ISC 2017

Grade 12
Accounts

Time allowed: 3 hours Maximum Marks: 80

Candidates are allowed additional 15 minutes for only reading the

paper. They must NOT start writing during this time.

General Instructions:

Answer Question 1 (Compulsory) from Part | and five questions

from Part II, choosing two questions from Section A, two questions
from Section B and one question from either Section A or Section
B.
The intended marks for questions or parts of questions are given in
brackets [ ].
Transactions should be recorded in the answer book.
All calculations should be shown clearly.
All working, including rough work, should be done on the same page
as, and adjacent to the rest of the answer.
 SECTION - A
PART I (12 Marks)
Answer all questions.

Question 1 [6 x 2]
Answer briefly each of the following questions:
(i) Name the account which is prepared to find the profit and loss of
a joint venture, if:
(a) One co-venture records all transactions.
(b) All co-ventures record their own transactions.
(ii) What will be the treatment of loan given to a partner by the firm
at the time of its dissolution?
(iii) Give the adjusting entry for interest on capital allowed to a
partner, when the firm follows the fixed capital method.
(iv) State with reason, whether securities premium reserve can be
used to write off bad debts.
(v) Give any two differences between a Company s Balance Sheet
and a Firm's Balance Sheet.
(vi) State where the non-cash transactions will be recorded at the
time of issue of shares, if all cash transactions are entered in the Cash
Book.
 PART II (48 Marks)
Answer any four questions.

Question 2 [12]
Karan, Ali and Deb are partners in a firm sharing profits and losses
in the ratio of 3: 2: 1.On 31st March, 2016, their Balance Sheet was
as under:

Karan died on 1st July, 2016. An agreement was reached amongst

Ali, Deb and Karan’s legal representatives that:
(a) Building be revalued at Rs. 93,500.
(b) Furniture be appreciated by Rs. 10,000.
(c) To write off the Provision for Doubtful Debts since all debtors
were good.
(d) Investments be valued Rs. 38,000.
(e) Goodwill of the firm be valued at Rs. 1,20,000.
(f) Karan’s share of profit to the date of his death, to be calculated
on the basis of previous year's profit which was Rs. 25,000.
(g) Interest on capital to be allowed on Karan’s capital @ 6% per
annum.
(h) Amount payable to Karan’s legal representative to be transferred
to his legal representative’s loan account.
You are required to -
(i) Pass Journal entries on the date of Karan’s death.
(ii) Prepare the Interim Balance Sheet of the reconstituted firm.

Question 3 [12]
Cargo Ltd. invited applications for the issue of 20,000 Equity shares
of ? 10 each at a premium of ? 1 per share, payable as follows:
On Application - Rs. 3
On Allotment - The balance (including premium Rs. 1)
Applications were received for 30,000 shares and pro-rata allotment
was made to the remaining applicants after refunding application
money to 5,000 share applicants.
Nicholas, who was allotted 3,000 shares, failed to pay the allotment
money and his shares were forfeited.
Out of these forfeited shares, 1,000 shares were reissued as fully
paid-up @ ? 8 per share.
You are required to -
(i) Pass Journal entries in the books of the company.
(ii) Prepare Calls-in-Arrears Account.
(iii) Prepare Share Forfeiture Account.

Question 4
(A) Following balances have been extracted from the books of
Universe Ltd. as at 31st March, 2016:
Particulars
Equity Share Capital (Fully paid shares of Rs. 100 each) – Rs.
4,00,000
Unclaimed Dividend – Rs. 10,000
Bank Balance - Rs. 40,000
Security Premium Reserve – Rs. 75,000
Statement of Profit and Loss (Dr) – Rs. 50,000
Tangible Fixed Assets (at cost) - Rs. 3,50,000
Accumulated Depreciation till date - 25,000
Trade Marks - Rs. 70,000
You are required to prepare as at 31st March, 2016:
(i) The Balance Sheet of Universe Ltd. as per Schedule in of the
Companies Act, 2013.
(ii) Notes of Accounts. [8]
(B) Chrome Ltd. took over assets of Rs. 6,00,000 and liabilities of
Rs. 40,000 of Polymer Ltd. at an agreed value of Rs. 6,30,000.
Chrome Ltd. issued 10% Debentures of Rs. 100 each at a discount
of 10% to Polymer Ltd. in full satisfaction of the price. Chrome Ltd.
writes off any capital losses incurred during a year, at end of that
financial year.
You are required to pass the necessary Journal entries to record the
above transactions in the books of Chrome Ltd. [4]

Question 5 [12]
Juliet and Rabani are partners in a firm, sharing profits and losses in
the ratio of 3:1. On 31st March, 2016, their Balance Sheet was as
under:

Mike was taken as a partner for 1/4th share, with effect from 1st
April, 2016, subject to the following adjustments:
(a) Plant and Machinery was found to be overvalued by Rs. 16,000.
It was to be shown in the books at the correct value.
(b) Provision for Doubtful Debts, was to be reduced by Rs. 2,000.
(c) Creditors included an amount of Rs. 2,000 received as
commission from Malini. The necessary adjustment was required to
be made.
(d) Goodwill of the firm was valued at Rs. 60,000. Mike was to bring
in cash, his share of goodwill along with his capital of Rs. 1,00,000.
(e) Capital Accounts of Juliet and Rabani were to be readjusted in
the new profit sharing arrangement on the basis of Mike's capital,
any surplus to be adjusted through current account and any
deficiency through cash.
You are required to prepare r
(i) Revaluation Account.
(ii) Partners’ Capital Accounts.
(iii) Balance Sheet of the reconstituted firm.

Question 6
(A) Raslii and Runa jointly imdertake to complete the construction
of an auditorium for Pascal Ltd. They agreed to share profits and
losses in the ratio of 3:2. [6]
The contract price was Rs. 8,00,000 of which 5,00,000 was to be
payable to them in cash and the balance in fully paid shares of the
company.
A joint bank account was opened in which Rashi contributed Rs.
2,00,000 while Runa contributed Rs. 3,00,000.
The following expenses were incurred to complete the contract:
Salaries and Wages – Rs. 1,25,000
Purchase of material from a supplier on credit – Rs. 2,00,000
Material supplied by Rashi - Rs. 1,00,000
Legal fees paid by Runa - Rs. 85,000
The contract price was duly received after the completion of the
project and the accounts of the venture were closed after the supplier
was paid Rs. 1,98,000 in lull and final settlement.
Runa took over the shares at Rs. 2,80,000.
Rashi took over the remaining material at Rs. 45,000.
You are required to prepare:
(i) Joint Venture Account.
(ii) Joint Bank Account.
(iii) Shares Account.
(B) Joseph and Leena entered into a Joint venture to sell edible oil.
It was decided that Joseph would record all the transactions of the
venture.
Joseph supplied 3,000 litres of edible oil costing Rs. 4,50,000 to be
sold by Leena, incurring carriage and insurance-in-transit amounting
to Rs. 30,000.
20 litres of oil was lost in transit due to leakage which was
considered to be normal. Leena incurred Rs. 2,760 as clearing
charges and Rs. 2,000 as godown rent. She was entitled to a
commission of 2% on the sales made by her.
Leena was able to sell 2,000 litres of oil at Rs. 170 per litre.
The unsold stock was taken over by Joseph at the original cost plus
proportionate non-recurring expenses.
You are required to-
(i) Calculate the value of stock taken over by Joseph.
(ii) Pass the relevant Journal entries in the books of Joseph for:
(a) The stock taken over by Joseph.
(b) Commission due to Leena. [4]
Question 7
Mita, Rita and Sandra were partners in a firm, sharing profits and
losses in the ratio of 2:2:1. Mita had personally guaranteed that in
any year Sandra's share of profit, after allowing interest on capital to
all the partners @ 5% per annum and charging interest on drawings
@ 4% per annum, would not be less than Rs. 10,000.
The capitals of the partners on 1st April, 2015 were:
Mita 80,000, Rita Rs. 50,000 and Sandra Rs. 30,000.
The net profit for the year ended 31st March, 2016, before allowing
or charging any interest amounted to Rs. 40,000.
Mita had withdrawn Rs. 4,000 on 1st April, 2015, while Sandra
withdrew & 5,000 during the year.
You are required to prepare the Profit and Loss Appropriation
Account for the year 2015-16. [8]
(B) Anita, Asha and Bashir are partners sharing profits and losses in
the ratio of 3:2:1 respectively. From 1st April 2016, they decided to
change their profit sharing ratio to 2:1:3. Their partnership deed
provides that in the event of any change in the profit changing ratio,
the goodwill of the firm should be valued at two years’ purchase of
the average super profits for the past three years.
The actual profits and losses for the past three years were:
2015-16 Profit Rs. 40,000
2014-15 Profit Rs. 30,000
2013-14 Loss Rs. 10,000
The average capital employed in the business was Rs. 1,10,000; the
rate of interest expected from capital invested was 10%.
You are required to:
(i) Calculate the value of goodwill at the time of change in profit
sharing ratio. (Show the workings clearly with the formulae.)
(ii) Pass the Journal entry to record the change. [4]

Question 8
(A) Roshan, Mahesh, Gopi and Jai are partners sharing profits and
losses in the ratio of 3:3:2:2. The balances of capital accounts on 1st
April, 2015 were: Roshan Rs. 8,00,000, Mahesh Rs. 5,00,000, Gopi
Rs. 6,00,000 and Jai Rs. 6,00,000.
After the accounts for the year ended 31st March, 2016 were
prepared, it was discovered that interest on capital @ 10% per
annum as provided in the partnership deed had not been credited to
the partners’ capital accounts before the distribution of profits.
You are required to rectify the error by passing a single adjusting
Journal entry. [4]
(B) Mehta and Menon were partners in a firm, sharing profits and
losses in the ratio of 7:3.
They decided to dissolve their partnership firm on 31st March, 2016.
On that date, their books showed the following ledger account
balances:
Sundry Creditors Rs. 27,000
Profit and Loss A/c (Dr.) Rs. 8,000
Cash in Hand Rs. 6,000
Bank Loan Rs. 20,000
Bills Payable Rs. 5,000
Sundry Assets Rs. 1,98,000
Capital A/c
Mehta Rs. 1,12,000
Menon Rs. 48,000
Additional information:
(a) Bills Payable falling due on 31st May, 2016 were retired on the
date of dissolution of the firm, at a rebate of 6% per annum.
(b) The bankers accepted the furniture (included in sundry assets)
having a book value of Rs. 18,000 in full settlement of the loan given
by them.
(c) Remaining assets were sold for Rs. 1,50,000.
(d) Liability on account of outstanding salary not recorded in the
books, amounting to Rs. 15,000 was met.
(e) Menon agreed to take over the responsibility of completing the
dissolution work and to bear all expenses of realization at an agreed
remuneration of Rs. 2,000. The actual realization expenses were Rs.
1,500 which were paid by the firm on behalf of Menon.
You are required to prepare:
(i) Realization Account.
(ii) Partner’s Capital Accounts. [8]
 SECTION – B
(20 marks)
Answer any two questions
Question 9 [10]
From the information given below, calculate (up to two decimal
places):
(i) Operating Ratio.
(ii) Quick Ratio.
(iii) Debt to Equity Ratio.
(iv) Proprietary Ratio.
(v) Working Capital Turnover Ratio.
Particulars
Net revenue from operations – Rs. 12,00,000
Cost of revenue from operation – Rs. 9,00,000
Operating expenses – Rs. 15,000
Inventory – Rs. 20,000
Other Current Assets – Rs. 2,00,000
Current Liabilities – Rs. 75,000
Paid up Share Capital - Rs. 4,00,000
Statement of Profit and Loss (Dr) – Rs. 47,500
Total Debt - Rs. 2,50,000
Question 10 [10]
From the following information of Purity Ltd. calculate:
(i) Cash from Operating Activities
(iii) Cash from Financing Activities
Additional information:
During the year 2015-16:
(a) A piece of furniture costing Rs. 30.000 (accumulated
depreciation Rs. 5,000) was sold for Rs. 25,000.
(b) Tax of Rs. 9,000 was paid.
(c) Interim Dividend of Rs. 4,000 was paid.
(d) The company paid Rs. 3,000 as interest on debentures.

Question 11
(A) What is meant by the term Cash Equivalents as per Accounting
Standard 5? [2]
(B) The Current Ratio of a company is 2:1. State whether the Current
Ratio will improve, decline or will not change in the following cases:
[2]
(i) Bill Receivable of Rs. 2,000 endorsed to a creditor is
dishonoured.
(ii) Rs. 8,000 cash collected from Debtors of Rs. 8,500 in lull and
final settlement.
(C) From the following information, prepare a Comparative
Statement of Profit and Loss of Matrix Lad: [6]