Questions Isc Acc

Model Test Paper 1
Time Allowed: 3 Hrs. Max. Marks: 80

General Instructions:
(Candidates are allowed additional 15 minutes for only reading the paper. They must NOT start
writing during this time.)
(i) The Question Paper contains three sections.
(ii) Section A is compulsory for all candidates.
(iii) Candidates have to attempt all questions from either Section B or Section C.
(iv) There are internal choices provided in each section.
(v) The intended marks for questions or parts of questions are given in the brackets [].
(vi) All calculations should be shown clearly.
(vii) All working, including rough work, should be done on the same page as, and adjacent to, the
rest of the answer.
Section A (60 Marks)

(Answer all questions)
1. Arun, Varun and Karan were partners in a firm sharing profits in the ratio of their capitals,
which stood as follows: Arun—` 4,00,000; Varun—` 6,00,000 and Karan—` 4,00,000.
Arun retired from the firm, Varun and Karan to share future profits equally. Goodwill
of the firm is valued at ` 2,80,000. What will be the treatment of Goodwill?
(a) Credit Partners’ Capital Accounts with old profit-sharing ratio by ` 2,80,000.
(b) Credit Partners’ Capital Accounts with new profit-sharing ratio by ` 2,80,000.
(c) Credit Arun’s Capital A/c by ` 80,000 and debit Varun’s Capital A/c by ` 20,000
and Karan’s Capital A/c by ` 60,000.
(d) Credit Partners’ Capital Accounts with gaining ratio by ` 2,80,000. [1]
2. 3 Aces Ltd., an unlisted manufacturing company, has outstanding 20,000, 8% Debentures
of ` 100 each and is to redeem 5,000, 8% Debentures of ` 100 each at 10% premium
on 30th November, 2023. As per the provisions of the Companies Act, 2013, on which
date should the company invest in specified securities?
(a) On or before 30th November, 2022—` 3,00,000.
(b) On or before 30th November, 2023—` 75,000.
(c) On or before 30th April, 2022—` 3,00,000.
(d) On or before 30th April, 2023—` 75,000. [1]
1
3. Anu, Bina and Charan are partners. The firm had given a loan of ` 20,000 to Bina. They
decided to dissolve the firm. In the event of dissolution, the loan will be settled by
(a) Transferring it to debit side of Realisation Account.
(b) Transferring it to credit side of Realisation Account.
(c) Transferring it to debit side of Bina’s Capital Account.
(d) Bina paying Anu and Charan privately. [1]
4. Ramesh, a holder of 1,000 shares for ` 100 each, has paid ` 30 on application and ` 30
on allotment. He did not pay ` 20 on first call. His shares are forfeited subsequently
after first call. Share Capital Account will be debited by
(a) ` 85,000. (b) ` 1,00,000.
(c) ` 80,000. (d) ` 60,000. [1]
5. Anushka Ltd. took over assets of ` 10,80,000 and liabilities of ` 80,000 of Raja Ltd. at
an agreed value of ` 10,40,000. 8% Debentures of ` 100 each were issued against the
considerations. Pass the necessary Journal entry to record the purchase of business
in the books of Anushka Ltd. [1]
6. List any one difference between Average Profit and Super Profit. [1]
7. Mention the heading and sub-heading under which ‘Current Maturities of Long-term
Debt’ is shown in the Balance Sheet of a company as per Schedule III of the Companies
Act, 2013. [1]
8. Give any one difference between Realisation Account and Revaluation Account. [1]
9. State any two companies which are exempted from creating Debentures Redemption
Reserve. [1]
10. Rani and Adi who are in partnership sharing profits and losses in the ratio of 3 : 2
admit Manu as a partner for 1/5th share in profits. The capitals of Rani and Adi after
adjustments are ` 60,000 and ` 40,000 respectively. Manu is to bring 20% of the total
capital of the new firm. How much amount should Manu bring as capital? [1]
11. Pankaj, Naresh and Saurabh are partners sharing profits in the ratio of 2 : 2 : 1.
Naresh retires from the firm due to his illness. His claim against capital and
share of goodwill is ` 1,00,000. Thereafter, an unrecorded vehicle is noticed. It
is valued at ` 50,000 and is given to him and balance by current date cheque.
Give the Journal entries for recording the payment to Naresh in the books of the firm.
Or
Amit, Bunty and Charan were partners in a firm sharing profits in 2 : 2 : 1 ratio. The firm
closes its books on 31st March every year, Amit died three months after the last accounts
were prepared. On that date the goodwill of the firm was valued at ` 90,000. On the
death of a partner his share of profit in the year of death was to be calculated on the
basis of the average profit of the last four years. The profits of last four years were:
Year Ended 31.3. 2020 31.3. 2021 31.3. 2022 31.3. 2023
Profits (`) 2,00,000 1,80,000 2,10,000 1,70,000 (Loss)
Pass necessary Journal entries for goodwill and Amit’s share of profit on his death.
Show clearly the calculation of Amit’s share of profit. [3]
2
12. Aruna and Karuna are partners in a firm. They admit Varuna on 1st April, 2023 for
1/4th share in the profits of the firm. On an average, profit earned by Aruna and
Karuna is ` 1,00,000. Average capital employed by the firm is ` 8,00,000. Normal
rate of return in a similar type of business is 10%. Value of firm’s goodwill is to be
determined on the basis of Capitalisation of Super Profit.
You are required to:
(i) Calculate goodwill of the firm.
(ii) Pass the Journal entries in the books of the firm if Varuna brings her share of
goodwill in cash. [3]
13. Dow Housing Finance Ltd. issued 80,000, 9% Debentures of ` 10 each on
30th June, 2019 redeemable at a premium of 5% on 31st March, 2023. Pass the
necessary Journal entries at the time of redemption of debentures.
Or
Eagle Ltd. (a listed NBFC) redeems its 40,000, 9% Debentures of ` 100 each in instalments
as follows:
On 31st March, 2022 20%
On 31st March, 2023 30%
On 31st March, 2024 50%
You are required to prepare the Debenture Redemption Investment Account for the year
2022–23 and 2023–24. [3]
14. Kanodia Ltd. issued 20,000; 8% Debentures of ` 100 each at a discount of 3% redeemable
at a premium of 5%. Debentures are to be redeemed in the following manner:
Year End Face Value of Debentures (`)
2 2,00,000
3 4,00,000
4 6,00,000
5 8,00,000
Prepare Loss on Issue of Debentures Account for 5 years. [3]
15. Harish and Gopal were partners in a firm sharing profits in the ratio of 3 : 2. On
31st March, 2023, their Balance Sheet was as follows:
BALANCE SHEET OF HARISH AND GOPAL as at 31st March, 2023
Liabilities ` Assets `
Creditors 36,000 Cash 47,000
Outstanding Expenses 10,000 Bank 93,000
Gopal’s Wife’s Loan 50,000 Debtors 76,000
Capitals: Stock 2,00,000
Harish 2,80,000 Furniture 20,000
Gopal 1,60,000 4,40,000 Land and Building 1,00,000
5,36,000 5,36,000

On the above date the firm was dissolved. Various assets were realised and liabilities
were paid/settled as under:
(i) Gopal agreed to pay his wife’s loan.
3
(ii) Land and Building was sold for ` 1,50,000 and Debtors realised ` 12,000 less.
(iii) Half of the creditors agreed to accept furniture of the firm as settlement of their
claim and remaining half agreed to accept 10% less.
(iv) 50% stock was taken by Harish on payment by cheque of ` 90,000 and remaining
stock was sold for ` 94,000.
(v) Realisation expenses of ` 10,000 were paid by Gopal on behalf of the firm.

Prepare Realisation Account. [6]
16. Chander and Damini were partners in a firm sharing profits and losses equally. On
BALANCE SHEET OF CHANDER AND DAMINI as at 31st March, 2023
Sundry Creditors 1,04,000 Cash at Bank 30,000
Capitals: Bills Receivable 45,000
Chander 2,50,000 Debtors 75,000
Damini 2,16,000 4,66,000 Furniture 1,10,000
Land and Building 3,10,000
5,70,000 5,70,000

On 1st April, 2023, they admitted Elina as a new partner for 1/3rd share in the profits
on the following conditions:
(i) Elina will bring ` 3,00,000 as her capital and necessary amount for goodwill.
(ii) Debtors to the extent of ` 5,000 were unrecorded.
(iii) Furniture will be reduced by 10% and 5% provision for doubtful debts will be created
on bills receivables and debtors.
(iv) Value of land and building will be appreciated by 20%.
(v) There being a claim against the firm for damages, a liability to the extent of ` 8,000
will be created for the same.
(vi) Value of the goodwill of the firm to be calculated on the basis of Elina’s share in profit
and capital contributed by her.

You are required to prepare Revaluation Account and Partners’ Capital Accounts.
Or

Sonu and Monu are partners in a firm, sharing profits and losses equally. Their Balance
Sheet as at 31st March, 2023 is as follows:
Sundry Creditors 25,000 Cash at Bank 24,000
General Reserve 15,000 Sundry Debtors 22,000
Capital Accounts: Less: Provision for Doubtful Debts 1,000 21,000
Sonu 45,000 Stock 10,000
Monu 40,000 85,000 Machinery 60,000
Goodwill 10,000
1,25,000 1,25,000
4

On 1st April, 2023, Gopal is admitted as a partner for 1/4th share of the future profits
on the following terms and conditions:
(i) Bad debts amounting to ` 1,500 to be written off.
(ii) Stock to be taken by Sonu at ` 12,000.
(iii) Machinery to be valued at ` 50,000.
(iv) Goodwill of the firm to be valued at ` 20,000.
(v) Gopal to bring ` 50,000 as his capital. He was unable to bring his share of goodwill.
(vi) General Reserve not to be distributed. For this, it was decided that Gopal would
compensate the old partners through his Current Account.

You are required to prepare:
(a) Partners’ Capital Accounts.
(b) Balance Sheet of the reconstituted firm. [6]
17. Following balances have been extracted from the books of Moonlight Ltd. as at
31st March, 2023. Prepare its Balance Sheet as at that date.
Particulars `
Equity Share Capital (Fully paid shares of ` 100 each) 10,00,000
Unclaimed Dividend 25,000
Bank Balance 1,00,000
Securities Premium 1,87,500
Statement of Profit & Loss (Dr.) 1,25,000
Tangible Fixed Assets (Machinery) (at cost) 8,75,000
Accumulated Depreciation till date 62,500
Trade Marks 1,75,000
[6]
18. Mohit, Ali and John are in partnership with capitals of ` 3,00,000 (Credit), ` 2,50,000
(Credit) and ` 20,000 (Debit) respectively on 1st April, 2022. The Partnership Deed
provides as follows:
(i) 10% of Net Profit to be transferred to General Reserve.
(ii) Partners are to be allowed interest on capital @ 5% p.a. and are to be charged interest
on drawings @ 6% p.a.
(iii) John is to get salary of ` 60,000 p.a.
(iv) Mohit is to get commission of 10% of net profit.
(v) Ali is also entitled to a commission of 10% of the profit before charging interest on
drawings but after making appropriations.

During the year, Mohit withdrew ` 3,000 in the beginning of every month, Ali
withdrew ` 3,000 during the middle of every month and John withdrew ` 3,000 at
the end of every month.
On 1st October, 2022, John gave a loan of ` 5,00,000.
5
The manager is entitled to salary of ` 2,000 p.m. and a commission of 10% of
net profit after charging his salary and commission.
Profit of the firm for the year ended on 31st March, 2023 before providing for any of
the above adjustments was ` 2,37,000.

You are required to prepare for the year ending 31st March, 2023:
(a) Profit & Loss Appropriation Account.
(b) Mohit’s Capital Account.
Or
The partnership agreement of Mohan, Mahesh and Nusrat provides that:

(i) Profit will be shared by them in the ratio of 2 : 2 : 1.
(ii) Interest on capital to be allowed at the rate of 6% per annum.
(iii) Interest on drawings to be charged at the rate of 3% per annum.
(iv) Mahesh to be given a salary of ` 2,500 per month.
(v) Mahesh’s guarantee to the firm that the firm would earn net profit of at least
` 4,00,000 per annum and any shortfall in the profit would be personally met
by him.
Capitals of the partners on 1st April, 2022, were Mohan—` 6,00,000;
Mahesh—` 5,00,000; Nusrat—` 5,00,000.
During the financial year 2022–23, all the three partners withdrew ` 5,000 each
in the beginning of every month.
Net profit of the firm for the year 2022–23 was ` 3,50,000.
You are required to prepare for the year 2022–23:
(a) Profit & Loss Appropriation Account.
(b) Partners’ Capital Accounts. [10]
19. Radha Mohan Ltd. invited applications for issuing 4,00,000 equity shares of ` 50 each.
The amount was payable as follows:
On Application—` 15 per share
On Allotment—` 25 per share
On First and Final Call—` 10 per share
Applications for 6,00,000 shares were received and pro rata allotment was made to all

the applicants as follows:
Applicants for 4,00,000 shares were allotted 3,00,000 shares.
Applicants for 2,00,000 shares were allotted 1,00,000 shares.
6
It was decided that excess amount received on applications will be adjusted towards
amount due on allotment and surplus if any will be refunded. Vibhuti, who was
allotted 6,000 shares out of the group applying for 4,00,000 shares did not pay the
allotment money and her shares were forfeited. Afterwards, these forfeited shares
were reissued at ` 30 per share as fully paid-up. Later, first and final call was
made. Shahid, who had applied for 2,000 shares out of the group applying for
2,00,000 shares failed to pay first and final call and his shares were also forfeited.
These shares were later reissued at ` 60 per share fully paid-up.
(i) Pass necessary Journal entries in the books of Radha Mohan Ltd. for the above
transactions.
(ii) Prepare the Calls-in-Arrears Account.
Or

Sukanya Ltd. invited applications for issuing 1,00,000 equity shares of ` 10 each. The
shares were issued at a premium of ` 20 per share. The amount was payable as follows:
On Application and Allotment—` 14 per share (including premium of ` 10)
On First Call—` 8 per share (including premium of ` 5)
On Final Call—` 8 per share (including premium of ` 5)
Applications for 96,000 shares were received. Rohit, a shareholder holding 7,000 shares,
failed to pay both the calls and Namit, a holder of 5,000 shares, did not pay the
final call.
Shares of Rohit and Namit were forfeited. Of the forfeited shares, 8,000 shares including
all the shares of Rohit were reissued to Reena @ ` 8 per share fully paid-up.
(i) Pass necessary Journal entries for the above transactions in the books of Sukanya Ltd.
(ii) Prepare the Calls-in-Arrears Account. [10]
Section B (20 Marks)

20. What will be the value of inventories of Star Ltd. from the particulars given below?
Current Ratio 2.5 : 1
Quick Ratio 1.5 : 1

Current Assets: ` 2,00,000.
(a) ` 60,000. (b) ` 70,000.
(c) ` 80,000. (d) ` 65,000. [1]
7
21. Which of the following transactions will result into flow of cash?
(a) Cash withdrawn from bank ` 50,000.
(b) Issued 10,000, 9% Debentures for the vendors of machinery.
(c) Received ` 25,000 from debtors.
(d) Deposited cheques of ` 10,000 into bank. [1]
22. State the objective of computing proprietary Ratio. [1]
23. State how Cash Flow Statement is historical in nature. [1]
24. Name any two tools of Analysis of Financial Statements. [1]
25. Prepare Common-size Balance Sheet from the following information:
31st March, 2023 (`) 31st March, 2022 (`)
Shareholders’ Funds 22,20,000 12,00,000
Non-current Liabilities 6,00,000 6,00,000
Total Equity and Liabilities 30,00,000 20,00,000
Non-current Assets 25,20,000 14,00,000
[3]
26. From the following Statement of Profit & Loss of Hind Ltd. for the year
2022–23, calculate any three ratios (up to two decimal places):
(i) Trade Receivables Turnover Ratio.
(ii) Inventory Turnover Ratio.
(iii) Net Profit Ratio .
(iv) Operating Profit Ratio.
STATEMENT OF PROFIT & LOSS OF HIND LTD. for the year ending 31st March, 2023
Particulars Note No. `
Revenue from Operations 10,00,000
Other Income (Rent received) 50,000
Total Revenue 10,50,000
Expenses:
Purchases 2,75,000
Change in Inventories 1 20,000
Employee Benefit Expenses 2 20,000
Depreciation 10,000
Other Expenses 3 25,000
Total Expenses 3,50,000
Profit before Tax 7,00,000

Less: Tax (2,80,000)
Profit after Tax 4,20,000
8
Notes to Accounts
Particulars `
1. Change in Inventories
Opening Inventory 30,000
Less: Closing Inventory 10,000
20,000
2. Employee Benefit Expenses
Wages 10,000
Salaries 10,000
20,000
2. Other Expenses
Carriage Inward 10,000
Carriage Outward 15,000
25,000
Additional Information: `
Debtors (as on 31st March, 2023) 35,000
Bills Receivable (as on 31st March, 2023) 25,000
Cash Revenue from Operations 2,50,000
[6]
27. From the following Balance Sheet of Parker Ltd. as at 31st March, 2023 and 31st March,
2022, prepare Cash Flow Statement:
BALANCE SHEET OF PARKER LTD. as at 31st March, 2023 and 31st March, 2022
Particulars Note No. 31st March, 31st March,
2023 (`) 2022 (`)
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
(a) Share Capital 6,00,000 4,00,000
(b) Reserves and Surplus 1 2,00,000 1,00,000
2. Non-Current Liabilities
Long-term Borrowings: 8% Bank Loan 1,00,000 2,00,000
3. Current Liabilities
(a) Trade Payables (Creditors) 45,000 60,000
(b) Short-term Provisions 2 1,50,000 1,20,000
Total 10,95,000 8,80,000
II. ASSETS
1. Non-Current Assets
(a) Property, Plant and Equipment and Intangible Assets:
(i) Property, Plant and Equipment (Machinery) (Net) 6,00,000 6,00,000
(ii) Intangible Assets: Patents 45,000 50,000
(b) Non-current Investments 75,000 ...
2. Current Assets
(a) Inventories 15,000 10,000
(b) Trade Receivables (Debtors) 2,55,000 2,00,000
(c) Cash and Bank Balance 1,05,000 20,000
Total 10,95,000 8,80,000
9
Notes to Accounts
Particulars 31st March, 31st March,
2023 (`) 2022 (`)
1. Reserves and Surplus
Surplus, i.e., Balance in Statement of Profit & Loss 2,00,000 1,00,000
2. Short-term Provisions
Provision for Tax 1,50,000 1,20,000
Additional Information:

(i) During the year, a machine costing ` 75,000 was purchased. Loss on sale of machinery
was ` 5,000.
(ii) Depreciation charged on machinery was ` 12,000.
(iii) Tax paid during the year was ` 50,000.
(iv) Bank loan of ` 1,00,000 was paid on 31st March, 2023 with bank interest for the year.
Or

From the following information of Abhipra Ltd., determine:
(i) Cash Flow from Operating Activities.
(ii) Cash Flow from Financing Activities.
Particulars 31st, March 31st, March
2023 (`) 2022 (`)
Trade Receivables 85,000 1,00,000
Inventories 1,25,000 1,50,000
Prepaid Expenses 60,000 50,000
Expenses Outstanding 45,000 35,000
Provision for Tax 75,000 50,000
Cash in Hand 2,50,000 3,75,000
Furniture (at book value) 6,00,000 8,00,000
General Reserve 2,50,000 2,00,000
10% Debentures 2,00,000 1,50,000
Goodwill 3,00,000 3,50,000
Trade Payables 1,05,000 1,25,000
Balance of Statement of Profit & Loss (Cr.) 6,50,000 6,00,000
Proposed Dividend 25,000 20,000
Share Capital 25,00,000 15,00,000

During the year 2022–23:
(a) A piece of furniture costing ` 1,50,000 (accumulated depreciation ` 15,000) was sold
for ` 1,25,000.
(b) Tax of ` 45,000 was paid.
(c) Interim Dividend of ` 20,000 was paid.
(d) The company paid ` 15,000 as interest on debentures. [6]
10
Model Test Paper 2
General Instructions: As per Model Test Paper 1

1. Om and Shiv are partners in a firm having a capital of ` 54,000 and ` 36,000 respectively.
They admitted Mohan for 1/3rd share in the profits. Mohan brought proportionate
amount of capital. The capital brought in by Mohan would be
(a) ` 90,000. (b) ` 45,000.
(c) ` 54,000. (d) ` 36,000. [1]
2. Deepak, Farukh and Lilly were partners in a firm sharing profits in the ratio of
3 : 2 : 1. On 28th February, 2023, Farukh retired from the firm. On Farukh’s retirement,
there was a balance of ` 12,000 in Workmen’s Compensation Reserve against which
there was no liability. On Farukh’s retirement, this amount will be
(a) Debited to Capital Accounts of all the partners (including Retiring Partner) in
their profit-sharing ratio.
(b) Credited to Capital Accounts of all the partners (including Retiring Partner) in
their profit-sharing ratio.
(c) Credited to Capital Accounts of Deepak and Lilly in their profit-sharing ratio.
(d) Credited to Capital Account of Farukh. [1]
3. Hi-Tech Ltd. forfeited 50 shares of ` 100 each issued at 10% premium for non-payment
of allotment money of ` 30 per share (including premium) and first call of ` 30 per
share. The second and final call of ` 20 per share was not yet called. At the time of
passing entry for forfeiture, Forfeited Shares Account will be
(a) debited by ` 5,000. (b) credited by ` 1,500.
(c) debited by ` 4,000. (d) credited by ` 4,000. [1]
4. In a company’s Balance Sheet, Debit Balance of Statement of Profit & Loss is
shown under
(a) Non-current Liabilities. (b) Current Liabilities.
(c) Non-current Assets. (d) Reserves and Surplus. [1]
5. Give the formula for calculating Goodwill by Capitalisation of Super Profit. [1]
6. What Journal entry will be passed when unrecorded liability of ` 10,000 is paid by
Mohan, a partner, on dissolution of a firm? [1]
26
7. Name the account to which the amount of premium received on Issue of Debentures
is credited. [1]
8. What will be the accounting treatment of Debenture Redemption Investment (DRI) in
case of redemption of debentures in equal instalments. [1]
9. Why is the Realisation Account prepared? [1]
10. What is meant by a debenture issued as collateral security? [1]
11. Lokesh, Mansoor and Nihal are partners sharing profits and losses in the ratio of
3 : 1 : 2. On 31st March, 2023, Mansoor retired and balance in his capital account
after making adjustment of reserves and profit on revaluation was ` 70,000. Lokesh
and Nihal paid him ` 84,000 in full settlement of his claim. To settle his account, a
computer of book value of ` 84,000 was given to Mansoor.
You are required to pass the necessary Journal entries in the books of the firm.
Or

Shivam, Kapil and Deepak are partners sharing profits and losses in the ratio of
4 : 3 : 3. Kapil retired and Shivam and Deepak decide to share future profits and
losses in the ratio of 3 : 5. At the time of retirement of Kapil, Debtors and Provision
for Doubtful Debts were ` 38,000 and ` 4,000 respectively. ` 3,000 of the debtors
were bad. Provision for Doubtful Debts is to be 5% of Sundry Debtors.
You are required to pass the necessary Journal entries. [3]
12. Xavier and Yusuf are partners sharing profits in the ratio of 3 : 2. They admit
Zaman for 1/5th share in profits as a partner on 1st April, 2022. Zaman brings ` 5,00,000
as his capital and the share of goodwill by cheque. For this purpose, goodwill of the
firm is valued at two years’ purchase on the basis of average net profit (corrected)
of the last three years. Profits for the last three years were as follows:
Year 2019–20 2020–21 2021–22
Profits (`) 3,71,400 4,20,000 3,60,000
A machinery was purchased on 1st April, 2020 for ` 60,000 but it was debited
to Office Expenses Account. Depreciation is charged @ 10% following diminishing
balance method.
(i) Calculate the value of firm’s goodwill.
(ii) Pass the necessary Journal entries in the books of the firm. [3]
13. On 31st March, 2021, books of Khyati Ltd. (an unlisted manufacturing company) had
following balances:
8% Debentures (Redeemable on 30th September, 2022)—` 90,00,000;
Debenture Redemption Reserve—` 6,00,000.
27
To meet the provisions of the Companies Act, 2013, the company transferred the
required balance amount to Debenture Redemption Reserve Account on 31st March,
2022. It met the requirements of Debenture Redemption Investment.
You are required to pass the necessary Journal entries related to Debenture Redemption
Reserve Account for the year 2021–22 and 2022–23.
Or

Care Products Ltd., a listed company, has outstanding 15,000, 10% Debentures of ` 100
each redeemable at a premium of 15%. Pass the necessary Journal entries at the time of
Redemption of Debentures (Ignore interest). [3]
14. Akai Ltd. issued 1,000; 7% Debentures of ` 100 each at 5% premium, redeemable at
10% premium after 4 years.
You are required to pass Journal entries for issue of debentures and writing off
Loss on Issue of Debentures, if the company decides to write it off in the year
of issue. [3]
15. Given below is the Balance Sheet of Saurabh, Gaurav and Pawan as on 31st March,
2023 on which date they dissolved their partnership. They shared profits and losses
in the ratio of 4 : 3 : 3. It was decided that Pawan shall be incharge of realisation
of assets and distribution thereof. For this service, he was to get as remuneration
1% of the value of assets realised other than Cash and Bank and 10% of the amount
distributed to partners.
BALANCE SHEET as at 31st March, 2023
Saurabh’s Capital A/c 55,000 Cash at Bank 1,375
Gaurav’s Capital A/c 22,500 Sundry Assets 2,68,625
Pawan’s Capital A/c 60,000
Sundry Creditors 75,000
Employees’ Provident Fund 7,500
Workmen Compensation Reserve 50,000
2,70,000 2,70,000
Sundry Assets realised ` 2,32,500 and creditors were paid in full.

You are required to prepare the Realisation Account. [6]
16. Abha and Bimal are partners in a firm sharing profits and losses in the ratio of
3 : 2. On 1st April, 2023, they admitted Chintu into partnership for 1/5th share in
the profits of the firm. On that date their Balance Sheet stood as under:
BALANCE SHEET as at 1st April, 2023
Capital A/cs: Plant and Machinery 1,30,000
Abha 1,20,000 Furniture 25,000
Bimal 1,00,000 2,20,000 Investment 1,00,000
General Reserve 20,000 Sundry Debtors 50,000
Sundry Creditors 1,00,000 Bank 35,000
3,40,000 3,40,000
28
Chintu was admitted on the following terms:
(i) He will bring ` 80,000 as capital and ` 30,000 for his share of goodwill premium.
(ii) Partners will share future profits in the ratio of 5 : 3 : 2.
(iii) Gain (Profit) on revaluation of assets and reassessment of liabilities was ` 7,000.
(iv) After making adjustments, Capital Accounts of the partners will be in proportion
to Chintu’s capital. Balance to be paid or brought by the old partners by cheque
as the case may be.
(b) Bank Account.
Or

Xavier and Yogesh are partners sharing profits and losses in the ratio of 3 : 2. On
BALANCE SHEET OF XAVIER AND YOGESH

as at 31st March, 2022
Creditors 28,000 Cash at Bank 45,000
Workmen Compensation Reserve 12,000 Debtors 65,000
General Reserve 50,000 Less: Provision for Doubtful Debts 5,000 60,000
Capital A/cs: Stock 30,000
Xavier 60,000 Investments 50,000
Yogesh 40,000 1,00,000 Goodwill 5,000
1,90,000 1,90,000
They admit Gopal as a partner on 1st April, 2022 on the following terms:
(i) Goodwill of the firm is valued at ` 1,25,000. Gopal shall bring his share of premium
for goodwill by cheque.
(ii) Unaccounted accrued commission of ` 500 will be accounted.
(iii) Market value of investments was ` 45,000.
(iv) A debtor whose dues of ` 16,000 were written off as bad debts paid ` 15,800.
(v) A claim of ` 2,000 for workmen’s compensation is to be provided.
(vi) Gopal will bring proportionate capital for 1/5th share in the profits of the firm.
(a) Revaluation Account, and
(b) Capital Accounts of the Partners. [6]
29
17. Following balances have been extracted from the books of Mera Desh Mahan Ltd. as
at 31st March, 2023:
. TRIAL BALANCE as at 31st March, 2023

Particulars Dr. (`) Cr. (`)
Equity Share Capital ... 5,00,000
Fixed Assets 7,30,000 ...
Reserves and Surplus (Surplus, i.e., Balance in Statement of Profit & Loss) ... 2,22,000
Inventories 50,000 ...
Cash and Bank Balances 1,58,000 ...
Trade Payables ... 60,000
8% Debentures (1/5th of the debentures to be redeemed on 31st March, 2024) ... 2,00,000
Interest accrued and due on 8% Debentures ... 8,000
Trade Receivables 20,000 ...
Investments (Long-term) 32,000 ...
Total 9,90,000 9,90,000
Additional Information: Underwriting commission of ` 10,000 on issue of shares is

written off from Statement of Profit & Loss.

You are required to prepare Balance Sheet of the company as per Schedule III of the
Companies Act, 2013 as at 31st March, 2023. [6]
18. Naveen, Qadir and Rajesh were partners in electronic goods business in Dehradun,
Uttarakhand. After the accounts of partnership were drawn up and closed, it was
noticed that interest on capital has been allowed to partners @ 6% p.a. for the years
ending 31st March, 2022 and 2023, although there is no provision for interest on capital
in the Partnership Deed. On the other hand, Naveen and Qadir were entitled to a
salary of ` 3,500 and ` 4,000 per quarter respectively, which has not been allowed.
Their fixed capitals were ` 4,00,000, ` 3,60,000 and ` 2,40,000 respectively. During
the last two years, they had shared the profits and losses as follows:
Year Ended Ratio
31st March, 2022 3:2:1
31st March, 2023 5:3:2
Pass necessary adjusting entry for the above adjustments in the books of the firm on
1st April, 2023. Show your workings.
Or

Moli, Bhola and Raj were partners in a firm sharing profits and losses in the ratio of
3 : 3 : 4. Their Partnership Deed provided for the following:
(i) Interest on capitals @ 5% p.a.
(ii) Interest on drawings @ 12% p.a.
(iii) Interest on partners’ loan @ 6% p.a.
30
(iv) Moli was allowed an annual salary of ` 4,000; Bhola was allowed commission of
10% of net profit and Raj was guaranteed minimum profit share of ` 1,50,000
after making all the adjustments as provided in the partnership agreement.

Their fixed capitals were Moli: ` 5,00,000; Bhola: ` 8,00,000 and Raj: ` 4,00,000.
On 1st April, 2022, Bhola had given loan of ` 1,00,000 to the firm. Profit of the firm
for the year ended 31st March, 2023 before interest on Bhola’s loan was ` 3,06,000.
Bhola withdrew ` 5,000 at the end of each month, Moli withdrew ` 10,000 at the end
of each quarter and Raj withdrew ` 40,000 at the end of each half year.
Prepare Profit & Loss Appropriation Account for the year ended 31st March, 2023 and
Partners’ Current Accounts. [10]
19. Shiva Ltd., invited applications for issuing 80,000 equity shares of ` 10 each at a
premium of ` 35 per share. The amount was payable as follows:
On Application—` 8 (including ` 5 premium) per share;
On Allotment—` 12 (including ` 10 premium) per share;
On First and Final Call—Balance.
Applications were received for 75,000 shares and allotment was made to all the
applicants. Rahim, a shareholder who was allotted 3,000 shares failed to pay
allotment money and his shares were forfeited. Afterwards, the first and final
call was made. Suhani, who held 3,000 shares failed to pay final call. Her Shares
were also forfeited. All the forfeited shares were reissued for a sum of ` 62,000 as
fully paid-up.
(a) Pass necessary Journal entries for the above transactions in the books of
the company.
(b) Prepare Calls-in-Arrears Account.
Or

Sargam Ltd. invited applications for issuing 80,000 equity shares of ` 100 each at a
premium. The amount was payable as follows:
On Application—` 20 per share;
On Allotment—` 60 (including premium) per share;
On First and Final Call—` 40 per share.
Applications were received for 1,20,000 shares. Allotment was made on pro rata basis to

all the applicants. Excess money received on applications was adjusted on amount due
on allotment. Sitaram, who had applied for 6,000 shares, failed to pay the allotment
money and Harnam did not pay first and final call on 800 shares allotted to him. The
shares of Sitaram and Harnam were forfeited. 4,200 of these shares were reissued
for ` 100 per share as fully paid-up. The reissued shares included all the forfeited
shares of Harnam.
(a) Pass necessary Journal entries for the above transactions in the books of Sargam Ltd.
(b) Prepare Calls-in-Arrears Account. [10]
31
20. Priya Ltd. has a Current Ratio of 3 : 1. Its inventories are ` 40,000 and Current Liabilities
are ` 75,000. What will be the Quick Ratio of the Company?
(a) 3 : 2. (b) 2 : 3.
(c) 37 : 15. (d) 15 : 37. [1]
21. Interest received by a manufacturing company is classified in Cash Flow Statement as:
(a) Operating Activity.
(b) Investing Activity.
(c) Financing Activity.
(d) Both as an Operating Activity and Financing Activity. [1]
22. State one transaction involving decrease in Current Ratio and no change in working
capital if Current Ratio is 2 : 1. [1]
23. What is meant by the term ‘Cash Equivalents’ as per AS-3? [1]
24. What is Common-size Balance Sheet? [1]
25. From the following information, prepare Comparative Balance Sheet of HMSC Ltd.:
2023 (`) 2022 (`)
Non-Current Liabilities 12,00,000 12,00,000
Current Liabilities 3,60,000 4,00,000
Non-Current Assets 50,40,000 28,00,000
Current Assets 9,60,000 12,00,000
[3]
26. On the basis of the following information, calculate:
(i) Operating Ratio;
(ii) Inventory Turnover Ratio;
(iii) Proprietary Ratio.
Information:
Cash Revenue from Operations ` 10,00,000
Credit Revenue from Operations 120% of Cash Revenue from Operations
Operating Expenses 10% of Total Revenue from Operations
Gross Profit Ratio 40%
Opening Inventory ` 1,50,000
Closing Inventory ` 20,000 more than Opening Inventory
Current Assets ` 3,00,000
Current Liabilities ` 2,00,000
Share Capital ` 5,00,000
Reserves and Surplus ` 1,00,000
Non-current Assets: Property, Plant and Equipment and Intangible Assets ` 5,00,000
[6]
32
27. You are required to prepare a Cash Flow Statement of Green View Ltd. (as per AS-3)
for the year 2022–23 from the following Balance Sheets:
BALANCE SHEET OF GREEN VIEW LTD. as at 31st March, 2023 and 31st March, 2022
2023 (`) 2022 (`)
(a) Share Capital 15,00,000 12,50,000
Long-term Borrowings: Bank Loan 2,00,000 ...
(a) Short-term Borrowings: Bank Overdraft 1,00,000 50,000
(b) Trade Payables 2 7,00,000 6,50,000
(c) Short-term Provisions 3 2,50,000 1,50,000
Total 35,00,000 27,00,000
II. ASSETS
—Property, Plant and Equipment (Plant and Machinery) 3,00,000 2,00,000
(b) Non-current Investments 1,00,000 1,50,000
2. Current Assets
(a) Inventories 12,00,000 8,70,000
(b) Trade Receivables 9,00,000 9,80,000
(c) Cash and Bank Balances (Cash at Bank) 10,00,000 5,00,000
Total 35,00,000 27,00,000
Notes to Accounts
2023 (`) 2022 (`)
7,50,000 6,00,000
2. Trade Payables
Creditors 4,50,000 5,00,000
Bills Payable 2,50,000 1,50,000
7,00,000 6,50,000
Provision for Tax 2,50,000 1,50,000

(i) During the year, ` 50,000 depreciation was charged on machinery.
(ii) Company has paid ` 1,20,000 interim dividend during the year.
(iii) Tax provided during the year ` 2,00,000.
Or

You are required to prepare Cash Flow Statement of Sunrise Ltd. (as per AS-3) for
the year 2022–23 from the following Balance Sheets:
33
BALANCE SHEET OF SUNRISE LTD. as at 31st March 2023 and 31st March, 2022
2023 (`) 2022 (`)
(a) Share Capital 20,00,000 20,00,000

Long-term Borrowings 2 10,00,000 10,00,000
(a) Trade Payables 15,50,000 6,00,000
(b) Other Current Liabilities 3 1,00,000 70,000
Total 55,50,000 41,70,000
II. ASSETS
(i) Property, Plant and Equipment (Machinery) 30,00,000 20,00,000
(ii) Intangible Assets (Patents) 3,00,000 3,40,000
(b) Non-current Investments 2,00,000 1,50,000
2. Current Assets
(a) Inventories 4,00,000 6,00,000
(c) Cash and Bank Balances 9,50,000 1,80,000
Total 55,50,000 41,70,000
Notes to Accounts
2023 (`) 2022 (`)
2. Long-term Borrowings
10% Debentures 10,00,000 10,00,000
3. Other Current Liabilities
Unclaimed Dividend 60,000 ...
Outstanding Expenses 40,000 70,000
1,00,000 70,000
1. During the year, a Machinery costing ` 4,00,000, on which depreciation charged was
` 2,20,000, was sold at a profit of ` 60,000.
2. Depreciation charged on machinery was ` 7,00,000.
3. During the year, the company declared Interim Dividend @ 10%.
4. At the end of the year, investment costing ` 50,000 was sold at a profit of 20%.
New investment was also purchased at the end of the current accounting year.
5. Proposed Dividend for 2022–23—` 3,00,000. [6]
34
Model Test Paper 3

1. Trade creditors ` 4,00,000. Half the trade creditors accepted plant and machinery at
an agreed value of ` 1,35,000 and cash in settlement of their claims after allowing a
discount of ` 40,000. Remaining trade creditors were paid 95% in settlement. Realisation
Account will be debited by
(a) ` 25,000. (b) ` 2,15,000.
(c) ` 1,90,000. (d) ` 2,25,000. [1]
2. William Pens Ltd. issued 10,000, 7% Debentures of ` 100 each at a discount of 4%.
The issue was fully subscribed. It has balance in Securities Premium of ` 25,000.
It will write off Discount on Issue of Debentures
(a) ` 40,000 from Securities Premium.
(b) ` 40,000 from Statement of Profit & Loss.
(c) ` 25,000 from Securities Premium and ` 15,000 from Statement of Profit & Loss.
(d) ` 15,000 from Securities Premium and ` 25,000 from Statement of Profit & Loss.
[1]
3. When a partnership firm is dissolved, firm’s assets are applied first in payment of
(a) Partner’s debts to third parties.
(b) Partner’s advances.
(c) Partner’s capital.
(d) Firm’s debts due to the third parties. [1]
4. Pawan Hans Ltd. issued prospectus inviting applications for issuing 50,000 Equity
Shares of ` 10 each at a premium of ` 5 per share payable ` 4 on application, ` 3
on allotment and balance as first and final call. It received ` 4,00,000 as Application
Money. Number of Equity Shares applied are
(a) 70,000 Equity Shares. (b) 75,000 Equity Shares.
(c) 1,00,000 Equity Shares. (d) 90,000 Equity Shares. [1]
5. State the treatment of carried forward losses in case of retirement or death of a
partner. [1]
50
6. Why self-generated goodwill is not recognised as an asset in the books of accounts? [1]
7. A company has outstanding 3,000; 10% Debentures of ` 100 each, out of which
500; 10% Debentures of ` 100 each are redeemable within 12 months of the date
of Balance Sheet. State the head and sub-head under which these 500, 10% Debentures
will be shown. [1]
8. How Premium on Redemption of Debentures is different from Securities Premium?
Give one reason. [1]
9. Gold and Silver are partners with capitals of ` 20,000 and ` 40,000 respectively
and sharing profits equally. They admitted Copper as their third partner for
one-fourth profits of the firm on payment of ` 24,000 as his capital. The amount of
hidden goodwill is
(a) ` 12,000. (b) ` 2,000.
(c) ` 16,000. (d) ` 10,000. [1]
10. Munnar Tea Estates Ltd., an unlisted tea plantation and processing company has to
redeem its 10,000, 7% Debentures of ` 100 each on 31st March, 2023. As per the
provisions of the Companies Act, 2013, by which date the company should invest
in specified securities?
(a) 31st March, 2023. (b) 31st March, 2022.
(c) 30th April, 2022. (d) 30th April, 2022. [1]
11. Kavi, Dhruv and Parth are partners in a firm sharing profits and losses in the ratio of
5 : 3 : 2. Dhruv retires from the firm on 1st April, 2022 and Kavi and Parth decide
to share future profits and losses in the ratio of 3 : 5.
At the time of retirement of Dhruv, investment existed at ` 40,000. Half of the
investments are taken by partners in their profit-sharing ratio at book value. Remaining
investments are valued at ` 25,000.
You are required to pass the necessary Journal entries.
Or

Ajay, Vijay and Ram are partners sharing profits in the ratio of 4 : 2 : 2. It is provided
under the partnership deed that on the death of a partner his share of goodwill is to be
valued at one half of the net profits credited to his account during the last 4 completed
years and share of profit up to the date of death is to be based on the average profit of
the last three completed years, plus 10%.
Vijay died on 30th June, 2022. The firm’s profits for the last 4 years were as follows:
Year 2018–19 2019–20 2020–21 2021–22
Profits/Loss (`) 1,20,000 60,000 (20,000) 80,000

(i) Calculate Vijay’ share of interim profit.
(ii) Pass necessary Journal entry to adjust Vijay’s share of goodwill. [3]
51
12. Aman and Bharat are partners in a firm sharing profits and losses in the ratio of
3 : 2. They admit Chetan as a partner for 1/5th share on 1st April, 2022. Chetan takes
his share from Aman and Bharat in the ratio of 2 : 3.
Goodwill of the firm is valued at 5 years’ purchase of Super Profit based on Average
Profit of last 3 years. Average Profit and Normal Profit are ` 3,50,000 and ` 3,00,000
respectively.
(i) Calculate goodwill of the firm.
(ii) Pass Journal entries in the books of the firm if Chetan brings his share of goodwill
by cheque. [3]
13. Maira Ltd., an unlisted trading company, has outstanding 20,000, 8% Debentures of
` 100 each out of which it has to redeem 5,000 Debentures on 25th January, 2022
and 5,000 Debentures on 31st March, 2022. It has balance in Debentures Redemption
Reserve of ` 1,00,000. The company met the requirements of the Companies Act,
2013 and transferred the required amount to Debentures Redemption Reserve on
31st March, 2021. It also met the requirements with respect to Debentures Redemption
Investment.
You are required to
(i) Pass Journal entries for Debentures Redemption Reserve;
(ii) Prepare Debentures Redemption Investment Account.
Or

Big Basket Ltd., an unlisted retail Grocery Store company, has outstanding 18,000,
6% Debentures of ` 100 each. It is to redeem the above debentures as follows:
On 31st December, 2020 — 10,000 Debentures,
31st December, 2021 — 5,000 Debentures, and
31st December, 2022 — Balance Debentures
You are required to prepare Debentures Redemption Investment Account for the years
ended 31st March, 2021, 2022 and 2023. Investment was made by the company on
1st April, 2020. [3]
14. Emaar India Ltd. issued 20,000, 7% Debentures of ` 100 each at a discount of ` 3
and redeemable at ` 102 after five years payable ` 50 on application and balance on
allotment. Applications were received for 25,000 debentures. Allotment was made to
all the applicants on pro rata basis.
You are required to pass the Journal entries for the above. [3]
15. Pass the necessary Journal entries for the following transactions on the dissolution of
the firm of Shiv, Gopal and Mohan, after various assets (other than cash) and outside
liabilities have been transferred to Realisation Account:
(i) ‘Shiv’ a partner agreed to take responsibility of completing dissolution at an
agreed remuneration of ` 1,000, and to bear realisation expenses. Realisation
expenses amounted to ` 800 were paid by Shiv out of his own funds.
52
(ii) A creditor of ` 4,500 accepted stock valued at ` 5,200 in full satisfaction of his
claim.
(iii) ` 8,000 for damages claimed by a customer had been disputed by the firm. It
was agreed at 75% by a compromise between the customer and the firm.
(iv) Assets realised ` 79,000.
(v) On the date of dissolution, the balance of General Reserve was ` 6,000.
(vi) A bill discounted from bank was dishonoured and ` 5,000 were paid. [6]
16. Karim and Rehman are partners in a firm sharing profits in the ratio of 5 : 3. Their
Balance Sheet as at 31st March, 2022 was as follows:

Creditors 45,000 Goodwill 20,000
General Reserve 48,000 Machinery 63,000
Karim 55,000 Debtors 25,000
Rehman 45,000 1,00,000 Less: Provision for Doubtful Debts 2,500 22,500
Profit & Loss A/c 22,000
Cash at Bank 5,500
1,93,000 1,93,000
They admit Rohit as a new partner on 1st April, 2022 for 1/3rd share on the
following terms:
(i) Rohit is to contribute ` 86,000 as his share of capital.
(ii) Goodwill of the firm is valued at ` 72,000.
(iii) Machinery is valued at ` 83,000.
(iv) An amount of ` 1,000 due from Harsh, a debtor is to be written off as no
longer receivable. Provision for Doubtful Debts on remaining debtors is to be
maintained.
(v) Out of total insurance premium paid, ` 1,700 to be treated as prepaid insurance.
This amount was earlier debited to Profit & Loss Account.
(a) Revaluation Account.
(b) Partners’ Capital Accounts.
Or

Asin and Shreyas are partners in a firm sharing profits in the ratio of 3 : 1. They
admit Ajay as a new partner for 1/4th share in the profits. New profit-sharing ratio
will be 2 : 1 : 1. Ajay brought ` 2,00,000 for his capital and ` 50,000 for his share of
premium for goodwill.
53
On 31st March, 2022 the date of admission, the Balance Sheet was as follow:
Sundry Creditors 60,000 Bank 90,000
Employees’ Provident Fund 20,000 Debtors 80,000
Capital Accounts: Stock 1,50,000
Asin 4,00,000 Furniture 50,000
Shreyas 1,00,000 5,00,000 Machinery 2,10,000
5,80,000 5,80,000
It was agreed that:

(i) Stock is undervalued by ` 50,000.
(ii) Machinery will be depreciated to 88% and furniture be written down by 4%.
(iii) A provision of 5% for Doubtful Debts will be made on debtors.
(iv) Capital Accounts of all the partners were adjusted in the new profit-sharing
ratio after admission. For surplus or deficiency, the Current Accounts were to
be opened.
(b) Balance Sheet of the new firm. [6]
17. Following information is extracted from the books of account of Pawan Hans Ltd.
for the year ended 31st March, 2022. You are required to show these items in the
Balance Sheet of the company as at 31st March, 2022.
Authorised Capital:
50,000 Equity Shares of ` 10 each
10,000 Preference Shares of ` 50 each.
Subscribed and Fully Paid-up Share Capital: 20,000 Equity Shares;

3,000; 8% Preference Shares
Subscribed but Not Fully Paid-up Share Capital: 5,000 Equity Shares on which ` 8
per share was received against ` 10 called-up.
Sr. No. Particulars `
1. Forfeited Shares Account (2,000 × ` 5) 10,000
2. 10% Debentures 10,00,000
3. Debentures Redeemable (30th June, 2022) 1,00,000
4. Sundry Debtors 7,50,000
5. Bills Receivable 1,50,000
6. Surplus, i.e., Balance in Statement of Profit & Loss 5,00,000
[6]
54
18. On 31st March, 2022, balances in the Capital Accounts of Esha and Manav were
` 75,000 and ` 1,00,000 respectively after making adjustments for profits and drawings.
Subsequently, it was noticed that interest on capital @ 10% p.a. was not allowed and
interest on drawings @ 5% p.a. were not charged in arriving at the divisible profit
for the year.
During the year, Esha withdrew ` 3,000 at the end of each half year and Manav
` 3,000 at the end of each quarter.
Net Profit for the year ended 31st March, 2022 was ` 50,000. The profit-sharing ratio
of the partners is 3 : 2.
(a) Pass the necessary Journal entries to rectify the errors in accounting, showing the
workings clearly.
(b) Prepare adjusted Capital Accounts of the partners.
Or
Sanjay and Manoj are partners in a firm. On 1st April, 2021, their fixed Capital Accounts
showed balances of ` 4,00,000 and ` 8,00,000 respectively.
On this date, their Current Account balances were ` 1,00,000 and ` 2,00,000 respectively.
On 1st January, 2022, Sanjay introduced further capital of ` 4,00,000 while Manoj gave
a loan of ` 3,00,000 to the firm.
The Partnership Deed provided for:
(i) Interest on Capital Account and Current Account balances to be allowed at the
rate of 10% per annum.
(ii) Interest on drawings to be charged at the rate of 12% per annum.
(iii) Profits to be shared by them in the ratio of 3 : 2.
(iv) 10% of the net profit to be transferred to General Reserve.
During the financial year, both partners withdrew ` 12,000 each in the beginning of
every quarter.
Profit of the firm, before allowing or charging any interest, for the financial year was
` 10,00,000.
You are required to prepare for the financial year ended 31st March, 2022:
(a) Profit & Loss Appropriation Account;
(b) Partners’ Fixed Capital Accounts;
(c) Partners’ Current Accounts; and
(d) Partner’s Loan Account. [10]
19. Mirage Ltd. was incorporated on 1st October, 2021 with registered capital of 5,00,000
Equity Shares of ` 20 each. Parvesh, one of the promoters incorporated the company.
His work was valued at ` 50,000 for which he was to be issued equity shares at par.
55
It issued 1,00,000 shares at par to public for subscription. The issue was subscribed
in excess by 50,000 shares. Shares were allotted rejecting applications for
50,000 Equity Shares. Up to 31st March, the company had called:
• ` 7 per share on application;
• ` 5 per share on allotment; and
• ` 4 per share on first and final call
Amount received by the company on the shares allotted were:
• On 70,000 Equity Shares ` 16 per share;
• On 20,000 Equity Shares ` 12 per share; and
• On 10,000 Equity Shares ` 7 per share.
Shares, except on which the company had received ` 16 per share, were forfeited.
Half of the forfeited shares on which ` 12 per share were received were reissued
@ ` 15 per equity share as fully paid-up.
(i) Pass Journal entries to record the above transactions; and
(ii) Prepare Calls-in-Arrears Account.
Or
Spitfire Ltd. was incorporated on 1st October, 2021 with registered capital of 10,00,000
Equity Shares of ` 10 each. Amrit, one of the promoters incorporated the company
and his remuneration was agreed to be ` 50,000 for which he was to be issued equity
shares at par. Preliminary expenses of ` 1,00,000 were paid by Amrit, which were
written off at the year end from Securities Premium. Preliminary Expenses were paid
from shares issued to public.
It issued 2,00,000 shares to public for subscription at a premium of ` 3 per share
payable
• ` 3 on application;
• ` 6 on allotment; and
• Balance as First and Final Call.
Applications were received for 1,90,000 Equity Shares and allotment was made.
Allotment Money was received on 1,89,000 Equity Shares while First and Final Call
was received on 1,88,000 shares, which included Equity Shares on which Allotment
Money was not received. Shares on which calls were in arrears were forfeited.
Out of the forfeited shares, 1,500 Equity Shares were reissued @ ` 8 as fully paid-up.
(i) Pass Journal entries to record the above transactions; and
(ii) Prepare Share Capital Account. [10]
56
20. What will be the Earming Per Share (EFS) of Honda Ltd. from the particulars
given below?
Net Profit after Tax: ` 2,50,000
10% Preference Share Capital (` 10 each): ` 5,00,000
Equity Share Capital (` 10 per share): ` 5,00,000
(a) ` 6. (b) ` 5.
(c) ` 4. (d) ` 10. [1]
21. Dividend received by a manufacturing company is classified in a Cash Flow Statement

(a) as an Operating Activity.
(b) as a Financing Activity.
(c) as an Investing Activity.
(d) Both as an Operating Activity and a Financing Activity. [1]
22. State the objective of computing Return on Investment Ratio. [1]
23. What is meant by Cash Flow from Financing Activities? [1]
24. Which item is assumed to be 100 in case of Common-size Statement of

Profit & Loss? [1]
25. From the following particulars, prepare a Comparative Statement of Profit & Loss of
Gold Coin Ltd.
2022 2021
Revenue from Operations ` 36,00,000 24,00,000
Other Income (% of Revenue from Operations) ` 4,32,000 ` 4,80,000
Expenses (% of Revenue from Operations) 70% 60%
Tax Rate 30% 30%
[3]
26. From the following Statement of Profit & Loss of Vikas Ltd. for the year 2021–22,
calculate any three ratios (up to two decimal places):
(i) Trade Receivables Turnover Ratio.
(ii) Inventory Turnover Ratio.
(iii) Net Profit Ratio .
(iv) Operating Profit Ratio.
57
STATEMENT OF PROFIT & LOSS OF VIKAS LTD.
for the year ending 31st March, 2022
Particulars Note No. `
Revenue from Operations 10,00,000
Other Income (Rent received) 50,000
Total Revenue 10,50,000
Expenses:
Purchases 2,75,000
Change in Inventories 1 15,000
Employee Benefit Expenses 2 25,000
Depreciation 10,000
Finance Cost (Interest on Debentures) 20,000
Other Expenses 3 25,000
Total Expenses 3,70,000
Profit before Tax 6,80,000
Provision for Tax 2,72,000
Profit after Tax 4,08,000
Notes to Accounts
Particulars `
15,000
2. Employee Benefit Expenses
Wages 10,000
Salaries 15,000
25,000
2. Other Expenses
Carriage Inward 10,000
Carriage Outward 15,000
25,000
Additional Information: `
Trade Receivable (as on 1st April, 2021) 40,000
Trade Receivable (as on 31st March, 2022) 80,000
Cash Revenue from Operations 2,50,000
[6]
58
27. You are required to prepare a Cash Flow Statement of Kumar Ltd. as per AS-3 (Revised)
from the following Balance Sheet:
BALANCE SHEET OF KUMAR LTD.

as at 31st March, 2022 and 31st March, 2021
2022 (`) 2021 (`)
(a) Share Capital 2,50,000 1,50,000
(b) Reserves and Surplus 1 70,000 50,000
Long-term Borrowings: 10% Bank Loan 90,000 60,000
(a) Short-term Borrowings 40,000 35,000
(b) Short-term Provisions 2 35,000 30,000
Total 4,85,000 3,25,000
II. ASSETS
—Property, Plant and Equipment (Plant and Machinery) 3,20,000 1,60,000
(b) Intangible Assets (Goodwill) 30,000 35,000
2. Current Assets
(a) Trade Receivables 50,000 90,000
(b) Cash and Bank Balances (Cash at Bank) 85,000 40,000
Total 4,85,000 3,25,000
Notes to Accounts
2022 (`) 2021 (`)
Surplus, i.e., Balance in Statement of Profit & Loss 70,000 50,000

(i) Contingent Liability 31st March, 2022 (`) 31st March, 2021 (`)
Proposed Dividend 28,000 25,000
(ii) During the year, a machinery costing ` 30,000, on which depreciation charged was
` 18,000 was sold at a profit of 25%.
(iii) Depreciation charged on machinery was ` 20,000.
(iv) Additional bank loan was taken on 31st December, 2021.
59
Or

From the following Balance Sheets of Star Ltd. as at 31st March, 2022 and 31st March,
2021, prepare a Cash Flow Statement:
BALANCE SHEETS OF STAR LTD. as at 31st March, 2022 and 31st March, 2021
2022 (`) 2021 (`)
(a) Share Capital 6,00,000 5,00,000
Long-term Borrowings 2 2,00,000 1,00,000
Trade Payables 1,50,000 90,000
Total 12,70,000 9,40,000
II. ASSETS
—Property, Plant and Equipment 3 7,00,000 5,00,000
(b) Non-current Investments 70,000 50,000
2. Current Assets
(b) Trade Receivables 1,20,000 70,000
(c) Cash and Bank Balances (Cash at Bank) 3,20,000 2,30,000
Total 12,70,000 9,40,000
Notes to Accounts
2022 (`) 2021 (`)
General Reserve 1,00,000 80,000
Securities Premium 5,000 ...
3,20,000 2,50,000
10% Debentures 2,00,000 1,00,000
3. Property, Plant and Equipment
Machinery (Cost) 8,50,000 6,10,000
Less: Accumulated Depreciation 1,50,000 1,10,000
7,00,000 5,00,000
(i) Machinery costing ` 50,000 (Accumulated Depreciation ` 35,000) was sold at a
loss of 20%.
(ii) Equity Shares were issued at a premium of 15% on 1st April, 2021.
(iii) Additional debentures were issued on 1st October, 2021 at a discount of 10%. The
company wrote off the discount on issue of debentures from Securities Premium.
(iv) Interim Dividend paid during the year amount to ` 25,000. [6]
60
Model Test Paper 4

1. Does the Dissolution of a firm necessarily mean the Dissolution of Partnership? [1]
2. Retiring partner is compensated for giving his share in future profits in favour of
one or more of the continuing partners. In what ratio do the remaining partners
compensate the retiring parnter?
(a) Sacrificing Ratio. (b) Gaining Ratio.
(c) Capital Ratio. (d) Profit-sharing Ratio. [1]
3. Core Services Ltd. invited applications for issuing 75,000 Equity Shares of ` 10 each
at par payable ` 5 on application and balance on allotment. It received ` 3,00,000
as application money. Number of Equity Shares that the company will allot to
subscribers is:
(a) 75,000 Equity Shares. (b) 60,000 Equity Shares.
(c) 70,000 Equity Shares. (d) Nil. [1]
4. Name the main head and sub-head under which Machinery is shown in the Balance
Sheet as per Schedule III of the Companies Act, 2013. [1]
5. Anu, Bina and Charan are partners. The firm had given loan of ` 20,000 to
Bina. They decided to dissolve the firm. In the event of dissolution, the loan will be
settled by
(a) transferring it to debit side of Realisation Account.
(b) transferring it to credit side of Realisation Account.
(c) transferring it to debit side of Bina’s Capital Account.
(d) bina paying Anu and Charan privately. [1]
6. Business Services Ltd., an unlisted company has outstanding 10,000, 6% Debentures of
` 100 each. Out of these, it is to redeem 3,000, 6% Debentures on 31st March, 2022.
Balance in Debentures Redemption Reserve Account is ` 20,000 as on 31st March, 2021.
The amount it should transfer to Debentures Redemption Reserve before redemption
of debentures is
(a) ` 10,000. (b) ` 80,000.
(c) ` 1,00,000. (d) Nil. [1]
78
7. Srijan, Raman and Manan are partners sharing profits and losses in the ratio of 3 : 1 :
1. They admit Yogesh as a partner. New profit sharing-ratio among Srijan, Raman,
Manan and Yogesh becomes 4 : 3 : 2 : 1. Yogesh brings in the necessary amount of
goodwill. Goodwill of the firm is valued at ` 3,00,000. In this case
(a) Srijan will be credited with ` 60,000.
(b) Srijan will be debited with ` 60,000.
(c) Raman will be debited with ` 60,000.
(d) Yogesh will be debited with ` 60,000. [1]
8. Give the reason why Securities Premium cannot be used for transferring amount to
Debentures Redemption Reserve Account. [1]
9. Average Profit : ` 5,50,000
Capital Employed : ` 10,00,000
Normal Rate of Return : 15%
Remuneration of all partners during the year is ` 2,50,000 p.a. to be treated as a charge
on profit.
Value of Goodwill on the basis of two years’ purchase of Super Profit will be
(a) ` 2,40,000. (b) ` 3,00,000.
(c) ` 2,00,000. (d) ` 2,80,000. [1]
10. Best Business Solutions Ltd. is to redeem 10,000, 10% Debentures of ` 100 each in
four equal annual instalments beginning from 31st March, 2021. It invested ` 37,500
in specified securities on 1st April, 2020. It
(a) will realise investment at the time of each redemption and reinvest.
(b) may or may not realise the investment at the time of each redemption.
(c) will realise the investment at the time of third redemption.
(d) will realise the investment at the time of last redemption. [1]
11. Meera, Sarthak and Rohit are partners in a firm. Sarthak retired from the firm and
his claim including his capital and his share of goodwill is ` 1,20,000.
There was unrecorded furniture estimated at ` 6,000, half of which was handed over
to an unrecorded liability of ` 6,000 out of total liability of ` 12,000 and remaining
half was handed over to Sarthak at a discount of 10% in part satisfaction of his claim.
Balance of Sarthak’s claim was discharged by cheque.

(i) Prepare Revaluation Account,
(ii) Pass necessary Journal entry for recording the final payment to Sarthak.
79
Or

Sudha, Rahim and Kartik are partners sharing profits & losses in the ratio of 14 : 5 : 6
respectively.
Rahim retires and gives 5/25th share of his profit to Sudha.
Goodwill of firm is valued at ` 5,00,000. Goodwill already appears in the books of
the firm at ` 75,000.
Profit for the first year after Rahim’s retirement was ` 1,00,000.
You are reqired to pass necessary Journal entries to adjust goodwill and to distribute
profit. [3]
12. Anil, Vineet and Vipul are partners sharing profits in the ratio of 6 : 3 : 1. They admitted
Meera into partnership with effect from 1st April, 2022. New profit-sharing ratio among
Anil, Vineet, Vipul and Meera will be 3 : 3 : 3 : 1. Partners decide to give effect to
the following without affecting the book values (after the required adjustment from
Workmen Compensation Reserve and Investment Fluctuation Reserve) by passing
an adjustment entry:
Book Values (`)
General Reserve 1,40,000
Profit & Loss (Cr.) 60,000
Advertisement Suspense A/c 50,000
Workmen Compensation Reserve 30,000
Investment Fluctuation Reserve 20,000

(i) Claim on account of Workmen Compensation is ` 20,000.
(ii) Book value of Investment is ` 1,00,000 (Market Value ` 85,000).

Pass the required adjustment entry. [3]
13. Nimrat Business Solutions Ltd. is an unlisted trading company. It has outstanding
20,000, 8% Debentures of ` 100 each out of which it has to redeem 5,000 Debentures
on 25th January, 2022 and 7,500 Debentures on 31st March, 2022. The company met
the requirements of the Companies Act, 2013 and invested the required amount in
fixed deposit with State Bank of India earning interest @ 6% p.a. on 15th April, 2021.

(i) Pass the Journal entries for Debentures Redemption Investment; and
(ii) Prepare Debentures Redemption Investment Account.
(Ignore interest on Fixed Deposit)
80
Or
Home Store Ltd., an unlisted retail company has outstanding 20,000, 7% Debentures of
` 100 each. It is to redeem the above debentures as follows:
On 31st December, 2020 5,000 Debentures,
On 31st December, 2021 7,000 Debentures, and
On 31st December, 2022 Balance Debentures
You are required to prepare Debentures Redemption Reserve Account for the years ended
31st March, 2021, 2022 and 2023, if the company maintains DRR at 10% of Outstanding
Debentures. [3]
14. Greater Noida Developers Ltd. issued 50,000, 7% Debentures of ` 100 each at a discount
of 5% and redeemable at 5% premium after five years. Amount being payable as:
` 50 on application;
` 20 (after discount) on allotment; and
Balance on allotment.
Applications were received for 40,000 debentures. Allotment was made to all the
applicants.
A debentureholder holding 500 debentures did not pay the allotment money but
paid it with the first and final call after three months along with interest @ 10% p.a.
You are required to pass the Journal entries for Debentures Allotment and First and
Final Call. [3]
15. Following is the Balance Sheet of Surjit and Rahi, who share profits and losses in the
ratio of 4 : 1, as at 31st March, 2022:
BALANCE SHEET OF SURJIT AND RAHI as at 31st March, 2022

Bank Loan 6,000 Debtors 17,000
Surjit’s Brother’s Loan 8,000 Less: Provision for Doubtful Debts 2,000 15,000
Rahi’s Loan 3,000 Stock 15,000
Investment Fluctuation Reserve 5,000 Investments 25,000
Surjit’s Capital 50,000 Building 25,000
Rahi’s Capital 40,000 Goodwill 10,000
Profit & Loss A/c 10,000
1,20,000 1,20,000
The firm was dissolved on the above date. Following was agreed and/or transactions

took place:
(i) Surjit agreed to pay his brother’s loan.
(ii) Debtors of ` 5,000 proved bad.
(iii) Other assets realised: Investment at 20% less and goodwill at 60%.
(iv) One of the creditors for ` 5,000 was paid only ` 3,000.
(v) Building was auctioned for ` 30,000 and the auctioneer’s commission was ` 1,000.
81
(vi) Rahi took over stock at ` 4,000 (being 20% less than the book value). Balance
Stock realised 50%.
(vii) Realisation expenses amounted to ` 2,000.
You are required to prepare the Realisation Account. [6]
16. The Balance Sheet of Madan and Mohan, who share profits and losses in the ratio of
3 : 2 on 31st March, 2022 was as follows:
Creditors 28,000 Cash at Bank 10,000
Workmen Compensation Reserve 12,000 Debtors 65,000
General Reserve 20,000 Less: Provision for Doubtful Debts 5,000 60,000
Madan 60,000 Investment (Market Value ` 45,000) 50,000
Mohan 40,000 1,00,000 Patents 10,000
1,60,000 1,60,000
They decided to admit Gopal on 1st April, 2022 for 1/4th share and the
new profit-sharing ratio will be 9 : 6 : 5 in the new firm, on the following terms:
(i) Gopal will bring in ` 20,000 as his share of premium for Goodwill and ` 50,000
as his capital.
(ii) That unaccounted accrued income of ` 1,000 be provided for.
(iii) A debtor whose dues of ` 5,000 were written off as bad debts paid ` 4,000 in
full settlement.
(iv) A claim of ` 3,000 on account of workmen compensation to be provided for.
(v) Patents were overvalued by ` 2,000.
(vi) Capitals of the partners shall be proportionate to their profit-sharing ratio taking
Gopal’s capital as base. Adjustment of capitals to be made by cash.
(a) Revaluation Account.
Or

Shashi and Ashu are partners with profit-sharing ratio of 2 : 1. Their Balance Sheet
on 31st March, 2022 was as follows:
General Reserve 12,000 Debtors 40,000
Capital A/cs: Less: Provision for Doubtful Debts 3,600 36,400
Shashi 40,000 Stock 20,000
Ashu 30,000 70,000 Machinery 33,600
Patents 2,000
1,17,000 1,17,000
82
They admitted Tanya into partnership on this date. New profit-sharing ratio is agreed
as 3 : 2 : 1. Tanya brings proportionate capital after the following adjustments:
(i) Tanya brings ` 10,000 in cash as per her share of Goodwill.
(ii) Provision for doubtful debts is to be reduced by ` 2,400.
(iii) Patents are valueless.
(iv) There is an old typewriter valued at ` 2,600. It does not appear in the books of
the firm. It is now to be recorded.
(a) Partners’ Capital Accounts, and
(b) Opening Balance Sheet of the New Firm. [6]
17. Following information is extracted from the books of account of Rose Petals Ltd.
for the year ended 31st March, 2022. You are required to show these entries in the
Balance Sheet of the company as at 31st March, 2022.
Authorised Capital:
1,00,000 Equity Shares of ` 10 each
10,000, 10% Preference Shares of ` 100 each.
Issued Capital:
50,000 Equity Shares
3,000, 10% Preference Shares
Subscribed and Fully Paid-up Share Capital:
40,000 Equity Shares;
3,000, 10% Preference Shares
Subscribed but Not Fully Paid-up Share Capital: 5,000 Equity Shares on which ` 8

per share was received against ` 10 called-up.

Sr. No. Particulars `
1. Term Loan from State Bank of India, out of which ` 5,00,000 is due for repayment on 31st December, 2022 15,00,000
2. Cash Credit 2,00,000
3. Land and Building 7,50,000
4. Patents 1,50,000
5. Sundry Creditors 5,00,000
6. Surplus, i.e., Balance in Statement of Profit & Loss (Dr.) 1,50,000
7. Securities Premium 1,35,000
[6]
18. Ajay and Vijay are in partnership sharing profits and losses in the ratio of 3 : 2.
Following are the particulars of the capitals and drawings of the partners:
Ajay (`) Vijay (`)
Capital (1st April, 2021) 3,00,000 2,50,000
Drawings (made on 1st June, 2021) 15,000 30,000
Ajay had taken a loan of ` 50,000 from the firm on which interest of ` 1,000 was
due by him to the firm.
83
Their partnership deed provided for the following:
(i) Interest on capital will be allowed @ 5% p.a.
(ii) Interest on drawings will be charged @ 4% p.a.
(iii) Each partner will be given a salary of ` 5,000 per month.
(iv) 10% of the correct Net Profit to be transferred to General Reserve.
The profit of the firm for the year ended 31st March, 2022 amounted to ` 3,85,000
before taking into account any interest, salaries and Manager’s Salary of ` 90,000.
(a) Profit & Loss Appropriation Account for the year ended 31st March, 2022.
Or

Mohan, Vijay and Anil are equal partners in a firm, the balances in their Capital Accounts
being ` 30,000, ` 25,000 and ` 20,000 respectively. In arriving at these figures, profit
for the year ended 31st March, 2022, ` 24,000 had already been credited to partners
in their profit-sharing ratio.
Their drawings were Mohan ` 5,000, Vijay ` 4,000 and Anil ` 3,000 during the year
2021–22.
Subsequently, following omissions were noticed and it was decided to give them
effect.
(i) Interest on capital at 10% per annum.
(ii) Interest on Drawings was: Mohan ` 250, Vijay ` 200 and Anil ` 150.
You are required to make the necessary correction Journal entry. [10]
19. Lotus Flowers Ltd. was incorporated with registered capital of 1,00,000 Equity Shares
of ` 50 each. Durgesh, one of the promoters did all the work related to company
incorporation. His work was valued at ` 50,000 for which he was paid after the
company was incorporated and shares were issued. It issued 75,000 shares at premium
of 10% to public for subscription. Amount payable was as follows:
• ` 25 per share on application;
• ` 20 per share on allotment; and
• Balance on first and final call.
The issue was subscribed two times. Shares were allotted to all the applicants on
pro rata.
Due amounts were received except on 5,000 shares which were forfeited and later
reissued @ ` 60 per share.
(i) Pass the Journal entries to record the above transactions; and
(ii) Prepare Shares Forfeited Account.
84
Or

Rehmat Overseas Ltd. was incorporated on 1st January, 2022 with registered capital
of 5,00,000 Equity Shares of ` 10 each and 50,000 Preference Shares of ` 50 each.
Preliminary expenses of ` 2,00,000 were paid by Alok. Alok was reimbursed the
expense from the amount received from issue of shares. They were written off at
the year-end from Securities Premium.
It issued 2,00,000 shares to public for subscription at a premium of ` 5 per share
payable as:
• ` 3 on application;
• ` 8 on allotment; and
• Balance on First and Final Call.
The issue was fully subscribed.
Allotment Money was received on 1,90,000 Equity Shares while First and Final Call
received was ` 7,52,000. Shares on which call money was not received were forfeited.
Half of the forfeited shares were reissued as fully paid-up for ` 15 per share.
(i) Pass the Journal entries to record the above transactions; and
(ii) Prepare Note to Account on Share Capital. [10]

20. What will be the Return on Investment of Hillock Ltd. from the information given
below?
Net Profit before Interest & Tax = ` 80,000
10% Debentures = ` 1,00,000
Share Capital = ` 2,30,000
Reserves and Surplus = ` 70,000
(a) 15%. (b) 10%.
(c) 20%. (d) 25%. [1]
21. Net increase in Working Capital other than Cash and Bank Balance will increase, decrease
or not change Cash Flow from Operating Activities. Give reason in support of your answer.
[1]
22. Inventory Turnover Ratio of Good Luck Ltd. is 5 times. State giving reason, whether
the Ratio will increase, decrease or not change on increase in value of Closing Inventory
by ` 5,000. [1]
23. Cash received from Trade Receivables is classified under which kind of activity while
preparing a Cash Flow Statement? [1]
24. Revenue from Operations ` 6,00,000; Other Income is 15% of Revenue from Operations,
Expenses are 60% of Revenue from Operations and Tax Rate is 40%. Amount of profit
after tax will be
(a) ` 1,44,000. (b) ` 1,98,000.
(c) ` 1,38,000. (d) ` 1,65,600. [1]
85
25. From the following information, prepare Comparative Balance Sheet of DBSE Ltd.:
2022 (`) 2021 (`)
Non-Current Liabilities 6,00,000 6,00,000
Current Liabilities 1,80,000 2,00,000
Non-Current Assets 25,20,000 14,00,000
Current Assets 4,80,000 6,00,000
[3]
26. From the following Balance Sheet of Abhipra Ltd. as at 31st March, 2022 and the
additional information, calculate any three ratios (up to two decimal places):
(i) Trade Receivables Turnover Ratio;
(ii) Inventory Turnover Ratio;
(iii) Working Capital Turnover Ratio;
(iv) Debt to Equity Ratio.
BALANCE SHEET OF ABHIPRA LTD. as at 31st March, 2022
2022 (`) 2021 (`)
(a) Share Capital 12,00,000 10,00,000
(b) Reserves and Surplus 10,00,000 7,00,000
(a) 10% Long-term Borrowings 8,00,000 6,50,000
(b) Long-term Provisions 1,00,000 80,000
(a) Short-term Borrowings 1,00,000 80,000
(b) Trade Payables 3,00,000 3,50,000
(c) Short-term Provisions 50,000 40,000
Total 35,50,000 29,00,000
II. ASSETS
(i) Property, Plant and Equipment 23,00,000 19,00,000
(ii) Intangible Assets (Goodwill) 1,00,000 50,000
(b) Non-current Investments (Trade) 1,50,000 1,00,000
2. Current Assets
(a) Current Investments 1,50,000 1,50,000
(b) Inventories 2,00,000 3,00,000
(c) Trade Receivables 6,00,000 3,00,000
(d) Cash and Bank Balance 50,000 1,00,000
Total 35,50,000 29,00,000

(i) Revenue from Operations (2021–22) : ` 20,00,000
(ii) Cash Revenue from Operations : ` 8,00,000
(iii) Gross Profit : 25% of Cost. [6]
86
27. Following are the Balance Sheets of Krishna Ltd. as on 31st March, 2022 and 2021:
2022 (`) 2021 (`)
(a) Share Capital 1 14,00,000 10,00,000
Long-term Borrowings (10% Debentures) 5,00,000 1,40,000
(a) Trade Payables 1,00,000 60,000
(b) Short-term Provisions 3 80,000 60,000
Total 25,80,000 16,60,000
II. ASSETS
Property, Plant and Equipment and Intangible Assets:
(i) Property, Plant and Equipment 4 16,00,000 9,00,000
(ii) Intangible Assets (Goodwill) 1,40,000 2,00,000
2. Current Assets
(a) Inventories 2,50,000 2,00,000
(c) Cash and Bank Balance (Cash at Bank) 90,000 60,000
Total 25,80,000 16,60,000
Notes to Accounts
2022 (`) 2021 (`)
1. Share Capital
Equity Share Capital 12,00,000 6,00,000
10% Preference Share Capital 2,00,000 4,00,000
14,00,000 10,00,000
Machinery 17,60,000 10,00,000
Less: Accumulated Depreciation (1,60,000) (1,00,000)
16,00,000 9,00,000
Prepare a Cash Flow Statement after taking into account the following adjustments:
(i) Tax paid during the year amounted to ` 70,000.
(ii) During the year, a machine costing ` 1,40,000 (depreciation provided thereon ` 60,000)
was sold for ` 50,000.
(iii) 10% Preference shares were redeemed at par at the end of the year.
(iv) New Debentures have been issued on 1st July, 2021.
87
Or

Following is the Balance Sheet of Honda Ltd. as at 31st March, 2022:
2022 (`) 2021 (`)
(a) Share Capital 4,50,000 4,00,000
(b) Reserves and Surplus 1 37,000 30,000
Long-term Borrowings 2 1,15,000 60,000
(a) Short-term Borrowings (Bank Overdraft) 68,000 1,25,000
(b) Trade Payables 60,000 70,000
(c) Other Current Liabilities 3 8,000 5,000
(d) Short-term Provisions 4 42,000 30,000
Total 7,80,000 7,20,000
II. ASSETS
Property, Plant and Equipment (Machinery) 2,50,000 3,00,000
2. Current Assets
(a) Current Investments 5,000 2,000
(b) Inventories 3,50,000 3,00,000
(c) Trade Receivables 1,40,000 1,00,000
(d) Cash and Bank Balances (Cash at Bank) 35,000 18,000
Total 7,80,000 7,20,000
Notes to Accounts
2022 (`) 2021 (`)
Debenture Redemption Reserve 25,000 20,000
Surplus, i.e., Balance in Statement of Profit & Loss 12,000 10,000
37,000 30,000
10% Debentures 1,15,000 60,000
Dividend Payable 8,000 5,000
Note: Proposed Dividend for the year ended 31st March, 2021 & 2022 are ` 58,000 and ` 53,000 respectively.
(i) Interest paid on Debentures ` 6,000.
(ii) Depreciation charged during the year was ` 40,000.
(iii) 5,000 equity shares of ` 10 each were issued on 31st March, 2022; Share Issue Expenses
incurred ` 5,000, which were written off from Statement of Profit & Loss.
You are required to prepare a Cash Flow Statement (as per AS–3) for the year 2021–22. [6]
88
Model Test Paper 5

1. On the retirement of Hari from the firm of ‘Hari, Ram and Sharma’, Balance Sheet showed
debit balance of ` 12,000 in the Profit & Loss Account. For calculating the amount
payable to Hari, this balance will be transferred
(a) to the credit of the Capital Accounts of Hari, Ram and Sharma equally.
(b) to the debit of the Capital Accounts of Hari, Ram and Sharma equally.
(c) to the debit of the Capital Accounts of Ram and Sharma equally.
(d) to the credit of the Capital Accounts of Ram and Sharma equally. [1]
2. Samsung Ltd. is to redeem 20,000, 9% Debentures of ` 100 each in four equal annual
instalments beginning from 31st March, 2022. It invested ` 75,000 in specified securities
on 1st April, 2021. It
(a) will realise investment at the time of each redemption and reinvest.
(b) may or may not realise the investment at the time of each redemption.
(c) will realise the investment at the time of third redemption.
(d) will realise the investment at the time of last redemption. [1]
3. At the time of firm’s dissolution, the amount of ‘Investment Fluctuation Reserve’ is
transferred to
(a) Credit side of Realisation Account.
(b) Debit side of Realisation Account.
(c) Debit side of Partners’ Capital Accounts.
(d) Credit side of Partners’ Capital Accounts. [1]
4. Mohan Ltd. forfeited 500 Equity Shares of ` 100 each for non payment of first call of
` 30 per share. The final call of ` 10 per share was not made. The forfeited shares
were reissued for ` 65,000 full paid-up.
What is the amount of gain on reissue of shares transferred to Capital Reserve?
(a) ` 2,500 (b) ` 30,000
(c) ` 20,000 (d) ` 60,000 [1]
5. Change in Partnership Deed means dissolution of firm. Is it correct? [1]
6. Give the formula for calculating Goodwill by Capitalisation of Average Profit. [1]
106
7. State the heading and sub-heading under which Premium on Redemption of Debentures
and Securities Premium are shown in the Balance Sheet of a company prepared as
per Schedule III of the Companies Act, 2013. [1]
8. State two purposes for a company to purchase its own debentures from the open market.
[1]
9. Give the Journal entry to distribute ‘Workmen Compensation Reserve’ of ` 60,000 at

the time of admission of Seema as a new partner, when there is claim of ` 40,000
against it. The firm has two partners Piyush and Deepika. [1]
10. Parker Ltd. (a Listed NBFC) has purchased for cancellation its own 2,500,
10% Debentures of ` 100 each redeemable at 10% premium for ` 125 each.
You are required to pass Journal only for cancellation of debentures. [1]
11. Lalit, Pankaj and Rahul are partners sharing profits in the ratio of 5 : 3 : 2. Pankaj
retires and Lalit and Rahul decide to share profits in the ratio of 3 : 5 in future. At
the time of retirement of Pankaj, investments were ` 80,000. Half of the investments
have been taken by partners in their profit-sharing ratio at book value. Remaining
investments were valued at ` 50,000.
You are required to pass necessary Journal entries.
Or
Babita, Chetan and David are partners sharing profits in the ratio of 3 : 2 : 1. Chetan
died on 30th June, 2022. On Chetan’s death, goodwill of the firm was valued at
` 60,000. Chetan’s share in the profit of the firm till his death was to be calculated
on the basis of previous years’ profit which was ` 1,50,000. Calculate Chetan’s share
in the profit of the firm.
You are required to pass necessary Journal entries for:

(i) Treatment of Goodwill.
(ii) Chetan’s Share of profit at the time of his death. [3]
12. Aman and Manish are partners in a firm sharing profits in the ratio of 3 : 2. They
admit Mahesh into the partnership for 1/6th share of the future profits. Goodwill,
valued at 4 times the average super profit of the firm, was ` 18,000. The firm had
Assets worth ` 15,00,000 and Liabilities ` 12,00,000.
The normal earning of such firms is expected to be 10% p.a.

(i) Find the Average profit/Actual profit earned by the firm during the last 4 years.
(ii) Pass the Journal entries in the books of the firm if Mahesh brings his share of
goodwill by cheque. [3]
107
13. Venus Ltd., an unlisted (Non-NBFC or HFC) company, has outstanding 10,000,
8% Debentures of ` 100 each redeemable as follows:
5,000 Debentures on 31st March, 2022;
2,500 Debentures on 31st March, 2023; and
Balance on 31st March, 2024.
Determine the amount that the company should have in DRR Account before each
redemption and amount transferred from DRR to General Reserve after each redemption.
Or
Moon Ltd. (an unlisted Non-NBFC/HFC) had 10,000, 9% Debentures of ` 100 each
outstanding for redemption as on 1st April, 2020. These debentures are to be redeemed
as follows
On 31st March, 2022 25%
On 31st March, 2023 35%
On 31st March, 2024 40%
Determine the amount that the company should invest or have balance in Debentures
Redemption Investment for each redemption. Also state the date when the amount
should be invested or it should have the balance for each redemption. [3]
14. Sterling Ltd. issued 10,000, 10% Debentures of ` 100 each at 6% discount, redeemable at
premium of 10% after 5 years, payable as ` 60 on application and the balance on allotment.
The issue was oversubscribed by 1,000 debentures and allotment was made on
pro rata basis. All money was duly received.
You are required to pass Journal entries for allotment money due and received. [3]
15. Ram and Rahim were partners sharing profits in the ratio of 3 : 1. They agreed to
dissolve the firm. The assets (other than Cash at Bank ` 4,000) of the firm realised
` 1,20,000. The liabilities and other particulars of the firm on that date were as follows:
`
Creditors 25,000
Ram’s Capital 80,000
Rahim’s Capital 5,000 (Dr. Balance)
Profit & Loss Account 8,000 (Dr. Balance)
Realisation Expenses 2,000
The creditors were paid 80% in settlement.
(i) Realisation Account; and
(ii) Partners’ Capital Accounts. [6]

108
16. Sahaj and Nimish are partners in a firm sharing profits in the ratio 2 : 1. Their Balance
Sheet on 31st March, 2022 was as follows:
Creditors 30,000 Machinery 1,20,000
General Reserve 30,000 Furniture 80,000
Employees’ Provident Fund 40,000 Stock 50,000
Capital A/cs: Sundry Debtors 30,000
Sahaj 1,20,000 Cash 20,000
Nimish 80,000 2,00,000
3,00,000 3,00,000

They agreed to admit Gauri for 1/3rd share as a partner from 1st April, 2022 subject
to the following terms:
(a) Gauri will bring her share of goodwill in cash and proportionate capital.
(b) Reduce the value of stock by ` 5,000.
(c) Depreciate furniture by 10% and appreciate machinery by 5%.
(d) ` 3,000 of the debtors proved bad. A provision of 5% was to be created on Sundry
Debtors for doubtful debts.
(e) Goodwill of the firm was valued at ` 45,000.
(i) Partners’ Capital Accounts, and
(ii) Balance Sheet of the Reconstituted firm.
Or

Charu and Harsha were partners in a firm sharing profits in the ratio of 3 : 2. On
1st April, 2022 their Balance Sheet was as follows:
BALANCE SHEET OF CHARU AND HARSHA as at 1st April, 2022
Creditors 17,000 Cash 6,000
General Reserve 4,000 Debtors 15,000
Workmen Compensation Reserve 9,000 Less: Provision for Doubtful Debts 2,000 13,000
Investment Fluctuation Reserve 11,000 Investments 20,000
Capital A/cs: Plant 14,000
Charu 30,000 Land and Building 38,000
Harsha 20,000 50,000
91,000 91,000

On the above date Vaishali was admitted for 1/4th share in the profits of the firm on
the following terms:
(a) Vaishali will bring ` 20,000 for her capital and ` 4,000 for her share of goodwill premium.
(b) All debtors were considered good.
(c) The market value of investments was ` 15,000.
109
(d) There was a liability of ` 6,000 for Workmen Compensation.
(e) Capital accounts of Charu and Harsha are to be adjusted on the basis of Vaishali’s
capital by opening Current Accounts.
(i) Revaluation Account, and
(ii) Partners’ Capital Accounts. [6]
17. Following balances have been extracted from the books of Universal Ltd. as at 31st
March, 2022:
Particulars Amount (`)
Equity Share Capital (Fully paid shares of ` 100 each) 5,00,000
Unclaimed Dividend 10,000
Bank Balance 1,40,000
Securities Premium 75,000
Statement of Profit & Loss (Dr.) 50,000
Tangible Fixed Assets (at cost) 3,50,000
Accumulated Depreciation till Date 25,000
Patents & Trade Marks 70,000
Provision for Tax 35,000
Trade Receivables 60,000
Trade Payables 25,000
You are required to prepare as at 31st March, 2022:

(i) The Balance Sheet of Universal Ltd. as per Schedule III of the Companies Act, 2013.
(ii) Notes to Accounts. [6]
18. John, Mathew and Ginni are partners sharing profits and losses in the ratio of
2 : 1 : 1. Throughout the half-year ended 31st March, 2022, their Capital Accounts
have remained unchanged at ` 1,50,000, ` 1,00,000 and ` 75,000 respectively. Their
Current Account balances on 1st October, 2021 were:
`
John 21,250 Dr.
Mathew 15,000 Dr.
Ginni 25,000 Cr.
During the six-months period in 2021–22:
John withdrew ` 2,500 in the middle of every month;
Mathew withdrew ` 5,000 at the end of every month; and
Ginni withdrew ` 20,000 during the period.
110

Their Partnership Deed provides that:
(a) Partners to be allowed interest on capital @ 5% p.a.
(b) Partners to be allowed or charged interest on Current Account balances @ 4% p.a.
(c) Interest on drawings to be charged @ 6% p.a.
(d) Mathew to be entitled to a salary of ` 1,250 per month.
(e) John to be entitled to a commission of 5% of the correct net profit of the firm
after charging such commission.
During the half-year ended 31st March, 2022, the net profit of the firm was ` 5,17,500
after charging Mathew’s salary which had been debited to Wages and Salaries Account.
You are required to prepare for the half-year ended 31st March, 2022:
(i) Profit & Loss Appropriation Account, and
(ii) John’s Current Account.
Or
Ahmad, Bheem and Daniel are partners in a firm sharing profits in the ratio of
5 : 3 : 2. On 1st April, 2021, their Capital Accounts stoods at ` 8,00,000, ` 6,00,000
and ` 4,00,000 respectively.
The terms of their partnership were as follows:
(i) Interest on capital to be allowed @ 5% per annum.
(ii) Bheem to get a salary of ` 3,000 per month.
(iii) Daniel to get a commission of ` 12,000 per annum.
Ahmad’s share of profit (excluding interest on capital but including salary) is
guaranteed at not less than ` 25,000 per annum.
Bheem’s share of profit, including interest on capital but excluding salary, is guaranteed
at not less than ` 55,000 per annum. Any deficiency arising on that account shall be
met by Daniel.
The profit of the firm for the year ended 31st March, 2022 amounted to ` 2,16,000.
You are required to prepare for the year 2021–22:
(i) Profit & Loss Appropriation Account, and
(ii) Ahmad’s Capital Account. [10]
19. Sargam Ltd. invited applications for issuing 80,000 equity shares of ` 100 each at a
premium. The amount was payable as follows:
On Application — ` 20 per share
On Allotment — ` 60 (including premium) per share
On First call and Final Call — ` 40 per share
111
Applications for 1,20,000 shares were received. Allotment was made on pro-rata
basis to all the applicants. Excess money received on applications was adjusted on
sums due to allotment. Sitaram, who had applied for 6,000 shares failed to pay the
allotment money and Harnam did not pay first and final call on 800 shares allotted
to him. The shares of Sitaram and Harnam were forfeited. 4,200 of these shares were
reissued for ` 100 per share as fully paid up. The re-issued shares included all the
forfeited shares of Harnam.
(i) Pass necessary Journal entries for the above transactions in the books of Sargam Ltd.
(ii) Prepare the Calls-in-Arrears Account.
Or
Relax Ltd. invited applications for issuing 5,00,000 equity shares of ` 10 each at par.
The amount per share was payable as follows:
On Application — ` 1 per share;
On Allotment — ` 2 per share;
On First Call — ` 3 per share;
On Second and Final Call — Balance.
Applications for 8,00,000 shares were received. Applications for 1,00,000 shares were
rejected and pro rata allotment was made to the remaining applicants. Excess money
received with applications was adjusted towards sums due on allotment. All calls
were made. Ashok, a shareholder holding 5,000 shares, failed to pay the allotment
and the call money. Mohan, a shareholder who had applied for 7,000 shares, failed
to pay the first and second and final call. Shares of Ashok and Mohan were forfeited
after the second and final call. Of the forfeited shares 8,000 shares were reissued at
` 12 per share fully paid-up. The reissued shares included all the forfeited shares
of Ashok.
(i) Pass necessary Journal entries for the above transactions in the books of Relax Ltd.
(ii) Prepare the Calls-in-Arrears Account. [10]

20. What will be the Return on Investment (ROI) of Henry Ltd. from the particulars given
below:
Net Profit after Interest but before Tax ` 1,40,000
15% Long-term Borrowings ` 4,00,000
Shareholders’ Funds ` 2,40,000
Tax Rate 50%
(a) 30.25% (b) 31.25%
(c) 28.25% (d) 29.25% [1]
112
21. Sale of Shares/Debentures of other companies by a manufacturing company is
classified as
(a) Operating Activity.
(b) Investing Activity.
(c) Financing Activity.
(d) Investing as well as Financing Activity. [1]
22. Give an example each of Horizontal and Vertical Analysis. [1]
23. State the purpose of ‘Cash Equivalents’. [1]
24. Current Ratio is 2 : 1. State giving reason whether the Current Ratio will improve or decline
or will not change on sale of Stock-in-Trade (Costing ` 10,000) for ` 9,000. [1]
25. Following information is extracted from the Statement of Profit & Loss of Gold Coin Ltd.
for the year ended 31st March, 2022:
2022 (`) 2021 (`)
Revenue from Operations 60,00,000 45,00,000
Employee Benefit Expenses 30,00,000 22,50,000
Depreciation 7,50,000 6,00,000
Other Expenses 15,50,000 10,00,000
Tax Rate 30% 30%
Prepare Comparative Statement of Profit & Loss. [3]

26. The Statement of Profit & Loss of Surya Ltd. for the year ended 31st March, 2022 and
the Balance Sheet of the company as at 31st March, 2022 are given below:
STATEMENT OF PROFIT & LOSS

for the year ended 31st March, 2022
Particulars Note Amount
No. `
I. Revenue from Operations 4,40,000
II. Other Income (Rent Received) 10,000
III. Total Revenue (I + II) 4,50,000
IV. Expenses
(a) Purchase 2,50,000
(b) Change in Inventories 1 20,000
(c) Employees Benefit Expenses (Salary) 42,000
(d) Other Expenses 2 38,000
V. Total Expenses 3,50,000
VI. Profit before Tax (III – V) 1,00,000
113
BALANCE SHEET
Particulars Note No. Amount
`
(a) Equity Share Capital 3,00,000
(b) Reserves and Surplus 1,00,000
(a) Short-term Borrowings 50,000
(b) Trade Payables 1,50,000
Total 6,00,000
II. ASSETS
(i) Property, Plant and Equipment (Plant and Machinery) 4,00,000
2. Current Assets
(a) Inventories 20,000
(b) Trade Receivables 1,00,000
(c) Cash and Bank Balance (Cash at Bank) 80,000
Total 6,00,000
Notes to Accounts
Particulars Amount
`
20,000
2. Other Expenses
Direct Expenses 30,000
Loss on Sale on Building 8,000
38,000
You are required to calculate any three following ratios (up to two decimal places)

from the above Statement of Profit & Loss and Balance Sheet:
(i) Current Ratio
(ii) Inventory Turnover Ratio
(iii) Proprietary Ratio
(iv) Operating Profit Ratio. [6]
114
27. From the following Balance Sheet of Pioneer Traders Ltd. as 31st March, 2022, prepare
Cash Flow Statement:
BALANCE SHEET OF PIONEER TRADERS LTD.
2022 (`) 2021 (`)
(a) Share Capital 6,00,000 4,00,000
Long-term Borrowings: 10% Bank Loan 1,00,000 2,00,000
(a) Trade Payables 45,000 60,000
(b) Other Current Liabilities 2 20,000 ...
(c) Short-term Provisions 3 70,000 40,000
Total 10,35,000 8,00,000
II. ASSETS
(i) Property, Plant and Equipment: Machinery (Net) 6,00,000 6,00,000
(ii) Intangible Assets: Patents 45,000 50,000
(b) Non-current Investments 75,000 ...
2. Current Assets
Total 10,35,000 8,00,000
Notes to Accounts
2022 (`) 2021 (`)
Unpaid Dividend 20,000 ...
Note: Proposed Dividend for the years ended 31st March, 2021 and 2022 was ` 60,000 and ` 1,00,000 respectively.

(i) During the year, a machine costing ` 75,000 was purchased. Loss on sale of machinery
was ` 5,000. Depreciation charged on machinery was ` 12,000.
(ii) Tax paid during the year was ` 50,000.
(iii) Bank loan of ` 1,00,000 repaid on 1st April, 2021.
115
Or

From the following Balance Sheet of Ajanta Limited as on 31st March, 2022, prepare
a Cash Flow Statement:
2022 (`) 2021 (`)
(a) Equity Share Capital 10,00,000 10,00,000
Long-term Borrowings—9% Debentures 3,20,000 2,40,000
(a) Trade Payables 2 1,80,000 2,40,000
(b) Other Current Liabilities 3 1,80,000 1,60,000
Total 19,20,000 17,60,000
II. ASSETS
Property, Plant and Equipment 4 13,40,000 12,00,000
(b) Non-current Investments 5 2,40,000 1,60,000
2. Current Assets
(a) Inventories 1,20,000 1,60,000
Total 19,20,000 17,60,000
Notes to Accounts
2022 (`) 2021 (`)
Surplus, i.e., Balance in Statement of Profit & Loss 1,20,000 ...
2,40,000 1,20,000
2. Trade Payables
Creditors 1,40,000 1,20,000
Bills Payable 40,000 1,20,000
1,80,000 2,40,000
Outstanding Rent 1,80,000 1,60,000
Plant and Machinery 14,90,000 13,00,000
Accumulated Depreciation (1,50,000) (1,00,000)
13,40,000 12,00,000
5. Non-Current Investments
Shares in XYZ Limited 2,40,000 1,60,000
(i) During the year 2021–22, a machinery costing ` 50,000 and accumulated depreciation
thereon ` 15,000 was sold for ` 32,000.
(ii) 9% Debentures of ` 80,000 were issued on 1st April, 2021 at a discount of 5% which
was written off from Statement of Profit & Loss.
(iii) Interim Dividend paid during the year amounted to ` 50,000. [6]
116

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Model Test Paper 1

Time Allowed: 3 Hrs. Max. Marks: 80

Section A (60 Marks)

Section B (20 Marks)

Profit before Tax 7,00,000

Section A (60 Marks)

Sundry Assets realised ` 2,32,500 and creditors were paid in full.

BALANCE SHEET OF XAVIER AND YOGESH

. TRIAL BALANCE as at 31st March, 2023

Additional Information: Underwriting commission of ` 10,000 on issue of shares is

Section A (60 Marks)

You are required to:

BALANCE SHEET as at 31st March, 2022

It was agreed that:

21. Dividend received by a manufacturing company is classified in a Cash Flow Statement

22. State the objective of computing Return on Investment Ratio. [1]

23. What is meant by Cash Flow from Financing Activities? [1]

24. Which item is assumed to be 100 in case of Common-size Statement of

BALANCE SHEET OF KUMAR LTD.

Section A (60 Marks)

9. Average Profit : ` 5,50,000

Capital Employed : ` 10,00,000

Normal Rate of Return : 15%

You are required to:

BALANCE SHEET OF SURJIT AND RAHI as at 31st March, 2022

Section B (20 Marks)

Section A (60 Marks)

9. Give the Journal entry to distribute ‘Workmen Compensation Reserve’ of ` 60,000 at

You are required to pass necessary Journal entries.

You are required to pass necessary Journal entries for:

The normal earning of such firms is expected to be 10% p.a.

You are required to:

(ii) Partners’ Capital Accounts. [6]

You are required to prepare as at 31st March, 2022:

Section B (20 Marks)

22. Give an example each of Horizontal and Vertical Analysis. [1]

23. State the purpose of ‘Cash Equivalents’. [1]

Prepare Comparative Statement of Profit & Loss. [3]

STATEMENT OF PROFIT & LOSS

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