25% on Sales
Closing Stock is more by Rs. 4,000 than the opening stock.
Q-80: Compute the amount of Gross Profit and sales if :
[Opening Stock Rs. 28,000; Closing Stock Rs. 32,000]
Opening stock Rs.60,000
Closing Stock Rs.1,00,000
Q-74: From the following details, calculate (i) Opening Stock (ii) Closing Stock:
Stock Turnover Ratio 8 times
Stock Turnover Ratio 6 times
Profit 20% on sales
Gross Profit 25% on Cost
[Gross profit Rs.1,60,000; Sales Rs.8,00,000]
Sales 1,80,000
Closing stock is Rs. 15,000 in excess of Opening Stock.
Q-81: From the following details, calculate the value of opening stock:
[Opening Stock 16,500; Closing Stock 31,500]
Closing Stock Rs.68,000
Total Sales (including Cash Sales Rs. 1,20,000) Rs.4,80,000
Q-75: From the following details, calculate opening stock and closing stock:
Total Purchases (including Credit Purchases Rs. 2,93,200) Rs.3,60,000
Stock Turnover Ratio : 6 Times
Goods are sold at a profit of 25% on cost.
Gross Profit : 20% on Sales
[Rs.92,000]
 (21) (22)

Q-88: Calculate current ratio from the following :

CA. Naresh Aggarwal’s Working Capital is Rs.2,50,000
ACADEMY of ACCOUNTS Bills Payable are Rs.50,000
Sundry Creditors are Rs.75,000
Accounting • Costing • Taxation • Financial Management [3 : 1]
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Q-89: Calculate the amount of closing debtors from the following data :
Total Sales Rs. 25,00,000
Q-82: ABC Pvt. Ltd. has cost of goods sold amounted to Rs. 2,10,000 and Inventory Cash Sales Rs. 12,22,500
Turnover Ratio is 6 times. Stock at the beginning is 1.5 times more than the stock at Credit Collection Period 52 days
the end. Calculate the values of Opening and Closing stocks. Debtors at the beginning of the year Rs. 1,74,000
[Opening Stock Rs. 50,000; Closing Stock Rs. 20,000] [Debtors Turnover Ratio: 7 Times; Closing Debtors: Rs.1,91,000]

Q-83: India Ltd. has cost of goods sold amounted to Rs. 1,50,000 its Inventory Turnover Q-90: Calculate Current Assets of a company from the following information:
Ratio is 10 times. Stock at the beginning is 2 times more than the stock at the end. (i) Stock Turnover Ratio 4 Times
Calculate the values of Opening and Closing stocks. (ii) Stock in end is Rs. 20,000 more than that in the beginning
[Opening Stock Rs. 22,500; Closing Stock Rs. 7,500] (iii) Sales Rs. 3,00,000

AoA
(iv) Gross Profit Ratio 25%
Q-84: From the following information, calculate Opening Stock and Closing Stock: (v) Current Liabilities Rs. 40,000
Stock Turnover 6 times (vi) Quick Ratio 0.75
Gross profit was Rs.80,000 which was 20% of sales [Rs. 96,250]
Closing stock was Rs.15,000 more than opening stock.
[Opening Stock: Rs.45,833; Closing Stock: Rs.60,833] Q-91: Calculate Current Assets of a company from the following information :
(i) Stock Turnover is 5 Times
Q-85: From the following information, calculate Opening Stock and Closing Stock: (ii) Stock at end is Rs. 15,000 more than that stock in the beginning
Rs.2,00,000 is the cost of goods sold. (iii) Sales Rs. 2,00,000
Inventory Turnover is 8 times. (iv) Gross Profit Ratio 25%
Stock at the beginning is 1.5 times of the stock at the end. (v) Current Liabilities Rs. 50,000
[Opening Stock: Rs.30,000; Closing Stock: Rs.20,000] (vi) Quick Ratio 0.75
[Rs.75,000]
Q-86: Calculate debtors in the beginning, and at the end of the year.
Net credit sales during the year were Rs.1,80,000. Q-92: The ratio of current assets (Rs.4,50,000) to current liabilities (Rs.3,00,000) is
Debtors Turnover ratio is 4 times. 1.5 : 1. The accountant of the firm is interested in maintaining a current ratio of
Closing debtors are two times in comparison to opening debtors. 2 : 1, by paying off a part of the current liabilities. Compute the amount of current
[Opening Debtors: Rs.30,000; Closing Stock: Rs.60,000] liabilities that should be paid, so that the current ratio at the level of 2 : 1 may be
maintained.
Q-87: Calculate the Gross Profit Ratio based on the following information : [Rs.1,50,000]
Cash Sales 25% of Total Sales
Purchases Rs.2,76,000 Q-93: Net Profit Ratio of a company was 20%. Its indirect expenses were Rs. 75,000
Credit Sales Rs.2,40,000 and cash sales were Rs. 3,00,000. The credit sales was 80% of the total sales.
Excess of Closing Stock over Opening Stock Rs. 20,000. Calculate the Gross Profit Ratio of the company.
[20%] [25%]
 (23) (24)

CA. Naresh Aggarwal’s (c) Payment to Creditors Rs. 1,000.

ACADEMY of ACCOUNTS (d)

(e)
Selling Expenses Rs. 800.
Cash Sales Rs. 10,000.
Accounting • Costing • Taxation • Financial Management (f) Purchase Returns Rs. 100.
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org [(a) Increase; (b) Increase; (c) No Change; (d) Increase; (e) Decrease; (f) Decrease]

Q-99: State with reasons whether the operating ratio of a company will increase,
Q-94: Gross profit Ratio of a company was 25%. Its indirect expenses were Rs.50,000
decrease or not change due to the following transactions :
and Cash sales were Rs.2,00,000. The credit sales was 75% of the total sales.
(i) Paid wages Rs. 1000.
Calculate the Net Profit ratio of the company.
(ii) Issued Rs. 1,00,000 12% debentures.
[18.75%]
(iii) Sold goods on credit Rs. 15,000.
(iv) Paid Rs. 5,000 commission on sales.
Q-95: The Debt Equity Ratio of X Ltd. is 1 : 2. Which of the following would increase,
(v) Paid Rs. 4,000 for advertisement.
decrease or not change the Debt Equity Ratio:
[(a) Increase; (b) No Change; (c) Decrease; (d) Increase; (e) Increase]
(a) Issue of Equity Shares
(b) Sale of goods on cash basis,
(c) Cash received from Debtors

AoA
(d) Redemption of Debentures
(e) Purchases of goods on credit.
[(a) Decrease; (b) Decrease, if there is profit; (c) No Change; (d) Decrease; (e) No Change]
••••••••••••••••••••••
Q-96: The Debt Equity Ratio of Y Ltd. is 3 : 2. Which of the following would increase,
decrease or not change the Debt Equity Ratio :
(a) Issue of Equity Shares
(b) Sale of goods on cash basis,
(c) Cash received from Debtors
(d) Redemption of Debentures
(e) Purchases of goods on credit.
[(a) Decrease; (b) Decrease, if there is profit; (c) No Change; (d) Decrease; (e) No Change]

Q-97: The Current Ratio of Best Trading Ltd. is 2 : 1. Which of the following would
increase, decrease or not change the Current Ratio :
(a) Paid to Creditors
(b) Sale of goods for cash at a Loss of Rs.1,000.
(c) Cash received from Customers
(d) Bills Receivable Dishonored
(e) Purchases of goods on credit.
[(a) Increase; (b) Decrease; (c) No Change; (d) No Change; (e) Decrease]

Q-98: The Operating Ratio of a company is 80%. State, giving reasons, which of the
following transactions will : Increase, Decrease or Not alter the operating ratio:
(a) Credit Purchase of Goods Rs. 5,000.
(b) Sales Returns Rs. 200.
 (25) (26)

CA. Naresh Aggarwal’s C. Profitability Ratios:

ACADEMY of ACCOUNTS 1 . Gross Profit Ratio = Gross Profit . x 100

Net Sales / Revenue from Operation
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org 2 . Net Profit Ratio = Net Profit . x 100
Net Sales / Revenue from Operation

3. Operating Ratio or Operating Profit x 100

Formulae for Ratio Analysis Operating Expenses Ratio
=
Net Sales / Revenue from Operation

A. Liquidity Ratios: 4. Operating Ratio or = Total Operating Expenses x 100

Operating Expenses Ratio Net Sales / Revenue from Operation
1 . Current Ratio = Current Assets .
Current Liabilities 5. Return on Investment (ROI) or = Net Profit before Interest, Tax and Dividend x 100
Return on Capital Employed Capital Employed
2. Quick/Liquid Ratio or = Quick Assets . or Quick Assets .
Acid Test Ratio Current Liabilities Quick Liabilities 6. Earning Per Share = Net Profit after Interest, Tax and Preference Dividend .

AoA
Numbers of Equity Shares
B. Turnover / Activity Ratios:
7. Dividend Per Share = Equity Dividend Paid during the year .
1. Fixed Assets Turnover Ratio = Sales / Cost of Goods Sold . Numbers of Equity Shares
Net Fixed Assets
8. Price Earning Ratio = Market Price per Equity Share .
2. Current Assets Turnover Ratio = Sales / Cost of Goods Sold . Earning Per Share
Current Assets
D. Solvency Ratios:
3. Working Capital Turnover Ratio = Sales / Cost of Goods Sold .
Working Capital 1. Debt Equity Ratio = Debt (i.e. Long Term Loans) .
Equity (i.e. Shareholder's Fund)
4. Stock Turnover Ratio = Cost of Goods Sold / Cost of Revenue from Operation ..
Average Stock / Inventory 2. Total Assets to Debt Ratio = Total Assets .
Debt (i.e. Long Term Loans)
5. Debtors Turnover Ratio = Net Credit Sales .
Average Account Receivable 3. Proprietary Ratio = Proprietor's Fund (i.e. Shareholder's Fund) .
Total Assets
6. Creditors Turnover Ratio = Net Credit Purchases .
Average Account Payable 4. Interest Coverage Ratio = Net Profit before Interest, Tax and Dividend .
Interest on Long Term Debt / Debentures
7. Average Collection Period = 365 / 12 / 52 .
Debtors Turnover Ratio

8. Average Payment Period = 365 / 12 / 52 . Other Formulae

Creditors Turnover Ratio
1. Current Assets = Cash + Bank + Debtors + B/R + Stock + O/s Incomes +
Prepaid Expenses + Marketable Securities +
Short Term Loans & Advances (given)
 (27) (28)

17*. Operating Profit = Net Profit - Non Operating Incomes + Non Operating Expenses
2. Current Liabilities CA. Naresh
= Bank OverdraftAggarwal’s
+ Creditors+ B/P + O/s Expenses + + Interest + Tax
ACADEMY of ACCOUNTS
Advance Incomes + Provision for Taxation + Proposed Dividend
+ Short Term Loans (taken)
or Gross Profit - Other Operating Expenses

Accounting • Costing • Taxation • Financial Management 18. Total Operating Expenses = Cost of Goods Sold + Other Operating Expenses
3. West
QuickPatel
Assets = Current
Nagar, New Delhi. Assets - Stock
Ph:8800215448. - Prepaid
Website: Expenses
www.academyofaccounts.org or Sales - Operating Profit

4*. Quick Liabilities = Current Liabilities - Bank Overdraft - Cash Credit 19. Other Operating Expenses = Office & Administration Expenses + Selling & Distribution Exp.

5. Cost of Goods Sold = Sales - Gross Profit or Opening Stock + Purchases + 20. Equity Dividend Paid = Total Dividend Paid - Preference Dividend Paid
Direct Expenses - Closing Stock or Paid up Value per Equity Share x Dividend Rate

6. Equity Fund = Equity Share Capital + Reserve & Surplus - Fictitious Assets 21. Total Assets = Fixed Assets + Investments + Current Assets
or Total Liabilities - Fictitious Assets
7. Shareholder's Fund / Equity= Equity Fund + Preference Share Capital or Debt + Equity + Current Liabilities

8. Capital Employed = Total Shareholder's Fund + Long Term Loans 22. INCOME STATEMENT

AoA
or Fixed Assets + Working Capital (1) SALES
Less: Cost of Goods Sold
9. Fictitious Assets = Preliminary Expenses + Underwriting Commission + (2) GROSS PROFIT
Discount on issue of Shares / Debentures Less: Operating Expenses
(3) OPERATING PROFIT
10. Net Fixed Assets = Total Fixed Assets - Depreciation Less: Non Operating Expenses
Add: Non Operating Incomes
11. Working Capital = Current Assets - Current Liabilities (4) PROFIT before INTEREST and TAX
Less: Interest
12. Average Stock = Opening Stock + Closing Stock (5) PROFIT after INTEREST before TAX
2 Less: Tax
(6) NET PROFIT or PROFIT after TAX
13. Average A/c Receivable = Opening Debtors + Closing Debtors + Opening B/R + Closing B/R Less: Preference Dividend
2 (7) PROFIT FOR EQUITY SHAREHOLDERS
or Debtors + B/R Equity Dividend Paid
(8) PROFIT SHOWN IN THE BALANCE SHEET
14. Average A/c Payable = Opening Creditors + Closing Creditors + Opening B/P + Closing B/P
2
23. Balance Sheet
or Creditors + B/P
Liabilities Amt. Assets Amt.
15. Net Credit Sales = Total Sales - Cash Sales - Sales Return Equity Share Capital 10,000 Fixed Assets 15,000
or Total Credit Sales - Sales Return Pref. Share Capital 8,000 Investments 5,000
Reserve & Surplus 3,000 Current Assets 6,000
16. Net Credit Purchase = Total Purchase - Cash Purchase - Purchase Return Long Term Loans 4,000 Fictitious Assets 1,000
or Total Credit Purchase - Purchase Return Current Liabilities 2,000

27,000 27,000
 (29)

CA. Naresh Aggarwal’s

Theoretical Questions
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
Q-1*: What is meant by Ratio Analysis ?
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Q-2: Explain the three types of presentation of ratios.

Q-3*: Write advantages of Ratio Analysis.

Q-4*: Explain briefly the meaning and significance of the following ratios :
(a) Current Ratio
(b) Quick Ratio
(c) Stock Turnover Ratio
(d) Debtors Turnover Ratio
(e) Working Capital Ratio
(f) Operating Ratio

AoA
(g) Gross Profit Ratio
(h) Debt-Equity Ratio
(i) Proprietary Ratio
(j) Debt to Total Assets Ratio

Q-5: What are the categories under which the various ratios are grouped on the
basis of objectives ?

Q-6: Give any three examples each of current assets and current liabilities.

Q-7: What are the objectives of calculating Solvency Ratios ?

Q-8: What does Debt Equity Ratio indicate ?

Q-9: Give the purpose of Operating Ratio.

•••••••••••••••••••••••••
 CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org

For Eenquiries
Call or whatsapp: 8800215448
(Whatsapp anytime, Calls only between 3.00 pm to 8.00 pm)

Email: ca.naresh.vc@gmail.com

AoA
Website: academyofaccounts.org

Cash Flow Statement

Watch us on

https://www.youtube.com/CaNareshAggarwal
 (1) (2)

CA. Naresh Aggarwal’s Q-4: From the following Balance Sheets of Maharaja Ltd. prepare Cash Flow Statement.

ACADEMY of ACCOUNTS Liabilities 2011 2012 Assets 2011 2012

Accounting • Costing • Taxation • Financial Management Share Capital 3,00,000 4,00,000 Goodwill 1,15,000 90,000
Debentures 1,50,000 1,00,000 Machinery 2,00,000 1,70,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org General Reserve 40,000 70,000 Land & Building 1,60,000 2,00,000
Q-1: From the following Balance Sheets of Sudershan Ltd. prepare Cash Flow Statement. Profit & Loss A/c 72,000 98,000 Bills Receivable 20,000 30,000
Creditors 55,000 83,000 Stock 1,57,000 3,09,000
Liabilities 2011 2012 Assets 2011 2012 Bills Payable 20,000 16,000 Cash 10,000 18,000
Share Capital 1,80,000 2,00,000 Machinery (Gross) 2,10,000 2,80,000 Provision for Tax 40,000 50,000 Underwriting
Depreciation Reserve 60,000 62,000 Debtors 96,000 83,000 Proposed Dividend 20,000 30,000 Commission 35,000 30,000
Profit & Loss A/c 45,000 72,000 Stock 60,000 40,000 6,97,000 8,47,000 6,97,000 8,47,000
Debentures 60,000 54,000 Discount on issue
Creditors 35,000 32,000 of Debentures 3,000 2,000 [Operating Activities: 18,000; Investing Activities: (40,000); Financing Activities: 30,000]
Bank Balance 11,000 15,000
Q-5: From the following Balance Sheets of Arjun Ltd. prepare Cash Flow Statement.
3,80,000 4,20,000 3,80,000 4,20,000

AoA
Liabilities 2011 2012 Assets 2011 2012
[Operating Activities: 60,000; Investing Activities: (70,000); Financing Activities: 14,000]
Share Capital 25,000 30,000 Fixed Assets 45,000 50,000
Q-2: From the following Balance Sheets of Vishnu Ltd. prepare Cash Flow Statement. General Reserve 2,500 4,000 Stock 10,000 12,000
Profit & Loss A/c 20,500 16,500 Debtors 15,000 12,500
Liabilities 2011 2012 Assets 2011 2012 Secured Loans 10,000 12,500 Cash 2,000 2,500
Share Capital 1,20,000 2,00,000 Machinery at cost 2,10,000 2,50,000 Sundry Creditors 5,000 6,000 Preliminary Expenses 1,000 500
Provision for Dep. 92,000 95,000 Debtors 93,000 81,000 Income Tax Provision 10,000 8,500
Profit & Loss A/c 60,000 75,000 Stock 80,000 1,30,000 73,000 77,500 73,000 77,500
Debentures 80,000 70,000 Preliminary Expenses 5,000 4,000
Creditors 48,000 40,000 Bank Balance 12,000 15,000 [Operating Activities: (2,000); Investing Activities: (5,000); Financing Activities: 7,500]

4,00,000 4,80,000 4,00,000 4,80,000 Q-6: From the following Balance Sheets of King Ltd. prepare Cash Flow Statement.
[Operating Activities: (27,000); Investing Activities: (40,000); Financing Activities: 70,000] Liabilities 2011 2012 Assets 2011 2012

Q-3: From the following Balance Sheets of Rajdhani Ltd. prepare Cash Flow Statement. Equity Share Capital 5,00,000 6,50,000 Goodwill 1,70,000 2,00,000
10% Pref. Share Cap. 2,00,000 1,50,000 Land and Building 6,00,000 8,00,000
Liabilities 2011 2012 Assets 2011 2012 Reserve & Surplus 1,00,000 1,80,000 Furniture 1,20,000 50,000
Share Capital 2,00,000 2,00,000 Gross Block 2,70,000 2,50,000 Provision for Tax 40,000 60,000 Debtors 10,000 20,000
Depreciation Reserve 40,000 62,000 Debtors 96,000 83,000 Bills Payable 80,000 45,000 Prepaid Expenses 40,000 20,000
Profit & Loss A/c 45,000 72,000 Stock 60,000 74,000 Outstanding Expenses 55,000 65,000 Cash 20,000 50,000
General Reserve 60,000 40,000 Bank Balance 11,000 51,000 Preliminary Expenses 15,000 10,000
Debentures 60,000 50,000 Expense on issue 9,75,000 11,50,000 9,75,000 11,50,000
Creditors 35,000 36,000 of Debentures 3,000 2,000
[Operating Activities: 90,000; Investing Activities: (1,60,000); Financing Activities: 1,00,000]
4,40,000 4,60,000 4,40,000 4,60,000
[Operating Activities: 30,000; Investing Activities: 20,000; Financing Activities: (10,000)] Q-7: From the following Balance Sheets of Sudershan Ltd. prepare Cash Flow Statement.
 (3) (4)

CA. Naresh Aggarwal’s Q-9: From the following Balance Sheets of XYZ Ltd. prepare Cash Flow Statement.
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management Liabilities 2011 2012 Assets 2011 2012

West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Share Capital 2,00,000 2,50,000 Goodwill 10,000 2,000
Debentures 1,00,000 80,000 Land and Building 2,00,000 2,70,000
Reserve & Surplus 50,000 70,000 Plant & Machinery 1,00,000 1,40,000
Liabilities 2011 2012 Assets 2011 2012 Creditors 25,000 60,000 Debtors 40,000 60,000
Equity Share Capital 1,50,000 2,00,000 Goodwill 36,000 20,000 Bills Payable 20,000 80,000 Stock 55,000 72,000
12% Pref. Share Capital 75,000 50,000 Land & Building 40,000 60,000 Provision for Tax 25,000 20,000 Marketable Securities 15,000 18,000
General Reserve 20,000 35,000 Plant 80,000 1,00,000 Proposed dividend 15,000 20,000 Cash at Bank 10,000 15,000
Profit and Loss A/c 15,000 24,000 Debtors 1,20,000 1,55,000 Preliminary Expenses 5,000 3,000
Creditors 27,500 35,000 Cash 12,500 9,000
4,35,000 5,80,000 4,35,000 5,80,000
Provision for Tax 10,000 15,000 Bank 4,000 12,000
Stock 5,000 3,000 Additional Information:
(a) Land & Building purchased during the year was of Rs.1,00,000.

AoA
2,97,500 3,59,000 2,97,500 3,59,000 (b) Depreciation Charged on Plant during the year was Rs.20,000
Additional Information: (c) Plant costing Rs. 30,000 (Accumulated Depreciation Rs.18,000) was sold during the year
(a) Land and Building purchased during the year was of Rs.30,000. for Rs.10,000.
(b) Depreciation Charged on Plant during the year was Rs.16,000 [Operating Activities: 1,55,000; Investing Activities: (1,62,000); Financing Activities: 15,000;
(c) Plant costing Rs.20,000 (Accumulated Depreciation Rs.5,000) was sold during the year for Depreciation on Land and Building: Rs.30,000; Purchase of Plant: Rs.72,000]
Rs.12,000.
[Operating Activities: 48,500; Investing Activities: (69,000); Financing Activities: 25,000 Q-10: From the following Balance Sheets of Sudershan Ltd. prepare Cash Flow Statement.
Depreciation on Land & Building: Rs.10,000; Purchase of Plant & Machine: Rs.51,000]
Liabilities 2011 2012 Assets 2011 2012
Q-8: From the following Balance Sheets of Sudershan Ltd. prepare Cash Flow Statement. Equity Share Capital 45,000 65,000 Fixed Assets 40,700 83,000
General Reserve 10,000 7,500 Stock 16,000 13,000
Liabilities 2011 2012 Assets 2011 2012 Debentures 12,000 20,000 Debtors 24,000 21,000
Equity Share Capital 3,00,000 4,00,000 Fixed Assets 4,00,000 5,50,000 Outstanding Expenses 10,000 15,000 Bank 2,000 2,500
Profit and Loss A/c 85,000 1,10,000 Investments 2,00,000 2,25,000 Trade Creditors 6,700 11,000 Prepaid Expenses 800 500
Bank Loan 1,00,000 75,000 Debtors 1,90,000 1,75,000 Bills Payable 1,300 2,500 Profit & Loss Account 1,500 1,000
Outstanding Expenses 80,000 1,35,000 Bills Receivable 80,000 92,000
85,000 1,21,000 85,000 1,21,000
Creditors 3,10,000 2,95,000 Bank 20,000 ---
Proposed dividend 45,000 60,000 Cash 10,000 18,000 Additional Information:
Discount on Shares 20,000 15,000 (a) Land & Building Purchased during the year was of Rs.60,000.
(b) Furniture costing Rs.10,000 (Accumulated Depreciation Rs.3,000) was sold during the year
9,20,000 10,75,000 9,20,000 10,75,000 for Rs.8,000.
Additional Information: [Operating Activities: 24,500; Investing Activities: (52,000); Financing Activities: 28,000;
(a) Depreciation Charged during the year was Rs.50,000. Depreciation on Fixed Assets: Rs.10,700]
(b) Plant and Machine costing Rs.2,80,000 was purchased during the year.
(c) Investments costing Rs.60,000 were sold for Rs.75,000. Q-11: From the following Balance Sheets of Sudershan Ltd. prepare Cash Flow Statement.
[Operating Activities: 1,68,000; Investing Activities: (2,10,000); Financing Activities: 30,000;
Sale of Fixed Assets: Rs.80,000; Purchase of Investments: Rs.85,000]
 (5) (6)

[Operating Activities: 1,07,000; Investing Activities: (1,31,000); Financing Activities: 30,000]

CA. Naresh Aggarwal’s Purchase of Land & Building: Rs.70,000; Purchase of Plant & Machine: Rs.57,000]
ACADEMY of ACCOUNTS Q-13: From the following Balance Sheets of Mahesh Ltd. prepare a Cash Flow Statement for
Accounting • Costing • Taxation • Financial Management the year ended 31.12.2012
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Liabilities 2011 2012 Assets 2011 2012
Equity Share Capital 2,50,000 3,00,000 Goodwill 36,000 20,000
Liabilities 2011 2012 Assets 2011 2012
Pref. Share Capital 75,000 50,000 Building 1,80,000 1,60,000
Equity Share Capital 4,00,000 5,50,000 Goodwill 70,000 1,00,000 General Reserve 20,000 35,000 Plant 40,000 1,00,000
13% Pref. Share Cap. 2,00,000 1,50,000 Land and Building 5,00,000 8,00,000 Profit and Loss A/c 15,000 24,000 Debtors 1,19,000 1,54,000
Reserve & Surplus 1,00,000 1,80,000 Furniture 1,20,000 1,00,000 Creditors 25,000 29,000 Cash 12,000 9,000
Provision for Tax 40,000 60,000 Debtors 10,000 14,000 Provision for Tax 12,000 20,000 Stock 10,000 15,000
Bills Payable 80,000 45,000 Prepaid Expenses 1,30,000 20,000
3,97,000 4,58,000 3,97,000 4,58,000
Outstanding Expenses 55,000 65,000 Cash 35,000 10,000
Preliminary Expenses 10,000 6,000 Additional Information:
(a) Depreciation provided on Building Rs. 30,000 and on Plant Rs. 10,000.

AoA
8,75,000 10,50,000 8,75,000 10,50,000
(b) During the year a plant costing Rs. 25,000 (Book Value Rs.18,000) was sold for Rs.16,000.
Additional Information: [Operating Activities: 54,000; Investing Activities: (82,000); Financing Activities: 25,000;
(a) Land & Building Purchased during the year was of Rs.3,50,000. Purchase of Building: Rs.10,000; Purchase of Plant: Rs.88,000]
(b) Depreciation Charged on Furniture during the year was Rs.18,000
(c) Furniture costing Rs. 40,000 (Written down Value Rs.25,000) was sold during the year for Q-14: From the following Balance Sheets of ABC Ltd. prepare Cash Flow Statement.
Rs.28,000.
Liabilities 2011 2012 Assets 2011 2012
[Operating Activities: 2,50,000; Investing Activities: (3,75,000); Financing Activities:
1,00,000; Equity Share Capital 4,00,000 5,50,000 Goodwill 70,000 1,00,000
Depreciation on Land and Building: Rs.50,000; Purchase of Furniture: Rs.23,000] 12% Pref. Share Cap. 2,00,000 1,50,000 Land and Building 5,00,000 8,00,000
Profit and Loss A/c 1,00,000 1,80,000 Furniture 1,20,000 1,00,000
Q-12: From the following Balance Sheets of XYZ Ltd. prepare Cash Flow Statement. Provision for Tax 40,000 60,000 Debtors 50,000 20,000
Bills Payable 80,000 75,000 Prepaid Expenses 80,000 20,000
Liabilities 2011 2012 Assets 2011 2012
Outstanding Expenses 35,000 35,000 Cash 35,000 10,000
Share Capital 2,00,000 2,50,000 Goodwill 10,000 30,000 Proposed Dividend 20,000 30,000 Underwriting
Debentures 1,00,000 80,000 Land and Building 2,00,000 2,50,000 Commission 20,000 30,000
Profit and Loss A/c 20,000 70,000 Machinery 1,00,000 1,30,000
8,75,000 10,80,000 8,75,000 10,80,000
Sinking Fund 30,000 40,000 Debtors 40,000 60,000
Bills Payable 20,000 60,000 Stock 70,000 90,000 Additional Information:
Provision for Tax 25,000 20,000 Cash 12,000 18,000 (a) Depreciation provided on Land & Building Rs. 50,000 and on Furniture Rs. 10,000.
Creditors 40,000 60,000 Expense on issue (b) During the year Furniture costing Rs.40,000 (Depreciation provided Rs.15,000) was sold at
of Debentures 3,000 2,000 a profit of Rs.3,000.
[Operating Activities: 2,72,000; Investing Activities: (3,67,000); Financing Activities: 70,000]
4,35,000 5,80,000 4,35,000 5,80,000
Purchase of Land & Building: Rs.3,50,000; Purchase of Furniture: Rs.15,000]
Additional Information:
(a) Depreciation provided on Land & Building Rs. 20,000 and on Machinery Rs. 15,000. Q-15: From the following Balance Sheets of Herry Ltd. prepare a Cash Flow Statement as per
(b) During the year a Machine costing Rs. 30,000 (Written down Value Rs.12,000) was sold for Accounting Standard-3.
Rs.16,000.
 (7) (8)

(b) Land and Buildings costing Rs.40,000 (Accumulated Depreciation Rs.10,000) was sold for
CA. Naresh Aggarwal’s Rs.25,000.
ACADEMY of ACCOUNTS (c) An interim Dividend of Rs.12,000 was paid during the year.
[Operating Activities: 1,62,000; Investing Activities: (1,00,000); Financing Activities: (22,000)]
Accounting • Costing • Taxation • Financial Management Purchase of Land & Building: Rs.50,000; Purchase of Plant & Machine: Rs.90,000]
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Q-17: From the following Balance Sheets of Suda Ltd. prepare Cash Flow Statement.

Liabilities 2011 2012 Assets 2011 2012 Liabilities 2011 2012 Assets 2011 2012

Share Capital 3,00,000 4,00,000 Goodwill 1,15,000 90,000 Share Capital 1,60,000 2,70,000 Gross Block 2,10,000 3,00,000
Debentures 1,50,000 1,00,000 Machinery 2,40,000 2,25,000 Securities Premium - 5,000 Less: Depreciation (60,000) (62,000)
General Reserve 40,000 70,000 Less: Depreciation (20,000) (25,000) Profit & Loss A/c 45,000 72,000 Net Block 1,50,000 2,38,000
Profit & Loss A/c 72,000 98,000 Furniture 1,60,000 2,00,000 Debentures 60,000 54,000 Bills Receivables - 13,000
Creditors 55,000 83,000 Stock 1,57,000 3,09,000 Creditors 5,000 19,000 Debtors 1,01,000 1,27,000
Bills Payable 20,000 16,000 Cash 25,000 18,000 Provision for Tax 15,000 20,000 Stock 20,000 44,000
Provision for Tax 40,000 50,000 Underwriting Bank Balance 14,000 18,000
Proposed Dividend 20,000 30,000 Commission 20,000 30,000

AoA
3,45,000 5,02,000 3,45,000 5,02,000
6,97,000 8,47,000 6,97,000 8,47,000 Additional Information:
Additional Information: (a) During the year Machinery costing Rs.50,000 (Accumulated Depreciation Rs.35,000) was
(a) During the year Machinery costing Rs.30,000 (Accumulated Depreciation Rs.12,000) was sold for Rs.10,000.
sold for Rs.15,000. (b) An interim Dividend of Rs.8,000 was paid during the year.
(b) Furniture costing Rs.75,000 (Accumulated Depreciation Rs.25,000) was sold for Rs.40,000. (c) Final Dividend of Rs.12,000 was paid during the year.
(c) An interim Dividend of Rs.15,000 was paid during the year. [Operating Activities: 45,000; Investing Activities: (1,30,000); Financing Activities: 89,000]
[Operating Activities: 38,000; Investing Activities: (50,000); Financing Activities: 5,000 Purchase of Fixed Assets: Rs.1,40,000; Depreciation of Current Year: Rs.37,000]
Dep. on Machine: 17,000; Purchase of Furniture: 90,000; Purchase of Machine: 15,000]
Q-18: From the following Balance Sheets of Vasundhara Ltd. prepare Cash Flow Statement.
Q-16: From the following Balance Sheets of Herry Ltd. prepare Cash Flow Statement. Liabilities 2011 2012 Assets 2011 2012
Liabilities 2011 2012 Assets 2011 2012 Equity Share Capital 3,00,000 4,00,000 Fixed Assets 4,00,000 5,50,000
Equity Share Capital 1,50,000 2,00,000 Land & Buildings 80,000 1,00,000 Profit and Loss A/c 85,000 1,10,000 Stock 2,00,000 2,25,000
Debentures 80,000 50,000 Plant and Machinery 1,25,000 1,65,000 Bank Loan 1,00,000 1,20,000 Debtors 2,10,000 1,90,000
General Reserve 20,000 26,000 Less: Depreciation (15,000) (20,000) Accumulated Dep. 80,000 90,000 Bills Receivable 80,000 1,05,000
Profit & Loss A/c 40,000 60,000 Stock in Trade 60,000 45,000 Creditors 3,10,000 2,95,000 Bank 20,000 ---
Creditors 12,000 45,000 Marketable Securities 75,000 1,10,000 Proposed dividend 45,000 60,000 Cash 10,000 5,000
Bills Payable 20,000 16,000 Cash at Bank 15,000 20,000 9,20,000 10,75,000 9,20,000 10,75,000
Provision for Tax 18,000 23,000 Expense on issue
Proposed Dividend 20,000 30,000 of Shares 20,000 30,000 Additional Information:
(a) During the year Fixed Assets costing Rs.40,000 (Accumulated Depreciation Rs.15,000)
3,60,000 4,50,000 3,60,000 4,50,000 was sold for Rs.20,000.
Additional Information: (b) An interim Dividend of Rs.30,000 was paid during the year.
(a) During the year Machinery costing Rs.50,000 (Accumulated Depreciation Rs.28,000) was (c) Income Tax of Rs.18,000 was paid during the year.
sold for Rs.15,000. [Operating Activities: 1,00,000; Investing Activities: (1,70,000); Financing Activities: 45,000;
Depreciation on Fixed Assets: Rs.25,000; Purchase of Fixed Assets: Rs.1,90,000]
 (9) (10)

sold for Rs.15,000.

CA. Naresh Aggarwal’s Prepare Cash Flow Statement of the company as per AS-3.
ACADEMY of ACCOUNTS [Operating Activities: 8,000; Investing Activities: (65,000); Financing Activities: 55,000]
Depreciation on Plant & Machinery: Rs.22,000; Purchase of Plant & Machinery: Rs.80,000]
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Q-21: From the following Balance Sheets of Mohini Ltd., prepare Cash Flow Statement of the
company as per AS-3.
Q-19: Following is the Balance Sheets of Rich Ltd. Liabilities 2011 2012 Assets 2011 2012
Liabilities 2011 2012 Assets 2011 2012 Equity Share Capital 45,000 65,000 Fixed Assets 64,700 83,000
General Reserve 10,000 7,500 Stock 16,000 13,000
Equity Share Capital 5,00,000 6,50,000 Goodwill 2,00,000 2,20,000
Profit & Loss Account 10,000 15,000 Marketable Securities 18,000 21,000
10% Pref. Share Cap. 2,00,000 1,50,000 Plant & Machinery 6,00,000 8,00,000
10% Debentures 30,000 20,000 Cash 2,000 2,500
Reserve & Surplus 1,00,000 1,80,000 Furniture 90,000 50,000
Trade Creditors 6,700 11,000 Prepaid Expenses 800 500
Provision for Tax 40,000 60,000 Debtors 10,000 -
Bills Payable 1,300 2,500 Preliminary Expenses 1,500 1,000
Bills Payable 80,000 45,000 Prepaid Expenses 40,000 50,000
Outstanding Expenses 40,000 40,000 Cash 18,000 20,000 1,03,000 1,21,000 1,03,000 1,21,000

AoA
Bank Overdraft 15,000 25,000 Preliminary Expenses 17,000 10,000
Additional Information:
9,75,000 11,50,000 9,75,000 11,50,000 (a) A piece of Machinery costing Rs.40,000 on which accumulated depreciation was Rs.15,000
was sold for Rs 28,000 and a new machine was purchased for Rs.50,000.
Additional Information:
(b) Debentures were redeemed at 20% premium at the end of year 2012.
(a) The Balance of Depreciation on Plant & Machinery 31.12.2011 and 31.12.2012 were Rs.60,000
(c) Income Tax paid during the year was Rs.5,000
and Rs.75,000 respectively.
[Operating Activities: 20,500; Investing Activities: (22,000); Financing Activities: 5,000]
(b) During the year Machinery costing Rs.80,000 (Accumulated Depreciation Rs.30,000) was
[Depreciation on Fixed Assets: Rs.6,700; Interest paid on Debentures: Rs.3,000]
sold for Rs.40,000.
(c) Dividend paid during the year on the opening balance of Equity Shares Capital was 12%.
Q-22: From the following Balance Sheets of Maharaja Ltd. prepare Cash Flow Statement.
Prepare Cash Flow Statement of the company as per AS-3.
[Operating Activities: 2,07,000; Investing Activities: (2,35,000); Financing Activities: 30,000] Liabilities 2011 2012 Assets 2011 2012
Depreciation on Plant & Machine: Rs.45,000; Purchase of Plant & Machine: Rs.2,95,000]
Share Capital 3,00,000 5,50,000 Goodwill 1,50,000 1,80,000
12% Debentures 1,50,000 1,00,000 Machinery 2,00,000 1,80,000
Q-20: Following is the Balance Sheets of Bharat Ltd.
General Reserve 40,000 70,000 Land & Building 1,50,000 3,20,000
Liabilities 2011 2012 Assets 2011 2012 Profit & Loss A/c 72,000 98,000 Bills Receivable 20,000 60,000
Creditors 55,000 83,000 Stock 1,42,000 2,09,000
Share Capital 1,20,000 2,00,000 Machinery 2,10,000 2,50,000
Bills Payable 20,000 16,000 Cash 15,000 33,000
General Reserve 90,000 1,00,000 Debtors 93,000 86,000
Provision for Tax 60,000 80,000 Underwriting
Profit & Loss A/c 60,000 75,000 Stock 80,000 1,30,000
Commission 20,000 15,000
Debentures 80,000 70,000 Cash Balance 12,000 10,000
Bank Overdraft 50,000 35,000 Preliminary Expenses 5,000 4,000 6,97,000 9,97,000 6,97,000 9,97,000
4,00,000 4,80,000 4,00,000 4,80,000 (a) Land & Building purchased during the year was for Rs.2,00,000
(b) An Interim dividend paid was Rs. 15,000.
Additional Information:
(c) Debentures were redeemed at 10% premium at the beginning of year 2012.
(a) The Balance of Depreciation on Plant & Machinery 31.12.2011 and 31.12.2012 were Rs.40,000
Prepare Cash Flow Statement of the company as per AS-3.
and Rs.50,000 respectively.
[Operating Activities: 80,000; Investing Activities: (2,30,000); Financing Activities: 1,68,000
(b) During the year Machinery costing Rs.30,000 (Accumulated Depreciation Rs.12,000) was
Depreciation on Land and Building: Rs.30,000; Interest paid on Debentures: Rs.12,000]
 (11) (12)

[Operating Activities: 2,83,000; Investing Activities: (3,80,000); Financing Activities: 72,000;

CA. Naresh Aggarwal’s Purchase of Land & Building: Rs.3,50,000]
ACADEMY of ACCOUNTS Q-25: From the following Balance Sheets of A Ltd. you are to prepare Cash Flow Statement:
Accounting • Costing • Taxation • Financial Management
Liabilities 2011 2012 Assets 2011 2012
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Equity Share Capital 3,00,000 3,50,000 Patents 10,000 8,000
Q-23: From the following Balance Sheets of King Ltd. prepare Cash Flow Statement. Provision for Bad Debts 1,000 2,000 Land & Building 2,00,000 2,12,000
General Reserve 1,00,000 1,10,000 Plant & Machinery 1,00,000 1,78,000
Liabilities 2011 2012 Assets 2011 2012 Profit & Loss A/c 50,000 70,000 Furniture 80,000 84,000
Equity Share Capital 5,00,000 6,50,000 Goodwill 1,70,000 2,00,000 Loan - 28,000 Investment 10,000 14,000
10% Pref. Share Cap. 2,00,000 1,50,000 Land and Building 5,00,000 7,50,000 Creditors 80,000 48,000 (Long term)
Profit and Loss A/c - 1,80,000 Furniture 1,20,000 70,000 Provision for Taxation 25,000 28,000 Debtors (Good) 50,000 60,000
Provision for Tax 1,20,000 1,25,000 Debtors 11,000 43,000 Stock 86,000 57,000
Outstanding Expenses 55,000 45,000 Prepaid Expenses 40,000 30,000 Cash at Bank 10,000 15,000
Provision for Bad Debts 1,000 3,000 Cash 20,000 60,000 Expense on Issue of
Profit and Loss A/c 15,000 - shares 10,000 8,000

AoA
8,76,000 11,53,000 8,76,000 11,53,000 5,56,000 6,36,000 5,56,000 6,36,000

Additional Information: (a) Dividend proposed during the year was of Rs.15,000.
(a) Depreciation provided on Land & Building Rs.50,000. (b) Income tax paid during the year was Rs.20,000.
(b) Income Tax of Rs.55,000 was provided during the year. (c) A machine costing Rs.20,000 (Book Value Rs.18,000) was disposed off for Rs.7,000.
(c) Dividend paid during the year was Rs.70,000 [Operating Activities: 36,000; Investing Activities: (1,09,000); Financing Activities: 78,000
[Operating Activities: 2,90,000; Investing Activities: (2,80,000); Financing Activities: 30,000; Purchase of Plant & Machine: Rs.96,000]
Purchase of Land & Building: Rs.3,00,000]
Q-26: From the following Balance Sheets of XYZ Ltd. prepare Cash Flow Statement.
Q-24: From the following Balance Sheets of ABC Ltd. prepare Cash Flow Statement. Liabilities 2011 2012 Assets 2011 2012
Liabilities 2011 2012 Assets 2011 2012 Share Capital 2,00,000 3,20,000 Goodwill 10,000 2,000
Equity Share Capital 4,00,000 5,50,000 Goodwill 70,000 1,00,000 Debentures 1,00,000 80,000 Land and Building 2,00,000 2,70,000
10% Pref Share Cap. 2,00,000 1,50,000 Land and Building 5,00,000 8,00,000 Profit and Loss A/c 45,000 - Plant & Machinery 1,00,000 1,40,000
Profit and Loss A/c 1,00,000 1,80,000 Furniture 1,20,000 1,00,000 Creditors 25,000 60,000 Debtors 40,000 60,000
Creditors 40,000 55,000 Debtors 50,000 20,000 Bills Payable 20,000 80,000 Stock 55,000 72,000
Bills Payable 80,000 75,000 Stock 80,000 20,000 Provision for Tax 40,000 40,000 Marketable Securities 15,000 18,000
Provision for Tax 55,000 70,000 Cash 35,000 10,000 Cash at Bank 10,000 15,000
Underwritting Profit and Loss A/c - 3,000
Commission 20,000 30,000 4,30,000 5,80,000 4,30,000 5,80,000
8,75,000 10,80,000 8,75,000 10,80,000 (a) Dividend proposed during the year was of Rs.18,000.
Additional Information: (b) Income tax paid during the year was Rs.25,000.
(a) Depreciation provided on Land & Building Rs. 50,000. (c) Plant costing Rs.30,000 (Accumulated Depreciation Rs.18,000) was sold during the year
(b) A provision of Rs.42,000 for Income Tax was made during the year. for Rs.16,000.
(c) Dividend paid during the year was Rs.18,000. [Operating Activities: 14,000; Investing Activities: (1,06,000); Financing Activities: 1,00,000;
Purchase of Plant & Machinery: Rs.52,000]
 (13) (14)

Q-29: From the following Balance Sheets of XYZ Ltd. prepare a Cash Flow Statement.
CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS Particulars Note No. 31.03.2016 31.03.2015

Accounting • Costing • Taxation • Financial Management (I) EQUITY AND LIABILITIES

(1) Shareholders funds
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org (a) Share capital 1 2,50,000 2,00,000
(b) Reserves and surplus 2 70,000 50,000
Q-27: From the following Balance Sheets of Radha Ltd. prepare Cash Flow Statement.
Liabilities 2011 2012 Assets 2011 2012 (2) Non-current liabilities
(a) Long-term borrowings 3 80,000 1,00,000
Share Capital 1,60,000 2,70,000 Gross Block 2,10,000 3,00,000
Securities Premium - 5,000 Bills Receivables - 13,000 (3) Current liabilities
Prov. for Depreciation 60,000 62,000 Debtors 1,01,000 1,27,000 (a) Trade payables 4 1,40,000 45,000
Profit & Loss A/c 45,000 72,000 Stock 20,000 44,000 (b) Short-term provisions 5 40,000 40,000
Debentures 60,000 54,000 Expense on issue TOTAL 5,80,000 4,35,000
Creditors 5,000 19,000 of Shares 3,000 2,000
(II) ASSETS
Provision for Tax 15,000 20,000 Bank Balance 11,000 16,000

AoA
(1) Non-current assets
3,45,000 5,02,000 3,45,000 5,02,000 (a) Fixed assets
(i) Tangible assets 6 4,10,000 3,00,000
(a) During the year Machinery costing Rs.40,000 (Accumulated Depreciation Rs.25,000) was (ii) Intangible assets 7 2,000 10,000
sold for Rs.10,000. (b) Other non-current assets 8 3,000 5,000
(b) Shares of Rs.50,000 were issued at par to vendors in part payment of purchase of Fixed (2) Current assets
Assets. (a) Current Investments 9 18,000 15,000
[Operating Activities: 16,000; Investing Activities: (70,000); Financing Activities: 59,000 (a) Inventories 72,000 55,000
[Cash Purchase of Fixed Asset:80,000; Cash issue of Shares:60,000; Depreciation:27,000] (b) Trade receivables 60,000 40,000
(c) Cash and cash equivalents (Bank) 15,000 10,000
Q-28: From the following Balance Sheets of Vasundhara Ltd. prepare Cash Flow Statement. TOTAL 5,80,000 4,35,000

Liabilities 2011 2012 Assets 2011 2012 Notes of Accounts

Particulars 31.03.2016 31.03.2015
Equity Share Capital 3,00,000 4,00,000 Machinery 4,00,000 5,50,000
Profit and Loss A/c 85,000 1,10,000 Land & Buildings 2,00,000 2,25,000 Note 1: Share Capital
Bank Loan 1,00,000 1,20,000 Debtors 2,10,000 1,90,000 Equity Share Capital 2,00,000 1,50,000
Dep. on Machinery 80,000 90,000 Bills Receivable 80,000 1,05,000 Preferance Share Captial 50,000 50,000
Creditors 3,10,000 2,95,000 Bank 20,000 --- 2,50,000 2,00,000
Provision for Tax 45,000 60,000 Cash 10,000 5,000
Note 2: Reserve and Surplus
9,20,000 10,75,000 9,20,000 10,75,000 General Reserve 30,000 25,000
Profit and Loss (Surplus) 40,000 25,000
(a) During the year Machine costing Rs.50,000 (Accumulated Depreciation Rs.15,000) was 70,000 50,000
sold for Rs.25,000.
(b) Shares of Rs.50,000 were issued at par to vendors in part payment of purchase of Machin- Particulars 31.03.2016 31.03.2015
ery.
Note 3: Long term Borrowings
[Operating Activities: 55,000; Investing Activities: (1,50,000); Financing Activities: 70,000 Debentures 80,000 1,00,000
[Cash Purchase of Machinery: Rs.1,50,000; Cash issue of Shares: Rs.50,000 80,000 1,00,000
Depreciation on Machinery: Rs.25,000]
 (15) (16)

Particulars Note No. 31.3.2018 31.3.2017

CA. Naresh Aggarwal’s
I. EQUITY AND LIABILITIES
ACADEMY of ACCOUNTS (1) Shareholder’s Funds :
Accounting • Costing • Taxation • Financial Management (a) Share Capital 2,00,000 2,00,000
(b) Reserve and Surplus 1,55,000 80,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org (2) Current Liabilities :
(a) Trade Payables 1,28,000 1,45,000
Note 4: Trade Payables (b) Short term Provision 1 45,000 35,000
Creditors 60,000 25,000 5,28,000 4,60,000
Bills Payable 80,000 20,000 II. ASSETS
1,40,000 45,000 (1) Non-CurrentAssets :
(a) Fixed Assets :
Note 5: Short term Provisions (i) Tangible Assets 2 2,00,000 1,50,000
Provision for Tax 40,000 40,000 (ii) Intangible Assets 3 33,000 40,000
40,000 40,000 (2) Current Assets :
(a) Current Investments 4 15,000 12,000
Note 6: Tangible Assets

AoA
(b) Inventory 2,15,000 1,80,000
Land and Building 2,70,000 2,00,000
(c) Trade Receivables 50,000 60,000
Plant and Machinery 1,40,000 1,00,000
(d) Cash & Bank 10,000 8,000
4,10,000 3,00,000
(e) Other Current Assets 5 5,000 10,000
Note 7: Intangible Assets 5,28,000 4,60,000
Goodwill 2,000 10,000 Notes : 31.3.2018 31.3.2017
2,000 10,000
(1) Short term Provision :
Provision for Taxation 45,000 35,000
Note 8: Other Non Current Assets
Preliminary Expenses 3,000 5,000 (2) Tangible Assets :
3,000 5,000 Machinery 2,00,000 1,50,000
(3) Intangible Assets :
Note 9: Current Investments Goodwill 33,000 40,000
Marketable Securities 18,000 15,000 (4) Current Investments :
18,000 15,000 Marketable Securities 15,000 12,000
Additional Information: (5) Other Current Assets :
(a) Land & Building purchased during the year was of Rs.1,00,000. Prepaid Expenses 5,000 10,000
(b) Depreciation Charged on Plant during the year was Rs.20,000
Additional Information :
(c) Plant costing Rs. 30,000 (Accumulated Depreciation Rs.18,000) was sold during the
(a) Machinery whose original cost was Rs.50,000 was sold for Rs.10,000 during
year for Rs.10,000.
the year. Accumulated depreciation on this machinery was Rs.26,000.
[Operating Activities: 1,40,000; Investing Activities: (1,62,000); Financing Activities: 30,000 (b) Depreciation on Machinery charged during the year Rs.20,000.
Depreciation on Land and Building: Rs.30,000; Purchase of Plant: Rs.72,000] (c) An Interim Dividend was paid during the year @ 15% on Equity share Capital.
[Operating Activities: 1,19,000; Investing Activities: (84,000); Financing Activities: (30,000)
Q-30: From the following Balance Sheets of X Ltd., you are required to prepare a Purchase of Machinery: Rs.94,000]
Cash Flow Statement :
Q-31: From the following Balance Sheets of Vishva Ltd., prepare Cash Flow Statement
as per AS-3 (revised) for the year ending 31st March, 2018 :
 (17) (18)

Additional information:
CA. Naresh Aggarwal’s (a) Tax paid during the year 2017-18 Rs.57,600.
ACADEMY of ACCOUNTS (b) Depreciation on plant charged during the year 2017-18 was Rs.57,600.
(c) Additional debentures were issued on March 31, 2018.
Accounting • Costing • Taxation • Financial Management [Operating Activities: 12,960; Investing Activities: (9,600); Financing Activities: 1,20,800
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Provision made for Tax: Rs.52,800]

Q-32: From the following Balance Sheets of Kuber Ltd., prepare Cash Flow Statement
Particulars Note No. 31.03.2018 31.03.2017
as per AS-3 (revised) for the year ending 31st March, 2018 :
I. EQUITY AND LIABILITIES
Particulars Note No. 31.03.2018 31.03.2017
1. Shareholder’s Funds :
(a) Share Capital 4,08,000 3,36,000 I. EQUITY AND LIABILITIES
(b) Reserves and Surplus 1 1,44,000 90,240 1. Shareholder’s Funds :
2. Non-Current Liabilities (a) Share Capital 2,04,000 1,68,000
(a) Long-term Borrowings (10% Debentures) 2,40,000 1,92,000 (b) Reserves and Surplus 1 72,000 45,120
3. Current Liabilities 2. Non-Current Liabilities
(a) Short-term Borrowings (Bank Overdraft) 40,000 20,000 (a) Long-term Borrowings (10% Debentures) 1,20,000 96,000

AoA
(b) Trade Payables 1,15,200 1,44,000 3. Current Liabilities
(c) Short-term Provisions (a) Short-term Borrowings (Bank Overdraft) 20,000 10,000
(Provision for Income Tax) 67,200 72,000 (b) Trade Payables 57,600 72,000
10,14,400 8,54,240 (c) Short-term Provisions (Provison for Tax) 33,600 36,000
II. Assets : 5,07,200 4,27,120
1. Non-Current Assets : II. Assets :
(a) Fixed Assets : 1. Non-Current Assets :
(1) Tangible Assets 2 4,75,200 5,28,000 (a) Fixed Assets :
2. Current Assets (1) Tangible Assets 2 2,37,600 2,64,000
(a) Inventories 2,47,200 1,82,400 2. Current Assets
(b) Trade Receivables 3 1,34,400 1,10,400 (a) Inventories 1,23,600 91,200
(c) Cash and Cash Equivalents 1,57,600 33,440 (b) Trade Receivables 3 67,200 55,200
10,14,400 8,54,240 (c) Cash and Cash Equivalents 78,800 16,720
5,07,200 4,27,120
Notes : 31.3.2018 31.3.2017
1. Reserves and Surplus Notes : 31.3.2018 31.3.2017
Balance in Statement of Profit and Loss 62,400 23,040 1. Reserves and Surplus
General Reserve 81,600 67,200 Balance in Statement of Profit and Loss 31,200 11,520
1,44,000 90,240 General Reserve 40,800 33,600
2. Tangible Assets 72,000 45,120
Land and Building 3,84,000 3,88,800 2. Tangible Assets :
Plant and Machinery 91,200 1,39,200 Land and Building 1,92,000 1,94,400
4,75,200 5,28,000 Plant and Machinery 45,600 69,600
3. Trade Receivables 2,37,600 2,64,000
Debtors 76,800 96,000 3. Trade Receivables
Bills Receivables 57,600 14,400 Debtors 38,400 48,000
1,34,400 1,10,400 Bills Receivables 28,800 7,200
67,200 55,200
 (19) (20)

Additional information: (iii) Mortgage Loan was taken on 1st July 2017 @ 12% p.a. Interest has been paid
CA.2017-18
(a) Tax paid during the year Naresh Aggarwal’s
Rs.28,800. up-to date.
ACADEMY of ACCOUNTS
(b) Depreciation on plant charged during the year 2017-18 was Rs.28,800.
(c) Additional debentures were issued on March 31, 2018.
[Operating Activities: 36,125; Investing Activities: (20,000); Financing Activities: (13,625)
Interest Paid: Rs.1,125]
Accounting • Costing
[Operating Activities: • Taxation
6,480; Investing Financial
• (4,800);
Activities: Management
Financing Activities: 60,400
West Patel Nagar, New Delhi. Ph:8800215448. Website:Provision
www.academyofaccounts.org
made for Tax: Rs.26,400] Q- 34: Following is the Balance Sheet of Super Limited as at 31st March, 2018:
Particulars Note No. 31.03.2018 31.03.2017
Q-33: Prepare a Cash Flow Statement from the Balance Sheets given below :
I. EQUITY AND LIABILITIES
Particulars Note No. 31.3.2018 31.3.2017 1. Shareholder’s Funds
I. EQUITY AND LIABILITIES (a) Share Capital 6,00,000 2,00,000
(1) Shareholder’s Funds : (b) Reserves and Surplus 1 50,000 2,40,000
(a) Share Capital 2.50,000 2,50,000 2. Non-Current Liabilities
(b) Reserve and Surplus 1 1,12,500 45,000 Long-term Borrowings 2 1,60,000 1,20,000
(2) Non-Current Liabilities : 3. Current Liabilities
(a) Long-term Borrowings 2 12,500 - (a) Trade Payables 12,000 40,000
(3) Current Liabilities : (b) Short-term Provisions 3 1,36,000 1,40,000

AoA
(a) Trade Payables 50,000 40,000 9,58,000 7,40,000
(b) Short-term Provision 3 7,500 10,000 II. Assets
4,32,500 3,45,000 1. Non-Current Assets
II. ASSETS (a) Fixed Assets 4 6,72,000 3,84,000
(1) Non-Current Assets 2. Current Assets
(a) Fixed Assets 1,55,000 1,50,000 (a) Inventories 1,34,000 1,20,000
(2) Current Assets : (b) Trade Receivables 1,02,000 130,000
(a) Current Investments 8,000 10,000 (c) Cash and Bank Balances 50,000 98,000
(b) Inventory 1,60,000 75,000 (d) Other Current Assets . 8,000
(c) Trade Receivables 1,00,000 1,05,000 9,58,000 7,40,000
(d) Cash & Bank Balance 9,500 5,000 Notes : 31.3.2018 31.3.2017
4,32,500 3,45,000 1. Reserves and Surplus
Notes : 31.3.2018 31.3.2017 Surplus i.e., Balance in Statement of Profit & Loss 50,000 2,40,000
(1) Reserve & Surplus : 2. Long-term Borrowings
General Reserve 75,000 60,000 10% Long term Loan 1,60,000 1,20,000
Profit & Loss Balance 37,500 (15,000) 3. Short-term Provisions
1,12,500 45,000 Provision for Tax 1,36,000 1,40,000
(2) Long-term Borrowings : 4. Fixed Assets :
Mortgage Loan 12,500 - Machinery 7,68,000 4,30,000
Accumulated Depreciation (96,000) (46,000
(3) Short-term Provision : 6,72,000 3,84,000
Income Tax Provision 7,500 10,000 Additional information :
Additional Information : (i) Additional loan was taken on 1st July, 2017.
(i) Depreciation written off on fixed assets @ 10% on last year’s balance. (ii) Tax of Rs.1,06,000 was paid during the year.
(ii) Interim Dividend paid during the year @ 10% on Share Capital. (iii) Machinery of the book value of Rs.1,60,000 (Accumulated Depreciation
Rs.20,000) was sold at a loss of Rs.36,000.
 (21) (22)

(3) Short term Provision :

CA. Naresh Aggarwal’s Provision for Doubtful Debts 7,000 5,000
ACADEMY of ACCOUNTS Provision for Repairs 1,000
8,000
-
5,000
Accounting • Costing • Taxation • Financial Management (4) Fixed Assets :
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Tangible Assets 2,50,000 1,00,000
Less : Accumulated Depreciation (24,000) (15,000)
2,26,000 85,000
Prepare Cash Flow Statement.
[Operating activities: (79,000); Investing Activities: (3,94,000) Additional Information :
Financing Activities: 4,25,000; Machinery purchased: Rs.5,38,000 (a) Interim Dividend paid during the year Rs.18,000.
Current year’s Depreciation: Rs.90,000] (b) Non Current Investments costing Rs.5,000 were sold at a profit of 40%.
(c) Tangible Fixed Assets Costing Rs.10,000 (accumulated depreciation Rs.4,000)
Q-35: From the following Balance Sheets of ABC Ltd. prepare a Cash Flow Statement. were sold for Rs.8,500.
(d) Additional debentures amounting to Rs.25,000 were issued at par on 01.08.2017.
Particulars Note No. 31.03.2018 31.03.2017
Interest on debentures has been paid regularly.
I. EQUITY AND LIABILITIES [Operating Activities: 1,55,000; Investing Activities: (1,52,000); Financing Activities: 57,000
(1) Shareholder’s Funds : Purchase of Machinery: Rs.1,60,000; Current Year’s Depreciation: Rs.13,000;

AoA
(a) Share Capital 2,37,500 2,00,000 Purchase of Non Current Investments: Rs.7,500]
(b) Reserve and Surplus 1 58,000 (15,000)
(2) Non-Current Liabilities : Q-36: From the following Balance Sheets of P Ltd., prepare Cash Flow Statement:
(a) Long-term Borrowings 2 1,25,000 1,00,000
Particulars Note No. 31.3.2018 31.3.2017
(3) Current Liabilities :
(a) Trade Payables 55,000 25,000 I. EQUITY AND LIABILITIES
(b) Short term Provision 3 8,000 5,000 (1) Shareholder’s Funds :
4,83,500 3,15,000 (a) Share Capital 5,00,000 4,50,000
II. ASSETS (b) Reserve and Surplus 1 1,18,000 70,000
(1) Non-Current Assets : (2) Current Liabilities :
(a) Fixed Assets 4 2,26,000 85,000 (a) Trade Payables 1,49,000 1,17,000
(b) Non-Current Investments 22,500 20,000 (b) Short term Provisions (Prov. for Tax) 50,000 40,000
(2) Current Assets : 8,17,000 6,77,000
(a) Current Investments 15,000 25,000 II. ASSETS
(b) Inventory 1,00,000 75,000 (1) Non-Current Assets :
(c) Trade Receivables 28,000 88,000 (a) Fixed Assets
(d) Cash and Bank 92,000 22,000 (i) Tangible Assets 2 3,70,000 2,80,000
4,83,500 3,15,000 (ii) Intangible Assets 3 90,000 1,15,000
(2) Current Assets :
Notes : 31.3.2018 31.3.2017
(a) Inventory 1,09,000 77,000
(1) Reserve & Surplus :
(b) Trade Receivables 2,30,000 1,80,000
Securities Premium 30,000 -
(c) Cash & Cash Equivalents 18,000 25,000
Profit & Loss Balance 28,000 (15,000)
8,17,000 6,77,000
58,000 (15,000)
(2) Long-term Borrowings :
15% Debentures 1,25,000 1,00,000
 (23) (24)

II. ASSETS
CA. Naresh Aggarwal’s (1) Non-Current Assets :
ACADEMY of ACCOUNTS (a) Fixed Assets
(b) Non-Current Investments
4 1,24,000
4,000
2,80,000
20,000
Accounting • Costing • Taxation • Financial Management (2) Current Assets :
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org (a) Inventory 4,00,000 1,20,000
(b) Trade Receivables 2,42,000 1,12,000
(c) Cash & Cash Equivalents 60,000 46,000
Notes : 31.3.2018 31.3.2017
8,30,000 5,78,000
(1) Reserve & Surplus :
General Reserve 70,000 40,000
Notes : 31.3.2018 31.3.2017
Profit & Loss Balance 48,000 30,000
(1) Reserve & Surplus :
1,18,000 70,000
General Reserve 44,000 -
(2) Tangible Assets :
Profit & Loss Balance 1,00,000 (74,000)
Land and Building 1,70,000 2,00,000
1,44,000 (74,000)
Plant 2,00,000 80,000
(2) Long-term Borrowings :
3,70,000 2,80,000
Public Deposits 1,50,000 1,00,000
(3) Intangible Assets :

AoA
(3) Short-term Provision :
Goodwill 90,000 1,15,000
Provision for Taxation 40,000 50,000
Additional Information : Provision for Doubtful Debts 8,000 10,000
(a) Contingent Liability 31.3.2018 31.3.2017 48,000 60,000
Proposed Dividend 40,000 32,000 (4) Fixed Assets :
(b) Depreciation of Rs.10,000 and Rs.20,000 has been charged on plant, land and Land - 2,00,000
buildings respectively. Plant & Machinery 2,00,000 1,60,000
(c) An interim dividend of Rs.20,000 has been paid. Accumulated Depreciation (76,000) (80,000)
(d) Income tax of Rs.25,000 has been paid. 1,24,000 2,80,000
(e) Rent Received during the year Rs.10,000. Additional Information :—
[Operating Activities: 1,05,000; Investing Activities: (1,10,000); Financing Activities: (2,000) (a) A piece of machinery was sold for Rs.16,000 dufing the year 2018. Its original
Purchase of Machinery: Rs.1,30,000; Sale of Land and Building: Rs.10,000] cost was Rs.40,000 and depreciation of Rs.30,000 has been provided on it.
(b) Non-Current Investments were sold at a loss of 40%.
(c) Land was sold for Rs.3,00,000.
Q-37: Following are the Balance Sheets of Super Star Ltd. :— (d) Interest paid on public deposits amounted to Rs.12,000.
Particulars Note No. 31.03.2018 31.03.2017 You are required to prepare Cash-Flow Statement.
[Operating Activities: (2,69,600); Investing activities: 2,45,600
I. EQUITY AND LIABILITIES Financing Activities: 38,000]
(1) Shareholder’s Funds :
(a) Share Capital 4,00,000 4,00,000 Q-38: From the following Balance Sheets of Star Ltd., you are required to prepare
(b) Reserve and Surplus 1 1,44,000 (74,000) Cash-Flow Statement.
(2) Non-Current Liabilities :
(a) Long-term Borrowings 2 1,50,000 1,00,000 Particulars Note No. 31.03.2018 31.03.2017
(3) Current Liabilities : I. EQUITY AND LIABILITIES
(a) Trade Payables 88,000 92,000 (1) Shareholder’s Funds :
(b) Short-term Provision 3 48,000 60,000 (a) Share Capital 6.60,000 6,00,000
8,30,000 5,78,000 (b) Reserve & Surplus 50,000 60,000
 (25) (26)

Q-39: Following are the Balance Sheets of Moon Ltd:

CA. Naresh Aggarwal’s
Particulars Note No. 31.03.2018 31.03.2017
ACADEMY of ACCOUNTS I. EQUITY AND LIABILITIES
Accounting • Costing • Taxation • Financial Management (1) Shareholder’s Funds :
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org (a) Share Capital 1,50,000 1,25,000
(b) Reserve and Surplus 1 1,03,500 87,500
(2) Current Liabilities :
(2) Non-Current Liabilities:
(a) Short-term Borrowings 2 10,000 7,500
Long-term Borrowings 50,000 80,000
(b) Trade Payables 15,500 27,000
(3) Current Liabilities :
(c) Short-term Provision 3 42,000 40,500
(a) Short-term Borrowings 1 10, 000 —
3,21,000 2,87,500
(b) Trade Payables 1,94,000 2,48,000
II. ASSETS :
(c) Short-term Provision 2 60,000 48,000
(1) Non-Current Assets :
10,24,000 10,36,000
(a) Fixed Assets :
II. ASSETS :
(i) Tangible Assets 4 1,35,000 1,35,000
(1) Non-Current Assets :
(ii) Intangible Assets 25,000 15,000
(a) Fixed Assets :

AoA
(b) Non-Current Investments 22,500 25000
(i) Tangible Assets 5,20,000 4,00,000
(2) Current Assets :
(ii) Intangible Assets 3 15,000 1,20,000
(a) Trade Receivables 1,33,500 1,09,500
(b) Non-Current Investments 1,28,000 1,00,000
(b) Cash & Cash Equivalents 5,000 3,000
(2) Current Assets :
3,21,000 2,87,500
(a) Inventory 12,5000 1,40,000
(b) Trade Receivables 1,96,000 2,60,000
Notes : 31.3.2018 31.3.2017
(c) Cash & Cash Equivalents 40,000 16,000
(1) Reserve & Surplus
10,24,000 10,38,000
Balance from statement of Profit & Loss 98,500 87,500
Notes : 31.3.2018 31.3.2017 Securities Premium 5,000
(1) Short-term Borrowings : 1,03,500 87,500
Bank Overdraft 10,000 — (2) Short-term Borrowings :
(2) Short-term Provision : Bank Overdraft 10,000 7,500
Taxation Provision 60,000 48,000 (3) Short-term Provision :
(3) Intangible Assets : Provision for Tax 31,000 32,500
Goodwil — 1,00,000 Provision for Doubtful Debts 11,000 8,000
Patents 15,000 20,000 42,000 40,500
15,000 1,20,000 (4) Tangible Assets :
Additional Information : Land 75,000 35,000
(a) Machinery whose original cost was Rs.1,00,000 (accumulated depreciation Machinery 60,000 1,00,000
thereon being Rs.64,000) was sold for Rs.40,000. 1,35,000 1,35,000
(b) Depreciation on Machinery charged during the year was Rs.50,000. Additional Information :
(c) Non-Current Investments costing Rs.20,000 were sold for Rs.64,000 during the (a) Machinery of the book value of Rs.30,000 was sold for Rs.9,000 during the
year. year.
(d) Interest paid on long-term borrowings amounted to Rs.6,000. (b) Interim Dividend paid during the year Rs.12,500.
[Operating Activities: 1,40,000; Investing Activities: (1,50,000); Financing Activities: 34,000 (c) During the year Company sold 40% of its original non-current investments at a
Purchase of Tangible Assets: Rs.2,06,000] loss of 20%.
 (27) (28)

You are required to prepare Cash Flow Statement. Q-41: From the following information Prepare a Cash from Operating Activities as per AS-3:
CA. Naresh Aggarwal’s Profit and Loss Account
[Cash from operating activities: Rs.22,500; Cash used in investing activities: (40,500)
ACADEMY of Cash
ACCOUNTS
from financing activities: Rs.20,000] Particulars Amount Particulars Amount
Accounting •
Q-40: You are required
Costing •
to prepare
Taxation Financial Management
• Statement from the following
Cash-Flow To Cost of Goods Sold 2,00,000 By Sales (including Cash Sales 2,50,000
West Patel
informations :Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org To Office Expenses 10,000 amounted to Rs.50,000)
To Selling Expenses 3,000 By Profit from Sale of Land 10,000
Particulars Note No. 31.03.2018 31.03.2017 To Depreciation 4,000 By Interest Received 12,000
I. EQUITY AND LIABILITIES
To Loss on Sale of Plant 2,000
(1) Shareholder’s Funds :
To Goodwill written off 4,000
(a) Share Capital 5,92,000 5,60,000
To Income Tax Paid 9,000
(b) Reserve & Surplus 84,480 80,320
To Net Profit 40,000
(2) Non-Current Liabilities : 2,72,000 2,72,000
Long-term Borrowings 1 48,000 96,000
(3) Current Liabilities :
Following is the position of Current Assets and Current Liabilities :
(a) Trade Payables 94,720 82,880
2011 2012
(b) Short Term Provision 2 6,400 5,600
Stock 20,000 18,000

AoA
8,25,600 8,24,800
Debtors 13,000 10,000
II. ASSETS :
Bills Receivable 8,000 9,000
(1) Non-Current Assets :
Creditors 9,000 15,000
(a) Fixed Assets :
Bills Payable 7,000 6,000
(i) Tangible Assets 2,40,000 1,60,000
Outstanding Office Expenses 3,000 5,000
(ii) Intangible Assets 40,000 80,000
[Operating Activities: Rs.39,000; Cash Receipts: Rs.2,52,000; Cash Paid: Rs.2,04,000]
(2) Current Assets :
(a) Inventory 3,41,600 3,93,600
Q-42: From the following information Prepare a Cash from Operating Activities :
(b) Trade Receivables 1,41,600 1,19,200
Profit and Loss Account
(c) Cash & Cash Equivalents 62,400 72,000 Particulars Amount Particulars Amount
8,25,600 8,24,800
To Opening Stock 1,00,000 By Sales 14,00,000
Notes : 31.3.2018 31.3.2017
To Purchases of Materials 9,50,000 By Dividend Received 30,000
(1) Long-term Borrowings :
To Wages 2,00,000 By Commission Accrued 10,000
12% Debentures 48,000 96,000
Add: Outstanding 50,000 2,50,000 By Profit on Sale of Building
(2) Short Term Provision :
To Salaries 80,000 Book value 5,00,000
Provision for Doubtful Debts 6,400 5,600
Add: Outstanding 40,000 Sold for 6,20,000 1,20,000
1,20,000 By Closing Stock 1,30,000
Additional information : Less: Prepaid 5,000 1,15,000
(i) Interim Dividend paid during the year Rs.28,000 To Office Expenses 60,000
(ii) Plant Purchased Rs.80,000 To Selling & Distribution Exp. 40,000
(iii) Intangible Assets written off during the year Rs.40,000 To Depreciation 55,000
(iv) Debentures redeemed on 1st Feb. 2018 Rs.48,000 To Preliminary Exp. written off 12,000
(v) Interest on debentures has been paid up-to date. To Goodwill written off 20,000
[Cash from operating activities: Rs.1,24,960; Cash used in investing activities: (Rs.80,000) To Net Profit 88,000
Cash used in financing activities: (Rs.54,560)]
16,90,000 16,90,000
 (29) (30)

Current Assets and Current Liabilities 31.3.2011 31.3.2012

CA. Naresh Aggarwal’s Sundry Debtors 60,000 56,000
ACADEMY of ACCOUNTS Sundry Bills Receivable
Creditors
5,000
40,000
7,000
48,000
Accounting • Costing • Taxation • Financial Management Bills Payable 10,000 11,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Outstanding Expenses 2,000 1,600
Prepaid Expenses 900 1,200
[Cash from Customers: Rs.14,00,000; Paid to Creditors: Rs.13,30,000; Inventory 70,000 58,000
Net Cash from Operating Activities: Rs.70,000] [Cash from Customers: Rs.16,72,000; Paid to Creditors: Rs.14,62,700;
Net Cash from Operating Activities: Rs.1,94,300]
Q-43: From the following information calculate Cash from Operating Activities as per Accounting
Standard-3 : Q-45: Compute ‘Cash Flow from Operating Activities’ from the following details :
Profit and Loss Account 31.12.2018 31.12.2017
Particulars Rs. Rs.
Particulars Amount Particulars Amount
Profit & Loss A/c 1,10,000 1,20,000
To Opening Stock 40,000 By Sales 8,40,000 Debtors 50,000 62,000
To Purchases 3,20,000 By Closing Stock 60,000 Outstanding Rent 24,000 47,000

AoA
To Wages 40,000 By Dividend 40,000 Goodwill 80,000 76,000
Add: Outstanding 60,000 1,00,000 By Commission Accrued 20,000 Prepaid Insurance 8,000 4,000
To Rent 1,20,000 By Net Loss 60,000 Creditors 26,000 38,000
Add: Outstanding 40,000 1,60,000 [(37,000)]
To Salaries 80,000
To Selling and Distribution Exp. 1,20,000 Q-46: Calculate ‘Cash Flow from Operating Activities’ from the following balances:
To Depreciation 60,000 Particulars 2018 2017
To Preliminary Exp. written off 20,000 Debtors 40,000 50,000
To Loss on Sale of Fixed 20,000 Stock 12,500 10,000
To Goodwill written off 1,00,000 Creditors 20,000 25,000
Outstanding Expenses 1,000 800
10,20,000 10,20,000
Bills Payable 40,000 25,000
[Operating Activities: Rs.1,60,000; Cash Receipts: Rs.8,40,000; Cash Paid: Rs.6,80,000] Profit & Loss A/c (Dr.) 30,000 (Dr.) 50,000
Additional information: Goodwill written off Rs.10,000
Q-44: Calculate ‘Cash Flow from Operating Activities’ from the following information: [47,700]
Income Statement
For the year ended 31st March, 2018 Q-47: Calculate ‘Cash Flow from Operating Activities’ from the following information:
Rs. Particulars 2017 2018
Sales 16,70,000 Debtors 42,000 46,000
Less : Cost of Goods Sold -13,30,000 Prepaid Expenses 2,000 2,700
GROSS PROFIT 3,40,000 Accrued Income 1,500 1,200
Less: Administrative Expenses 90,000 Income received in Advance 800 1,000
Selling Expenses 63,000 Bills Payable 13,000 11,000
Depreciation 32,000 Creditors 26,000 28,000
Preliminary Expenses Written off 10,000 Outstanding Expenses 8,000 6,000
Direct Taxes 15,000 -2,10,000 Profit made during 2018 amounted to Rs.1,00,000 after taking into account the following
NET PROFIT AFTER INCOME TAX 1,30,000 adjustments:
---------------
 (31) (32)

Particulars 31.03.2017 31.03.2018

CA. Naresh Aggarwal’s Profit & Loss Account (Dr.) 60,000 (Cr.) 70,000
ACADEMY of ACCOUNTS General Reserve
Provision for Depreciation
20,000
60,000
30,000
70,000
Accounting • Costing • Taxation • Financial Management Outstanding Expenses 10,000 6,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Goodwill 40,000 20,000
Sundry Debtors 80,000 70,000
An item of Plant costing Rs.40,000 having book value of Rs.28,000 was sold for Rs.36,000.
(i) Profit on Sale of Investment Rs.2,000. [Current Year’s Depreciation: Rs.22,000; Cash from Operations: Rs.1,80,000]
(ii) Loss on Sale of Machine Rs.900.
(iii) Goodwill Amortized Rs.3,000. Q-51: From the following information calculate Cash from Operating Activities as per Accounting
(iv) Depreciation Charged Rs.2,900. Standard-3 :
[98,600] Particulars 2017 2018
Debtors 25,000 20,000
Q-48: X Ltd. made a profit of Rs.1,00,000 after charging depreciation of Rs.20,000 on assets Bills Receivable 5,000 6,250
and a transfer to General Reserve of Rs.30,000. The goodwill written off was Rs.7,000 and the Creditors 12,500 10,000
gain on sale of Machinery was Rs.3,000. Outstanding Expenses 400 500

AoA
The other information available to you (changes in the value of Current Assets and Current Bills Payable 20,000 12,500
Liabilities) is as follows: Accrued Income 3,000 3,500
At the end of the year Debtors showed an increase of Rs.6,000; Creditors an increase of Operating profit before working capital changes Rs. 65,000
Rs.10,000; Prepaid Expenses an increase of Rs.200; Bills Receivable a decrease of Rs.3,000; [Rs.58,350]
Bills Payable a decrease of Rs.4,000 and Outstanding Expenses a decrease of Rs.2,000.
Ascertain the cash flow from the operating activities.
[1,54,800]
••••••••••••••••••••••
Q-49: On March 31st 2018, Ramesh & Co. indicated a profit of Rs.1,25,000 after considering
the following :
Depreciation on Building Rs.25,000.
Depreciation on Plant & Machinery Rs.45,000.
Amortization of Goodwill Rs.20,000.
Gain on sale of Machinery Rs.10,000.
The current assets and current liabilities at the beginning and the end of the year are follows:
Particulars 01.04.2017 31.03.2018
Accounts Receivable 35,000 45,000
Stock in hand 75,000 69,000
Cash in hand 18,000 30,000
Accounts payable 30,000 32,000
Expenses payable 10,000 5,000
Bank overdraft 60,000 35,000
[1,98,000]

Q-50: Calculate Cash from Operations from the following information :

 (33) (34)

B. Cash Flow from Investing Activities :

CA. Naresh Aggarwal’s
Purchase of Fixed Assets -
ACADEMY of ACCOUNTS Sale of Fixed Assets +
Accounting • Costing • Taxation • Financial Management Purchase of Long Term Investments -
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Sale of Long Term Investments +
Tax on Profit on Sale of Assets / Investments -
CASH FLOW STATEMENT Interest / Rent / Dividend Received** +
(Indirect Method) Net Cash from / (used in) Investing Activities xxxx
For the year ended ...............
Particulars Rs. Rs. C. Cash Flow from Financing Activities :
Issue of Shares / Debentures (For Cash only) +
A. Cash Flow from Operating Activities : Redemption of Preference Shares / Debentures -
Net Profit before Tax and Extraordinary Items (Note-1) xxxx Loans Taken +
Adjustments for Repayment of Loans -
Depreciation written off + Interest Paid* / Dividend Paid -

AoA
Goodwill written off + Tax on Dividend Paid -
Preliminary Expenses Written off + Net Cash from / (used in) Financing Activities xxxx
Underwriting Commission Written off +
Discount on issue of Debentures/Shares written off + Net Increase / (Decrease) in Cash & Cash Equivalent xxxx
Expense on issue of Debentures/Shares written off + Opening Balance of Cash & Cash Equivalent xxx
Loss on Sale of Fixed Assets +
Closing Balance of Cash & Cash Equivalent xxxx
Foreign Exchange Losses +
Interest Paid* +
Interest / Rent / Dividend Received** -
Note-1:
Profit on Sale of Fixed Assets -
Calculation of ‘Net Profit before Tax and Extraordinary Items’
Operating Profits before Working Capital Changes xxxx
Net Profit as per Profit and Loss Account
Increase in Current Assets -
or
Decrease in Current Assets +
Closing Balance of P&L A/c - Opening Balance of P&L A/c
(except Cash, Bank and Marketable Securities)
Add: Proposed Dividend (Current Year’s only)
Increase in Current Liabilities +
Add: Interim Dividend
Decrease in Current Liabilities -
Add: Provision for Taxation (Current Year’s only)
(except Bank Overdraft)
Add: Increase in General Reserve / Sinking Fund / Other Reserves
Cash Generated from Operating Activities xxxx
Less: Decrease in General Reserve
Income Tax Paid -
Add: Loss Due to Extraordinary Items
Cash Flow before Extraordinary Items xxxx
Extraordinary Items -
Net Cash from / (used in) Operating Activities xxxx
 (35) (36)

CA. Naresh Aggarwal’s

CASH FLOW STATEMENT
ACADEMY ofMethod)
(Direct ACCOUNTS Cash Receipts from Customers
Net Sales (Total Sales - Sales Return) xxxx
Accounting • Costing Taxation
For the• year Financial Management
ended •...............
Opening Balance of Debtors and Bills Receivables +
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Particulars Rs. Rs. Closing Balance of Debtors and Bills Receivables -
Bad Debts during the year -
A. Cash Flow from Operating Activities :
Discount allowed to Customers -
Cash Receipts from Customers +
Cash receipts from customers xxxx
Cash paid to Suppliers and Employees -
Cash Generated from Operating Activities xxxx
Income Tax Paid -
Cash paid to Suppliers and Employees
Cash Flow before Extraordinary Items xxxx
Net Purchases (Total Purchase - Purchases Returns) xxxx
Extraordinary Items -
All Direct Expenses +
Net Cash from / (used in) Operating Activities xxxx
Opening Stock +

AoA
Closing Stock -
B. Cash Flow from Investing Activities :
COST OF GOODS SOLD xxxx
Purchase of Fixed Assets -
All Other Operating Cash Expenses
Sale of Fixed Assets +
(Office & Adm. Exp. and Selling & Distribution Exp.) +
Purchase of Long Term Investments -
Discount Received from Creditors -
Sale of Long Term Investments +
Opening Balance of Creditors, Bills Payable and O/s Exp. +
Tax on Profit on Sale of Assets / Investments -
Closing Balance of Creditors, Bills Payable and O/s Exp. -
Interest / Rent / Dividend Received +
Opening Balance of Prepaid Expenses -
Net Cash from / (used in) Investing Activities xxxx
Closing Balance of Prepaid Expenses +
Opening Stock -
C. Cash Flow from Financing Activities :
Closing Stock +
Issue of Shares / Debentures (For Cash only) +
Cash paid to suppliers and employees xxxx
Redemption of Preference Shares / Debentures -
Loans Taken +
Repayment of Loans -
Interest Paid / Dividend Paid -
Tax on Dividend Paid -
Net Cash from / (used in) Financing Activities xxxx
Net Increase / (Decrease) in Cash & Cash Equivalent xxxx
Opening Balance of Cash & Cash Equivalent xxx
Closing Balance of Cash & Cash Equivalent xxxx
 (37)

CA. Naresh Aggarwal’s

Theoretical Questions
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
Q-1*: What is meant by Cash Flow Statement ?
WestorPatel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Define Cash Flow Statement.

Q-2*: Show the format of a Cash flow Statement as per AS-3.

Q-3*: Briefly explain the objectives of preparing a Cash Flow Statement.

Q-4: List three items of inflows of cash receipts from investing activities.

Q-5: List the two of outflows of cash from investment activities.

Q-6: List three items of inflows of cash receipts from Financing activities.

AoA
Q-7: List the three of outflows of cash from Financing activities.

•••••••••••••••••••••••••
 CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org

For Eenquiries
Call or whatsapp: 8800215448
(Whatsapp anytime, Calls only between 3.00 pm to 8.00 pm)

Email: ca.naresh.vc@gmail.com

AoA
Website: academyofaccounts.org
Accounts of
Non Profit Organisations

Watch us on

https://www.youtube.com/CaNareshAggarwal
 (1) (2)

CA. Naresh Aggarwal’s

ACADEMY of ACCOUNTS Q-3* : Prepare an Income & Expenditure Account from the following information :
Receipts and Payments Account
Accounting • Costing • Taxation • Financial Management For the year ended 31.12.2010
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Receipts Rs. Payments Rs.

To Balance b/d 3,000 By Salaries :

Q-1: Prepare an Income & Expenditure Account from the following information :
To Legacies 2,100 Arrear 1,000
Receipts and Payments Account
To Government Grant 2,500 Current 12,000
For the year ended 31.12.2010
To Furniture 1,500 Advance 2,000 15,000
Receipts Rs. Payments Rs. (Book Value Rs. 1,800) By Newspapers 200
To Subscription : By Rent :
To Balance b/d 5,000 By Rent 9,500
Arrear 900 Arrear 100
To Subscription : By Salaries :
Current 22,000 Current 2,400 2,500
2009 2,000 2009 700
Advance 1,000 23,900 By Furniture 4,200
2010 15,000 2010 3,600
To Entrance Fees 1,000 By Stationery 1,200
2011 1,500 18,500 2011 400 4,700

AoA
To Donations 1,500 By Sundry Expenses 700
To Sale of Furniture 2,000 By Stationery 1,200
By Fixed Deposits 5,000
To Donations 1,500 By Sundry Expenses 700
By Balance c/d 6,700
To Government Grant 4,000 By Furniture Purchases 4,200
By Balance c/d 10,700 35,500 35,500
31,000 31,000 [Surplus: Rs.12,300]
[Surplus: Rs.5,500]
Q-4 : Prepare an Income & Expenditure Account from the following information :
Receipts and Payments Account
Q-2 : Prepare an Income & Expenditure Account from the following information :
For the year ended 31.12.2010
Receipts and Payments Account
For the year ended 31.12.2010 Receipts Rs. Payments Rs.
Receipts Rs. Payments Rs. To Balance b/d 5,400 By Salaries (Including Rs.700 3,000
To Legacies 5,100 for 2009 and Rs.300 for 2011)
To Balance b/d 5,000 By Postage & Telegram 1,500
To Government Grant 2,000 By Sundry Expenses 700
To Subscription : By Salaries and Wages :
To Building Fund 3,500 By Municipal Taxes 1,500
2009 500 2010 4,800
To Life Membership Fees 2,100 (Including Rs.300 for Advance)
2010 18,000 2011 600 5,400
To Subscription : By Rent :
2011 1,500 20,000 By Miscellaneous Expenses 700
Arrear 1,600 Arrear 100
To Sale of Investments 2,000 By Bonds and Debentures 2,200
Current 9,000 Current 2,400 2,500
(Book Value Rs. 1,500) By Periodicals 800
Advance 900 11,500 By Furniture 4,200
To Donations 1,500 By Books 3,000
To Entrance Fees 1,000 By Stationery 1,200
To Life Membership 1,100 By Balance c/d 16,000
(50% to be capitalised) By Fixed Deposits 5,000
29,600 29,600 By Balance c/d 12,500
[Surplus: Rs.12,200] 30,600 30,600
[Surplus: Rs.9,100]
 (3) (4)

To Sale of Old Newspapers 150 By Refreshments 1,700

CA. Naresh Aggarwal’s To Lockers Rent 450 By Tournament Fund
ACADEMY of ACCOUNTS To Interest on Deposits 400 Investments
By Newspapers & Periodicals4,700
5,000

Accounting • Costing • Taxation • Financial Management

38,000 38,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
[Deficit: Rs.12,500]

Q-5* : Prepare an Income & Expenditure Account from the following information : Q-7 : Prepare an Income & Expenditure Account from the following information :
Receipts and Payments Account Receipts and Payments Account
For the year ended 31.12.2010 For the year ended 31.12.2010
Receipts Rs. Payments Rs. Receipts Rs. Payments Rs.
To Balance b/d 19,800 By Salaries (Including Rs.800 13,200 To Balance b/d 2,000 By Salaries :
To Government Grant 1,200 for 2009 and Rs.400 for 2011) To Legacies 4,100 Arrear 1,800
To Sale of Drama Tickets 4,000 By Sundry Expenses 1,700 To Government Grant 2,800 Current 8,000
To Sports Fund 7,000 By Rent, Rates & Taxes 4,500 To Furniture 2,500 Advance 900 10,700

AoA
To Life Membership Fees 4,200 (Including Rs.500 for Advance) (Book Value Rs. 2,600) By Newspapers 450
To Subscription : By Drama Show Expenses 3,400 To Subscription : By Rent :
Arrear 2,600 By Charity 5,100 Arrear 2,900 Arrear 150
Current 15,000 By Telephone & Electricity 2,000 Current 18,500 Current 3,400 3,550
Advance 1,000 18,600 By Equipments 4,200 Advance 1,200 22,600 By Furniture 6,500
To Entrance Fees 1,000 By Stationery 1,200 To Entrance Fees 1,500 By Stationery 1,200
(60% to be capitalised) By Investments 5,000 To Donations for Tournament1,500By Sundry Expenses 1,700
By Balance c/d 15,500 By Fixed Deposits 8,000
By Balance c/d 4,900
55,800 55,800
[Deficit: Rs.8,800] 37,000 37,000
Additional Information :
Q-6 : From the following Receipts and Payment Account, prepare an Income & Outstanding sundry expenses are Rs. 300. Stock of stationery at the end was Rs.
Expenditure Account for the year ended 31.12.2010 400. Outstanding Subscription of current year was Rs. 1,000. Entrance Fees
Receipts and Payments Account includes Donation for Tournament amounted to Rs. 200.
For the year ended 31.12.2010 [Surplus: Rs.12,950]
Receipts Rs. Payments Rs.
Q-8 : Prepare an Income & Expenditure Account from the following information :
To Balance b/d 14,400 By Salaries 6,200 Receipts and Payments Account
To Subscription 13,000 By Upkeep of Ground 1,500 For the year ended 31.12.2010
(Including Rs.400 last year By Tax and Insurance 3,700
Receipts Rs. Payments Rs.
and Rs.600 for the next year) By Audit Fees 1,700
To Sale of Sports Equipments 4,000 By Sundry Expenses 1,300 To Balance b/d 4,500 By Salaries :
(Cost Rs. 5,600) By Expenses on Team 2,500 To Legacies 5,100 Last Year 2,300
To Tournament Fund 5,000 By Affiliation Fees 1,200 To Furniture 3,800 Current Year 14,000
To Sale of Grass 600 By Sports Equipments 8,500 (Book Value Rs. 4,000) Next Year 500 16,800
To Government Grant 1,500 By Newspapers 800
 (5) (6)

(b) Rent includes Rs.200 for last year and Rs.500 are arrear for current year.
CA. Naresh Aggarwal’s (c) Depreciate Books by 20% and Desks by 10% for full year.

ACADEMY of ACCOUNTS (d) Entrance Fees is to be capitalised to extent of 40%.

[Surplus: Rs.2,950]
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Q-10*: Prepare an Income & Expenditure Account and Balance Sheet as on that
date from the following information :
Receipts and Payments Account
To Subscription : By Rent : For the year ended 31.12.2010
2009 2,900 Arrear 2,500
2010 28,400 Current 10,400 3,550 Receipts Rs. Payments Rs.
2011 3,200 34,500 By Furniture 8,200 To Opening Balances : By Wages 6,500
To Entrance Fees 4,200 By Stationery 3,000 Cash 3,000 By Rent and Rates 1,800
To Donations for Festival 1,500 By Sundry Expenses 2,450 Bank 5,000 8,000 By Printing & Stationery 1,400
By Deposits 5,000 To Subscription 16,000 By Equipments (30.9.2010) 5,000
By Balance c/d 00 To Fees 1,100 By Books 2,000
55,100 55,100 To Interest 550 By 8% Fixed Deposit (1.4.2010)10,000

AoA
To Life Membership Fees 5,500 By Newspapers & Periodicals3,200
Additional Information : To Donation 3,000 By Library Expenses 3,500
Outstanding sundry expenses are Rs. 500. Stock of stationery at the end was Rs. To Entrance Fees 2,000 By Closing Balance :
600. Outstanding Subscription of current year was Rs. 1,600. Entrance Fees To Sundry Receipts 850 Cash 2,500
includes Donation for Festival amounted to Rs. 700. Bank 1,100 3,600
[Surplus: Rs.9,350]
37,000 37,000
Q-9 : Prepare an Income & Expenditure Account from the following information : Other Informations:
Receipts and Payments Account (a) Outstanding subscription for last year was Rs.500 and for current year it was
For the year ended 31.12.2010 Rs.800. Subscription received in advance last year was Rs.300 and during current
Receipts Rs. Payments Rs. year it was Rs.1,100.
(b) During the year wages amounted to Rs.700 were paid for year 2009 and Rs.300
To Opening Balances : By Honaraium to Lecturers 5,500 were arrear for year 2010. Advance wages paid during 2010 were Rs.600 and in
Cash 2,500 By Rent and Rates 1,800 2009 it was Rs.400.
Bank 3,500 6,000 By Printing & Stationery 1,400 (c) On 01.01.2010 Club had Building of Rs.40,000 and Equipments of Rs.10,000.
To Fees 1,100 By Books 2,000 (d) Depreciation on Building is provided @10% and on Equipments @ 20% p.a.
To Subscription 16,400 By Desks & Chairs 5,000 [Surplus: Rs.1,000; Capital Fund: Rs.57,900; Balance Sheet: Rs.65,800]
To Interest 450 By 8% Fixed Deposit (1.4.2010)10,000
To Life Membership Fees 2,600 By Newspapers & Periodicals3,200 Q-11 : Prepare an Income & Expenditure Account and Balance Sheet as on that
To Donation 25,000 By Lecture Hall Expenses 3,500 date from the following information :
To Entrance Fees 2,000 By Closing Balance : Receipts and Payments Account
To Miscellaneous 550 Cash 4,000 For the year ended 31.12.2010
Bank 17,700 21,700
Receipts Rs. Payments Rs.
54,100 54,100
To Opening Balances : By Salaries 6,500
(a) Subscription includes Rs. 600 for last year and Rs. 1,500 for the coming year. Cash 3,200 By Taxes and Insurance 1,800
Current years subscription still in arrear amounted to Rs. 1,800. Bank 12,800 16,000 By Furniture 5,000
 (7) (8)

Additional Information:
CA. Naresh Aggarwal’s (a) On 31.12.2009 the club possessed books worth Rs.40,000 and furniture worth
ACADEMY of ACCOUNTS Rs.17,000. Provide depreciation on these assets @ 10% including the purchase
during the year.
Accounting • Costing • Taxation • Financial Management (b) Subscriptions in arrears at the beginning of the year amounted to Rs.700 and at
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org the end of the year Rs.1,100 were outstanding.
(c) The club paid three months rent in advance both in the beginning and at the end of
the year.
To Subscription 27,800 By Equipments (01.04.2010) 8,000
[Surplus: Rs.15,700; Capital Fund: Rs.64,920; Balance Sheet: Rs.85,620]
To Fees 2,400 By Books 5,000
To Interest 1,000 By 8% Fixed Deposit (1.4.2010) 20,000
Q-13: Prepare an Income & Expenditure Account and Balance Sheet as on that date
To Life Membership Fees 2,500 By Newspapers & Periodicals 4,500
from the following information :
To Donation 4,100 By Library Expenses 1,500
Receipts and Payments Account
To Entrance Fees 3,000 By Closing Balance :
For the year ended 31.12.2010
To Sundry Receipts 1,550 Cash 1,800
Bank 4,250 6,050 Receipts Rs. Payments Rs.

58,350 58,350 To Opening Balances 11,000 By Salaries 6,500

AoA
To Subscription 19,800 By Building 18,000
Other Informations:
To Legacies 20,000 By Rent and Insurance 5,000
(a) Outstanding subscription for last year was Rs.1,000 and for current year it was
To Life Membership Fees 2,000 By Newspapers & Periodicals4,500
Rs.600. Subscription received in advance last year was Rs.900 and during current
To General Donations 4,100 By Library Expenses 7,500
year it was Rs.2,700.
To Special Donations 5,000 By Furniture 7,000
(b) During the year Salaries amounted to Rs.900 were paid for year 2009 and Rs.500
To Entrance Fees 3,000 By Closing Balance 16,400
were arrear for year 2010. Advance Salaries paid during 2010 were Rs.1,200
(60% to be capitalised)
and in 2009 it was Rs.1,500.
(c) On 01.01.2010 Club had Building of Rs.50,000 and Equipments of Rs.20,000. 64,900 64,900
(d) Depreciation on Building is provided @10% and on Equipments @ 20% p.a.
Other Informations:
[Surplus: Rs.13,450; Capital Fund: Rs.86,700; Balance Sheet: Rs.1,05,850]
(a) Outstanding subscription for last year was Rs.1,200 and for current year it was
Rs.1,600. Subscription received in advance last year was Rs.500 and during
Q-12: Prepare an Income & Expenditure Account and Balance Sheet as on that date
current year it was Rs.700.
from the following information :
(b) During the year Rent amounted to Rs.750 were paid for year 2009 and Rs.650 for
Receipts and Payments Account
the year 2011.
For the year ended 31.12.2010
(c) Unexpired Insurance were Rs.1,200 on 31.12.2010 and on 01.01.2010 it was
Receipts Rs. Payments Rs. Rs.1,500.
(d) On 01.01.2010 Club had Building of Rs.32,000 and Furniture of Rs.20,000.
Balance b/d 6,380 Rent 3,360
(e) Depreciation on Building is provided @ 5% and on Furniture @ 10%.
Entrance Fees 1,100 Wages 4,900
(f) Legacies are to be capitalised.
Subscriptions 36,000 Lighting Charges 3,400
[Deficit: Rs.2,300; Capital Fund: Rs.64,450; Balance Sheet: Rs.91,650]
Donations 3,300 Books Purchases 3,000
Life Membership Fees 5,000 Office Expenses 9,000
Q-14*: Prepare an Income & Expenditure Account and Balance Sheet as on that
Interest on Deposits 480 8% Fixed Deposits (on 1.07.2010) 24,000
date from the following information :
Proceeds of Tournaments 4,640 Tournament Expenses 4,040
Receipts and Payments Account
Cash in hand 5,200
For the year ended 31.12.2010
56,900 56,900
 (9) (10)

01.01.2010 31.12.2010
CA. Naresh Aggarwal’s (a) Stock of Medicines 1,000 400
ACADEMY of ACCOUNTS (b)
(c)
Advance Subscription
Subscription Due
1,600
2,000
1,400
2,400
Accounting • Costing • Taxation • Financial Management (d) Equipments 30,000 28,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org (e) Buildings 40,000 36,000
[Surplus: Rs.5,400; Capital Fund: Rs.1,21,400; Balance Sheet: Rs.1,28,200]

Receipts Rs. Payments Rs. Q-16: From the following Receipts & Payments A/c and the information supplied,
To Balance b/d 5,000 By Rent 9,500 prepare an Income & Expenditure Account and the Balance Sheet as on that date:
To Subscription 18,500 By Doctor’s Salaries 4,700 Receipts and Payments Account
To Sale of Equipments 2,000 By Medicines 1,200 For the year ended 31.12.2010
To Donations 3,500 By Sundry Expenses 700 Receipts Rs. Payments Rs.
To Interest on Investments 2,000 By Equipments 4,200
(10% for full year) By Balance c/d 10,700 To Balance b/d 700 By Salaries 2,800
To Subscriptions: By General Expenses 600
31,000 31,000 2009 400 By Electric Charges 400

AoA
Other Information: 2010 2,000 By Books 1,000
01.01.2010 31.12.2010 2011 500 2,900 By Newspapers 800
(a) Subscription Due 1,000 1,200 To Rent received 1,400 By Balance 400
(b) Advance Subscription 800 700 To Profit from Entertainment 800
(c) Stock of Medicines 500 200 To Sales of Newspapers 200
(d) Equipments 15,000 14,000 6,000 6,000
(e) Buildings 20,000 18,000
[Surplus: Rs.2,700; Capital Fund: Rs.60,700; Balance Sheet: Rs.64,100] (a) The club has 100 members each paying an annual subscription of Rs.25,
subscription outstanding on 31st December, 2009 were Rs.600.
Q-15 : Prepare an Income & Expenditure Account and Balance Sheet as on that (b) On 31st December, 2010 salaries outstanding amounted to Rs.200. Salaries paid
date from the following information : in 2010 included Rs.600 for the year 2009.
Receipts and Payments Account (c) On 1.1.2010, the club owned Building valued at Rs.20,000; Furniture Rs.2,000
For the year ended 31.12.2010 and books Rs.2,000.
(d) Provide depreciation on Furniture at 10% p.a.
Receipts Rs. Payments Rs. [Surplus: Rs.500; Capital Fund: Rs.24,700; Balance Sheet: Rs.25,900]
To Balance b/d 10,000 By Rent 19,000
Q-17*: Prepare an Income & Expenditure Account and Balance Sheet as on that
To Interest on Investments 4,000 By Equipments 8,400
date from the following information :
(10% for full year) By Furniture 10,000
Receipts and Payments Account
To Subscription 37,000 By Doctor’s Salaries 9,400
For the year ended 31.12.2010
To Sale of Equipments 4,000 By Medicines 2,400
To Donations 7,000 By Sundry Expenses 1,400 Receipts Rs. Payments Rs.
By Balance c/d 11,400
To Balance b/d 10,000 By Rent 19,000
62,000 62,000 To Subscription : By Salaries :
2009 4,000 2009 1,400
Other Information:
2010 30,000 2010 7,200
2011 3,000 37,000 2011 800 9,400
 (11) (12)

(d) Provide depreciation on Building and Furniture by 5% and 10% respectively.

CA. Naresh Aggarwal’s [Surplus: Rs.2,500; Capital Fund: Rs.36,300; Balance Sheet: Rs.40,900]
ACADEMY of ACCOUNTS Q-19*: Prepare an Income & Expenditure Account and Balance Sheet as on that date
Accounting • Costing • Taxation • Financial Management from the following information :
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Receipts and Payments Account
For the year ended 31.12.2010
To Sale of Furniture 4,000 By Stationery 4,400 Receipts Rs. Payments Rs.
To Donations 3,000 By Sundry Expenses 1,400
To Balance b/d 1,000 By Salaries 4,800
To Government Grant 8,000 By Furniture Purchases 10,000
To Subscription : By General Expenses 1,200
By Balance c/d 17,800
2009 1,000 By Electric Charges 800
62,000 62,000 2010 4,000 By Books 400
2011 800 5,800 By Newspapers 1,000
(a) Outstanding and advance Subscription for year 2009 were Rs. 4,800 and Rs.1,200
To Sale of Old Furniture By Repairs 600
respectively. Outstanding for the current year are Rs.1,000.
(costing Rs 400) 240 By Postage 200
(b) Outstanding and advance Salaries in 2009 were Rs.2,000 and Rs.1,000
To Sundry Receipts 2,960 By Furniture 1,000
respectively . Outstanding for the current year are Rs.600.

AoA
To Profit from Entertainment 1,600 By Balance c/d 2,000
(c) On 31.12.2009 Club had Building of Rs.40,000 and Furniture of Rs.20,000
To Sale of Newspapers 400
(d) Provide depreciation on Building and Furniture by 5% and 10% respectively.
[Surplus: Rs.5,000; Capital Fund: Rs.72,600; Balance Sheet: Rs.81,800] 12,000 12,000

(a) The club has 100 members, each paying annual subscription of Rs.50. Rs.200
Q-18 : Prepare an Income & Expenditure Account and Balance Sheet as on that
are still in arrears for the year 2009.
date from the following information :
(b) On 31.12.2010 salaries outstanding amounted to Rs.400, salaries paid included
Receipts and Payments Account
Rs.400 for the year 2009.
For the year ended 31.12.2010
(c) On 1.1.2010, the club owned Land and Building valued at Rs.40,000, Furniture
Receipts Rs. Payments Rs. Rs.2,400 and Books Rs.2,000.
[Surplus: Rs.1,200; Capital Fund: Rs.46,200; Balance Sheet: Rs.48,600]
To Balance b/d 5,000 By Rent 9,500
To Subscription : By Salaries :
Q-20: Prepare an Income & Expenditure Account and Balance Sheet as on that
2009 2,000 2009 700
date from the following information :
2010 15,000 2010 3,600
Receipts and Payments Account
2011 1,500 18,500 2011 400 4,700
For the year ended 31.12.2010
To Sale of Furniture 2,000 By Stationery 2,200
To Donations 1,500 By Sundry Expenses 700 Receipts Rs. Payments Rs.
To Government Grant 4,000 By Furniture Purchases 5,000
To Balance b/d 3,000 By Salaries :
By Balance c/d 8,900
To Legacies 2,100 Arrear 1,000
31,000 31,000 To Grant for Building 2,500 Current 12,000
To Furniture 1,500 Advance 2,000 15,000
(a) Outstanding and advance Subscription for year 2009 were Rs.2,400 and Rs.600
(Book Value Rs. 1,800) By Newspapers 200
respectively. Outstanding for the current year are Rs.500.
To Subscription : By Rent :
(b) Outstanding and prepaid Salaries in 2009 were Rs.1,000 and Rs.500 respectively.
Arrear 900 Arrear 100
Outstanding for the current year are Rs.300.
Current 22,000 Current 2,400 2,500
(c) On 31.12.2009 Club had Building of Rs.20,000 and Furniture of Rs.10,000
Advance 1,000 23,900 By Furniture 4,200
 (13) (14)

(a) There are 250 members cash paying an annual subscription of Rs.10, and Rs.50
CA. Naresh Aggarwal’s as still in arrears for 2009-10.
ACADEMY of ACCOUNTS (b) Municipal taxes amounting to Rs.40 per annum have been paid upto 30.06.2011
and Rs.50 for salaries is outstanding.
Accounting • Costing • Taxation • Financial Management (c) Building stands in the books at Rs.5,000 and it is required to write off depreciation
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org at 5% p.a.
(d) 6% p.a. interest is accrued on Government bonds for 5 months.
[Surplus: Rs.1,975; Capital Fund: Rs.6,115; Balance Sheet: Rs.8,200]
To Entrance Fees 1,000 By Stationery 1,200
To Donations 1,500 By Sundry Expenses 700 Q-22: Prepare an Income & Expenditure Account and Balance Sheet as on that date
By Fixed Deposits 5,000 from the following information :
By Balance c/d 6,700 Receipts and Payments Account
For the year ended 31.12.2010
35,500 35,500
Receipts Rs. Payments Rs.
Other Information:
(a) Outstanding and advance Subscription for last year were Rs. 1,200 and Rs. 800 To Balance b/d 17,100 By Salaries 6,200
respectively. Outstanding of Current years were Rs. 400. To Subscription 13,000 By Upkeep of Ground 1,500

AoA
(b) Donations includes Grant for Building amounted to Rs. 500. (Including Rs.400 last year By Tax and Insurance 3,700
(c) Opening and Closing stock of Stationery were Rs. 200 and Rs. 300 respectively. and Rs.600 for the next year) By Audit Fees 1,700
(d) Opening balance of Land and Building; Computers and Furniture were of Rs. To Furniture 3,700 By Stationery 1,300
25,000; Rs. 15,000 and Rs. 5000 respectively. Depreciation is charged on them (Cost Rs. 4,000) By Furniture 2,500
at the rate of 10%, 30% and 20% respectively. To Tournament Fund 5,000 By Affiliation Fees 1,200
[Surplus: Rs.2,120; Capital Fund: Rs.47,500; Balance Sheet: Rs.53,620] To Sale of Grass 600 By Sports Equipments 8,000
To Sale of Old Newspapers 150 By Refreshments 1,700
Q-21: Given below is the Receipts and Payments Accounts of the a Club for the year To Lockers Rent 450 By Tournament Fund
ended 31.03.2011 : To Interest on Tournament Investments 5,000
Receipts and Payments Account Fund Investments 400 By Newspapers & Periodicals5,200
For the year ended 31.03.2011 By Balance c/d 2,400
Receipts Rs. Payments Rs. 40,400 40,400
To Balance b/d 1,025 By Salaries 600 Other Informations:
To Subscription By General Expenses 80 (a) The club had 150 members each required to pay Rs.100 p.a. for Subscription.
2009-10 40 By Entertainment Expenses 450 (b) During the year Salaries amounted to Rs. 900 were paid for year 2009 and Rs.
2010-11 2,050 By Electricity Charges 140 500 were arrear for year 2010.
2011-12 60 By Newspapers 150 (c) Opening and Closing stock of stationery were Rs. 300 and Rs. 500 respectively.
To Donations 540 By Municipal Expenses 50 (d) On 31.12.2009 Club had Building of Rs. 40,000; Equipments of Rs. 10,000;
To Proceeds of Entertainment 1,450 By Charity 850 Furniture of Rs. 20,000. Tournament Fund Investments Rs. 10,000 and
To Sale of waste paper 45 By Investment (Govt. Bonds) 2,000 Tournament Fund Rs. 10,000.
By Balance c/d 890 (e) Depreciation on Building is provided @5%; on Furniture @ 10% and on Equipments
5,210 5,210 @ 20%.
[Deficit: Rs.13,450; Capital Fund: Rs.86,900; Balance Sheet: Rs.89,950]
You are required to prepare the club’s Income and Expenditure Account for the year
ended 31.03.2011 and the Balance Sheet as on that date, after taking the following Q-23*: Prepare an Income & Expenditure Account and Balance Sheet as on that
information into account : date from the following information :
 (15) (16)

Receipts and Payments Account

CA. Naresh Aggarwal’s For the year ended 31.12.2010
ACADEMY of ACCOUNTS Receipts Rs. Payments Rs.
Accounting • Costing • Taxation • Financial Management To Balance b/d 5,000 By Postage & Telegram 1,500
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org To Subscription : By Salaries and Wages :
2009 500 2010 4,800
2010 18,000 2011 600 5,400
Receipts and Payments Account 2011 1,500 20,000 By Miscellaneous Expenses 700
For the year ended 31.12.2010 To Sale of Bonds 2,000 By Bonds and Debentures 2,200
Receipts Rs. Payments Rs. (Book Value Rs. 1,500) By Periodicals 800
To Donations 5,000 By Books 3,000
To Balance b/d 14,550 By Salaries 5,000 To Life Membership 1,100 By Balance c/d 19,500
To Subscription 25,600 By Upkeep of Ground 3,500
(Including Rs.600 last year By Tax and Insurance 3,600 33,100 33,100
and Rs.1,000 for the next year) By Audit Fees 2,400 Balance Sheet
To Furniture 5,200 By Stationery 4,200 As on 31.12.2009

AoA
(Cost Rs. 6,000) By Furniture 5,000
To Sports Fund 8,000 By Affiliation Fees 2,400 Liabilities Rs. Assets Rs.
To Sale of Waste 1,900 By Computer (01.07.2010) 15,000 Capital Fund 18,800 Cash 5,000
To Sale of Old Newspapers 450 By Refreshments 4,000 Advance Subscription 300 Furniture 6,500
To Ground Rent 4,800 By Sports Fund Investments 8,000 Sports Fund 4,000 Books 4,000
To Interest on Sports Fund By Newspapers & Periodicals5,200 Loan 2,000 Outstanding Subscriptions 700
Investments 1,500 By Balance c/d 3,700 Life Memberships 2,500 Buildings 10,000
62,000 62,000 Prepaid Wages 1,400

Other Informations: 27,600 27,600

(a) The club had 600 members each required to pay Rs.50 p.a. for Subscription. (a) Half of the donations are to be capitalised.
(b) During the year Salaries amounted to Rs. 1,200 were paid for year 2009 and Rs. (b) Provide depreciation on Books @ 20%; Furniture @ 10% and Building @ 5%.
1,500 were arrear for year 2010. [Surplus: Rs.9,550; Balance Sheet: Rs.41,950]
(c) Opening and Closing stock of stationery were Rs. 500 and Rs. 1,200 respectively.
(d) On 31.12.2009 Club had Land & Building of Rs. 60,000; Equipments of Rs. 25,000; Q-25 : Prepare an Income & Expenditure Account and Balance Sheet as on that
Furniture of Rs. 20,000. Sports Fund Investments Rs. 15,000 and Sports Fund date from the following information :
Rs. 15,000. Receipts and Payments Account
(e) Depreciation on Building is provided @5%; on Furniture @ 10% and on Equipments For the year ended 31.12.2010
@ 20% and on computer 30% p.a.
[Deficit: Rs.5,700; Capital Fund: Rs.1,19,450; Balance Sheet: Rs.1,40,750] Receipts Rs. Payments Rs.

To Balance b/d 20,000 By Stationery 6,000

Q-24: Prepare an Income & Expenditure Account and Balance Sheet as on that To Sale of Investments 8,000 By Investments 8,800
date from the following information : (Book Value Rs. 6,000) By Newspapers 2,400
To Subscription : By Salaries and Wages :
2009 2,000 2010 19,200
2010 72,000 2011 2,400 21,600
2011 6,000 80,000 By Miscellaneous Expenses 3,600
 (17) (18)

Balance Sheet
CA. Naresh Aggarwal’s
as at 31.12.2009
ACADEMY of ACCOUNTS Liabilities Rs. Assets Rs.
Accounting • Costing • Taxation • Financial Management Capital Fund 67,240 Buildings 60,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Advance Subscriptions 1,200 Outstanding Subscription 760
Outstanding Expenses 2,800 Outstanding Lockers Rent 480
To Legacies 20,000 By Books 12,000 Loan 10,000 Cash 20,000
To Life Membership 4,400 By Balance c/d 78,000
81,240 81,240
1,32,400 1,32,400
[Surplus: Rs.7,120; Balance Sheet: Rs.85,060]
Balance Sheet
As on 31.12.2009 Q-27*: The following is the Receipts & Payments Account of the Raja Club for the
year ending 31.12.2010 :
Liabilities Rs. Assets Rs.
Receipts and Payments Account
Building Fund 16,000 Books 16,000 For the year ended 31.12.2010
Loan 8,000 Outstanding Subscriptions 2,800

AoA
Receipts Rs. Payments Rs.
Life Memberships 10,000 Buildings 40,000
Capital Fund 75,200 Cash 20,000 To Balance b/d 300 By Rent 5,200
.
Advance Subscription 1,200 Furniture 26,000 To Entrance Fees 550 By Stationery, Expenses etc.3,074
Prepaid Salaries 5,600 To Subscriptions: By Wages 5,330
2009 200 By Billiards Table 3,900
1,10,400 1,10,400
2010 16,900 By Repairs and Renewals 800
Other Information: 2011 300 17,400 By Interest 1,500
(a) Half of the Legacies are to be capitalised. To Locker Rents 500 By Balance c/d 2,396
(b) Provide depreciation on Books @ 20%; Furniture @ 10% and Building @ 5%. To Special Subscriptions for
[Surplus: Rs.38,200; Balance Sheet: Rs.1,67,800] Governor’s party 3,450
22,200 22,200
Q-26: Prepare Income & Expenditure Account and a Balance Sheet from the following
Receipts & Payments Account and the Balance Sheet. Additional Information :
Receipts and Payments Account Locker rents, Rs.60, related to 2009 and Rs 90 is still owing; Rent Rs.1,300 pertained
For the year ended 31.12.2010 to 2009 and Rs.1,300 is still owing; Stationery expenses etc. Rs.312 related to 2009
and still owing Rs.364; Subscriptions unpaid for 2010 Rs.868; Special Subscriptions
Receipts Rs. Payments Rs.
for Governor’s party outstanding Rs.550.
To Balance b/d 20,000 By Expenses : The club owned sports materials of the value Rs.16,000 on 01.01.2010. This was
To Locker Rent 1,400 2009 2,400 valued at Rs.13,500 on 31.12.2010. The club took a loan of Rs.20,000 in 2009.
To Subscriptions 2010 4,000 6,400 Treat Entrance Fees as of revenue nature.
2009 400 By Land 8,000 You are required to prepare the Income & Expenditure Account for 2010 and Balance
2010 4,200 By Interest 800 Sheet as at that date.
2011 300 8,900 By Misc. Expenses 4,000 [Surplus: Rs.392; Capital Fund (Deficiency): Rs.5,052; Balance Sheet: Rs.25,964]
To Entrance Fees 1,600 By Balance c/d 16,700
To Miscellaneous Incomes 8,000 Q-28: The following is the Receipts and Payments Account of Star Club for the year
ended 31st December, 2010 :
35,900 35,900
 (19) (20)

Receipts and Payments Account

CA. Naresh Aggarwal’s For the year ended 31.12.2010
ACADEMY of ACCOUNTS Receipts Rs. Payments Rs.
Accounting • Costing • Taxation • Financial Management To Opening Balances: By Crockery Purchased 2,650
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Cash 3,520 By Maintenance 6,820
Bank 27,380 By Match Expenses 13,240
6% Fixed Deposit 30,000 By Salaries 11,000
Receipts and Payments Account To Subscriptions (including By Conveyance 820
For the year ended 31.12.2010 Rs. 6,000 for 2009) 40,000 By Upkeep of Lawn 4,240
To Entrance Fees 2,750 By Postage Stamps 1,050
Receipts Rs. Payments Rs.
To Donations 5,010 By Cricket Goods 9,720
Cash in Hand (01.01.2010) 15,000 Bank Overdraft (01.01.2010)31,000 To Interest on Fixed Deposits 900 By Sundry Expenses 2,000
Subscriptions Investment in Securities 30,000 To Tournament Fund 20,000 By Investments 5,700
2009 3,000 Furniture 14,500 To Sale of Crockery 2,000 By Tournament Expenses 18,800
2010 1,62,000 Salaries 62,000 (Book Value Rs.1,200) By Closing Balances:
2011 1,500 1,66,500 Stationery and Printing 8,900 Cash 2,200

AoA
Income from Entertainments 2,900 Miscellaneous Expenses 14,200 Bank 23,320
Entrance fees 6,700 Balance on 31.12.2010 : 6% Fixed Deposits 30,000
Interest on Securities 4,800 Cash in Hand 5,500
1,31,560 1,31,560
Sale proceed of old chairs 1,200 Cash at Bank 31,000 36,500
Other Information:
1,97,100 1,97,100
(a) Monthly Salary is Rs. 1,000
Prepare Income and Expenditure Account of the Club for the year ended 31st December, (b) The value of unused postage stamps is as follows:
2010 and a Balance Sheet as at that date having due regard to the following additional On 31.12.2009 Rs. 750; On 31.12.2010 Rs. 900.
information : (c) Stock of Cricket Equipments is as follows:
(a) The Club has 1800 members, each paying an annual subscription of Rs.100, On 31.12.2009 Rs. 3,210; On 31.12.2010 Rs. 2,800.
Subscription amounting to Rs.900 are in arrears in respect of the year, 2009. (d) Arrears of subscription:
(b) Stock of stationery on 31st December, 2009 was Rs.1,250 and at 31st December, On 31.12.2009 Rs. 6,600; On 31.12.2010 Rs. 8,000.
2010 Rs.870. (e) Donations and Entrance Fees are not to be capitalised.
(c) Entrance fees are to be capitalised. [Surplus Rs.1,610; Capital Fund: Rs.71,460; Balance Sheet: Rs.75,270]
(d) Salary of Rs.5,500 for December 2010 is outstanding. Expenses occurring at
31st December, 2009 amounted to Rs.1,320. the Club has paid Rs.5,500 in the Q-30*: Compute the income from subscription for the year 2010 from the following
year 2009 towards telephone charges of which Rs.1,250 relate to 2010. particulars of Janta Club :
(e) As on 31st December, 2009 Premises stand in the books at Rs.2,45,000 and 01.01.2010 31.12.2010
Investments at Rs.65,000. Depreciate Premises and Furniture by 5%. Outstanding Subscription 20,000 12,000
[Surplus: Rs.85,015; Capital Fund: Rs.2,99,080; Balance Sheet: Rs.3,97,795] Advance Subscription 5,000 7,000
Subscription received during the year 2010 was Rs.1,60,000.
Q-29*: Prepare an Income & Expenditure Account and Balance Sheet as on that [Rs.1,50,000]
date from the following information :
Q-31: How will you deal with the following items while preparing the final accounts for
the year 2010
 (21) (22)

(c) Subscription outstanding as at 31.12.2009: Rs.12,000

CA. Naresh Aggarwal’s (d) Subscription outstanding for the year 2010: Rs.7,000
ACADEMY of ACCOUNTS [Rs.75,000]

Accounting • Costing • Taxation • Financial Management Q-36: Prepare the Subscription Account from the following items for the year ending
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org on December 31, 2010 :
(a) Subscription in arrears on 31.12.2010: Rs.1,000
31.12.2009 31.12.2010 (b) Subscription received in advance on 31.12.2010: Rs.2,400
Outstanding Locker Rent Rs.400 Rs.600 (c) Total Subscription received during 2010: Rs.50,800
Advance Locker Rent Rs.300 Rs.250 (including Rs.800 for 2009; Rs.1,800 for 2011 and Rs.600 for 2012)
Lockers Rent received during the year 2010: Rs.5,200 (d) Subscription outstanding for 2010 Rs.800
[Rs.5,450] [Rs.48,400]

Q-32: Calculate subscriptions for the year 2010 to be shown in the books of a Recreation Q-37*: From the following extracts of Receipts & Payments Account and the additional
Club for the year ending 31.12.2010 information, you are required to calculate the Income from Subscriptions for the year
Rs. ending 31.12.2010 and show them in the Income & Expenditure Account, and the
Subscriptions received during the year 2010 20,000 Balance Sheet of a Club.

AoA
Subscriptions received in Advance in 2010 3,000 An Extract of Receipts and Payments Account
Subscriptions received in Advance in 2009 2,000 for the year ending on 31.12.2010
Subscriptions outstanding at the end of 2010 4,000 Receipts Rs. Payments Rs.
Subscriptions outstanding at the beginning of the year 2010 2,000
[Rs.21,000] To Subscription:
2009 1,000
Q-33: In 2010, the subscriptions received by Suvidha Library were Rs.60,000. These 2010 4,000
subscriptions include Rs.1,200 received for 2009 and Rs.1,600 received for 2011. On 2011 800 5,800
31.12.2010, subscriptions due but not received were Rs.800. What amount of
subscription should be credited to the Income and expenditure Account for the year The club has 100 members, each paying annual subscription of Rs.50. Subscriptions
ending 31.12.2010 outstanding on 31.12.2010 were Rs.1,200.
[Rs.58,000] [Rs.5,000]

Q-34: The Sports Club was founded on April 1, 2010 with 150 members. The annual Q-38: From the following extracts of Receipts & Payments Account and the additional
subscription per member being Rs.100. By the end of that year, two members had not information, you are required to calculate the Income from Subscriptions for the year
paid their subscription but nine had paid for a year in advance. ending 31.03.2011 and show them in the Income & Expenditure Account, and the
Prepare the Club’s Subscription A/c as it would appear after the closing of Income & Balance Sheet of a Club.
Expenditure at March 31, 2011. An Extract of Receipts and Payments Account
[Income: Rs.15,000; Receipt: Rs.15,700] for the year ending on 31.03.2011
Receipts Rs. Payments Rs.
Q-35*: How will you deal with the following case while preparing the final accounts for
the year 2010 : To Subscription:
(a) Subscription received during 2010 : 2009-10 5,000
for 2009: Rs.10,000; for 2010: Rs.60,000; for 2011: Rs.9,000 2010-11 35,000
(b) Subscription received in advance as at 31.12.2009: Rs.8,000 2011-12 2,000 42,000

(a) Subscription outstanding on 31.03.2010 Rs.6,000

 (23) (24)
Q-43: On the basis of the following information calculate the amount of stationery to
be shown in Income and Expenditure Account for the year ended 31.03.2011
CA. Naresh Aggarwal’s Rs.
ACADEMY of ACCOUNTS Amount paid for stationery during the year 2010-11
Stock of stationery on 01.04.2010
2,080
300
Accounting • Costing • Taxation • Financial Management Creditors of stationery on 01.04.2010 200
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Stocks of stationery on 31.03.2011 150
Creditors of stationery on 31.03.2011 130
(b) Subscription outstanding on 31.03.2011 Rs.10,000 [Rs.2,160]
(c) Subscription received in advance on 31.03.2010 Rs.3,000
[Rs.47,000] Q-44: Calculate what amount will be posted to Income & Expenditure Account for the
year ending on 31st December 2010.
Q-39: Salaries paid by a Club during 2010 amounted to Rs.18,000. Information about 31.12.2009 31.12.2010
prepaid and unpaid is given below. How will this item appear in the Income and Stock of Stationery 350 50
Expenditure Account for 31.12.2010. Creditors for Stationery 200 130
01.01.2010 31.12.2010 Advances paid for Stationery 20 30
Unpaid Salary 2,500 1,800 Amount paid for stationery during the year 2010 was Rs.2,080.
Prepaid Salary 1,200 2,000 [Rs.2,300]

AoA
[Rs.16,500]
Q-45*: What amount to be shown in the Income and Expenditure Account in the
Q-40: During 2010, the miscellaneous expenses actually paid by a Club were Rs.4,500. books of a club for the year 31.12.2010
Find out the actual expenses chargeable to Income and Expenditure Account for the Rs.
year 31.12.2010, if prepaid and outstanding miscellaneous expenses are as under : Payments towards stationery during the year 2010 21,700
31.12.2009 31.12.2010 Stock of Stationery on 31.12.2009 4,200
Prepaid Expenses Rs.200 Rs.300 Stock of Stationery on 31.12.2010 1,000
Outstanding Expenses Rs.500 Rs.900 Unpaid as on 31.12.2009 400
[Rs.4,800] Unpaid as on 31.12.2010 1,800
Prepaid as on 31.12.2009 900
Q-41: How will the following appear in the final accounts of a sports Club? Prepaid as on 31.12.2010 1,700
Rs. [Rs.25,500]
Stock of sports materials on 1.1.2010 3,000
Sports materials purchased during 2010 18,400
Stock of sports materials on 31.12.2010 1,400 Theoretical Questions
[Rs.20,000]

Q-42: On the basis of the following information, calculate the amount that will be Q-1: Distinguish between a Receipts & Payment Account and Cash Book.
shown against the item ‘Sports Material Used’ in the Income and Expenditure Account Q-2: Distinguish between an Income & Expenditure Account and Profit & Loss
of a sports club for the year ended 31st March 2011 : Account.
Rs.
Amount paid for Sports material during the year ended 31.03.201124,600 Q-3: Distinguish between a Receipts & Payment Account and Income & Expenditure
Stock of Sports material on 01.04.2010 8,000 Account.
Creditors for Sports Material on 01.04.2010 4,000 Q-4: How would you treat Entrance Fees in accounts ?
Stock of Sports Material on 31.03.2011 2,600
Creditors for Sports Material on 31.03.2011 1,000
[Rs.27,000] ••••••••••••••••••••••
 (25)

CA. Naresh Aggarwal’s

ACADEMY of ACCOUNTS
Treatment
Accounting • Costing of •any
• Taxation Expense
Financial / Consumable
Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Income & Balance
Expenditure A/c Sheet

1. Amount given in payment (Cr.) of Receipts & Payments A/c Dr. ------

2. Outstanding / Due / Unpaid / Accrued of Current Year + Liabilities (Closing)

3. Outstanding / Due / Unpaid / Accrued of Last Year - Liabilities (Opening)

4. Advance / Prepaid / Unexpired of Current Year - Assets (Closing)

AoA
5. Advance / Prepaid / Unexpired of Last Year + Assets (Opening)

6. Opening Stock / Stock at the beginning + Assets (Opening)

7. Closing Stock / Stock at the end - Assets (Closing)

Treatment of any Income

Income & Balance

Expenditure A/c Sheet

1. Amount given in Receipts (Dr.) of Receipts & Payments A/c Cr. ------

2. Outstanding / Due / Accrued of Current Year + Assets (Closing)

3. Outstanding / Due / Accrued of Last Year - Assets (Opening)

4. Advance / Unearned of Current Year - Liabilities (Closing)