[PAGE : 1]

ACCOUNTING PROCESS
UNIT-VI: Rectification of Errors
Book Page No. 83
Answer 13:

RECTIFIED JOURNAL ENTRIES

Transaction Particulars Debit (Rs.) Credit (Rs.)
(1) Suspense A/c Dr. 420
To Purchase Return A/c 4220
(Being rectification of omission of
amount not posted to Return
Outward Book)
(2) Sales A/c Dr. 350
Purchase A/c Dr. 350
To Suspense A/c 700
(Being rectification of purchase
amount entered in the sales book)
(3) Z's A/c Dr. 680
To Suspense 680
(Being rectification of wrong amount
and wrong side of account)
(4) Sales A/c Dr. 4,500
Suspense A/c Dr. 900
To Furniture A/c 5,400
(Being rectification of wrongly
entered amount)
(5) Drawings A/c Dr. 500
To Purchase A/c 500
(Being recording of the omission of
goods taken by proprietor)
Suspense A/c
Particulars Rs. Particulars Rs.
To Difference in trial Balance 60 By Sales A/c 350
To Purchase Return A/c 420 By Purchase A/c 350
To Furniture A/c 900 By Z's A/c 680
1,380 1,380

Q.14
Answer:
Transaction Particulars Debit (Rs.) Credit (Rs.)
(1) Purchase A/c Dr. 15,000
Sales A/c Dr. 15,000
To Ravi's A/c 30,000
(Being rectification of purchases
wrongly entered to sales book)
 [PAGE : 2]
(2) Bills Receivable A/c Dr. 25,000
Bills Payable A/c Dr. 25,000
To Arun A/c 50,000
(Being rectification of bills receivable
wrongly recorded in bills payable
books)
(3) Prepaid Rent A/c Dr. 3,500
To Suspense A/c 3,500
(Being rectification of omission of
prepaid rent a/c to be brought
forward)
(4) Customer A/c Dr. 4,000
To Purchase A/c 2,000
To Purchase Return A/c 2,000
(Being rectification of purchase
return wrongly entered in purchase
book)
(5) Bills payable A/c Dr. 25,000
Radio A/c Dr. 45,000
To Purchase A/c 46,000
To Janki A/c 1,500
(Being recording of the amount
wrongly entered in purchase book as
46000)
Suspense A/c
Particulars Rs. Particulars Rs.
To Balance b/d 1,000 By Prepaid Rent A/c 3,500
To Balance c/d 2,500
3,500 3,500

Q.15
Answer:
Transaction Particulars Debit (Rs.) Credit (Rs.)
(1) Suspense A/c Dr. 10,000
To A's A/c 10,000
(Being rectification of amount
received from A wrongly debited to
his account)
(2) Suspense A/c Dr. 40,000
To Purchase A/c 20,000
To Purchase Return A/c 20,000
(Being rectification of purchase
return wrongly posted to purchase
a/c)
(3) Suspense A/c Dr. 16,000
To Discount A/c 16,000
(Being rectification of discount
 [PAGE : 3]
received wrongly debited to Discount
A/c
(4) Motor Car Repairs A/c Dr. 9,060
To Motor Car A/c 7,060
To Suspense A/c 2,000
(Being rectification motor car repairs
of Rs. 9060 wrongly debited to
motor car A/c as 7060)
(5) B's A/c Dr. 40,000
To A's A/c 40,000
(Being rectification of amount paid to
B wrongly debited to A)
Suspense A/c
Particulars Rs. Particulars Rs.
To A's A/c 1,00,000 By Difference in trial 1,54,000
To Purchase A/c 20,000 Balance (Bal. fig.)
To Purchase Return A/c 20,000 By Motor Car Repairs A/c 2,000
To Discount A/c 16,000
1,56,000 1,56,000

Q.16
Answer:
Transaction Particulars Debit (Rs.) Credit (Rs.)
(I) Suspense A/c Dr. 10,800
To Mr. A's A/c 10,800
(Being rectification of receipt from A
wrongly posted to A's Debit A/c)
(II) Suspense A/c Dr. 2,000
To Purchase Return A/c 2,000
To Purchase A/c
(Being rectification of purchase
return wrongly posted to purchase
A/c)
(III) Suspense A/c Dr. 4,000
To Discount A/c 4,000
(Being rectification of wrong posting
of discount received to debit of
discount A/c)
(IV) Repairs of Motor Car A/c Dr. 2,740
To Motor Car A/c 2,740
To Suspense A/c
(Being rectification of motor car
repairs wrongly debited motor car
A/c
(V) B's A/c Dr. 4,000
To A's A/c 4,000
 [PAGE : 4]
(Being rectification of payment to B
wrongly debited to A's A/c)
Suspense A/c
Particulars Rs. Particulars Rs.
To Mr. A A/c 10,800 By Difference in Trial Balance 15,800
To Purchase Return A/c 1,000 BY Repairs A/c 1,000
To Purchase A?c 1,000
To Discount A/c 4,000
16,800 16,800

Q.17
Answer:
Rectified Journal Entries
Transaction Particulars Debit (Rs.) Credit (Rs.)
(I) Suspense A/c Dr. 180
To P&L Adjustment A/c 180
(Being rectification of under-
valuation of sales book)
(II) P&L Adjustment A/c Dr. 2,400
To Customer A/c 2,400
(Being rectification of personal car
expenses wrongly debited to trade
expenses)
(III) Drawings A/c Dr. 250
To P&L Adjustment A/c 250
(Being rectification of personal car
expenses wrongly debited to trade
expenses)
(IV) P&L Adjustment A/c Dr. 2,750
To Customer A/c 2,750
(Being rectification of sales return
undervalued by Rs. 2740)
(V) Suspense A/c Dr. 100
To P&L Adjustment A/c 100
(Being rectification of discount
allowed wrongly debited to discount
A/c)
(VI) P&L Adjustment A/c Dr. 136
To Suspense A/c 36
To Creditors A/c 100
(Being rectification of undervaluation
of purchase book and wrong posting
to suppliers A/c as Rs. 51)
 [PAGE : 5]
Q.18
Answer:
Transaction Particulars Debit (Rs.) Credit (Rs.)
1 Purchase A/c Dr. 1,080
Sales A/c Dr. 1,080
To Suspense A/c 2,160
(Being purchase was recorded by
mistake in sales day book)
2 Salary ac/ (25,200 + 2,520) Dr. 27,720
To Suspense A/c 27,720
(Being total of salary a/c Bal. of Rs.
25,200 written as 2,520 on the
wrong side.)
3 Interest on Overdraft A/c Dr. 1,300
To Suspense A/c 1,300
(Being posting of entry to the ledger
ommitted)
Suspense A/c
Dr. Cr.
Particulars Rs. Particulars Rs.
To Bal. b/d 31,180 By Purchase 1,080
By Sales 1,080
By Salary 27,720
By Interest on overdraft 1,300
31,180 31,180
 [PAGE : 6]

BANK RECONCILIATION STATEMENT

Book Page No. 97
Answer 18:
As on 30th June, 1996
Adjusted Cash Book
Particulars Rs. Particulars Rs.
To Balance b/d 44,500 By Insurance Premium A/c 2,700
To Dividend A/c 4,000 By Error in totaling A/c 50
To Rent A/c 6,000 By Bank Charges A/c 50
To Bill Receivable A/c 5,900 By Bills Payable A/c 2,000
By Balance c/d 55,600
60,400 60,400

Bank Reconciliation Statement

Particulars Rs.
Adjusted balance as per Cash Book (Cr.) 55,600
Add: Cheques issued but not presented for payment till 30th June, 1996 60,000
1,15,600
Less: Cheques paid into bank for collection but not collected till 30th 50,000
June, 1996
Balance as per Pass Book 65,600

Answer 19:
Bank Reconciliation Statement
as on 31st March, 1997
Particulars +Items –Items
Rs. Rs.
Overdraft as per Cash Book 7,640
Add: Cheques deposited but not credited by the bank 10,000
Interest debited by the bank but not recorded in the cash book 1,000
Bank Charges not recorded in the cash book 340
Less: Interest on securities collected by the bank but not 1,080
recorded in cash book
Credit transfer not recorded in the cash book 200
Dividend collected by the bank directly but not recorded in the 1,000
cash book
Cheques issued but not presented for payment 37,400
Balance as per Bank Statement (bal. fig.) 20,700
39,680 39,680
 [PAGE : 7]
Answer 20:
Bank Reconciliation Statement
(as on 31st March, 2002)
Particulars +Items –Items
Rs. Rs.
Balance as per Cash Book 3,72000
Add: Cheques issued but not presented for payment 72,000
Dividend received, but not entered in cash book 5,000
Interested allowed by bank 1,250
Less: Cheque deposited, but not allowed 15,400
Bank charges 200
A cheque dishonoured, but not collected in cash book 320
House tax directly paid by bank 350
Balance as per Pass Book (Balancing Figure) 4,33,980
4,50,250 4,50,250

Answer 21:
Bank Reconciliation Statement
Particulars +Items –Items
Rs. Rs.
Balance as per Pass Book (Cr.) 1,565
Add: Bank charge 35
Cheque from A & B deposited on 25.03.2003 but 1,765
credited by bank in April 2003
Less: Cheque issued to X&Y for payment but not yet presented 984
Cash directly deposited by Z 816
Interest allowed by bank 45
Balance as per Cash Book (Balancing Figure) 1,520
3,365 3,365

Answer 22:
Bank Reconciliation Statement
(As on 30th September, 2003)
Particulars +Items –Items
Rs. Rs.
Bank (Credit) Balance as per Pass Book 10,000
Add: (1) Cheques received but not deposited in Bank 1,200
(2) Insurance premium paid directly bank bank 600
(3) Cheque received but entered twice in the cash book 1,000
(4) Bills discounted dishonoured but not recorded in the 5,200
cash book
Less: (1) Cheques deposited but not entered in cash book 500
(2) Bank charges entered twice in cash book 20
(3) Cheque issued but not presented for payment 500
Balance (Dr.) as per Cash Book (bal. fig.) 16,980
18,000 18,000
 [PAGE : 8]
Answer 23:
Bank Reconciliation Statement
(As on 30th September, 2005)
Particulars +Items –Items
Rs. Rs.
1. Overdraft as per Bank Pass-Book 21,494
2. Cheque deposited but not yet entered in Cash Book 700
3. Under cast of debit side of the Bank column 100
4. Cheque deposited Rs. 5,000 but entire in Pass BOok as 4
Rs. 4,996
5. Cheque dishonoured but not recorded in Cash Book 530
6. Bills collected by bank but not recorded in Cash-Book 3,500
7. Bank Charges recorded twice in Cash-Book 25
8. Bills dishonured but not yet recorded in Cash Book 8,015
9. Cheque deposited but not yet Collected by Bank 2,320
10. Cheque issued but not yet presented for payment 1,250
11. Over draft as per Cash-Book 16,200
27,069 27,069
 [PAGE : 9]

INVENTORIES
Book Page No. 111
Q.17
Answer:
Statement of Valuation of Physical as on 31st March 1996
Particulars Rs. Rs.
Value of stock as on 9th April, 1996 25,000
Add: Cost of sales
Sales made between 31.03.1996 and 9.4.1996 1,720
Less: Gross profit @ 25% on sales 430 1,290
26,290
Less: Purchases actually received
Purchases from 1.4.1996 to 9.4.1996 120
Less: Goods not received up to 9.4.1996 50 70
26,220
Less: Purchases during March, 1996 received 100
on 4.4.1996
Value of Physical stock as on 31.3.1996 26,120

Q.18.
Answer:
Statement of valuation of stock as on 31st March 1997
Particulars Rs. Rs.
Value of stock as on 9th April, 1996 70,000
Add: Purchases during the period from 1.4.1996 to 3,46,000
31.3.1997
Add: Manufacturing expenses 70,000
4,86,000
Less: Cost of sales during the period sales 5,22,000
Less: Gross Profit 1,03,200 4,18,800
Value of closing stock 67,200
Working Notes:
Calculation of Gross Profit:
Gross profit on normal sales
(5,22,000 – 16,000) × 20/100 1,01,200
Gross profit on the abnormal sales
16,000 – (20,000 – 6,000) 2,000
 [PAGE : 10]
Q.19.
Answer:
Navkar Ltd.
Stock Ledger
Under FIFO Method
Receipts Issues Balance
Date Unit Rate Amount Unit Rate Amount Unit Rate Amount
(MT) Rs. Rs. (MT) Rs. Rs. (MT) Rs. Rs.
Opening
Balance 5,000 22 1,10,000 5,000 22 1,10,000
1.6.99 1,000 30 30,000 5,000 22 1,10,000
1,000 30 30,000
5.6.99 2,000 35 70,000 2,000 22 44,000 3,000 22 66,000
1,000 30 30,000
10.6.99 1,500 38 57,000 3,000 22 66,000 1,000 30 30,000
2,000 35 70,000
1,500 38 57,000
15.6.99 1,500 35 52,500 1,000 30 30,000
2,000 35 70,000
1,500 38 57,000
1,500 35 52,500
20.6.99 2,000 32 64,000 1,000 30 30,000 500 38 19,000
2,000 35 70,000 1,500 35 52,500
1,000 38 38,000 2,000 32 64,000
25.6.99 500 38 19,000 1,000 32 32,000
1,500 35 52,500
1,000 32 32,000
28.6.99 2,000 35 70,000 1,000 32 32,000
2,000 35 70,000
30.6.99 1,500 30 45,000 1,000 32 32,000 1,500 30 45,000
2,000 35 70,000
16,500 4,98,500 15,000 4,53,500

Q.20
Answer:
Statement of valuation of stock as on 30th June 2000
Particulars Rs. Rs.
Value of stock as on 23rd June, 2000 4,80,000
Add: Unsold stock out of the goods sent on 24,000
consignment
Purchase during the period from 23rd June 24,000
2000 to 30th June 2000
Goods in transit on 30th June, 2000 16,000
Cost of goods sent on approval basis 12,800 76,800
5,56,800
Less: Cost of sales during the period from
23rd June, 2000 to 30th June 2000
Sales 1,20,000
Less: Gross profit 9,600 1,10,400
Value of stock as on 30th June 2000 4,46,400
Working Notes:
 [PAGE : 11]
Rs.
1. Calculation of normal sales
Actual Sales 1,36,000
Less: Abnormal sales 12,000
Return of goods sent on approval 16,000 28,000
Normal Sales 1,08,000
2. Calculation of gross profit
Gross profit on normal sales 20/100 × Rs. 1,08,000 21,600
Less: Loss on sale of abnormal goods (Rs. 24,000 – 12,000
Rs. 12,000)
Gross Profit 9,600

Q.21
Answer:
Valuation of stock as on 31st March 2002
Particulars Rs. Rs.
1. Stock of Godown on 15th April 50,000
2. Add: (a) Cost of goods sold after 31st March till
stock taking 32,000
(b) Cost of stock with customer on approval
[(Rs. 10,000 - Rs. 4,000) × 80/100] 4,800 36,800
3. Less: (a) Cost of goods purchased after 31st March 86,800
till stock taking is made 5,034
(b) Stock belonging to consignors
(Rs. 8,000 × 30/100) 2,400 7,434
4. Stock as on March 31, (at cost) 79,366

Q.22
Answer:

Particulars Rs. Rs.

Opening Stock 14,250
Add: Written off last year 1,750 16,000
Add: Purchases 76,250
Add: Manufacturing Expenses 15,000
Cost of production 1,07,250
Less: Cost of Goods sold:
Sales 1,24,500
Less: Abnormal Sales 4,500
1,20,000
Less: Gross Profit @ 20% on sales 24,000
96,000
Add: Cost of Abnormal Sales 5,000
1,01,000 1,01,000
Value of Closing stock 6,250
 [PAGE : 12]
Statement of Profit Rs. Rs.
Gross Profit 24,000
Less: Loss on Sale of Goods 500
Administrative Expenses 3,000
Selling Expenses 6,050
Financial Charges 2,150 11,700
Profit for the year 2004 12,300
 [PAGE : 13]

CONCEPT AND ACCOUNTING OF DEPRECIATION

Book Page No. 123
Q.19
Answer:
Date Particulars Rs. Date Particulars Rs.
1993 1993
Jan.1 To Bank A/c 1,94,000 Dec.31 By Dep. A/c 25,000
To Bank A/c (Erection 6,000 By Balance c/d 2,75,000
cost)
July 1 To Bank A/c 1,00,000
3,00,000 3,00,000
1994 1994
Jan.1 To Balance b/d 2,75,000 Dec.31 By Dep. A/c 30,000
Dec.31 By Balance c/d 2,45,000
2,75,000 2,75,000
1995 1995
Jan.1 To Balance b/d 2,45,000 July 1 By Bank A/c 1,00,000
(Sales Proceeds)
Dec.31 By P & L A/c 60,000
(Loss on sale)
By Dep. A/c 17,500
By Balance c/d 2,17,500
3,95,000 3,95,000
1996 1996
Jan.1 To Balance b/d 2,17,500 Dec.31 By Dep. A/c 32,625
(15% on 2,17,500)
By Balance c/d 1,84,875
2,17,500 2,17,500
Notes:
(1) Calculation of Depreciation
Machinery I Machinery II Machinery III
(10% per annum on the original cost)
[Date of Purchase: 1st Jan. 1993 1st July 1993 1st July 1993
(Rs.) (Rs.) (Rs.)
1993 20,000 5,000 –
( 10 100 × 2,00,000) (1,00,000 × 6 12 × 10 100 ) –
1994 20,000 10,000 –
1995 – 10,000 75,000
(1,50,000× 6 12 × 10 100 )

(2) Loss as Sale:

Rs.
Cost (Purchase) 2,00,000
Less: Total Depreciation (on First Machinery) 40,000
W.D.V. on the date of sale 1,60,000
Less: Sale Value 1,00,000
Loss on sale 60,000

Q.20.
Answer:
Date Particulars Rs. Date Particulars Rs.
 [PAGE : 14]
1996 1996
Jan.1 To Bank A/c (1) 19,40,000 Dec.31 By Dep. A/c 2,50,000
Jan.1 To Bank A/c (Erection 60,000 (1) Rs. 2,00,000 + (2)
expense) Rs. 50,000
Jul.1 To Bank A/c (2) New 10,00,000 By Balance c/d 27,50,000
machinery (Rs. 18,00,000 + Rs.
9,50,000)
30,00,000 30,00,000
1997 1997
Jan.1 To Balance b/d 27,50,000 Dec.31 By Dep. A/c 3,00,000
(1) Rs. 2,00,000 + (2)
Rs. 1,00,000
By Balance c/d 24,50,000
27,50,000 27,50,000
1998 1998
Jan.1 To Balance b/d 24,50,000 Jul.1 By Bank A/c 8,00,000
Jul.1 To Bank A/c (3) 15,00,000 Dec.31 By P&L A/c 7,00,000
Dec.31 By Dep. A/c 2,75,000
(1) Rs.1,00,000 + (2)
Rs. 1,00,000 + (3) Rs.
75,000
Dec.31 By Balance c/d 21,75,000
(2) Rs. 7,50,000 + (3)
Rs. 14,25,000
39,50,000 39,50,000
1999 1999
Jan.1 To Balance b/d 21,75,000 Dec.31 By Dep. A/c 4,35,000
(2) Rs. 1,50,000 + (3)
Rs. 2,85,000
Dec.31 By Balance c/d 17,40,00
(2) Rs. 6,00,000 + (3)
Rs. 11,40,000
21,75,000 21,75,000
2000 2000
Jan.1 To Balance b/d 17,40,000 Dec.31 By Dep. A/c 3,48,000
(2) Rs. 1,20,000 + (3)
Rs. 2,28,000
Dec.31 By Balance c/d 13,92,000
(2) Rs. 4,80,000 + (3)
Rs. 9,12,000
17,40,000 17,40,000
Notes:
Rs.
Loss on sale on machinery:
Cost of purchase (1.1.1996) 20,00,000
Depreciation for 1996 (full year) 2,00,000
18,00,000
Depreciation for 1997 (full year) 2,00,000
16,00,000
Depreciation for 1998 (half year) 1,00,000
Written down value 15,00,000
Sale of the machinery 8,00,000
Loss on sale 7,00,000
 [PAGE : 15]

Accounting for special transactions

Unit-I: Bills of exchange and promissory notes
Book No. 132
Q.14
Journal Entries in the books of Mr. David
Date Particulars Amount Amount
(Dr) Rs. (Cr) Rs.
1995 Bill Receivable (No.1) A/c Dr. 6,000
Jan.1 Bills Receivable (No.2) A/c Dr. 10,000
To Mr. Thomas's A/c 6,000
(Being drawing to bills receivable no. 1
due for maturity on 4.3.95 and bills
receivable no. 2. due for maturity on
4.4.95)
March Mr. Thomas' A/c Dr. 6,000
4
To Bills Receivable (No.1) A/c 6,000
(Being the reversal entry for bill no. 1 on
agreed renewal)
March Bills Receivable (No.3) A/c Dr. 6,180
4
To interest A/c 180
To Mr. Thomas' A/c 6,000
(Being the drawing of bill of exchange no.
3 due for maturity on 7.5.1995 with
interest @ 18% p.a. in lieu of the original
acceptance of Mr. Thomas)
Mar. 20 Bank A/c Dr. 9,900
Discount A/c Dr. 100
To Bills Receivable (No.3) A/c 10,000
(Being the amount received from official
assignee of Mr. Thomas @ 50 Paise per
rupee against dishonoursed bill)
May 7 Mr. Thomas A/c Dr. 6,180
To Bill Receivable (No.3) A/c 6,180
(Being the amount due from Mr. Thomas
on dishonor of acceptance of presentation
on the due date.)
May 7 Mr. Thomas A/c Dr. 3,090
To Bill Receivable (No.3) A/c 3,090
(Being the amount due from Mr. Thomas
on dishonor of acceptance of presentation
on the due date.)
May 7 Bad Debts A/c Dr. 3,090
To Mr. Thomas A/c 3,090
(Being the balance 50% debt in Mr.
 [PAGE : 16]
Thomas A/c arising out of dishonoured bill
written as bad.)

Q.15
Journal Entries in the books of Mr. David
Date Particulars Amount Amount
(Dr) Rs. (Cr) Rs.
1997 B's A/c Dr. 10,000
Jan.1 To Sales A/c 10,000
(Being sale of goods to B on credit)
Jan.1 Bills Receivable A/c Dr. 10,000
To B's A/c 10,000
(Being the acceptance of bill received)
Mar.1 Bank A/c Dr. 9,900
Rebate on Bill A/c Dr. 100
To Bills Receivable A/c 10,000
(Being retirement of bill by B one month
before maturity by giving rebate @ 12%
p.a.)
Journal Entries in the Books of B
Date Particulars Amount Amount
(Dr) Rs. (Cr) Rs.
1997 Purchase A/c Dr. 10,000
Jan.1 To A's A/c 10,000
(Being purchase of goods from A on Credit)
Jan.1 A's A/c Dr. 10,000
To Bills Payable A/c 10,000
(Being the acceptance of bill given to A)
Mar.1 Bills Payable A/c Dr. 10,000
To Bank A/c 9,900
To Rebate on Bills A/c 100
(Being the bill dischanged under rebate @
12% p.a.)

Working Note:
12 1
Calculation of Rebate : 10,000 × × = 100
100 12

Q.16
Answer:
Books of Shubham
Journal Entries
Date Particulars Amount Amount
(Dr) Rs. (Cr) Rs.
1998 Bills Receivable A/c Dr. 45,000
June 1 To Rajendra A/c 45,000
 [PAGE : 17]
(Being Acceptance received from Rajendra
for Mutual accommodation)
June 1 Bank A/c Dr. 44,100
Discount A/c Dr. 900 45,000
To Bills Receivable A/c
(Being Bill discounted)
June 1 Rajendra Dr. 15,000
To Bank A/c 14,700
To Discount A/c 300
(Being one-third of proceeds remitted to
Rajendra)
Sept.4 Rajendra Dr. 63,000
To Bills Payable A/c 63,000
(Being Acceptance given to Rajendra on
failure of remittance of the amount due)
Sept.4 Bank A/c Dr. 11,100
Discount A/c Dr. 900
To Rajendra 12,000
(Being receipt of Amount from Rajendra
and discount amount credited to him.)
Dec.7 Bills Payable A/c Dr. 63,000
To Rajendra 63,000
(Beings Acceptance to Rajendra
dishonoured on insolvency.)
Dec.7 Rajendra Dr. 42,000
To Bank A/c 16,800
To Deficiency A/c 25,200
(Being Amount paid @ 40% and balance
credited to Deficiency A/c on failure of
payment)
Books of Rajendra
Journal Entries
Date Particulars Amount Amount
(Dr) Rs. (Cr) Rs.
1998 Shubham Dr. 45,000
June 1 To Bills Payable A/c 45,000
(Being Acceptance given for the bill)
June 1 Bank A/c Dr. 14,700
Discount A/c Dr. 300 15,000
To Shubham
(Being one third of the proceeds of bill after
discounting received from shubham
Sept.4 Bill Receivable A/c Dr. 63,000
To Shubham 63,000
(Being Acceptance received from Shubham
to cover the amount due from him)
Sept.4 Bank A/c Dr. 61,650
 [PAGE : 18]
Discount A/c Dr. 1,350
To Bills Receivable A/c 63,000
(Being Shubham's Acceptance discounted)
Sept.4 Bills Payable A/c Dr. 45,000
To Bank A/c 45,000
(Being own acceptance due on the date
met)
Sept.4 Shubham Dr. 12,000
To Bank A/c 11,100
To Discount A/c 900
(Being Amount remitted to Shubham, after
getting the bill discounted)
Dec.7 Shubham Dr. 63,000
To Bank A/c 63,000
(Being Shubham's Acceptance dishonoured
on insolvency)
Dec.7 Bank A/c Dr. 16,800
Bad Debts A/c Dr. 25,200
To Shubham 42,000
(Beings Amount and bad debts written off
in respect of amount due from Shubham)
Working Note:
Calculation of discount to be borne by Mr. Shubham:
Rs. 15,000 paid to Rajendra out of bill of Rs. 45,000 as such Rs. (45,000 - 15,000)
= 30,000 due to Rajendra and Rs. 11,100 further received from Rajendra.
Therefore 30,000 + 11,100 = Rs. 41,100 are shared by Shubham, out of total
Discount shared by Shubham.
41,100 41,100
= × (63,000 – 61,650) = × 1,350 = Rs. 900.
61, 650 61, 650

Q.17
Answer:
Books of H
Date Particulars Amount Amount
(Dr) Rs. (Cr) Rs.
1.7.99 G's A/c Dr. 80,000
To Bills Payable A/c 80,000
(Being Acceptance of bill drawn by G)
1.9.99 J's A/c Dr. 90,000
To Sales A/c 90,000
(Being Sales made to J)
1.9.99 Bills Receivable A/c Dr. 80,000
Banks A/c Dr. 9,000
Discount A/c Dr. 1,000
To J's A/c 90,000
(Being Acceptance received from J's
 [PAGE : 19]
endorsement of bill received from G and
Rs. 9,000 received in full settlement of the
amount due)
1.9.99 Bills Payable A/c Dr. 80,000
To Bills Receivable A/c 80,000
(Being Own acceptance received from Ji's
Endorsement cancelled)
1.10.99 Purchase A/c Dr. 1,00,000
To G's A/c 1,00,000
(Being purchase made from G)
G's A/c Dr. 20,000
To Bank A/c 20,000
(Being Amount paid to G after adjustment
of Rs. 80,000 for accommodation extended
to him)

Q.18
Answer:
Ram's Journal
Date Particulars Amount Amount
(Dr) Rs. (Cr) Rs.
2001 Hari's A/c Dr. 1,00,000
Jan.1 To Sales A/c 1,00,000
(Being Sale of goods to Hari on credit)
Jan.1 Bills Receivable A/c Dr. 1,00,000
To Hari's A/c 1,00,000
(Being Bill accepted by Hari for the amount
due)
Jan.4 Bank A/c Dr. 97,000
Discount Dr. 3,000
To Bills Received A/c 1,00,000
(Being Bill accepted by Hari Discounted
with the bank @ 12% p.a.)
Jan.4 Hari's A/c Dr. 1,00,250
To Bank A/c 1,00,250
(Being the amount the amount of bill
dishonoured and nothing charges paid
thereon, debited to Hari's account)
Hari's Journal
Date Particulars Amount Amount
(Dr) Rs. (Cr) Rs.
2001 Purchase Account Dr. 1,00,000
Jan 1 To Ram's A/c 1,00,000
(Being purchases of goods from Ram on
credit)
Jan 1 Ram's A/c Dr. 1,00,000
To Bills Payable A/c 1,00,000
 [PAGE : 20]
(Being Acceptance given on the bill drawn
by Ram)
April 4 Bills Payable A/c Dr. 1,00,000
Trade Expenses A/c Dr. 250
To Ram's A/c 1,00,250
(Being Dishonour of the bill drawn by Ram
on the due date)
Q.19
Answer:
Book of X Journal Entries
Date Particulars Amount Amount
(Dr) Rs. (Cr) Rs.
2001 Bills Receivable A/c Dr. 4,000
April 1 To Y 4,000
(Being acceptance on bill received)
April 1 Bank A/c Dr. 3,920
Discount A/c 80
To Bills Receivable A/c 4,000
(Being Bill discounted @ 6% p.a.)
April 1 Y's A/c Dr. 2,000
To Bank A/c 1,960
To Discount A/c 40
(Being half of the proceeds sent)
April 4 Y's 7,000
To Bills Payable A/c 7,000
(Being acceptance given on a New Bill)
April 4 Bank A/c Dr. 1,300
Discount A/c Dr. 200
To Y 1,500
(Being amount received from Y)
Aug. 4 Bills Payable A/c Dr. 7,000
To Y 7,000
(Beings bill dishonoured due to insolvency)
Aug. 4 Y Dr. 3,500
To Bank A/c 875
To Deficiency A/c 2,625
(Beings the amount of 25 paisa in a rupee
paid to Y)
Working Note:
Y's Account
Date Particulars F.N. Amt. Date Particulars F.N. Amt.
2001 2001
April 1 To Bank A/c 1,960 April 1 By B/R 4,000
April 1 To Discount A/c 40 April 4 By Bank A/c 1,300
April 4 To Bill Payable A/c 7,000 April 4 By Discount 200
April 4 To Bank A/c 875 April 4 By B/P A/c 7,000
April 4 To Deficiency A/c 2,625
12,500 12,500
 [PAGE : 21]
Q.20
Answer
In the books of Anil
Journal Entries
Date Particulars L.F. Amount Amount
(Dr) Rs. (Cr) Rs.
2003 Bills Receivable A/c Dr. 9,000
5 April To Sanjay's A/c 9,000
(Being acceptance received for
material accommodation)
5 April Bank A/c Dr. 8,820
Discount A/c Dr. 180
To Bills Receivable A/c 9,000
(Being discounting of bills)
5 April Sanjay's A/c Dr. 3,000
To Bank A/c 2,940
To Discount A/c 60
(Being 1/3 proceeds of the bill
transfer to the Sanjay's A/c)
8 July Sanjay's A/c Dr. 12,600
To Bills Payable A/c 12,600
(Being acceptance of bill given)
8 July Bank A/c Dr. 2,220
6, 000 2,200 Dr. 180
Discount A/c 270
12, 330
To Sanjay's A/c 2,400
(Being amount received from Sanjay
against 2nd bills)
11 Oct. Bills Payable A/c Dr. 12,600
To Sanjay's A/c 12,600
(Being dishonor of bill due insolvency)
15 Oct. Sanjay's A/c 8,400
To Bank A/c 4,200
To Deficiency A/c 4,200
(Being @ 50% of (Rs. 6,000 + 2,400)
paid to Sanjay)
 [PAGE : 22]

UNIT-II SALE OF GOODS ON APPROVAL OR RETURN BASIS

Book Page No. 141

Q.9
Answer
In the Books of 'X'
Goods on Sales or Return, Sold and Returned Day Books
Date Party to whom LF Amount Date Sold Returned
(2002) goods sent (Rs.) (2002) (Rs.) (Rs.)
Dec. 10 M/S ABC Co. 10,000 Dec. 25 10,000 –
Dec. 12 M/S DEF Co. 15,000 Dec. 16 – 15,000
Dec. 15 M/S GHI Co. 12,000 Dec. 20 10,000 2,000
Dec. 20 M/S DEF Co. 16,000 Dec. 24 16,000 –
Dec. 25 M/s ABC Co. 11,000 Dec. 28 11,000 –
Dec. 30 M/s GHI Co. 13,000 – – –
77,000 47,000 17,000
Goods on Sales or Return Total Account
Date Particulars Amount Date Particulars Amount
(2002) (Rs.) (2002) (Rs.)
To Returns 17,000 Dec. 31 By goods sent on 77,000
To Sales 47,000 sales or Return
To Balance c/d 13,000
77,000 77,000

Q.10
Answer:
Journal Entries in the Books of Mr. A
(i) Mr. B's (Debtor) A/c Dr. 20,000
To Sales A/c 20,000
(Being goods are approved by Mr B)
(ii) Mr. B's (Debtor) A/c Dr. 20,000
To Sales A/c 20,000
(Being goods are sold)
Sales Return A/c Dr. 20,000
To Mr. B's A/c 20,000
(Being goods are rejected by the
customer)
(iii) Mr. B's A/c Dr. 20,000
To Sales 20,000
(Being goods are sold)
Sales Return A/c Dr. 10,000
To Mr. B's A/c 10,000
(Being half of goods rejected by the
customer)
 [PAGE : 23]

UNIT III : CONSIGNMENT

Book Page No. 151
Q.11
Answer:
In the Books of M/s Ram & Co., Delhi
Consignment Account
Dr. Cr.
Particulars Amt. (Rs.) Particulars Amt. (Rs.)
To Goods sent on Consignment 28,80,000 By Laxman Traders A/c (10,000 25,00,000
A/c (12,000 × 240) × 250)
To Bank 6,000 By Goods sent on Consignment 4,80,000
To Laxman Traders (expenses) 2,000 (12000 × 40)
To Laxman Traders 1,45,000 By Stock on consignment 4,32,900
To Stock Reserve 72,000
To Net Profit 3,07,900
(Profit on Consignment
Transferred)
34,12,900 34,12,900
Laxman Traders Account
Particulars Amt. (Rs.) Particulars Amt. (Rs.)
To Consignment A/c (sales) 25,00,000 By Consignment A/c 2,000
By Consignment A/c (1) 1,45,000
By Bank A/c 10,00,000
By Balance c/d 13,53,000
25,00,000 25,00,000
Working Note:
1. Calculation of Commission Payable
5% on 25,00,000 = 1,25,000
20% on 1,00,000 = 20,000
1,45,000

2. Valuation of closing stock on consignment

2000 sarees @ Rs. 240 = 4,80,000
Add: Proportionate expenses
6, 000 2, 000 1,000
12, 000
4,81,000
Less: Reduction in cost by 10% 48,100
Value of closing stock 4,32,900

Q.12
Answer:
Consignment Account
Dr. Cr.
Date Particulars Rs. Date Particulars Rs.
1997 1997
Jan 15 To Goods sent on 25,00,000 March 4 By Y A/c (Sales) 21,00,000
Consignment A/c April 10 By Y A/c (Sales) 10,80,000
Jan 15 To Bank A/c 7,000 April 30 By Stock on Consignment 2,51,150
Jan 30 To Y A/c (Clearance 4,500 A/c (2)
 [PAGE : 24]
expenses)
Mar. 4 To Y A/c (Selling 75,000
Expenses)
April 10 To Y A/c (Selling 37,500
Expenses)
April 30 To Y A/c (Commission) 1,63,500
(1)
April 30 To Net Profit 6,43,650
34,31,150 34,31,150
Y (Bombay) Account
Dr. Cr.
Date Particulars Rs. Date Particulars Rs.
1997 1997
March 4 To Consignment A/c 21,00,000 Jan 30 By Consignment A/c 4,500
April 10 To Consignment A/c 10,80,000 March 4 By Consignment A/c 75,000
April 1 By Consignment A/c 37,500
April 30 By Consignment A/c (1) 1,63,500
April 30 By Bank A/c 28,99,500
31,80,000 31,80,000
Working Notes:
1. Computation of commission
Let Total Commission be x
x = 225 × 500 + 1/4[(21,00,000 + 10,80,000) – × – (12,500 × 225)]
x = 1,12,500 + 1/4 [31,80,000 – × – 28,12,500]
X X
x = 1,12,500 + 91,875 – ;x+ = 1,12,500 + 91,875
4 4
5X
= 2,04,375
4
x = 1,63,500
Total Commission = Rs. 1,63,500
2. Valuation of closing stock
25 televisions @ Rs. 10,000 2,50,000
7, 000 25
Add: Proportionate expenses of the consignor 700
250
Add: Proportionate clearance expenses paid by the consignee
4,500 25
450
250
2,51,150

Q.13
Answer
D's Account
Dr. Cr.
Date Particulars Rs. Date Particulars Rs.
1998 1998
Feb. 1 To Bill Payable A/c 6,40,000 Mar 31 By Bank A/c 7,62,600
(80% of Rs. 8,00,000) (820 cycles × Rs. 930)
Mar. 31 To Cash A/c 12,500
 [PAGE : 25]
Mar. 31 To Commission A/c 70,520
Mar. 31 To Bank A/c 39,580
7,62,600 7,62,600
Bills Payable Account
Dr. Cr.
Date Particulars Rs. Date Particulars Rs.
1998 1998
Mar.4 To Bank A/c 6,40,000 Feb. 1 By D's A/c 6,40,000
6,40,000 6,40,000
Value of Closing Stock with 'A'
Rs.
160 cycles at Rs. 640 (cost price including freight) 1,02,400
20 Cycles shop-soiled at 50% of the Rs. 640 i.e. Rs. 320 each 6,400
Value of closing stock with A 1,08,800

Q.14
Answer:
Consignment Account
D's Account
Particulars Amt.(Rs.) Particulars Amt.(Rs.)
To Goods sent on consignment A/c 7,20,000 By Goods sent on consignment A/c 1,20,000
[(6,000×120)] [Unloading 6,000 × 20]
To Bank 3,000 By Y [5,000 × 125] 6,25,000
[Packing and freight] By Consignment Stock
To Y Cost 6,00,000 ×
Selling Exps. 1,000 1/6 1,00,000
Commission (i) 31,250 Add: Exps.
Extra Comm. (ii) 5,000 37,250 [3,000×1/6] 500
To Profit & Loss A/c 75,200 1,00,500
Less: 10% 10,050 90,450
8,35,450 8,35,450
Books of Y
'X's Account
Particulars (Rs.) Particulars (Rs.)
To Bank A/c [Selling Exps.] 1,000 By Bank A/c [Sale] 6,25,000
To Commission A/c
Gen. Comm. 31,250
Extra Comm. 5,000 36,250
To Bank A/c (Remittance) 5,00,000
To Balance C/d 87,750
6,25,000 6,25,000
Working Note: (i) Commission = 6,25,000 × 5% = 31,250
(ii) Extra Comm. = 20% [5,000 × (125 – 120)] = 5,000

Q.15
Answer:
Consignment A/c
Particulars Amt. (Rs.) Particulars Amt.(Rs.)
To Goods sent on consignment 7,20,000 By Sales 8,88,000
To Cash A/c (Cartage, Freight etc.) 80,000 By Abnormal Loss 1,000
To Consignee: By Stock on Consignment 61,950
 [PAGE : 26]
Non-recurring Exp. 39,950 (Closing stock)
Recurring Exps. 22,500 62,450
To Consignee:
Ordinary Commission 17,760
Del-credere Commission 8,880 26,640
To P&L A/c on consignment 61,860
9,50,950 9,50,950
Abnormal Loss
Particulars Amt. Particulars Amt.
(Rs.) (Rs.)
By Consignment A/c 1,000 By Cash A/c (Insurance 570
Claim Received.)
By P & L A/c (Loss) 430
1,000 1,000
P & L A/c on consignment
Particulars Amt. Particulars Amt.
(Rs.) (Rs.)
To Abnormal Loss 430 By Consignment A/c 61,860
To P & L A/c 61,430
61,860 61,860
Working Note:
(i) Calculation of packet-remain unsold (i.e. closing stock)
Total packets sent 800
Less: Lost 1
799
Less: Sold 740
Packets remaining unsold 59
Rs.
Cost of 59 packets = 59 × Rs. 900 53,100
Consignor's production expenses = 59 × Rs. 100 5,900
Consignee's Direct proportionate Expenses
39, 950 2,950
= × 59
799
Value of Closing Stock 61,950

Q.16
Answer:
In the books of A
Consignment Account
Dr. Cr.
Date Particulars Amt. Date Particulars Amt.
(Rs.) (Rs.)
2004 2004
Feb.18 To Goods sent on 1,00,000 Mar.15 By B's account (Sales) (600 96,000
consignment account × Rs. 160)
Feb.18 To Cash Account 1,500 May20 By B's account (Sales) (300 51,000
(Expenses) × Rs. 170)
To B's Account (Clearance 3,000 June30 By Consignment stock 10,450
charges) (W.N.-2)
 [PAGE : 27]
June30 To B's account (Selling 18,000
expenses) i.e. (900 × Rs.
20)
Commission 24,900
(W.N-1)
June30 To Profit and loss account 10,050
1,57,450 1,57,450
B's Account
Date Particulars Amt. Date Particulars Amt.
(Rs.) (Rs.)
2004 2004
Mar.15 To Consignment account 96,000 Feb.18 By Consignment Account 3,000
(Sales) (Clearance charge)
May20 To Consignment account 51,000 June30 By Consignment account
(Sales) (Selling expenses, & 18,000
Commission) 24,900
June30 By Cash account 1,01,100
1,47,000 1,47,000
Working Notes:
1. Computation of total commission:
Let total commission paid/payable be X.
1
X = 900 × Rs. 25 + [Rs. 96,000 + Rs.51,000] – × – (900 × Rs. 125)
4
1
X = Rs. 22,500 + [Rs. 1,47,000 – × – Rs. 1,12,500]
4
1
X = Rs. 22,500 + [Rs. 34,500 – ×]; 4X = Rs. 90,000 + Rs. 34,500 – × –
4
4x + x = Rs. 90,000 + Rs. 34,500
5x = Rs. 1,24,500
x = Rs. 24,900
2. Computation of value of the stock:
Rs.
100 DVD players @ Rs. 100 each 10,000
(Rs.1, 500 100) 150
Add: Proportionate expenses of A
1, 000

Proportionate expenses paid by B

(Rs.3, 000 100) 300
1, 000
10,450

Q.17.
Answer
In the books of M
Consignment A/c
Dr. Cr.
Particulars Rs. Particulars Rs.
To Goods sent to consignee A/c 1,00,000 By S A/c 1,12,500
(5,000 × Rs. 20) Sales (3,750 kg.× Rs. 30)
To Bank By Cash A/c (Insurance paid) 2,250
Freight & insurance 25,000 By Abnormal loss a/c 875
 [PAGE : 28]
To S A/c By Stock on Consignment 25,658
Godown Rent 10,000 By P&L a/c (loss) 5,342
Wages 1,000
Printing & Stationary 5,000
Commission (1,12,500 × 5%) 5,625
1,46,625 1,46,625
S A/c
Dr. Cr.
Particulars Rs. Particulars Rs.
To Consignment (3750×Rs.30) 1,12,500 By Bills Receivable 50,000
By Consignment
Godown Rent
Wages 1,000
Printing & Stationary 5,000
Commission 5,625
By Bank A/c 40,875
1,12,500 1,12,500

(i) Calculation of Closing Stock:

Particular Kg.
Goods Sent 5,000
(–) Destroyed in transit (125)
(–) Sold by 'S' (3750)
(–) Lost due to leakage (125)
Closing stock 1,000 Kg.
(ii) Calculation of value of closing stock:
Total Cost 1,25,000
(–) Abnormal loss (3125)
12,1875
(+) Consignee's exp. NIL
(Note) 1,21,575
Units remaining Cost
4,750 1,21,875
1,000 25,658
Note on Consignee expenses: It is assumed that expenses paid by consignee are
selling expenses in nature & hence are not included in closing stock.
 [PAGE : 29]

UNIT- IV: JOINT VENTURES

Book Page No. 164
Q.14
Answer
Memorandum Joint Venture Account
for the period - August 1 to 31, 1996
Particulars Rs. Particulars Rs.
To A's A/c By B's A/c Sales 2,00,000
Crackers 1,00,000
Forwarding charge 6,000
Insurance charge 2,000
Discount charge 4,500
To B's A/c
Cartage charges. 3,000
Commission 5,000
Rental charge 4,000
To Profit transferred to:
A's A/c 37,750
B's A/c 37,750
2,00,000 2,00,000
In the Books of A
B in Joint Venture Account
Particulars Rs. Particulars Rs.
To Bank A/c 1,00,000 By Bill Receivable A/c 1,00,000
To Bank A/c By Bank A/c 50,250
Forwarding charges 6,000
Insurance Charge 2,000
To Discount Charges 4,500
To Profit & Loss A/c 37,750
1,50,250 1,50,250
In the Books of B
A in Joint Venture Account
Particulars Rs. Particulars Rs.
To Bills Payable 1,00,000 By Bank A/c 2,00,000
To Bank A/c
Cartage Charges 3,000
Commission 5,000
Rental Charges 4,000
To P & L A/c 37,750
To Bank A/c 50,250
2,00,000 2,00,000

Q.15
Answer:
B's Account
Date Particulars Amt. Date Particulars Amt.
(Rs.) (Rs.)
1996 1997
 [PAGE : 30]
May21 To Bank (Purchases) 3,50,000 Feb.1 By Bank insurance 5,000
To Bank (Expenses) 10,000 company
1997 Mar.15 By Bank (Sale of 50 1,12,500
Mar15 To Commission 11,250 motors)
Apr.30 To Profit & Loss A/c 39,700 Apr.1 By Bank 1,50,000
(receipt from B)
Apr.30 By Bank 1,43,450
(receipt from B)
4,10,950 4,10,950
Memorandum Joint Venture Account
Particulars Rs. Particulars Rs.
To A: By A (Received from
Cost of Motors 3,50,000 insurance company) 5,000
Freight and Insurance 10,000 By A 1,12,500
To B: By B 3,60,000
Clearing charges 1,700
Repairs 3,000
Godown Rent 6,000
To A 11,250
To B 36,000
To Net Profit transfer to
A's A/c 39,700
B's A/c 19,850
4,77,500 4,77,500

Q.16
Answer:
Memorandum Joint Venture Account
Particulars Rs. Particulars Rs.
To D: By B (sales) 85,000
Machines 45,000 By B(machine taken over) 7,200
Commission 900
Repairs 12,000
Sundry
Expenses 600 58,500
To B:
Freight 2,400
Octroi 600
Godown Rent 500
Advertisement 1,700
To Profit transfer to
D's A/c 11,400
B's A/c 17,100 28,500
92,200 92,200
In the Books of D
Joint Venture with B Account
Particulars Rs. Particulars Rs.
To Bank: By Bank 40,000
Marchines 45,000 (Remittance)
Repairs 12,000 By Bank (Bal. fig.) 29,900
 [PAGE : 31]
Commission 900
Sundry Expenses 600 58,500
To P & L A/c 11,400
69,900 69,900
In the Books of B
Joint Venture with D Account
Particulars Rs. Particulars Rs.
To Bank: By Bank (Sales) 85,000
Freight 2,400 By Bank (Machines) 7,200
Octroi 600
Rent 500
Advertisement 1,700 5,200
To Bank (Remittance) 40,000
To P & L A/c 17,100
To Bank (Bal. fig.) 29,900
92,200 92,200

Q.17
Answer:
In the books of H
Joint Venture with Mr. S. Account
Date Particulars Amt. Date Particulars Amt.
(Rs.) (Rs.)
01.08.2004 To Bank Account 5,00,000 13.08.2004 By Bank account 2,15,000
(sale)
12.08.2004 To Bank Account 8,000 30.09.2004 By Bank account 4,50,000
(Freight) (sale)
15.11.2004 To Profit and loss 47,000 30.10.2004 By Bank account 4,37,000
account (share of (sale)
profit)
15.11.2004 To Bank account 5,47,000
(payment on
settlement)
11,02,000 11,02,000
Memorandum Joint Venture Account
Dr. Cr.
Particulars Rs. Particulars Rs.
To S (250 units × Rs. 10,00,000 By H- (Sales):
4,000) 50 Monitors @ 2,15,000
To H (Freight) 8,000 Rs. 4,300
To Profit 100 monitors @ 4,50,000
H 47,000 Rs. 4,500
S 47,000 94,000 100 monitors @ 4,37,000
Rs. 4,370
11,02,000 11,02,000
Q.18
Answer:
(i) The Memorandum Joint Venture A/c :-
In the books of A and B
 [PAGE : 32]
Dr. Cr.
Particulars Rs. Particulars Rs.
To A :- By Sales
Cost (C.D. players) 3,60,000 A (20 × 4,500) 90,000
Forwarding Charges 2,880 B (80 × 4,500) 3,60,000
Interest (2 months) 1,500
Selling Expenses 5,000
To B :-
Clearing charges 720
Interest (1 month) 2,250
Sundry Expenses 50
Selling Expenses 20,000
To Net Profit to
A 28,000
B 28,800 57,600
4,50,000 4,50,000
(ii) Joint Venture with B a/c in the books of A:-
Particulars Rs. Particulars Rs.
To Bank A/c (Part payment 72,000 By Bank A/c (Sales 22,500
of cost) proceeds)
To Bank A/c (forward) 2,880 By Bank A/c 1,50,000
To Bank A/c 2,88,000 (Remittance from B)
(Bal. Cost of Purchase) By Bank A/c 67,500
To Bank A/c (selling) 5,000 (Sales proceeds)
To Interest A/c 1,500 By Bank A/c 1,58,180
To P & L A/c 28,800 (Received for B)
3,98,180 3,98,180
(iii) Joint Venture with A a/c in the books of B:-
Particulars Rs. Particulars Rs.
To Bank a/c Clearing By Bank A/c (Sales) 90,000
charges 720 proceeds of 20 CD
Remittance including players
charges 1,50,000 By Bank A/c (sale 2,70,000
Selling Exp. 20,000 proceeds of 60 C.D.
Interest 2,250 Players)
Sundry Expense 50
To P & L A/c 28,800
To Bank A/c (paid to A) 1,58,180
3,60,000 3,60,000
Working Notes:
(i) Calculation of Interest on loan:-
Loan taken by A as on 1st July 50,000 (1st July to 1st September) Interest –
2
50,000 × 18% × = Rs. 1,500
12
Loan taken by B as on 1st August Rs. 1,50,000 (1st Aug. to 1st September)
1
Interest – 1,50,000 × 18% × = 2,250.
12
 [PAGE : 33]

UNIT V : ROYALTY ACCOUNTS

Q.6
Answer:
Year Minimum Actual Short Short-workings Actual Closing
Rent Royalty Working Recouped P/L Payment short
(–)or Ex: Working
W(+) Dr. Cr.
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
2006-07 1,00,000 36,000 (-)64,000 – 64,000 – 1,00,000 NIL
2007-08 1,30,000 54,000 (-)76,000 – – 19,000 1,30,000 95,000
2008-09 1,60,000 1,50,000 (-)10,000 – 50,000 – 1,60,000 55,000
2009-10 1,90,000 2,28,000 +38,000 38,000 7,000 – 1,90,000 10,000
2010-11 2,20,000 3,00,000 +80,000 10,000 – – 2,90,000 –
Ledger of Ritu
Royalty A/c
31.03.07 To Richa 36,000 31.03.07 By Profit & Loss A/c 36,000
31.03.08 To Richa 54,000 31.03.08 By Profit & Loss A/c 54,000
31.03.09 To Richa 1,50,000 31.03.09 By Profit & Loss A/c 1,50,000
31.03.10 To Richa 2,28,000 31.03.10 By Profit & Loss A/c 2,28,000
31.03.11 To Richa 3,00,000 31.03.11 By Profit & Loss A/c 3,00,000
Richa's A/c
31.03.07 To Bank A/c 1,00,000 31.03.07 By Royalty A/c 36,000
By Short working A/c 64,000
1,00,000 1,00,000
31.03.08 To Bank A/c 1,30,000 31.03.08 By Royalty A/c 54,000
By Short working A/c 76,000
1,30,000 1,30,000
31.03.09 To Bank A/c 1,60,000 31.03.09 By Royalty A/c 1,50,000
By Short working A/c 10,000
1,60,000 1,60,000
31.03.10 To S.W. A/c 38,000 31.03.10 By Royalty A/c 2,28,000
31.03.11 To Bank A/c 1,90,000
2,28,000 2,28,000
31.03.11 To S.W. A/c 10,000 31.03.11 By Royalty A/c 3,00,000
31.03.11 To Bank A/c 2,90,000
3,00,000 3,00,000

Short Workings A/c

31.03.07 To Richa 64,000 31.03.07 By Profit & Loss A/c 64,000
31.03.08 To Richa 76,000 31.03.08 By Balance c/d 95,000
31.03.08 To P/L 19,000 31.03.09 By P/L A/c 50,000
01.04.08 To Balance b/d 95,000 By Balance c/d 55,000
31.03.09 To Richa 10,000
1,05,000 1,05,000
1.4.09 To Balance b/d 55,000 31.03.10 By Richa 38,000
By P/L 7,000
By Balance c/d 10,000
 [PAGE : 34]
55,000 55,000
01.04.10 To Balance b/d 10,000 By P/L A/c 10,000

Q.7
Answer:
Analytical table
Year Minimu Actual Short Working Short Transferred Actual Closing
m Rent Royalty (–) or Excess workings to P&L A/c Payment short
Working (+) Recouped Working
2007-08 80,000 - (-) 80,000 - - 80,000 80,000
2008-09 80,000 30,000 (-) 50,000 - - 80,000 1,30,000
2009-10 80,000 1,15,000 + 35,000 35,000 - 80,000 95,000
2010-11 48,000* 50,000 + 2,000 2,000 - 48,000 50,000
2011-12 80,000 1,60,000 + 80,000 50,000 - 1,10,000 -
(365 146)
* 80,000 ×
345
In the books of Kailash
Royalty A/c
Date Particulars Amount Date Particulars Amount
31.03.2008 To Jagdish A/c Nil 31.03.2008 By P/L A/c Nil
Nil Nil
31.03.2009 To Jagdish A/c 30,000 31.03.2009 By P/L A/c 30,000
30,000 30,000
31.03.2010 To Jagdish A/c 1,15,000 31.03.2010 By P/L A/c 1,15,000
1,15,000 1,15,000
31.03.2011 To Jagdish A/c 50,000 31.03.2011 By P/L A/c 50,000
50,000 50,000
31.03.2012 To Jagdish A/c 1,60,000 31.03.2012 By P/L A/c 1,60,000
1,60,000 1,60,000

Short Workings A/c

Date Particulars Amount Date Particulars Amount
31.03.2008 To Jagdish 80,000 31.03.2008 By Bal. c/d 80,000
80,000 80,000
01.04.2008 To Balance 80,000 31.03.2009 By Bal. c/d 1,30,000
b/d
To Jagdish 50,000
1,30,000 1,30,000
01.04.2008 To Balance 1,30,000 31.03.2010 By Jagdish 35,000
b/d
31.03.2010 By Balance c/d 95,000
1,30,000 1,30,000
01.04.2010 To Balance 95,000 4th Year By Jagdish 2,000
By P/L A/c 43,000
By Balance c/d 50,000
95,000 95,000
01.04.2011 To Balance 50,000 31.03.2012 By Jagdish 50,000
 [PAGE : 35]
b/d
50,000 50,000
Jagdish A/c
Date Particulars Amount Date Particulars Amount
31.03.2008 To Bank A/c 80,000 31.03.2008 By Royalty Nil
31.03.2008 By S/W 80,000
80,000 80,000
31.03.2009 To Bank A/c 80,000 31.03.2009 By Royalty 30,000
31.03.2009 By S/W 50,000
80,000 80,000
31.03.2010 To Bank A/c 80,000 31.03.2010 By Royalty 1,15,000
31.03.2010 To Short 35,000
working A/c
1,15,000 1,15,000
31.03.2011 To Bank A/c 48,000 31.03.2011 By Royalty 50,000
31.03.2011 To Short 2,000
working A/c
50,000 50,000
31.03.2012 To Bank A/c 1,10,000 31.03.2012 By Royalty 1,60,000
31.03.2012 To Short 50,000
working A/c
1,60,000 1,60,000
Q.8
Answer:
Jagdish A/c
Date Particulars Amount Date Particulars Amount
31.03.10 To Landlord A/c 15,00,000 31.03.10 By Royalty receivable A/c
(Minimum Rent) (4,000 tone × 120/-) 4,80,000
By P & L a/c 10,20,000
15,00,000 15,00,000
31.03.11 To Landlord a/c 19,00,000 31.03.11 By Royalty receivable A/c 8,40,000
(19,000 tone × 100/-) (7000 × 120/-)
31.03.11 By P and L A/c 10,60,000
19,00,000 19,00,000
31.03.12 To Landlord A/c 22,00,000 31.03.12 By Royalty receivable a/c 9,60,000
(22,000 tone × 100/-) (8,000 tone × 120/-)
By P & L a/c 12,40,000
22,00,000 22,00,000
Q.9
Answer:
Analytical Table
Year Production Rate of Royalty Min Short Short Short Short Actual
(Tonnes) Royalty Rent workings working working working Payment
occurred recouped lapsed carried
forward
2008 1,000 2 2,000 10,000 8,000 - - 8,000 10,000
2009 2,000 2 4,000 11,000 7,000 - - 15,000 11,000
2010 10,000 2 20,000 12,000 - 8,000 7,000 - 12,000
2011 15,000 2 30,000 13,000 - - - - 30,000
 [PAGE : 36]
In the books of Mining Development Corporation
Royalty Account
Dr. Cr.
Date Particulars Amount Date Particulars Amount
31.12.08 To Land Lord 2,000 31.12.2008 By P/L A/c 2,000
A/c
31.12.09 To Land Lord 4,000 31.12.2009 By P/L A/c 4,000
A/c
31.12.10 To Land Lord 20,000 31.12.2010 By P/L A/c 20,000
A/c
31.12.11 To Land Lord 30,000 31.12.2011 By P/L A/c 30,000
A/c
Short Working Account
Dr. Cr.
Date Particulars Amount Date Particulars Amount
31.12.08 To Land Lord A/c 8,000 31.12.08 By Balance c/d 8,000
31.12.09 To Balance b/d 8,000 31.12.09 By Balance c/d 15,000
31.12.09 To land Lord A/c 7,000
15,000 15,000
31.12.10 To Balance b/d 15,000 31.12.10 By Landlord A/c
31.12.10 By Profit and Loss 7,000
A/c (lapsed)
15,000 15,000
Landlord Account
Dr. Cr.
Date Particulars Amount Date Particulars Amount
31.12.08 To Bank A/c 10,000 31.12.08 By Royalty A/c 2,000
31.12.08 By Short working A/c 8,000
10,000 10,000
31.12.09 To Bank A/c 11,000 31.12.09 By Royalty A/c 4,000
31.12.09 By Short working A/c 7,000
11,000 11,000
31.12.10 To Short 8,000 31.12.10 By Royalty A/c 20,000
working A/c
31.12.10 To Bank A/c 12,000
20,000 20,000
31.12.11 To Bank A/c 30,000 31.12.11 By Royalty A/c 30,000

Q.10
Answer:
Rs. 15,000 (being assured Rent).
Here,
(a) Royalty payable = Rs. 5 × 2,000 = Rs. 10,000
 [PAGE : 37]
(b) Mainimum Rent = Rs. 15,000 (as per question).
Rent payable is the higher of (a) and (b) i.e. Rs. 15,000.

Q.11
Answer
Statement showing royalty payable
Short working
Year o/p Actual Min. rent Excess Occurred Recouped Written c/f Amount
royalty short off or Payable
working lapsed
09-10 2,500 7,50,000 15,00,000 0 7,50,000 0 0 7,50,000 15,50,000
10-11 4,200 12,60,000 15,00,000 0 2,40,000 0 0 9,90,000 15,50,000
11-12 5,600 16,80,000 15,00,000 1,80,000 0 1,80,000 5,70,000 2,40,000 15,50,000
12-13 6,500 19,50,000 15,00,000 4,50,000 0 2,40,000 0 0 17,10,000
13-14 2,700 8,10,000 9,00,000 0 90,000 0 0 90,000 9,00,000
14-15 7,100 21,30,000 15,00,000 6,30,000 0 90,000 0 0 20,40,000
Royalties A/c
Date Particulars Amount Date Particulars Amount
31.03.10 To Landlord A/c 7,50,000 31.03.10 By P/L A/c 7,50,000
31.03.11 To Landlord A/c 12,60,000 31.03.11 By P/L A/c 12,60,000
31.03.12 To Landlord A/c 16,80,000 31.03.12 By P/L A/c 16,80,000
31.03.13 To Landlord A/c 19,50,000 31.03.13 By P/L A/c 19,50,000
31.03.14 To Landlord A/c 8,10,000 31.03.14 By P/L A/c 8,10,000
31.03.15 To Landlord A/c 21,30,000 31.03.15 By P/L A/c 21,30,000
Landlord A/c
Date Particulars Amount Date Particulars Amount
31.03.10 To Bank A/c 15,00,000 31.03.10 By Royalties A/c 7,50,000
31.03.10 By Short Workings A/c 7,50,000
15,00,000 15,00,000
31.03.11 To Bank A/c 15,00,000 31.03.11 By Royalties A/c 12,60,000
31.03.11 By Short Working A/c 2,40,000
15,00,000 15,00,000
31.03.12 To Bank A/c 15,00,000 31.03.12 By Royalties A/c 16,80,000
31.03.12 To Short Working A/c 1,80,000
16,80,000
31.03.13 To Bank A/c 17,10,000 31.03.13 By Royalties A/c 19,50,000
To Short Working A/c 2,40,000
19,50,000 19,50,000
31.03.14 To Bank A/c 9,00,000 31.03.14 By Royalties A/c 8,10,000
31.03.14 By Short Working A/c 90,000
9,00,000 9,00,000
31.03.15 To Bank A/c 20,40,000 31.03.15 By Royalties A/c 21,30,000
31.03.15 To Short Working A/c 90,000
21,30,000 21,30,000

Short Working Account

Date Particulars Amount Date Particulars Amount
31.03.10 To Landlord A/c 7,50,000 31.03.10 By Balance c/d 7,50,000
7,50,000 7,50,000
01.04.10 To Balance b/d 7,50,000 31.03.11 By Balance c/d 9,90,000
31.03.11 To Landlord A/c 2,40,000
 [PAGE : 38]
9,90,000 9,90,000
01.04.11 To Bal. b/d 9,90,000 31.03.12 By Landlord A/c 1,80,000
By P/L A/c 5,70,000
By Bal. c/d 2,40,000
9,90,000 9,90,000
01.04.12 To Bal. b/d 2,40,000 31.03.13 By Landlord A/c 2,40,000
2,40,000 2,40,000
31.03.14 To Landlord A/c 90,000 31.03.14 By Bal. c/d 90,000
90,000 90,000
01.04.14 To Bal. b/d 90,000 31.05.15 By Landlord A/c 90,000
90,000 90,000

Q.12
Answer:
Minimum rent per annum = Rs. 2,00,000 ÷ 5 = Rs. 40,000
Royalty based on Sales = 10% of Rs. 3,00,000 = Rs. 30,000
Amount of Royalty payable is Rs. 40,000
(Since minimum rent is more than royalty on the basis of sales).

Q.13
Answer:
Statement showing calculation of short workings and its Recoupment
Sl. Year Production Royalty Minimum Short working
ended (Tonnes) Rs. 2.50 Rent Rs. Caused Recouped Transferred
March per tone (Rs.) to P & L
31 Rs. Account
1 2013 80,000 2,00,000 2,40,000 40,000 – –
2 2014 90,000 2,25,000 2,40,000 15,000 – –
3 2015 60,000 1,50,000 1,80,000* 30,000 – –
4 2016 1,20,000 3,00,000 2,40,000 - 60,000 25,000
* Minimum rent proportionately reduced in view of strike for 3 months in the year
ended March 31, 2015 (Rs. 2,40,000 × 3/4) = Rs. 1,80,000.
(i) In the books of Bansal Coal Ltd.
Royalty Account
Dr. Cr.
Year ended Particulars Rs. Particulars Rs.
31st March
2013 To Butcher M A/c 2,00,000 By Profit & Loss A/c 2,00,000
2014 To Butcher M A/c 2,25,000 By Profit & Loss A/c 2,25,000
2015 To Butcher M A/c 1,50,000 By Profit & Loss A/c 1,50,000
2016 To Butcher M A/c 3,00,000 By Profit & Loss A/c 3,00,000
(ii) Short Working Account
Dr. Cr.
Year ended Particulars Rs. Year ended Particulars Rs.
March 31 March 31
2013 To Butcher M 40,000 2013 By Balance c/d 40,000
 [PAGE : 39]
40,000 40,000
2014 To Balance b/d 40,000 2014 By Balance c/d 55,000
To Butcher M 15,000
55,000 55,000
2015 To Balance b/d 55,000 2015 By Balance c/d 85,000
To Butcher M 30,000
85,000 85,000
2016 To Balance c/d 85,000 2016 By Butcher M 60,000
By Profit & Loss A/c 25,000
85,000 85,000
(iii) Butcher M Account
Dr. Cr.
Year ended Particulars Rs. Year ended Particulars Rs.
March 31 March 31
2013 To Bank A/c 2,40,000 2013 By Royalty A/c 2,00,000
By Short Working 40,000
A/c
2,40,000 2,40,000
2014 To Bank A/c 2,40,000 2014 By Royalty A/c 2,25,000
By Short Working 15,000
A/c
2,40,000 2,40,000
2015 To Bank 1,80,000 2015 By Royalty A/c 1,50,000
By Short Working 30,000
A/c
1,80,000 1,80,000
2016 To Short 2016 By Royalty A/c 3,00,000
Working A/c 60,000
To Bank A/c 2,40,000
3,00,000 3,00,000
 [PAGE : 40]

UNIT VI: AVERAGE DUE DATE

Q.14
Answer:
Calculation of Average Due Date
Date of Bill Term Due Date No. of Days Amount Rs. Product
from 10th
Aug. 1994
Aug. 10, 1994 3 months Nov. 13,1994 95 6,000 5,70,000
Oct. 23, 1994 60 days Dec. 25, 1994 137 5,000 6,85,000
Dec. 04, 1994 2 months Feb. 07, 1995 181 4,000 7,24,000
Jan. 14, 1995 60 days Mar. 18, 1995 220 2,000 4,40,000
March 08, 2 months May 11, 1995 274 3,000 8,22,000
1995
20,000 31,41,000
Average Due Date
Total of Product
= Base Date + days equal to
Total of Amount
32, 41, 000
= 10th Aug. 1994 +
20, 000
= 10th Aug. 1994 + 162.05
= 162 days (approx.) after Aug. 10, 1994]
i.e. January, 19, 1995

Q.15
Answer:
Due Dates Amount Rs. No. of Days from Products.
April 1
April 1, 1996 2,000 0 0
April 10, 1996 5,000 9 45,000
May 16, 1996 10,000 45 4,50,000
June 9, 1996 3,000 69 2,07,000
Total 20,000 7,02,000
Total of Product
Average Due Date = Base Date + Days equal to
Total of Amount
7,02,000
Average Due Date = 1st April +
20, 000
=1st April + 35 days
= 6th May, 1996
Interest therefore has been calculated on Rs. 20,000 from 6th May, 1996 i.e.,
15 55
Interest = 20,000 × × = Rs. 450.82
100 366
 [PAGE : 41]
Q.16
Answer:
Calculation of Average Due date
Date of Bill Term Due Date No. of Days Amount Rs. Products.
from for base
date (10th
August)
Aug. 10, 3, months Nov. 13, 95 6,000 5,70,000
1996 1996
Oct. 23, 60 days Dec. 24, 136 5,000 6,80,000
1996 1996
Dec. 14, 2 months Feb. 07, 181 4,000 7,24,000
1997 1997
Jan. 14, 60 days Mar. 18, 220 2,000 4,40,000
1997 1997
March 08, 2 months May 11, 274 3,000 8,22,000
1997 1997
Total 20,000 32,36,000
Total of Product
Average Due Date = Base Date + Days equal to
Total of Amount
32,36,000
= 10th August +
20,000
=10th August + 161.8
= 162 Days (Approx.) after 10th August, 1996
i.e. 19th January, 1997.
Note: The due date of the second bill dated 23rd October, 1996 is 25th December,
1996. Since 25th December is a public holiday, the preceding day i.e., 24th
December has been considered as the due date.

Q.17
Answer:
Calculation of Average Due date
Taking 6th January, 1998 as the base date:
For Green's payments
Due Dates Amount Rs. No. of days from Products
the base date, i.e.,
6th Jan.
1998
6th January 6,000 0 0
2nd February 2,800 27 75,600
31st March 2,000 84 1,68,000
Total 10,800 2,43,600
 [PAGE : 42]
For Red's Payments
Due Dates Amount Rs. No. of Days from Products.
April 1
1998
6th January 6,600 0 0
9th March 2,400 62 1,48,800
20th March 500 73 36,500
Total 9,500 1,85,300
Excess of Green's products over Red's = Rs. 2,43,600 - Rs. 1,85,300
= Rs. 58,300
Balance due to Red = Rs. 10,800 = Rs. 9,500 = Rs. 1,300
58,300
Number of days from the base date to the date of settlement is
1,300
= 45 days (approx.)
Therefore, the date of settlement of the balance amount is 45 days after 6th
January, i.e., on 20th February.
On 20th February 1998, Green has to pay Red Rs. 1,300 to pay-off the account.

Q.18
Answer:
Calculation of Average Due date
Taking 10th March, 1999 as the base date:
Due Dates Amount Rs. No. of days from Products
the base date, i.e.,
10th March
10th March 5,000 0 0
2nd April 18,000 23 4,14,000
30th April 60,000 51 30,60,000
10th June 2,000 92 1,84,000
Total 85,000 36,58,000
Sum of Product
Average Due Date = Base Date + Days equal to
Sum of Amount
36,58,000
= 10th March + i.e. 43 days (approx.)
85,000
= 22nd April, 1999
Computation of Interest: Interest can be calculated on Rs. 85,000 from 22nd
April, 1999 to 30th June, 1999 at 10% p.a. i.e., interest on Rs. 85,000 for 69 days
at 10%
10 69
= Rs. 85,000 × ×
100 365
= Rs. 1,607 (approx.)
 [PAGE : 43]
Q.19
Answer:
12 18 24 30 36
Average Due Date = 1 Jan. 2000 + months
5
= 1 Jan. 2000 + 24 months
= 1 Jan. 2002
10
Interest to be charged = 25,000 × ×2
100
= Rs. 5,000

Q.20
Answer:
Bill Date Amount Term Due date (D) No. of days Product
(A) (Rs.) (C) (including (Taking (E) (F) = (B) ×
(B) grace period) 19 Nov. 03 (E) (Rs.)
as base)
16 Aug, 3,000 3 Months 19 Nov., 03 0 0
2003
20 Oct, 2003 2,500 60 Days 22 Dec., 03 33 82,500
14 Dec, 2,000 2 Months 17 Feb., 04 90 1,80,000
2003
24 Jan. 2004 1,000 60 Days 27 Mar., 04 129 1,29,000
06 March, 1,500 2 Months 09 May, 04 172 2,58,000
2004
10,000 6,49,500
Sum of Product
Average Due Date = Base Date + Days equal to
Sum of Amount
6, 49,500
= 19 Nov., 03 +
10,000
= 19 Nov, 03 + 65 days (approx)
= 23 Jan. 2004
 [PAGE : 44]

UNIT VI; ACCOUNT CURRENT

Book page No. 186
Q.9
Answer:
Mr. A in Account Current with Mr. X
Date Particulars Amount Days Product Date Particulars Amount Days Product
2004 2004
Jan.01 To Balance 4,000 75 3,00,000 Jan.29 By 1,200 46 55,200
b/d Purchase
account
Jan.15 To Sale 2,230 60 1,33,800 Feb.10 By Cash 1,000 34 34,000
account Account
Mar.13 To Red lnk 58,000 Mar.13 By Bills 2,000
product Receivable
(Rs. 2,000 account
× 29)
Mar.15 To Interest 110 Mr. 15 By 4,02,600
Account Balance of
product
(Rs. By 2,140
4,02,600× Balance
10 1 c/d
)
100 366 (amount
to be
paid)
6,340 4,91,800 6,340 4,91,800
Note: Interest is charged @ 10% p.a. upto 15th March 2004.

Q.10
Answer:
Mr. A in Account Current with Mr. X
Date Particulars Dr Cr Dr./Cr Balance Day Dr. Cr.
. Product Product
2012
01-07 To Bal. b/d 75,000 - Dr. 75,000 13 9,75,000 -
14-07 BY Cash A/c - 1,38,000 Cr. 63,000 15 - 9,45,000
29-07 To Self A/c 97,000 - Dr. 34,000 20 6,80,000 -
18-08 By Cash A/c - 22,000 Dr. 12,000 22 2,64,000 -
09-09 By Self A/c 11,000 - Dr. 23,000 22 5,06,000 -
30-09 To Interest A/c 457 - Dr. 23,457 - - -
30-09 By Bal. c/d 23,457
1,83,457 1,83,457 24,25,000 9,45,000
Note: Interest is computed as follows:
1
On Cr. Products : Rs. 9,45,000 × 8% × = Rs. 207
365
1
On Dr. Products : Rs. 24,25,000 × 10% × = Rs. 664
365
So, Net Interest to be debited = 664 - 207 = Rs. 457
 [PAGE : 45]
Q.11
Answer:
Mr. A in Account Current with Mr. X
Date Particulars Rs. Date Day Product Date Particulars Rs. Date Days Product
1/7 To Balance 750 1/7 123 92,250 20/8 By Sales 200 20/8 72 14,400
b/d Return
15/8 To Sales 1,250 15/8 77 96,250 22/9 By Bank 800 22/9 39 31,200
To Interest 18.48 15/10 By Cash 500 15/10 16 8,000
By Bal. c/d 518.48 By 1,34,900
Balance
of
Products
2,018.48 1,88,500 2,018.48 1,88,500

5 1
Interest = 1,34,900 × ×
100 365
Interest = Rs. 18.48.

Q.12.
Answer:
Date Particulars Dr. (Rs.) Cr. (Rs.) Balance Dr. or Cr. Days Dr. Product Cr. Product
(Rs.) (Rs.) (Rs.)
1.4.15 To Balance 2,40,000 2,40,000 Dr. 13* 31,20,000
b/d
14.4.15 By Cash A/c 1,20,000 1,20,000 Dr. 15 18,00,000
29.4.15 To Self 97,000 2,17,000 Dr. 1 2,17,000
30.4.15 By Cash A/c 3,00,000 83,000 Cr. 9 7,47,000
9.5.15 To Self 1,71,000 88,000 Dr. 9 7,92,000
18.5.15 By Cash A/c 1,23,000 35,000 Cr. 14* 4,90,000
31.5.15 To Interest 1,353 Dr.
A/c
31.5.15 By Balance 33,647
c/d
5,43,000 5,43,000 59,29,000 12,37,000
Interest Calculation:
On Rs. 59,29,000 × 10% × 1/365 = Rs. 1,624
On Rs. 12,37,000 × 8% × 1/365 = (Rs. 271)
Net interest to be debited = (Rs. 1,353)

Note: *In the given answer, starting/transaction date has been considered and the
date of next transaction has been ignored for the purpose of calculation of number
of days. However, it may be assumed otherwise and in the case, 14 days will be
considered for the first transaction i.e. 14.4.15 and 13 days for the last transaction
of the month i.e. 18.5.15. The Dr. product total and Cr. Product total will be Rs.
61,69,000 and Rs. 12,02,000 respectively. Net amount of interest to be debited will
also get changed and will amount to Rs. 1,427 on the basis of this assumption.
 [PAGE : 46]

Q.13
Answer:
B in Account Current with A (Interst to 31st March, 2017 @ 10% p.a.)
Date Particulars Due Amount Day Product date Particulars Due Amount Day Product
Date (Rs.) (Rs.) Date (Rs.) (Rs.)

1.1.17 To Bal. b/d – 1,00,000 – – 15.1.17 By Cash – 2,00,000 15 30,00,000

10.1.17 To Sales – 2,00,000 10 20,00,000 1.3.17 By Cash – 1,00,000 60 60,00,000

15.2.17 To Sales – 2,00,000 46 92,00,000 31.3.17 By Bal. of – 1,80,00,000

Product
31.3.17 To Bal. of Prod. – - – 1,58,00,000 [2,00,000 ×
90]
31.3.17 To Int. on Bal. 4,329 31.3.17 By Bal. c/d 2,04,329

1, 58, 00, 000 10 1

365 100

5,04,329 2,70,00,000 2,70,00,000

 [PAGE : 47]

Preparation of Final Accounts of Sole Proprietors

Unit - I Final Accounts of Non-Manufacturing Entities

Book Page No. 18

Q.19
Answer:
Trading and Profit and Loss Account of Mr. Hari
(for the year ended 31st December, 1994)
Particulars Amount Particulars Amount
To Opening Stock 46,800 By Sales 3,89,600
To Purchases 3,21,700 Less: Returns 8,600 3,81,000
Add: Omitted By Closing Stock 78,600
Invoice 400
3,22,100
Less:Returns 5,800
3,16,300
Less:Drawing 600 3,15,700
To Freight & 19,600
Carriage
To Gross Profit c/d 77,500
4,59,600 4,59,600
To Rent and taxes 4,700 By Gross Profit b/d 77,500
To Salaries and 9,300 By Discount 4,440
wages
To Bank Interest 1,100
Add: Due 1,700 2,800
To Printing &
Stationary 14,400
Less: Prepaid 3,600 10,800
To Discount allowed 1,800
To General Expenses 11,450
To Insurance 1,300
To Postage & Telegram 2,330
Expenses
To Traveling Expenses 870
To Provision for Bad Debts 1,150
(New)
To Provision for Discount on 437
Debtors
To Depreciation on Furniture & 500
Fittings
To Net Profit transferred to 34,503
Capital A/c
81,940 81,940

Balance Sheet of Hari

as at 31st December, 1994
Liabilities Amount Assets Amount
Capital 76,690 Furniture & Fittings 5,000
 [PAGE : 48]
Add: Net Profit 34,503
1,11,193 Less: Dep. 500 4,500
Less: Drawings: Sundry Debtors 23,000
Cash 30,000 Less: Prov. for D/D 1,150
Goods 600 30,600 80,593
Bank Loan 20,000 21,850
Bank Interest Due 1,700 Less: Provision for
Sundry Creditors (1) 14,200 Disount 437 21,413

Stock 78,600
Prepaid: Printing & Stationery 3,600
Bank Balance 8,000
Cash Balance 380
1,16,493 1,16,493

(1) Sundry Creditors Balance as per Trial Balance 14,800

Less: Set off in respect of Ram 1,000
13,800
Add: Purchases Invoice which were omitted 400
14,200

Q.20
Answer:
Trading and Profit and Loss Account of Mr. R
for the year ended 31st March, 1997
Particulars Amount Particulars Amount
To Opening stock 1,20,000 By Sales 32,20,000
To Purchases 25,00,000 Less: Return 1,20,000 31,00,000
Less: Returns 1,00,000 24,00,000 By Closing Stock
8,10,000 (1) 2,30,00
33,30,000 33,30,000
To Rent 60,000 By Gross Profit b/d 8,10,000
To Establishment expenses 1,80,000
To Electricity charges 15,000
To Telephone Charges 10,000
To Commission on sales 30,000
To Insurance on sales 10,000
To Bad debts 20,000
To Provision for doubtful debts 25,000
To Interest on loan 45,000
To Depreciation (2) 85,000
To Manager's Commission (3) 30,000
To Net profit transferred to
capital account 3,00,000
8,10,000 8,10,000
Balance Sheet of R
(as at 31st March, 1997)
Liabilities Amount Assets Amount
Capital Account Building 5,00,000
 [PAGE : 49]
Opening Balance 5,20,000 Less: Dep. 25,000 4,75,000
Add: Profit 3,00,000 8,20,000 Machineries 2,00,000
18% Mortgage Loan 3,00,000 Less: Dep. 50,000
Interest accured on loan 45,000 Furniture 1,00,000
Sundry Creditors 4,00,000 Less: Dep. 10,000 90,000
Commission due to Manager 30,000 Closing Stock 2,30,000
Sundry Debtors 5,00,000
Less: Prov. for D/D 25,000 4,75,000
Bills Receivable 75,000
Cash at Bank 90,000
Cash in Hand 10,000
15,95,000 15,95,000
Working Notes:
Rs.
(1) Value of closing Stock
Stock (As on 7th April 1997) 1,80,000
Add: Cost of Sales
Sales (1.4.1997 to 7.4.1997) 2,50,000
Less: Gross Profit @20% on Sales 50,000 2,00,000
3,80,000
Less: Purchases 1,50,000
Closing Stock 2,30,000
(2) Depreciation
On Building (5% of 5,00,000) 25,000
On Machineries (35% of 2,00,000) 50,000
On Furniture (10% of 1,00,000) 10,000
85,000
(3) Manager's Commission
Profit before charging commission 3,30,000
Commission (3,30,000 × 10/110) 30,000

Q.21
Answer:
Trading and Profit and Loss Account
(For the year ended 31st March, 1998)
Particulars Amount Particulars Amount
To Opening stock 7,4000 By Sales 49,800
To Purchases 25,000 Less: Sales of
Less: Returns 300 24,700 Approval Basis 1,200 48,600
To Wages 5,400 By Closing Stock 6,000
To Gross Profit c/d 18,100 1,000 7,000
55,600 55,600
To Repairs to Plant 520 By Gross Profit b/d 18,100
To Salaries 2,100 By Discount on Purchases 708
To Rent 240 By Provision for Bad Debts(2) 752
To Bad Debts (200+600) 800
To Depreciation on
plant & Machinery 400
Building 500 900
 [PAGE : 50]
To Commission to work Manager 1,800
To Commission to General
Manager (3) 1,200
To Net Profit 12,000
19,560 19,560
Balance Sheet of Mr. X
(as at 31st March, 1998)
Liabilities Amount Assets Amount
Capital Account 10,000 Land and Building
Less: Income Tax 100 Plant and Machinery
9,900 Stock in Hand
Add: Net Profit 12,000 21,900 Add: Stock with
Bank Overdraft 760 Customers
Bills Payable 1,600 Debtors(1)
Sundry Creditors 6,252
Salaries Outstanding 400
Outstanding Commission:
Works Manager 1,800
General Manager 1,200 3,000
33,912
Working Notes:
Rs.
(1) Debtors as per Trial Balance 7,000
Less: Debtors on account of goods sold on approval
basis 1,200
Landlord account wrongly taken as debtor 240 1,440
5,560
Less: Bad Debts Written off 600
4,960

(2) Provision for Bad Debts Required (Adjusted Debtor):

5% on Debtors Rs. 4,960 = Rs. 248 = 1,000 - 248 =
752
(3) Calculation of Commission of General Manager:
10/10 × Rs. (15,000 – 1,800) = 1200

Q.22
Answer:
Trading and Profit and Loss Account of Mr. Rishabh
(For the year ended 31st March, 1998)
Particulars Amount Particulars Amount
To Opening Stock 21,300 By Sales 1,40,000
To Purchases (1) Less: Returns
84,000 Inward 5,000 1,35,000
Less: Returns By Loss of stock by
Outward 4,000 80,000 Fire 10,000
To Carriage 10,000 By Closing Stock 27,300
To Gross Profit c/d 61,000
1,72,300 1,72,300
 [PAGE : 51]
To Sundry Expenses 600 By Gross Profit b/d 61,000
To Printing and Stationary 500 By Provision for Discount on
To Insurance Exp. 1,000 Debtors(380-342) 38
Less: Prepaid 200 800 By Provision for Discount on
To Salaries and Wages 18,500 Creditors 360
To Trade Expenses 800 By Profit of Textile Department 10,000
To Loss by fire (4) 4,000
To Interest on Loan 1,350
To Prov. for D/D
(New) 900
Add: Bad Debts 400
Add: Further Bad
Debts 400
1,700
Less: Old Provision 1,000 700
To Depreciation
Land & Building 1,800
Plant/Machinery 4,000
Furniture 250 6,050
To Net Profit 38,098
71,398 71,398
Balance Sheet
As at 31st March, 1999
Liabilities Amount Assets Amount
Capital Account 1,00,000 Land and Buildings 90,000
Add: Net Profit 38,098 Less: Depreciation 1,800 88,200
1,38,098 Plant & Machinery 20,000
Less: Drawings 14,000 1,24,098 Less: Depreciation 4,000 16,000
Loan from Gajanand 30,000 Furniture 5,000
Interest Accrued 1,350 Less:Depreciation 250 4,750
Creditors 18,000 Stock:
Less: Provision for General Goods 27,300
Discount 360 17,640 Textile Goods 8,000 35,300
Debtors (less bad
debts.) 18,000
Less: Provision for
bad and Doubtful
Debts. 900
17,100
Less: Provision for
Discount 342 16,758
Insurance Claim 6,000
Prepaid Insurance 200
Cash at Bank 4,600
Cash in Hand 1,280
1,73,088 1,73,088
Working Notes:
Rs.
(1) Purchases 8,000
Add: Unrecorded Goods 6,000
86,000
 [PAGE : 52]
Less: Drawings 2,000
84,000
(2) Creditors 12,000
Add: For unrecorded Purchases 6,000
18,000
Provision for discount creditors (2%) of 18,000 = Rs.
360
(3) Loss by fire 10,000
Less: Insurance claim 6,000
Amount charged to profit and loss Account 4,000

Q.23
Answer:
Trading and Profit and Loss Account of Mr. James
(For the year ended 31st March, 2001)
Particulars Rs. Particulars
To Opening Stock 1,50,5000 By Sales 6,25,000
To Purchase 4,37,000 By Closing Stock 1,64,500
To Manufacturing 85,000
expenses
To Gross Profit c/d 1,17,000
7,89,500 7,89,500
To Administration 18,000 By Gross Profit b/d 1,17,000
Expenses
To Selling expenses 33,000
To Financial Charges 6,000
To Net profit transferred
to capital account 60,000
1,17,000 1,17,000

Q.24
Answer:
Trading and Profit & Loss Account
(For the year ended 31st March, 2004)
Particulars Amount Particulars Amount
To Opening Stock 5,00,000 By Sales 41,50,000
To Purchases 31,00,000 Less:Returns 55,000
Less: Return 45,000 40,95,000
30,55,000 Less: Goods
Less: Furniture 1,00,000 sent on appro. 1,50,000 39,45,000
29,55,000 By Goods sent on
Less:Drawings 50,000 29,05,000 Approval 1,00,000
To Carnage Inward 10,000 By Closing Stock 1,45,000
To Wages 50,000
To Gross Profit c/d 7,25,000
41,90,000 41,90,000
To Salaries 95,000 By Gross profit b/d 7,25,000
 [PAGE : 53]
To Rates & Taxes 50,000 By Discount received 75,000
To Postage & Telegram 1,05,000 By Net Loss transferred to
To Insurance 90,000 Capital A/c 5,02,300
To Printing & Stationary 95,500
To Advertisement 1,70,000
To Discount allowed 50,000
To General Expenses 65,700
To Carriage Outward 22,000
To Bad debts 50,000
To Provision for Doubtful debts 40,000
To Salesman
Commission 78,000
Add: Outstanding 3,16,500 3,94,500
To Depreciation on:
Furniture 65,000
Motor Car 9,600 74,600
13,02,300 13,02,300
Balance Sheet
As at 31st March, 1999
Liabilities Amount Assets Amount
Capital 22,59,200 Furniture 5,50,000
Less: Drawings 45,000 Add: Purchases 1,00,000
Less: Goods with- 6,50,000
Drawn 50,000 Less: Dep. 65,000 5,85,000
Motor Car 48,000
21,64,200 Less: Dep. 9,600 38,400
Less: Net Loss 5,02,300 16,61,900 Stock in hand 1,45,000
Sundry Creditors 4,00,000 Goods sent on
Outstanding Salesman's Approval
Commission 3,16,500 Sundry Debtors 10,00,000 1,00,000
Less: Goods sent
on approval 1,50,000
8,50,000
Less: Bad Debts 50,000
8,00,000
Less: Provision for
Doubtful debts 40,000 7,60,000
Cash in Hand 2,50,000
Cash in Bank 5,00,000
23,78,400 23,78,400
Q.25
Answer:
In the books of Mr. XYZ
Rectification Entries
Dr. Cr.
Date Particulars L.F. Amount Amount
Rs. Rs.
(i) Returns in ward account Dr. 2,575
Sales Account Dr. 1,725
To Purchases account 2,575
To Returns outward account 1,725
 [PAGE : 54]
(Being sales return and purchases return wrongly
included in purchases and sales respectively, now
it is rectified)
(ii) Drawings account Dr. 3,500
To Purchases account 3,500
(Being goods withdrawn for own consumption
included in purchases, now it is rectified)
(iii) Plant and machinery account Dr. 450
To Wages account 450
(Being wages paid for installation of plant and
machinery wrongly debited to wages, now it is
rectified)
(iv) Advertisement expenses account Dr. 825
To Purchases account 825
(Being free samples distributed for publicity out
of purchases, now it is rectified)
In the books of Mr. XYZ
Trading and profit and loss account for the year ended 31st March, 2004
Particulars Amount Particulars Amount
To Opening stock 32,250 By Sales 2,13,575
To Purchase 1,53,100 Less: Sales return 2,575 2,11,000
Less: Purchases return 1,725 1,51,375 By Closing stock
To Carriage inward 1,125
To Wages 11,715 100 100 1,25,000
Rs.80, 000
80 80
To Gross profit c/d 1,39,535
3,36,000 3,36,000
To Salaries 22,550 By Gross profit b/d 1,39,535
To Rent 4,300 By Bad debits recovered 450
To Bad debts 1,100
To Carriage outward 1,350
To Advertisement 4,175
expenses
To Printing and stationary 1,250
To Provision for doubtful
debts 5% of Rs.
1,20,000 6,000
Less: Existing prov. 3,200 2,800
To Provision for discount
on debtors
2.5% of Rs. 1,14,000 2,850
Less: Existing prov. 1,375 1,475
To Depreciation
Plant and machinery 3,000
Furniture and fittings 1,025 4,025
To Office expenses 10,160
To Interest on loan 3,000
To Net Profit 83,800
1,39,985 1,39,985
In the books of Mr. XYZ
Balance Sheet of Mr. XYZ (as on 31st March, 2004)
Liability Rs. Amount Assets Rs. Amount
Rs. Rs.
Capital account 65,000 Plant and machinery 20,000
Add: Net Profit 83,800 Less: Depreciation 3,000 17,000
1,48,800 Furniture and fittings 10,250
Less: Drawings 11,500 1,37,300 Less: Depreciation 1,025 9,225
Bank overdraft 80,000 Closing stock 1,25,000
 [PAGE : 55]
Sundry creditors 47,500 Sundry debtors 1,20,000
Payable salaries 2,450 Less: Provision for doubtful 6,000
debts
provision for bad debts 2,850 1,11,150
Prepaid rent 300
Cash in hand 1,450
Cash at bank 3,125
2,67,250 2,67,250

Q.26
Answer:
In the books of Shri Shivam
Trading and profit and loss a/c
(For the year ended 31.03.05)
Particulars Amount Particulars Amount
To Opening stock 40,000 By Sales 2,64,000
To Purchases 1,70,000 (–) Sale or Return bases (1200) 2,62,800
To Wages 29,000 By Goods given as free
To Carriage Inward 400 sample 2,000
To Gross Profit 56,400 By Closing stock
- Given 30,000
- With Costumer 1,000 31,000
2,95,800 2,95,800
To Depreciation By Gross profit 56,400
Furniture & Fixtures 800 By Discount 1,200
Plant & Machinery 12,400 13,200
To Loss by fire 2,000
To Patent written-off 4,000
To Salaries 14,800
To Bad Debts 800
(+) Additional 200 1,000
To Prov. for Doubtful 950
debts
To Prov. for Discount 360
To Postage & Fax 3,000
To Rent, Rates & Taxes 7,200
To Interest on Loan
Paid 300
(+) Outstanding 300 600
To Insurance 1,600
To Travailing exp. 1,000
To Sundry Exp. 600
To Advertisement (Goods 2,000
gives as Sample)
To Net Profit transfer to 5,290
Capital A/c
59,600 59,600
Balance Sheet
(as on 31.03.2005)
Liabilities Amount Assets Amount
Capital Furniture & Fittings 8,000
Op. Balance 1,60,000 (-) Depreciation 800 7,200
(-) Drawings (24,000) Plant & Mach. (Note-1) 62,000
(+) NP 5,290 1,41,290 (-) Depreciation 12,400 49,600
Patent 40,000
(-) Written-off (4,000) 36,000
Land 38,350
Creditor for Plant & Stock. 31,000
 [PAGE : 56]
Mach. [Note-] 3,000 Deptor (Note-2) 19,000
Loan for shyam 20,000 (-) Prov. for D/D (950)
(+) Interest 300 20,300 (-) Prov. for discount (360) 17,690
Sundry Creditors 24,000 Cash in hand 13,250
Bank Overdraft 15,000 Cash at Bank 20,500
2,03,590 2,03,590

Working Notes:
Rs.
(1) Computation of Plant & Machinery
Balance given 60,000
(+) New Machinery (1.4.04) 4,000
(-) Machinery Sold. (2,000)
62,000

(2) Computation of Debtor

Balance 20,400
(-) Bad Debts (200)
(-) Sale or return (1,200)
19,000
 [PAGE : 57]

PARTNERSHIP ACCOUNT
UNIT-I: INTRODUCTION OF PARTNERSHIP ACCOUNT

Book Page No. 40

Q.12
Answer:
Profit and Loss Appropriation Account for the year ended 31st December, 2004
Particulars Rs. Rs. Particulars Rs.
To Interest on capital By Net profit b/d (Profit
A (5% on Rs. 3,20,000) 16,000 (before interest) 1,59,000
B (5% on Rs. 2,00,000) 10,000
C (5% on Rs. 1,60,000) 8,000 34,000
To Partner's capital account
A 5 to Rs. 1,25,000 62,500
10
Less: Transferred to C 5,000 57,500
B 3 to Rs. 1,25,000 37,500
10
C 2 25,000
to Rs. 1,25,000
10
Less: Transferred to A 5,000 30,000
1,59,000 1,59,000
Q.13
Answer:
Let the total share be = 1
1
Share of new partner G =
4
1 3
Remaining share of profit =1– =
4 4
3 3 9
New ratio of (A) = × =
4 5 20
3 2 6
New ratio of (M) × = =
4 5 20
New ratio of A:M:G =9:6:5
Again, let the total share at the time of admission of N = 1
1 4
Share of new partner N is 20% i.e. 1- =
5 5
Remaining share
4 9 9
New ratio of (A) = × =
5 20 25
4 6 6
New ratio of (M) = × =
5 20 25
4 5 5
New ratio of (G) = × =
5 20 25
New ratio of A:M:G:N =9:6:5:5
 [PAGE : 58]
Q.14
Answer
When the partnership deed is silent on the matter of interest on capitals and salary
to partners, on partner can claim interest on capital and salary. Therefore, claim of
X and Z is not correct. However, inclusion of specific provision regarding the said
issues in partnership deed can entitle them for interest on capital and salary.

Q.15.
Answer:
In the absence of a partnership deed, the following provisions are applied.
(a) The partners will share profits/losses equally; and
(b) Interest @ 6% per annum is to be paid on the loan advanced to the firm by a
partner.

Q.16
Answer
1. At the time of admission of Govind:
Let the total share of profit at the time of admission of Govind is 1 Share of
New Partner 'Govind' = ¼
Ramaining share of profit = 1 - ¼ = 3 2
3 3 9
New share of Anil = × =
4 5 20
3 2 6
New share of Mukesh = × =
4 5 20
New profit sharing of Anil, Mukesh & Govind is
2. At the time of admission of Madan:
Let total share at the time of admission of Madan is 1
Share of new partner 'Madan' = 1/5
Remaining share = 1 – 1/5 = 4/5
Now,
4 9 9
New share of ANil = × =
5 20 25
New share of Mukesh = 4/5 × 6/20 = 6/25
New share of Govind = 4/5 × 5/20 = 5/25
New Profit sharing ratio of ANil, Mukesh, Govind and Madan is
9 6 5 1
: : : i.e. 9:6:5:5
25 25 25 5
 [PAGE : 59]

UNIT II: TREATMENT OF GOODWILL IN PARTNERSHIP

Q.11
Answer:
Computation of Goodwill
C brings capital for 1/6th share in profit = Rs. 25,000
Total capital of the firm = Rs. 25,000 × 6 = Rs. 1,50,000
Capital of old partners should be = Rs. 1,50,000 - Rs. 25,000
= Rs. 1,25,000
Actual combined capital of old partners = Rs. 60,000 + Rs. 40,000
= Rs. 1,00,000
So, the goodwill of the firm = Rs. 1,25,000 - Rs. 1,00,000
= Rs. 25,000

Q.12
Answer:
Valuation of goodwill
(1) 5 years purchase of super profit.
Particulars Amount
(Rs.)
Average Profit 1,36,000
Less: Normal profit @ 20% of (Rs. 3,00,000 + Rs. 2,00,000) (1,00,000)
Super profit 36,000
Value of goodwill = 5 × Super profit
= 5 × 36,000
= Rs. 1,80,000
Value of goodwill of the firm will be Rs. 1,80,000.
(2) Capitalization method
Average profit
Normal Value of business =
Normal rate of profit
1,36,000
= = Rs. 6,80,000
20%
Particulars Amount
(Rs.)
Normal value of business 6,80,000
Less: Actual capital employed - Shiv 3,00,000
- Mohan 2,00,000 (5,00,000)
Value of goodwill of the firm will be 1,80,000
(3) 3 years purchase of average profit.
Goodwill = 3 × Average profit
= 3 × 1,36,000
= Rs. 4,08,000
Value of goodwill of the firm will be Rs. 4,08,000.
 [PAGE : 60]

UNIT-III: ADMISSION OF A NEW PARTNER

Answer 13:
Profit and Loss Adjustment A/c
Dr. Cr.
Date Particulars Rs. Date Particulars Rs.
1998 1998
April 1 To Plant and machinery A/c 5,000 April 1 By Partner's Capital A/c
To Furniture and fitting A/c 1,000 Loss on revaluation
To Stock A/c 1,500 A 4,950
To Provision for Bad and 750 B 3,300
Doubtful A/c
8,250 8,250

Partners' Capital Accounts

Dr. Cr.
Particulars A Rs. B Rs. C Rs.Particulars A Rs. B Rs. C Rs.
To Profit & Loss 4,950 3,300 –By Balance b/d 37,000 28,000
Adjustment A/c
To A's B's Capital A/c – – 15,000By Cash A/c 40,000
To Balance c/d 44,050 27,700 25,000By A's Capital A/c 12,000 3,000
49,000 31,000 40,000 49,000 31,000 40,000

Balance Sheet of A, B and X

as on 1st April 1998
Liabilities Rs. Assets Rs.
Capital Accounts: Plant and Machinery 15,000
A 44,050 Furniture and Fitting 4,000
B 27,700 Stock 13,500
X 25,000 96,750 Sundry Debtors 20,000
Sundry Creditors 5,000 Less: Prov. for Bad and 750 19,250
Doubtful debts
Cash on Hand 50,000
1,01,750 1,01,750

Working Notes:
(1) Adjustment of Goodwill:
A pays Rs. 15,000 as premium for goodwill for 1/3rd share of the future profits.
Thus, total value of goodwill is Rs. 15,000 × 3 i.e., Rs. 45,000.
Sacrificing ratio:
A: 3/5 – 1/3 = 4/15
B: 2/5 – 1/3 = 1/15
Hence, Sacrificing ratio is 4:1
Adjustment of X's share of goodwill through existing partner's capital accounts in the
profit sacrificing ratio:
 [PAGE : 61]
Rs.
4
A: Rs. 15,000× = 12,000
5
1
B: Rs. 15,000× = 3,000
5
15,000

Answer 14:
Journal Entries
Date Particulars Rs. Rs.
Bank A/c Dr. 40,000
To Hari's Capital A/c 40,000
(Being amount paid by Suraj credited to Hari)
Hari's Capital A/c Dr. 30,000
To Bank A/c 30,000
(Being amount withdrawn by Hari)
Sundry Creditors A/c Dr. 3,000
Revaluation A/c Dr. 15,000
To Investments A/c 12,000
To Plant A/c 6,000
(Being revaluation of investments, plant and sundry creditors
recorded)
Hari's Capital A/c Dr. 7,500
Ram's Capital A/c Dr. 7,500
To Revaluation A/c 15,000
(Being loss on revaluation transferred to old partners in equal
ratio)
Bank A/c Dr. 23,000
To Suraj's Capital A/c 23,000
(Being proportionate capital brought in by Suraj)

Partners' Capital Accounts

Dr. Cr.
Date Particulars A Rs. B Rs. C Rs. Date Particulars A Rs. B Rs. C Rs.
1999 1999
Jan.1 To Revaluation 7,500 7,500 – Jan.1To Balance 60,000 60,000 –
A/c b/d
Jan.1 To Bank A/c 30,000 – – Jan.1 By Bank A/c 40,000 – –
Dec.31 To Bank A/c 15,000 22,500 7,500 Jan.1 By Bank A/c – – 23,000
Dec.31 To Bal. c/d 67,500 60,000 25,500 Dec.31 By P&L A/c 20,000 30,000 10,000
1,20,000 90,000 33,000 1,20,000 90,000 33,000
 [PAGE : 62]
Balance Sheet as at 31st December, 1999
Liabilities Rs. Assets Rs.
Capital Accounts: Plant 29,000
Hari 67,500 Furniture 10,000
Ram 60,000 Investments 18,000
Suraj 25,500 1,53,000 Stock 50,000
Creditors 1,02,000 Debts 60,000
Bank 88,000
2,55,000 2,55,000

Working Notes:
(1) New profit sharing ratio:
Old ratio New ratio
1 1 1 2
Hari  
2 2 6 6
1 1 3
Ram or
2 2 6
1
Suraj
6
New Ratio =2:3:1

(2) Amount of capital brought in By Suraj:

Rs.
Capital on 1.1.1999
Hari (1,00,000 – 30,000 – 7,500) 62,500
Ram (60,000 – 7,500) 52,500
1,15,000

Let the total capital after admission of Suraj is Rs. X

1x
Rs. 1,15,000 + =x
6
5
x = Rs. 1,15,000
6
6
x = 1,15,000× = Rs. 1,38,000
5
1
Suraj's proportionate capital = Rs. 1,38,000 ×
6
= Rs. 23,000
 [PAGE : 63]
(3) Cash at Bank on 31st December, 1999
Rs.
st
Cash at bank on 31 December, 1998 40,000
Add: Amount paid by Suraj for goodwill 40,000
Amount paid by Suraj for capital 23,000
Profits earned during the year 60,000
1,63,000

Less: Drawings – Hari (30,000+15,000) 45,000

Ram 22,500
Suraj 7,500 75,000
88,000
Q.15
Answer:
Profit and Loss Adjustment Account
Dr. Cr.
Particulars Rs. Particulars Rs.
To Partner's Capital A/c By Goodwill 4,000
A 7,800 By Land & Building 15,600
B 15,6000 23,400 By Furniture 3,800
23,400 23,400

Partners' Capital Account

Dr. Cr.
Particulars A (Rs.) B (Rs.) C (Rs.) Particulars A (Rs.) B (Rs.) C (Rs.)
By Balance b/d 26,400 33,600 -
By Contingency 2,000 4,000 -
Reserve
By Profit & Loss 7,800 15,600 -
Adjustment A/c
To Balance c/d 53,200 53,200 53,200 By Sundry Assets - - 22,400
By Bank A/c 17,000 - 30,800
53,200 53,200 53,200 53,200 53,200 53,200
Bank Account
Dr. Cr.
Particulars Rs. Particulars Rs.
To Bank b/d 12,000 By Balance c/d 59,800
To A's Capital A/c 17,000
To C's Capital A/c 30,800
59,800 59,800
Q.16
Answer:
Revaluation Account
Particulars Rs. Particulars Rs.
To Furniture A/c 870 By Buildings (29,200- 3,200
To Stock A/c 1,070 26,00)
 [PAGE : 64]
To P.B.D. (35,000 × 5%) 1,550 By Investment 450
– 200
To Outstanding Wages 1,560
To Profit Nil
5,050 5,050
Partners' Capital Account
Dr. Cr.
Particulars A (Rs.) B (Rs.) C (Rs.) Particulars A (Rs.) B (Rs.) C (Rs.)
Balance c/d 71,000 54,000 25,000 By Balance b/d 44,000 36,000
By Cash A/c - - 25,000
By Goodwill 27,000 18,000
71,000 54,000 25,000 71,000 54,000 25,000
Balance Sheet
(As on 1 Jan., 2000)
Liabilities Amount Assets Amount
Rs. Rs.
Capital Goodwill 45,000
A 71,000 Buildings 29,200
B 54,000 Furniture (Rs.5,800-Rs.870) 4,930
C 25,000 1,50,000 Investment (2,500+450) 2,950
Sundry Creditors 11,500 Stock in Trade (21,400-1,070) 20,330
(12,900 - 1,400) Debtors 35,000
B/P 4,100 Less: P.B.D.(5%) 1,750 33,250
Bank O/D 9,000 Cash (15,500 + 25,000) 40,500
Outstanding 1,560
Wages
1,76,160 1,76,160
Working notes:
25, 000
Calculation of Goodwill = - 44,000 - 36,000 - 25,000 = Rs. 45,000
1/6

Q.17
Answer:
Revaluation Account
Particulars Rs. Particulars Rs.
To Furniture 1,840 By Land & Building 29,400
To Stock 5,880
To Prov. of O/s bills 2,64
To Partner's Capital a/c 19,040
29,400 29,400
Partners' Capital Account
Dr. Cr.
Particulars A (Rs.) B (Rs.) C (Rs.) D (Rs.) Particulars A (Rs.) B (Rs.) C (Rs.) D
(Rs.)
By Bal. b/d 70,800 59,700 29,100 -
By General 9,000 7,500 4,500 -
Reserve
By 8,160 6,800 4,080
Revaluation
 [PAGE : 65]
To Cash 7,320 6,800 By Cash - - -
To Bal. c/d 88,200 73,500 44,100 29,400 By Goodwill 7,560 6,300 3,780 -
By Cash 2,640
95,520 80,300 44,100 29,400 95,520 80,300 44,100 29,400
Revaluation Account
Dr. Cr.
Particulars Rs. Particulars Rs.
To Balance b/d 3,780 By A 7,320
To D's Capital 29,400 By B 6,800
To C's Capital 2,640 By Balance c/d 21,700

35,820 35,820

Balance Sheet of the new firm

(After admission of D)
Liabilities Rs. Assets Rs.

Capital Land & Building 1,19,700

A 88,200 Furniture 12,860
B 73,500 Goodwill 28,140
C 44,100 Stock 52,920
D 29,400 2,35,200 Debtors 5,2920
Creditors 37,800 Cash 21,700
Bills payable 12,600
Provision for O/s 2,640
bills
2,88,240 2,88,240
Working notes:
1. Calculation of old Ratio:
A B C
6 5 3
: :
14 14 14
6 : 5 : 3
2. Calculation of New Ratio:
1
D's Share –
8
1 7
1– =
8 8
7 6 6
A. × =
8 14 15
7 5 5
B. × =
8 14 16
7 3 3
C. × =
8 14 16
 [PAGE : 66]
A B C D
6 5 3 1
: : :
16 16 16 8
6 5 3 2
= : : :
16 16 16 16
6 : 5 : 3 : 2
3. Calculation of Closing Bal. of Capital A/c:
Ratio Capital
2 29, 400 16
: 29,400 =
16 2
6
A - 2,35,200 × = 88,200
16
5
B - 2,35,200 × = 73,500
6
3
C - 2,35,200 × = 44,100
16
2
D - 2,35,200 × = 29,400
16
 [PAGE : 67]

UNIT IV : RETIREMENT OF A PATNER

Q.14
Answer:
Revaluation Account
Dr. Cr.
Particulars Rs. Particulars Rs.
To Buildings A/c 10,000 By Investments A/c 3,000
To Plant and Machinery 26,0000 By Loss to Partners:
A/c
To Provision for Doubtful A 30,400
Debts A/c 27,800 B 18,240
C 12,160 60,800
63,800 63,800

A's Capital Account

Particulars Rs. Particulars Rs.
To Revaluation A/c 30,400 By Balance b/d 80,000
To Goodwill A/c 40,000 By Reserves A/c 10,000
To Balance c/d 80,000 By Goodwill A/c 50,000
By Bank A/c (Bal. figure) 10,400

1,50,400 1,50,400
B's Capital Account
Particulars Rs. Particulars Rs.
To Revaluation A/c 18,240 By Reserves A/c 20,000
To Investment A/c 15,000 By Balance b/d 6,000
To B's Loan A/c 22,760 By Goodwill A/c 30,000

56,000 56,000
C's Capital Account
Particulars Rs. Particulars Rs.
To Revaluation A/c 12,160 By Balance b/d 30,000
To Goodwill A/c 40,000 By Reserves A/c 4,000
To Balance c/d 80,000 By Goodwill A/c 20,000
By Bank A/c 78,160
1,32,160 1,32,160
D's Capital Account
Particulars Rs. Particulars Rs.
To Goodwill A/c 20,000 By Bank A/c 60,000
To Balance c/d 40,000

60,000 60,000
D's Capital Account
Particulars Rs. Particulars Rs.
To Goodwill A/c 20,000 By Bank A/c 60,000
 [PAGE : 68]
To Balance c/d 40,000

60,000 60,000
Bank Account
Particulars Rs. Particulars Rs.
To A's Capital A/c 10,400 By Bank Overdraft A/c 44,000
To C's Capital A/c 78,160 By Balance c/d 1,04,560
To D's Capital A/c 60,000
1,48,560 1,48,560

Balance Sheet of Dowell & Co.

As on 1st April 1996
Liabilities Rs. Assets Rs.
Capital Account: Land 10,000
A 80,000 Buildings 1,90,000
C 80,000 Plant and Machinery 1,04,000
D 40,000 Furniture 43,000
Long Term Debt 3,00,000 Stock 1,30,000
Trade Creditors 1,70,000 Debtors 1,39,000
B's Loan Account 22,760 Less: Provision for 27,800 1,11,200
Doubtful
Debts
Balance at Bank 1,04,560

6,92,760 6,92,760

Q.15
Answer:
Revaluation Account
Dr. Cr.
Particulars Rs. Particulars Rs.
To Machinery A/c 3,40,000 By Land and building A/c 3,00,000
To Closing stock A/c 50,000 By Sundry Creditors A/c 50,000
To Provision for Bad 30,000 By Partner's Capitals A/cs
Debts A/c Ram 20,000
Hari 30,000
Mohan 20,000

4,20,000 4,20,000

Partner's Capital Account

Dr. Cr.
Particulars Ram Rs. Hari Rs. Mohan Particulars Ram Rs. Hari Rs. Mohan
Rs. Rs.
To Hari's By Balance 10,00,000 15,00,000 10,00,000
b/d
Capital A/c 1,98,000 - 72,000 By Joint Life
 [PAGE : 69]
To Policy A/c 1,00,000 1,50,000 1,00,000
Revaluation
A/c 20,000 30,000 20,000 By Ram's
To Cash & Capital - 1,98,000 -
Bank A/c - 9,45,000 - By Mohan's
To Hari's Capital A/c - 72,000 -
Loan A/c - 9,45,000 - By Cash &
To Balance 21,00,000 - 14,00,000 Bank A/c
c/d (Bal. figure) 12,18,000 - 3,92,000

23,18,000 19,20,000 14,92,000 23,18,000 19,20,000 14,92,000

Cash and Bank Account

Dr. Cr.
Particulars Rs. Particulars Rs.
To Balance b/d 2,00,000 By Hari's Capital A/c 9,45,000
To Joint Life policy A/c 3,50,000 By Balance c/d 12,15,000
To Ram's Capital A/c 12,18,000
To Mohan's Capital A/c 3,92,000

21,60,000 21,60,000

Partner's Capital Account

Dr. Cr.
Liabilities Amount Assets Amount
Capital Accounts: Land and buildings 13,00,000
Ram 21,00,000 Machinery 13,60,000
Mohan 14,00,000 35,00,000 Closing stock 4,50,000
Sundry Creditors 4,50,000 Sundry Debtors 6,00,000
Hari's Loan A/c 9,45,000 Less: Provision for 30,000 5,70,000
Bad debts
Cash and Bank Balances 12,15,000

48,95,000 48,95,000
Working Notes:
1 Gaining ratio of existing partners
Ram 3/5 - 2/7 = 11/35
Mohan 2/5 - 2/7 = 4/35
2. Adjustment of goodwill
Total goodwill of the firm = 6,30,000
Hari's share (3/7) × 6,30,000 = 2,70,000
Hari's share of goodwill is to be borne by Ram and Mohan is their gaining
ratio i.e. 11:4
Ram = 11/15 × 2,70,000 = 1,98,000
Mohan = 4/15 × 2,70,000 = 72,000
 [PAGE : 70]
Q. 16
Answer:
Particulars Rs. Rs.
(i) A's Capital A/c Dr. 20,000
B's Capital A/c Dr. 16,000
C's Capital A/c Dr. 12,000
To Profit and loss adjustment a/c 48,000
(Being Profit written back for adjustements)
(ii) Profit and Loss Adjustment A/c Dr. 4,000
To B's Capital A/c 4,000
(Being Bouns credited to B's Capital Account)
(iii) Profit and Loss Adjustment A/c Dr. 44,000
To A's Capital A/c 12,000
To B's Capital A/c 16,000
To C's Capital A/c 16,000
(Being Distribution of profits in the new ratio)
(iv) Goodwill A/c Dr 16,800
Fixtures A/c Dr. 2,780
To Provision for Bad Debts A/c 1,870
To A's Capital A/c 4,830
To B's Capital A/c 6,440
To C's Capital A/c 6,440
(*Being Revaluation of asset on A's
retirement)
(v) A's Capital Dr. 1,32,760
To A's Loan A/c 1,32,760
(Being Transfer of A's Capital Account to hios
Loan A/c)
(vi) B's Capital A/c Dr. 26,324
C's Capital A/c Dr. 24,216
To Goodwill A/c 56,800
To Provision for Bad Debts A/c 3,740
(Being goodwill written off and provision for
bad debts raised)
* Note: Effect of the revaluation is directly adjust with the partner's capital
accounts. It can be solved by opening a new account i.e. revaluation accounts.

Partner's Capital Account

Dr. Cr.
Particulars A (Rs.) B (Rs.) C Particulars A (Rs.) B (Rs.) C (Rs.)
(Rs.)
To Profit & Loss By Balance b/d 1,35,930 95,120 61,170
Adjustment A/c 20,000 16,000 12,000 By Profit & Loss - 4,000 -
To A's Loan A/c 1,32,760 – – Adjustment A/c
To Goodwill A/c & - 36,324 24,216 By Profit & Loss 12,000 16,000 16,000
and Provision for Adjustment A/c
bad Debts A/c By Goodwill A/c 4,830 6,440 6,440
To Balance c/d - 69,236 47,394 and Fixture A/c
 [PAGE : 71]
1,52,760 1,21,560 83,610 1,52,760 1,21,560 83,610

Q.17
Answer
Journal Entries
Date Particulars Rs. Rs.
(i) Goodwill A/c Dr. 20,000
To Profit and Loss Adjustment A/c 20,000
(Being revaluation of goodwill on L's retirement)
(ii) Profit and Loss Adjustment A/c Dr. 30,000
To Furniture A/c 10,000
To Stock in Trade A/c 20,000
(Being revaluation of furniture and stock-in-
trade recorded)
(iii) K's Capital A/c Dr. 5,000
L's Capital A/c Dr. 3,000
M's Capital A/c Dr. 2,000
To Profit and Loss Adjustment A/c 10,000
(Being net revaluation loss debited to partners
capital account on the ratio of 5:3:2)
(iv) Reserve A/c Dr. 50,000
To K's Capital A/c 25,000
To L's Capital A/c 15,000
To M's Capital A/c 10,000
(Being reserve transferred to Partners capital
accounts)
(v) L's Capital A/c Dr. 72,000
To Cash A/c 36,000
To N's Capital A/c 36,000
(Beings 50% of the amount due to L paid off in
cash and the balance retained in the firm as
capital of N)
(vi) K's Capital A/c Dr. 25,000
M's Capital A/c Dr. 10,000
N's Capital A/c Dr. 15,000
To Goodwill A/c 50,000
(Being goodwi8ll written off, as agreed after
retirement of L and admission of N in the new
profit sharing ratio
(vii) M's Capital A/c Dr. 14,000
To Bank/Cash A/c 14,000
(Being amount paid to M to make his capital
proportionate)
 [PAGE : 72]
Balance Sheet M/s K, M N
As on 1st April, 1999
Liabilities Rs. Assets Rs.
Capital Accounts: Furniture 10,000
K 35,000 Sundry Debtors 50,000
M 14,000 Stock in Trade 30,000
N 21,000 70,000
Sundry Creditors 20,000

90,000 90,000

Working Notes:
Partner's Capital Account
Dr. Cr.
Particulars K L M N Particulars K L M N
(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
To Profit & Loss By Balance b/d 40,000 60,000 30,000 -
Adjustment A/c 5,000 3,000 2,000 - By Reserve 25,000 15,000 10,000 -
To Cash A/c - 36,000 - - By L's Capital - - - 36,000
A/c
To N's Capital A/c - 36,000 - -
To Goodwill A/c 25,000 - 10,000 15,000
To Bank - - 14,000 -
(Bal. Figure)
To Balance c/d 35,000 - 14,000 21,000
65,000 75,000 40,000 36,000 65,000 75,000 40,000 36,000

Q.18
Answer:
Books of M/s X and Co.
Revaluation Account
Liabilities Rs. Assets Rs.
To Buildings (10%) 20,000 By Investment 3,000
To Plant and Machinery 15% (10%) 57,000 By Loss
To P.B.D. (10%) 13,900 A 26,370
B 17,580
C 43,950 87,900

90,900 90,900
Working Notes:
Partner's Capital Account
Dr. Cr.
Particulars A B C D Particulars A B C D
(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
To Goodwill 60,000 - 80,000 60,000 By Balance b/d 1,40,000 76,000 1,40,000 -
To Investment - 25,000 - - By Goodwill 60,000 40,000 1,00,000 -
To Revaluation By Bank A/c
(Loss) 26,370 17,580 43,950 - (Bal. figure) 12,730 - 3,950 1,50,000
To B's Loan
(Bal. fig.) - 73,420 - -
To Balance c/d 90,000 - 1,20,000 90,000

1,76,730 1,16,000 2,43,950 1,50,000 1,76,730 1,16,000 2,43,950 1,50,000

 [PAGE : 73]
Working notes:
Calculation of closing Balance of Partner's Capital
Total Capital of Reconstituted firm = 3,00,000
New Ratio of A:C:D = 3:4:3
A's share = 3,00,000 × 3/10 = Rs. 90,000
C's share = 3,00,000 × 4/10 = Rs. 1,20,000
D's share = 3,00,000 × 3/10 = Rs. 90,000

Books Account
Particulars Rs. Particulars Rs.
By A's Capital A/c 12,370 By Bank Overdraft 44,000
By C's Capital A/c 3,950 By Balance c/d 1,22,320
By D's Capital A/c 1,50,000

1,66,320 1,66,320

Balance Sheet as on 1st Jul. 2001

Liabilities Amount Assets Amount
Capital A/c Land 1,00,000
A 90,000 Building 1,80,000
B 1,20,000 [90% 2,00,000]
C 90,000 3,00,000 Plant and Machinery 3,23,000
[85% of 3,80,000]
Long Term Debt 4,00,000 Stock 1,16,000
B's Loan 76,420 Sundry Debtors 1,39,000
Trade Creditors 1,93,000 Less: Provisions for 13,900 1,25,100
Bad Debts
Cash at Bank 1,22,320

9,66,420 9,66,420

Q.19
Answer:
(i) Gain New Ratio
3 2 6 4 6 12 6 18
A- × = A: + = =
9 3 27 9 27 27 27
3 1 3 2 3 6 3 9
C- × = C: + = = Therefore the new ratio 2:1
9 3 27 9 27 27 27
(ii) Gain New Ratio
3 1 3 4 3 8 3 11
A- × = A: + = =
9 2 18 9 18 18 18
3 1 3 2 3 4 3 7
B- × = B: + = = Therefore the new ratio 11:7
9 2 18 9 18 18 18
 [PAGE : 74]
(iii) Gain New Ratio
3 3 9 4 6 12 6 18
A: × = A: + = =
9 4 36 9 27 27 27
3 1 3 2 3 8 3 11
B: × = B: + = = Therefore the new ratio 25:11
9 4 36 9 36 36 36
(iv) Gain
4 3 7
A: + =
9 9 9
2
B: Transfer the new ratio is 7:2
9
 [PAGE : 75]

UNIT V : DEATH OF A PARTNER

Book Page No. 78

Q.7
Answer:
Partners Capital Account
Particulars X Y Z Particulars X Y Z
(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)

To Revluation A/c 3,600 7,200 7,200 By Balance c/d 40,000 80,000 80,000
To Z's Executor's A/c - - 1,12,000 By General 6,000 12,000 12,000
To Balance c/d 52,400 1,04,800 - Reserve
By Good will A/c 3,600 7,200 7,200
By Car Account 6,400 12,800 12,800
By P & L - - 7,200
Suspense A/c

56,000 1,12,000 1,19,200 56,000 1,12,000 1,19,200

Balance Sheet of M/s OM & Co.
(As at 31.12.1999)
Liabilities Amount Assets Amount
Capital A/c Goodwill 48,000
X 52,400 Building 1,40,000
Y 1,04,800 Car 32,000
Sundry Creditors 20,000 Stock 16,000
Bank Loan Computers 50,000
Z's Executor's Account 1,12,000 Investments 6,000
Sundry Debotrs 20,000
Cash at Bank 20,000
P & L Suspense Account 7,200

3,39,200 3,39,200
Working notes:
(1) Calculation of goodwill and Z's share of profits: Rs.
(a) Adjusted profit (for the year ended 31.3.99)
Profit 30,000
Add Back: Cost of car wrongly written off 40,000
Less: Depreciation for the year 1998-99
(20% on Rs. 40,000) 8,000 32,000
62,000
(b) Average of last three year's profit/losses:
Year ended on: Profit/loss
31.03.1997 10,000
31.03.1998 20,000
31.03.1999 62,000
72,000
72, 000
Average profit Rs, 24,000
3
 [PAGE : 76]
(c) Goodwill at 2 year's purchase
Rs. 24,000 × 2 = Rs. 48,000
(d) Z's share of profits (for 9 months)
9 2
Rs. 24,000 × × = Rs. 7,200
12 5

Revaluation Account
Dr. Cr.
Particulars Rs. Particulars Rs.
To Stock A/c 4,000 By Building A/c 20,000
To Computers A/c 30,000 By Loss transferred to:
To Investment A/c 4,000 X Capital A/c 3,600
Y Capital A/c 7,200
Z Capital A/c 7,200
38,000 38,000

Q.8
Answer
Revaluation Account
Particulars Rs. Particulars Rs.
To Machinery 10,000 By Freehold Land
To Provision for doubtful & Building 1,00,000
debts (5% of 1,60,000) 8,000
To Capital accounts:
P 41,000
Q 24,600
R (Profit transferred) 16,400 82,000

1,00,000 1,00,000
P's Capital Account
Particulars Rs. Particulars Rs.
To Drawings 46,000 By Balance b/d 7,00,000
To P's heir 11,00,000 By Q's capital A/c 1,98,000
(Balance By R's capital A/c 1,32,000
transferred) By Profit & Loss Suspense A/c 75,000
By Revaluation A/c 41,000

11,46,000 11,46,000

P's Heir Account

Date Particulars Amt. Rs. Date Particulars Amt. Rs.
31.08.2012 To Bank A/c 5,00,000 31.08.2012 By P's Capital A/c 11,00,000
31.03.2013 To Bank A/c 6,42,000 31.03.2013 By Interest A/c
(6,00,000×12%
7
× ) 72,000
12
 [PAGE : 77]

11,42,000 11,42,000
Working Notes:
1. Calculation of gaining ratio of Partners Q and R
New share Old share Gaining share Sacrificing share
P 5/10 5/10
3 3 6 3 3
Q 3/5 3/10 – = =
5 10 10 10
2 2 4 2 2
R 2/5 2/10 - = =
5 10 10 10
2. Calculation of Goodwill
Particulars Rs.
2009-10 2,90,000
2010-11 3,40,000
2011-12 3,60,000

9,90,000
Average Profit = 9,90,000/3 = Rs. 3,30,000
Goodwill = 3,30,000 × 2 = Rs. 6,60,000
5
Share of P in good will = 6,60,000 × = Rs. 3,30,000
10
Adjustment for P's share of goodwill through Q's and R's capital accounts (in
their gaining ratio 3:2):
Q's capital A/c (3,30,000 × 3/5) = Rs. 1,98,000
R's capital A/c (3,30,000 × 2/5) = Rs. 1,32,000
3. Share of P in profits for the period between 1.4.2012 to 31.08.2012 i.e. till
the date of death:
1st April, 2012 to 31st August, 2012 = 5 months
Profit for year 2011-12 = Rs. 3,60,000
5
Estimated profit for 5 months = 3,60,000 × = Rs. 1,50,000
12
5
Share of P = 1,50,000 × = Rs. 75,000
10

Q.9
Answer:
(i) Balance sheet as on 31.03.2016
Liabilities Amount Assets Amount
Capital A/c Fixed Assets
A 5,09,380 10,00,000
B 4,09,390 9,18,770 Less: WDV (1,00,000)
Trade Payables 3,50,000 9,00,000
 [PAGE : 78]
Less: Dep.n (95,000) 8,05,000
Trade Receivable 1,90,000
Investory 2,30,000
Cash & Bank 43,770

12,68,770 12,68,770

Capital A/c as on 1.10.2015

Particulars A B C Particulars A B C
To Revaluation loss 40,000 40,000 20,000 By Bal. b/d 5,00,000 4,00,000 3,00,000
of FA
To C's Capital A/c 50,000 50,000 - By Reserves 40,000 40,000 20,000
To Drawings 41,250 41,250 17,500 By A & B (g/w
To Executor's A/c - - 4,20,000 Adj.) - - 1,00,000
To Balance c/d 4,90,000 3,90,000 By P&L App.
A/c 81,250 81,250 37,500

6,21,250 5,21,250 4,57,500 6,21,250 5,21,250 4,57,500

Capital A/c as on 31.03.2016

Dr. Cr.
Particulars A B Particulars A (Rs.) C (Rs.)
To Drawings 50,000 50,000 By Balance b/d 4,90,000 3,90,000
To Balance c/d 5,09,380 4,09,390 By P&L App. A/c 69,380 69,390

5,59,380 4,59,390 5,59,380 4,59,390

Working Notes:

Capital A/c as on 31.03.2016

Dr. Cr.
Particulars Amount Particulars Amount
(Rs.) (Rs.)
To Interest on C's Capital 37,500 By Profit 2,00,000
To A 81,250
B 81,250 1,62,500
2,00,000 2,00,000
To Executors A/c 66,230 By Profit 2,05,000
To A 69,380
B 69,390 1,38,770
2,05,000 2,05,000
Calculation of profit for first half and second half
Particulars Amount (Rs.)
Profit after Depreciation 4,05,000
Add: Depreciation 95,000
Profit before depreciation 5,00,000
Profit for the first half 2,50,000
Less: Depreciation of first half (50,000)
 [PAGE : 79]
Post Depreciation profit 2,00,000
Profit for the second half 2,50,000
Less: Depreciation of second half (45,000)
Post Depreciation profit 2,05,000

Application of Section 37 of the partnership Act.

6 6
(i) Interest of 4,20,000 × × = Rs. 12,600
100 12
Or
(ii) Profit earned out of unsettled capital
4,20,000
2,05,000 × = Rs. 66,230.
(4,90,000 3,90,000 4,20,000)
In the absence of specific agreement amongst partners on the above subject
matter, the representative of the deceased partner can receive at their option,
interest at the rate of 6 p.a. or the share of profit earned for the amount due to the
decease partner.
In the given case, it would be reational to assume that the representatives would
opt for Rs. 66,230.
Executors A/c
Dr. Cr.
Particulars B Particulars C (Rs.)
To Bank A/c 4,86,230 By C's Capital A/c 4,20,000
By P&L App. A/c 66,230

4,86,230 4,86,230

Q.10
Answer:
Calculation of Share of Life Policy
Particulars X Y Z Total
1. Amount received on JLP due to X 1,00,000 50,000 50,000 2,00,000
death, distributed in 2:1:1
2. Amount received on separate Life 75,000 37,500 37,500 1,50,000
Policy of X, distributed in 2:1:1
3. Surrender Value of Y's Policy 50,000 25,000 25,000 1,00,000
distributed in 2:1:1 (50% of
Assured Value 2,00,000)
4 Surender Value of Z's policy 75,000 37,500 37,500 1,50,000
distributed in 2:1:1 (50% of
Assured Value 3,00,000)
Total Amount Due 3,00,000 1,50,000 1,50,000 6,00,000
 [PAGE : 80]
Q.11
Answer:
Balance sheet as on 31.03.2016
Liabilities Amount Assets Amount
Capital Accounts: Building 4,50,000
Shyam 2,25,000 Plant & Machinery 97,700
Laxman 2,25,000 Stock 33,000
Shankar 1,20,000 Debtors 66,900
Current Accounts: Furniture & Fittings 66,700
Shyam 21,600 Cash at Bank 1,48,500
Laxman 6,600 (1,01,100+1,65,000-
Sundry Creditors 29,400 1,17,600)
Ram's Executor's Loan 2,35,200
8,62,800 8,62,800
Working Notes:
1. Calculation of Goodwill
Profit for the year ended 31.03.2013 86,700
Profit for the year ended 31.03.2014 1,43,200
Profit for the year ended 31.03.2015 1,07,600
3,37,500
3,37,500
Average Profit = = 1,12,500
3
Good will = Rs. 1,12,500 × 2 years = Rs. 2,25,000
1
Ram's share of goodwill = 2,25,000 × = 75,000
3
1
Shankar's share of goodwill = 2,25,000 × = 45,000
5
2. Balance Sheet as on 31st July, 2016
Liabilities Amount Assets Amount
Capital A/c (balancing figure) 7,86,000 Building 4,50,000
Creditors 29,400 Stock 33,000
Sundry Debtors 66,900
Plant and Machinery 97,700
Furniture & Fitting 66,700
Cash at Bank 1,01,100

8,15,400 8,15,400

3. Calculation of profits made during the period of 1st April, 2016 to 31st July,
2016
Rs.
Combined Capital (of all partners) as on 31.07.2016 7,86,000
Less: Capital on 1.4.16
(2,70,000+2,40,000+2,40,000+4,200+6,000-3,000) 7,57,200
 [PAGE : 81]
28,800
Add: Drawings at all partners (60,000+48,000+54,000) 1,62,000
Total Profit 1,90,800
Share of Profit of each partner 63,600

Working Notes:
4. Partner's Capital Account
Dr. Cr.
Ram Shyam Laxman Shankar Ram Shyam Laxman Shanka
(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) r (Rs.)
To Ram - 37,500 37,500 - By Balance b/d 2,70,000 2,40,000 2,40,000 -
(Goodwill) Adj. By Goodwill 75,000 - - -
adjustment
(shyam and
laxman)
To Ram's 3,52,800 - - - By Ram's 7,800 - - -
Executors Current A/c
To Shyam and - - - 45,000 By Cash - - - 1,65,000
Laxman By Shankar
(Goodwill adj.) - - -
To Balance c/d 2,25,000 2,25,000 1,20,000 22,500 22,500 -

3,52,800 2,62,500 2,62,500 1,65,000 3,52,800 2,62,500 2,62,500 1,65,000

5. Partner's Current Account
Dr. Cr.
Ram Shyam Laxman Ram Shyam Laxman
(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
To Balance - - 3,000 By Balance b/d 4,200 6,000 -
b/d
To Drawings 60,000 48,000 54,000 By Profit and 63,600 63,600 63,600
loss A/c
To Capital A/c 7,800 - -
(bal. fig.)
To Balance c/d - 21,600 6,600

67,800 69,600 63,600 67,800 69,600 63,600

6. Ram's Executors Account
Rs. Rs.
To Cash and Bank 1,17,600 By Ram's Capital A/c 3,52,800
To Ram's Executors Loan A/c 2,35,200

3,52,800 3,52,800
 [PAGE : 82]

FINANCIAL STATEMENT OF NOT-FOR-PROFIT

ORGANIZATION

Book Page No. 95

Q.14
Answer
Recreation Club
Income and Expenditure Account
(For the year ended 31st March, 1996)
Expenditure Rs. Income Rs.
To Secretary's Salary 12,000 By Subscription 17,100
To Salaries to staff 25,000 By Sales of old newspapers 2,500
To Charities 1,000 By Interest on securities 2,000
To Printing & Stationary 600 Add: Outstanding 400 2,400
To Upkeep of land 2,000 By Proceeds of sport and 4,020
To Sport materials written 10,000 concerts
off By Advertisement in the year 5,000
To Telephone expenses 3,480 book
To Postage expenses 120 By Excess of Expenditure over 24,880
To Rates and taxes 1,500 Income
To Depreciation on furniture 200
55,900 55,900

Balance Sheet
Of Excellent Recreation Club
as on 31st March, 1996
Liabilities Rs. Assets Rs.
Capital fund opening Land 10,000
balance Furniture 2,000
Less: Excess of 36,680 Less: Depreciation 200 1,800
Expenditure Sports Materials 10,000
over income 24,800 Less: Written off 10,000 Nil
11,800 Investment in
Add: Legacies 4,000 15,800 securities 20,000
Endowment Fund 20,000 Subscriptions
Subscription received Receivable 1,000
in Advance 400 Interest Due 400
Cash in hand and
at Bank 3,000
36,200 36,200
 [PAGE : 83]
Workings Notes:
1. Balance Sheet of Excellent Recreation Club as on 31st March 1995
Liabilities Rs. Assets Rs.
Capital Fund (Balancing) 36,680 Land 10,000
Amount Furniture 2,000
Subscription Received in 500 Arrears of Subscription 2,000
Advance Investments in Securities 20,000
Cash in hand and at Bank 3,180

37,180 37,180

2. Subscription pertaining to the period ended 31st March 1996

Rs.
Subscription received during the year 18,000
Add: Outstanding Subscription on 31.3.1996 1,000
19,000
Add: Received in Advanced as on 31.3.1995 500
19,500
Less: Outstanding subscription as on 31.03.1995 2,000
17,500
Less: Received in advance as on 31.3.1996 400
17,100

Q.15
Answer:
Income and expenditure Account of Mumbai Club
(For the year ended 31st December 1996)
Expenditure Rs. Income Rs.
To Salary 2,000 By Donations 5,000
To Repair Expenses 500 Less: Capitalised 2,000 2,500
To Misc Expenses 500 By Subscriptions 12,000
Less: Prepaid 90 Add: Outstanding 900 12,500
To Insurance Premium 200 12,900
Less: Outstanding 40 240 Less: Advance 350 12,550
To Paper, ink, etc. 150 By Entrance Fees 1,000
To Drama Expenses 500 By Interest on Investment 300
To Surplus 14,150 100 6, 000
8 5
100 12
By Interest received from 400
Bank 150
By Sale of Drama Tickes 1,050
17,950 17,950
 [PAGE : 84]
Balance sheet of Mumbai Club
(For the year ended 31st December 1996)
Liabilities Rs. Assets Rs.
Capital Fund Billiard Table 30,000
Opening Balance 36,000 Furniture 6,000
Add: Surplus 14,150 Investements 6,000
Donations: 2,500 52,650 Interest Accrued 200
Outstanding Insurance Prepaid Expenses 90
Premium 40 Subscriptions Receivable 900
Subscriptions Received in 350 Cash in Hand 2,650
Advance Cash at Bank 7,200

53,040 53,040
Working Notes:
Balance sheet of Mumbai Club
(as on 31st December, 1995)
Liabilities Rs. Assets Rs.
Capital Fund 36,000 Billiard Table 30,000
(Balancing Figure) Cash in Hand 4,000
Creditors for Billiard table 8,000 Cash at Bank 10,000
44,000 44,000
Q.16
Answer:
Balance sheet of Mahaveer Sports Club
(As on 1st April, 1997)
Liabilities Rs. Assets Rs.
Capital Fund (Balancing Figure) 86,000 Library Books 10,000
Outstanding Expenses: Sports Goods 8,000
Salaries Furniture and Fixtures 10,000
Newspapers and 1,000 Subscriptions Receivable 5,000
Periodicals 400 Investment:
Electricity charges 800 Govt. Securities 50,000
Rent and taxes 600 2,800 Accrued Intest 600
Cash and Bank Balance 5,200

88,800 88,800
Income and Expenditure Account
For the Year Ended on 31st March 1998
Liabilities Rs. Assets Rs.
To Salaries 16,000 By Subscription 41,800
To Electricity Charges 800 By Interest on investments 1,200
To Rent and Taxes 5,400 By Sundry Receipts 300
To Newspapers and periodicals 1,180
To Misc. Expenses 5,400
To Depreciation on fixed assets 5,000
To Excess of income over
Expenditure 9,520

43,300 43,300
 [PAGE : 85]

Balance sheet of Mahaveer Sports Club

As on 31st March 1998
Liabilities Rs. Assets Rs.
Capital Fund Fixed Assets:
Opening Balance 86,000 Furniture and 9,000
Add: Excess of Income Fixtures
over Exp. 9,520 Sport Goods 8,000
Add: Donations 10,000 1,05,520 Library Books 18,000
Outstanding Expenses Investment:
(W.N.3) Govt. Securities 50,000
Salaries 2,000 Accrued Interest 600
Newspapers and Subscription
Periodicals 500 Receivable 12,000
Electricity Charges 1,000 Cash and Bank Bal. 12,020
Rent and taxes 600 4,100
1,09,620 1,09,620
Workings Notes:
(1) Subscription for the year ended 31st March 1998: Rs.
Subscription received during the year 34,800
Add: Subscriptions received on 31.3.98 12,000
46,800
Less: Subscriptions receivable on 31.3.97 5,000
41,800
(2) Expenses Calculation:
Expenses Salaries Electricity Rent and Newspaper
Charges taxes and Periodicals
Rs. Rs. Rs. Rs.
Paid During the year 15,000 600 5,400 1,080
Add:Outstanding (as on 31.3.98) 2,000 1,000 600 500
17,000 1,600 6,000 1,580
Less:Outstanding (as on 31.3.97) 1,000 800 600 400
Expenses for the year 16,000 800 5,400 1,180
(3) Depreciation Calculation:
Assets Book Additions Total Rate of Deprec- W.D.V. on
value during the Depre- iation as
(31.397) year ciation (31.3.98)
p.a.
Rs. Rs. Rs. Rs. Rs.
Furniture & 10,000 - 10,000 10% 1,000 9,000
fixtures
Sports goods 8,000 2,000 10,000 20% 2,000 8,000
Library books 10,000 10,000 20,000 10% 2,000 18,000
28,000 12,000 40,000 5,000 35,000
 [PAGE : 86]
Q.17
Answer:
Receipt and Payment Account of
Bombay Medical Aid Society
(For the year ended 31st December, 2000)
Liabilities Rs. Assets Rs.
To Cash Balance 8,000 By Purchase of Equipment 15,000
To Subscription 50,000 By Charity show expenses 1,500
To Donation 15,000 By Medical supply 30,000
To Interest 9,000 By Honorarium 10,000
To Charity show collections 12,500 By Salaries 28,000
By Sundry Expenses 1,000
By Cash in Hand 9,000

94,500 94,500
Income and Expenditure Account
Bombay Medical Aid Society
For the year ended 31st December, 2000
Expenditure Rs. Income Rs.
To Medicine consumed (3) 29,000 By Subscription (1) 51,200
To Honorarium to doctors 10,000 By Donation 15,000
To Salaries 28,000 By Interest on 9,000
To Sundry expenses 1,000 Investment
To Depreciation Equipment 6,000 By Profit on charity show:
To Building 2,000 Show collection 12,500
To Surplus 10,200 Show expenses -1,500 11,000

86,200 86,200
Balance Sheet of Bombay Medical Aid Society
(As on 31st Dec. 2000)
Liabilities Rs. Assets Rs.
Capital Fund (5) Building 50,000
Opening Balance 1,80,300 Less: Depreciation 2,000
Add: Surplus 10,200 1,90,500 Equipment 21,000
Subscription received in advance 700 Add: Purchases 15,000
Amount due for medicine supply 13,000 36,000
Less: Depreciation 6,000 30,000
Stock of medicine 15,000
Investments 1,00,000
Subscription receivable 2,200
cash in hand 9,000
2,04,200 2,04,200
Working Notes:
Rs.
1. Subscription for the year ended 31st December 2000
Subscription receivable during the year 50,000
Less: Subscription receivable on 1.1.2000 1,500
Less: Subscription received in advance on 31.12.2000 700
47,800
 [PAGE : 87]
Add: Subscription receivable on 31.12.200 2,200
Add: Subscription received in advance on 1.1.2000 1,200
51,200

2. Purchase of Medicine
Payment for Medicine Supply 30,000
Less: Amount due for medicine supply on 1.1.2000 9,000
21,000
Add: Amount due for medicine supply on 31.12.2000 13,000
34,000

3. Medicine consumed
Stock of medicine on 1.1.2000 10,000
Add: Purchase of Medicine during the year 34,000
44,000
Less: Stock of Medicine on 31.12.2000 15,000
29,000

4. Depreciation of Equipment
Value of equipment on 1.1.2000 21,000
Add: Purchase of equipment during the year 15,000
36,000
Less: Value of equipment on 31.12.2000 30,000
Depreciation on equipment for the year 6,000

5. Balance Sheet of Medical Aid Society

As on 31st December 1999
Liabilities Rs. Assets Rs.
Capital fund (balance figure) 1,80,300 Building 50,000
Subscription received in advantage 1,200 Equipment 21,000
Amount due for medicine supply 9,000 Stock of medicine 10,000
Investment 1,00,000
Subscription receivable 1,500
Cash in hand 8,000

1,90,500 1,90,500

Q.18
Answer:
M/s Smith Library Society
Income & Expenditure Account
(for the ended on 31st March 2002)
Liabilities Rs. Assets Rs.
To Electric charges 7,200 By Entrance fees 30,000
To Postage & Stationery 5,000 Less: 75% Capitalised 22,500 7,500
To Telephone charges 88,000 By Membership Fee 2,00,000
To Rent 4,000 Less: Advance 10,000 1,90,000
 [PAGE : 88]
To Salaries 66,000 By Sale of old news-papers
Add: Outstanding 3,000 69,000 By Hire of lecture Hall
To Depreciation on: Intt. on Securities 8,000
Books 10% 46,000 Add: Outstanding 500 8,500
Electric fitting 10% 15,000 By Excess of Expenditure 16,700
Furniture 10% 10,000 71,000 over income

2,44,200 2,44,200

M/s Smith Library Society

Balance Sheet
As on 31st March 2002
Liabilities Rs. Assets Rs.
Capital Fund 7,93,000 Electric fittings 1,50,000
Add: 75% Ent. fee 22,500 Less: Depreciation 15,000
8,15,500 Furniture 50,000
Less: Deficiency 16,700 7,98,800 Less: Depreciation 5,000
Advance Membership free 10,000 Books 4,00,000
Outstanding Expenses Add: Additions 60,000
Rent 4,000 4,60,000
Salaries 3,000 7,000 Less: Depreciation 46,000 4,14,000
Investment in securities 1,90,000
Outstanding interest on
Securities 500
Cash in Hand 20,000
Cash at Bank 11,300

8,15,800 8,15,800

Working Notes:
Interest on securities
1,50,000 × 5% = 7,500
40,000 × 5% × ½ = 1,000
= 8,500
Less: Received 8,000
Outstanding = 500

18(a)
Answer:
Trustwell Club
Correct Receipt & Payments Account
For the year ended 31st March 2003
Receipt Amount Payments Amount
To Balance b/d 450 By Expenses 3,600
To Subscription A/c 4,500 By Sports Material 2,700
[see work note-1] By Balance c/d 90,720
To Other fees 1,800
 [PAGE : 89]
To Donation for buildings 90,000
To Sale of furniture [450-180] 270

97,020 97,020
Income & Expenditure Account
(for the year ended 31st March 2003)
Particulars Amount Particulars Amount
To Expenses 3,600 By Subscription A/c 4,590
To Sports Material By Other Fee 1,800
Opening stock 6,660 By Interest on Investment 1,350
Add: Purchase 2,700 (5% of 27,000)
9,360 By Deficiency 3,600
Less: Closing Stock 1,800 7,560
To Loss on sale of
furniture 180
11,340 11,340
Balance Sheet
(As on 31st March 2003)
Liabilities Rs. Assets Rs.
Prepaid Cash in Hand 90,270
Subscription 90 Outstanding subscription 270
Donation for Furniture 1,800
building 90,000 Less: Sold 450 1,350
Capital Fund 36,000 5% Investment 27,000
Less: Deficiency 3,600 32,400 Add: Intt accrued 1,350 28,350
Sports Material 1,800
1,22,490 1,22,490
Working Notes:
Subscription Account
Particulars Amount Particulars Amount
To Outstanding Subscription 180 By Prepaid Subscription 90
To Prepaid Subscription 36,000 By Cash A/c
To Income & Expenditure [Subscription recd. during
A/c (given) the year: (Bal. Fig.] 4,500
By Outstanding Subscription
(closing) 270

36,090 36,090
Balance Sheet
(As on 1st April 2002)
Liabilities Rs. Assets Rs.
Prepaid Expenses 90 Outstanding Subscription 180
Capital fund 36,000 Furniture 1,800
(Balancing fig.) 5% Investment 27,000
Sport Material 6,660
Cash in Hand 450
36,090 36,090
 [PAGE : 90]
Q.19
Answer:
In the books of Diana Club
Income & Expenditure Account
(For the year ended 30th Sept. 2003)
Expenditure Amount Income Amount
To Honoraria to Secretory 9,600 By Subscription (6) 20,980
To Misc. Expenses 3,060 By Bar Receipts 14,900
To Rates and Taxes 2,520 By Sale proceeds of old
To Groundman's wages 1,680 news paper 4,800
To Printing and Stationary* 940 By Entertainment Fees 8,540
To Telephone expenses 4,780 By Profit on sale of car (5) 2,200
To Bar Expenses (2) 10,900 By Bank Interest 460
To Repairs 640
To Depreciation:
on Club premises (3) 1,020
on Car (4) 4,680
To Income excess over 12,060
Expenditure transfer to
capital fund.
51,880 51,880
Balance Sheet
(As on 30th Sept. 2003)
Cr. Dr.
Liabilities Amount Assets Amount
Capital Fund (opening) (7) Club premises (3) 19,380
43,600 Car (A) 26,520
Add: Income over expenditure Bar Stock 1,740
for the year 12,060 56,660 Subscription outstanding 1,960
Outstanding for bar purchase 860 Cash and Bank 6,920

56,520 56,520
* In the above question opening and closing cash and bank balance is shown in the
Receipts and Payments A/c. So, no adjustment is required regarding cheque issued
for the expense of printing and stationery but not yet presented for payment.

Working Notes:

(1) Calculation of the amount of bar purchase during the year

Rs.
Payment for bar purchase 11,540
Add: Outstanding due on 30.09.03 860
12,400
Less: outstanding due on 01.10.02 1,180
Purchase during the year 11,220
(2) Calculation of bar expenses during the year
Rs.
Opening bar stock 1,420
 [PAGE : 91]
Add: Purchase during the year (1) 11,220
12,640
Less: Closing bar stock 1,740
Bar Expenses absorbed during the year 10,900

(3) Depreciation on club premises:

Rs.
W.D.V as on 01.10.2002 20,400
(Rs. 58,000 - Rs. Dep. till date Rs. 37,600)
Less: Dep. for the year @ 5% p.a. 1,020
W.D.V. as on 1.10.2003 19,380

(4) Depreciation on Car:

Rs.
Purchase price of the new car
(Rs. 25,200 + Rs. 6,000 i.e. sale proceed of old car) 31,200
Less: Depreciation for the year @ 15% p.a. 4,680
W.D.V. as on 1.10.2003 26,520

(5) Calculation of profit on the sale of old car:

Rs.
Sale value realized from old car 6,000
Less: W.D.V. of the old car as on date
Cost of car as on 01.10.02 Rs. 24,380
Less: Accumulation Depreciation Rs. 20,580 3,800
2,200

(6) Subscription for the year:-

Rs.
Subscription received during the year 21,420
Add: Outstanding at the end 1,960
23,380
Less: Outstanding at the beginning 2,400
Subscription for the year 20,980
Opening Balance Sheet
(as on 01.10.2002)
Liabilities Amount Assets Amount
Outstanding for bar 1,180 Club premises 58,000
Purchase Less: Accumulated
Capital Fund (Opening) 43,600 Depreciation 37,600 20,400
(Bal. fig.) Car 24,380
Less Accumulated
Depreciation 20,580 3,800
Stock in Bar 1,420
Subscription 2,400
Outstanding 16,760
Cash and Bank
44,780 44,780
 [PAGE : 92]
Q.20.
Answer
In the books of Victoria Club Receipt & Payment A/c
for the year ended 31st March, 2006
Dr. Cr.
Liabilities Rs. Assets Rs.
To Bal. b/d By Salaries 19,000
Subscription Add: Paid for 2005 1,600
As per income & Exp. A/c 30,000 Less: Unpaid for 2006 (1,800) 18,800
+2004-05 Received 2,400 By Misc. Expense 2,000
- 2006-07 Advance 1,080 (+) prepaid 240 2,240
(-) 2005-6 Recei. in 2004-05 (1,800) By Audit fee 1,000
(-) O/s of 2005-06 (3,000) 28,680 (+) Paid for 2004-05 800
To Entrance fee 1,000 (-) O/s for 2005-06 (1,000) 800
To Profit on annual sports 3,000 By Chief executing Honor 4,000
By Printing & Stationary 1,800
By Annual day exe. 2,000
By Interest on Bank loan 600
By Purchase of sport equip. 1,600
10,800-(10,400-1,200)
By Bal. c/d. 6,400
37,340 37,340
Balance Sheet as on 31st March 2006
Liabilities Amount Assets Amount
Capital Fund 46,160 Sports equip. 10,400
(+) Excess of income + purchase 700
over expend. 2,400 48,560 (-) Dep. 1,200 10,800
Subscription Recd. in 1,080 Sports ground 40,000
Adv. Cash in hand 6,400
O/s salaries 1,800 Subscription 3,000
O/s Audit fee 1,000 Receivable 240
Bank loan 8,000 Prepaid insurance
60,440 60,440
Working Note:

Balance Sheet as On 31st March 2005:

In the books of Diana Club
Income & Expenditure Account
(For the year ended 30th Sept. 2003)
Particulars Rs. Particulars Rs.
Capital fund (Bal-figure) 46,160 Sports equipment 10,400
Bank Loan 8,000 Sports ground 40,000
Subscription Received in advance 1,800 Cash in hand 5,560
O/s salaries 1,600 O/s subscription 2,400
O/s audit fee 800 Receivable
58,360 58,360
 [PAGE : 93]

COMPANY ACCOUNTS
UNIT-II ISSUE, FORFEITURE AND REISSUE OF SHARES.

Book Page No. 122

Q.21
Answer
Journal Entries
Particulars Dr.(Rs.) Cr.(Rs.)
Share Capital A/c (200 × Rs.8) Dr. 1,600
To Share Forfeited A/c (200 × Rs.5) 1,000
To Share First Call A/c (200 × Rs.3) 600
(Forfeiture of 200 shares of Rs. 10/- each Rs. 8 being
called up for non-payment of first call money of Rs. 3 per
share as per Board's resolution dated ………….)
Bank A/c (150 × Rs.8) Dr. 1,200
Share Forfeited A/c Dr. 300
To Share Capital A/c 1,500
(Re-issue of 150 forfeited shares of Rs. 10 each as fully
paid for Rs. 8 per share i.e. at a discount of Rs. 2 per
share as per Board's Resolution dated………………..)
Share Forfeited A/c Dr. 450
To Capital Reserve A/c 450
(Transfer of capital profit proportionate to forfeited
shares re-issued i.e. on 150 shares to Capital Reserve
A/c)
Q.22
Answer: Journal Entries
Forfeiture
Equity Share Capital A/c (1,000 × 7) Dr. 7,000
Security Premium A/c (1,000 × 2) Dr. 2,000
To Share Forfeiture A/c (1,000 × 3) 3,000
To Equity Share Allotment A/c (1,000 × 4) 4,000
To Equity Share First Call A/c (1,000 × 2) 2,000
(Being 1,000 share forfeited)
 Re issue
 Bank A/c (600 × 8.5) Dr. 5,100
Share Forfeiture A/c (600 × 1.5) Dr. 900
To Equity Share competed A/c (600 × 10) 6,000
(Being 600 share re-issued as fully paid up for 8.5 per
share)
 Share Forfeiture A/c Dr. 900
To Capital Reserve A/c 900
(Being transfer of net gain on Re-issue of 600 forfeited share to capital reserve)
3,000
i.e. 600 900
1,000
 [PAGE : 94]
Q.23
Answer:
Journal Entries Forfeiture
Equity Share Capital A/c (360 × 8) Dr. 2,880
Security Premium A/c (360 × 2) Dr. 720
To Share Forfeiture A/c (360 × 5) 1,800
To Equity Share Allotment A/c (360 × 4) 1,800
(Being 360 shares forfeited)
 Re issue
 Bank A/c (320 × 8) Dr. 2,560
Share Forfeiture A/c (320 × 2) Dr. 640
To Equity Share competed A/c (320 × 10) 3,200
(Being 320 share re-issued as fully paid up for 8 per share)
 Share Forfeiture A/c Dr. 960
To Capital Reserve A/c 960
(Being transfer of net gain on Re-issue of 600 forfeited share to capital reserve)
1,800
i.e. 320 640 = 960
360
Q.24
Answer
In the Books of Delhi Chemicals Ltd.
Journal Entries
Particulars Dr.(Rs.) Cr.(Rs.)
Bank A/c Dr.
To Share Application A/c
(Being receipt of application money on 80,000 shares @
Rs. 2 per share)
Share Application A/c Dr. 1,60,000
To Share Capital A/c 1,20,000
To Share Allotment A/c 16,000
To Bank A/c 24,000
(Being application money on 60,000 shares @ Rs. 2 each
transferred to Share Capital A/c, surplus application
money of 60,000 shares transferred to Share Allotment
A/c and application money of 12,000 shares refunded to
the unsuccessful applicants)
Share Application A/c Dr. 3,00,000
To Share Capital A/c 1,80,000
To Securities Premium A/c 1,20,000
(Being Share allotment money due on 60,000 shares @
Rs. (including premium of Rs. 2 per share)
Share First & Final Call A/c Dr. 3,00,000
To Share Capital A/c 3,00,000
(Being first & final call due on 60,000 shares @ Rs. 5 per
share)
Bank A/c Dr. 3,00,000
 [PAGE : 95]
To Share First & Final Call A/c 3,00,000
(Being call money received on shares)
Notes
1 Share Capital
Authorized Share Capital 15,00,000
Issued, Subscribed, called up and paid-up share
capital (60,000 equity shares of Rs. 10 each fully
paid up) 6,00,000
2. Reserves and Surplus
Securities Premium 1,20,000
 [PAGE : 96]

UNIT-III: ISSUE OF DEBENTURES

Q.18
Answer:

Journal Entries
Particulars Dr.(Rs.) Cr.(Rs.)
Bank A/c Dr. 95,000
Loss on issue of Debentures A/c Dr. 10,000
To 15% Debentures A/c 1,00,000
To Premium of Redemption of Debentures A/c 5,000
(Being the issue of debentures at a discount of 5% to be
redeemed at 5% premium)
Profit & Loss Appropriation A/c Dr. 1,00,000
To General Reserve A/c 1,00,000
(Being transfer of amount equivalent of the nominal
value of debenture redeemed out of profit)
15% Debentures A/c Dr.
Premium on Redemption of Debenture A/c Dr.
To Debenture holders A/c
(Being amount due on redemption)
Debenture holders A/c Dr. 1,05,000
To Bank A/c 1,05,000
(Being the payment made to debenture holders

Q.19
Answer:
S. Date Particulars Amount Amount
N. Dr. Cr.
1 1.1.2010 Bank A/c Dr. 1,80,000
Debenture discount A/c Dr. 20,000
Loss on Issue of Debentures A/c Dr. 10,000
To 12%Debentures A/c 2,00,000
To Premium on Redemption of
Debenture A/c 10,000
(For issue of debentures at discount
redeemable at Premium)
2 30.6.2010 Debentures Interest A/c Dr. 12,000
To Debentures holders A/c 10,800
To Tax deducted at Source A/c 1,200
(Being TDS deducted and debenture
interest is recognised)
3 30.6.2010 Debentures Holders A/c Dr. 10,800
Tax Deducted at Source A/c Dr. 1,200
To Bank A/c 12,000
(Being TDS and Interest Paid)
 [PAGE : 97]
4 31.12.2010 Debentures Interest A/c Dr. 10,800
To Debentures holders A/c 10,800
To Tax deducted at Source 1,200
(Being TDS deducted and debenture
interest is recognised)
5. 31.12.2010 Debenture Holders A/c Dr. 10,800
Tax Deducted at Source A/c Dr. 1,200
To Bank A/c 12,000
(Being TDS and interest paid)
6. 31.12.2010 Profit & Loss A/c Dr. 6,000
To Loss on issue of Debentures A/c 6,000
(Being proportionate Loss on issue of
debenture written off (i.e. 30,000 ×
1/5)
7. 31.12.2010 Profit & Loss A/c Dr. 24,000
To Debentures Interest 24,000
(Being transfer of debenture interest
to P&L A/c)
8. 31.12.2014 Debentures A/c Dr. 2,00,000
Premium on Redemption of Dr. 10,000
debentures A/c
To Debenture holders A/c 2,10,000
(Being redemption of Debentures)
9. 31.12.2014 Debenture Holders A/c Dr. 2,10,000
To Bank A/c 2,10,000
(Being Payment to Debenture
holders)
Entries no. 2, 3, 4, 5, 6, 7 to be repeated every year till 31.12.2014. In 2014
following extra entries to be passed.

Q.20
Answer:
(i) Bank A/c Dr. 73,500
Loss on issue of Debenture A/c Dr. 7,000
To 12% Debenture A/c 70,000
To Security Premium A/c 3,500
To Premium on Redemption of Debenture A/c 7,000

(ii) Forture Limited

Balance Sheet

I. Equities and Liabilities Amount in Rs.

Reserve and Surplus
Securities premium 3,500
Less: Loss on issue of debentures (7,000) (3,000)
Non - Current Liabilities
 [PAGE : 98]
12% Debenture 70,000
Debenture redemption premium 7,000
Total 73,500

II. Assets
Current Assets
Cash and cash equivalent 73,500
Total 73,500

Q.21
Answer:
Debenture Suspense A/c Dr. 40,00,000
To Debentures A/c 40,00,000
(Being issue of 0% 40,000, 14% debenture of Rs. 100 each as collateral security
for a bank loan of Rs. 25,00,000 as per Board Resolution dated)
Particulars Amount Rs.
I Equities & Liabilities
Non current liabilities
Long term borrowings 1 40,00,000
Current liabilities
Short term borrowings 2 25,00,000
65,00,000
II. Assets
1. Non Current Assets
Other non current asset 3 40,00,000
2. Current Assets
Cash and cash equivalents 25,00,000
Total 65,00,000
Note:
1. Long term borrowings
40,000; 14% Debentures of Rs. 100 each 40,00,000
(issued as callateral security as per contra)
2. Short term borrowings
Bank Loan 25,00,000
(Secured by issue of 40,000, 14% debenture of
Rs. 100 each as collateral security)
3. Other not current assets
Debenture Suspense A/c 40,00,000
(Issued as collateral security as per contra)

Q.22
Answer:
Date Particulars Amount Amount
Dr. Cr.
31.12.12 Interest on Debentures A/c Dr. 37,500
To Debentures holders A/c 37,500
(Being 3 months interest due on
 [PAGE : 99]
Debentures)
31.12.12 Debentures holders A/c Dr. 37,500
To Bank A/c 37,500
(Being Interest on debenture paid)
31.03.13 Interest on Debentures A/c Dr. 37,500
To Accrued interest on Debentures A/c 37,500
(Being 3 months debenture interest
accrued but not due)
31.03.13 Profit and Loss A/c Dr. 75,000
To Interest on debentures A/c 75,000
(Being interest on debentures transferred
to profit and loss A/c)
01.04.13 Profit and Loss A/c Dr. 37,500
To Interest on debentures A/c 37,500
(Being opening entry made)
30.06.13 Interest on Debentures A/c Dr. 75,000
To Debenture holders A/c 75,000
(Being 6 months interest due)
30.06.13 Debenture holders A/c Dr. 75,000
To Bank A/c 75,000
(Being 6 months interest paid)
31.12.13 Interest on Debentures A/c Dr. 75,000
To Debenture holders A/c 75,000
(Being 6 months interest due on
Debentures)
31.12.13 Debenture holders A/c Dr. 75,000
To Bank A/c 75,000
(Being interest on debenture paid)
31.03.14 Interest on Debentures A/c Dr. 37,500
To Accrued interest on Debentures A/c 37,500
(Being 3 months debenture interest
accrued but not due)
31.03.14 Profit and Loss A/c Dr. 1,50,000
To Interest on debentures A/c 1,50,000
(Being interest on debentures transferred
to profit and loss A/c)

Q.23
Answer:
Journal Entry
Particulars Dr. (Rs.) Dr. (Rs.)
Bank A/c Dr. 9,50,000
Loss on Issue of Debentures A/c Dr. 1,50,000
To 12% Debentures A/c 10,00,000
To Premium on Redemption of Deb. A/c 1,00,000
(Allotment of 10,000 12% debentures of Rs.
100) each issued at a discount of 5% and
 [PAGE : 100]
redeemable at a premium of 10% after 5 years
as per Board's Resolution dated…..)
Note: Total loss on issue of debentures has been arrived at as follows: Loss on
issue of debentures = Discount on issue + Premium on redemption
= Rs. (50,000 + 1,00,000) = Rs. 1,50,000
This total loss of Rs. 1,50,000 has to be written off over a period of 5 years.
Therefore, every year 1/5 of Rs. 1,50,000 = Rs. 30,000 have to be written off.

Loss on issue of Debentures A/c

Dr. Cr.
Date Particulars Rs. Date Particulars Rs.
1st year (at To 12% Debentures 50,000 1st year (at By Profit and Loss 30,000
the beginning) A/c the end) A/c
To Premium on 1,00,000 By Balance c/d 1,20,000
Redemption A/c
1,50,000 1,50,000
2nd year (at To Balance b/d 1,20,000 2nd year (at By Profit and Loss 30,000
the beginning) the end) A/c
By Balance c/d 90,000
1,20,000 1,20,000
3rd year (at To Balance b/d 90,000 3rd year (at By Profit and Loss 30,000
the beginning) the end) A/c
By Balance c/d 60,000
90,000 90,000
4th year (at To Balance b/d 60,000 4th year (at By Profit and Loss 30,000
the beginning) the end) A/c
By Balance c/d 30,000
60,000 60,000
5th year (at To Balance b/d 30,000 5th year (at By Profit and Loss 30,000
the beginning) the end) A/c
30,000 30,000

Q.24
Answer:
Date Particulars Amount Amount
Dr. Cr.
(a) Bank A/c Dr. 9,00,000
Discount on Issue of Debentures A/c Dr. 1,00,000
To 12% Debentures A/c 10,00,000
(Being the issue of 10,000 12%
debentures of Rs. 100 each at discount of
10% but redeemable at per)
(b) Bank A/c Dr. 10,50,000
To 12% Debentures A/c 10,00,000
To Securities / Debenture Premium A/c 50,000
(Being the issue of 10,000 12%
debentures of Rs. 100 each at a premium
of 5% but redeemable at per)
(c) Bank A/c Dr. 10,00,000
 [PAGE : 101]
Loss on Issue of debentures A/c Dr. 50,000
To 12% Debentures A/c 10,00,000
To Premium on Redemption 50,000
debenturesA/c
(Being the issue of 10,000 12%
debentures of Rs. 100 each at per but
redeemable at a premium of 5%)
(d) Bank A/c Dr. 9,50,000
Loss on Issue of debentures A/c Dr. 1,50,000
To 12% Debentures A/c 10,00,000
To Premium on Redemption 1,00,000
debenturesA/c
(Being the issue of 10,000 12%
debentures of Rs. 100 each at a discount
of 5% but redeemable at a premium of
10%)
(e) Bank A/c Dr. 11,00,000
Loss on Issue of debentures A/c Dr. 1,00,000
To 12% Debentures A/c 10,00,000
To Premium on Redemption 2,00,000
debenturesA/c
(Being the issue of 10,000 12%
debentures of Rs. 100 each at per but
redeemable at a premium of 20%)

Q.25
Answer:
Total Amount of discount and expenses is Rs. 70,000
5,00,000 10% 50,000
(exp)
20,000
70,000
It should be written-off each year according to the ratios of the amount
outstanding.
Years Ration
1 5
2 5
3 5
4 5
5 5
6 4
7 3
8 2
9 1
Total of Ratio 35
In each of the first 5 years discount to be written-off will be:
 [PAGE : 102]

70, 000 5
= Rs. 10,000
35
70, 000 4
6th year = Rs. 8,000
35
70, 000 3
7th year = Rs. 6,000
35
70, 000 2
8th year = Rs. 4,000
35
70, 000 1
9th year = Rs. 2,000
35

Q.26
Answer:
Journal Entry:
1. Debentures Suspense A/c Dr. 6,00,000
To 12% Debentures A/c 6,00,000
2. Bank A/c Dr. 5,00,000
To Bank Overdraft A/c 5,00,000
Balance Sheet of Mars Ltd. as at 31.03.2016

I Equities & Liabilities

Non current liabilities
Long term borrowings 1 6,00,000
Current liabilities
Short Term Loan 2 5,00,000
11,00,000
II Assets
Non Current Assets
Other non current asset 3 6,00,000
Current Assets
Bank 5,00,000
11,00,000

Notes:
1 Long term borrowings 6,00,000
6,000, 12% Debentures of Rs. 100 each
(issued as collateral security as per Contra)
2. Short Term Borrowings:
Bank Overdraft 5,00,000
(Secured by the issue of 6,000, 12% Debentures of Rs. 100
each as collateral security)
3. Other Non-Current Assets:
Debentures Suspense A/c 6,00,000
(Issued as collateral security as per Contra)
 [PAGE : 103]
Q.27
Answer:
Journal Entries
(1) Bank A/c Dr. 1,80,000
Discount on Issue of 10% Debentures A/c Dr. 20,000
Loss on Issue of 10% Debentures A/c Dr. 20,000
To 10% Debentures A/c 2,00,000
To Premium on Redemption of Debentures A/c 20,000
Note: Total Loss on Issue = Rs. 20,000 + Rs. 20,000
= Rs. 40,000
 [PAGE : 104]

BASIC ACCOUNTING RATIOS

Book Page no. 149
Q.28
Answer:
Calculation of Fixed Assets and Proprietor's Fund
Since Ratio of Fixed Assets
to Proprietor's Fund = 0.75
Therefore, Fixed Assets = 0.75 proprietor's Fund
Net Working Capital = 0.25 proprietor's Fund
6,00,000 = 0.25 proprietor's Fund
Therefore, Proprietor's Fund =
= Rs. 24,00,000
Proprietor's Fund = Rs. 24,00,000
Since, Fixed Assets = 0.75 Proprietor's Fund
therefore, Fixed Assets = 0.75 × 24,00,000
= Rs. 18,00,000
Fixed Assets = Rs. 18,00,000

29.
Answer.
The net profit is computed as follows:
Particulars Rs.
Sales Revenue 22,50,000
Less: Direct Costs0 15,00,000
Gross Profits 7,50,000
Less: Operating Expense 2,40,000
EBIT 5,10,000
Less: Interest (9% × 7,50,000) 67,500
EBT 4,42,500
Less: Taxes (@ 40%) 1,77,000
PAT 2,65,500
(i) Net Profit Margin
EBIT(1 t) 5,10,000 (1 0.4)
Net Profit Margin = × 100 = = 13.6%
Sales 22,50,000
(ii) Return on Assets (ROA)
ROA = EBIT (1-t) ÷ Total Assets
= 5,10,000 (1 - 0.4) ÷ 25,00,000 = 3,06,000 ÷ 25,00,000
= 0.1224 = 12.24%
(iii) Asset Turnover
Sales 22,50,000
Asset Turnover = = =0.9
Assets 25,00,000
Asset Turnover = 0.9
(iv) Return of Equity (ROE)
 [PAGE : 105]
PAT 2,65,500
ROE = = = 15.17%
Equity 17,50, 000
ROE - 15.17%

Q.30.
Answer:

(i) Quick ratio = Quick Assets

Current Liabilities
Quick Assets = Current Assets - Stock - Prepaid
Expenses
= 30,50,000 - 21,60,000 - 10,000
Quick Assets = 8,80,000
Quick Ratio = 8,80,000/10,00,000
= 0.88:1
(ii) Debt-Equity Ratio = Long term debts
Shoreholders Funds
= 16,00,000
(20,00, 000 8,00,000)
= 0.57:1
(iii) Return on Capital Employed (ROCE)
ROCE = PBIT
× 100
Capital Employed
= 12, 00,000
× 100 = 27.27%
44,00,000
(iv) Average Collection Period
= Sundry Debtors
× 360
Credit Sales
= 4,00,000
× 360
32, 00,000
= 45 days

Q.31
Answer:

(i) Computation of Average Inventory

Gross Profit = 25% of 30,00,000
Gross Profit = 7,50,000
Cost of goods sold (COGS) = 30,00,000 - 7,50,000
COGS = 22,50,000
Inventory Turnover Ratio = COGS
Average Inventory
 [PAGE : 106]
6 = 22,50,000
Average Inventory
Average inventory = 3,75,000
(ii) Computation of Purchases
Purchases = COGS + Interest in Stock
= 22,50,000 + 80,000
Purchase = 23,30,000
(iii) Computation of Average Debtors
Let Credit Sales be Rs. 100
Cash sales = 25
× 100
100
= Rs. 25
Total Sales = 100 + 25
= 125
If Then
Total Sales Credit Sales
125 100
30,00,000 30, 00,000
× 100
125
= 6,00,000
Credit Sales = 24,00,000
Cash Sales = 6,00,000
Now Debotrs = Net Credit Sales
Average debtors
= 8
or Debtor Turnover Ratio = 24,00,000
Average debtors
= 8
or Average Debtors = 24, 00,000
8
Average Debtors = 3,00,000
(iv) Computation of Average Creditors
Credit Purchases = Purchases - Cash Purchases
= 23,30,000 - 2,30,000
= 21,00,000
Now Creditors Turnover Ratio = Credit Purchases
Average Creditors
10 = 2,10,000
Average Creditors
or Average Creditor = 2,10,000
(v) Computation of Average Payment Period
Average Payment Period = 365/Creditors Turnover Ratio
= 365
10
= 36.5 days
 [PAGE : 107]
Average payment period = 36.5 days
(vi) Computation of Average Collection Period
Average collection period = 365/ Debtors Turnover Ratio
= 365
= 45.625 days
8
Average collections period = 45.625 days
(vii) Computation of Current Assets
Current Ratio = Current Assets (CA)
Current Liabilities(CL)
or 2.4 = CA
CL
or CL = CA
2.4
Working capital = Current Assets - Current liabilities
2,80,000 = CA
(CA) -
2.4
2,80,000 = 1.4CA
2.4
or CA = 4,80,000
(viii) Computation of Current Liabilities
4,80,000
Current liabilities = = 2,00,000
2.4

Q.32
Answer:
(i) Calculation of Proprietor's Fund
Since Ratio of Fixed Assets to Proprietor's Fund = 0.75
Therefore, Fixed Assets = 0.75 Proprietor's Fund
Net Working Capital = 0.25 Proprietor's Fund
12,00,000 = 0.25 Proprietor's Fund
12,00,000
Therefore, Proprietors Fund =
0.25
= 48,00,000
(ii) Calculation of Fixed Assets
Fixed Assets = 0.75 Proprietor's Fund
= 0.75 × 48,00,000
= 36,00,000
(iii) Calculation of Net Profit Ratio
Net Working Capital = 0.25 × 48,00,000
= 12,00,000
Sales
Working Capital Turnover Ratio =
WorkingCapital
Sales = 60,00,000
 [PAGE : 108]
PAT
ROE =
Equity
PAT
0.15 =
48,00,000
PAT = 7,20,000
Net Profit
Net Profit Ratio = × 100
Sales
7,20,000
= × 100
60,00,000
Net Profit Ratio = 12%
Alternative Treatment:
Fixed Assets may be computed alternatively by (Proprietor's fund × Fixed Assets to
Proprietor's Fund Ratio) and Proprietor's Fund by (Fixed Assets + Net Working
Capital.)

Q.33
Answer:
Balance Sheet of Sona Ltd. as on 31st March 2013
Particulars as at 31st March Note Amount
I Equity and Liabilities:
(1) Sharesholder's Funds:
(a) Share Capital (given) 5,75,000
(b) Reserves and Surplus Note 1 2,60,000
(2) Current Liabilities:
(a) Trade Payables - Creditors Note 2 1,00,000
(b) Other Current liabilities - Bank Credit Note 2 2,00,000
Total 11,35,000
II Assets:
(1) Non-Current Assets:
Fixed Assets (Bal. Fig.) 6,85,000
(2) Current Assets:
(a) Inventories Note 4 2,10,000
(b) Trade receivables - Debtors Note 7 1,75,000
(c) Cash & Cash equivalents - Cash & Bank Note 8 65,000
11,35,000

Working Notes:
Current Assets
1. Current ratio = = 1.5 times.
Current Liabilities
Therefore, Current Asset = 1.5 × Current Liabilities.
2. Net working capital = Current Assets - Current Liabilities
= 1.5 × CL - CL = 1,50,000
= 0.5 CL = 1,50,000
 [PAGE : 109]

1,50,000
CL = = 1,50,000
0.5
Bank Credit & Creditors divided in
2:1 ratio, 2,00,000 & 1,00,000
3. Current Assets = 1.5 × Current Liabilities = 1.5 × 3,00,000 = 4,50,000
Quick Assets
4. Quick ratio = = 0.8 times
Current Liabilities
Quick Assets Stock
= 0.8
Current Liabilities
4,50,000 Stock
So, = 0.8
3,00,000
COGS COGS
5. Inventory Turnover = = = times
Stock 2,10,000
SO, COGS = 2,10,000 × 5 = 10,50,000
6. Since Gorss Margin is 25%, COGS constitutes 75% of sales.
10,50, 000
So, sales = = 14,00,000
75%
1.5
7. Debtors = Sales × = 1,75,000.
12
8. Cash & Bank = Total current assets - stock - debtors
= 4,50,000 - 2,10,000 - 1,75,000 = 65,000
Reserves & Surplus
9. = 4 times.
Cash& Bank
So, R & S = 65,000 × 4 = 2,60,000

Q.34
Answer
Balance Sheet of a firm:
Liabilities Amount Assets Amount
Rs. Rs.
Capital 27,00,000 Fixed Assets 28,00,000
Reserves & Surplus 9,00,000 36,00,000 Current assets:
Current liabilities 8,00,000 Debtors 7,00,000
Stock 6,00,000
Cash 3,00,000 16,00,000
44,00,000 44,00,000
Note: 1 Net Working Capital:
Rs. 8,00,000 = Current Assets - Current Liabilities
Rs. 8,00,000 = 2CL = CL
CL = 8,00,000
CA = 2 CL
= 2 (8,00,000)
 [PAGE : 110]
CA = 16,00,000
Note:2 Liquid Ratio
1.25 = CA- Stock
CL
16,00,000 Stock
1.25 =
8,00,000
Stock = 16,00,000 - 10,00,000
Stock = Rs. 6,00,000
Note: 3 Stock Turnover ratio:
7 times = COGS *Absence of information about opening
Avg. Stock* stock considering closing stock as Avg.
Stock
COGS
7 =
6,00,000
COGS = 42,00,000
GP = COGS × 33.33%
= 42,00,000 × 33.33%
GP = 14,00,000
Sales = COGS + GP
= 42,00,000 + 14,00,000
Sales = Rs. 56,00,000
Note: 4 Sales to Fixed assets
Sales
2 =
FA
56,00,000
F.A. =
2
F.A. = 28,00,000

Note: 5 Networth
Networth = Total Assets - CL
= 28,00,000 + 16,00,000 - 8,00,000
= Rs. 36,00,000
Capital = 36,00,000 × 0.75 = Rs. 27,00,000
R&S = 36,00,000 × 0.25 = Rs. 9,00,000
Note:6 Av. Debt Collection Period = 1.5 months
1.5
Debtors = 56,00,000 × = 7,00,000
12
Note:7 Cash = CA - Stock - Debtors
= 16,00,000 - 6,00,000 = 7,00,000
= 3,00,000
Q.35
 [PAGE : 111]
Answer.
Workings:
1. Net Profit = 6.25% of Rs. 60,00,000 = Rs. 3,75,000
100
2. Net worth = Rs. 3,75,000 × = Rs. 15,00,000
25
7
Share Capital = Rs. 15,00,000 × = Rs. 10,50,000
10
3
Reserve = Rs. 15,00,000 × = Rs. 4,50,000
10
100
Debentures = Rs. 60,000 × = 4,00,000
15
3. Sundry Creditors = Rs. 2,00,000
Current Assets
Current Ratio = = 2
Current Liabilities
Current Assets = 2 Current Liabilities
cost of goods sold
4. Inventory Turnover = = 12
closing stock
Rs.18,00,000
Hence, Closing Stock = = Rs. 1,50,000
12
Calculation of Earnings Before Interest and Tax (EBIT)
Particulars Amount Rs.
Net Profit 3,75,000
Tax @ 50% 3,75,000
Profit Before Tax 7,50,000
Add: Interest on Debentures 60,000
Earnings Before interest and Tax (EBIT) 8,10,000
(i) Calculation of operating Expenses
for the year ended 31st March 2015
Particulars Amount Rs. Amount Rs.
Sales 60,00,000
Less: Cost of Goods Sold 18,00,000
EBIT 8,10,000 26,10,000
Operating Expenses 33,90,000
(ii) Balance Sheet as on 31st March, 2015
Liabilities Amount Amount Rs. Assets Amount Amount
Rs. Rs. Rs.
Share capital 10,50,000 Fixed Assets 17,00,000
Reserve 4,50,000 (balancing figure)
Debentures 15% 4,00,000 Current Assets:
Sundry Creditors 2,00,000 Closing stock 1,50,000
Debtors 2,00,000
Cash 50,000 4,00,000
21,00,000 21,00,000
Q.36
 [PAGE : 112]
Answer:
Trading Profit & Loss A/c
(For the year ending 31st March 2015)
Particulars Rs. Particulars Rs.
To Opening Stock 4,50,000 By Sales 90,00,000
To Purchases 65,70,000 By Closing Stock 7,20,000
(Balancing figure)
To Gross Profit c/d 27,00,000
97,20,000 97,20,000
To Interest on Long term 7,00,000 By Gross Profit b/d 27,00,000
debt @ 14%
To Miscellaneous Expenses 76,923
(Balancing figure)
To Income Tax 6,73,077
To Net Profit 12,50,000
27,00,000 27,00,000

Working Note:
Debt 2
Debt Equity Ratio = 2:1; =
Equity 1
Rs.50,00,000
Equity = = Rs. 25,00,000
2
Net Profit after tax (PAT)
Return on Equity = = 50%
Equity
Or, Net profit after tax (PAT) = Rs. 25,00,000 × 50% = Rs. 12,50,000
100
Net Profit before tax = Rs. 12,50,000 × = Rs. 19,23,077
65
Tax = 19,23,077 - Rs. 12,50,077
= Rs. 6,73,077
Sales
Capital Turnover Ratio = = 1.2
Capital
Sales
Or, = 1.2
(Rs.25,00,000 Rs.50,00,000)
So, Sales = Rs. 75,00,000 × 1.2 = Rs. 90,00,000
Closing Stock = Rs. 90,00,000 × 8% = Rs. 7,20,000
Gross Profit = Rs. 90,00,000 × 30% = Rs. 27,00,000

Q.37.
Answer:
Trading & Profit and Loss A/c
Dr. Cr.
Particulars Rs. Particulars Rs.
To Opening Stock 80,000 By Sales 32,00,000
To Purchases 27,20,000 By Closing stock 4,00,000
 [PAGE : 113]
To Gross Profit c/d 8,00,000
36,00,000 36,00,000
To Sundry expenses 1,60,000 By Gross Profit b/d 8,00,000
(balance figure)
To Net Profit 6,40,000
8,00,000 8,00,000
Balance Sheet
Liabilities Rs. Assets Rs.
Capital 32,00,000 Fixed Assets 40,00,000
Liabilities 64,00,000 Investment
Current Assets:
Closing Stock 4,00,000
Other Current Assets 52,00,000
96,00,000 96,00,000
Working Notes:
Fixed Assets 5
(i) =
Total Current Assets 7
40,00,000 5
=
Total Current Assets 7
Total Current asset = 56,00,000
Fixed Assets 5
(ii) =
Capital 4
40,00,000 5
=
Capital 4
Capital = 32,00,000
Capital 1
(iii) =
TotalLiabilities 2
32,00,000 1
=
TotalLiabilities 2
Total Liabilities = 64,00,000
Net Profit 1
(iv) =
Capital 5
Net Profit 1
=
32, 00,000 5
Net Profit = 6,40,000
Net Profit
(v) Net Profit Ratio = × 100
Sales
6,40,000
20 = × 100
Sales
Sales = 32,00,000
GrossProfit
(vi) Gross Profit Ratio = × 100
Sales
 [PAGE : 114]
GrossProfit
25 = × 100
32,00,000
Gross Profit = 8,00,000
(vii) Cost of goods sold = Sales - GP
= 32,00,000 - 8,00,000
= 24,00,000
COGS
(viii) Stock T/O Ratio =
Average Stock
24,00,000
10 =
Average Stock
Average Stock = 2,40,000
Opening stock + closing stock
(ix) Average Stock =
2
Opening stock + 4,00,000
2,40,000 =
2
Opening Stock = 80,000
(x) Cost of Goods sold = Opening Stock + Purchase - Closing Stock
24,00,000 = 80,000 + purchase - 4,00,000
Purchase = 27,20,000

Q.38
Answer:
Balance Sheet as at 31st March, 2016
Liabilities Rs. Assets Rs.
Equity Share Capital 12,50,000 Fixed Assets 24,00,000
Reserves & Surplus 7,50,000 Current Asset
Long-term borrowing 10,00,000 Debtors 6,25,000
Current Liability 12,00,000 Stock 6,00,000
Cash 5,75,000 18,00,000
42,00,000 42,00,000
Working Notes:
1. Calculation of Debtors:
Average collection period = 45days
360
Debtors T/O Ratio = =8
45
Credit Sales
Debtors =
Debtors T/O
Rs.50,00,000
= = Rs.6,25,000
8
2. Calculation of Fixed Assets:
COGS
Fixed Asset =
Fixed Asset
 [PAGE : 115]

36,00,000
1.5 =
FA
FA = Rs. 24,00,000.
3. Calculation of working capital:
Fixed Asset to Networth = 1.2
FA 1.2
=
NW 1
NW = 1.2

FA WC
1 2
24,00,000 ?
Working Capital = Rs. 24,00,000 × 0.2
= Rs. 4,80,000.
4. Current Assets : Current Ratio
= 1.5 and Liquid Ratio = 1
Stock = 1.5 = 1 = 0.5
Current Assets = Amount of Stock × 1.5/0.5
= Rs. 6,00,000 × 1.5/0.5 = Rs. 18,00,000
5. Current Liabilities
= Current Assets / Current Ratio
= Rs. 18,00,000 / 1.5 = Rs. 12,00,000
6. Liquid Assets (Debtors and Cash & Cash equivalents)
= Current Assets - Stock
= Rs. 18,00,000 - Rs. 6,00,000
= Rs. 12,00,000
7. Reserves and Surplus
Reserves & Surplus and Share Capital = 0.6 + 1 = 1.6
Reserves and Surplus = Rs. 20,00,000 × 0.6 / 1.6 = Rs. 7,50,000
Share Capital = Net worth - Reserves and Surplus
= Rs. 20,00,000 - Rs. 7,50,000
= Rs. 12,50,000
8. Net Worth
= Fixed Assets / 1.2
= Rs. 24,00,000 / 1.2
= Rs. 20,00,000
9. Cash & Cash equivalents
= Liquid Assets - Debtors
= Rs. 12,00,000 - Rs. 6,25,000
= Rs. 5,75,000
10. Long term Debts
 [PAGE : 116]
Capital Gearing Ratio = Long term / Debts/ Equity Sharesholder's Fund (New
worth)
Or, Long term Debts = Rs. 20,00,000 × 0.5 = Rs. 10,00,000.

Q.39
Answer.
1. Sales and cogs:
Gross Profit
G.P. Ratio = × 100
Sales
4,00,000
25 = × 100
Sales
4,00, 000 100
Sales =
25
Sales = 16,00,000
COGS = Sales - Gross Profit
= 16,00,000 - 4,00,000
COGS = 12,00,000
2. Sundry Debtors:
Debtors
Debtors Velocity = × 100
Sales
Debtors
3 = × 12
16,00,000
16,00,000 3
Debtors =
12
Debtors = 4,00,000
Now S. Debtors + BR = 4,00,000
S. Debtors = 4,00,000 - 25,000
= 3,75,000
3. Sundry Creditors
COGS = Opening Stock + Purchase - Closing Stock
12,00,000 = 7,95,000 + Purchase - 8,05,000
Purchase = 12,10,000
Creditors
Creditors Velocity = × 12
Purchase
Creditors
2 = × 12
12,10,000
12,10,000 2
Creditors =
12
Creditors = 2,01,667
Now S. Creditors + BP = 2,01,667
S. Creditors = 2,01,667 - 10,000
 [PAGE : 117]
= 1,91,667
4. Closing Stock
COGS
Stock Turnover Ratio =
Average Stock
12,00,000
1.5 =
Average Stock
Average Stock = 8,00,000
Opening Stock+Closing Stock
Average Stock =
2
Opening Stock+(Opening Stock 10,000)
8,00,000 =
2
16,00,000 = 2 Opening Stock + 10,000
Opening Stock = 7,95,000
Closing Stock = Opening Stock + 10,000
= 7,95,000 + 10,000
Closing Stock = 8,05,000
5. Fixed Assets
COGS
FATR =
Fixed Assets
12,00,000
4 =
Fixed Assets
Fixed Assets = 3,00,000

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