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Bcom Sem 1 Financial Accounting 1 EMQuestion Bank

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Chapter - 1 Piecemeal Distribution of Cash Among Partners

MULTIPLE CHOICE QUESTIONS

In the following sub-questions, more than one answer is given, of which only one
answer is correct. Select the Correct answer supported by necessary
explanation/working note.

1. In order to find out additional capital of any partner as per surplus capital
method, consider the capital of a particular partner whose proportional
capital compared to other partner’s capital is -
(i) More
(ii) Zero
(iii) Less
(iv) None of these
2. As per surplus capital method, after paying outside liabilities and patner’s
Loan the balancing amount of cash -
(i ) Is distributed among the partners as per their profit and loss sharing
ration.
(i i ) Is paid in context to the excess capital of a partner having highest
capital.
(iii) Is paid to a particular partner having highest capital on the basis
of profit and loss sharing ratio.
(i v) Is equally distributed amongst partners without considering profit and
loss sharing ratio as well as the payable capital to each partner.
3. Before distributing cash amongst partners whatever profit or loss reserves as
per the balance sheet -
(i) will not be distributed amongst partners.
(ii) will be distributed amongst partners as per their profit and loss
shar ratio.
(iii) Will be distributed amongst partner in context to each partner’s
capital.
(iv) Will be distributed equally amongst partners.
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4. A, B and C are partners sharing profits and losses in the ration of 3:2:1. If
the capital of partner A, B and C are Rs. 30,000, Rs. 30,000 and Rs. 20,000
respectively then which partner’s capital should be considered as base?
(i ) B’s capital
(i i ) C’s capital
(i i i ) No One’s capital
(iv) A’s capital
5. If there is a debit balance of any one partner’s capital account the same will
be distributed among the remaining partners:
(i) As per the ratio of their capital
(ii) As per their profit and loss sharing ratio.
(iii) Nil (will not be distributed)
(iv) None of the above.
6. An amount of Rs. 20,000 was kept a side for the dissolution expenses, but
the actual amount of expenses comes to Rs.
(i) Rs. 4,000 will be deducted from the Last installment.
(ii) Rs. 4,000 will be added the last installment.
(iii) Rs. 16,000 will be deducted from the last installment.
(iv) Rs. 20,000 will be deducted from the first installment and Rs.
4,000 will be added to the last installment.
7. After discharging all the debt at the time of dissolution of a firm of partners
A, B and C; there was a surplus amount of Rs. 4,000 against first installment
and second installment was realized by Rs. 26000. Their profit and loss
sharing ratio is 2:1:2. The capital of the each partner was Rs. 30,000; Rs.
20,000 and Rs. 30,000 respectively. The piecemeal distribution of cash
among the partners will be as follows:
(i) B will get Rs. 1,000 each from first installment and second
installment and remaining surplus amount will be distributed
amount all partners as per their profit – sharing ratio
(ii) B will get entire amount of the first installment and Rs. 1,000
against second installment. Remaining surplus amount will be
distributed among all partners as per their profit-sharing
ration.
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(iii) The whole amount will be distributed among all partners in the
ratio of 3:2:3.
(iv) The surplus amount of first installment and the second
installment’s amount will be distributed among all partners in
proportion of 2:1:2.
8. A, B and C are partners in a firm sharing profits and losses equally. The
partners capitals are: A Rs. 65,000, B Rs. 55,000 and C Rs. 75,000. B’s
Loan Rs. 18,000.
If first installment in realized by Rs. 28,000 the same will be distributed as
follows:
(i) B's loan will be paid by Rs. 18.000 and A will get Rs. 10.000 his
capital.
(ii) B’s loan will be paid by Rs. 18,000 and Rs. 10.000 will be W towards
C’s capital.
(iii) The entire amount Rs. 28.000 will be paid to partner B only
(iv) B's loan will be paid up to the extent of Rs. 8.000 and A and C will
get Rs. 10,000 against their capitals.
9. A. B and C are the partners sharing profit / loss in the ratio of 3 : 4 :2
respectively. Their capitals are Rs. 28.000. Rs. 14,000 and Rs. 12,000
respectively.
On selling of assets, the first installment of Rs. 9.000 is received. The will be
distributed among the partners by maximum loss method follows:
(i) A will get Rs. 9,000
(ii) A, B and C each will get Rs. 3,000.
(iii) B will get Rs. 9,000.
(iv) C will get Rs. 9,000.
10. Ajay, Vijay and Suresh are the partners sharing profit and losses in the ratio
of 3 : 2 : 1. Their capitals at the time of payment of the last installment are
Rs. 18,000, Rs. 15,000 and Rs. 8,000 respectively. Last installment of Rs.
7,100 was received Rs. 1,200 was spent out of Rs. 1,500 kept as reserve for
dissolution expenses. The realization loss will be:
(i) Rs. 16,8000, Rs. 11,200 and Rs. 5,600
(i i ) Rs. 11,200, Rs. 16,800 and Rs. 5,600

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(i i i ) Rs. 11,300, Rs. 11,300 and Rs. 11,300
(i v) Rs. 5,600, Rs. 11,200 and Rs. 16,800.
11. Purvi and Monika are partners sharing profits and losses in the proportion of
3:2 having the capitals of Rs. 37,500 and Rs. 15,000 respectively. They
decided to dissolve the partnership firm. On that day, Purvi loan stood at Rs.
7,500. Realization expenses amounted to Rs. 1,500. First installment of Rs.
46,500 was received. As per maximum loss method the realization loss will
be distributed as under:
(i ) Rs. 3,000 and Rs. 6,000
(i i ) Rs. 6,000 and Rs. 3,000
(iii) Rs. 9,000 and Rs. 6,000
(i v) Rs. 7,500 and Rs. 7,500
12. The capitals of the partners are as follows:
A: Rs. 8,000; B: Rs. 4,000; C Rs. 3,000.
If the installment of Rs. 3,300 is received the same will be distributed among
the partners as under as per the maximum loss method:
(i) A will get Rs. 3,300 but B and C will not get at all.
(i i ) Each partner will get Rs. 1,100.
(i i i ) A will not get at all but B will get Rs. 3,000 and C will get Rs. 300.
(i v) C will get Rs. 3,300 but A and B will not get at all.
13. A, B and C are the partners sharing profits and losses in the ratio of 4:3:3.
Their capital were Rs. 30,000, Rs. 40,000 and Rs. 50,000 respectively. The
firm was dissolved. After discharging all the debts, Rs. 40,000 was realized
from the sale proceeds of the assets. Then, as per the maximum loss method
what amount would be received by B?
(i) Rs. 17,500
(ii) Rs. 15,000
(iii) Rs. 12,000
(iv) Nil.
14. Anil, Bipin and Kirit are the the partners sharing profits and losses in the
ratio of 3:2:1. Their capitals are Rs. 45,000, Rs. 50,000 and Rs. 40,000
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respectively. They dissolve the firm. After discharging all the debts, Rs.
45,000 were realized from the sale of assets. Then, what amount would be
received by Bipin and Kirti?
(i ) Rs. 25,000 and Rs. 20,000
(i i ) Rs. 22,500 and Rs. 22,500
(iii) Rs. 20,000 and Rs. 25,000
(i v) Rs. 30,000 and Rs. 15,000
15. Amit, Samit and Gamit are sharing profits and lossses in the ratio of 3:4:2
respectively. Their capitals are Rs. 84,000, Rs. 42,000 and Rs. 36,000
respectively. On selling of assets, the first installment of Rs. 27,000 is
received. According to maximum loss method:
(i) Samit will get Rs. 27,000.
(ii) Gamit will get Rs. 27,000.
(iii) Amit, Samit and Gamit each will get Rs. 9,000.
(iv) Amit will get Rs. 27,000.
16. In Piecemeal distribution according to Surplus Capital Method, final deficit
of each partner -
(i) Will not be in ratio of capital.
(ii) Will be in ratio of profit and loss
(iii) Will not be in ratio of profit and loss.
(iv) Will be in ratio of capital.
17. A, B and C are partners sharing Profit-Loss in the ratio of 3:4: 2
respectively. Their capitals are Rs. 36,400, Rs. 18,200 and Rs. 15,600
respectively.
On selling of Assets the first installment of Rs. 11,700 is received. This
installment will be distributed among the partners by Maximum Loss
Methods as follows:
(i) A gets Rs. 11,700
(ii) A, B and C each gets Rs. 3,900
(iii) B gets Rs. 11,700
(iv) C gets Rs. 11,700
18. P, Q and R are partners sharing profits & losses in the ratio of 5:3: 2
respectively. If the capital of partners P, Q and R are Rs. 80,000, Rs. 60,000
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and Rs. 40,000 respectively and the General Reserve Balance is Rs. 20,000,
which partner’s capital should be considered as base in Surphts Capital
Method?
(i) P’s capital
(ii) Q’s capital
(iii) R’s capital
(iv) No one’s capital
19. In Piecemeal distribution of cash, the credit balance of Profit & Loss
Account is -
(i) Deducted from Partners’ Capital A/c
(ii) Added in Partners'’ Capital A/c
(iii) Should not be distributed.
(iv) Deducted from cash.
20. In Piecemeal distribution of cash, the credit balnce of Profit & Loss
Account is -
(i) Deducted from Partners’ Capital A/c
(ii) Added in Partners'’ Capital A/c
(iii) Should not be distributed.
(iv) Deducted from cash.
21. In Piecemeal distribution of cash, an amount of Rs. 12,000 was kept aside
for the dissolution expenses, but the actual amount of expenses comes to Rs.
10,000, then -
(i) Rs. 10,000 deduct from cash.
(ii) Rs. 10,000 deduct from first installment.
(iii) Rs. 10,000 deduct from last installment.
(iv) Rs. 12,000 will be deducted from the first installment and Rs.
2,000 will be added to the last installment.
22. When Piecemeal distribution of cash is done according to Surplus Capital
Method -
(i) Partner having the highest capital gets first.
(ii) All partners get in profit sharing ratio.
(iii) All partners get equal amount.
(iv) Partner whose capital is more in proportion of his profit sharing
ratio gets first.
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23. _________is the correct sequence of payment of dues on dissolution of a
partnership firm.
(i) Partner’s Loan – Capital – Creditors – Secured Loan
(ii) Creditors – Secured Loan – Partner’s Loan – Capital
(iii) Secured Loan – Partner’s Loan – Creditors – Capital
(iv) Secured Loan – Creditors – Partner’s Loan – Capital
24. Under ________________ assumption the amount received on each
installment is distributed, while making Piecemeal distribution on
dissolution of a partnership firm.
(i) All partners are solvent.
(ii) All partners are insolvent.
(iii) One partner is solvent.
(iv) No amount will be realized in future.
25. Amount reserved for Dissoulution expenses will be subtracted from the
__________ installment.
(i) First
(ii) Second
(iii) Third
(iv) Last installment
26. An amount of Rs. 5,000 was kept aside for the dissolution expenses, but the
actual amount of expenses comes to Rs. 4,400 then -
(i) Rs. 5,000 will be deducted from the first installment and Rs. 600
will be added to the last installment.
(ii) Rs. 600 will be deducted from the first installment.
(iii) Rs. 600 will be added to the last installment.
(iv) Rs. 4,400 will be deducted from the last installment.
27. Shivangi and Urvi are partners sharing profit and losses in the proporation
of 3:2 having the capitals of Rs. 15,000 and Rs. 6,000 respectively. They
decided to dissolve the partnership firm. On that day Shivangi’s loan stood
at Rs. 3,000. Realization expenses amounted to Rs. 600. First installment of
Rs. 18,600 was received. As per maximum loss method the realization loss
will be as under -
(i) Rs. 1,200 and Rs. 2,400
(ii) Rs. 3,600 and Rs. 2,400
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(iii) Rs. 2,400 and Rs. 1,200
(iv) Rs. 3,000 and Rs. 3,000
28. If the installment is not sufficient to repay two partners loan in piecemeal
distribution of cash, then the cash will be distributed between the partners -
(i) In their Loan Ratio
(ii) In their Capital Ratio
(iii) In their Profit Sharing Ratio
(iv) None of the above

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Chapter - 2 Share Capital Transactions

MULTIPLE CHOICE QUESTIONS

In the following sub-questions, more than one answer is given, of which only one
answer is correct. Select the Correct answer supported by necessary
explanation/working note.

1. On Equity shares of Rs. 10 each, issued at a premium of Rs. 10, minimum


amount must be called up along with the application is
(i) Rs. 1
(ii) Rs. 0.50
(iii) Rs. 2
(iv) Rs. 1.50
2. The Maximum rate of interest paid by a company on call in advance as per
table A is :
(i ) 5%
(ii) 6%
(i i i ) 10%
(i v) 2.5%
3. On Equity Share of Rs. 100 the minimum application money per share
should be:
(i ) Rs. 10
(i i ) Rs. 20
(i i i ) Rs. 2.50
(iv) Rs. 5
4. On Equity Shares of Rs. 200 each the minimum application money per share
should be -
(i ) Rs. 5
(ii) Rs. 10
(i i i ) Rs. 2.50
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(i v) Rs. 20
5. The maximum rate of interest received by a company on call in arrears as
per Table A -
(i ) 6%
(i i ) 18%
(i i i ) 12%
(iv) 5%
6. X Ltd. issued Equity Shares of Rs. 150 each at 100% premium. The minimum
amount to be called per share on application as per SEB1 guidelines -
(i ) Rs. 7.50
(i i ) Rs. 15
(i i i ) Rs. 37.50
(iv) Rs. 75
7. The annual interest on calls-in-advance according to Table-A should be -
(i) 5%
(ii) 8%
(iii) 6%
(iv) 6.5%
8. A Ltd – issued equity shares of Rs. 100 each at 100% premium. The
minimum amount to be called per share on application according to Table-
A should be -
(i ) Rs. 10
(i i ) Rs. 25
(i i i ) Rs. 7.50
(iv) Rs. 5
9. When shares are forfeited, then the amount called up on forfeited shares is
debited to -
(i) Share Capital A/c
(ii) Share Call A/c.
(iii) Capital Reserve A/c.
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(iv) Share Forfeited A/c
10. On Equity Shares of Rs. 200 each, the minimum application money per
share should be -
(i) Rs. 5
(ii) Rs. 10
(iii) Rs. 15
(iv) Rs. 20
11. Minimum amount required to call on application is _______________ as
per companies act.
(i) Rs. 1
(ii) 5% of face value
(iii) Rs. 10
(iv) Amount decided by the company.
12. Vir Ltd. issued equity shares of Rs. 300 each at 100% premium. The
minimum amount to be called per share on application as per SEBI
guidelines:
(i) Rs. 15
(ii) Rs. 30
(iii) Rs. 75
(iv) Rs. 150
13. A company forfeits 2,000 shares of Rs. 10 each held by Mr. Pawwan for
non-payment of call money of Rs. 4 per share. The called up value per share
was Rs. 9 On forfeiture, the amount debited to share capital will be -
(i) Rs. 20,000
(ii) Rs. 8,000
(iii) Rs. 2,000
(iv) Rs. 18,000
14. A company has issued 10,000 shares of Rs. 10 each at Rs. 12. The company
has allotted 1 share to the applicant of 5 shares. Excess money received on
application is to be transferred to next calls. Company is asking Rs. 6 with
applications and remaining money with call. Darshan was allotted 100

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shares. Which of the following sentences is correct with reference to
Darshan?
(i) Company will call for Rs. 600 from him.
(ii) Company will return Rs. 600 to him.
(iii) Company will return Rs. 1,800 to him.
(iv) Company will call Rs. 1,200 from him.
15. A company can issue shares at 5% discount.
(i) True
(ii) False
(iii) Can issue with permission of Central Government and State
Government both.
(iv) Can issue if Articles of Association and Memorandum of Association
both permits.
16. Ved Ltd. issued equity shares of Rs. 100 each at 100% premium. The
minimum amount payable on application as per SEBI’s guidelines is -
(i ) Rs. 5
(i i ) Rs. 10
(iii) Rs. 50
(i v) None of these
17. When shares are forfeited, the amount called on shares is debited to -
(i) Share Capital A/c
(ii) Capital Reserve A/c
(iii) Share Forfeiture A/c
(iv) None of these
18. One of the following is included in the issued and paid up share capital -
(i) Sweat Equity Shares
(ii) Buy-back of Shares
(iii) Potential Equity Shares
(iv) None of the above

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Chapter - 3 Profit Prior to Incorporation

MULTIPLE CHOICE QUESTIONS

In the following sub-questions, more than one answer is given, of which only one
answer is correct. Select the Correct answer supported by necessary
explanation/working note.

1. Preliminary Expenses are apportioned between two periods in -


(i ) Time Ratio
(i i ) Turnover Ratio
(i i i ) Prior to Incorporation Period
(iv) Post Incorporation Period
2. A Ltd. was incorporated on 1-4-2005 and its promoters had taken over
business from 1-1-2005. Annual accounts are prepared on 31-12-2005. The
average monthly sale of pre-incorporation period is double than the
average monthly sale of post incorporation period, then the sales ratio will
be -
(i) 2:3
(i i ) 1:2
(i i i ) 2:1
(i v) 3:2
3. The date of purchase of business 1-11-2004; The date of incorporation 1-2-
2005; the date of preparing annual accounts 31-12-2005. The purchase
price of business in Rs. 2,00,000 and interest at 6% p.a. is to be paid. The
purchase price was paid on 1-5-2005. The interest for pre and post
incorporation periods will be -
(i) Rs. 3,000 and Rs. 3,000
(ii) Rs. 6,000 and Rs. 6,000
(iii) Post Incorporation
(iv) None of the above
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4. The data of purchase of business 1-1-2006; date of incorporation 1-4-2006.
The data of year ending 30-9-2006. The average monthly sale of first 3
months is double than the average monthly sale of remaining period; so the
sales ratio will be -
(i) 1:1
(i i ) 2:1
(i i i ) 1:2
(i v) None of the above
5. Depreciation is calculated on the asset purchased by company in -
(i ) Time Ratio
(i i ) Turnover Ratio
(iii) Post incorporation period
(i v) Pre-Incorporation Period
6. If there is a loss prior to incorporation, it will be debited to -
(i ) Profit and Loss Account
(ii) Goodwill Account
(i i i ) Capital Reserve Account
(i v) None of the above
7. Salesmen’s Commission is divided in profit prior to incorporation according
to -
(i ) Time ratio
(ii) Turnover ratio
(i i i ) Prior to incorporation period
(i v) Post incorporation period
8. The data of purchase of business 1-4-2010, date of incorporation 1-8-2010.
The date of year ending 31-12-2010. The date of commencing business is 1-
9-2010. The interest of Rs. 9,000 on purchase price is paid on 31-12-2010.
The interest for pre and post incorporation periods will be -
(i) Rs. 4,000 and Rs. 5,000
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(i i ) Rs. 5,000 and Rs. 4,000
(i i i ) Post incorporation Rs. 9,000
(i v) Prior to incorporation Rs. 9,000
9. On which basis audit fees can be distributed?
(i ) Sales Ration
(i i ) Post-Incorporation
(i i i ) Pre-Incorporation
(iv) Time Ratio
10. Profit of Pre-incorporation period is called -
(i ) Capital Income
(i i ) Revenue Income
(iii) Capital Profit
(i v) Revenue Profit
11. The date of purchase of business 1-7-2011, the date of incorporation 1-10-
2011, the date of preparing first annual accounts 31-3-2012. The purchase
price of business is Rs. 7,00,000 and interest at 9% p.a. is to be paid. The
purchase price was paid with interest on 30-11-2011. The interest for pre
and post-incorporation periods will be -
(i ) Pre-incorporation Rs. 26,250
(i i ) Post-incorporation Rs. 26,250
(iii) Rs. 15,750 and Rs. 10,500
(i v) Rs. 10,500 and Rs. 15,750
12. Time Ratio 1:2, Accounting year April to March.
The sale of every month from July to March is equal. There was strike in the
month of November, due to which there is no sales in that month. The total
sales of first three months were 15% of the total sales of remaining months.
Find out Sales Ratio.
(i ) 10:23
(i i ) 3:8
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(iii) 11:35
(i v) 3:17
13. Profit prior to incorporation is transferred to ___________________
Account.
(i ) General Reserve
(ii) Capital Reserve
(i i i ) Goodwill
(i v) Reserve fund
14. Share issue expenses written off are recorded in _________ period.
(i ) Pre-incorporation
(ii) Post incorporation
(i i i ) Both (i) and (ii)
(i v) Not recorded
15. From the information given below, find out the proportion of sales for the
period prior to and after incorporation.
Date of purchase of business: 1-7-12,
Date of incorporation: 1-10-12
Date of year ending: 31-3-13.
The average sales of first three months are half of the average sales for the
remaining months.
(i ) 1:1
(i i ) 1:2
(i i i ) 1:3
(iv) 1:4
16. Ashtha Ltd. was incorporated on 1-7-12 to purchase business of Dhairya
Brothers from 1-3-12. The first accounts of the company were prepared on
31-12-12. The total sales till then were Rs. 1,40,000. Sales proportion was
same in all months. What would be the sales for the period after
incorporation?
(i) Rs. 20,000
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(ii) Rs. 84,000
(iii) Rs. 1,20,000
(iv) Rs. 1,10,000
17. How should we allocate the expenses of incorporation of a company?
(i) As expenses after incorporation period
(ii) As expenses before incorporation period
(iii) In the proportion of time before and after incorporation
(iv) In the proportion of sales prior to and after incorporation.
18. If there is a loss prior to incorporation, it will be debited to
(i) Profit and Loss Account
(ii) General Reserve Account
(iii) Capital Reserve Account
(iv) Goodwill Account
19. Directors fees in profit prior to incorporation is to be allocated in the ratio
of -
(i) Time
(ii) Sales
(iii) Only post incorporation
(iv) None of the above
20. Depreciation in profit prior to incorporation is to be allocated in the ratio
of -
(i) Sales
(ii) Time
(iii) Only post incorporation
(iv) None of the above

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Chapter - 4 Accounts of Business Purchase

MULTIPLE CHOICE QUESTIONS

In the following sub-questions, more than one answer is given, of which only one
answer is correct. Select the Correct answer supported by necessary
explanation/working note.

1. Dosti Ltd. purchased the business of Dostana Bros. Purchase consideration


was paid by 10,000 Equity Shares of Rs. 100 each at 25% premium. Capital
Reserve arrived at Rs. 50,000. If the value of total liabilities taken over was
Rs. 2,50,000, then the value of total assets taken over would be -
(i) Rs. 15,50,000
(i i ) Rs. 10,00,000
(i i i ) Rs. 15,00,000
(i v) Rs. 13,00,000
2. When a purchaser bears the firm’s dissolution expenses, then the same is
debited to which account?
(i ) Share Capital
(i i ) Vendor’s A/c
(i i i ) Dissolution expenses
(iv) Goodwill
3. When old Debts are recovered, it is credited to
(i ) Bad Debt Recovery Account
(i i ) Vendor’s Creditors Ac
(i i i ) Vendor’s Debtors A/c
(iv) Vendor’s Suspense A/c
4. When the value of goodwill is not given, the value of goodwill is found out
in the purchase of business by applying the following formula.
(i ) Goodwill = Net assets less purchase price.

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(i i ) Goodwill = Purchase price less total assets.
(i i i ) Goodwill = Total assets less purchase price
(iv) Goodwill = Purchase price less net assets
5. At the time of purchase of business, the amount of capital reserve is arrived
at with the help of following formula -
(i ) Capital reserve = Purchase price less net assets
(ii) Capital reserve = Net assets less purchase price
(i i i ) Capital reserve = Total assets less purchase price
(i v) Goodwill = Purchase price less net assets
6. When purchase price is fixed at Rs. 1,50,000, the goodwill for purchaser
company had arisen Rs. 20,000. If the purchase company wants the capital
reserve of Rs. 20,000 out of this purchase, how much purchase price should
be fixed ?
(i) Rs. 1,10,000
(i i ) Rs. 1,00,000
(i i i ) Rs. 90,000
(i v) Rs. 1,20,000
7. At the time of purchasing a business a company accepted to make
recovery from debtors and to pay to creditors on behalf of the firm. The
company is entitled for the commission of 4% of recovery made and 2% of
payment made. The company recovered Rs. 58,000 from debtors worth Rs.
60,000 and paid the creditors of Rs. 30,000 at a discount of 5%. How much
would be the amount of commission?
(i ) Rs. 2,870
(i i ) Rs. 2,990
(iii) Rs. 2,890
(i v) Rs. 2,970

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8. When dissolution expenses of the vendor firm is paid by the purchasing
company, ________________ account is debited in the books of purchasing
company.
(i ) Dissolution expenses
(ii) Goodwill
(i i i ) Capital Reserve
(i v) Vendor Firm
9. When purchase consideration is less than net assets, the amount of
difference should be considered as -
(i ) Capital Reserve
(ii) Goodwill
(i i i ) Liabilities
(i v) None of these
10. Is it compulsory for the company to pay for Goodwill in cash while
acquiring / purchasing a business?
(i) No
(ii) Yes
(iii) Yes and no both
(iv) None of the above
11. At the time of purchase of business, total value of assets agreed between
purchaser and seller is Rs. 5,00,000 and total liabilities accepted by the
purchaser is Rs. 20,0000. If the purchase price is fixed at Rs. 4,50,000, then
how much can be considered to be goodwill amount?
(i ) Rs. 2,00,000
(i i ) Rs. 5,00,000
(i i i ) Rs. 4,50,000
(iv) Rs. 1,50,000
12. Business purchasing co. issued 2,000 equity shares each of Rs. 100 at 20%
premium to public, which were fully subscribed and paid up. How will this
transactions be recorded in the books of vendor firm?
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(i) Premium Dr. To Co. Cash A/c
(ii) Cash/Bank A/c Dr. To Equity Share Capital A/c
(iii) No entry is to be passed in the books of vendor firm
(iv) None of these answers
13. While calculating the purchase price, the number of shares issued by the
purchasing company is calculated at their -
(i ) Cost Price
(i i ) Face Value
(iii) Market Price
(i v) No value
14. If the purchase price is less than the net assets, the difference is
considered as -
(i) Goodwill
(ii) Purchase Price
(iii) Capital Reserve
(iv) None of theses
15. If all types of full consideration are not given, then purchase price is found
out by -
(i) Consideration method
(ii) Evaluation method
(iii) Net Assets method
(iv) None of these
16. Pavan Ltd. has taken over Chirag Bros. Sundry assets at Rs. 5,00,000 and
the value of goodwill at Rs. 50,000, other Sundry liabilities at Rs. 4,00,000.
Then the purchase price of the business will be -
(i) Rs. 1,00,000
(ii) Rs. 1,25,000
(iii) Rs. 1,75,000
(iv) Rs. 1,50,000

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17. When net assets are less than purchase price in conversion of business,
then the difference is debited to -
(i) Goodwill A/c
(ii) Capital Reserve A/c
(iii) P & L A/c
(iv) General Reserve A/c
18. A company paid the purchase consideration for acquiring a business as
under:
3,000 Equity Shares, each of Rs. 100 at 10% premium, 5,000 Debentures
each of Rs. 10 at 10% discount and cheque of Rs. 40,000. Calculate
purchase consideration.
(i) Rs. 3,90,000
(ii) Rs. 3,85,000
(iii) Rs. 4,20,000
(iv) Rs. 4,15,000
19. Goodwill + Net Assets = Purchase Consideration of business, and Purchase
Consideration of business + ___________ = Net Assets of business.
(i) Goodwill
(ii) Total Assets
(iii) Capital Reserve
(iv) Total Liabilities
20. When business purchasing company does not accept the Debtors and
Creditors of the firm, but accept to collect the money and paid the creditors
as an agent, then, which of the following accounts are to be opened in the
books of the company?
(i) Suspense Accounts of Debtors and Creditors
(ii) Collection Account
(iii) Payment Account
(iv) Assets Account
21. Purchase consideration of Business + Capital Reserve = ___________
(i) Net assets of business
(ii) Goodwill
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(iii) Consideration
(iv) Total Assets of Business
22. When purchase price is fixed at Rs. 1,65,000, the goodwill for purchaser
company has arisen Rs. 22,000. If the purchaser company wants the capital
reserve of Rs. 22,000, what purchase price should be fixed?
(i) Rs. 1,21,000
(ii) Rs. 1,10,000
(iii) Rs. 99,000
(iv) None of the above
23. Which of the following amount is treated as Owners’ Funds?
(i) Reserve Fund
(ii) Workers Savings Account
(iii) Loan of partner
(iv) None of these
24. Total assets of a firm are Rs. 3,30,000. Total liabilities are Rs. 50,000.
Purchase price is determined at Rs. 2,30,000. Then what it would be ?
(i) Goodwill
(ii) Capital Reserve
(iii) Both Goodwill and Capital Reserve
25. The value of goodwill is found out in the purchase of business by applying
the following formula -
(i) Purchase Price – Net Assets
(ii) Net Assets – Purchase Price
(iii) Purchase Price – Total Assets
(iv) Total Assets – Purchase Price
26. When purchase price is fixed at Rs. 1,60,000, the goodwill for purchasing
company had arisen Rs. 30,000. If the purchasing company wants the
Capital Reserve of Rs. 20,0000, what amount of purchase price should be
fixed?
(i) Rs. 1,00,000
(ii) Rs. 1,10,000
(iii) Rs. 1,20,000
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(iv) Rs. 1,30,000
27. A company paid the purchase price for acquiring a business as under:
(1) 2,000 Equity shares of Rs. 100 each at 10% premium
(2) 1,200 Debentures of Rs. 100 each at 10% discount
(3) Cash payment Rs. 39,800.
What would be the purchase price ?
(i) Rs. 3,87,800
(ii) Rs. 3,47,800
(iii) Rs. 4,07,800
(iv) Rs. 3,67,800
28. A company pays Cash Rs. 7,20,000, Debentures of Rs. 3,60,000 at face
value and 2,00,000 Equity shares of Rs. 1 each as the purchase
consideration of Rs. 14,80,000. Find out the amout of premium per share.
(i) Rs. 1
(ii) Rs. 2
(iii) Rs. 3
(iv) None of these
29. Total assets of a firm are Rs. 6,40,000. Total Liabilites are Rs. 90,000.
Purchase price is determined at Rs. 4,80,000. Then what it would be?
(i) Goodwill
(ii) Capital Reserve
(iii) Goodwill and Capital Reserve Both
(iv) None of the above
30. Pukar Ltd. has taken over Gargi Bros. Sundry Assets are Rs. 10,00,000 and
the value of goodwill is Rs. 1,00,000, Other Sundry liabilities are Rs.
8,00,000. Then the purchase price of the business will be -
(i) Rs. 2,00,000
(ii) Rs. 2,50,000
(iii) Rs. 3,50,000
(iv) Rs. 3,00,000

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31. Sarthank Ltd. purchased the business of Sarthak Brothers. The company
issued 20,000 equity shares of Rs. 100 each at 25% premium for purchase
consideration. If value of goodwill is Rs. 1,00,000, and total liabilities taken
over is Rs. 5,00,000, then the value of total assets taken over is -
(i) Rs. 29,00,000
(ii) Rs. 30,00,000
(iii) Rs. 31,00,000
(iv) None of these
32. The commission earned on collection from debtors and payment made to
creditors is utilized to -
(i) Write off goodwill
(ii) To write off assets
(iii) To write off discount on debentures
(iv) None of these
33. PM Company pays Cash Rs. 4,80,000, Debentures of Rs. 4,40,000 and
50,000 Equity shares of Rs. 10 each. The purchase consideration is Rs.
15,20,000. Find out the amount of premium per share.
(i) Rs. 1
(ii) Rs. 2
(iii) Rs. 3
(iv) None of these

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Chapter - 5 Final Accounts of Companies

MULTIPLE CHOICE QUESTIONS

In the following sub-questions, more than one answer is given, of which only one
answer is correct. Select the Correct answer supported by necessary
explanation/working note.

1. In Balance Sheet, the amount of calls in arrears will be shown as -


(i) Deducted from the called up Share Capital
(i i ) Under the head Reserve and Surplus
2. Particulars Debit (Rs.) Credit (Rs.)
Rs. Rs.
6% Debentures Account - 3,00,000
Debenture Interest Account 6,000 -
What Amount of interest will be shown in Profit and Loss Statement?
(i ) Rs. 6,0000
(i i ) Rs. 12,000
(iii) Rs. 18,000
3. 2,000 Equity Shares of Rs. 10 each, Rs. 8 paid up on which 10% is the
interim dividend declared, then the amount of dividend will be -
(i ) Rs. 80,000
(ii) Rs. 1,60,000
(i i i ) Rs. 2,00,000
4. Securities Premium Account is shown in the Balance Sheet under the head
of -
(i ) Share Capital A/c.
(ii) Reserve and Surplus
(i i i ) Current Liabilities
(i v) Non Current Liabilities
5. Dividends are usually paid on -

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(i ) Authorised Capital
(i i ) Issued Capital
(iii) Paid up Capital
(i v) Reserve Capital
6. Which of the following items does not appear under the head Reserves and
Surplus in the balance sheet?
(i) General Reserve
(ii) Proposed Dividend
(iii) Securities Premium
(iv) Sinking fund
7. Which of the following denotes the dividend declared by the directors
between two annual general meetings?
(i ) Proposed dividend
(i i ) Final dividend
(i i i ) Unpaid dividend
(iv) Interim dividend
8. Corporate dividend tax is computed on -
(i) Proposed dividend
(ii) Profit after tax
(iii) Provision of income tax
(iv) Income from business operation
9. Trial balance of Swati Ltd. for the year ending 31-3-2016 shows the
following details:
Particulars Debit Rs. Credit Rs.
- 3,00,000
6% Bank Loan Account
6,000 -
Interest on Bank Loan Account

Which amount of interest is required to be debited in the Profit & Loss


Account for the year ending 31-3-2019?
(i ) Rs. 6,000

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(i i ) Rs. 12,000
(i i i ) Rs. 18,000
(iv) Rs. 24,000
10. If in the trial balance, 10% debentures are of Rs. 1,00,000 and interest on
debentures paid is Rs. 5,000, then the amount to be debited to Profit & Loss
Account is -
(i) Rs. 5,000
(ii) Rs. 10,000
(iii) Rs. 15,000
(iv) None of these
11. The company has 10,000 equity shares of Rs. 10 each, Rs. 8 per share paid
up, then interim dividend payable at 10% will be -
(i) Rs. 8,000
(i i ) Rs. 10,000
(i i i ) Rs. 18,000
(i v) None of these
12. The unpaid interest on debentures will be shown under the head
__________ in the balance sheet as per Schedule-III of the Companies Act,
2013.
(i) Other Current Liabilities
(i i ) Short Term Provisions
(i i i ) Trade Payables
(i v) None of these
13. The Provision for Income-tax is to be shown under the head __________ in
the balance sheet as per Schedule-III of the Companies Act, 2013.
(i) Short Term Provision
(i i ) Long Term Provisions
(i i i ) Trade Payables
(i v) None of these
14. Of the following, which item is Contingent Liability for the company?
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(i) Unpaid Dividend on Cumulative Preference Shares
(i i ) Unpaid Dividend
(i i i ) Unpaid Expenses
(i v) None of the above

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