-: Preface: -

We are delighted to apprise you that CBSE OTQ

Orientation Workshop was successfully conducted at SRN
International School with the objective to enhance the skill
of teachers and equip them with all kind of challenges. The
mentors were guided to prepare Objective Type Question
which comprise of Multiple Choice Questions, Multiple
Response Type, Matching the following based questions,
Fill in the blanks, Ranking questions, Sequencing questions
and Reason Assertion type etc.
The success of the workshop was due to the valuable
participation of the 50 teachers from all over India.
Once again, we would like to express our gratitude to
Hon’ble Chairperson, CBSE Smt. Anita Karwal for
bestowing us this golden opportunity.

Resource Persons:
1. Mrs. Usha Sharma - Principal
(SRN International School, Jaipur)
2. Mr. Gaurav Palia - PGT -Commerce
(DAV Centenary Public School, New Delhi)
 -: Participants:-

S.No. Name of Participants School Name

1 Sanjay Kumar Gulabi Allenhouse Public School Khalasi Lines Kanpur,UP
2 Vasim Mohammed AVS Public Sr. Sec. School
3 Nidhi Mathur B.V.B. Vidhashram K.M, Munshi Marg, Jaipur
4 JiteshGarg Cambridge Court High School, Jaipur
5 Ranjeet Singh Bhati Central Academy, C.H.B. Jodhpur
6 Brajesh Jee Sinha DAV Public School,Gandhi Nagar
7 Jitesh Mehandiratta Delhi Public International School, Bikaner
8 Prevendra Kumar Jha Delhi Public School, Udaipur
9 ShyamaRathod Emmanuel Mission Sr.Sec. School, Sirohi
10 Vibha Choudhary Green Valley Public School, Bhilwara
11 Archana Bansal Jaipur School
12 Gaurav Takkar Jaipuria Vidyalaya, Jaipur
13 Vijay Kumar Agarwal Jayshree Periwal High School, Jaipur
14 Nitesh Shah Kapil Gyan Peeth, Jaipur
15 Rimple Nayyar Maharaja Sawai Bhawani Singh School, Jaipur
16 RuchiSogani Mahaveer Public School
17 Vivek Kumar Goyal Maheshwari Girls Public School
18 Rohit Khandelwal MDVM (PARLE) School
19 Ragini Nair MGD Girls School
20 Vishal Bhargava MPS International School, Jaipur
21 Manju Ghai MPS, Pratap Nagar
22 Dipti Ganatra Nand Vidya Niketan School, Jamnagar
23 Priyanka Jain Neerja Modi School, Jaipur
24 Kalpesh Nagar New Look Sr. Sec. School Lodha, Banswara
25 Peeyush Agarwal Oxford International Academy ,Vaishali Nagar, Jaipur
S.No. Name of Participants School Name
26 Arpit Agarwal Rabindranath World School
27 Shweta Pathak S.J. Public School Janta Colony, Jaipur
28 Naman Sharma S.V. Public School, Adarsh Nagar, Jaipur
29 Kank Goyal Saint Anselm Pink City School, Jaipur
30 Pramod Dalmia Saint Pual High School, Indore
31 Dr. DiptiYadav Saint Soldier Public School, Jaipur
32 SudeepSamdani Sangam School Of Excellence
33 Ashok Sharma Sanskar School, Jaipur
34 Neelam Bafna Seedling Public School, Jaipur
35 Gurnish Kaur Shanti Asiatic School, Jaipur
36 Deepak Kumar Sneh Public School Muhana, Jaipur
37 VeenuOberoi Springdales School, Jaipur
38 Dinesh Manghani SPS, Jagatpura, Jaipur
39 Bhupendra Kriplani SRN International School, Jaipur
40 Anju Behl St. Angela Sophia Sr. Sec. School, Jaipur
41 Ismita Bhati St. Anselm Sr. Sec. School , Alwar
42 Vandana Harwani St. Anselm Sr. Sec. School,MNS, Jaipur
43 Sunisha Bhutani St. Edmund’s School, Jawahar Nagar ,Jaipur
44 Amarjeet Singh St. Edmund’s School, Malviya Nagar ,Jaipur
45 Garima Sharma St. Stephen’s Sr. Sec. School, Ajmer
46 Lalita Sharma St. Xavier’s School, Behror
47 Shilpi Sharma Subodh Public School ,Near Airport, Jaipur
48 Pradeep Kumar Gupta Subodh Public School, Rambagh Crossing Jaipur
49 Saurabh Khatri Tagore International School, Mansarovar, Jaipur
50 Akshat Kumar Sharma Vadanta International School

“Education is not preparation for life;

education is life itself’’
 XII –Accountancy
Objective Type Question Bank
Index/Contents

Page No.

1. Accounting for Partnership Firms – Fundamentals Pg. 2 to 14

2. (A) Change in Profit Sharing Ratio among the Existing Partners Pg. 15 to 31

(B) Admission of a Partner

3. Retirement or Death of a Partner Pg. 32 to 42

4. Dissolution of a Partnership Firm Pg. 43 to 57

5. Financial Statement of Not-for-Profit Organizations Pg. 58 to 72

6. Company Accounts – Issue of Shares Pg. 73 to 88

7. Company Accounts Pg. 89 to 107

(A) Issue of Debentures

(B) Redemption of Debentures

8. (A) Financial Statement of Companies Pg. 108 to 123

(B) Financial Statement Analysis

(C) Tools for Financial Analysis

(D) Common Size Statements

9. Accounting Ratios Pg. 124 to 133

10. Cash Flow Statement Pg. 134 to 146

Page 1 of 146
 Objective Type Question Bank

UNIT – 1 Accounting for Partnership Firms – Fundamentals

Typology of Questions
R – Remembering

U- Understanding

A – Application

A&E- Analysis & Evaluation

Fill in the blanks :

Remembering
1. Interest on loan taken by a partner is recorded on___________ of Profit and Loss Account.
[ Credit side ]
2. Interest on Capital are under the Fixed Capital Account method is credited to ___________.
[ Partners Current A/c ]
3. In the absence of partnership deed rate of interest on partner loan will be_________.
[ 6% p. a. ]
4. If drawings of equal amount are made in the beginning of every month for 9 month ending 31 st
March, then interest on drawing will be calculated for an average period for _________Months.
[5]
5. The maximum numbers of partners in case of limited liability partnership is __________.
[ Unlimited ]
6. In case of guarantee of minimum profit to a partner deficiency of guaranteed partner is from shared
by remaining partner in ____________. [ Agreed Ratio ]
7. If partner’s capital is fixed interest on drawing will be recorded on __________.
[ Partner’s Current A/c ]
8. Profit and Losses are to be shared in __________ irrespective of their capital contribution.
[ Agreed Ratio ]
9. Interest at the rate of_______ is to be allowed on a partner’s loan to the firm.[ 6% p. a. ]
10. In the absence of the date of withdrawal, interest should be charged for __________ month on the
whole amount. [ Six ]
11. Manager’s commission is a ___________ against profits. [ charge ]
12. Interest on partner’s loan is not credited to the partner’s ________. [ capital ]
13. Goodwill is an __________ assets. [ Intangible ]

Understanding
14. Under __________ method the goodwill can be calculated by deducting the actual capital
employed from the capitalized value of the average profits.

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 [ Capitalization of average Profits ]
15. Under weighted average method it is considered to be better to give a _________ Weightage to
the profit to the recent years. [Highest ]
16. The person who purchases a running business of the firm must pay in the form of _________ a
sum which is equal to the profits he is likely to receive for the first few years.
[Goodwill ]
17. Super profit is the excess of __________ over the normal profits. [ Actual ]

Application
18. Following two main steps are involved in valuing the goodwill under the __________ Method :

1. Calculate super profit

2. Multiply super profit X number of years purchase [Super Profit ]

19. If average capital employed in a firm is Rs. 5,00,000, actual profit is Rs. 70,000 and normal rate of
return is 10%, then super profit is: ___________. [ 20,000 ]
20. If Drawings are made at the beginning of each month , the interest on drawing is calculated for
_______ months. ( 6.5)

Analysis & Evaluation

21. A and B are Partners .A drew Rs 32,000 .If the rate of Interest on Drawing is 12% per annum then
______ will amount of interest on drawing . ( Rs 1920 )
22. A drew Rs 50,000 during the year. If the rate of Interest on Drawing is 10% then _____ will be the
amount of Interest on Drawing . ( Rs 5,000. )
23. If average capital employed in a firm is Rs 12,00,000 , actual profit is Rs 1,50,000 and Normal rate
of return is 10% per annum . The amount of super profit will be ______ ( Rs 30,000 ).
24. The Goodwill of firm Rs 1,80,000 valued at three year's purchase of super profit . If capital
employed is Rs 2,00,000 and Normal rate of return is 10% per annum .The amount of average
profit will be ___________ .( Rs 80,000 )
25. Goodwill is an ________ asset , but not a _______ asset ( Intangible , Fictious )

True/False
Remembering
1. The nature of Profit and Loss Account is real. [F]
2. Registration of partnership is optional. [T]
3. A body corporate can be a partner in partnership firm. [F]
4. Sleeping partner are those who do not take part in conduct of the business. [F]

Page 3 of 146
Understanding
5. When the Partnership agreement is silent about the treatment of interest on capital then it will be
treated as charge on profit. [F]
6. Fixed capital always shows Debit balance. [F]
7. When a partnership firm gives loan to its partner then interest on loan will be debited in profit and
loss account. [T]
8. In case of fixed capital account method drawing out of capital is shown in partner current
account. [F]
9. Manager’s commission is shown in Profit and Loss Appropriation Account. [F]
10. Interest as a charge means interest on capital is to be allowed whether the firm has earned profit
or incurred loss. [T]
11. In the absence of partnership deed mutual relations are governed by the Indian partnership act
2013. [T]
12. Capital in the beginning is calculated by subtracting drawing and adding profit distributed.
[F]

Application
13. Drawing against capital means drawing by a partner out of his/her expected share in the profit of
the current year. [F]
14. The net profit of the firm is Rs. 8,00,000 partners are entitled to salary Rs. 1,00,000 p.a. if 10% of
divisible profit to be transferred to general reserve then amount will be Rs. 80,000. [F]
15. When new partner share of profit is more than the guaranteed profit then he is given only the
guaranteed amount of profit. [F]
16. Private assets of the partners cannot be used to meet the liability of the firm in case firm’s assets
are insufficient to meet its liabilities. [F]
17. It is compulsory to have a partnership agreement in written. [F]
18. Current account of partners are maintained under the fluctuating capital account. [F]

Analysis & Evaluation

19. Business of the firm can be conducted even by one partner. [T]
20. Unless otherwise specified, the partners have to share profits and losses in proportion of the
capital contributed by them. [F]
21. In the absence of Partnership deed, partners are entitled to interest on capital. [F]
22. Interest on loan advanced by a partner to the firm shall be paid even if there are losses in the
business. [T]
23. Under Fixed Capital method, any addition to capital will be shown in Partner’s Capital Account.
[T]
24. Liability of the partner is limited. [F]
25. Average profit method takes into consideration the future maintainable profits. [T]

Page 4 of 146
 MCQ
1. [ R ] Super profit can be calculated:-
a. Average profit – Normal profit
b. Net profit – Average profit
c. Capital Employed –Net Profit
d. Net Profit – Capital Employed [a]
2. [ R ] Which step is not involved in valuing the goodwill according to super profit method:-
a. Ascertain Average Profit
b. Ascertain Super Profit
c. Ascertain Normal Profit
d. Multiply Super Profit with Number of years purchased [a]
3. [ R ] Better quality of product will increase the sales and profit. Identify the factor:-
a. Capital Employed
b. Efficiency of Management
c. Location
d. Risk [b]
4. [ A ] If Average Profit = Rs. 1, 60,000

Actual Capital Employed = Rs. 5, 00,000

If rate of Normal Profit = 20%

What is the amount of Super Profit?

a. Rs. 60,000
b. Rs. 1,00,000
c. Rs. 20,000
d. Rs. 80,000 [a]
5. [ A&E] If Goodwill is Rs. 1,20,000, Average Profit is Rs. 60,000 Normal. Rate of Return is10% on
Capital Employed Rs. 4,80,000. Calculate capitalized value of the firm:-
a. Rs. 6,00,000
b. Rs. 5,00,000
c. Rs. 4,00,000
d. Rs. 7,00,000 [a]
6. [ A&E ] Tangible Assets of the firm are Rs. 14,00,000 and Outside liabilities are Rs. 4,00,000, Profit of
the firm is Rs. 1,50,000 and normal rate of return is 10% Calculate capital employed
a. Rs. 10,00,000
b. Rs. 1,00,000
c. Rs. 50,000
d. Rs. 20,000 [a]
7. [ A ] A business has earned Super profit of Rs. 1,00,000during the last few years and Normal rate of
returns in 10% Calculate goodwill
a. Rs. 10,00,000
b. Rs. 54,000

Page 5 of 146
 c. Rs. 20,000
d. Rs. 36,000 [a]
8. [ U ] Rani and Shyam is partner in a firm. They are entitled to interest on their capital but the net profit
was not sufficient for paying his interest, then the net profit will be disturbed among partner in
a. 1 : 2
b. Profit Sharing Ratio
c. Capital Ratio
d. Equally [c]
9. [ U ] Which one of the following items is recorded in the Profit and Loss appropriation account
a. Interest on Loan
b. Partner Salary
c. Rent paid to Partner’s
d. Managers Commission [b]
10. [ U] A,B and C were partner in a firm sharing Profit in the ratio of 3:2:1 during the year the firm earned
profit of Rs. 84,000.

Calculate the amount of Profit or Loss transferred to the capital A/c of B.

a. Loss Rs. 87,000

b. Profit Rs. 87,000
c. Profit Rs.28,000
d. Profit Rs.14,000 [c]
11. [U ] Closing entry for interest on loan allowed to partners
a. Interest on partner’s loan …Dr.
To Profit and Loss A/c
b. Interest on loan …Dr.
To Profit and Loss Appropriation A/c
c. Profit and Loss Appropriation A/c …Dr.
To interest on partner’s loan A/c
d. Profit and Loss Appropriation A/c …Dr.
To interest on loan A/c [c]
12. [ R ] Salary to a partner under fixed capital account is credited to
a. Partner’s Capital A/c
b. Partner’s current A/c
c. Profit & Loss A/c
d. Partner’s Loan A/c [b]
13. In the absence of partnership deed partner share profit and loss in
a. Ratio of capital Employed
b. Equal Ratio
c. 2 : 1
d. 1 : 2 [b]
14. [ R] As per section a minor may be admitted for the benefit of the partnership if:-
a. One partner agree
b. More than one agree
c. All partners agree
d. Both (a) or (b) [c]

Page 6 of 146
15. [ R ] If the partner carries on the business that is similar to firm competition with the firm and profit
earned from it, the profit
a. Shall be retained by the partner
b. Shall be paid to firm
c. Can be retained or gained to the firm
d. Both (a) or (b) [b]
16. [ R ] The relation of the partner with the firm is that of
a. An owner
b. An agent and A Principal
c. An agent
d. Manager [b]
17. [ A&E ] A, B, and C are partner’s sharing profits in the ratio of 5:3:2According to the partnership
agreement C is to get a minimum amount of Rs. 10,000 as his share of profits every year. The net
profit for the year ended 31st March, 2019 amounted to Rs. 40,000. How much amount contributed by
A?
a. Rs. 1,350
b. Rs. 1,250
c. Rs. 750
d. Rs. 1,225 [b]

Sequence
18. [ A ] A partnership firm earned divisible profit of Rs. 5,00,000, interest on capital is to be provided to
partner is Rs. 3,00,000, interest on loan taken from partner is Rs. 50,000 and profit sharing ratio of
partners is 5:3 sequence the following in correct way
I. Distribute profits between partners
II. Charge interest on loan to Profit and Loss A/c
III. Calculate the net profit Transfer to Profit and Loss appropriation A/c
IV. Provide interest on capital
[ ii, iii, iv, i ]
19. [ A ] Which one of the following item cannot be recorded in Profit and Loss Appropriation Account?
a. Interest on Capital
b. Manager’s Commission
c. Interest on Drawings
d. Partner’s Salary [b]
20. [ A & E ] A and B are partner’s sharing profit equally. A draw regularly Rs. 4,000 at the end of every
month for 6 months. Year ended on 30thSeptember 2018, calculate interest on drawings @ rate 5%
p.a.
a. Rs. 350
b. Rs. 450
c. Rs. 150
d. Rs. 250 [d]
21. [ R ] Which section of the partnership act defines partnership as the relation between person who
have agreed to share the profit of the business carried on by all or any of them acting for all?
a. Section 61
b. Section 130

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 c. Section 4
d. Section 48 [b]
22. [ A & E ] A and B are the partner sharing profit in the ratio of 2:3. They admitted C as a new partner
for 1/5thshare in the profit of the firm Rs. 50,000 for the year ended 31st March 2019. What will be C’s
share in profit
a. Rs. 5,000
b. Rs. 10,000
c. Rs. 20,000
d. Rs. 8,000 [B]
23. [ A & E ] A and B are partner’s sharing profit in the ratio 2:1 on 31st March 2019, firm’s net profit is
Rs. 86,000 the partnership deed provided interest on capital A and B Rs. 5,000 to Rs. 7,000
respectively and Interest on drawing from charged A. Rs 1,000 per month. Calculate profit to be
transferred to Partner’s Capital A/c.
a. Rs. 10,00,000
b. Rs. 95,000
c. Rs. 10,000
d. Rs. 86,000 [d]
24. [ A & E ] If fixed amount is withdraw on the last day of every month and interest on drawing charged is
10% p.a. Interest on drawing amounted to Rs 2,750 what will be drawing amount.
a. Rs. 2,500p.m.
b. Rs. 10,000p.m.
c. Rs. 7,500p.m.
d. Rs. 5,000 per month [d]

Q25 [ A & E ] A firm had Assets of Rs 1,50,000 partner’s capital account showed a balance of Rs
1,20,000 and reserves constituted the rest . If normal rate of return is 10% per annum and Goodwill is
valued at Rs48,000 at four years purchase of super profits , find the super profit of firm :

(a) Rs 6,000
(b) Rs 18,000
(c) Rs 12,000
(d) Rs 8,000 [c]

Match The following :

1.[ R]

1. According to companies act 2013 a)50

maximum numbers of partners in a firm can b)100
be
[ 1-a ]

Page 8 of 146
2.[ R ]

1. Item which may be debited to partners a) Interest on Capital

capital account b) Interest on Drawings

2. Item which may be credited to partners

capital account
[ 1-b, 2-a ]

3.[ U]

1. Rent paid to a partner a) Charge against profit

2. Salary paid to partner b) Appropriation of profit
c) Both
[1-a, 2-b ]

4.[ U]

1) remuneration to partner a) Not paid to any partner in the absence of

2) interest on loan partnership deed
b) Paid 6% p. a.
c) Not charged from partners
[1-a, 2-b ]

5.[ A]

1. when drawings are made at the end a) 6

of quarter
2. when drawings are made in middle of b) 7.5
every quarter
c) 4.5
[1-c, 2-a]

6.[U]

1. Guarantee of a profit is allowed even a) Loss

in case of b) profit
c) both
[ 1-a ]

7.[R]

1)Partners current account are opened when a) fixed

their capital accounts are b) fluctuating
2) Partners capital accounts are opened c) both
when their capital accounts are d) none

[ 1-a, 2-c ]

Page 9 of 146
8.[U]

1) Product method a) amount of drawing is uniform

b) amount of drawing is irregular
c) time intervals between the two
drawings is also uniform
[1- b]

9.[U]

1) when partnership deed does not a) interest on capital is not allowed

provide interest on capital b) interest on capital is allowed in all
2) when partnership deed provides for circumstances
interest on capital but is silent on c) interest on capital is allowed if only
whether it is charge or appropriation profit is their
[ 1-a, 2-c ]

10.[A&E]

1. If actual capital employed is 5,00,000 and a) 1,00,000

capitalized value of average profit is 4,00,000 b) (1,00,000)
goodwill would be c) Nil
[ 1-b ]

11.[A&E]

1) Closing stock under valued a) Deducted to the current year and

2) Closing stock over valued added to the previous year
b) Added to the current year and
deducted from previous year
c) No effect
[ 1-b, 2-a ]

12.[ A]

Identify weight for the past years while calculating goodwill by weighted average profit-

1. 2016 a) 1
2. 2018 b) 2
3. 2019 c) 3
4. 2017 d) 4
e) 5
[ 1-a, 2-c, 3-d, 4-b ]

Page 10 of 146
13[U].

1. Goodwill which is acquired by making a) Inherit goodwill

a payment b) purchase goodwill

[ 1-b ]

14.[U]

1. The method in which goodwill is calculated a) Super profit

on the basis of surplus profit in comparison to b) Average profit
average profit
[ 1-a ]

15.[ R ] Identify the factors affecting the value of goodwill-

a) Favourable location
1. Experienced management increased b)Longevity of business
2. Increased number of customers over a c)Efficiency of management
period of time
d) Risk involved
[ 1-c, 2-a ]

16. [ U]

1) Interest on capital allowed to partners a) Profit and Loss A/c is Credited

2) Interest on drawing charged by firm b) Credited to partners’ capital A/c
c) Debited to partners’ capital A/c
d) Profit and Loss A/c is debited
[ 1-b, 2-c ]

17.[A]

1. Interest on capital a) Cr. Side of Profit and Loss Appropriation A/c

2. Interest on drawing b) Dr. side of Profit and Loss Appropriation A/c
c) Dr. of Partner Loan
[ 1-b, 2-a ]

Q18 .[U]

1. Fixed capital a) Additional Capital Introduced

2. Fluctuating capital b) Interest on Drawing
c) Interest on Partner Loan
d) Rent to Partner

[ 1-a, 2-b ]

Page 11 of 146
Q19 [ A]

1 In the absence of Partnership Deed , Interest ( a) 8% per annum

on loan of a partner is allowed

2 In the absence of Partnership Deed Interest ( B) 9 % per annum

on Drawing of a partner is charged

( C) 6% per annum

( d) No Interest is charged

[ 1- c ; 2- d ]

Q20 [A&E]

1 A and B are Partners. The net divisible profit (a) Rs 2,50,000

as per Profit & Loss Appropriation account is
Rs 2,50,000 . The total interest on partner’s
Drawing is Rs 4,000 . A' salary Rs 4,000 per
quarter and B' salary is Rs 40,000 per annum.
What will net profit or loss earned during the
year .
2 A and B are Partners . The net divisible profit (b) Rs 1,25,000
as per Profit & Loss Appropriation account is
Rs 2,50,000 . The total interest on partner’s
Drawing is Rs 4,000 . A' salary Rs 4,000 per
quarter and B' salary is Rs 40,000 per annum.
What will be A' s share of profit .
(c) Rs 3,02,000

(d) Rs 3,06,000

( 1: c ; 2- b)

Q21 [A&E]

1 A entitled to a salary of Rs 10,000 per (a) Rs 23,000

annum and commission of 10 % 0f the Net
profit after charging his salary but before
charging his commission . The Net profit Rs
2,30,000. What will be the amount of A' s
Commission.
2 B entitled to commission of 10 % on net (b) Rs 22,000
profit after charging his commission . The Net
profit Rs 2,20,000 .what will be the amount of
B' s Commission .

(c) Rs 20,000

Page 12 of 146
 (d) Rs 25,000

( 1- b ; 2-b )

Q22[ A&E]

1 When a partner is given guarantee by other (a) Partnership firm

partner's loss on such guarantee is borne by :

2 When a partner is given guarantee of profit (b) All the other partner’s
by other , Profits above on such guarantee is
borne by :

(c) Partners who gave the guarantee

(d) No Partners will borne

( 1- c ; 2 – d )

Q23[ A&E ]

1 A Drawings Rs 50,000 during the year .The ( a) Rs 5,000

rate of Interest on Drawing is 10% per annum .
what will be amount of interest on drawing :

2 A drawing Rs 50,000 during the year . The ( b)Rs 2,500

rate of Interest on Drawing 10 % . What will be
amount of interest on drawing :

( c) Rs 10,000
( d) Rs 15,000

( 1- b ; 2- a )

Q24 [U]

1 Ratio in which Partners share profit & losses (a) New profit sharing ratio
before reconstitution of firm

2 Ratio in which Partners surrenders their share of (b) Gaining Ratio

profit in favour of other partner’s

3 Ratio in which all the Partners share the future (c) Sacrificing Ratio
profit and losses

4 Ratio in which Partners acquire the share from (d) Old Ratio
other
( 1- b, 2- c ; 3- a ; 4 – b )

Q25 [ A]

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1 Drawing against profits (a) Debited to partner's capital account

2 Drawing against capital (b) Credited to partner's capital account

(c) Debited to drawing account

(d) Credited to drawing account

[1–c;2–a]

Page 14 of 146
 UNIT – 2
(A) Change in Profit Sharing Ratio among the Existing Partners
(B) Admission of a Partner

FILL IN THE BLANKS :

Remembering

[1] Reserve appearing in the Balance Sheet at the time of admission of a partner, is
distributed among partners in their ____________ Ratio.( Old)

[2] At the time of admission, the assets are revalued and liabilities are reassessed. The increase or
decrease in the values is debited or credited in ________________ Account.( Revaluation )

[3R] Sacrificing ratio is computed at the time of___________ (Reconstitution)

[4R] Revaluation Account is prepared at the time of _____ ( Reconstitution )

[5R] At the time of admission, Gain (Profit) or Loss on revaluation is shared by the old partners

in their ________________ ratio.( Old )

[6RU] Revaluation account is a __________________ account.( Nominal )

[7R] The Revaluation Account shows _______________ in Values of assets and liabilities. (increase
or decrease )

Understanding

[8U] In the case of downward revaluation of an asset, Revaluation Account is ___________.( Debited )

[ 9U] In case of upward revaluation of a liability, Revaluation Account is ___________. ( Debited ) `

[10U] At the time of admission of a partner new profit-sharing ratio is used for sharing future
___________’ ( Profits )

[11AU] At the time of admission, if claim of Workmen Compensation is more than the Workmen

Compensation Reserve, the amount of Workmen Compensation Reserve and the claim is

transferred to ______________________ account.( Provision for workmen compensation liability )

Page 15 of 146
[12U] At the time of admission, if the book value and the market value of investment is same Investment
Fluctuation Reserve is transferred to __________ account of the old partners in their
______________ ratio.( capitals , old )

[13U] For the distribution of revaluation profit in case firm is following Fixed Capital Accounts method is
transferred to ________ accounts ( current )

[14U] An amount previously written off as bad debt is promised to be paid by the debtor. The promised
amount will not be credited to _________________ Account. ( debtors )

[15U] The newly admitted partner brings his / her share of capital for which he will get _______ in firm.

( Profit share )

Application

[16A] Balance sheet prepared after the new Partnership Deed, the assets and liabilities are
shown at __________ if Revaluation Account is prepared.( Revised values )

[17A] In valuation of Goodwill, the Weighted Average Profit Method is preferred over average method
when profits are _____________. (Trends )

[18AU] At the time of admission of partner if an unrecorded liability is recognized, it is debited in

___________ Account. (Revaluation )

[19U] A, B and C share profits and losses in the ratio of 3:2:1. On admission of D, they agree to share
profits and losses in the ratio of 5:4:2:1.Sacrificing Ratio of A, B and C will be _________. ( only A
sacrifice by 1/12)

[20R] The formula for calculating Super profit is Average Profit – ____________ Profit.( normal profit )

[21A] R and S are partners sharing profits equally. They admitted T for 1/3rd. share in the firm. New
Profit-sharing Ratio will be……………………. ( equally )

Analysis & Evaluation

[22A & E] A and B are partners sharing profits and losses in the ratio of 3 : 2. A's capital is
Rs. 60,000 and B's capital is Rs. 30,000. They admit C for 1/5th share of profits. C
should bring Rs. __________ as capital.( 22,500)

[23 A & E] A and B are partners sharing profit and losses in the ratio of 3 : 2. They admit C for
1/5thshare of profits. The sacrificing ratio between A and B will be _______.( 3:2)

Page 16 of 146
[24 A & E ] If the new partner brings in his share of goodwill in kind (Furniture), __________
account will be debited . ( Assets )

[ 25 A & E ] If the new partner does not brings in his share of goodwill in cash ______ account
will be debited . ( current )

MULTIPLE CHOICE QUESTION

Remembering

Q1 When goodwill is not recorded in the books at all on admission of a partners ?

A If paid privately

B If brought in cash

C If not brought in cash

D If brought in Kind [ a]

Q2 The Need of revaluation of assets and liabilities on admission

A Assets and Liabilities should appears at revised values

B Any profit and loss an account of change in values belong to old partners

C All unrecorded assets and liabilities get recorded

D None of Above [b]

Q3 On admission of a partner, which of the following items the Balance Sheet is transferred to the credit
of Capital Accounts of old partners in the old Profit-sharing Ratio, if Capital Accounts are maintained
following Fluctuating Capital Accounts Method

(a) Deferred Revenue Expenditure;

(b) Profit and Loss Account (Debit Balance);
(c) Profit and Loss Account (Credit Balance);
(d) Balance in Drawings Account of partners. (c)

Q4 If the new partner brings his share of goodwill in cash , it will shared by old partner in :

A Sacrificing ratio

B Old profit sharing Ratio

C New Ratio

Page 17 of 146
D Capital ratio [a]

Q5 Revaluation Account is a :

A Real Account

B Nominal Account

C Personal Account

D None of the Above [ b]

Q6 When new partner brings cash for goodwill , the amount is credited to :

A Realisation Account

B Cash account

C Premium for Goodwill Account

D Revaluation Account [c]

Understanding

Q6 The balance in the investment Fluctuation fund after meeting the fall in book value of
investment , at the time of admission of partner will transferred to :

A Revaluation Account

B Capital Account of old Partners

C General Reserve

D capital Account of All Partners [ b]

Q7 A and B are Partners sharing Profits in the ratio of 3:2. They Admit C for ¼ share who
contributed Rs 30,000 for his share of goodwill. The total value of the goodwill of the firm
will be :

A Rs 1,50,000

B Rs 1,20,000

C Rs 1,00,000

D Rs 1,60,000 [b]

Q8 The Credit Balance of Profits and Loss appears in the books at the time of admission of
partner will be transferred to :

Page 18 of 146
A Profit and loss appropriation account

B All partners capital Account

C Old partners capital Account

D Revaluation Account [ c]

Q 9 Goodwill of the firm is valued at Rs 1,00,000 . Goodwill also appears in the books at Rs
50,000 . C is admitted for ¼ Share . The amount of goodwill to be brought in by c will be :

A Rs 20,000

B Rs 25,000

C Rs 30,000

D Rs 40,000 [ b]

Q10 If the new partner brings any additional amount of cash other than his capital contributions
then it is termed as :

A Capital

B Reserves

C Profits

D Premium for Goodwill [ d]

Applying

[11] X and Y are partners sharing profits and losses in the ratio of 3 : 2. Z is admitted for 1/5 th
share in profits which he gets from X. New profit sharing ratio will be

(a) 12 : 8 : 5 (b) 8 : 12 : 5

(c) 2:2:1 (d) 2:2:2 (c)

[12] A and B are partners sharing profit and losses in the ratio of 3 : 2. A's capital is Rs.
1,20,000 and B's capital is Rs. 60,000. They admit C for 1/5 thshare of profits. C should
bring as his capital

(a) Rs. 36,000 (b) Rs. 48,000

(c) Rs. 58,000 (d) Rs. 45,000 (d)

Page 19 of 146
[13] A and B are partners sharing profits and losses in the ratio 5 : 3. On admission, C brings
by cheque Rs. 70,000 as Capital and Rs. 48,000 as Goodwill. New Profit-sharing Ratio
among A, B and C is 7 : 5 : 4. Sacrificing ratio between A and B is :

(a) 3:1 (b) 4:7

(c) 5:4 (d) 2:1 (a)

[14] X and Y are partners sharing profits in the ratio 5 : 3. They admitted Z for 1/5th share in
profits, for which he paid Rs. 1,20,000 as Capital and Rs. 60,000 as Goodwill. Capitals for
each partner, taking Z's capital as base capital will be:

(a) 3,00,000, 1,20,000 and 1,20,000 (b) 3,00,000, 1,20,000 and 1,80,000

(c) 3,00,000, 1,80,000 and 1,20,000 (d) 3,00,000, 1,80,000 and 1,80,000

(c)

[15] A and B are partners sharing profits in the ratio of 7 : 3. C is admitted as a new partner.
"A" gave 1/7th of his share and "B" gave 1/3 rd of his share to C. New Profit-sharing Ratio
will be:

(a) 6:2:2 (b) 4:1:1

(c) 3:2:2 (d) None (a)

[16] X and Y share profits and losses in the ratio of 4 : 3. The admit Z in the firm for 3/7th
share which he gets 2/7thfrom X and 1/7thfrom Y. New Profit-sharing Ratio will be :

(a) 7:3:3 (b) 2:2:3

(c) 5:2:3 (d) 2:3:3 (b)

[17] A and B are partners, sharing profits in the ratio of 5 : 3. They admit C for 1/5 thshare in
profits, which he acquires equally from both A and B. New profit sharing ratio will be:

(a) 21 : 11 : 8 (b) 20 : 10 : 4

Page 20 of 146
 (c) 15 : 10 : 5 (d) 10 : 5 : 4 (a)

Analysis & Evaluation

[18] A, B and C share profits and Losses in the ratio, of 3 : 2 : 1. D is admitted for 1/6 th share
which he gets from A. New ratio will be:

(a) 2:2:1:1 (b) 3:1:1:1

(c) 2:2:2:1 (d) 1:1:2:2 (a)

[19] A, B and C are partners sharing profits in the ratio of 4 : 3 : 2. D is admitted for 2/9 thshare
of profits. He brings Rs. 30,000 as capital.New Profit-sharing Ratiois 3 : 2 : 2 : 2. Goodwill
amount will be credited in the capital account of :

(a) A only (b) A, B and C (equally)

(c) A, and B (equally) (d) A, and C (equally) (b)

[20] A and B are partners sharing profits in the ratio of 3 : 2. On admission of C for 1/5 th share,
Land is appreciated by 10% (Book Value Rs. 80,000),Building is decreased by 20% (Rs.
2,00,000), Unrecorded Debtors of Rs. 1,250 are bought in the books and Creditors of Rs.
2,750 need not be paid. The Gain (profit) /loss on revaluation will be:

(a) Loss Rs. 28,000 (b) Loss Rs. 40,000

(c) Profit Rs. 28,000 (d) Profit Rs. 40,000 (a)

[21] Amit and Anil are partners sharing profits in the ratio of 5 : 3 having Capitals of Rs.
2,50,000 and Rs. 2,00,000 respectively. Atul was admitted as partner for 1/5 th share in
profits who brings Rs. 50,000 as Capital and Rs. 16,000 as Goodwill. Capitals are to be in
proportion to profit-sharing ratio based on Atul’s share. Capitals of Amit, Anil and Atul
respectively after admission of Atul will be:

(a) 1,25,000 : 75,000 : 50,000 (b) 2,20,000 : 1,82,000 : 66,000

(c) 2,92,500 : 2,25,000 : 50,000 (d) 2,82,500 : 2,19,500 : 66,000 (a)

Page 21 of 146
[22] X and Y are partners sharing profits in the ratio of 3 : 1. They admit Z as a partner who
pays Rs. 4,000 as Goodwill .New Profit-sharing Ratio being 2 : 1 : 1 among X, Y, Z.
Goodwill will be credited to:

(a) X and Y as Rs. 3,000 and Rs. 1,000 (b) X only

(c) Y Only (d) None (b)

[23] R and S are partners sharing profits in the ratio of 5 : 3. T joins the firm and R gives him
1/4thof his share and S gives 1/5thof his share to him. New Profit-sharing Ratio will be:

(a) 75 : 48 : 37 (b) 45 : 32 : 27

(c) 13 : 7 : 4 (d) 35 : 30 : 25 (a)

[24] A, B and C are equal partners, they wanted to change the profit sharing ratio to 4 : 3 : 2.
They raised the goodwill to Rs. 90,000. The effected accounts will be:

(a) C's Capital A/c Dr. 10,000

To A's Capital A/c 10,000

(b) B's Capital A/c Dr. 10,000

To A's Capital A/c 10,000

(c) C's Capital A/c Dr. 10,000

To B's Capital A/c 10,000

(d) A's Capital A/c Dr. 10,000

To C's Capital A/c 10,000

(d)

[25] A, B and C are partners haring profits in ratio of 3 : 2 : 1. They admit D as partner in the
firm. A, B and C give 1/3rd, 1/6th, 1/9thshare of their respective profits. The share of profit
of D will be:

(a) 1/10 (b) 13/54

(c) 12/54 (d) 10/55 (b)

Page 22 of 146
[26] A and B are partners sharing profits in ratio of 3 : 2. A's Capital is Rs. 30,000 and B's
Capital is Rs. 15,000. They admit C for 1/5thshare of profits. C will bring as his capital

(a) Rs. 9,000 (b) Rs. 12,000

(c) Rs. 14,500 (d) Rs. 11,250 (d)

[27] X and Y are partners. Z is admitted as partner for 1/7 thshare. New Profit- sharing Ratio will
be

(a) 2:3:1 (b) 3:3:1

(c) 6:5:2 (d) 1:1:1 (b)

[28] A, B, C and D are partners. They change their profit sharing ratio to 2 : 2 : 1 : 1. C’s
sacrifice is

(a) 1/6 (b) 1/12

(c) 1/24 (d) 2/6 (b)

[29] A and B share profits equally. They admit C for 1/7th share. New Profit-sharing Ratio of A and B is:

(a) 4/7, 1/7 (b) 3/7, 3/7

(c) 2/7, 2/7 (d) 2/7, 4/7. (b)

[30] A and B are partners. C is admitted for 1/5th share. C brings Rs. 1,20,000 as his share in Capital.
Net worth of the firm is:

(a) Rs. 1,00,000 (b) Rs. 4,00,000

(c) Rs. 1,20,000 (d) Rs. 6,00,000 (d)

[31] A and B share profits in the ratio of 3:2. A’s capital is Rs. 48,000, B’s capital is Rs. 32,000. C is
admitted for 1/5th share in profits. C will bring as his Capital

(a) Rs. 20,000 (b) Rs. 16,000

(c) Rs. 1,00,000 (d) Rs. 64,000 (a)

Page 23 of 146
[32] A and B share profits in the ratio of 3: 4. C is admitted for 1/5th share. New Profit-sharing ratio will
be

(a) 3: 4: 1 (b) 12: 16: 7

(c) 16: 12: 7 (d) 12 : 6 : 7 (b)

[33] A and B share profits and losses in the ratio of 3: 2. Their respective capitals are Rs. 1,20,000 and
Rs. 54,000. C is admitted for 1/3rd share in profits who brings Rs. 75,000 as his share of capital.
Capitals of A and B to be adjusted according to C’s share. A will withdraw from capital

(a) Rs. 30,000 (b) Rs. 32,000

(c) Rs. 15,000 (d) Rs. 28,000 (a)

[34] A and B are partners. C is admitted with a guaranteed profit of Rs. 10,000 from A. New Profit-sharing
ratio is 3:2:1. Profit for the year 2018 – 19 is Rs. 1,20,000. C will get

(a) Rs. 10,000 (b) Rs. 20,000

(c) Rs. 30,000 (d) None of these (b)

TRUE / FALSE :

1. [ R] . In the absence of agreement, consent of all partners is required to admit a partner. (T)
2. [ R]. Goodwill is an intangible current asset. (F)
3. { R} Self-generated Goodwill is recorded in the books of accounts and shown in the Balance Sheet
as an asset as per Accounting Standard -26, Intangible Assets.(F)
4. [ R] In case of admission of a partner, all existing partners sacrifice.(F)
5. [ U] New partner may or may not contribute Capital at the time of admission.(T)
6. [ U] New partner may bring his share of goodwill premium in kind.(T)
7. [ U ] At the time of admission of partner, the partnership firm is dissolved.(F )
8. [ R ] Super profit is a profit a firm earns above the normal profits.( T)
9. [ A ] The goodwill brought at the time of admission of partner will be distributed among all the
partners in new Profit-sharing Ratio.( F)
10. [ A ] Claims of Workmen Compensation if more than Workmen Compensation Reserve is debited
to Revaluation Account (T)
11. [ A ] Increase in Provision for Doubtful Debts will be credited to Revaluation Account.( F)
12. [ R ] Efficiency of management is a factor affecting goodwill of a firm.(T)

Page 24 of 146
13. [ U ] When there is change in Profit-sharing Ratio among partners assets are revalued and
liabilities are re-assessed.( T)
14. [ U ] New partner brings goodwill in the firm to get share in the past profits.(F)
15. [ A&E ] Gaining Partner(s) compensate Sacrificing Partner(s) when Profit-sharing Ratio changes.
(T)
16. [ A ] Reserves and accumulated profits are distributed in old Profit-sharingRatio at the time of
change in Profit-sharing Ratio.( T)
17. [ U ] Admission of a partner changes the relationship between / among existing partners. (T)
18. [ U ]Goodwill appearing in the Balance Sheet means Purchased Goodwill.( T)
19. [ A&E ] While computing goodwill, abnormal incomes and expenses are not ignored to calculate
the value of goodwill.( F)
20. [ A&E ] Weighted Average Method is preferred over Average Profit method at the time of falling
profits.( F)
21. [ A&E ] Hidden Goodwill arises when total capital is computed based on the New Partner’s Capital
is less than total capitals of remaining partners after all adjustments.( F)
22. [ U ]Employee Provident Fund is a part of Accumulated Profits and Reserves.( F)
23. [ A ] Gaining partner always compensates the Sacrificing Partner.(T)
24. [U] Additional Capital requirement and skill of the new partner are examples of reasons for
admitting a partner.( T)
25. [ A &E ]At the time of admission, reserves may be decided by the partners to be carried forwarded.
(T.)
.

Page 25 of 146
Match the Following:

R – Remembering

U- Understanding

A – Application

A&E- Analysis & Evaluation

1. Match items in List I with items in List II using the codes given below the Lists-

List I List II

A. Partner’s Current A/c 1. Dissolution of Partnership

B. Goodwill Account 2. Admission of a partner

C. Partner’s Drawings A/c 3. Fixed capital of partners

D. Realisation A/c 4. Goods taken by a partner for self consumption

Codes:

(a) A-1, B-4; C-2; D-3 (b) A-3; B-2; C-4; D-1

(b) A-1; B-2; C-4; D-3 (d) A-3, B-4; C-2; D-1 (b)

2. Match items in List I with items in List II using the codes given below

List I List II

A. Permanent Drawings 1. Credit side of Partner’s Current A/c

B. Partner’s Salary 2. Debit side of Partner’s Capital A/c

C. Fresh Capital introduced 3. Debit side of Partner’s current A/c

D. Interest on Drawings 4. Credit side of Partner’s Capital A/c

(a) A – 2, B – 1, C – 4, D – 3 (b) A – 1, B – 2, C – 4, D – 3

(c) A – 2, B – 1, C – 3, D – 4 (d) A – 4, B – 2, C – 1, D – 3 (a)

3. Match the assets in List I with the types of assets in List II using the codes given

Page 26 of 146
 below

List I (Assets) List II (Types of Assets)

A. Land & Building 1. Fictitious Assets

B. Profit and Loss Account (Dr.) 2. Wasting Assets

C. Mines 3. Fixed Assets

D. Goodwill 4. Intangible Assets

(a) A – 3, B – 1, C – 2, D – 4 (b) A – 1, B – 2, C – 3, D - 4

(c) A – 3, B – 4, C – 1, D – 2 (d) A – 3, B – 1, C – 4, D – 2 (a)

4. A firm does not have a Partnership Deed. Based on this fact, Match items in List I with
items in List II using the codes given below

List I List II

A. Interest will be allowed @ 6% pa 1.Drawings of partners

B. Interest will not be allowed 2. Net loss of the firm for an accounting
year

C. No interest will be charged 3. Capitals contributed by the partners

D. Partners shall share equally 4. Loan given by a partner to the firm.

(a) A – 1; B – 3; C – 2; D – 4 (b) A – 4; B – 3; C – 2; D - 1

(c) A – 3; B – 2; C – 4; D – 1 (d) A – 4; B – 3; C – 1; D - 2 (d)

[5] [ A ]

DESCRIPTION OPTIONS
(a) Hidden Goodwill(at the time of (1) Written off in new PSR
admission
(b) Goodwill appearing in the books (at the (2) Written off in old PSR
time of change in PSR)
(3) Total capital based on New partner
share – total of all partners capital

Page 27 of 146
 (4) Total of all partners capital – total
capital based on new partner

[6] [ U ]

DESCRIPTION OPTIONS
(1) Premium for goodwill a/c is opened (a) At the time of retirement
(b) At the time of death
(c) at the time of admission
(d) At the time of reconstitution of
partnership firm

[7] [ R ]

DESCRIPTION OPTIONS
(a) Admission of a new partner [1] with the consent of any existing partner
[2] With the consent of majority of existing
partners
[3] with the consent of all partners
[4] old-new
[5] New-old

[8] [U]

DESCRIPTION OPTIONS
[1] Profit and loss adjustment a/c
[2] Partners capital a/c
(a)Revaluation a/c
(b) Personal A/c
(c) P&L suspense a/c
(d) Real a/c

[9] [ A ] Where the following will be shown

[1] Rs. 2,00,000 introduced by new partner [A] Partners Capital Account
[2] Goodwill given in old balance sheet [B] Balance sheet
[C] Profit & loss Appropriation Account
[D] Revaluation Account

[10] [ A ]

Page 28 of 146
[1] Increase in value of Machine [A] Dr. Revaluation Account
[2] Provision for doubt full debts no longer [B] Cr. Revaluation Account
required
[C] No Change

[11] [ A ]

[1] Bad Debts Recovered [A] Dr. Revaluation Account

[ 2] unrecorded investment [B] Cr. Revaluation Account
[C] No Change

[12] [ U ]

[1] Goodwill appearing in the balance sheet at [A] Written off in old ratio
the time of admission of new partners
[B] Written off in new ratio

[13][ U ]

[1] When new partner brings his/her share [A] New Partners Capital A/c Dr.
goodwill in cash To Sacrificing Partners Capital A/c
[B] Cash A/c Dr.
To Premium for goodwill
[C] No entry passed in the books of accounts

[14] [ A ] Treatment of above on admission of new partner

[1] Creditors over valued [A] No treatment required

[2] creditors under valued [B] Dr. Revaluation Account
[C] Cr. Revaluation Account

[15] [ A ] Treatment on admission on the following

[A] Profit on revaluation account [1] No treatment required in partners capital

[ B ] Profit & loss ( Dr) Balance [2] Cr. in partners’ capital account
[3] Dr. in partners’ capital account

[16] [ A&E]

when the new partner brings additional cash Capital

other than his capital
When the new partner brings Assets other Reserves
than cash for his capital
Profit
Premium for goodwill

Page 29 of 146
[17] [A ]

When new partner gives his/her goodwill [A] old partners capital Dr
personally or privately To bank

When old partners withdraws goodwill amount [B] Cash A/c Dr.
To Premium for goodwill
[C] No entry passed in the books of accounts

[18][ A ]

When new partner is unable to bring his/her [C] No entry passed in the books of accounts
share goodwill in cash
When new partner is bring his/her share [A] New Partners Capital A/c Dr.
goodwill in cash To Sacrificing Partners Capital A/c
[B] Cash A/c Dr.
To Premium for goodwill

[19] [ A ]Treatment of above on admission of new partner

[A] No treatment required

[1] Building undervalued [B] Dr. Revaluation Account
[2] Building overvalued [C] Cr. Revaluation Account

[20] [ A ]Treatment of above on admission of new partner

Book value of land = Market value of land [A] No treatment required

Book value of land > Market value of land [B] Dr. Revaluation Account
[C] Cr. Revaluation Account

[21] [ A ]Treatment on admission on the following

General Reserves [1] No treatment required in partners capital

Advertisement suspense [2] Cr. in partners’ capital account
[3] Dr. in partners’ capital account
[22] [ A&E] Treatment on admission on the following

No profit/loss on revaluation account [1] No treatment required in partners capital

Loss on revaluation account [2] Cr. in partners’ capital account
[3] Dr. in partners’ capital account

[23] [ A&E]

DESCRIPTION OPTIONS

Page 30 of 146
Revaluation a/c is open (e) At the time of retirement
(f) At the time of death
(g) at the time of admission
(h) At the time of reconstitution of
partnership firm

[24][ U ]

DESCRIPTION OPTIONS
Sacrificing ratio [1] with the consent of any existing partner
Gaining Ratio [2] With the consent of majority of existing
partners
[3] with the consent of all partners
[4] old-new
[5] New-old

25 [ U ] Match items in List I with items in List II using the codes given below

List I List II

A. Capital withdrawn 1. Credit side of Partner’s Current A/c

B. opening balance of capital 2. Debit side of Partner’s Capital A/c

3. Debit side of Partner’s current A/c

4. Credit side of Partner’s Capital A/c

Page 31 of 146
 UNIT – 3 Retirement or Death of a Partner
R- Remembering
U- Understanding
A – Application
A&E- Analysis & Evaluation

True / False
1. ( R )In Death of a partner the share of profit of deceased partner is calculated either on time basis or on
turnover basic. [T]
2. ( U )Profit sharing ratio of remaining partner is decided according to mutual agreement among the
remaining partners. [F]
3. ( A&E)The amount paid to the retiring partners is excess of his capital after adjusting accumulated
profits/losses revaluation profits/losses, share of goodwill etc is taken as his share of hidden goodwill of
the firm. [T]
4. ( A)The gaining partners should compensate the sacrificing partners to the extent of their gain for the
respective share of goodwill. [T]
5. ( A&E)Goodwill will be debited with the agrees value less already shown in the Balance sheet.[ F ]
6. ( A)Goodwill may be written off in all the partners are in old profit sharing ratio. [T]
7. ( R) The death of a partner, deceased partner share in the goodwill is divides equally among continuing
partners. [F]
8. ( U )Death of a partner is like a compulsory retirement. [T]
9. ( A)Retiring partners’ share of goodwill is debited to his his/her capital account at the time of retirement.
[F]
10. ( U)Goodwill is recorded in the books only when it is purchased. [T]
11. ( A&E) Partner capital account is debited with his/her share of goodwill is credited in their gaining ratio.
[F]
12. ( A) In case of goodwill account written off the capital account of all partners is credited. [F]
13. ( U )Retiring Partner remains liable for all the acts of the firm up to the date of his retirement. [ T ]
14. ( R ) Provident Fund is credited to all partners in their old ratio at the time of Retirement of a Partner.
[F]
15. ( A)On the death of a partner, Cr. Balance of P&L A/c appearing in the Balance sheet should be
credited to the capital A/c of the remaining partners in their new profit sharing ratio. [ F ]
16. ( A)Share in profit of deceased partner is transferred to P&L suspense A/c. [T]
17. ( A)The share of goodwill of the retiring partner is debited to remaining partner in their gaining ratio.
[T]
18. ( U )Remaining partners acquire the share of profit of the retiring partner in old ratio. [ F ]
19. ( A&E) A, B and C are partners sharing profits in the ratio of 5:2:1.On retirement of C, the gaining ratio
will be 5:2. [T]
20. ( A) The retiring partner’s capital account is debited with his/her share of goodwill and remaining
partner’s capital account is credited. [F ]
21. ( A&E) In case, goodwill account written off the capital account of all partners is credited. [F]
22. ( A)At the time of death of a partner his share of goodwill is divided equally among continuing partners.
[F]

Page 32 of 146
23. ( A)Retiring partner’s share of goodwill is debited to his/Her capital account at the time of retirement.
(F)
24. (A) Amount finally paid to deceased is transferred to executors account . ( T)
25. (A&E) At the time of retirement of a partner there is a workmen compensation reserve Rs 25,000 and
claim of it Rs 30,00 Then Rs 5,000 will be credited to Revaluation account . ( F)

Fill in the blanks:

1. ( R)Goodwill will be debited with the agreed value_________ goodwill already shown in the book.
[ Less ]
2. ( U)Market value of the business – net worth of the business = ________. [ Goodwill ]
3. ( R)The executer is entitles to all the right of a __________. [ Deceased Partner ]
4. ( A)Share of goodwill of the decease partner is ________ to his capital account. [ Credited ]
5. ( R)In case of death of a partner the profit may be estimated on the basis of ______ and_______.
[ Time, Sales ]
6. ( U )The balance in the capital account of the deceased partner is transferred to his ______ account.
[ Executor’s ]
7. ( U)Interest on drawings due from deceased partner till the date of the death is _______ to his capital
account. [ Debit ]
8. ( U)The executor of the deceased partner is entitled to all the right of __________.
[ Deceased Partner ]
9. ( A)Share of goodwill of the deceased partner is _______ to his capital account. [ Credited ]
10. (A)The balance in the capital account of the deceased partner is transferred to his _________ account.
[Executor ]
11. ( A)Interest on drawing due from deceased partner till the date of the death is ________ to his capital
account. [Debited ]
12. (A)When a partner retires or dies his share of profit taken over by the remaining partners in ________
ratio. [ Gaining ]
13. ( A)At the time of retirement of partner the amount of goodwill of retiring partner will be paid by the
continuing partners in ________ ratio. [Gaining ]
14. (R )New ratio – old ratio = ________ ratio. [ Gaining ]
15. ( R )As per section 37 of the Indian partnership act 1932, in the absence of partnership deed, the
retiring partner is entitled to interest @______ till the time amount due to him is not paid. [ 6% ]
16. ( A)The share of profit of deceased partner from the closure of last balance sheet till the date of his
death is credited to __________ account. [ Profit and Loss A/c ]
th
17. ( A& E)A, B,C, are partners sharing profits in the ratio of 7:5:4 . C died on 30 June, 2018 and profits
for the year 2017-18 were Rs. 24,000. C’s share in profit will be ______. [Rs. 1,500 ]
18. ( A) In case of death of a partner the profit may be estimated on the basis of time or ____________.
[ Turnover ]
19. ( A&E)Ram Mohan and Sohan are partner sharing profit in the ratio of 4:3:2 , Mohan died on 1st Oct
2019,new ratio will be 1:2 among Ram and Sohan , goodwill of the firm is valued at Rs.
6,00,000_____________ amount will be transfer to Mohan capital A/c. [ Rs.2,00,000 ]

Page 33 of 146
20. (A&E)Mohan a partner died on 30th sep 2019 he withdraw Rs.4,000 per month in the beginning of every
month. Rate of interest charged on drawings is 12% p.a. Amount of interest on drawing will be
_________ if firm closes its account at the end of every year. [ Rs.840 ]
21. (A&E) X,Y, Z are partners Z died on 31 march2019. There is balance in P&L A/c in the assets side in
the balance sheet Rs. 60,000, Amount transfer to ________ side of partner’s capital account.
[ Debit ]
22 ( A) ______ is the ratio in which retiring partner is compensated by continuing partners ( Gaining )
23 ( A) ______ account is prepared when amount payable to outgoing partner is paid in installments with
interest. ( Loan )
24 ( A) In case of retirement of a partner, any one of continuing partner sacrifice his share then his capital
will be _________. ( credited )
25 ( A) At the of retirement of a partner Provision for bad and doubtful debts appears in in balance sheet
and all Debtors become good at the time of retirement , then provision for bad & doubtful debts will be
_____________ in revaluation account. ( credited )

MCQ’s

1. ( R )Gain of Revaluation at the time of retirement is transferred to:

(a) All Partners
(b) Outgoing partner
(c) Remaining Partner
(d) Retiring Partner [a]
2. ( R ) Gaining ratio is calculated by
(a) Old ratio – new share
(b) Old share + acquired share
(c) New share – old share
(d) New share + old share [c]
3. ( R )Gaining ratio is calculated at the time of
(a) Admission of a partner
(b) Retirement of a Partner
(c) Dissolution of a partnership firm
(d) Both (a) and (c) [b]
4. ( A ) If Goodwill is appearing in the balance sheet , it will be Credited to
(a) Gaining partner
(b) Retiring partners
(c) All partners
(d) Remaining Partners’ [c]
5. ( A )If the retiring partner is not paid full amount due to him immediately on retirement, his balance is
transferred to his :
(a) Loan A/c
(b) Capital A/c
(c) Bank A/c
(d) Suspense A/c [a]

Page 34 of 146
6. ( A&E)A, B, C were partners sharing Profit and Losses in the ratio of 3.2.1 Books are closed on
31stMarch every year. C dies on 30th, Nov 2018. Under the partnership deed, the executors of
deceased partner are entitled to his share of profit up to the date of death, Profit as on ended 31 st Mar
2018 was Rs. 2,40,000 C’s share of profit will be
(a) 26667
(b) 40000
(c) 30000
(d) 53333 [a]
7. ( A)A, B, C are partners sharing profit and losses in the ratio of 4:3:1: B retires and gives his share of
profit to A Rs. 3,600 and C Rs. 4,500. What is the Gaining sharing ratio of A and C?
(a) 4:5
(b) 2:1
(c) 68:48
(d) 4: 1 [a]

8. ( U )In which ratio Retiring partner is compensated by the continuing partner for his share of goodwill,in
which ratio?
(a) Gaining ratio
(b) Sacrificing ratio
(c) Old ratio
(d) New ratio [a]
9. ( R )Revaluation account is prepared at the time of :
(a) Admission of partner
(b) Retirement of a partner
(c) Death of a partner
(d) Reconstitution of the firm [d]
10. If three partners A, B, C are sharing profit as 5:3:2,then on the death of a partner A, how much B and C
will pay to A executor on account of goodwill. Goodwill is to be calculated on the basic of 2 years
purchase of last 3 years average profit, profits for the last 3 years are Rs. 3,28,000 Rs. 3,46,000 and
Rs. 4,00,000.
(a) Rs. 3,16,000 and Rs. 1,42,000
(b) Rs. 2,44,000 and Rs. 2,16,000
(c) Rs. 4,29,600 and Rs. 2,86,400
(d) Rs. 2,16,000and Rs. 1,44,000 [c]
11. (U )Revaluation account is prepare to calculate gain or loss at the time of
(a) Admission of partner
(b) Retirement of a partner
(c) Death of a partner
(d) All of a above [d]
12. ( U )An account prepared to ascertain the gain or loss at the time of death of a partner is called
(a) A realisation Account
(b) Executors Account
(c) Revaluation Account
(d) Decreased Partner [c]
13. ( R )Amount due to outgoing partner is shown on the balance sheet as his
(a) Liability

Page 35 of 146
 (b) Asset
(c) Capital
(d) Loan [d]
14. ( A )A, B and C are partners in a firm sharing profit and losses in 3:4:2 B retire from the firm. The profit
on revaluation on that date was Rs. 72,000, New ratio between A and C is 5:3 Profit on revaluation will
be distributed as:
(a) A Rs. 32,000 B Rs. 24,000 C Rs. 16,000
(b) ARs. 24,000 B Rs. 32,000 C Rs. 16,000
(c) A Rs. 45,000 C Rs. 27,000
(d) ARs. 47,250 C Rs. 24,750 [b]
15. P, Q and R sharing profit and losses in the ratio of 8:5:3. Q retire from the firm takes 3/16 from P and R
takes 5/16 from P. New profit sharing ratio between Q and R will be
(a) 1:1
(b) 10:6
(c) 9:7
(d) 5:3 [a]
16. ( A)In the event of death of a partner of employees provided fund appears in the balance will be shown
in
(a) Capital A/c (Cr.)
(b) Account (Dr.)
(c) Liability side [Balance Sheet]
(d) Asset side[Balance Sheet] [c]
17. ( A)Share of goodwill of the retiring partner is debited to remaining partners in their
(a) Old ratio
(b) New ratio
(c) Gaining ratio
(d) Sacrificing ratio [c]
18. ( A)At the time death of a partner general reserve appearing in the balance sheet should be credited to:
(a) All partners including deceased partner in their old profit sharing ratio
(b) Remaining partners in the new profit sharing ratio
(c) Neither the decreased nor the remaining partners
(d) Remaining partner in gaining ratio [a]
19. ( U )Retiring or outgoing partner
(a) Is liable for firm liabilities
(b) Not liable for any liabilities of the firm
(c) Is liable for obligation incurred before his retirement
(d) Is liable for obligation incurred before and after his retirement [c]
20. A, B and C are partner with Profit and Losses in the ratio of 4:3:2. B retires if A and C share profit of b
in 5:3 then find the new profit sharing ratio
(a) 47:25
(b) 17:11
(c) 31:11
(d) 14:21 [a]
21. ( A )Outgoing partner give his share of profit remaining partners. In what ratio do the remaining partners
contribute to such compentation amount?
(a) Gaining ratio

Page 36 of 146
 (b) Capital ratio
(c) Sacrificing ratio
(d) Old profit sharing ratio [a]
22. ( U )Claim of the retiring partner is payable in the following form
(a) Fully in cash
(b) Fully transferred to loan A/c to be paid later with some interest on it
(c) Party in cash and party as loan repayable later with agreed interest
(d) Any of the above method [d]
23. ( A)A, B and C sharing profit in ratio 3:2:1 C retires from the firm. Goodwill is to be valued at Rs. 60,000
find the amount payable to retiring on account of goodwill
(a) Rs. 30,000
(b) Rs. 20,000
(c) Rs. 10,000
(d) Rs. 60,000. (B)
Q24( A) A ,B & C are partners sharing profits in ratio 3:2:1.C retired from the firm . The total capital of new
firm is fixed at Rs 60,000 . What will be the new capital of A and B :
A Rs 30,000 and Rs 30,000
B Rs 24,000 and Rs 36,000
C Rs 36,000 and Rs 24,000
D Rs 40,000 and Rs 20,000 (c)

Q25 ( A&E) A ,B and C are partners sharing profits in the ratio 2:2:1. B retires from the firm .The capital
account of A,B and C are Rs 60,000 Rs70,000 and Rs 50,000 respectively after adjustment of goodwill ,
reserved and revaluation . B was to paid in cash brought in by A and C in such a way that there capital are
in proportion of new ratio . How much amount A and C must bring to pay B :
A Rs 50,000 by A & Rs 20,000 by B
B Rs 60,000 by A & Rs 10,000 by B
C Rs35,000 by A and Rs 35,000 by B
D Rs 40,000 by A and Rs 30,000 by B ( B)

Match the following

Q1 ( A)
1. The share of goodwill of the retiring partner A. Capital Ratio
is Credited to remaining partners in their
2. In the event of death of a partner the B. New Ratio
general reserve is transferred to partners’
capital A/c
C. Gaining Ratio
D. Old Ratio
[1-C, 2-D]
Q2 ( A)
1. At the end of the accounting period profit A. Profit and Loss A/c
and loss suspense A/c is closed by
transferring its balance to the

Page 37 of 146
2. Balance of profit and loss A/c appears in the B. Profit and Loss Appropriation A/c
balance sheet is transferred to
C. Capital A/c
[1-A, 2-C]
Q3 (A&E)
1. According to the Indian Partnership Act A. 6% p.a.
1932 interest payable to the deceased partner
on amount left will be
2. Interest payable on partners’ loan B. 12%p.a.
C. The Bank Rate
[1-A, 2-A]
Q4 ( U )
1. Gaining ratio is used at the time of A. Change in profit sharing ratio
2. Sacrificing ratio is used at the time of B. Admission of a partner
C. Retirement or death of a partner

[1-C, 2-B]
Q5 ( A)
1. Balance of advertisement Suspense A/c A. New Ratio
appearing in Balance Sheet at the time of
death of a partner is debited to all partners
’Capital A/c in
2. Profit earned after retirement of partner is B. Old Ratio
distributed among remaining partner in
C. Sacrifice Ratio
D. Gaining Ratio

[1-B, 2-A]
Q6( A)
1. Salary outstanding is recorded A. Debit Side Revaluation A/c
2. Creditors of Rs. 12,000 were not likely to be B. Credit Side Revaluation A/c
claimed
C. Debit Partner Capital A/c
D. Credit Partner Capital A/c

[1-A, 2-B]
Q7( U)
1.Credit the share of profit of the deceased A. Revaluation A/c
partner.
2. Profit On Revaluation of deceased partner B. Profit and Loss A/c Suspense A/c
C. Profit and Loss A/c Appropriation A/c
[1-B, 2-A]

Q8( R)
1. Profit on revaluation on retirement A. Old profit sharing ratio
2. Share of goodwill of retiring partner B. New profit sharing ratio
C. Sacrificing ratio
D. Gaining ratio

Page 38 of 146
 [1-A, 2-D]

Q9( A&E)
A at the time of retirement Workmen A. Debit Workmen Compensation Reserve and
Compensation Reserve in Balance Sheet is credit partners’ capital A/c
Rs. 20,000
1. Actual claim for Workmen Claim is Rs. B. Debit revaluation credit Provision for
15,000 Workmen Claim
2. Actual claim for Workmen Claim is Rs. C. Debit prov. For Workmen Claim revaluation
22,000 A/c
D. Debit partners’ capital A/c and credit
Workmen Compensation Reserve
[1-A, 2-B]

Q10( R)
1. Profit on revaluation will be credited to A. Partners’ Capital A/c
2. Loan on revaluation will be debited to B. Profit and Loss A/c
C. Profit and Loss Appropriation A/c
[1-A, 2-A]
Q11( R)
1. Goodwill appearing in Balance Sheet at the A. Credited to Partners Loan A/c
time of retirement is
2.General reserve appearing in Balance Sheet B. Debited to Partners’ Capital A/c
at the time of retirement is

[1-B, 2-A]

Q12( A)
1. Increase in value of furniture A. Debited to Revaluation A/c
2. Increase in creditors B. Credited to Revaluation A/c
C. Debited to Realisation A/c
D. Credited to Realisation A/c
[1-B, 2-A]

Q13( A)
1. Partner’s share gain or loss from A. Capital Ratio
Revaluation of assets and assessment of
liabilities is distributed in
2. Partner’s share of Loss on Revaluation B. New Ratio
C. Gaining Ratio
D. Old Ratio
[1-D, 2-D]

Q14( U)

Page 39 of 146
1. Decrease in value of machine A. Debited to Revaluation A/c
2.Decrease in bills payable B. Credited to Revaluation A/c
C. Debited to Realisation A/c
D. Credited to Realisation A/c
[1-A, 2-B]

Q15( A)
1.Profit& Loss Appropriation Account A. Distribution of General Reserve
2.Profit & Loss Suspense B. Distribution of Net Profit
C. Distribution of Profit upto the date of death
[1-B, 2-C]

Q16( A)
1. Retirement of a partner leads to : A. No change in profit sharing ratio
2. Death of a partner leads to : B. Loss in profit sharing ratio
C. Gain in profit sharing ratio
[1-C, 2-C]

Q17( U )
1. On Retirement of a partner credit balance of A. Remaining partner capital account is
Profit & Loss Account credited
2. On the death of a partner Debit balance of B. Remaining partner capital account is
Profit & Loss Account Debited
C. All partner capital account is credited
D. All partners capital account is debited
[1-C, 2-D]

Q18( A)
1. At the time of retirement of a partner , profit A. Capital Account of retiring partners
on revaluation is credited to :
2. At the time of retirement of a partner, loss on B. Capital Account of all partners in old ratio
revaluation is debited to ;
C. Capital Account of remaining partners in
new ratio
D. Capital Account of remaining partners in old
ratio
[1-B, 2-B]
Q19( U )
1. At the time of retirement of a partner profit A. New Ratio
on revaluation is divided among partners in :
2. At the time of retirement of a partner general B. Gaining Ratio
reserves is divided among partners in :
C. Sacrificing Ratio
D. Old Ratio
[1-D, 2-D]
Q20( A&E)
1. The deceased partner’s share of profit up A. Profit & Loss Adjustment
to his death is recorded in :
2. The deceased partner’s share of loss up to B. Profit & Loss

Page 40 of 146
his death is recorded in :
C. Profit & Loss Appropriation
D. Profit & Loss Suspense
[1-D, 2-D]
Q21( A&E)
1. A, B & C are partners in the firm. B retires A. 65,000
from the firm. The capital of A and C after all
adjustment is Rs. 50,000 and Rs. 60,000.
Adjust their capitals in new profit sharing ratio.
Calculate the new capital of C.
2. A,B & C are partners in ratio 2:1:1. B retires B. 55,000
from the firm. The capital of new firm is fixed at
Rs 1,20,000. Calculate the new capital of
partner of A.
C. 40,000
D. 80,000
[1-B, 2-D]
Q22( A&E )
1. A,B & C are partners in firm. C retires. What A. 3:2
will be the gaining ratio between A and B.
2. A, B & C are partners in firm. C retires. C B.4:3
gives share to A for Rs. 8,000 and to B for Rs.
4,000.Calculate gaining ratio between A and B.
C. 1:1
D. 2:1
[1-C, 2-D]
Q23( A& E )
1. Y& Z are partners sharing ratio 4:3:3. Z retires A. X and Y both gains.
and the new ratio between X and Y is 7:3. Which
partner gain?
2. X, Y& Z are partners sharing in ratio 6:4:5. Y B. Only X gains
retires and new ratio between X and Z is 11:4.
Which partners gain?
C. Only Y gains
D. X and Y both sacrifice.
[1-B, 2-B]
Q24( A& E )
1. A, B & C are partners, C retires from the firm. A. 10,000
There is workmen compensation reserve
appearing in Balance Sheet of Rs. 60,000.
Calculate the amount credited to C for workmen
compensation reserve.
2. A, B & C are partners, C retires from the firm. B. 15,000
There is workmen compensation reserve
appearing in Balance Sheet of Rs. 60,000. Claim
on account of workmen compensation is Rs.
15,000. Calculate the amount credited to C for
workmen compensation reserve.
C. 20,000
D. 25,000

Page 41 of 146
 [1-C, 2-B]

Q25 ( A&E)
1 A ,B & C are partners in ratio 2:2:1. C retires from A New capital of A Rs 2,40,000 and of B Rs
the firm . The capital balance of A B& C are Rs 1,20,000.
1,20,000 ; Rs 1,40,000 and Rs 1,00,000. C was to
be paid in cash brought in by A and B . What be
the new capital of A and B of newly constituted firm.

2 A, B and C are partners in the ratio 2:2:1. C B New capital of A Rs 1,80,000 and of B Rs
retires from the firm The capital balance of A B & C 1,80,000
are Rs 1,20,000 ; Rs 1,40,000 and Rs 1,00,000 . C
was to be paid in cash brought in by A and B and to
leave Rs 60,000 in the Bank account . How much
amount A and B should bring to pay c

C Amount brought in by A is Rs 2,80,000 and by

B is Rs 1,40,000

D Amount brought in by A is Rs 2,10,000 and by B

is Rs 2,10,000

Answer 1 – B ; 2 - D

Page 42 of 146
 UNIT - 4 Dissolution of a Partnership Firm

Fill in the blanks

*Remembering*

1. When any asset is taken by the partner at the time of dissolution of the partnership firm then______
Account will be debited. [Partner’s Capital]

2. In case of dissolution of the partnership firm, Provision for Doubtful Debts is transferred to
__________Account. [Realisation]

3. Dissolution of Partnership may or may not involve ___________ of the firm. [Dissolution]

4. Realisation Account is _______in nature. [Nominal]

5. Loss of realization Account is debited to Partner’s Capital Account is the __________.

[Profit-Sharing
Ratio]

6. Profit on realisation is credited to Partner’s Capital Account in their ______________.

[Profit-Sharing Ratio]

7. Asset taken by a partner at the time of dissolution is_______ to partner’s capital Account.

[Debited]

8. When Realisation expenses are paid by a partner on behalf of the firm, Partner’s Capital Account will
be________. [Credited]

*Understanding*

9. A firm may be compulsory dissolved when all the partners or all the partners except one become
_________. [Insolvent]

10. Firm’s Property is applied first for settling ____________. [Firm’s debts]

Page 43 of 146
11. In case of dissolution of firm ______relationship between/among the partners comes to an end.
[Economic]
12. When any of the partners agrees to carry out dissolution for an agreed remuneration, including
Realisation expenses, ________ Account will be credited. [Partner’s Capital]

13. B, a partner was appointed to look after the process of dissolution for which he was allowed a
remuneration of Rs. 5,000. B agreed to bear the dissolution expenses. Actual dissolution expenses
Rs.3,000 paid by B. Realisation Account will be debited by______. [Rs. 5,000]

14. Accumulated Profits/losses are distributed amongst the partners in their _____ ratio at the time of
Dissolution of Partnership Firm. [Profit sharing]

*Application

15. Stock was sold Rs. 20,000 (being 25% more than the book value). Amount of stock transferred to
Realisation Account is_______. [Rs. 16,000]
16. If Partner’s loan is appearing on the assets side of the balance sheet at the time of dissolution of firm,
it is transferred to ________Account. [Partner’s Capital]
17. At the time of dissolution of Partners’ firm closing balances of Partners’ Capital Account is transferred
to ________Account. [Cash/Bank]
18. Creditors of Rs. 30,000 and Bills Payable of Rs. 8,000 were due on an average basis of one month
after 31stMarch, 2019 but they were paid immediately on 31stMarch, 2019 @ 6% discount p.a., the
amount debited to Realisation Account will be ____________.
[Rs. 37,810]

*Analysis and Evaluation

19. Furniture of Rs. 5,500 appears in the balance sheet on the date of dissolution of the Partnership firm,
realised at a loss of 10% on selling price. Amount collected from furniture ____________.
[Rs. 5,000]
20. If Workmen Compensation Reserve appears at Rs. 20,000 in the balance sheet and there is a claim
of Rs. 15,000 to be paid against it, then __________ will be transferred to Realisation Account.
[Rs. 15,000]
21. At the time of Dissolution of firm, goodwill appearing the balance sheet is transferred to
_________Account. [Realisation]
22. If a partner becomes a person of unsound mind and therefore the firm is dissolved, this type of
dissolution is called dissolution by _________. [Court]
23. Unrecorded assets, though brings in cash on its disposal, but are not transferred in __________
Account. [Realisation]
24. If investments are not given on the assets side of the balance sheet and only Investment Fluctuation
Reserve is given on the liabilities side, it is transferred to __________ Account
[Partner’s Capital]

25. If workmen compensation reserves appearing in balance sheet at Rs 30,000 and there is claim of Rs
18,000 to be paid against it then _______ amount will be transferred to partners capital account .
( 12,000 )

Page 44 of 146
TRUE AND FALSE
REMEMBERING
1. Dissolution of Partnership is different from Dissolution of Partnership Firm. [T]
2. The court can order the Dissolution of a Partnership Firm, if any of the partners become a person of
unsound mind. [T]
3. For paying off firm’s debts all partners are jointly and separately liable to pay. [T]
4. Partner’s Loan Account is transferred to Realisation Account. [F]
5. When the Expenses are borne and paid by the Partner out of his own pocket. Then Journal Entry for
realization expenses is passed. [F]
6. Dissolution of Partnership means change in existing relations of the partners [T]
7. When the business of the firm is unlawful then it is compulsory Dissolved. [T]

UNDERSTANDING

8. Change in Business Relationship among the Partner’s is Dissolution of Partnership. [T]

9. Assets having provisions are recorded in Realisation Account at its net value. [F]
10. Partners Loan is an outside Liability. [F]
11. Partners’ wife’s loan is transferred to Realisation Account. [T]
12. When a liability is discharge by a partner, it is credited to his account. [T]
13. Court does not intervene in the Dissolution of Partnership. [T]

APPLICATION

14. If creditor is Rs. 20,000, loan Rs. 10,000 and capital is of Rs. 1,50,000 cash balance is Rs. 30,000,
then Remaining Assets will be Rs. 1,80,000. [F]
15. Debtors of Rs. 50,000 are realized at a loss of2% the amount thus realised is Rs. 49,000. [ T ]
16. At the time of dissolution, balance sheet reveals capital of Rs. 90,000 general reserve Rs.1,00,000,
loan of Rs. 50,000. Cash Balance Rs. 1,00,000. Then assets are realised at 30% giving a loss of Rs.
6,60,000. [F]
17. Raju a partner, bear all Expenses of Realisation, for which he is paid Rs. 4,000 Raju paid Rs. 5,000
as Dissolution Expenses then Realisation Account is debited by Rs. 5,000. [F]
18. Creditors of Rs. 80,000 are paid 20% less hence the amount paid is Rs. 64,000. [T]

Page 45 of 146
ANALYSIS & EVALUATION

19. When it is agreed that a partner will bear the Realisation Expenses and for which he is paid an agreed
amount, then Realisation Account is debited by the amount payable to the partner.
[T]
20. Furniture worth Rs. 30,000 taken over by partner a, then cash account is debited and Realisation
Account is credited. [F]
21. Liabilities to third parties do not include Accumulated Profits. [T]
22. Realisation Expenses Rs. 15,000 were to be borne and paid by Rohit, then Realisation Account is
debited. [F]
23. No entry will be made if debtors of Rs. 18,000 agreed to pay the Realisation Expenses of Rs. 17,500,
in full settlement of his account. [F]
24. Creditor of Rs. 20,000 accepted investments of Rs. 17,000 in full settlements of his claim recorded in
Realisation Account. [F]
25. Debtors of Rs . 25,000 were taken over by the partner at this value ,it will be recorded in the credit
side of partner capital account (F)

Multiple Choice Questions

Remembering
1. Nature of realisation Account :-
(a) Nominal Account
(b) Real Account
(c) Personal Account [a]

2. Partners Loan Account is :-

(a) Personal Account
(b) Real Account
(c) Nominal Account [a]

3. Nature of bank Account is :-

(a) Artificial Personal Account
(b) Natural Personal Account
(c) Representative Personal Account [a]

4. Court may pass order of the dissolution of the firm where :-

(a) Expiry of the term for which the firm was constituted
(b) When the business of the firm can’t be carried on except at a loss
(c) On completion of the venture [b]

5. Section 48 of the Indian partnership act 1932 deals with :-

(a) Payment of firms debts and privatedebts
(b) Settlement of account when the firm is dissolved
(c) Dissolution of the firm [b]

Page 46 of 146
6. Liabilities to third parties in case of dissolution of partnership firm do not include : -
(a) Reserves
(b) Credit Balance of P&L Account
(c) Partners loan
(d) All of the Above. [d]

7. When Realisation expenses are borne& paid by the same partner :-

(a) No entry will be passed
(b) Realisation Account will be debited ,CashAccount will be credited
(c) None of above [a]

8. Partners loan Account is not transferred to :-

(a) Bank Account
(b) Realisation Account
(c) Partners loan Account [b]

9. Dissolution of the Partnership does not include :-

(a) Admission of a partner
(b) Death of a partner
(c) Change in Profit-Sharing Ratio
(d) Dissolution of firm [d]

Understanding

10. Dissolution of the Partnership firm means :-

(a) Change in existing ratio of partners
(b) Dissolution of Partnership among all partners
(c) Death of a Partner
(d) Dissolution of firm [b]

11. Liability which is not shown in balance sheet but paid at the time of dissolution :-
(a) Outstanding Expenses
(b) Bills payable
(c) Unrecorded liability [c]

12. Third party liabilities are shown in Realisation Account :-

(a) Debits side of Realisation Account
(b) Credit side of Realisation Account
(c) Debit side of Partner Capital Account
(d) Credit side of Partner CapitalAccount [b]

Page 47 of 146
13. Accumulated Profit /Loss are transferred to Partner’s Capital Account in case of dissolution in
their
(a) New Ratio
(b) Gaining Ratio
(c) Profit Sharing Ratio
(d) None of the above [c]

14. On Dissolution goodwill Account is transferred to :-

(a) Credit side of Bank Account
(b) Debit side of Partners Capital Account
(c) Debit side of Realisation Account
(d) Credit side of Realisation Account [c]

15. Change in existing agreement between Partners is called :-

(a) Dissolution of Partnership
(b) Dissolution of Partnership Firm
(c) Admission of a Partner
(d) Death of a Partner [a]

16. On dissolution goodwill realised shown in balance sheet is recorded as :-

(a) Bank/cash A/cDr., To RealisationA/c
(b) Partner’s Capital A/cDr., To Bank/CashA/c
(c) Realisation A/c Dr., To Bank/CashA/c
(d) Realisation A/c Dr., To Bank/CashA/c [a]

17. If a partner undertakes to pay the liability of a firm on dissolution it will be recorded as :-
(a) RealisationA/c Dr., To Bank/CashA/c
(b) RealisationA/c Dr., To Partners Capital A/c
(c) Bank/Cash Dr., To Partners Capital A/c
(d) None of the above [b]

18. On dissolution advertisement suspense appearing in balance sheet is shown in :-

(a) RealisationAccount
(b) Partner’s Capital Account
(c) Bank Account
(d) Revaluation Account [b]

19. On dissolution of partnership firm the personal debt of a partner will be paid out of :-
(a) Partners personal asset
(b) Firm profit
(c) Both (a) and (b)
(d) All of the above [a]

Analysis & Evaluation

Page 48 of 146
20. If a partner has taken some of the Sundry Asset at Rs. 7,200 ( being 10% less than book value ) its
book value is :-
(a)Rs. 7,920
(b)Rs. 8,000
(c) Rs. 7,200
(d)Rs. 7,000 [b]

21. Realisation expenses of Rs. 7,000 were to be paid by the partner. The firm will be paying him a
remuneration of Rs. 7,500 for the dissolution work. The Partner’s Capital Account will be credited with
and Rs. :-
(a)Rs. 7,500
(b)Rs. 14,500
(c) Rs. 7,000
(d)Rs. 7,300 [a]

22. ‘A’ one of the Partners was to bear all the Realisation Expenses for which he was given a commission
of 3% of net cash realised from Dissolution. Cash realised from Assets was Rs. 25,000. Amount paid
for paying off liabilities amounted to Rs. 5,000. The amount of commission will be:-
(a) Rs. 750
(b) Rs. 150
(c) Rs. 800
(d) Rs. 600 [d]

23. If WCR was not given in balance sheet & liability arises of Rs. 10,000, the Journal Entry will be :-
(a) WCR A/cDr., To Partner Capital A/c
(b) Realisation A/c Dr., To Bank A/c
(c) Bank A/c Dr., To RealisationA/c
(d) No Entry [b]

24. While preparing memorandum Balance Sheet if the Asset side is more than the Liabilities side
&Partners Capital is already appearing on the Liabilities side, the balancing figure will be :-
(a) Profit and Loss (Dr.)
(b) Creditors
(c) Furniture
(d) Cash [b]

25. There were investment worth Rs. 1,20,000, 75% of the investment were taken over by a Partner
at75% of their book value. The value at which the investment are taken over is:-
(a) Rs. 90,000
(b) Rs. 67,500
(c) Rs. 80,000
(d) Rs. 65,000 [b]

Page 49 of 146
26. 50% of the Furniture valued at Rs. 20,000, taken by a Partner at Rs. 18,000, and remaining50% will
be sold at 20%less than the book value, amount transferred to Bank Account will be:-
(a) Rs. 20,000
(b) Rs. 10,000
(c) Rs. 16,000
(d) Rs. 18,000 [c]

Match the following

R – Remembering

U- Understanding

A – Application

A&E- Analysis & Evaluation

Q1[R]

1. All the partners are liable jointly and severally a) Private debts
for

2. If partner has taken loan by mortgaging his b) Firms debts

Private property then his private property can't be
applied first for setting

[ 1-b, 2-b ]

Q2[R]

1. On the event of Dissolution of the a) Realisation Account is not prepared

Partnership Firms
b) Books of the firm are closed
2. On the event of Dissolution of Partnership
c)Business of the firm become unlawful

Page 50 of 146
 [ 1-b, 2-a ]

Q3[R]

1. Realisation Account is a) Personal in Nature

2. Partner’s Capital Account is b) Nominal in Nature

c) Real in Nature
[ 1-b, 2-a ]

Q4[U]

1. Partners loan to the firm a) Is asset for firm

2. Firm loan to the partner b) Is liability for the firm
[ 1-b, 2-a ]

Q5[R]

1. Credit Balance of Bank Account is a) Realisation Account and Partner’s Capital

transferred to Account
2. Liability due to Partner’s is not transferred to b) Bank Account

c) Realisation Account
[ 1-c, 2-c ]

Q6[R]

1. Employees Provident Fund is recorded in a) Realisation and Cash Account

2. Asset taken by the Partner is recorded in b) Realisation Account

Page 51 of 146
 c) Partner Capital Account

d) Realisation and Partner Capital Account

[ 1-a, 2-d ]

Q7[R]

1. Third party liability of a firm a) Partner's Capital

2. Internal liability of a firm b) Creditors
c) Employees
[ 1-b, 2-a ]

Q8[U]

1. Cash realised from sale of asset is a) Revaluation Account

transferred to
2. Payment made to Partner’s capital is
transferred to b) Realisation Account

c) Cash Account

d) Partner Capital Account

[1-b, 2-c ]

Q9[U]

1. Death of the Partner a) Compulsory Dissolution

2. Unlawful business b) Happening of an event
3. Person of unsound firm c) Mutual Agreement
4. Dissolution with the consent of the partners d) Dissolution by court
[1-b, 2-a, 3-d, 4-c ]

Q10 [A] If goodwill appear in the Balance Sheet

1. On transfer of Goodwill to Realisation Account a) Partner Capital A/cDr.

To Realisation A/c

Page 52 of 146
2. If realised in cash b) Realisation A/c Dr.
To goodwill A/c

3. If any asset taken by any partner c) Bank A/cDr.

To RealisationA/c

[1-b, 2-c, 3-a ]

Q11[U]

1. All the Partners become insolvent a) Happening of an event

2. On completion of venture b) Compulsory Dissolution
[ 1-b, 2-a ]

Q12[A]

1. A's wife loan taken over by A a) Realisation Account

2. Provision for doubtful debts b) Partners Capital Account
3. Bank overdraft c) Bank Account
4. Partners loan d) Partners loan Account
[ 1-b, 2-a, 3-a, 4-d ]

Q13[A&E]

1. Workmen Compensation Reserve appears in the a) Workmen Compensation Reserve A/c…Dr.20,000

Balance Sheet at Rs. 20,000 To Realisation A/c12,000

To Partner’s CapitalA/c8,000

2. Workmen Compensation Reserve appears in the b) Workmen Compensation Reserve A/c Dr. 20,000
Balance Sheet at Rs. 20,000 liability arise at Rs. To Realisation A/c 20,000
12,000
Realisation A/c …Dr. 25,000

To Bank A/c 25,000

3. Workmen Compensation Reserve appears in the c) Realisation …Dr. 20,000

Balance Sheet at Rs. 20,000 and liability arises To Bank A/c 20,000
at Rs. 25,000

4. Workmen Compensation Reserve does not d) Workmen Compensation Reserve A/c Dr. 20,000

Page 53 of 146
 appears in the Balance Sheet and liability Asset To Partners Capital A/c20,000
Rs. 20,000
[ 1-d, 2-a, 3-b, 4-c ]

Q14[U]

1) Revaluation Account
a) All Assets and Liabilities are recorded
2) Realisation Account b) Only changes in assets and liabilities are
recorded
[ 1-b, 2-a ]

Q15 [A&E]

1)
Creditor Rs. 20,000 took over the stock a) Cash A/c Dr. 5,000
ofRs.15,000 in full settlement of his debt To Realisation A/c 5,000

2) Creditor Rs.20,000 took over the stock of

b) No entry
Rs.15,000

3) Creditors Rs.20,000 took over the stock c) RealisationA/c Dr. 5,000

of Rs. 25,000 and paid the balance of
firm To cash A/c 5,000

[ 1-b, 2-c, 3-a ]

Q16[A]

1) Unrecorded liability taken by partner

a) No entry
2) Unrecorded liability paid in cash
b) Realisation A/c Dr.
To cash A/c

c) Realisation A/cDr.
To Partner’s Capital A/c

Page 54 of 146
 [ 1-c, 2-b]

Q17[A]

1) Unrecorded asset sold for cash

a) No entry

b) Cash Account Dr.

To Realisation A/c

[ 1-b ]

Q18[A]

1. Dr. Balance of Profit and Loss Account a) Partner’s Capital A/c …Dr.
To Profit and Loss A/c

2. Cr. Balance of Profit and Loss Account b) Profit and Loss A/c …Dr.
To Partner’s Capital A/c

[ 1-a, 2-b ]

Q19[A]

Debt already written off is now

received at the time of dissolution is
1) recorded in
a) Partners Capital A/c …Dr.
To Realisation A/c

2) Asset taken by partner

b) Realisation A/c …Dr.
To Partners Capital A/c

Page 55 of 146
3) Partner paid his wife loan
c) No entry
4)Creditors taken investments
d) Bank A/c …Dr.
To Realisation A/c

[ 1-d, 2-a, 3-b, 4-c ]

Q20 [A]

1 Realisation expenses paid by partner a) Partner capital will be credited

and was to be borne by him only
2 Realisation expenses paid by firm but it b) No effect on partner capital
was to borne by a partner

c) Partner capital will debited

d) Realisation will be debited

[ 1 – b; 2- c ]

Q 21[A&E]

1 Realisation expenses Rs 20,000 paid by firm a) Partners Capital will be credited Rs

, out of which Rs 12,000 was to be borne by a 12,000
partner :

2 Realisation expenses paid Rs 20,000 paid by b) Partner capital will be debited Rs12,000
partner , out of which Rs 8,000 was to borne by
the firm

c) Partner capital will be credited Rs8,000

d) Partners Capital will be debited Rs

8,000

[ 1 – b; 2- c ]

Q22[A&E]

1 If one of a partner takes sundry Assets for a) Rs1,00,000

Rs99,000 which is 10 % less than book value .
Find Book value of Sundry Assets:
2 If one of a partner takes sundry Assets for Rs b) Rs 1,10,000
99,000 which is 10% more than book value .
Find Book value of Sundry Assets

Page 56 of 146
 c) Rs 1,11,000

d) Rs 90,000

[ 1- b; 2 d ]

Q23[A&E]

1 Bank overdraft will be transferred to : a) Partners Capital account

2 Bank loan will be transferred to : b) Partners current account

c) Bank account

d) Realisation account

[1–d;2–d]

Q24[A]

1 At the time of dissolution of a Partnership firm a) Realisation account

Partners Capital account will closed by :

2 At the time of dissolution of a Partnership firm b) Partner current account

Partner loan account will be closed by :

c) Partners Capital account

d) Bank account

[ 1-d; 2- d ]

Q25[A]

1 Dissolution of Partnership which account is a) Profit and loss account

prepared:

2 Dissolution of Partnership firm which account b) Realisation account

is prepared :

c) Revaluation account

d) Profit and loss Appropriation account

[1–c;2–b]

Page 57 of 146
 UNIT – 5 Financial Statement of Not-For-Profit Organizations

R – Remembering

U- Understanding

A – Application

A&E- Analysis & Evaluation

Fill In the Blanks

1. ( R) Hospitals, schools, clubs, are examples of _______________ [NPO]

2. ( R) Donation for Building is shown in __________ side of balance sheet. [Liabilities]

3. ( R) The total of income side of Income and Expenditure Account is more than the total of
expenditure side by Rs.25,000. Rs.25,000 is ___________ [Surplus]

4. ( A) Rent paid by Jaipur Club was Rs.40,000. If rent outstanding for the years ended 31stMarch,
2019 and 31st March, 2018is Rs. 15,000 and Rs. 2,000 respectively. Rent shown in Income and
Expenditure Account will be __________ .[Rs. 53,000]

5. ( A) The Balance Sheet as at 31st March, 2019 of Rotary Club of Jaipur shows total asset at Rs.
5,99,500. If the creditors for Medicines and Rents is Rs.99,000 and Rs. 500 respectively and
Surplus of the Club for the year was Rs. 50,000. The Opening Capital Fund was
______________[Rs. 4,50,000]

6. ( R ) Subscription received in advance in the current year is shown on _________ side of Balance
Sheet. [Liabilities]

7. ( A&E) A club has 400 members each paying an annual subscription of Rs. 300. On 31st March,
2019 Advance Subscription is Rs. 2,000 and Outstanding Subscription is Rs. 7,000. Income and
expenditure will be credited by_________ as subscription for the year ended 31st March, 2019.
[Rs. 1,20,000]

8. ( A& E )A Society has 500 members each paying Rs. 100 as annual subscription. It received Rs.
40,000 towards subscription during the year. Subscription received in advance at the beginning of
the year was Rs. 12,000. In the Receipts and Payments Account Subscription Received will be
shown as ______________. [Rs. 40,000]

9. ( U )Subscription income for the year is a _____________income. [Revenue]

Page 58 of 146
10. ( R )General Donation is shown in _________________. [Income and Expenditure Account]

11. ( R ) Legacy Donation received for a specific purpose is shown in _______. [Balance Sheet]

12. ( A& E ) club has 250 members each paying an annual subscription of Rs. 1,000. The receipt and
payments account for the year ended 31st March, 2019 showed Rs. 2,65,000 received as
subscription. Additional information provided is:

Subscription outstanding on 31st March, 2018 Rs. 40,000

Subscription received in Advance as on 31st March, 2019 Rs. 30,000

Subscription received in Advance as on 31st March, 2018 Rs.12,000

_______Amount that will be shown as Outstanding Subscription as on 31st March, 2019

[Rs. 43,000]

13. ( A) Subscription outstanding at the beginning of current year is ________ from the amount of
subscription on the credit side of Income and Expenditure Account. [Deducted]

14. ( U ) Income and Expenditure Account shows the amount of subscription for the ____________
irrespective of the fact whether it is received or not. [Current year]

15. ( A&E) Star Sports Club received Rs. 62,000 as subscription for the year ending 31 st March, 2018.
The are 250 members each paying an annual subscription of Rs. 400 each. Subscription of Rs.
10,000 was received in advance on 31st March, 2017. The amount of subscription outstanding for
the current year is_________ [Rs. 28,000]

16. ( A& E) Income and Expenditure Account of a cricket club shows Rs. 36,000 as the amount of
subscription for the year ended 31st March, 2018.Subscription outstanding at the end of year was
Rs. 8,000. Subscription received in advance at the end of the year was Rs. 6,000. The amount of
subscription to be shown on the receipts side of Receipts and Payments Account will
be_______________ [Rs. 34,000]

17. ( U ) Subscriptions are ___________ in nature for a Not for Profit Organisation.[Revenue]

18. ( R )Not for Profit Organisation is a ____________ Legal entity. [Separate]

19. ( U )Capital fund Is also known as _________________ (Accumulated Fund)

20. ( R)An NPO does not have ____________ like proprietorship, partnership and joint stock
company. [ Capital]

Page 59 of 146
 21. ( R ),Y and Z were doctors and they started a dispensary in rural area. They provided free service
to poor and charged fee from others. The Organization is not an example of _________[Not for
Profit Organisation]

22. ( U )X and Y provided services of providing education to below BPL children charging nominal fee
for running the school. It is a ________________.[Not for Profit Organization]

23. ( R)The regular source of income of a club is ___________[Subscription]

24. ( U )Subscription is of ____________nature therefore it is shown in Income and Expenditure

Account.[ Revenue]

25. ( A) National sports club received Rs. 25,000 as subscription during the year 2018-19. The club
has 300 members each pay Rs. 100p.a, during the year 2017-18, 10 members had paid their
subscription for year 2018-19. The amount of subscription outstanding for the year 2018-19 will be
_______________.[Rs. 4,000]

26. ( A)A club has 350 members. Each pay Rs. 10 p.a as subscription, Outstanding Subscription for
the year 2018-19 was Rs. 500. How many members have paid their subscription during the year
2018-19 _________.[ 300 members]

True /False
1. ( R) Life membership fees and Endowment Fund are examples of capital Receipts. (T)

2. ( A)Creditors for Stationary in the beginning of the year are added to the amount of stationary
purchase while calculating the amount of stationary consumed during the year . (F)

3. ( U )Both revenue and capital payment are shown on the expenditure side of Income and
Expenditure Account. (F)

4. ( A )Subscriptions in Arrears at the end of the year has a debit balance. (T)

5. ( R)Specific donations are shown in the asset side of Balance Sheet. (F)

6. ( A) Surplus increases the credit balance of capital. (T)

7. ( U )A NPO distributes its surplus or deficit to its members. (F)

8. ( U )Outstanding subscription is an asset. (T)

9. ( A)Deficit in an NPO is debit balance of Receipts and Payments Account. (F)

Page 60 of 146
10. ( R)/Capital Fund normally has a credit balance. (F)

11. ( A&E)If a Club has 400 members each paying a monthly subscription of Rs. 100, Subscription to be
credited to Income and Expenditure Account is Rs. 40,000. (T)

12. ( A) Bank overdraft is shown on credit side of Receipts and Payments Account in the beginning of
the year. (T)

13. ( R)Deficit decreases the credit balance of Capital Fund. (T)

14. ( U )Income and Expenditure Account is prepared on cash basis while Receipts and Payments
Account is prepared on accrual basis. (F)

15. ( R) In Poor Girls Marriage Fund of Rs. 1,00,000, further donation received towards the fund is
added. (T)

16. ( U ))Receipts and Payments Account is a summary of all capital receipts. (F)

17. ( A) Surplus as per Income and Expenditure Account is deducted from Capital Fund. (F)

18. ( A) Government grant received by a school for scholarship is revenue receipt. (T)

19. ( A)Legacy (If purpose specified), Life membership Fees, Specific Donation etc, is added in Capital
Fund. (T)

20. ( R ) Receipts and Payments Account is a nominal account whereas Income and Expenditure
Account is a real account. (F)

21. ( A&E ) If Match Fund is Rs.20,000 while match expenses are Rs. 23,000, 3,000 will be debited to
Income and Expenditure Account. (T)

22. ( A&E) due to be received’ in the current year is added to subscription on the credit side of Income
and Expenditure Account. (T)

23. ( A&E)If there appears a sports fund , the expense incurred on sports activities will be shown on
debit side of income and expenditure account . ( F)

24. ( R)Donation for specific fund is always capitalized . ( T)

25. ( R) A Non - profit organisation never undertakes trading activities ( F)

Page 61 of 146
MULTIPLE CHOICE QUESTIONS
1. ( R )Receipts and Payments Accounts generally shows:
(a) A Debit balance
(b) A Credit balance
(c) Surplus or deficit
(d) Capital Fund (a)

2. ( R ) Subscription received by a school for organizing annual function is a:

(a) Capital receipts
(b) Revenue receipts
(c) Assets
(d) Earned income (b)
3. ( A&E) Subscription received in cash Rs 60,000; subscription received in advance for next year Rs
3,000 and received in advance during previous year is Rs 2,000.Subscription in arrears at the end of
current year Rs 5,400 . Amount credited to Income and Expenditure Account will be :
(a) Rs 53,600
(b) Rs. 55,600
(c) Rs. 66,400
(d) Rs. 64,400 (d)

4. ( A& E ) How much amount will be shown in Income and Expenditure A/c in the following case:

2019(Rs.) 2020(Rs.)

Creditors for medicines. 10,000 12,000

Stock of Medicines. 8,000 13,000

Payment made for Medicines during 2019-20 was Rs. 2,50,000

(a) Rs. 2,53,000

(b) Rs. 2,47,000
(c) Rs. 2,57,000
(d) Rs. 2,43,000 (b)

5. ( U )Excess of Income over Expenditure is:

(a) Deficit
(b) Capital Fund
(c) Surplus
(d) Deficiency (d)

6. ( A&E )Opening balance of sports material was Rs 10,000. During the year, sports material purchased
for Rs 12,000; Rs 3,000 of sports material were found defective and hence returned during the year.
At the end of the year, unused stock of sports material were Rs. 16,500. Amount of Sports Material
consumed during the year is:
(a) Rs. 1,500
(b) Rs. 3,500

Page 62 of 146
 (c) Rs. 5,500
(d) Rs. 2,500 (d)

7. ( A&E) Total Assets at the end are Rs.2,25,000. External Liabilities are Rs. 1,00,000. If surplus for the
year is Rs. 20,000, Opening Capital Fund will be:
(a) Rs. 1,05,000
(b) Rs. 1,25,000
(c) Rs. 25,000
(d) Rs. 1,00,000 (a)

8. ( A)In Receipts and Payments Account, items entered are:

(a) Capital receipts
(b) Revenue receipts
(c) Both a and b
(d) None of the above (c)

9. ( U )Income and Expenditure Account shows:

(a) Surplus
(b) Deficit
(c) Capital Fund
(d) Surplus or Deficit (d)

10. ( R ) Subscription received by a Library is:

(a) Capital receipt
(b) Revenue receipt
(c) Asset
(d) Unearned income (b)

11. (A &E ) Salary outstanding in the beginning of the year is Rs 10,000 and at the end of the year it is Rs
20,000, if the amount Debit to Income and Expenditure Account is Rs 1,00,000, what is the cash paid
to Salary Account:
(a) Rs. 1,10,000
(b) Rs. 1,20,000
(c) Rs. 90,000
(d) Rs. 70,000 (c)

12. ( A)The transactions shown in Income and Expenditure Account are:

(a) Revenue in nature
(b) Capital in nature
(c) Both (a) and (b)
(d) Assets and Liabilities (a)

13. ( R ) Amount received from sale as grass by a club is:

(a) Capital receipt
(b) Revenue receipt
(c) Asset

Page 63 of 146
 (d) Liability (b)

14. ( U )Subscription received in advance during the Current year:

(a) an Income
(b) an Assets
(c) a Liability
(d) an expense (c)

15. ( U )Donation received for a special purpose is accounted as an:

(a) Asset
(b) Liability
(c) Income
(d) Fund. (d)

16. ( R )The two main sources of income of a Not for Profit Organisation is:
(a) Subscriptions
(b) Donations
(c) Both (a) and (b)
(d) Neither (a) nor (b) (c)
17. ( R ) Subscription received in advance in the current year is :
(a) An income
(b) An assets
(c) A liability
(d) Expense ( c)

18 ( A&E ) Subscription received in cash during the year Rs 40,000 ; subscription outstanding at the end
of previous year was Rs 1,500 and outstanding at he end of current year was Rs 2,000 . Subscription
received in advance for the next year was Rs 800. The amount credited to income & expenditure account
will be :

( a) Rs 38,700

( b) Rs 39,700

( c) Rs 40,300

( d) Rs 41,300 ( b)

19 ( A&E )Amount paid for stationary purchased Rs 45,000 . the creditor for stationary in the beginning
and end of the year Rs 4,000 and Rs 6,500. Cash purchase of stationary is Rs 15,000 . calculate the
amount of stationary purchased in the current year :

(a) Rs 47,500
(b) Rs 37,500
(c) Rs 52.500
(d) Rs 62,500 ( d)

Page 64 of 146
20 ( A&E )Cash purchase of stationary is 20% of total purchase of stationary of current year . If amount
paid for stationary Rs 70,000 and the creditor for the stationary in the beginning and at the end is Rs
10,000 and Rs 20,000. ,calculate amount of total purchases of stationary for the current year .

(a) Rs 80,000
(b) Rs 1,00,000
(c) Rs 90,000
(d) 70,000 ( b)

21 ( A& E )The opening balance of tournament fund was Rs 32,800. During the year , donation received
towards this fund amount to Rs 15,400 ; amount spent tournament was Rs 12,300 and interest received
on tournament fund investment Rs 4,000 . The closing balance of tournament fund will be :

(a) Rs 56,500
(b) Rs 64,500
(c) Rs 39,900
(d) Rs 31,900 ( c)

22( R) Main source of income for NPO's :

(a) subscription

(b) specific donation

(c) legacy

(d) entrance fees ( a)

23 ( A) Amount received by sale of crockery should be treated as :

(a) Revenue Receipts

(b) Capital receipts
(c) Assets
(d) Unearned income ( b)

24( A&E ) Subscription received for the year ended 31st march 2016 is Rs 1,80,000 ; subscription
outstanding on 31st march 2015 is Rs 15,000 ( out of which Rs 10,000 is received in 2016 ) and
subscription outstanding on 31st march 2016 is Rs 18,000. What will be the outstanding subscription for
the year 2015- 2016 :

(a) Rs 18,000
(b) Rs 15,000
(c) Rs 13,000
(d) Rs 10,000 ( c)

25 ( A& E )Subscription received for the year ended 31st march 2016 is Rs 2,00,000 ; subscription
received in advance on 31st march 2015 is Rs 15,000 and subscription received in advance on 31st
march 2016 is Rs 18,000. There 200 members each paying Rs 1000 per annum for annual subscription
What will be the outstanding subscription for the year 2015- 2016 :

Page 65 of 146
( a) Rs 5,000

(b) Rs 4,000

( c) Rs 3,000

( d) Rs 2,000 ( c)

Matching Questions:
1 ( R ) Match the following items in NPO

Description Options
1 It is like a summary of cash transactions. A .Income and Expenditure A/c
2 It is like a Profit and Loss A/c b.Opening Balance Sheet
c.Receipts and Payment A/c

[1 – c; 2 – a]

2. ( R ) Match the following items in NPO

Description Options
1 Surplus is a.Excess of Expenditure over Income
2 Opening capital fund is b.Excess of Liabilities over Assets
3 Deficit is c.Excess of Income and Expenditure
d.Excess of Assets over Liabilities

[1 – c; 2 – d; 3 – a]

3. ( A) Match the following items in NPO

Description Option
1 Tournament Fund Rs 45,000 and a.Rs 20,000 will be shown in Balance Sheet
Tournament ExpenseRs 40,000 (Liabilities)
2 Tournament Fund Rs 60,000 and b.Rs 12,000 is Debited as expense and Rs.
Tournament Expenses Rs 40,000 18000 is Credited as Income.
3 Tournament Receipts Rs 18,000 and c.Rs 5,000 will be shown in Balance Sheet
Tournament Expenses Rs 12,000 (Liabilities)
4 Tournament Receipts Rs16000 and d. Rs 5,000 will be debited to Income and
Tournament Exp. Rs 21000 Expenditure Account.

[1 – c; 2 –a; 3 – b; 4 – d]

4. ( U ) Match the following items in NPO

Description Options
1 Legacy donation for specific purpose is a.Opening Balance Sheet and Closing
shown in Balance Sheet because it is Balance Sheet and Income and Expenditure
A/c
2 Entrance Fees is shown in b. Shown in Receipts and Payment A/c

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3 Opening and Closing Cash Balance are c.Capital Nature Income
shown in
d.Income and Expenditure A/c

[1 – c; 2 – d; 3 – b]

5( R) Match the following items in NPO

1. Subscription of current year is shown in a Will not be shown

2. Tournament Fund is shown in b Debit side of Income and Expenditure A/c
3.Tournament Expenses is shown in c Credit side of Income and Expenditure A/c
4. Salary is shown in d Liabilities side of Balance Sheet
5. Salary Outstanding is show in e Deducted from Tournament Fund
6.Depreciation
[1 – c; 2 – d; 3 – b; 4 – b; 5 – d; 6 – b]

6 ( R) Match the following items in NPO

1. Receipts and PaymentsAccount is a a Cash basis

2. Receipts and PaymentsAccount record b Non-cash items
transactions of
3. in Receipts and Payments Account all c Capital and Revenue Nature
transactions are recorded on
4. in Receipts and Payments Account, no D Real Account
adjustment are made for
[1 – d; 2 – c; 3 – a; 4 – b]

7.( U ) Match the following items in NPO

1.Outstanding rent of current year (a) ‘+’ to rent on Dr. side of Income
&ExpenditureAccount
2. Outstanding rent of previous year (b) ‘+’ to rent on Cr. side of Income
&ExpenditureAccount
3. Prepaid rent of current year (c) ‘-‘ to rent on Dr. side of Income
&ExpenditureAccount
4. Prepaid rent of previous year (d) ‘-‘ from rent on Cr. side of Income
&ExpenditureAccount
[1.(a) 2(c) 3(c) 4(a)]

8. ( U ) Match the following items in NPO

1. Donation for Building (a) Dr Side of Income and Expenditure A/c

2. Arrears of subscription at the beginning of (b) Cr. Side of Income and Expenditure A/c
the year
3. Endowment Fund (c) Opening Balance Sheet (Asset Side)
4. Deficit of a Fund (d) Liabilities side of Closing Balance Sheet

Page 67 of 146
 [1-d, 2-c, 3-d,4-a]

9( U) .Match the following items in NPO

1. Receipts and Payments Accounts is a a. Profit organization

2. Receipts and Payment Account is b. Summary of cash book
prepared for a
c. Not for profit organization
[1 – b; 2 – c]

10( R) .Match the following items in NPO

1. Receipts and Payments Accounts shows a. Excess of Income over Expenditure

2. Receipts and Payments Account does not b. Cash in hand
show
c. Excess of Expenditure over Income
d. Cash at Bank
[1 – (b) and (d); 2 – (a) and (c)]

11.( R)Match the following items in NPO

1. Receipts and Payments Account is a. Liabilities side of Balance Sheet

prepared
2. Income and Expenditure shows Surplus in b. Income and Expenditure A/c
case of
c. Capital Fund or General Fund
d. Excess of Income over Expenditure
e. On Cash Basis
[1 – e; 2 – d]

12( U ). Match the following items

1. Revenue Receipts for the NPOs a. Legacy

2. Capital Expenditure for the NPOs b. Purchase of books
c. Subscription received
[1 – c; 2 – b]

13.( A) Match the following items

1. Rent received will be shown a. as expense in Income and Expenditure A/c

2. Donations received for Swimming Pool is a b. Capital Receipts
c. Capital Expenditure
d. Receipts side of Receipts and Payments
Account
[1 – d; 2 – b]

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14.( A&E) club has 1000 Members each pays an annual subscription of Rs. 100. 15 members did not pay
their subscription for the year. 10 members paid subscription in advance for next year. 5 of them had
given subscription of this year in previous year. Based on these facts, match the following items:

1. Subscription Income to be credited in a. Rs. 1,500

Income and Expenditure Account
2. Subscription to be debited in Receipts and b. Rs. 500
Payments Account
3. Subscription received in advance in the c. Rs. 1,00,000
beginning
4. Subscription received in advance at the end d. Rs. 99,000
5. Subscription outstanding at the end of the e. Rs. 1,000
year
[1 – c; 2 – d; 3 – b; 4 – e; 5 – a]

Q15( A)

1 Specific Donation a) Receipt & Payment account

2 General Donation b) Income & Expenditure account

c) Balance sheet

d) Trading account

[ 1- c ; 2 – b ]

Q16( A)

1 Account that provides information of cash a) Balance sheet

position of Non Profit Organization
2 Account that provides information of b)Receipt& Payment
financial status of Non Profit Organization

c)Income & Expenditure

d)Subscription Account

[1 – b ; 2 a ]

Q17( A)

1 Endowment fund a)Set up to grant loan for specific purpose

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2 Prize fund b)Arising out of bequest or gift

c)Set up to use for distribution of prizes

[ 1 –b ; 2 –c ]

Q18( A)

1 sale of sports materials a)Revenue receipts

2 sale of sports Equipment b)Revenue expenditure

c)Capital receipt

d)Capital Expenditure

[1–a2–c]

Q19 ( A)

1 Receipt and payment account is prepared on 1 Accrual basis

basis of :
2 Income and expenditure account is prepared 2 Cash basis
on basis of :
3 None of the above

[1 – b ; 2-a ]

Q20 ( A)

1 Subscription Received is shown in : a)Trading Account

2 Subscription Receivable is shown in : b)Receipt & Payment Account
3 Subscription received in advance is shown in c)Income & Expenditure Account
:
d)Balance sheet
[ 1- b; 2 – d ; 3- d ]

Q21( A&E)

1 Amount paid for the stationary is shown in : a)Trading account

2 Creditor for stationary is shown is shown in : b)Receipt & Payment account
3 Advance paid to supplier of stationary is c)Balance sheet

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shown in :
4 Closing stock of stationary is shown in : d) Income & Expenditure account
[ 1- b ; 2- c; 3 – c; 4 – c ]

Q22( A& E)

1 How are not for profit organisation organised a)Partners

:
2 How are not for profit organisation managed b)Societies
:
C)Shareholder
d)Executive committee
[1–b;2–d]

Q23( A&E)

1 How much amount will be shown in income a)Rs 1,00,000

and expenditure if club has 400 members
each paying an annual subscription of Rs 100
. Outstanding subscription for current year is
Rs 2,000
2 How much amount will be shown in income b)Rs 42,000
and expenditure if club has 500 members
each paying an annual subscription of Rs 200
. Outstanding subscription for current year is
Rs 5,000 and subscription received in advance
Rs 3,000.
c)Rs 40,000
d)Rs 1,02,000
[1–c;2–a]

Page 71 of 146
Q24 ( A&E)

1 Salary paid by club is Rs 1,20,000 in current a) RS 1,22,000

year , how much amount will be shown in
income & expenditure account if unpaid salary
Rs 5,000 and salary paid in advance for the
current year was Rs 1,000.
2 Salary paid by club is Rs 1,20,000 in current b)Rs 1,24,000
year , how much amount will be shown in
income & expenditure account if unpaid salary
Rs 5,000 for Previous year and salary paid in
advance for the current year was Rs 1,000
c)Rs 1,16,000
d)Rs 1,14,000
[ 1- b ; 2- d]

Q25( A&E

1 Amount paid for sports material during the a)Rs 20, 400
year is Rs 20,000 ; stock of sports material at
the beginning and end of year Rs 3,300 and
Rs 2,900 . Creditors for sports materials at the
beginning and end is Rs 5,000 and Rs 4,000 .
how much amount is shown on debit side of
Income and expenditure Account .
2 Purchase of sports material during the year b)Rs 19,400
is Rs 20,000 ; stock of sports material at the
beginning and end of year Rs 3,300 and Rs
2,900 . Creditors for sports materials at the
beginning and end is Rs 5,000 and Rs 4,000 .
how much amount is shown on debit side of
Income and expenditure Account .
c)Rs 19,600
d)Rs 20,600
[ 1- b ; 2- c ]

Page 72 of 146
 UNIT -6 Company Accounts – Issue of Shares
R – Remembering

U- Understanding

A – Application

A&E- Analysis & Evaluation

Fill in the Blanks

Remembering ( R )

1. The options granted by the company to its employees and employee

directors at a price that is lower than the market price is ______.
[ ESOP ]
2. Share capital of a company is divided into small units .Every unit is known as
__________. [ Share ]
3. Actual number of shares offered to the public by the company for subscription
is known as___________. [ issued capital ]
4. Part of the issued capital offered for subscription to public is known
as_________. [subscribed capital ]
5. When the shares are issued at a price more than the face value, it is known
as share issued at________ [ premium ]
6. Excess balance amount of share forfeited account will be transferred to
___________ Account. [ Capital Reserve ]
7. When the called up amount is not paid by the shareholders then it will be
transferred to _________ Account. [ Calls-in-arrears ]

Understanding ( U )

1. At the time of forfeiture of shares Share Capital Account will be debited with
________________Value. [ Called Up ]
2. The application money should be refund within _______ days from the
closure of the issue. [ 15 days ]
3. A company must receive minimum subscription of _____ of shares before it
allots the share. [ 90% ]

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 4. X Ltd purchase the running business of Y Ltd consist total asset of Rs.
10,00,000 liabilities of Rs. 2,00,000. X Ltd paid Rs. 2,00,000 immediately in
cash and balance by issuing 7,000 share of Rs. 100 each at a premium of
Rs. 20 per share. The goodwill A/c will be debited by Rs._______.
[ 2,40,000 ]
5. Mr. X purchased business from Y Ltd. By payingRs.15 lakh for the assets
worth Rs.18 lakh and liabilities worth Rs.4 lakh. Then _______ A/c will be
credited by Rs. 1 lakh. [ goodwill ]
6. Alpha ltd. forfeited 200 equity shares of Rs. 10 each on which Rs. 6 was paid
(including Rs. 1 premium). On reissue, the company can allow Rs.______as
discount. [ Rs.5 each ]
7. Beta ltd. issued 10,000 shares of Rs.10 each at 20% premium which was
over-subscribed to the extent of 5,000 shares. All money to be paid on
application only and shares were allotted on pro-rata basis. The company will
refund________. [Rs.60,000, 5,000 x 12 ]
8. Rock ltd. Forfeited 2,000 equity shares of Rs. 10 each(called up Rs.7
each)for non-payment of Rs. 3 per share on allotment out of which company
reissued 1,000 shares for Rs.9 each ,Amount of share capital will be credited
by Rs.________. [Rs. 7,000 ]
9. Rock ltd. Issued 10,000 equity shares of Rs.10 each out of which 2,000
shares were offered to the promoters stands debited to___________ A/c.
[ incorporation cost ]
10. A company issued 50,000,12% preference shares of Rs.100 each.
Company received applications for 70,000 shares. This will be known as
________of shares. [ Oversubscription ]
11. If a company has not received. The minimum subscription, within
specified period then the application money should be refunded within the
______ days from the closure of the issue. [ 15 ]

Application (A)
1. A company issued 10,000 shares of Rs.10 each at par for which
Application were received for 50,000 shares. Amount called up:-On
application Rs.4 each, on allotment Rs.3 and final call remaining Amount
Shares were allotted on pro-rata basis Excess money will be refunded.
After utilization for allotment and final call. The Bank A/c will be credited
with Rs._______. [ 1 lakh ]

Page 74 of 146
 2. Santa ltd. issued 8,000 shares of Rs.10 each at per. Amount called up:-
Rs.4 on application,Rs.3 on allotment and Rs.3 on first and final call.X,a
shareholder holding 500 shares did not pay allotment money.The amount
received on allotment will be Rs.________.
[ 22,500 ]
3. Banta ltd. issued equity shares of Rs.10 each at 10% premium; all shares
were issued and subscribed. Amount called up:-On application Rs.3 each,
on allotment Rs.2,Rs.3 on first call and Rs. 2 on final call. Mr.A, a holder of
200 shares paid entire money on allotment. At the time of receiving the
money of “Calls in Advance” A/c will be credited with Rs._________
[ 1,000 ]
4. Z Ltd. Forfeited 400 share of Rs. 10each and Rs. 7 called up for non-
payment of first call of Rs. 2 per share. Out of these, 300 shares were
reissued for Rs. 6 per share as Rs. 7 paid up. Rs. _______will be
transferred to Capital Reserve Account. [ 1,200 ]
5. X Ltd purchased the running business of Y Ltd. Consisting total assets of
Rs 10,00,000, liabilities of 2,00,000 X Ltd. paid Rs. 2,00,000 immediately
in cash and balance issued 7,000 Shares of Rs. 100 each at a premium of
Rs. 20 per share . The goodwill A/c will be debited by Rs._________.
[ 2,40,000 ]
6. The % associated with preference shares is prefix is the rate of________.
[ dividend ]

Analysis and evaluation

1. Alpha Ltd. forfeited 200 equity share of Rs. 10 each on which Rs. 6 each was
paid.(includes Rs. 1 premium). On reissue, the company can allow Rs. _____
each as discount. [5]
2. Beta Ltd. issued 10,000 shares of Rs. 10 each at 20% premium which was
oversubscribed to the extent of 5,000 shares. All money to be paid on
application only and shares were allotted on pro-rata basis. The company will
refund _________ amount. (Rs. 60,000)
3. Rock Ltd. forfeited 2,000 equity shares of Rs. 10 each(called up Rs. 7 each)
for non -payment of Rs. 3 per share on allotment. Out of which company
reissued 1,000 shares for Rs. 9 each. Amount of share capital will be credited
with Rs. _______. [ 7,000 ]

Page 75 of 146
 4. Rock Ltd. issued 10,000 equity shares of Rs. 10 each out of which 2,000
shares were offered to the promoters. The shares issue to the Promoter’s
stands debited to ________Account. [ incorporation cost ]
5. A co. issued 50,000 shares 12%preference share of Rs. 100 each Company
received Applications for 70,000 shares. This will be known as ________ of
shares. [ oversubscription ]
6. Santa Ltd issued 8,000 shares of Rs. 10 each at par share amount to be
called up:-On application Rs. 3; on allotment Rs. 6&Re1 on final call, A
shareholder holding 500 shares did not pay allotment money the amount not
received on allotment will be Rs. ________. [ 3,000 ]
7. Banta ltd issued 4,000 Shares 10 each at 10% premium, Rs. 2 on application
and Rs. 3 allotment (including premium), all shares were issued & subscribed
Mr. A holder of 200 shares paid entire money on allotment, Calls in Advance
A/c will be credited by Rs. _______________.
[ 1000 ]
8. Part of the issued capital applied by public for subscription is known as _____
capital. [ subscribed ]
9. When the shares are reissued at a price more that face value it is known
as _______. [ Premium ]
10. Excess balance amount at Share forfeiture account will be transferred to
______ account. [ capital reserve ]
11. When the called up amount is not paid by the shareholder then it will be
transferred to ____ account. [ Calls-in-Arrears ]

True and False

1. ( R) A Company can issue shares at discount to public [F]
2. (R )A Company can issue shares more than Authorised. [F]
3. (R) A Company can issue and allot shares to a select group of people
privately. [T]
4. ( R ) Securities premium reserve account will appear in the Balance Sheet.
[T]
5. ( R) Company can forfeit its shares. [T]
6. ( U )Reserve capital is a part of unsubscribed capital. [F]
7. ( U )Equity share capital is also known as risk capital.; [T]
8. ( A)When the shares subscribed are more than issued, it is known as
undersubscribed of shares. [F]
Page 76 of 146
 9. ( A)When the shares are issued at a price more than face value it is said that
shares are issued at premium. [T]
10. ( A) When 90% of the issued shares are subscribed by the public it is known
as over subscription of shares. [F]
11. ( U )Securities premium money can be utilized to pay dividend to
shareholders. [F]
12. ( U )Securities premium money can be utilized to issue fully paid Bonus
shares. [T]
13. ( U ) equity shares we get interest and on debenture we get dividend.
[F]
14. ( A&E) Maximum amount of discount allowed at the time of reissue of
forfeited shares should not exceed the forfeited amount. [T]
15. ( A&E)Reserve capital A/c is the account where excess amount of forfeited
shares is transferred. [F]
16. ( U )Reserve capital is the capital which will be called up by the company only
at the event of winding up of the company. [T]
17. ( A)Subscribed capital can be more than issued capital. [F]
18. ( U)Liability of a shareholder is limited to the face value of shares allotted to
him. [T]
19. ( A)A private company restricts the rights to transfer its shares. [ T ]
20. ( U)The capital which will be repaid by the company within a stipulated time
period is known as irremediable preference share. [F]
21. ( U)Securities Premium money cannot be used for writing off commission.
[F]
22. (R) Equity shareholders are the owner of the company. [T]
23. ,( R) Debenture holders are the owner of the company. [F]
24. (A&E) Minimum amount at which shares can be reissued is the amount
received at the time of Forfeiture of shares ( T)
25. (R) Capital Reserve is a part of authorised capital of a company ( F)

MULTIPLE CHOICE QUESTIONS

1. ( R) Which of the following capital is not shown in the company’s Balance

Sheet
(a) Authorised capital

Page 77 of 146
 (b) `Issued &subscribed capital
(c) Called-up & paid up-capital
(d) Reserve capital [d]
2. (R) Shares Application &Allotment A/c is a:-
(a) Personal
(b) Real
(c) Nominal [a]
3. ( R) As per sec. of the companies Act amount. received as premium on
securities cannot be utilized for :-
(a) Issuing fully paid bonus shares to the members
(b) Purchase of fixed assets
(c) Writing off preliminary expenses
(d) Buy back of its own shares [b]

4. ( R) Penalty for delay in refunding application money is charged:-

(a) 6%
(b) 5%
(c) 15%
(d) 20% [c]
5. ( R)The portion of authorized capital which can be called up only on the
liquidation of the company :-
(a) Authorised capital
(b) Reserve capital
(c) Issued capital
(d) Called up capital [b]
6. ( R ) Preference shares can be of following types :-
(a) Cumulative Preference shares
(b) Participating Preference shares
(c) Redeemable Preference shares
(d) All of the above [d]
7. ( U )The amount of capital that a company can issue as par value is called:-
(a) Authorised capital
(b) Share premium
(c) Issued capital
(d) Fixed capital [a]

Page 78 of 146
8. ( U )When the shares are issued for consideration other than cash which
account will be debited
(a) Securities Premium
(b) Capital Reserve A/c
(c) Vendor A/c
(d) Share Capital A/c [c]
9. ( U )If the purchase consideration is more than net worth then which account
will be debited for the difference amount
(a) Capital Reserve A/c
(b) Asset A/c
(c) Goodwill A/c
(d) Vendor A/c [c]
10. ( A) ltd company took over assets worth Rs. 10,00,000 and liabilities of Rs.
3,00,000 for purchase consideration worth Rs. 12,00,000 how much amount
will be debited to goodwill account
(a) Rs. 10,00,000
(b) Rs. 5,00,000
(c) Rs. 3,00,000
(d) Rs. 12,00,000 [b]
11. ( A) A ltd company took over assets worth Rs. 10,00,000 and liabilities of Rs.
3,00,000for a purchase consideration of Rs. 12,00,000 Rs. 2,00,000 bill
payable accepted and remaining was paid by issuing shares at a premium of
25% on face value Rs. 100. How much amount will be credited to Securities
Premium A/c
(a) Rs. 8,00,000
(b) Rs. 2,00,000
(c) Rs. 10,00,000
(d) Rs. 12,00,00 [b]
12. ( A) A Company allotted 20,000 shares to applicants of 50,000 shares after
rejecting 10,000 applications. The ratio in which company allotted the share
will be
(a) 5:2
(b) 5:3
(c) 2:1
(d) 3:1 [c]

Page 79 of 146
13. ( A) A Co. has issued 6,000 equity shares of. Rs. 10 each at par and called
up amount Rs. 6 per share. The remaining part of capital is termed as
(a) Called up Capital
(b) Paid up Capital
(c) uncalled Capital
(d) Subscribed Capital [c]
14. ( A ) A company has issued 6,000 equity share of Rs. 10 each at par on
application Rs. 2, Rs. 3 on allotment Rs. 2 on first call Rs. 2 on second call
and remaining final call. The second call was not made

The amount collected on allotment is …………..

(a) 17000
(b) 19000
(c) 15000
(d) 18000 [d]
15. ( A ) A company issued 6,000 shares of Rs. 10 each money to be called up:-
On application Rs. 3 on allotment Rs. 3 on first call Rs. 2 and remaining on
second call. On allotment one shareholders having 100 shares paid full
amount

The amount collected on allotment……….

(a) 18,000
(b) 12,000
(c) 18,400
(d) 18,600 [c]
16. ( A) X ltd. Forfeited 1,000 shares of Rs. 10 each for the non-payment of final
call of Rs. 2. The account will be debited for called up price of a share at the
time of forfeiture of shares :
(a) Share Forfeiture A/c
(b) Share Capital A/c
(c) Share Final Call A/c
(d) None of these [b]
17. ( A&E )Amount of discount given at the time of reissue of shares should be
debited to :
(a) Shares Capital
(b) Discount on Shares
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 (c) Share Forfeiture A/c
(d) Calls-In-Areas A/c [c]
18. ( A&E ) 2,000 shares of Rs. 10 on which 7 have been called and Rs. 5 has
been paid are forfeiture out of these 1,500 shares is reissued for Rs. 9 as
fully paid. What is the amount to be debited to Share forfeiture A/c at the time
of reissue of shares
(a) Rs. 13,500
(b) Rs. 1,500
(c) Rs. 15,000
(d) Rs. 14,000
[b]

19( A) If the Purchase consideration is less than net worth then which account will
be debited for the difference amount :

a) Capital Reserve
b) Assets
c) Goodwill
d) Vendor ( a)

20( A&E ) A company issued 10,000 shares of Rs 10 each at par ; Rs3 on

application ; Rs 3 on allotment ; Rs4 on First & Final call . One shareholder holding
1,000 shares paid the entire amount of his shares with application . Calculate
amount received on application :

a) 1,00,000
b) 1,17,000
c) 1,10,000
d) 37,000 (d)

21 ( A& E )A company Forfeited 1,000 shares of Rs10 each , Rs7 called up . For
the non payment of Rs 2 First call. All these shares were reissued at Rs 5 per
share . What amount will be debited to share Forfeiture account :

a) 5,000
b) 2,000
c) 7,000
d) 10,000 (b)

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22 ( A&E ) A company Forfeited 1,000 shares of Rs 10 each , Rs 7 called up . For
the non payment of Rs 2 First call .All these shares were reissued at Rs 5 per
share . What will be Amount credited to share capital account at reissue:

a) 7,000
b) 10,000
c) 5,000
d) 2,000 (a)

23 ( A& E ) A company Forfeited 1,000 shares of Rs 10 each , Rs 7 called up. For

the non payment of Rs 2 First call . All these shares were reissued at Rs 5 per
share. What will the amount transferred to capital Reserve account :

a) 2,000
b) 3,000
c) 4,000
d) 5,000. (b)

24 ( A&E ) A company Forfeited 2,000 shares of Rs 10 each issued at 20 %

premium to be paid at the time of allotment on which Rs 8 is called up. company
not received Rs 4 on Allotment including premium and Rs2 in First call. What will
be the amount Debited to share capital account:

a) 20,000
b) 16,000
c) 24,000
d) 18,000. ( b)

25( A& E ) A company Forfeited 2,000 shares of Rs10 each issued at 20 %

premium to be paid at the time of allotment on which Rs 8 is called up. Company
not received Rs 4 on allotment including premium and Rs2 on First call .What will
be the amount credited to share Forfeiture account :

a) 10,000
b) 8,000
c) 6,000
d) 2,000

Page 82 of 146
Match the following
Q1( R)
1. First stage of company in a) Capital subscription
corporation
2.After getting the name of the b) Promotion
proposed company approved
c) Commencement of business
d) Incorporation or registration
[ 1-b, 2-c ]

Q2( R )
1. A Company can issue shares a) For cash
b) For considering other than cash
c) Both (a) and (b)
[ 1-c ]

Q3( R )
1. Shares issued at face value a) At discount
2. Shares issued at more than face b) At par
value
c) At premium
[ 1 – b, 2 – c]

Q4 ( R )
1. Amount not paid by the a) Calls in arrear
shareholder is
b) Calls in advance
[ 1-a ]

Q5( R )
1. What is the treatment of forfeiture a) Added
in balance sheet
b) Deducted
[ 1-a ]

Page 83 of 146
Q6( R )
1. A company having at least 7 a) Private company
members
2. A company having at least 2 b) Public company
members
c) One person company
[ 1-b, 2-a ]

Q7( U )
1. Actual number of shares offered a) Authorised capital
to the public
2.Maximum number of share above b) Issued capital
which a company cannot issue
shares to the public
c) Subscribed capital
d) Uncalled capital
[ 1-b, 2-a ]

Q8( U )
1. When shares are forfeited which a) Incorporation cost
account is debited
2. When the shares are issued to b) Share capital
promoters which account is debited
c) Share Forfeiture A/c
d) Capital Reserve A/c
[ 1-b, 2-a ]

Q9( U )
1.Amount called but not paid by the a) Call in advance
shareholders
2.Amount not called up but paid by b) Called up capital
the share holder
c) Paid up capital
d) Calls in Arrear
[ 1-d, 2-a ]

Page 84 of 146
Q10 ( U )
1. Shares issued by company to its a) Reserve Capital
employees or directors at a discount
b) Capital Reserve
c) Sweat Equity Share
d) Employee Stock Account
[ 1-c ]
Q11( R )
1. Amount of capital stated in M.O.A a) Issued Capital
2. Entire money called up and paid b) Authorised Capital
c) Called up Capital
d) Subscribed and fully paid up
[ 1-b, 2-d ]
Q12( R )
1. Dividend cannot accumulate on a) Non-cumulative preference share
b) Equity share
c) Preference share
d) Non-participating preference
share
[ 1-a ]
Q13( U )
1. Shares issued at less than face a) At discount
value
2. Shares issued at face value b) At Par
c) At premium
[ 1-a, 2-b ]
Q14( U )
1. Over – subscription a) Number of shares applied less
than offered
2. Under – subscription b) Number of shares applied equal
than offered
c) Number of shares applied more
than offered
[ 1-c, 2-a ]
Q15( U )
1. Capital Reserve a) Created out of uncalled capital
2. Reserve Capital b) Created out of revenue profits
c) Created out of capital profits
[ 1-c, 2-a ]

Page 85 of 146
Q16( U )
1.shares issued to promoters a) Issue expenses
2.Shares issued to underwriters b) Incorporation cost
c) Underwriting commission
d) Call in arrears
[ 1-b ; 2- c ]

Q17( A )
1.when shares are reissued at value a) Securities premium Reserves
less than face value
2. When shares are reissued at b) Discount on issue of shares
value more than face value
c) Share forfeiture
d) Call in advance
[ 1-c; 2- a ]

Q18( A)
1.At the time of forfeiture of shares a) Amount received
share capital is debited with
2.At the time of forfeiture of shares b) Amount not received
share Forfeiture is Credited with
c) Amount demanded
d) Calls in advance
[ 1-c ; 2 –a]

Q19( A)
1.Maximum amount of discount at a) Amount Received
the time of reissue of shares
2.Minimum amount at which shares b) Amount not received
can be reissued
c) Amount demanded
d) Calls in advance
[ 1 b; 2 a ]

Page 86 of 146
Q20( A)
1.Purchase consideration is more a) Capital Reserve
than net worth
2.Purchase consideration is less b) Assets
than net worth
c) Goodwill
d) vendor
[ 1 –c ; 2 –a ]

Q21( A )
1.The amount of nominal capital that a) Subscribed capital
company can issue .
2.The amount of nominal capital that b) Issued capital
cannot be issued
c) Reserved capital
d) Paid up capital
[ 1- b ; 2 c ]

Q22( R)
1.Share application & allotment a) Real account
account
2. Securities premium Reserve b) Nominal account
account
c) Personal account
d)
[ 1-c ; 2 –b ]

Q23( A&E)
1.A company issued 10,000 equity shares a) Rs 11,00,000
of Rs 10 each at 10 % premium for
consideration other than cash . what will
the amount of purchase consideration
2.A company purchased sundry assets of b) Rs 10,00,000
Rs 11,00,000 from other company
payment made by issuing 1,00,000 equity
shares of Rs 10 each at 10 % premium .
what will be amount of net worth .
c) Rs 1,00,000
d) Rs 1,10,000
[ 1 –d ; 2 – a ]

Page 87 of 146
Q24A& E )
1.A company forfeited 1,000 shares a) Rs 10,000
of Rs 10 each issued at par , Rs 8
called up per share . Rs 2 per share
was not paid . What will be amount
with which share capital account is
debited
2..A company forfeited 1,000 shares b) Rs 8,000
of Rs 10 each issued at par , Rs 8
called up per share . Rs 2 per share
was not paid . What will be amount
with which share Forfeiture account
is credited
c) Rs 2,000
d) Rs 6,000
[ 1 –b ; 2 – d ]

Q25( A& E )
1. A company forfeited 1,000 share a) Rs 10,000
of Rs 10 each issued at 20 %
premium ( to be paid at he time of
allotment ) on which Rs 2 for final
was yet not called and Rs 2 for First
call was not paid. What amount will
be debited to share capital account
2.. A company forfeited 1,000 share b) Rs 8,000
of Rs 10 each issued at 20 %
premium ( to be paid at he time of
allotment ) on which Rs 2 for final
was yet not called and Rs 2 for First
call was not paid. What amount will
be Credited to share Forfeiture
account
c) Rs 6,000
d) Rs 4,000

Page 88 of 146
 UNIT – 7 Company Accounts

(A) Issue of Debentures

(B) Redemption of Debentures

MULTIPLE CHOICE QUESTIONS

Remembering
1 The provision of companies act 2013 in respect of redemptions of debentures are
to protect the interest of :

A) Debenture holders B) Creditors C ) shareholders D) Bank .

2 Premium payable on redemption of debentures is in the nature of :

A) Liability account B) assets account C) expense account D ) none of the

above

3 Debenture holder are :

A) Owner of the company B) lenders of the company C) vendors of the

company D) customers of the company

4 At the time of issue of debentures , debentures account is :

A) Credited by the amount Received

B) Credited by the issue price of the debentures
C) Credited by nominal value of the debenture
D) none of the above

5 Return on debenture is called :

A) interest
B) dividend
C) A & B both
D) None of the above

Page 89 of 146
6 Perpetual Debenture is the other name of :

A) Convertible debentures
B) Irredeemable debenture
C) Naked debenture
D) None of the above

Understanding
7. in case of debenture of RS 10,000 are issued at par but redeemable at a
premium of 10% , The premium payable is debited to :

A) Debenture suspense account

B) Premium on redemption of debentures
C) Loss on issue of debentures
D) A & B both

8.A Ltd decided to redeem 2,000 9% debenture of Rs 100 each on 31st December
2018 , the company should invest in specified securities on or before :

A) 30thapril 2017
B) 30thapril 2018
C) 31st December 2017
D) 31st December 2018

9. Debentureholder account are :

A ) Personal

B) Real
C) Nominal
D) None of the above

10. XLtd has purchased the building and debentures are issued at discount which
account will be debited for discount :
A) Discount on issue of Debentures
B) Loss on issue of debenture
C) A& B any one can be
D) None of the above

Page 90 of 146
Application
11 Debentures are shown in the balance sheet of the company under the head of ;

A) Non current liabilities

B) Current liability
C) Share capital
D) None of the these

12 Discount or loss of issue of debenture to be written off after 12 months from the
date of balance sheet or after the period of operating cycle in shown as :

A) Other current assets

B) Other non current assets
C) Other long term liability
D) Other current liabilities

13 ABC Ltd Purchase a machinery worth Rs 1,98,000. The payment made by issue
of debenture of Rs 100 each at 10 % Discount in this case no. of debenture will be :

A) 1100
B) 2200
C) 3300
D) 4400

14 TP Ltd decided to redeem 1000, 10 % debenture of Rs 100 each redeemable at

10% premium . The company will have to invest in specified securities at least :

A) 15000
B) 16500
C) 25000
D) 27500
15 Global Ltd is to redeem 10,000 10% debenture of 100 each on 30thjune 2007
how much amount should be transferred to DRR by :
A) 2,50,000
B) 1,00,000
C) 5,00,000
D) Nil
16 Which of the following do not have voting right in the company :
Page 91 of 146
 A) Debentureholders
B) Shareholders
C) Both A & B
D) None of these

Evaluating

17. When 100 debenture issued at 5 % discount @ 100 each but redeemable at
premium of 8% . How much amount will be credited as premium on redemption of
debentures account :

A) 5000
B) 4000
C) 8000
D) 6000

18. United Ltd is to redeem 40,000 10% Debenture of Rs 100 each on 31st
December 2017. How much amount should it invest in specified securities :

A) Rs 600000
B) Rs 1000000
C) Rs 500000
D) Nil

19.B Ltd decides to redeem 10,000 10%Debentures of Rs 100 each on 30 Thjune

2017 . The company should invest in specified securities on or before :

A) 30th April 2016

B) 30th April 2015
C) 30th June 2016
D) 30th April 2017

20. A Ltd took over Assets of Rs 5,00,000 and liability of Rs 50,000 from B Ltd in
the agreed consideration of Rs 4,80,000 and Issued Debentures of Rs 100 each at
the premium of Rs 20 number of Debenture issued are :

A) 40,000
B) 48,000

Page 92 of 146
 C) 4,000
D) 4,800

Q21 A company issued 1000 7% Debentures of Rs 100 at 5% Discount and

Repayable at 10 % Premium .What will be the amount of Loss on issue of
Debentures.:

A Rs 10,000

B Rs 20,000

C Rs 15,000

D, Rs 30,000.

Q22 A Company issued 1000 7% Debentures of Rs 100 each at 5% Premium and

Repayable at 10% Premium. What will be the amount of Loss on issue of
Debentures:

A Rs 5,000

B Rs 10,000

C Rs 15,000

D Rs 20,000.

Q23 A company Redeem 1,000 6% Debentures of Rs 100 each at 10% premium

out of profit. What will be amount transferred to Debentures Redemptions reserve:

A Rs 25,000

B Rs 15,000

C Rs 50,000

D Rs 1,00,000

Q24 A Company issued 5,000 12% Debentures of Rs 100 each at 10 % Discount

and Repayable at 10 % Premium . Interest on Debentures are payable half yearly
on which Tax deducted at source of 10% p.a. what will the amount of tax deduction
of a year :

A Rs 3,000
Page 93 of 146
B Rs4,000

C Rs 5,000

D Rs 6,000

Q25 State Bank of India redeemed 10,000 5%Debentures of Rs 100 each at 10%
premium . What amount will be transferred to debenture redemption reserve :

A Rs 2,50,000
B Rs5,00,000
C Rs 10,00,000
D Nil

REMEMBERING
FILL IN THE BLANKS

Q 1. Debenture holder are the _________ of the company.

(creditors)

Q 2. From the point of view of security; _______ and ________ are the type of
debentures. (secured, unsecured)

Q 3. A collateral security is a _______ security besides the primary security when a

company obtains a loan from a Bank or any other financial institution.

(secondary)

Q 4. __________ Debentures are those which are payable on the expiry of the
specific period either in lump sum or in installments’.( Reedemable )

Q 5. When redemption in out of profit , ______ percent of reedemable debentures

are debentures is to be transfer to debenture redemption reserve.

(100%)

Page 94 of 146
Q 6. When debentures are repayable after a specific time , it is called ________ of
debentures. (Redemption)

UNDERSTANDING

Q 7. Interest on debenture is charge against ________ and is to be paid even if

there is no profit in the company. (profit)

Q 8.A debenture is said to be issued at a discount when the issue value is _______
than its nominal value. (less)

Q 9.Debentures are issued as other than cash, number of debentures will be

calculated as purchase price dividing by ________

( issue price)

Q 10.After redemption of debentures Debenture Redemption Reserve is

transferred to________ account. (general reserve)

Q 11.When redemption of debenture made on premium _______ account must be

debited along with debenture A/c

( Premium on redemption)

Q 12. Debenture Redemption Reserve is being made/created by _________A/c.

(surplus in statement of
P&L)

Q 13.Discount on issue of debenture is ________loss of the company.

(capital)

APPLICATION

Q 14. Interest payable on Debenture is calculated at the ______ value of

debentures.( nominal / face )

Q 15. Security premium reserve A/c is shown _______side of the balance sheet
under the head______.

(liabilities, reserve & surplus)

Page 95 of 146
Q 16.When debentures issued at par and redeemable at premium, loss on issue of
debentures A/c will be________.

(debited)

Q 17.A company is redeeming 20,000 debentures of Rs.100 each, out of profits

Rs._______is to be transferred to Debenture Redemption Reserve.

(Rs.20,00,000)

Q 18. A company redeemed 50,000 debenture of Rs.100 each by lump sum

method , Rs_________ is to be transferred to DRI A/c.

(Rs7,50,000)

Q 19. IDBI Bank issued 70,000 ,9% debentures of Rs100 each. Rs_______ is to be
transferred to Debenture Redemption on Reserve for the redemption of debenture.

(Zero)

Q 20. A company issued 100 debentures @Rs100 each at par redeemable at 5%

premium Rs________ will be debited to loss on issue of debenture A/c.

(Rs.5000)

Q 21. A company issued 500 debenture @ Rs.100 each at 5% discount and

redeemable at 7% premium Rs. ________ will be credited as premium on
redemption of debenture A/c.

(Rs.7000)

Q22 A company decided to redeem 10,000 6 % Debentures of Rs 100 each at 10%

premium . Amount already transferred to Debentures Redemption reserve is Rs
2,50,000 . ______________ will be the additional amount to be transferred to
Debentures Redemption reserve. ( Zero)

Q23 A company took a Bank loan of Rs 10,00,000 by issue of 10,00,000

6%Debenture as collateral security __________ amount will be shown in non
current liabilities in the balance sheet ( Rs 10,00,000)

Q24 _______% is minimum amount of the face value of Debentures to be

redeemed will be transferred to Debentures Redemption investment. ( 15%)

Page 96 of 146
Q25 _______% will be transferred to Debentures Redemption reserve when
redemption is purely out of profit in case of banking company ( zero)

True /False
Remembering
1. Debentures can be redeemed at premium (T)
2. Unsecure debentures can be issued in India (F)
3. At the time of redemption debenture redemption reserve is compulsory
(F)
4. A debenture holders is the owner of the company (F)
5. A debenture is written instrument acknowledging a debt (T)
6. Debenture include debenture/stock/ bond or another security of company
weather constituting a charge an the assets of company or not
(T)

Understanding
7. Premium on redemption of debenture account is shown under the Security
premium in the balance sheet (F)
8. Debenture redemption reserved is transferred to capital reserve after
redemption (F)
9. Profit on sale of redemption investment will be transferred to capital reserve
(T)
10. A debenture can get his money back only at the liquidation of the company
(F)
11. Debenture issued at a discount can be redeemed at premium
(F)
12. A company can issue debenture with voting rights (F)

Application

Page 97 of 146
13. Security premium reserve account will be debited at the time of debenture
redeemed on premium (F)
14. When debentures are redeemed liability on account of debentures is
increased (F)
15. Only redeemable debentures are compulsory redeemed (T)
16. Debenture premium cannot be used to pay dividend (T)
17. A ltd purchased machinery worth rs.198000. the payment made by issue of
debenture of Rs 100 each at 10% discount. In this case no. of debenture will
be 2200 (T)
18. Issue of 10000 , 9% debenture of Rs. 100 each as collateral security for
bank loan Rs. 100000. In this case debenture suspense a/c will be debited
by debenture a/c (T)

Analysis & Evaluation

19. A company redeemed 10000, 7% debenture of Rs. 100 each at par. The
DRR amount will be transfer to general reserve Rs. 25000
(F)
20. A company redeemed 100, 7% debentures of Rs.100 each on premium of
5%. Premium for redemption a/c will be debited by 700
(F)
21. When the debenture are issued at collateral security the final entry of
recording will be
Debenture suspense a/c Dr
To Debenture (T)
22. B ltd company has issued 200000 a/c debenture at discount of 6%. Amount
of discount on issue of debenture will be Rs. 12000 (T)
23. Journal entry for allotment of debenture to Vendor as purchase consideration
for Rs. 200000 is (T)
Vendor Dr 200000
To 10% Debenture 200000
24. A debenture issued at a discount can be redeemed at a premium
(T)
25. Debenture issued as collateral security will not be a part of long term
borrowing (T)

Page 98 of 146
MATCH THE FOLLOWING

Q1 ( R)

1.Debentures are transferable by a.Registered Debentures

Mere Delivery
2.Debentures redeemable either in b.Bearer Debentures
Lump Sum or Installments.
Ans.: 1-b 2-d c.Convertible Debentures
d.Redeemable Debentures
Q2 ( A)

1.Excess Value of Net Assest a. General Reserve

consideration.
2.Excess of Purchase consideration b. Capital Reserve
over Value of net assest.
1-b c. Vendor’s Account
2-d d. Goodwill Account
Q3( A)

1.Company issued 4000 12% a.Nominal value of Debentures

Debentures of Rs.100/- each at
5%Premium.Calculate Interest.
2.Company issued 10000 12% b.Paid up value of Debentures
debenture of Rs.100/- each at 5%
premium and redeemable at 10%
premium. Calculate loss on Issue of
Debentures
1-b c.No interest is paid.
2-d d.Called value of debenture.
Q4 ( R)

1. As per SEBI Guidelines: Amount a.50%

transferred to Debentures Redemption
Reserve:
a. Redemtion out of Profit
b. Redemption other than profit
2.1-d b.25%
Page 99 of 146
 2. 2-b c.80%
d.100%
Q5( U)

1.Premium on Redemption of a.Real Account

Debentures Account is a:
2.Loss on issue of Debenture is a : b.Nominal Account
1-c 2-b c.Personal Account

Q6 ( R)

1.Source Of Redemption a. By draws of lots in a installments

2.Method of Redemption b. By profit
1-b 2-a c. Securities premium reserves

Q7(A&E)

1.A company is redeeming a 50000 a. Debentures redemption Investment

7% Debentures of Rs.100 each at
5% premium amount 125000
transferred to:
2.A company is redeeming 50000 b. Debentures Redemption Reserve
7% Debentures of rs.100 each at 5%
premium Amounts Rs.75000
transferred to:
1-b 2-a d. General Redemption
e. Debentures Holder

Q8( A&E)

1.A Company purchased a Building a. Capital Reserves

of Rs.220000 for purchase
consideration of Rs.250000 , Rs
30000 will be transferred to :
2.A Company purchased building b. General Reserves
Rs.220000 for purchase
consideration of Rs.190000 Rs 30000
will be transferred to :
1-d 2-a c.Debentures Holders
d.Goodwill Account
Q9A&E)
Page 100 of 146
 1.A company issued 10000 7% a.150000
Debentures @ Rs.100 at 5%Premium
and Repayable at 10% Premium.
Calculate the loss on issue of
Debentures.
2.A company issued 10000 7% b.100000
Debentures @ Rs.100 at 5%Discount
and Repayable at 10% Premium.
Calculate the loss on issue of
Debentures.
1-b 2-a c.50000
d.200000
Q10(A&E)

1.A company issued 10000 7% a.1150000

Debentures @ Rs.100 at 5%Premium
and Repayable at 10% Premium.
Calculate amount received on issue
of debenture.
2.A company issued 10000 7% b.1050000
Debentures @ Rs.100 at 5%Discount
and Repayable at 10% Premium.
Calculate Amount Received on Issue
of debenture.
1-b 2-a c.1000000
d.950000
Q11(A&E)

1.A company issued 10000 7% a.1000000

Debentures @ Rs.100 at 5%Premium
and Repayable at 10% Premium.
Calculate premium of redemption of
debenture.
2.A company issued 10000 7% b.1100000
Debentures @ Rs.100 at 5%Discount
and Repayable at 10% Premium.
Calculate premium of redemption of
debenture.
1-b 2-b c.1200000
D.1500000
Q12 ( A)

Page 101 of 146

 1.Creation of debenture Redemption a.25%
Reserve for an Banking Company
2.Creation of debenture Redemption b.50%
reserve for non banking company.
c.100%
d.Exemted from created DRR.

Q13 (A)

1A company purchased Sundry a.25000

Assets of Rs.600000 and Liabilities of
50000 from another company for
purchase consideration of 600000.
Amount of Goodwill will be:
2.A company purchased Sundry b.50000
Assets of Rs.600000 and Liabilities of
50000 from another company for
purchase consideration of Rs.475000.
Amount of capital Reserve will be:
1-b 2-d c.100000
d.75000

Q14(A)

1.A company purchased Sundry a.550000

Assets of Rs.600000 and Liabilities of
50000 from another company for
purchase consideration of 600000.
Amount transfer to vendor Account
will be:
2.A company purchased Sundry b. 600000
Assets of Rs.600000 and Liabilities of
50000 from another company for
purchase consideration of Rs.475000.
Amount transfer to vendor Account
will be:
1-b 2-c c.475000
d.500000

Page 102 of 146

Q15A&E)

1.A company took over the assets of a.10000

Rs 1100000 and liabilities 110000
payable by issues of 12% debenture
of rs100each at10%discount.
Calculate the No of Debentures.
2.A company took over the assets of b.9000
Rs 1100000 and liabilities 110000
payable by issues of 12% debenture
of rs100each at 10 % premium.
Calculate the No of Debentures.
1-d 2-b c.9900
d.11000

Q16(A)

1.A company took over the assest of a.100000

Rs 1100000 and liabilities 110000
payable by issues of 12% debenture
of rs100each at10%discount.
Calculate amount of discount on issue
of debentures.
2.A company took over the assets of b.90000
Rs 1100000 and liabilities 110000
payable by issues of 12% debenture
of rs100each at 10 % premium.
Calculate amount of securities
premium reserves.
1-c 2-b c.110000
d.120000

Q17(A&E)

1.A company took over the assets of a.90000

Rs 1100000 and liabilities 110000
payable by issues of 12% debenture
of rs100each at10%v discount. And

Page 103 of 146

 repayable at 5% premium. Calculate
amount of loss on issue of
debentures.
2.A company took over the assets of b.45000
Rs 1100000 and liabilities 110000
payable by issues of 12% debenture
of rs100each at 10 % premium and
Repayable at 5% premium. Calculate
amount of loss on issue of
debentures.
1-c 2-b c.165000
D.135000

Q18(A&E)

1.A company took over the assets of a.900000

Rs 1100000 and liabilities 110000
payable by issues of 12% debenture
of rs100each at10%v discount. And
repayable at 5% premium. Calculate
amount transferred to vendor’s
account.
2.A company took over the assets of b.1100000
Rs 1100000 and liabilities 110000
payable by issues of 12% debenture
of rs100each at 10 % premium and
Repayable at 5% premium. Calculate
amount transferred to vendor’s
account.
1-c 2-c c.990000
d.850000

Q19( A&E)

1.A company took over the assets of a.990000

Rs 1100000 and liabilities 110000
payable by issues of 12% debenture
of rs100each at10%v discount. And
repayable at 5% premium. What
amount will be transferred to DRR at
Page 104 of 146
 the time of Redemption.
2.A company took over the assets of b.275000
Rs 1100000 and liabilities 110000
payable by issues of 12% debenture
of rs100each at 10 % premium. and
Repayable at 5% premium. What
amount will be transferred to DRR at
the time of Redemption.
1-b 2-d c.1100000
d.225000

Q20(A&E)

1.A company took over the assets of a.275000

Rs 1100000 and liabilities 110000
payable by issues of 12% debenture
of rs100each at10%v discount. And
repayable at 5% premium. What
amount will be transferred to DRI at
the time of Redemption.
2.A company took over the assets of b.225000
Rs 1100000 and liabilities 110000
payable by issues of 12% debenture
of rs100each at 10 % premium. and
Repayable at 5% premium. What
amount will be transferred to DRI at
the time of Redemption.
1-c 2-d c.165000
d.135000
Q21(A&E)

1.A company issued 10000 6% a.225000

debenture Rs100 each and half of
above debenture are due for
redemption. What amount will be
transferred to DRR.
2.A company issued 10000 6% b.150000
debenture Rs100 each and all of the
above debenture are due for
redemption. What amount will be

Page 105 of 146

 transferred to DRR.
1-d 2-d c.1000000
d.250000
Q22(A&E)

1.A company issued 10000 6% a.225000

debenture Rs100 each and half of
above debenture are due for
redemption out of profit. What amount
will be transferred to DRR.
2.A company issued 10000 6% b.150000
debenture Rs100 each and all of the
above debenture are due for
redemption out of profit. What amount
will be transferred to DRR.
1-c 2 c c.1000000
d.250000

Q23(A&E)

1.A company issued 5000 12% a.27000

debenture 100 Rs each at 5%
discount. And repayable at
10%premium. Interest on debenture is
Payable Half Yearly.TDS payable is
10%.Calculate Interest on debenture
for 6 month.
2.A company issued 5000 12% b.30000
debenture 100 Rs each at 5%
discount. And repayable at
10%premium. Interest on debenture is
Payable Half Yearly.TDS payable is
10%.Calculate TDS payable for 12
months.
1-b 2-c c.6000
d.3000

Page 106 of 146

Q24 ( R)

1 Cash received against Debentures : A Issue of Debentures as collateral

security

2 Assets received against Debentures : B Issue of Debentures for cash

3 Debentures given as secondary C Issue of Debentures in kind

security :

Answer 1-B; 2- C; 3 –A

Q25 (R)

1 When Debentures suspense account A Redemption at par.

is open :
2 When Premium on redemption of B Issue of Debentures as
Debentures account is opened collateral security

C Redemption at Premium
D Redemption at Discount

Answer : 1 – B & 2- C

Page 107 of 146

 UNIT - 8 (A) Financial Statement of Companies

(B) Financial Statement Analysis

(C) Tools for Financial Analysis

(D) Common Size Statement

R – Remembering

U- Understanding

A – Application

A&E- Analysis & Evaluation

FILL IN THE BLANKS

1. [ R ] There are ________ major heads on the assets side of a company’s

Balance sheet. [two]
2. [ R ] Assets and liabilities of a company are usually marshaled in the order of
_______ [ permanence]
3. [ U ] In the case of operating cycle cannot be determined then the time
period of operating cycle is assumed to be ________ months. [ 12 ]
4. [ R ] There are __________ major head of the equity and liabilities side of a
company’s balance sheet. [4]
5. [ U ] Claims are expected to be settled beyond twelve month or an operating
cycle is classified under ________. [Long term provision ]
6. [ R ] Bank overdraft and cash credit in the balance sheet of a company are
shown under ____________. [Short term borrowing]
7. [ R ] Analysis of the financial statement measures _______ capacity.
[Earning]
8. [ U ] When financial statement for a single year is analyzed, it is called
_________ analysis. [ vertical ]
9. [ u ]Financial statement analysis ignores ________ elements.
[qualitative]

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10. [ A ] When financial statement figures for two or more years are compared, it
is __________ statements. [ comparative financial ]
11. [ R ]Provision for tax is shown under the sub-head ___________[short term
provision ]
12. [ R] Financial statement refers to the statement of profit and loss and
__________. [ Balance sheet ]
13. [U] Financial statements do not show _________ information.[qualitative]
14. [U]__________ analysis is based upon the information available to the
internal groups. [ Internal ]
15. [A]________ are interested in knowing the firm’s ability to meet its short-term
liabilities. [ Creditors or Suppliers ]
16. [ A ] Financial statements are ________ in nature as they record past events
and facts. [ historical ]
17. [A&E]The debit balance of statement of profit and loss will be disclosed
under the head _________ as the _______ figure.[ Reserves and Surplus,
negative ]
18. [A]Prepaid expenses are shown under the main head _______ in the
balance sheet of a company. [ Current assets ]
19. [A&E]If the operating cycle cannot be identified, it is assumed to have
duration of __________. [ 12 months ]
20. [R]Provision for employee benefits is shown under the sub-head _________.
[Long term provisions]
21. [A&E]If expected period of payment of trade payables is 7 months and
operating cycle is of 14 months, then it is a ________ liability.
[Current liability]
22. [R]The statement which shows the assets and liabilities of the company is
known as _________. [ Balance Sheet ]
23. [U]Statement of profit and loss account is also called _______ statement.
[ Income ]
24. [R]Financial statements shows only ___________ information ( Quantities )
25. [U]The amount due on account of goods sold by the business is called
____________. (Trade Receivable )

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TRUE AND FALSE:

1.[R]It is compulsory for the directors of a company to present company’s

statement of Profit and Loss Account and Balance Sheet in the annual general
meeting of shareholders. [T]

2. [R]Contingent liabilities are shown in the balance sheet under the heading
Current Liabilities. [F]

3. [ R] The authorized capital is shown by way of information in the notes to

accounts. It is not added to the amount of share capital to be shown in balance
Sheet. [T]

4. [R ]It is not compulsory for a company to prepare balance sheet as per proforma
given in Schedule lll of companies Act, 2013. [F]

5. [ R ]Interest accrued and due on debentures is shown under the heading non-
current liabilities. [F]

6. [u]Facts and figures presented in financial statement are not at all based on
personal judgments. [F]

7. [U]Financial analysis removes the limitations of financial statements. [F]

8. [A]Horizontal analysis is useful in long term planning. [T]

9. [U]Financial analysis ignores qualitative factors. [T]

10. Financial statements show price-level changes. [F]

11. [A&E]Vertical analysis is useful in time series analysis. [F]

12. [A&E]Common size statements enable horizontal analysis. [F]

13. [U]Comparative financial statements show only absolute changes in the

figures. [F]

14.[ A] In case of common size statement, figures of previous years are taken as
base for comparison. [F]

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 15. [A]Comparative statement of profit and loss aims to measure increase or
decrease in income and expenditure in terms of rupees as well as in percentage.
[T]

16. [A]Comparative balance sheet shows the increase or decrease in various items
of balance sheet as compared to single year balance sheet, which shows the
balance of accounts at a certain date. [T]

17.[A&E]The operating cycle of a company is 17 months and the expected period

of realization of trade receivables is 14 months. Trade receivable is shown as
current assets. [T]

18.[R]The accountant of a company has shown credit balance of statement of profit

and loss in other current assets. [F]

19.[A] A company has call in arrears of Rs 4,00,000 and calls in advance of Rs.
1,50,000. The company shown net balance of Rs 2,50,000 under current assets .
[F]

20.[R]Securities premium reserves is shown under share capital head. [F]

21.[U]12 % Debentures redeemable within 12 months of the date of balance sheet

it is shown in short term provision. [T]

22 [R]Interest accrued on investment is shown in companies’ balance sheet under

non-current investment. [F]

23.[U] Both Horizontal and Vertical analysis are conducted for two or more
accounting periods. [F]

24.[A&E] Vertical analysis is also known as Static Analysis. [T]

25.[U] Financial analysis considers price level changes. [F]

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Multiple Choice Questions
1.[A&E] Share Capital of a company consists of 70,000 shares of Rs. 10 each, Rs.
8 called up. All the shareholders have duly paid the called up amount. Share capital
will be shown as:

(a)Subscribed and fully paid

(b) Subscribed but not yet fully paid

(c) Either (a) or (b)

(d) Neither(a) nor (b) [b]

2.[U]‘Claim against the company not acknowledged as debts’ is shown under :

(a) Current Liabilities

(b) Contingent Liabilities

(c) Non-current Liabilities

(d) Capital Commitments[b]

3.[R]12%Debentures in a company balance sheet is shown under the sub-head :

(a) Long term provisions

(b) Other current liabilities

(c) Long term borrowings

D(d) Other long term liabilities [c]

4. [R]Interest accrued on investments is shown in company’s Balance Sheet under

the main head .

(a) Non-current investments

(b) Current assets

(c) Other current assets

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(d) Other Non Current assets [b]

5. [U]11%Debentures redeemable within 12 months of the date of balance sheet

will be shown under:

(a) Short term borrowings

(b) Short terms provisions

(c) Other current liability

(d) Trade payables [c]

6. [A]Which of the following items is shown under the head ‘current assets’ while
preparing company’s Balance Sheet ?

(a) Investment in property

(b) Patents

(c) Inventories

(d) Vehicles [c]

7. [R]While preparing the balance sheet of a company, securities premium reserve

is shown under :

(a) Non Current liabilities

(b) Share capital

(c) Long term borrowings

(d) Reserves and surplus [d]

8.[R]Call in advance appears in a Company’s Balance sheet under:

(a) Current liabilities

(b) Share Capital

(c) Long term Borrowings

(d) Reserves and Surplus [a]

9. [R]Bills receivables appears in a company balance sheet under sub head :

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(a) Current investments

(b) Trade receivables

(c) Inventories

(d) Cash and cash [b]

10. [R]Schedule lll has prescribed format for presentation of balance sheet.

(a) Horizontal

(b) Vertical

(c) Either (a) or (b)

(d) Neither (a) nor (b) [b]

11. [U]Which analysis is considered as dynamic?

(a) Horizontal analysis

(b) Vertical Analysis

(c) Internal Analysis

(d) External Analysis [a]

12. [R]Analysis of financial statement is significant for:

(a) Creditors

(b)Management

(c) Employees

(d) all of the above [d]

13. [U]The area of interest for a creditor while analyzing financial statement will be:

(a) Solvency

(b) Liquidity

(c) Profitability

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(d) Long term solvency [a]

14. [U]The following analysis is based on one year data:

(a) Cash flow statement

(b) Dividend analysis

(c) Horizontal analysis

(d) Vertical analysis [a]

15. [U]Which of the following is a not limitation of analysis of financial statement?

(a)Window dressing

(b)Subjectivity

(c)Intra-firm comparison

(d) Only quantitative analysis [c]

16. [R] Earning capacity of a company is ascertained by:

(a) Solvency ratios

(b) Profitability ratios

(c) Liquidity ratio

(d) Working Capital Ratio [b]

17. [U]Under which tool of Financial Statement Analysis,100% is taken as a base

and all other related items are expressed as a percentage of base?

(a) Comparative Statement

(b) Common Size Statement

(c) Ratio analysis

(d) Cash Flow Statement [b]

18. [U]Which of the following is an objective of Comparative Statement?

(a) To make data simpler and understandable

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(b) To help in forecasting

(c) To indicates the trend

(d) All of the above [d]

19.[U] Which of the following is not a limitation of Comparative Statement?

(a) Ignores price level changes

(b) Ignores quantitative aspects

(c) Ignores Qualitative aspects

(d) Variation in accounting Policies . [b]

20. [A]Under the sub head of short – term provision which one is shown from the
following :

(a) Interest accrued and due on borrowing

(b) Proposed dividend

( c ) unpaid dividend

( d ) calls in advance [b]

21.[R] Which of the following items is shown under the heading ‘ Non – Current
liabilities ‘ in the balance sheet of a company ?

(a) 12% Debentures

( b) Reserves and surplus

( c) unclaimed dividend

(d) Provision for tax [ a]

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22.[ R]Which tool of analysis of financial statements shows a comparative study of
items of two or more years :

( a) Ratio analysis

( b) common size statements

( c) comparative statements [c]

23 [A&E] Intra – Firm Analysis is also known as :

(a) Cross- section Analysis

(b) Trend analysis
(c) Dividend decision Analysis
(d) Debt Analysis [b]

24 [A&E] Inter – Firm Analysis is also known as :

(a) Cross- section Analysis

(b) Trend analysis
(c) Dividend decision Analysis
(d) Debt Analysis [a]

25[A] It is statement in which each asset is expressed as a percentage to total

assets:

(a) Comparative Statement

(b) Common Size Statement

(c) Ratio analysis

(d) Cash Flow Statement [b]

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MATCH THE FOLLOWING

1. [R]

1.Loose tools a) Short term borrowing.

2.Bank overdraft b) Cash and cash equivalent.
c) Inventory
d) Long term provision.
1-c , 2-a

.2[R]

1.Cheques in hand a)Short term borrowing

2.Enchashment of employees b)Cash and cash equivalent
earned leave payable on retirement
c)Inventory
d)Long term provision
1-b, 2-a

3.[R]

1.Public deposits a)Inventories

2.Trade marks b)Cash and cash equivalents
c)Long term borrowing
d)Intangible fixed assets

1-c,2-d

4.[R]

1.Accrued income a)Inventories

2.Provision for employee’s benefit b)Other current assets
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 c)Short term provision
d)Long term provision
1-b,2-d

5.[R]

1. Mining rights a)Long term provision

b)Other long term liabilities

C) Fixed assets-Tangible assets

d)Fixed assets-intangible assets

1-d

6.[R]

1.Interest on calls and advance. a) Short term provision.

b) Other current liability.
c) Long term provision.
d) Short term borrowing.
1-b

7.[U]

1.Factory,Buildingunder a) Other Non Current assets.

construction.
2.shares in info-tech ltd. b) Non Current investment.
c) Fixed assets-work in progress
d) Current investment.
1-c,2-b

8.[U]

1.Financial statement. a) Balance Sheet

2.Financial analysis. b) Receipts and Payments Account.
c) Ratio
1-a,2-c

9.[R]

1.Employee benefit expenses a) Balance sheet

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2.Prepaid expenses. b) Statement of profit and loss.
c) Cash flow statement.
1-b,2-a

10.[A&E]

1.Comparative statement. a) Dynamic analysis.

2.Common size statement. b) Horizontal analysis
c) Vertical analysis.
d) External analysis.
1-b,2-c

11.[U]

1)Debentures redeemable after 5 a)Long term provision

years
2)Debentures redeemable within 1 b)Short term provision
year
c)Other current liability
d)Long term borrowings
1-d,2-c

12.[A&E]

1.500 shares on which final call not a)Authorised share capital

received
2.500 Shares on which final call has b)Subscribed and fully paid
not been called
c)Subscribed but not fully paid
d)Uncalled capital
1-c, 2-c

13.[A&E]

1.Provision for provident fund a)Short term provision

2.Provision for employees benefit to b)Short term borrowing
be settled within 12 months
c)Other current liabilities
1-a, 2-a

14.[A]

1.Sale of stock in trade a)Other income

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2.Interest received b)Revenue from operations
c)None of the above
1-b, 2-a

15.[A&E]

1.Employees benefit expense a)Percentage change +50%

increased from 8,00,000 to Rs
21,50,000
2.Cost of revenue from operations b)Percentage change+40%
increased by 10,00,000 to 15,00,000
c)Percentage change+16.87%
d)Percentage change +168.7%
1-d, 2-a

16[U]

1.Comparison of actual figures of a) Intra form Comparison.

one firm with those of industry to
which firm belongs.
2.Comparison of actual figures of b) Pattern comparison.
one firm with another firm belonging
to same industry.
c) Inter firm comparison.

1-b,2-c

17[R]

1.Employee benefit expense a) Conveyance expense.

2.Finance cost. b) Medical expense
c) Interest paid on term loan.
d) Business promotion expense.
1-b,2-c

18[R]

1.Interest on public deposit a) Revenue from operation

2. Entertainment expense. b) Finance cost
c) Other expense.
d) Employee benefit expense.
1-b,2-c

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19.[A]

1. Interest received a) Other expense

2. Profit on sale of investment. b) Revenue from operation.
c) Other income.
d) Employee Benefit Expense.
1-c,2-c

20.[U]

1.Unpaid dividend. a) Short term borrowing.

2.Bonds b) Long term provision.
c) Long term borrowing
1-d,2-c

21.[U]

1.Business promotion expense. a) Office and administrative

expense.
2.Audit fees b) Selling and distribution expense.
c) Other expense.
d)Finance cost.
1-c,2-c

22.[U]

1.Net profit as shown by statement a) Share capital.

of profit and loss.
2.Loans payable on demand. b) Reserve and surplus.
c) Long term borrowing.
d)Short term borrowing.
1-b, 2-d

23.[R]

1.Capital Reserve a) Share capital

2.Security Premium Reserve. b) Reserve and Surplus.
c) Other Reserve.
d)Subscribed Share Capital

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1-b, 2-b

24.[U]

1.Dividend earned by financial a) Other income.

company.
2.Dividend earned by non-financial b) Revenue from operation.
company.
c) Revenue and surplus.
1-b,2-a

25.[u]

1 Interest paid a) Cost of material consumed

2. Carriage inward b). Finance cost
C) other expenses
1-b , 2- a

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 UNIT – 9 Accounting Ratios

R – Remembering

U- Understanding

A – Application

A&E- Analysis & Evaluation

FILL IN THE BLANKS

Remembering

1.Provision for tax is shown under the sub head short term provisions.

2.Prepaid expenses are shown under the main head current assets in the balance sheet of the company.

3.Provisions for employee benefits is shown under the sub head long term provisions.

4.The statement which shows the assets and liabilities of a company is called balance sheet.

5.Statement of Profit and Loss account is also called income statement.

6.Financial year in case of a company is from 1 April to 31 March.

Understanding

7.Earning capacity of a business is assessed through profitability ratio.

8.Solvency of business is assessed through solvency ratio.

9.If the operating cycle cannot be identified then it is assumed to have a duration of 12 months.

10.Liquidity or short term financial position of a business is assessed through liquidity ratio.

11.When comparative statement of financial statements of an enterprise for two or more accounting
periods is prepared, it is known as intra firm comparisons.

12. In case of common size balance sheet, each assets is expressed as percentage to total assets and
each liability is expressed as percentage tototal liability.

APPLICATION

13.Proposed dividend will be shown in contingent liability heading in balance sheet.

14.Matured debentures will be shown incurrent liability main head in the balance sheet.

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15.Public deposits will be shown under the main head non current liabilities in the balance sheet.

16. Provisions for employees benefit will be shown under the main head of non-current liabilities in the
balance sheet.

17.Interest accrued but not due on debentures will be shown under main head of non-current liabilities in
the balance sheet.

18.Arrears of fixed Cumulative preference dividend will be shown under the main heading of contingent
liabilities.

Analysis and evaluation

19.If in 2017 share capital is 25 lakh and in 2016 share capital is 20 lakhs. The percentage change in
share capital is 25%.

20.If in 2018-2019,inventories appears in the balance sheet at Rs 18 lakhs- 20 lakhs. The percentage
change in inventory is 11.11%

21.If revenue from operation in 2017-2018 is 40 lakhs and profit before tax is 8.80 lakhs, then the % of
profit before tax is 22%.

22.If revenue from operations in 2018-19 is 60 lakhs and trade expenses are equal to 12 lakhs,then % of
trade expenses is 20%.

23.If expected period of payment of trade payables is 7 months and operating cycle is of 14 months then it
is a current liability.

24.Current assets-Current liabilities=Working Capital .

Revenue from Operations

25.Formula for working capital turnover ratio=
Working Capital

True or false
REMEMBERING

1. Contingent liabilities are shown in the balance sheet under the heading current liabilities. [F]
2. Financial analysis removes the limitations of financial statements. [F]
3. Common size statements enable horizontal analysis. [F]
4. 12% borrowings in a company‘s balance sheet is shown under the sub heading long term borrowings.
[T]
5. Financial statements show qualitative information. [F]
6. A total asset is assumed to be 100 on the asset side in case of common size balance sheet.
[T]

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UNDERSTANDING

7. Revenue from operations includes sale of products and sale of services. [T]
8. Interest accrued and due on debenture is shown under the heading non-current liabilities.
[F]
9. Vertical analysis is useful in time series analysis. [F]
10. A short term borrowing is disclosed under current liabilities in the company’s balance sheet.
[T]
11. Financial strength of a business enterprise is judged by its profitability. [T]
12. In case of common size statement, figures of previous year are taken as base for comparison.
[F]

APPLICATION

13. The four classification of ratio analysis are liquidity ratio, fixed asset ratio, Profitability ratio and
efficiency ratio. [T]
14. Should a business have no interest income in 1 year, and Rs. 1,000 of interest income in the following
year,the percentage of change in the interest income between two years is 100%.
[T]
15. Working capital is shown on the assets side of balance sheet under the heading non-current assets.
[F]
16. Two popular techniques of comparative analysis are year to year change analysis and index number
trend analysis. [T]
17. Comparative statement ignores the price level changes. [T]
18. Comparisons of company data with industry averages can provide some insight into the company’s
relative position in the industry. [T]

ANALYSIS & EVALUATION

19. Liquid ratio is also known as acid test ratio. [T]
20. Shareholders ‘funds are also known as net worth. [T]
21. A short term borrowing is a part of capital employed. [F]
22. A loose tool is a part of Inventory while calculating current Ratio. [T]
23. Net worth is also known as Share capital. [F]
24. Solvency refers to the ability of the enterprise to meet its current obligations. [F]
25. Purchase of goods will increase the cost of Revenue from operations. [T]

MULTIPLE CHOICE QUESTIONS

1. ( A ) current ratio is 2:1 current assets =Rs. 82,000. What will be current liabilities?
A) Rs. 41,000
B) Rs. 38,000
C) Rs. 15,000

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 D) Rs. 20,000 [A]
2. ( A) Current ratio 1.5 :1, Working capital Rs. 30,000.What will be the current liabilities:
A) 20.000
B) 60.000
C) 1,65,000
D) 1,50,000 [B]

3. (A& E) Calculate proprietary ratio: if share capital Rs. 5,00,000 ,reserve & surplus Rs. 2,00,000 and
general reserve Rs. 1,00,000 and total assets RS 21,00,000.
A) 0.33:1
B) 0.38:1
C) 0.48:1
D) 0.50:1 [A]
4. ( A&E) Current ratio 4:1, Current assets Rs. 60,000 quick assets are 2:5:1. Calculate inventory
A) 22,500
B) 37,500
C) 15,000
D) 25,000 [A]
5. ( A& E )Trade receivable turnover ratio 5 times, average trade receivables Rs. 60,000.Calculate net
credit revenue from operations.
A) Rs. 3,00,000
B) Rs. 2,00,000
C) Rs. 12,000
D) Rs.2,40,000 [A]
6. ( A)If cash sales is RS 2,00,000 and credit sales is 20% of total sales. Calculate amount of credit
sales.
A) Rs. 50,000
B) Rs. 2,50,000
C) Rs. 16,000
D) Rs. 3,00,000 [B]
7. ( U )Which of the following is not a limitation of analysis of financial statements?
A) Affected by personal basis
B) To know the financial strength
C) Lack of qualitative analysis
D) Based on accounting concepts [B]
8. ( U )Financial analysis become useless because it :
A) Measures the profitability
B) Measures the solvency
C) Lacks qualitative analysis
D) Marks a comparative study [C]
9. ( R)Parties interested in financial analysis are :
A) Investors
B) Government
C) Financial institutions
D) All of the above [D]

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10. ( R)Main limitation of financial analysis is:
A) To know the earning capacity
B) To know financial strength
C) Do not reflect changes in price level.
D) Comparative study with other firms. [C]
11. ( A)Fixed assets of a company are increased from Rs. 3,00,000 to Rs. 4,00,000.What is the
percentage change?
A) 25%
B) 33.3%
C) 20%
D) 40% [B]
12. ( A )A company’s current liabilities decreased from Rs. 4,00,000 to Rs. 3,00,000.What is the
percentage of change?
A) 25%
B) 33.3%
C) 20%
D) 40% [B]
13. ( A ) A Company’s working capital is Rs. 10 lakhs (Negative Balance) in the year 2018. It became Rs.
15 lakhs in the year 2019.What is the percentage of change?
A) 150%
B) 100%
C) 250%
D) 50% [A]
14. ( A)A company’s revenue from operations are Rs. 20,00,000,Cost of revenue from operations is Rs.
14,00,000 and indirect expenses are Rs. 2,00,000.What is the amount of gross profit?
A) Rs. 18 Lakhs
B) Rs. 4 Lakhs
C) Rs. 8 Lakhs
D) Rs. 6 Lakhs [D]
15. ( A )Total assets of a firm areRs. 20,00,000 and its fixed assets are Rs. 8,00,000.What will be the
percentage of Fixed assets on total assets?
A) 40%
B) 58%
C) 28%
D) 71% [A]
16. ( A)Total assets of a firm are Rs. 8,20,000 and its fixed assets are Rs. 5,90,000.What will be the
percentage of current assets on total assets.
A) 42%
B) 58%
C) 28%
D) 72% [C]
17. ( A&E) If net revenue from operations of a firm are Rs. 15,00,000, Gross profit is Rs. 9,00,000 and
operating expenses are Rs. 75,000. What will be the percentage of operating income on net revenue
from operations?
A) 45%
B) 55%

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 C) 35%
D) 65% [B]
18. ( R) Debt equity ratio is:
A) Short term solvency ratio
B) Long term solvency ratio
C) Liquidity ratio
D) Profitability ratio [B]
19. ( R )Current ratio is also known as :-
A) Solvency Ratio
B) Acid Test Ratio
C) Working Capital Ratio
D) Liquid Ratio [C]
20. ( U) Securities premium reserve included in :-
A) Debt
B) Equity
C) Liquid assets
D) Cost of revenue from operations [B]
21. ( U )What is trade investment?
A) Trading in securities
B) Investment in his own business
C) Investment in other company for promotion of his own business
D) None of the above [C]
22. ( A)If average inventory is Rs. 30,000 and closing inventory is Rs. 20,000 more than the opening,
what will be the value of closing inventory?
A) Rs. 10,000
B) Rs. 20,000
C) Rs. 30,000
D) Rs. 40,000 [D]
23. ( A&E) If the liquid ratio of a company is 1.5:1,then the company purchased goods of Rs. 50,000.
A) Decrease in liquid ratio
B) Increase in liquid assets
C) Decrease in current liability
D) Increase in liquid ratio [A]
24. ( A&E )If capital employed is Rs 8,00,000,total debt is Rs 5,00,000,current liability is Rs 2,00,000 then
debt equity ratio will be
A) 5:3
B) 3:5
C) 1:1
D) 8:5 [B]

Q25 (A&E) If Revenue from operations is Rs 12,00,000 and cash revenue from operations is 20% if credit
revenue from operations . What will be credit revenue from operations :

A Rs 2,00,000
B Rs 8,00,000
C Rs 10,00,000

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 D Rs 12,00,000. (C)

MATCH THE FOLLOWING

Q.1( R )
1) Working capital turnover ratio (a) Current assets / Current liabilities
2) Working capital ratio (b) Liquid assets / Current liabilities
(c) Revenue from operation / Working capital
(d) Cost of revenue from operation / Working
capital
[1-c ; 2-a]

Q.2( A)

1) Capital employed (a) Total Assets-current liabilities

2) Shareholder fund (b) Total Assets – total debts
(c) Fixed assets- current liabilities
[1-a, 2-b]

Q.3–( A&E)Debt equity Ratio is 0.5: 1, what will be the impact of following transactions
1) Purchased Machinery for cash (a) Increase
2) Issue of equity shares for cash (b) Decrease
(c) No change
[1-c, 2-b]

Q.4( R)
1) Average trade receivables (a) Opening Debtors + Closing Debtors
(b) Opening B/R + Closing B/R
[1-a]

Q.5( U)
1) Interest coverage ratio is calculated (a) Times
2) Return on investment (b) Percentage
(c) Proportionate
[1-a, 2-b]

Q.6( R)
1) Liquidity ratio (a) Current ratio and acid test ratio
2) Solvency ratio (b) Working capital ratio and working capital
turnover ratio
(c) Debt .equity ratio and proprietary ratio
(d) Gross profit ratio and operating ratio
[1-a, 2-c]

Q.7( A&E)
1) Debt. Equity ratio is 3:1 (a) Risky
2) Current ratio is 3:1 (b) Ideal
(c) Safe
(d) None of the above

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 [1-a, 2-c]

Q.8(A&E)Proprietary ratio is 0.7:1, what will be the impact of the following transactions
1) Building purchased for cash (a) Increase
(b) Decrease
(c) No change
[1-c]

Q.9( A)
1) Increase in ROI (a) Goods sold in profit
(b) Repayment of debentures
(c) Issue of Debentures
(d) Goods sold at loss
[1-b]

Q.10( U)
1) Loose tools are not included in inventory for (a) Due to low value of items
current ratio because
2) Stores & spares are not included in (b) Due to non – convertible into cash
inventory for current ratio
(c) Because of part of fixed assets
(d) None of the above
[1-b, 2-b]

Q.11( A)
1) Gross profit (a) Operating profits + other operation
expenses
2) Operating profit (b) RFO- operating cost
(c) Net profit + non of expenses
(d) Net profit + non of expenses
[1-a, 2-b]

Q.12( U)
1) Gross profit ratio will increase (a) Increase in revenue from operation
2) Gross profit ratio will decrease (b) Increase. in cost of revenue from operation
(c) Inc. in wages of workers
(d) Inc. in salary of employees
[1-a, 2-b]

Q.13( R)
1) Financial statement for a number of years (a) Vertical analysis
are analysed
2) When financial statement for a single year (b) Horizontal analysis
is analysed
(c) Comparative analysis
(d) Common size statement
[1-c, 2-d]

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Q.14( R)
1) Interest accrued on investment is shown (a) Current assets
under the main head
2) Calls in advance appears in which head (b) Current liabilities
(c) Contingent liabilities
[1-a, 2-b]

Q.15( R)
1) Office equipment (a) Current assets
2) Goodwill (b) Non-current tangible assets
(c) Non-current Intangible assets
[1-b, 2-c]

Q.16( R)
1) Sale of scrap (a) Expenses
2) Dividend received (b) Other income
(c) Revenue from operations
[1-b, 2-b]

Q.17( R)
1) Inventory (a) Current assets
2) Furniture and fixtures (b) Current liabilities
(c) Non-current assets
[1-a, 2-c]

Q.18( U)
1) Increase in gross profit (a) Increase in Rfo
2) Increase in operating profit (b) Rent received
(c) Interest paid on bank overdraft
[1-a, 2-a]

Q.19 –( A&E)Current ratio of

1) X LTD 2.5:1 (a) Y is better than X LTD
2) Y LTD 8:1 (b) Both the companies are having ideal
current ratio
(c) X LTD is better than Y LTD
(d) Both the companies are having poor
liquidity
[1-c, 2-c]

Q.20( U)
1) Gross profit ratio will increase (a) Increase in revenue from operations
2) Gross profit ratio will decrease (b) Increase in cost of revenue from operations
(c) Increase in wages of workers
(d) None of the above
[1-a, 2-b]

Q.21( R)
1) Performance ratios (a) Current ratio and acid test ratio
2) Profitability ratios (b) Fixed assets turnover and working capital

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 turnover ratio
(c) Debt equity ratio and proprietary ratio
(d) Gross profit ratio and operating ratio
[1-b, 2-d]

Q.22 –( A&E) Total assets to debt ratio is 3:1, what will be the impact of the following transactions.
1) Loan taken from bank and Rs. 3. lakhs (a) Increase
payable after 4 years
2) Building purchased for cash (b) Decrease
(c) No change
Q23 (A) [1-b, 2-c]

1 Earning capacity A ) Solvency Ratio

2 Short term creditably : B ) Profitability ratio

C ) Liquidity ratios

Answer 1- B; 2- C

Q24 (A&E)

1 . If average inventory is Rs1,00,000 and closing A) Rs 50,000

inventory is 2 time more than that in. the beginning
, then what will be the amount. of closing inventory :
2. If average inventory is Rs 1,00,000 and opening B) Rs 1,50,000
inventory is 1/3 of closing inventory , then what will
be the amount of opening inventory .

C) Rs 1,33,333

D) Rs66,667

Answer 1- B ; 2- A

Q25 (A&E)

1 If revenue from operations is Rs6,00,000 and A) Rs 2,00,000

Gross profit is 20% of cost of revenue from
operations. What will be the gross profit .

2 If cost of revenue from operations is Rs 6,00,000 B) Rs 1,00,000

and Gross profit is 25% of revenue from operations.
What will be the gross profit.

. C ) Rs1,50,000

Answer (1-B ; 2- A) D) Rs 50,000

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 UNIT -10 Cash Flow Statement

R – Remembering

U- Understanding

A – Application

A&E- Analysis & Evaluation

FILL IN THE BLANKS

1. ( R )The statement that gives information about the historical changes in cash and cash
equivalents is called ________________ (cash flow statement)

2. ( R) The _____________ of enterprise is principal revenue producing activity. (net sales)

3. ( R )The amount of Cash received from debtor is shown in ____________ activity of the company.
( Operating )

4. (R) Manufacturing expenses paid are classified into _________ activity.(Operating Activities)

5. ( U) An increase in Outstanding Salaries as compared to previous year’s outstanding salaries are

added under __________________ in Cash Flow Statement. (Changes in Working Capital)

6. ( U)Deprecation is added back to the net profit to determine Net Profit before Tax and Extra-
ordinary Activity because it is a ________________ item.(Non – Cash Item)

7. ( R) Receipts from Dividend is shown as ___________ activity in Cash Flow Statement.(Investing)

8. (A) Interest on Debentures paid is added in ________ in Cash Flow from Operating Activity.(net
profit)

9. ( U ) Operating Activities are the principal revenue producing activities of an enterprise and those
activities which are not ______________ or _____________. (Investing Activities, Financing
Activities)

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10. ( A&E) Net Profit before tax is Rs. 3530. Trade Receivables are Rs. 1,200 (as on 1 st April, 2018)
and Rs. 1,700 (as on 31st March, 2019).Cash Flow after Working Capital Changes will be
____________.(Rs. 3,030)

11. (A)In Cash Flow Statement, for calculating Net Profit before Tax and Extraordinary Items,
Proposed Dividend of __________ is added. (Previous year’s)

12. ( A&E) Plant with original cost of Rs. 800 and accumulated depreciation of Rs. 600 was sold for
Rs. 100. Loss of Rs. 100 will be added to ________________ in determining Cash Flow from
Operating Activities. (Net Profit)

13. (A&E) 1/4/18 31/3/19

Provision for tax 10,000 25,000
st
Tax paid during the year ended 31 March, 2019 is Rs. 15,000. While calculating Net Profit before
Tax and Extraordinary Activities, Rs. ___________ will be added. (Rs. 30,000)

14. (A&E)If net profit for the year is Rs. 50,000 and bills payable increased by Rs. 10,000 during the
year, then Cash Flow from Operating Activities will be Rs. _________. (Rs. 60,000)

15. (A)Amount transferred to General Reserve will be affecting __________ activity of Cash Flow
Statement. (Operating)

16. ( R)Issue of Shares and Debentures is a ____________ Activity.( Financing )

17. ( R)Purchase of Goodwill is shown as outflow under ___________ Activities.(Investing )

18. (R) Redemption of Debentures results in outflow under _______ Activity. (Financing )

19. ( U )Interest received Rs 10,000 by a Non-financial company is an __________ activity.(Investing)

20. (U)Dividend paid by a Non-financial company is a __________ Activity.(Financial)

21. ( A&E)Land costing Rs. 1,00,000 is sold for Rs 1,20,000.Under Operating Activities ___________
will be deducted and Rs. ________ will be shown as inflow under Investing Activity.(Rs. 20,000;
Rs. 1,20,000)

22. (A&E) Maira Ltd. issued Equity Shares of Rs 5,00,000 and with the proceeds redeemed
Debentures of Rs. 1,50,000 in the financial year. Cash inflow under Financing Activity will be Rs.
____________.(Rs. 3,50,000)

23. (A&E) Dividend is paid on 10% Preference Shares of Rs 1,00,000. Unclaimed Dividend during the
year is Rs. 2,000. Cash outflow for Dividend paid under Financing Activities will be _______ .(Rs.
8,000)

24. ( A&E) Redemption of debentures of Rs 1,00,000 at 10% premium. Amount shown as outflow
under Financing Activity will be ___________ . (Rs. 1,10,000)

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25. ( A&E) A company has issued 8% Debentures of Rs. 10,00,000 at a discount of 5% and
redeemable at a premium of 10%. Inflow under Financing Activity will be ___________ (Rs.
9,50,000)

26. ( A&E) A plant costing Rs 1,00,000, accumulated depreciation being Rs. 20,000 is sold at a profit
of Rs. 8,000. Amount that will be shown as inflow under Investing Activity will be Rs. ___________
. (Rs. 88,000)

27. ( A&E) A plant costing Rs. 2,00,000 having accumulated depreciation of Rs. 40,000 is sold for Rs.
1,70,000.Under Cash Flow from Operating Activities __________ will be deducted. (Rs. 10,000)

TRUE OR FALSE
1. ( R) case of financial enterprises interest paid and interest recd will be treated as cash flow from
operating activities. (T)

2. ( A)Dividend of Previous Year is added to net profit to calculate Net Profit before Tax and
Extraordinary Activities. (T)

3. (A)Redemption of Debentures by converting them into equity shares would result in flow cash.
(F)

4. (A)Decrease in Trade Payables is deducted to calculate Cash Flow from Operating Activities under
Change in Working Capital. (T)

5. (U)Cash in hand and cash at bank will affect Cash Flow from Operating Activities. (F)

6. ( A) paid on Long Term Borrowings is added back to Net Profit Before Tax and Extraordinary
Activities because it is an expense relating to Financing Activities. (T)

7. ( A&E) Surplus i.e., Balance in Statement of Profit and Loss 2016 2017
(12,000) (14,000)
General Reserve 2,000 3,000 (F)

8. (A)Refund of tax is deducted from Net Profit before Tax and Extraordinary Activities. (T)

9. (A&E) ( 2018) ( 2017)

Plant and Machinery Rs. 8,00,000 Rs. 7,00,000
Accumulated depreciation Rs. - 1,20,000 Rs. -1,00,000
Rs. 6,80,000 Rs. 6,00,000
Amount to be added to Net Profit before Tax and Extraordinary Items as Non – cash Expense
(Depreciation) is Rs. 20,000 (T)

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10. (R) Rent received is operating activity by manufacturing concern. (F)

11. ( R) Interest received on investment is financing activity. (F)

12. ( U) Purchase of land increases owner’s wealth. (F)

13. (U) Redemptions of debenture at a premium is inflow under Financing Activity. (F)

14. (A)Rs. 10,000 paid for redemption of debenture is outflow under Financing Activity. (T)

15. (U) Underwriting Commission paid on issue of shares increases outflow under Financing Activities.
(T)

16. (U)Interest received on debenture by a manufacturing enterprises shown as Investing Activity.

(T)

17. ( A&E) Asset of Rs.10,000 sold during the year at a profit of Rs. 2,000. Rs. 12,000 is shown as
inflow under investing Activity. (T)

18. (A&E) Goodwill 1st April, 201831st March, 2019

Rs. 10,000 Rs. 8,000
Goodwill amortized during the year is Rs. 2,000. (T)

19. (U)Purchase of software by a manufacturing concern is Operating Activity. (F)

20. ( A)10% Debenture of Rs5,00,000 issued on 1stOctober, 2018. Interest of Rs. 2,500 paid by
company will be shown in Financing Activity. (T)

21. (A) 10% Preference Share of Rs. 5,00,000 were issued at a premium of 5%. The amount received
i.e., Rs.4,50,000 will be shown as Financing Activity. (F)

22. (U)Short term deposits in bank will result in no flow of cash. (T)

23. (U) Bank deposits with 100days of maturity will be included in cash and cash equivalents.(F)

24. ( R) Interest received on Calls in Arrears by a company is a Financing Activity. (T)

25. ( R) Interest paid on bank overdraft is shown in financing activities (T)

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MULTIPLE CHOICE QUESTIONS :
1. (R) Which of the following will be added to Net Profit before Tax.
a) Provision for Taxation.
b) Depreciation
c) Decrease interest.
d) None of the above. (a)
2. ( R ) In case of financial enterprises cash flow from interest and dividend received and interest
paid is classified as cash flow from.
a) Operating Activity
b) Investing Activity
c) Finances Activity
d) Cash and Cash Equivalents. (a)

3. (R )Which of the following is not a cash inflow?

a) Decrease in debtors
b) Issues of shares
c) Decrease in creditors
d) Sale of fixed assets (c)

4. ( U ) Purchase of building against payment is

a) Operating Activity
b) Financing Activity
c) Investing Activity
d) None of these (c)

5. (R) Repayments of debenture is:

a) Operating Activity
b) Financing Activity
c) Investing Activity
d) None of these (b)

6( A )
.Investment costing Rs. 10,000 sold for Rs. 12,000. The amount shown in investing activity is
a) Rs. 2,000
b) Rs. 10,000
c) Rs. 12,000
d) Rs. 2,200 (c)

7.( A&E) Marketable Securities costing Rs. 10,000 sold for Rs. 12,000, Profit on sale of Marketable
Securities was credited to Statement of Profit and Loss. Which of the following statement is correct?
a) Rs. 2,000 will be deducted from Net Profit under Operating Activity and shown as inflow under
Investing Activities.
b) Rs. 2,000 will be deducted from Net Profit under Operating Activity and shown as Extra-ordinary
Item under Operating Activities.

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 c) Rs. 2,000 will be deducted from Net Profit under Operating Activity and shown as Extra-ordinary
Item under Investing Activities.
d) Rs. 2,000 will be deducted from Net Profit under Operating Activity and added to Cash and Cash
Equivalents. (b)

8. (A) On 1stOctober, 2018 10% Debentures of Rs. 1,00,000 were issued. Interest on Debenture paid by
company for year ended 31stMarch, 2019 is
a) Rs. 10,000
b) Rs. 15,000
c) Rs. 5,000
d) Rs. 2,500 (c)

9.( A)Increase in Bank Overdraft is

a) Investing Activity
b) Financing Activity
c) Operating Activity
d) Cash and Cash Equivalents (b)

10. ( A) Proceeds from raising bank loan is shown as

a) Investing Activity
b) Financing Activity
c) Operating Activity
d) Cash and Cash Equivalents. (b)

11.( A&E) On 1stJanuary, 2018 company issued shares of Rs.10,00,000 and paid Rs. 10,000 as Share
Issue Expense. Amount shown in Financing Activities
a) Rs. 10,00,000 as Inflow and Rs. 10,000 as Outflow.
b) Rs. 9,90,000as Inflow.
c) Rs. 10,10,000 as Inflow.
d) Rs. 10,00,000 as Inflow from Shares and Rs. 10,000 as Inflow for Share Issue Expenses.
(a)

12.( U ) A company which issued bonds to raise funds which

a) Increases liability
b) Increases equity
c) Increases assets
d) Decreases cash (a)

13.( U )Which of the following is not Cash or Cash Equivalents

a) Cash in hand
b) Demand Deposit
c) Bank Borrowings
d) Investment which is maturing within2 months from the date of acquisition (c)

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14. ( U )All of the following would be included in company`s Operating Activities except
a) Income tax payment
b) Collections from customer
c) Cash payment to suppliers
d) Interest on Current Investment (d)
15.( U ) Which of the following items is not a Non-cash items
a) Depreciation Expense
b) Amortization Expense
c) Result of Provision
d) Income tax Payment (d)

16.( A) of the following items would be subtracted from net income when using indirect method for
operating activity.
a) Depreciation Expense
b) Repayment of Bonds Payable
c) Gain on Sale of Land
d) Loss on Sale of Equipment. (c)

17( U ).Interest received on investment by a financing company is shown under:

a) Operating Activity
b) Investing Activity
c) Financing Activity
d) Cash and Cash Equivalents (a)

18.( A)Sale of current investment will be shown under

a)Operating Activity
b)Financing Activity
c)Investing Activity
d)Cash and Cash Equivalents (d)

19.( A&E) of Plant and Machinery of Book Value of Rs. 5,00,000 at a loss of 5%. Inflow under Investing
Activities will be
a)Rs. 4,75,000
b) Rs. 5,00,000
c) Rs. 3,80,000
d) Rs. 3,60,000 (a)

20.(A) of shares for consideration other than cash is

a) Shown under Operating Activity
b) Shown under Financing Activity
c) Shown under Investing Activity
d) not shown in Cash Flow Statement. (d)

21( A ).Interest paid on investment is shown under

a)Operating Activity

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 b)Financing Activity
c)Investing Activity
d)Cash and Cash Equivalents (b)

22.( A& E ) Issue of Debentures for consideration other than cash is shown as
a)Inflow of Cash under Financing Activities
b)Outflow of Cash under Financing Activities
c)Neither Inflow nor Outflow of Cash
d) Inflow of Cash under Operating Activities. (c)

23( A) .Issue of shares at a premium is shown as:

a) Inflow under Operating Activities.
b) Inflow under Financing Activities.
c) Inflow under Investing activity
d) Outflow under Financing Activities. (b)

24.( A) Dividend paid by a financing company is shown under :

a)Operating Activity
b)Investing Activity
c)Financing Activity
d)Cash and Cash Equivalents (c)

25 ( A)Dividend paid by non financing company is shown under:

a) Operating activity
b) Investing activity
c) Financing activity
d) Cash and cash equivalents. (c)

MATCH THE FOLLOWING

1. Match the following items:

a. Cash budget is prepared for 1. Present period

b. Cash flow statement is prepared for 2. Past period
c. 3. Future period
( a-3 ; b – 2 )

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2. Match the following items:

a. Cash and Cash Equivalents include 1. Cheques and drafts

b. Cash flow from Operative Activities 2. Cash payment of wages, etc Include
3. Marketable securities
4. Cash payments or refunds income
Tax.

( a -3 ; b -2 )

3. [Evaluation]

a. Interest received on investment 1. Operating activity

b. Dividend paid on preference share 2. Investing activity
3. financial activity

4. [ Evaluation ]

a. Acquisition of assets by issues of debentures 1. Operating Activity

b. Depreciation on fixed assets 2. Investing Activity

3. Financing Activity

4. Not shown in Cash Flow Statement

( a–4;b–1)

5. [Application]

a. Cash received from royalty, fees, commission 1. Inflow

b. Payment of salary rent. Etc. 2. Outflow
c. Sale of security by financial company 3. No flow of cash

(a-1;b–2;c–1)

6( A&E )

a. For an investment company- sale and purchase of security 1. Operating Activity

b. For an insurance company -receipt of premium 2. Investing Activity

3. Financing Activity

(a – 1 ; b -1 )

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7( A&E)

a. Goodwill written o 1. Increase the flow by Rs. 5,000

b. Loss on sale of machine Rs. 5,000 2. Decrease the flow by Rs, 5,000
3. No change in flow
(a–3;b–3)
8(U)

a. Increase in provision for tax 1. Inflow

b. Refund of tax 2. Outflow

3. No flow

( A -3 ; B -1 )

9.(A) a) Purchase of Land /Building 1) cash inflow

b) Issue of shares 2) investing activity

3) Operating activity
4) Financing activity
( a – 2 ; b -4 )

10(A)a) Redemption of Debenture 1) Investing Activity

b) Purchase of Goodwill 2) Financing Activity

3) Operating Activity

(a–2;b1)

1 1 (A&E) a) Conversion of Debentures into shares 1) Financing Activity

b) Land sold @ 10% profit is shown under 2) Is not shown in Cash Flow Statement
3) Investing activity
(a–2;b–3)

12(A&E) a) Dividend received on shares held as investment 1) Cash and Cash Equivalents
b) Bank Overdraft 2) Operating Activity
3) Investing Activity
4) Financing Activity
( a – 3 ; b -4 )

13A&E)a) Profit on sale of land 1) Operating activity

b)Loss on sale of fixed assets 2) Investing activity
3) Financing activity
(a2;b–2)

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14( U) a) Rent received on property held on investment 1) Operating Activity
b) Underwriting commission paid 2) Investing Activity
3) Financing Activity
4) Outflow of cash

( a- 2 ; b – 3 )

15( A&E)a) 10% Debentures of Rs 1,00,000 issued @ 20% premium 1) Rs. 15,000

b)Interest paid on long term loans(1,00,000)@15% 2) Rs. 1,00,000

3) Rs. 1,10,000

4) Rs. 1,20,000

(a–4;b–1)

16( R)a) Purchase of intangible assets 1) Operating Activity

b) Discount on issue of 2) Investing Activity
3) Financing Activity

(a–2;b–3)

17(A)a)Land sold at Loss of Rs 10,000. 1) Operating Activity

b)Securities premium at the time of issue of shares 2) Investing Activity

3) Financing Activity

( a -2 ; b- 3 )

18 ( A) a) Purchase of Goodwill 1. Operating Activity

b) Conversion of debentures into shares 2. Investing Activity

3. Financing Activity

4. Not recorded in FS

( a–2;b–3)

19( U)a) Premium on redemption on debentures 1)Operating Activity

b) Proceeds from public deposits 2) Investing Activity

3) Financing Activity

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(a–3;b–3)

20 A) a) Interim Dividend 1)Operating Activity

b)Proposed Dividend 2) Investing Activity

3) Financing Activity

(A–3;B3)

21(A) a) Sale of Marketable Securities 1) Operating Activity

b) Profit on sale of Marketable Securities 2) Investing Activity

3) Financing Activity

4) Cash and Cash Equivalents

( A - 4 ; b – 1)

22(A) a) Sale of Patents 1) Operating Activity

b) Profit on sale of Investment 2) Investing activity

3) Financing activity

4) Cash and Cash Equivalents

(A2;B–2)

23( A) a) Repayment t of Bank Overdraft 1) Operating Activity

b) Loss on sale of Marketable Securities 2) Investing Activity

3) Financing Activity

4) Cash and Cash Equivalents

( A – 3 ; b -1 )

24(U) a) Sale of Marketable Securities 1) Inflow of Cash

b) Profit on sale of Marketable Securities 2) Outflow of Cash

3) No Flow of Cash

4) Cash and Cash Equivalents

( a- 3 ; b -3)

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25( A) a) Dividend paid by financing company. 1) Operating activity

b) Dividend paid by non financing company. 2) Investing activity

3) Financing activity

4) Cash and cash equivalents

( a- 3; b -3 )

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