SOLUTION

EXAM: S.Y.B.Com (Accounting & Finance) Sem III DATE OF EXAM: 28/11/2017
SUBJECT: Financial Accounting (Special Accounting Areas) - III Q.P.CODE : 22810

INSTRUCTIONS FOR EXAMINERS.

1) Stepwise marking scheme is provided for each answer.

2) Marks to be given even though answer is written in different possible way and it is logically correct.
(e.g . 1.In Final Account, Old RDD and Bad debts may be written in Credit and debit side of P& L A/c
instead of adjusting to each other. 2. In case of some combine journal entry student may write
separate entries.etc…)
3) In case of theory questions, answers provided are suggestive so please see if the student has
written relevant answer then give marks accordingly.
4) Whereas Full marks can be allotted even for theory answers if all aspects as per requirement are
covered.
5) For any query please feel free to contact us on :-

Prof. Vijay Gawde [Chairperson] 8451806842

Prof. Pratap Kadam 9819148315
Prof. Mubeen Shaikh 9322123549

Q.1 A) FILL IN THE BLANKS WITH APPROPRIATE OPTION.(ANY 8) (08)

1. All
2. Adjusted
3. Realisation
4. Death
5. Equity
6. Vendor
7. Old profit sharing
8. Goodwill
9. Decrease
10. 1:1:1

Q. 1 B) MATCH THE FOLLOWING (ANY7) (07)

A B [WITH CORRECT OPTION]
Accounting for Foreign Exchange Accounting Standard 11
Amalgamation of Partnership Firm Accounting Standard 14
Realisation Prepared to close the books of old firm
Profit & Loss appearing on the asset side Undistributed Losses
New Ratio minus Old Ratio Gain Ratio
As per Partnership Act 1932 Rules governing partnership deed
Opening Stock Last accounting periods closing stock
As per revised Schedule VI of Companies Act Balance Sheet of a company
Base rate Rate for comparing P&L on Exchange Transaction
Outstanding Expenses Personal Account
Q.2. [A]
Dr. TRADING ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2017 Cr.
PARTICULAR AMOUNT AMOUNT PARTICULARS AMOUNT AMOUNT
To Opening stock 240000 By Sales 1400000

2 MARKS
To Purchases 450000 Less:- Returns -23000 1377000
Add:- Return -14000 436000
To Trade expenses 12500
To Gross Profit c/d 760000 By Closing Stock 71500
1448500 1448500
Dr. PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2017 Cr.
PARTICULAR APR-JUL AUG-MAR PARTICULARS APR-JUL AUG-MAR
To Salary & wages 45000 15000 By Gross Profit b/d 570000 190000
To Office rent 12750 4250

4 MARKS
To General expenses 1500 500
To Depreciation
Delivery Van 21000 7000
Tractor 13125 4375
To Net Profit c/d 476625 158875
570000 190000 570000 190000
Dr. PROFIT & LOSS APPROPRIATION ACCOUNT FOR THE YEAR ENDED 31/3/17 Cr.
PARTICULAR APR-JUL AUG-MAR PARTICULARS APR-JUL AUG-MAR
To Divisible Profit By Net Profit b/d 476625 158875

2 MARKS
Sathaye 191190 86839 By Interest on Drawing
Vikas 159325 72366 Sathaye 540 180
Anup 127460 0 Vikas 450 150
Anup 360 0
477975 159205 477975 159205
BALANCE SHEET AS ON 31ST MARCH 2017
LIABILITIES AMOUNT AMOUNT ASSET AMOUNT AMOUNT
Capital Delivery Van 280000
Sathaye 545809 Less :- Depreciation -28000 252000
Vikas 454841 1000650 Tractors 350000
Anup's Son loan 354850 Less :- Depreciation -17500 332500
5 MARKS

Income in advance 4000 Loose tools 40000

Sundry Creditors 80000 Book Debts 375000
Bank Overdraft 5000 Bills Receivable 50000
Advance to suppliers 250000
Cash 73500
Closing Stock 71500
1444500 1444500
Dr. PARTNERS CAPITAL ACCOUNT Cr.
PARTICULARS SATHAYE VIKAS ANUP PARTICULARS SATHAYE VIKAS ANUP
To Drawings 12000 10000 8000 By Balance b/d 300000 250000 200000

2 MARKS
To Goodwill 19500 16250 0 By Goodwill 0 0 35750
To Interest on Drawings 720 600 360
To Anup's son Loan 0 0 354850 By Divisible Profit [PRE] 191190 159325 127460
To Balance c/d 545809 454841 0 By Divisible Profit [POST] 86839 72366 0
578029 481691 363210 578029 481691 363210
Q.2. B
Dr. TRADING ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2017 Cr.
PARTICULAR AMOUNT AMOUNT PARTICULARS AMOUNT AMOUNT
To Opening a/c 50000 By Sales 381000

2 MARKS
To Purchases 225000 Less :- Return Inward 21000 360000
Less:- Return Out 5000 220000
To Wages 15000
To Gross Profit c/d 120000 By Closing stock 45000
405000 405000
Dr. PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2017 Cr.
PARTICULAR JAN-SEP OCT-DEC PARTICULARS JAN-SEP OCT-DEC
To Salaries 6750 2250 By Gross Profit b/d 90000 30000
To Postage & Insur 1050 350

4 MARKS
To General Expense 7350 2450
To Rent, Rates 11000
Add :- O/S 1000 9000 3000
To Depreciation 1575 525
To Net Profit C/d 64275 21425
90000 30000 90000 30000
Dr. PROFIT & LOSS APPROPRIATION ACCOUNT FOR THE YEAR ENDED 31/3/17 Cr.
PARTICULAR AMOUNT AMOUNT PARTICULARS AMOUNT AMOUNT
To Interest on Capital By Net Profit B/d
Mane 4800 Pre 64275
Kane 2400 Post 21425 85700
2 MARKS

Fene 150 7350

To Divisible Profit
Mane 35911
Kane 35911
Fene 6528 78350
85700 85700

Cr.
Dr. PARTNERS CAPITAL ACCOUNT
PARTICULARS MANE KANE FENE PARTICULARS MANE KANE FENE
To Drawing a/c 30000 15000 3000 By Balance c/d 48000 24000 6000

2 MARKS
To Debtors [Good] 300 By Goodwill 2000 2000
By Interest on Capital 4800 2400 150
To Balance c/d 60711 49311 9378 By Divisible Profit 35911 35911 6528
90711 64311 12678 90711 64311 12678
BALANCE SHEET AS ON 31ST MARCH 2017
LIABILITIES AMOUNT AMOUNT ASSET AMOUNT AMOUNT
Capital Fixed Asset 21000
Mane 60711 Less :- Depreciation 2100 18900
Kane 49311 Debtors 62000

5 MARKS
Fene 9378 119400 Less :- Withdrawn 300 61700
Bills Payable 7000
Creditors 20000 Cash in Hand 6800
Outstanding Rent 1000 Bank 15000
Closing stock 45000
147400 147400

Q.3. [A]

FOREIGN EXCHANGE FLUCTUATION ACCOUNT

PARTICULARS AMOUNT PARTICULARS AMOUNT

3 MARKS
To Home Ltd's a/c 187500 By Bank a/c 450000
By Bank a/c 900000
To Profit & Loss a/c 1387500 By Home Ltd 225000
1575000 1575000

Continued on the Next page

Q.3. A JOURNAL OF DANDEKAR & BROS
DATE PARTICULARS LF DEBIT CREDIT
10-08-15 Home Ltd's a/c……………………..Dr. [750000 X 50] 37500000

2 MARK
To Sales a/c 37500000
(Being goods exported to Bangladesh)
10-10-15 Bank a/c………………………..……..Dr. [750000 x 30/100 x 52] 11700000

2 MARK
To Home Ltd a/c [750000 x 30/100 x 50] 11250000
To Foreign Exchange Fluctuation A/c. [750000 x 30/100 x 2] 450000
(Being money received & fluctuation in exchange rate is
recorded)
21-01-16 Bank a/c………………………..……..Dr. [750000 x 30/100 x 54] 12150000

2 MARK
To Home Ltd a/c [750000 x 30/100 x 50] 11250000
To Foreign Exchange Fluctuation A/c. [750000 x 30/100 x 4] 900000
(Being money received & fluctuation in exchange rate is
recorded)
21-02-16 Bank a/c………………………..……..Dr. [750000 x 25/100 x 49] 9187500

2 MARK
Foreign Exchange Fluctuation A/C …Dr. [750000 x 25/100 x 1] 187500
To Home Ltd a/c [750000 x 25/100 x 50] 9375000
(Being money received & fluctuation in exchange rate is
recorded)
31-03-16 Home Ltd's a/c……………………..Dr. [750000 X 15/100 x 2] 225000

2 MARK
To Foreign Exchange Fluctuation A/c. 225000
(Being Foreign rate exchange adjusted with closing rate]
31-03-16 Foreign Exchange Fluctuation A/C ………Dr. 1387500

2 MARK
To Profit & Loss a/c 1387500
(Being balance on Foreign Exchange Fluctuation a/c
transferred to Profit & Loss a/c)
72337500 72337500
Q.3.[B]

IN THE BOOKS OF ABHINAV, CHETAN, KUNAL AND RAMAN.

STATEMENT OF PURCHASE CONSIDERATION
PARTICULARS L & CO. M & CO. TOTAL
ASSETS TAKEN OVER AT A.V.
Goodwill 84,000 1,00,000 1,84,000
Cash 48,000 64,000 1,12,000
Stock 2,14,000 1,86,000 4,00,000
Furniture 80,000 40,000 1,20,000
4 MARKS

Office Building 3,60,000 - 3,60,000

Debtors 1,14,000 1,90,000 1,90,000
TOTAL ASSETS: 9,00,000 5,80,000
LESS: LIABILITIES TAKEN OVER AT A.V.:
Creditors 1,50,000 2,00,000 3,50,000
Bills payable 50,000 40,000 90,000
Bank Loan 40,000 - 40,000
TOTAL LIABILITIES. 2,40,000 2,40,000
PURCHASE CONSIDERATION 6,60,000 3,40,000
 REALISATION A/C
PARTICULARS L & CO. M & CO. PARTICULARS L & CO. M & CO.
To Sundry Assets: By Sundry Liabilities:
Cash 48,000 64,000 Creditors 1,50,000 2,00,000
Stock 2,32,000 1,76,000 Bills payable 50,000 40,000

3 MARKS
Furniture 80,000 40,000 Bank Loan 40,000 -
Office Bldg. 3,60,000 - By New Firm a/c 6,60,000 3,40,000
Debtors 1,20,000 2,00,000 By P. Cap.A/c - 1,60,000
Investment - 1,60,000
To P.Cap. a/c(Profit) 60,000 1,00,000
9,00,000 7,40,000 9,00,000 7,40,000

PARTNERS CAPITAL A/C

PARTICULARS ABHINAV CHETAN KUNAL RAMAN PARTICULARS ABHINAV CHETAN KUNAL RAMAN

3 MARKS
To Real. - - 80,000 80,000 By Bal c/d 3,80,000 1,80,000 2,20,000 1,40,000
By Re. Fund 20,000 20,000 20,000 20,000
To New Firm 4,30,000 2,30,000 2,10,000 1,30,000 By Real. 30,000 30,000 50,000 50,000
4,30,000 2,30,000 2,90,000 2,10,000 4,30,000 2,30,000 2,90,000 2,10,000

NEW FIRM A/C

PARTICULARS L & CO. M & CO. PARTICULARS L & CO. M & CO.
To Realisation a/c 6,60,000 3,40,000 By P. Capital A/c.:

1 MARKS
Abhinav 4,30,000
Chetan 2,30,000
Kunal 2,10,000
Raman 1,30,000
6,60,000 3,40,000 6,60,000 3,40,000
BALANCE SHEET AS ON 31.03.2017
LIABILITIES AMT. ASSETS AMT.
CAPITAL A/C: Goodwill 1,84,000
Abhinav 4,30,000 Cash 1,12,000
Chetan 2,30,000 Stock 4,00,000
4 MARKS

Kunal 2,10,000 Furniture 1,20,000

Raman 1,30,000 Office Bldg. 3,60,000
Creditors 3,50,000 Debtors 3,04,000
Bills payable 90,000
Bank Loan 40,000
14,80,000 14,80,000
Q.4. [A]

IN THE BOOKS OF UMESH , VIBHA AND BABAN.

STATEMENT OF EXCESS CAPITAL
PARTICULARS UMESH VIBHA BABAN
1.Capital Balance 40,000 40,000 40,000
2.P.S.R. 2 1 1
3.Unit Value 20,000 40,000 40,000

5 MARKS
4.P.C.(L.U.V.*PSR) 40,000 20,000 20,000
5.E.C. - 20,000 20,000
6.P.S.R. 1 1
7.Unit Value 20,000 20,000
8.P.C. 20,000 20,000
9.U.E.C. - -

STATEMENT OF DISTRIBUTION OF CASH

PARTICULARS CASH I.TAX CREDITORS LOAN-S UMESH VIBHA BABAN
Balance 9,000 4,000 15,000 11,000 40,000 40,000 40,000
+ Stock(Excess) 5,000
_ Exp.(Furniture) 3,000
Cash Available 11,000
Less:I.Tax 4,000 4,000
Less: Crs. And S- Loan 7,000 4,038 2,962
Balance - - 10,962 8,038 40,000 40,000 40,000
Ist Realisation 12,000
Less: Crs. And S- Loan 12,000 6,923 5,077
Balance - - 4,039 2,961 40,000 40,000 40,000

10 MARKS
IInd Realisation 15,000
Less: Crs. And S- Loan 7,000 - 4,039 2,961
Less: Excess capital 8,000 - 4,000 4,000
Balance - - - - 40,000 36,000 36,000
IIIrd Realisation 10,000
Less: Excess capital 10,000 5,000 5,000
Balance - - - - 40,000 31,000 31,000
IVth Realisation 30,000
Less: Excess capital 22,000 11,000 11,000
Less: Paid to all Partner 8,000 4,000 2,000 2,000
Balance - - - - 36,000 18,000 18,000
Vth Realisation 35,000
Less: Paid to all Partner 35,000 - - - 17,500 8,750 8,750
Loss on Realisation - - - - 18,500 9,250 9,250
Q.4. [B]
CALCULATION OF NET ASSET
Assets taken over at agreed value
Land 600000
Plant 170000
Furniture 35000
Inventory 175000

1 MARK
Sundry Debtors 40000
Cash 55000
TOTAL - A 1075000
Less :- Liability taken over A.V.
Sundry Creditors 25000
TOTAL - B 25000
NET ASSET = A - B 1050000
DISCHARGE OF PURCHASE CONSIDERATION
WHOM AMOUNT WHAT
Guru 900000 9000 Equity Shares in GNKltd
Nanu of Rs. 100 each at par. 1 MARK
Kanu 90000 9000, 11% Preference shares of
Rs. 10 each at par.
60000 Cash [Bal. Fig.]
1050000

JOURNAL PROPER OF NEW COMPANY

PARTICULARS DEBIT CREDIT
Business Purchase a/c………Dr. 1050000
To Liquidators of old partnership firm a/c 1050000
Assets taken over at A.V..……Dr.
Land 600000
Plant 170000
1 MARK FOR EACH ENTRY

Furniture 35000
Inventory 175000
Sundry Debtors 40000
Cash 55000
To Liabilities taken over at A.V.
Sundry Creditors 25000
To Business Purchase a/c 1050000
Liquidators of old partnership firm a/c Dr. 1050000
To Equity Share capital a/c 900000
To Preference Share capital a/c 90000
To Cash a/c 60000
3175000 3175000
 JOURNAL PROPER OF OLD PARTNERSHIP FIRM
PARTICULARS DEBIT CREDIT
Realisation a/c…………..Dr. 1175000
To Sundry Assets a/c
Land 500000
Plant 300000
Furniture 160000
Inventory 175000
Sundry Debtors 40000
Sundry Liabilities a/c……Dr
Outstanding Expense 30000
Sundry Creditors 30000
To Realisation a/c 60000
GNK Ltd a/c………………..Dr. 1050000
To Realisation a/c 1050000
Equity Shares in GNK a/c…..Dr. 900000
Preference Shares in GNK a/c ….Dr. 90000

1 MARK FOR EACH ENTRY

Cash…………Dr. 60000
To GNK Ltd a/c 1050000
Realisation a/c……………..Dr. 30000
To Cash a/c [Payment of o/s Exp] 30000
Realisation a/c………..Dr. 55000
To Cash a/c [Bal. of cash trf to Real] 55000
Partner's Capital a/c …………Dr
Guru 75000
Nanu 50000
Kanu 25000
To Realisation a/c 150000
Guru's capital a/c……….Dr. 525000
To Equity Shares in GNK a/c 450000
To Preference Shares in GNK a/c 45000
To Cash a/c 30000
Nanu's capital a/c………….Dr. 350000
To Equity Shares in GNK a/c 300000
To Preference Shares in GNK a/c 30000
To Cash a/c 20000
Kanu's capital a/c……….Dr. 175000
To Equity Shares in GNK a/c 150000
To Preference Shares in GNK a/c 15000
To Cash a/c 10000
4620000 4620000
Q.5. A]
In case of amalgamation, purchase consideration is the agreed amount which transferee company
(Purchasing company) pays to the transferor company (Vendor company) in exchange of the ownership of
the transferor company. It may be in form of cash, shares or any other assets as agreed between both the
companies.
There are four various methods which can be used in this calculation:
NET ASSET METHOD –
Purchase consideration is equal to the total net asset of transferor company.
Total agreed amount of asset – Total agreed amount of liabilities
NET PAYMENT METHOD –
Payment made to the shareholders of transferor company in form of cash, shares or debentures.
LUMP SUM METHOD –
Fixed amount paid by the transferee company to the transferor company. This method does not require
any calculation as the amount is decided by mutual consent of both the companies.
INTRINSIC VALUE/ SHARE EXCHANGE METHOD –
Purchase consideration is calculated by dividing the net asset value of transferor company by price of one
share of transferee company.
The result figure then divided by number of existing shares of transferor company to find out the ratio.
Intrinsic value – Net asset / Number of equity shares.
Q.5. B]
1. Salary
2. Rent
3. Depreciation
4. Printing & Stationary
5. Telephone Charges
6. Postage & Telegram
7. Insurance

OR
Q.5. SHORT NOTES
1. The retiring partner is entitled to his/her share of goodwill at the time of retirement because the
goodwill is the result of the efforts of all partners including the retiring one in the past. The retiring partner
is compensated for his/her share of goodwill. As per Accounting Standard 10 (AS-10), goodwill is recorded
in the books only when some consideration in money is paid for it. Therefore, goodwill is recorded in the
books only when it is purchased and the goodwill account cannot be raised on its own. Therefore, in case
of retirement of a partner, the goodwill is adjusted through partner’s capital accounts.
If Goodwill raised for all partners pass the entry
Goodwill a/c……………Dr.
To All partners capital a/c
If Good will is raised only for the retiring partner pass the entry
Goodwill a/c……….Dr.
To Retiring Partners capital a/c
If the Goodwill is to be written off pass the entry
Remaining partner’s Capital a/c…….Dr.
To Goodwill a/c
2. In case of dissolution of firm, liabilities of a firm must be paid out of assets realised by the firm.
But the process of realising assets takes long time. Therefore the cash is distributed among the creditors
and partners as and when cash is available from the realisation of assets step by step. For this preferential
order is followed in the following way.
a) Realisation/ Dissolution Expense
b) Outside liabilities (third party debts ) in the ration of due from each creditor
c) Loan from Partners (in the proportion of their dues if more than one partner)
d) Capital of partners : in the profit sharing Ratio if capital is in the same ration otherwise it is paid
with the use of following methods:
i) Excess Capital Method
ii) Maximum Loss Method
Thus the process of distribution of cash is called as Piecemeal Distribution since Piecemeal means in stages
and not in one stage.

3. Advantages of Amalgamation
• Competition between the firm gets eliminated
• Research &Development facilities are increased
• Operating cost can be reduced
• Stability in the prices of the goods is maintained
• Benefit of division of Labour
• Economies of scale
• Pooling of capital

4. Form and contents of Balance sheet and Profit & Loss Account of a company under Schedule VI to the
Companies Act, 1956 revised.
Ministry of Corporate Affairs [MCA], Government of India, has on 3 March 2011, hosted on its website, the
revised Schedule VI to the Companies Act, 1956 which deals with the Form of Balance sheet, Profit & Loss
Account and disclosures to be made therein.
The revised Schedule VI has been framed as per the existing non-converged Indian Accounting Standards
notified under the Companies (Accounting Standards), Rules, 2006 and has no connection with the
converged Indian Accounting Standards.
The revised Schedule VI will apply to all the companies uniformly for the financial statements to be
prepared for the financial year 2010-11 and onwards.
Note :- The student can also prepare the format of the Balance sheet and Profit and loss as per revised
Schedule VI.
5. Monetary Item: Net investment in a non-integral foreign operation, refers to a monetary item that
isreceivable or payable to a foreign operation.Balance in monetary item must be translated at the closing
rate.
Examples of Monetary item (any 6 to be written)
Investments in debt securities
Net investment in the lease
Trade receivables (including allowances)
Other receivables to be settled in cash
Deposits and bank accounts
Cash
Provisions for employee benefits
Finance lease liability
Bank and other loans
Accruals
Trade payables