Accountancy: CUET Mock Test - 2 - CUET MCQ

Key Points

Realization Account:

• The nature of the Realization account is a Nominal Account. The purpose of preparing a Realization account is to close the dissolved firm's books of accounts and determine profit or loss on the Realization of assets and payment of liabilities. It is put together by:
  • Transferring all assets, except cash and bank accounts, to the account's debit side.
  • Transferring all liabilities to the credit side of the account except the Partner's Loan Account and the Partners' Capital Accounts.
  • Crediting the asset sale receipt to the account.
  • Debiting the account for the payment of liabilities.
  • Deducting the firm's dissolution expenses.
  • The account balance can be either profit or loss. This balance is transferred to the Partners' Capital Accounts in their profit-sharing ratio.
  • The final balance of capital accounts is transferred to Cash Account.

Important PointsRealization Account: This option is Incorrect because The purpose of preparing a Realization account is to close the dissolved firm's books of accounts and determine profit or loss on the Realization of assets and payment of liabilities. The final balance of capital accounts is transferred to Cash Account.

Cash Account: This option is correct because The nature of the Realization account is a Nominal Account. The purpose of preparing a Realization account is to close the dissolved firm's books of accounts and determine profit or loss on the Realization of assets and payment of liabilities. The final balance of capital accounts is transferred to Cash Account.

Profit & Loss Account: This option is Incorrect because The purpose of preparing a Realization account is to close the dissolved firm's books of accounts and determine profit or loss on the Realization of assets and payment of liabilities. The final balance of capital accounts is transferred to Cash Account.

Loan Accounts of Partners: This option is Incorrect because The purpose of preparing a Realization account is to close the dissolved firm's books of accounts and determine profit or loss on the Realization of assets and payment of liabilities. The final balance of capital accounts is transferred to Cash Account.

The correct answer is 13/54.

Key PointsProfit & Loss ratio - ratio in which profit or loss of partner's share are calculated.Important Points To calculate D's share of Profit when share taken by each Partner is given -

D receives from A's share =1/3 x 3/6 = 3/18 D receives from B's share= 1/6 x 2/6 = 1/18

D receives from C's share=1/6 x 1/9 =1/54

D's share of profit = 3/18+ 1/18+ 1/54

=(9+3+1)/54

=13/54

Additional Information New Profit ratio = Old ratio - Sacrifice Ratio

A = 3/6 -3/18= (9-3)/18=6/18=18/54

B=2//6 - 1/18=(6 -1)/18 =5/18 =15/54

C=1/6 - 1/54 =(9-1)/54=8/54

D =13/54

New Profit ratio = A:B:C:D

=18:15:8:13

The correct answer is Debit A's Capital A/c by Rs. 1,200; Debit B's Capital A/c by Rs. 800; credit goodwill A/c by Rs. 2,000.

Key Points

Goodwill already appearing in Books:

Goodwill already appearing in the Balance sheet at the time of admission of a partner is transferred to old partner's capital accounts in old ratio.

Working Notes:

Writing off goodwill already in the books (Distributed in Old Ratio)

A's account will be debited with = 2,000 x 3/5 = 1,200

B's account will be debited with = 2,000 x 2/5 = 800

Distribution of goodwill amounting to Rs. 3,000 (Distributed in Sacrificing Ratio)

A's account will be credited by = 3,000 x 3/5 = 1,800

B's account will be credited by = 3,000 x 2/5 = 1,200

The correct answer is Fixed.

Key Points

• In fixed capital method two accounts namely capital and current a/c are prepared.
• All transactions related to capital introduction and withdrawals by partners are recorded in Capital A/c and other adjustments like interest on capital, interest on drawings, commission, salary, share of profit or loss are recorded in Current A/c.
• As the name suggests, 'fixed capital account' this account shows a fixed capital balance and always shows positive or credit balance.

Important Points

• Credit Balance - When credit side of an account exceeds debit side, the balancing figure is known as credit balance.
• Capital Account - Capital account is prepared to show introduction, withdrawal and balance of capital by partners in a partnership firm. Capital Accounts can be prepared by fixed and fluctuating capital method.

The correct answer is 6% p.a.

Key Points According to Indian Partnership Act 1932, Interest at the rate of 6% p.a. is to be allowed on loan to the firm. Such interest shall be paid to the Partner's Loan even if there are losses to the firm, because it is treated as ''Charge against profit''.

Important Points Interest on Loan : According to provisions of Indian Partnership Act 1932, if any partner apart from his share capital advances money to the firm as loan, he is entitled to interest on such amount at the rate of 6 %, because it is treated as Charge Against Profit. Even if there is absence of partnership deed, it is to be paid to the partners.

Additional Information

Charge against Profit: In Accounting, charge against profit means the expenses that have to pay whether there is profit or loss.

The correct answer is (B), (A), (C), (D), (E)

Key Points

• Issue of Prospectus (B)
  • This is the first step in the process of issuing shares to the public.
  • A prospectus is an official document that companies must publish when they are offering their shares to the public for the first time. It contains details about the company, its financial status, and the shares being offered.
  • This step is correctly placed as the first step in the sequence, making statement B correct in its position.
• Receipt of Applications (A)
  • After the prospectus is issued, interested investors apply for shares. This is the next logical step in the process.
  • The receipt of applications indicates the interest of investors in purchasing the company's shares.
  • Placing this step after issuing the prospectus is correct, making statement A correctly sequenced.
• Allotment of Shares (C)
  • Once applications are received, the company proceeds to allot shares to applicants based on certain criteria and availability.
  • This step involves the actual distribution of shares to investors who applied for them.
  • Placing allotment of shares after receiving applications is the correct sequence, making statement C accurately placed.
• Making Call Money Due (D)
  • After shares are allotted, companies may require investors to pay the remaining amount (if shares are issued at a premium or in installments) known as call money.
  • This step is correctly sequenced after the allotment of shares.
  • Statement D is therefore correctly positioned in the sequence.
• Receiving Call Money (E)
  • The final step involves the actual payment of call money by the investors to the company.
  • This completes the share issuance process.
  • Placing this step at the end of the sequence is correct, making statement E accurately placed.

Hence, the sequence (B), (A), (C), (D), (E) is correct, making option 2 the right answer.

The correct answer is Key fields.

Key Points

• Key fields:
  • Key fields, often referred to as "primary keys" in one table and "foreign keys" in another, serve to establish a connection between two tables in a database.
  • They are crucial for maintaining the integrity of the database and ensuring that data between related tables stays consistent.
  • By using key fields, databases can enforce referential integrity, preventing orphan records and ensuring that relationships between tables are logically maintained.

Additional Information

• Table fields:
  • While "Table fields" can refer to any column within a table, not all table fields serve as key fields for relationships between tables.
• Joint fields:
  • The term "Joint fields" is not a standard term in database terminology for describing the common fields used in table relationships.
• Main fields:
  • "Main fields" may refer to important fields within a table but do not specifically denote the fields used to link tables together in a database.

The correct answer is ₹70,820.

Key Points

• Calculation of Monika's share in goodwill, reserve, and profit on revaluation:
• The profit-sharing ratio among Lisa, Monika, and Nisha is 2:2:1. Therefore, Monika's share is 2/5 of any divisible profit or reserve.
• Goodwill of the firm is ₹30,000. Monika's share of the goodwill is 2/5 of ₹30,000, which equals ₹12,000.
• The balance in the reserve on the date of Monika's death was ₹15,000. Monika's share of the reserve is 2/5 of ₹15,000, which equals ₹6,000.
• Profit on revaluation is ₹7,050. Monika's share of the profit on revaluation is 2/5 of ₹7,050, which equals ₹2,820.
• Summing up Monika's entitlements: Goodwill share (₹12,000) + Reserve share (₹6,000) + Profit on revaluation share (₹2,820) = ₹20,820.
• Additionally, Monika's capital account stood at ₹50,000. Therefore, the total amount to be transferred to Monika's Executors Account is her capital plus her entitlements: ₹50,000 (capital) + ₹20,820 (entitlements) = ₹70,820.

Additional Information

• Goodwill is an intangible asset that represents the value of the name, reputation, and the overall ongoing concern value of a business.
• In the event of a partner's death, the firm usually settles the account by paying the deceased partner's share of the capital and accumulated profits, including any share of goodwill and reserves, to their executor.
• The revaluation account is used to adjust the book values of assets and liabilities to their fair values. Profit or loss on revaluation is shared among the partners in their profit-sharing ratio.

The correct answer is ₹3,63,000.

Key Points

• To calculate the cost of medicine consumed during 2020-21, we need to consider several factors including payments to creditors, the opening and closing creditors, stock adjustments, and advances to suppliers.
• Starting with the payment to creditors which is ₹3,70,000, this figure represents the cash outflow towards settling dues for medicine purchases.
• Next, adjust for the change in creditors from the beginning to the end of the period. The creditors increased from ₹25,000 to ₹17,000, indicating that less was paid off than what was purchased on credit, thus add the difference (₹17,000 - ₹25,000 = -₹8,000).
• Similarly, account for the change in stock of medicines. The stock decreased from ₹62,000 to ₹54,000, indicating consumption. This decrease in stock (₹62,000 - ₹54,000 = ₹8,000) should be considered as part of the cost.
• Finally, adjust for advances to suppliers. The increase from ₹11,000 to ₹18,000 (₹18,000 - ₹11,000 = ₹7,000) indicates additional funds given in advance for future supplies, which should not affect the current period's medicine cost directly.
• Adding these figures: ₹3,70,000 (payments to creditors) - ₹8,000 (decrease in creditors) + ₹8,000 (decrease in stock), we get ₹3,70,000 as the total cost. The advances to suppliers do not affect the calculation directly as they are prepayments for future purchases.
• The calculation mistake in the original problem statement regarding the direct inclusion or subtraction of advances leads to confusion. The correct approach focuses on actual payments, creditor adjustments, and stock changes to find the consumed cost.

Additional Information

• Understanding the flow of funds and inventory adjustments is crucial in accounting to accurately measure costs and expenditures.
• This calculation is essential for businesses to understand their cost of goods sold (COGS) which directly impacts their gross profit.

The correct answer is The debit side of Realisation Account

Key Points

• The debit side of Realisation Account:
  • During the dissolution of a partnership, the goodwill account, if not already written off, is transferred to the debit side of the Realisation Account.
  • This transfer represents the write-off of goodwill as it is not a tangible asset to be realized in cash upon dissolution.
  • The purpose of this entry is to remove the goodwill value from the books, acknowledging that it does not fetch any amount during the realization process of assets and liabilities.

Additional Information

• The credit side of Realisation Account:
  • This option is incorrect as the credit side of the Realisation Account typically records the amounts realized from the sale of assets and settlement of liabilities, not the write-off of goodwill.
• The credit side of Partner's Capital/Current Account:
  • This option is incorrect because the goodwill amount is not credited to partners' capital or current accounts during dissolution. Such accounts are credited for their share of profit or realization surplus, not for goodwill write-off.
• The debit side of Partner's Capital/Current Account:
  • This option is also incorrect as the debit side of these accounts reflects deductions like drawings or share of loss, not the write-off of goodwill.

Z’s share = 1/5;
X’s share = 3/5 - 1/5 = 2/5;
Y’s share = 2/5;
New profit sharing ratio of X : Y : Z = 2 : 2 :1.

Taxation fund is neither profits nor free reserves, so it is not distributed.

Old partnership comes to an end and new partnership comes into existence and the firm continues.

The given statement is true only if the new partner is not able to bring his share of goodwill in money or money’s worth.

Existing goodwill is written-off in old ratio by debiting old partners’ capital accounts.

Deferred revenue expenditure account is debited.

Goodwill share is calculated at the valued amount of goodwill, not the amount appearing in books Ratio is supposed to be equal among X , Y , Z i.e. 1 : 1 : 1
∴ Z’s Share of Goodwill = 1/3 x 45,000
= ₹ 15,000

In the company’s balance sheet, only subscribed and fully paid up share capital amount is shown. Authorised capital and issued capital are shown in notes to accounts and reserve capital is not shown in the company’s balance sheet and note to accounts.

Since the company received applications for 50,000 shares but only has 25,000 shares available for allotment, they need to allot shares to everyone on a pro-rata basis.

To determine the ratio for allotment, we can divide the number of available shares by the number of shares applied for:

25,000 (available shares) ÷ 50,000 (shares applied for) = 0.5

This means that for every share applied for, the company can allot 0.5 shares. So, the ratio for allotment will be 1:2 (one share allotted for every two shares applied for).

The capital of a company is divided into units called shares, which represent a portion of ownership in the company. Shareholders have the right to vote on corporate matters and to receive dividends when profits are distributed.