NADT

Accountancy
Home Test- 2
MAX MARKS: 100; TIME: 180 Minutes

Marks
Q.1 Fill in the blanks (one mark each) (5)

1. There are two methods of Amalgamations Purchase Method & Pooling of Interest

Method/Merger Method.

2. Companies are required to prepare balance sheet as per format given under Schedule III

of Companies Act 2013.

3. Deferred Tax is not created on Permanent difference.

4. ICDS is applicable on Income Charged under the Head Profits & Gains Under Business

& Profession & Income from Other Sources.

5. Three fundamental accounting assumptions recognized by ICDS are Going Concern,

Accrual & Consistency.

Q.2 True & False with reasons (two marks each ) (12)
1. Dividend is a charge against the profits of the company.

False: Its appropriation of profits

2. Profit prior to incorporation is credited to General Reserve

True: Profit prior to incorporation is capital profits and hence credited to general reserve.

3. Expenses on Issue of Debentures are Finance Cost.

True: Since debentures are loans the expenses related to it is finance cost

4. AS 14 on Amalgamation tells about the accounting entries in the books of Transferee.

True: The entries related to amalgamation in the books of transferee company is only covered in
AS 14. The entries in the books of transferor company is not covered.

5. Note 1 of Balance Sheet of a Company form of Entity is on Corporate Information

True: as per Schedule III of Companies Act 2013 Note 1 is corporate information

6. Reserves and surplus having a Debit balance is shown on the asset side of the balance sheet.

False: Reserves & surplus having a debit balance is shown in the liability side as a negative
figure.

Q.3 Short Question (3 marks each) (Any 3) ( 9)

1. What is the formula to calculate the figure of Capital Employed & Operating profits?

Operating profits:

Profit before Interest (excluding interest on long term loans) & Tax

Capital Employed:

Share capital + Reserve & Surplus+ Long Term Loans- Non Operating Assets

Fictitious Asset

2. Give the functional classification of ratios.

Profitability ratios
Turnover/ activity ratio
Financial / solvency ratios
Market test ratios

3. What are the five conditions of Amalgamation in the Nature of Merger?

Amalgamation in the nature of merger is an amalgamation which satisfies all the

following conditions.

(i) All the assets and liabilities of the transferor company become, after amalgamation,

the assets and liabilities of the transferee company.

 (ii) Shareholders holding not less than 90% of the face value of the equity shares of the

transferor company (other than the equity shares already held therein, immediately before

the amalgamation, by the transferee company or its subsidiaries or their nominees)

become equity shareholders of the transferee company by virtue of the amalgamation.

(iii) The consideration for the amalgamation receivable by those equity shareholders of

the transferor company who agree to become equity shareholders of the transferee

company is discharged by the transferee company wholly by the issue of equity shares in

the transferee company, except that cash may be paid in respect of any fractional shares.

(iv) The business of the transferor company is intended to be carried on, after the

amalgamation, by the transferee company.

(v) No adjustment is intended to be made to the book values of the assets and liabilities

of the transferor company when they are incorporated in the financial statements of the

transferee company except to ensure uniformity of accounting policies.

4. Give the journal entries for VAT (Purchase, Sale & Payment of Tax).

Purchase:

Purchase A/C .Dr

Input VAT Credit A/c Dr

To Creditor/ Cash / Bank A/c

Sales:

Debtor/ Cash/ Bank A/c .Dr

To Sales A/c

To Output VAT A/c

 Payment Entry:

Output VAT A/cDr

To Input VAT A/c

To Bank/ Cash A/c

Q.4 Group the following ledger under suitable group as per Sch III (10)

1. Debenture Redemption Reserve 2. Dividend Distribution Tax

(Reserves & Surplus) (Deduction from Reserves & Surplus)
3. Preference Shares 4. Audit Fees
(Shareholders Fund) (Other Expenses)
5. Bonus paid to Employees 6. Prepaid Expenses
(Employee benefit Cost) (Current Assets)
7. Goodwill 8. Interest accrued and due on loans borrowed
(Fixed Assets, Intangible Assets) Current Liability
9. Remuneration to Managing Director 10. Remuneration to Non- Executive Director
(Employee benefit cost) (Other Expenses)

Q.5 Mr. Prakash keeps his accounts on single entry system. He has given
following information about his assets and liabilities. (20)
Particulars On 31.3.2012 On 31.3.2013
Creditors 55,200 58,500
Cash at Bank 600 1500
Bills Payable 26,400 28,200
Bills Receivable 16,200 18,300
Debtors 45,600 56,000
Stock In Trade 31,000 47,300
Machinery 66,200 78,000
Computer 18,000 17,000

During the year, Prakash brought in additional Rs.7,500 cash in business. He withdrew goods of
Rs. 2,100 and cash of Rs.7,200 for his personal use. Interest on opening capital is to be given at
5% and interest on drawing is to be charged at 10%

Prepare statement of profit or loss for the year ended 31-03-2013.

Answer
 Adobe Acrobat
PDFXML Document

Q.6 Parshav Pvt Ltd. was incorporated on 31st July, 2013. The company bought the
business of M/S Mahaveer and Co. with effect from 1st April 2013. From the following
figures relating to the year ending 31st March. 2014, find out the profits available for
dividends.
(15)
SR. NO. PARTICULARS AMOUNT

1. Sales 3,00,000

2. Purchases 1,50,000

3. Rent 9,000

4. Salaries 15,000

5. Directors Fees 8,000

6. Depreciation 14,000

7. General Expenses 18,000

8. Advertising 8,000

9. Stationary Expenses 6,600

10. Cash Discounts 7,500

11. Trade Discount 10,000

12. Preliminary Expenses 7,500

13. Partners Remuneration 15,000

14. Interest on Loans Received 50,000

PARTICULARS TOTAL BASIS PRE` POST

Direct Income
Sales 1:2 1,00,000 2,00,000
3,00,000
Direct Expenses
Purchases 1:2 50,000 1,00,000
1,50,000
Trade Discount 1:2 3,333 6,667
10,000
Gross Profit (1) 1,40,000 46,667 93,333
Indirect Expenses
Rent 1:2 3,000 6,000
9,000
Salaries 1:2 5,000 10,000
15,000
Directors Fees post 2,667 5,333
8,000
Depreciation 1:2 4,667 9,333
14,000
General Expenses 1:2 6,000 12,000
18,000
Advertising 1:2 2,667 5,333
8,000
Stationary Expenses 1:2 2,200 4,400
6,600
Cash Discounts 1:2 2,500 5,000
7,500
Preliminary Expenses post - 7,500
7,500
Partners Remuneration pre - 15,000
15,000
Subtotal (2) 1,08,600 28,700 79,900
Indirect Income
Interest received on loans 1:2 16,667 33,333
50,000
Net profit (1-2+1) 81,400 34,633 46,767

Since there is no details given about the sales for the different period its assumed that the tota sales is
spread evenly throughtout the year and the time ratio and the sales ratio is same
Hence Time Ratio and Sales Ratio is 1:2

Profits available for distribution as dividend is Rs.46,767/-

Q.7 Give a detailed format of Profit & Loss Account as per Schedule III of
Companies Act (10)
Refer PDF

Q.8 Give rectification entries for the following errors (9)

1. An amount of Rs.200 withdrawn by owner for personal use was debited to trade

expenses. Purchase of goods of Rs.300 from Nathan was wrongly entered in sales book.

2. A credit sale of Rs.100 to Santhanam was wrongly passed through purchase book.

3. Rs. 150 received from Malhotra was credited to Mehrotra.

4. Rs.375 paid as salary to cashier Dhawan was debited to his personal A/c.
 5. A bill of Rs. 2,750 for extension of building was debited to building repairs A/c

6. Goods of Rs.500 returned by Akashdeep were taken into stock, but returns were not

posted.

7. Old furniture sold for Rs. 200 to Sethi was recorded in sales book.

8. Amount of Rs.80 received as interest was credited to commission.

9. Cash deposited in bank Rs.2000/- wrongly debited to cash Account bank has been given

correct effect.

Adobe Acrobat
PDFXML Document

Q.9 Following is the extract of trial balance of XYZ Ltd as at 31st March 2016. (10)

Particulars Amount (Dr) Amount (Cr)

Advance Tax Paid 50,000 -

Mat Credit Entitlement 25,000 -

Tax Deducted at Source - 15,000

Tax Deducted at Source 25,000 -

Income Tax of Earlier Years 15,000

a. Income Tax for the Current Year as per Income Tax Provisions is Rs.1,50,000/-.
b. Income Tax on Book Profits as per MAT Provision is Rs.1,30,000/-
c. Show the journal entries for booking of tax expense, utilizing the input credit of TDS,
Advance Tax and MAT to the extent available and the payment entry for balance tax
liability

You are even required to prepare the ledger accounts of Tax Expense, TDS, Advance Tax, MAT