Accounting Model Test Paper - 2 (Answers) | Mock Tests & Past Year Papers for CA Foundation PDF Download

 Page 1


ANSWERS OF MODEL TEST PAPER 2 
FOUNDATION COURSE 
PAPER – 1: ACCOUNTING 
ANSWERS 
1. (a) (i) True: Since the temporary huts were necessary for the
construction, their cost should be added to the cost of the cinema 
hall and thus capitalised. 
(ii) False: Accrual concept implies accounting on ‘due’ or ‘accrual’
basis. Accrual basis of accounting involves recognition of revenues
and costs as and when they accrue irrespective of actual receipts
or payments.
(iii) True: In the early periods of useful life of a fixed assets, repairs
and maintenance expenses are relatively low because the asset is
new. Whereas in later periods, as the asset become old, repairs
and maintenance expenses  increase  continuously.  Under  written
down  value method, depreciation charged is high in the initial
period and reduces continuously in the later periods.  Thus,
depreciation and repair and maintenance  expenses  become  more
or  less uniform throughout the useful life of the asset.
(iv) True: Discount at the time of retirement of a bill is a gain for the
drawee and loss for the drawer.
(v) False: If individual life policies are taken in the name of the partners
and premium is paid from the firm, then retiring partner is entitled
to surrender value of all the partners policies.
(vi) False: Net income is determined by preparing income and
expenditure in case of persons practicing vacation.
(b) 
Book-keeping Accounting 
It is a process concerned with 
recording of transactions. 
It is a process concerned with 
summarising of the recorded 
transactions. 
It constitutes as a base for 
accounting. 
It is considered as a language of the 
business. 
Financial statements do not form 
part of this process. 
Financial statements are prepared in 
this process on the basis of book-
keeping records. 
Managerial decisions cannot be 
taken with the help of these 
records. 
Management takes decisions on the 
basis of these records. 
499
Page 2


ANSWERS OF MODEL TEST PAPER 2 
FOUNDATION COURSE 
PAPER – 1: ACCOUNTING 
ANSWERS 
1. (a) (i) True: Since the temporary huts were necessary for the
construction, their cost should be added to the cost of the cinema 
hall and thus capitalised. 
(ii) False: Accrual concept implies accounting on ‘due’ or ‘accrual’
basis. Accrual basis of accounting involves recognition of revenues
and costs as and when they accrue irrespective of actual receipts
or payments.
(iii) True: In the early periods of useful life of a fixed assets, repairs
and maintenance expenses are relatively low because the asset is
new. Whereas in later periods, as the asset become old, repairs
and maintenance expenses  increase  continuously.  Under  written
down  value method, depreciation charged is high in the initial
period and reduces continuously in the later periods.  Thus,
depreciation and repair and maintenance  expenses  become  more
or  less uniform throughout the useful life of the asset.
(iv) True: Discount at the time of retirement of a bill is a gain for the
drawee and loss for the drawer.
(v) False: If individual life policies are taken in the name of the partners
and premium is paid from the firm, then retiring partner is entitled
to surrender value of all the partners policies.
(vi) False: Net income is determined by preparing income and
expenditure in case of persons practicing vacation.
(b) 
Book-keeping Accounting 
It is a process concerned with 
recording of transactions. 
It is a process concerned with 
summarising of the recorded 
transactions. 
It constitutes as a base for 
accounting. 
It is considered as a language of the 
business. 
Financial statements do not form 
part of this process. 
Financial statements are prepared in 
this process on the basis of book-
keeping records. 
Managerial decisions cannot be 
taken with the help of these 
records. 
Management takes decisions on the 
basis of these records. 
499
(c) Bank Reconciliation Statement as on 31
st
 March, 2024
Particulars Details 
(`) 
Amount 
(`) 
Balance as per Pass Book (Cr.) 3,00,000 
Add: Cheque deposited but not yet cleared 44,000 
Add: Cheque recorded in Cash Book but not yet 
deposited 
10,000 
Add: Bank Charges debited by bank 500 54,500 
Less: Cheque issued but not yet presented (96,000 ) 
Less: Interest allowed by bank (3,000 ) (99,000 ) 
Balance as per Cash Book 2,55,500 
2. (a) Valuation of Physical Stock as at March 31, 2024 
` 
Stock at cost on 31.12.2023 80,000 
Add:  (1)  Undercasting of a page total 400 
(2) Goods purchased and delivered during
January – March, 2024
71,000  ` (70,000 – 6,000 + 7,000) 
(3) Cost of sales return ` (1,500 – 300) 1,200  72,600 
1,52,600 
Less:(1)  Overcasting of a page total 
` (6,000 – 5,000) 
1,000 
(2) Goods sold and dispatched during
January – March, 2024
` (90,000 – 5,000 + 4,000)     89,000
Less: Profit margin ?
?
?
?
?
?
×
125
25
  89,000  17,800 
 71,200   72,200 
Value of stock as on 31st March, 2024  80,400 
Note:  In the above solution, transfer of ownership is assumed to take 
place at the time of delivery of goods.  If it is assumed that transfer of 
There is no sub-field of book-
keeping. 
It has several sub-fields like financial 
accounting, management accounting 
etc. 
Financial position of the 
business cannot be ascertained 
through book-keeping records. 
Financial position of the business is 
ascertained on the basis of the 
accounting reports. 
500
Page 3


ANSWERS OF MODEL TEST PAPER 2 
FOUNDATION COURSE 
PAPER – 1: ACCOUNTING 
ANSWERS 
1. (a) (i) True: Since the temporary huts were necessary for the
construction, their cost should be added to the cost of the cinema 
hall and thus capitalised. 
(ii) False: Accrual concept implies accounting on ‘due’ or ‘accrual’
basis. Accrual basis of accounting involves recognition of revenues
and costs as and when they accrue irrespective of actual receipts
or payments.
(iii) True: In the early periods of useful life of a fixed assets, repairs
and maintenance expenses are relatively low because the asset is
new. Whereas in later periods, as the asset become old, repairs
and maintenance expenses  increase  continuously.  Under  written
down  value method, depreciation charged is high in the initial
period and reduces continuously in the later periods.  Thus,
depreciation and repair and maintenance  expenses  become  more
or  less uniform throughout the useful life of the asset.
(iv) True: Discount at the time of retirement of a bill is a gain for the
drawee and loss for the drawer.
(v) False: If individual life policies are taken in the name of the partners
and premium is paid from the firm, then retiring partner is entitled
to surrender value of all the partners policies.
(vi) False: Net income is determined by preparing income and
expenditure in case of persons practicing vacation.
(b) 
Book-keeping Accounting 
It is a process concerned with 
recording of transactions. 
It is a process concerned with 
summarising of the recorded 
transactions. 
It constitutes as a base for 
accounting. 
It is considered as a language of the 
business. 
Financial statements do not form 
part of this process. 
Financial statements are prepared in 
this process on the basis of book-
keeping records. 
Managerial decisions cannot be 
taken with the help of these 
records. 
Management takes decisions on the 
basis of these records. 
499
(c) Bank Reconciliation Statement as on 31
st
 March, 2024
Particulars Details 
(`) 
Amount 
(`) 
Balance as per Pass Book (Cr.) 3,00,000 
Add: Cheque deposited but not yet cleared 44,000 
Add: Cheque recorded in Cash Book but not yet 
deposited 
10,000 
Add: Bank Charges debited by bank 500 54,500 
Less: Cheque issued but not yet presented (96,000 ) 
Less: Interest allowed by bank (3,000 ) (99,000 ) 
Balance as per Cash Book 2,55,500 
2. (a) Valuation of Physical Stock as at March 31, 2024 
` 
Stock at cost on 31.12.2023 80,000 
Add:  (1)  Undercasting of a page total 400 
(2) Goods purchased and delivered during
January – March, 2024
71,000  ` (70,000 – 6,000 + 7,000) 
(3) Cost of sales return ` (1,500 – 300) 1,200  72,600 
1,52,600 
Less:(1)  Overcasting of a page total 
` (6,000 – 5,000) 
1,000 
(2) Goods sold and dispatched during
January – March, 2024
` (90,000 – 5,000 + 4,000)     89,000
Less: Profit margin ?
?
?
?
?
?
×
125
25
  89,000  17,800 
 71,200   72,200 
Value of stock as on 31st March, 2024  80,400 
Note:  In the above solution, transfer of ownership is assumed to take 
place at the time of delivery of goods.  If it is assumed that transfer of 
There is no sub-field of book-
keeping. 
It has several sub-fields like financial 
accounting, management accounting 
etc. 
Financial position of the 
business cannot be ascertained 
through book-keeping records. 
Financial position of the business is 
ascertained on the basis of the 
accounting reports. 
500
ownership takes place on the date of invoice, then ` 4,000 goods 
delivered in March 2024 for which invoice was received in April, 2024, 
would be treated as purchases of the accounting year 2023-2024 and 
thus excluded.  Similarly, goods dispatched in March, 2024 but invoiced 
in April, 2024 would be excluded and treated as sale of the year 
2023-2024. 
(b) In the books of M/s. Surya Lights 
Machinery Account 
Date Particulars Amount ` Date Particulars Amount ` 
1.1.2020 To Bank A/c 3,20,000 31.12.2020 By Depreciation A/c 96,000 
To Bank A/c 80,000  (`80,000+ ` 16,000) 
(Erection charges) 31.12.2020 By Balance c/d 4,64,000 
1.7.2020 To Bank A/c    1,60,000 (`3,20,000+ `1,44,000) 
5,60,000 5,60,000 
01.01.21 To Balance b/d 4,64,000 31.12.2021 By Depreciation A/c 
(`80,000+ ` 32,000) 
1,12,000 
 31.12.2021 By Balance c/d 3,52,000 
(` 2,40,000 + ` 1,12,000) 
4,64,000 4,64,000 
01.01.22 To Balance b/d 3,52,000 01.07.2022 By Bank A/c 1,60,000 
30.9.22 To Bank A/c 60,000 By Profit and Loss A/c 
(Loss on Sale – W.N.) 
40,000 
 31.12.2022 By Depreciation A/c 
(` 40,000 + ` 32,000 +  
` 3,000) 
75,000 
By Balance c/d 1,37,000 
(` 80,000 + ` 57,000) 
4,12,000 4,12,000 
01.01.23 To Balance b/d 1,37,000 31.12.2023 By Depreciation A/c 
(` 12,000 + ` 8,550) 
20,550 
By Balance c/d 1,16,450 
(` 68,000 + ` 48,450) 
1,37,000 1,37,000 
Working Notes: 
Book Value of machines (Straight line method) 
Machine I Machine II Machine III 
` ` `
Cost 4,00,000 1,60,000 60,000 
Depreciation for 2020   80,000   16,000 
Written down value as on 
31.12.2020 
3,20,000 1,44,000 
Depreciation for 2021   80,000   32,000 
501
Page 4


ANSWERS OF MODEL TEST PAPER 2 
FOUNDATION COURSE 
PAPER – 1: ACCOUNTING 
ANSWERS 
1. (a) (i) True: Since the temporary huts were necessary for the
construction, their cost should be added to the cost of the cinema 
hall and thus capitalised. 
(ii) False: Accrual concept implies accounting on ‘due’ or ‘accrual’
basis. Accrual basis of accounting involves recognition of revenues
and costs as and when they accrue irrespective of actual receipts
or payments.
(iii) True: In the early periods of useful life of a fixed assets, repairs
and maintenance expenses are relatively low because the asset is
new. Whereas in later periods, as the asset become old, repairs
and maintenance expenses  increase  continuously.  Under  written
down  value method, depreciation charged is high in the initial
period and reduces continuously in the later periods.  Thus,
depreciation and repair and maintenance  expenses  become  more
or  less uniform throughout the useful life of the asset.
(iv) True: Discount at the time of retirement of a bill is a gain for the
drawee and loss for the drawer.
(v) False: If individual life policies are taken in the name of the partners
and premium is paid from the firm, then retiring partner is entitled
to surrender value of all the partners policies.
(vi) False: Net income is determined by preparing income and
expenditure in case of persons practicing vacation.
(b) 
Book-keeping Accounting 
It is a process concerned with 
recording of transactions. 
It is a process concerned with 
summarising of the recorded 
transactions. 
It constitutes as a base for 
accounting. 
It is considered as a language of the 
business. 
Financial statements do not form 
part of this process. 
Financial statements are prepared in 
this process on the basis of book-
keeping records. 
Managerial decisions cannot be 
taken with the help of these 
records. 
Management takes decisions on the 
basis of these records. 
499
(c) Bank Reconciliation Statement as on 31
st
 March, 2024
Particulars Details 
(`) 
Amount 
(`) 
Balance as per Pass Book (Cr.) 3,00,000 
Add: Cheque deposited but not yet cleared 44,000 
Add: Cheque recorded in Cash Book but not yet 
deposited 
10,000 
Add: Bank Charges debited by bank 500 54,500 
Less: Cheque issued but not yet presented (96,000 ) 
Less: Interest allowed by bank (3,000 ) (99,000 ) 
Balance as per Cash Book 2,55,500 
2. (a) Valuation of Physical Stock as at March 31, 2024 
` 
Stock at cost on 31.12.2023 80,000 
Add:  (1)  Undercasting of a page total 400 
(2) Goods purchased and delivered during
January – March, 2024
71,000  ` (70,000 – 6,000 + 7,000) 
(3) Cost of sales return ` (1,500 – 300) 1,200  72,600 
1,52,600 
Less:(1)  Overcasting of a page total 
` (6,000 – 5,000) 
1,000 
(2) Goods sold and dispatched during
January – March, 2024
` (90,000 – 5,000 + 4,000)     89,000
Less: Profit margin ?
?
?
?
?
?
×
125
25
  89,000  17,800 
 71,200   72,200 
Value of stock as on 31st March, 2024  80,400 
Note:  In the above solution, transfer of ownership is assumed to take 
place at the time of delivery of goods.  If it is assumed that transfer of 
There is no sub-field of book-
keeping. 
It has several sub-fields like financial 
accounting, management accounting 
etc. 
Financial position of the 
business cannot be ascertained 
through book-keeping records. 
Financial position of the business is 
ascertained on the basis of the 
accounting reports. 
500
ownership takes place on the date of invoice, then ` 4,000 goods 
delivered in March 2024 for which invoice was received in April, 2024, 
would be treated as purchases of the accounting year 2023-2024 and 
thus excluded.  Similarly, goods dispatched in March, 2024 but invoiced 
in April, 2024 would be excluded and treated as sale of the year 
2023-2024. 
(b) In the books of M/s. Surya Lights 
Machinery Account 
Date Particulars Amount ` Date Particulars Amount ` 
1.1.2020 To Bank A/c 3,20,000 31.12.2020 By Depreciation A/c 96,000 
To Bank A/c 80,000  (`80,000+ ` 16,000) 
(Erection charges) 31.12.2020 By Balance c/d 4,64,000 
1.7.2020 To Bank A/c    1,60,000 (`3,20,000+ `1,44,000) 
5,60,000 5,60,000 
01.01.21 To Balance b/d 4,64,000 31.12.2021 By Depreciation A/c 
(`80,000+ ` 32,000) 
1,12,000 
 31.12.2021 By Balance c/d 3,52,000 
(` 2,40,000 + ` 1,12,000) 
4,64,000 4,64,000 
01.01.22 To Balance b/d 3,52,000 01.07.2022 By Bank A/c 1,60,000 
30.9.22 To Bank A/c 60,000 By Profit and Loss A/c 
(Loss on Sale – W.N.) 
40,000 
 31.12.2022 By Depreciation A/c 
(` 40,000 + ` 32,000 +  
` 3,000) 
75,000 
By Balance c/d 1,37,000 
(` 80,000 + ` 57,000) 
4,12,000 4,12,000 
01.01.23 To Balance b/d 1,37,000 31.12.2023 By Depreciation A/c 
(` 12,000 + ` 8,550) 
20,550 
By Balance c/d 1,16,450 
(` 68,000 + ` 48,450) 
1,37,000 1,37,000 
Working Notes: 
Book Value of machines (Straight line method) 
Machine I Machine II Machine III 
` ` `
Cost 4,00,000 1,60,000 60,000 
Depreciation for 2020   80,000   16,000 
Written down value as on 
31.12.2020 
3,20,000 1,44,000 
Depreciation for 2021   80,000   32,000 
501
Written down value as on 
31.12.2021 
2,40,000 1,12,000 
Depreciation for 2022   40,000   32,000   3,000 
Written down value as on 
31.12.2022 
2,00,000 80,000 57,000 
Sale proceeds 1,60,000 
Loss on sale   40,000 
3. (a) In the books of Mr. Jalaj 
Statement of Affairs 
Liabilities 31.3.23 31.3.24 Assets 31.3.23 31.3.24 
Capital 
(bal fig) 
3,01,500 5,50,875 Furniture 62,500 56,250 
Loans 1,12,500 87,500 Building 1,25,000 1,21,875 
Creditors 62,500 1,00,000 Stock 1,25,000 3,12,500 
Debtors 75,000 1,37,500 
Cash in 
hand 
14,000 16,500 
Cash at 
bank 
75,000 93,750 
4,76,500 7,38,375 4,76,500 7,38,375 
Capital A/c 
Particulars ` Particulars `
To Cash (drawings) 30,000 By Bal b/d 3,01,500 
To Bal c/d  5,50,875 By Cash  50,000 
By Profit (bal fig) 2,29,375 
5,80,875 5,80,875 
(b) Revaluation Account 
` ` 
To Furniture A/c 40,000 By Office equipment 
A/c 
47,000 
To Stock A/c 50,000 By Building A/c 5,00,000 
To Joint life policy  10,000 By Provision for  
To Partners’ capital 
A/cs: 
doubtful debts 15,000 
X 2,31,000 
Y 1,54,000 
Z   77,000 4,62,000 _______ 
5,62,000 5,62,000 
502
Page 5


ANSWERS OF MODEL TEST PAPER 2 
FOUNDATION COURSE 
PAPER – 1: ACCOUNTING 
ANSWERS 
1. (a) (i) True: Since the temporary huts were necessary for the
construction, their cost should be added to the cost of the cinema 
hall and thus capitalised. 
(ii) False: Accrual concept implies accounting on ‘due’ or ‘accrual’
basis. Accrual basis of accounting involves recognition of revenues
and costs as and when they accrue irrespective of actual receipts
or payments.
(iii) True: In the early periods of useful life of a fixed assets, repairs
and maintenance expenses are relatively low because the asset is
new. Whereas in later periods, as the asset become old, repairs
and maintenance expenses  increase  continuously.  Under  written
down  value method, depreciation charged is high in the initial
period and reduces continuously in the later periods.  Thus,
depreciation and repair and maintenance  expenses  become  more
or  less uniform throughout the useful life of the asset.
(iv) True: Discount at the time of retirement of a bill is a gain for the
drawee and loss for the drawer.
(v) False: If individual life policies are taken in the name of the partners
and premium is paid from the firm, then retiring partner is entitled
to surrender value of all the partners policies.
(vi) False: Net income is determined by preparing income and
expenditure in case of persons practicing vacation.
(b) 
Book-keeping Accounting 
It is a process concerned with 
recording of transactions. 
It is a process concerned with 
summarising of the recorded 
transactions. 
It constitutes as a base for 
accounting. 
It is considered as a language of the 
business. 
Financial statements do not form 
part of this process. 
Financial statements are prepared in 
this process on the basis of book-
keeping records. 
Managerial decisions cannot be 
taken with the help of these 
records. 
Management takes decisions on the 
basis of these records. 
499
(c) Bank Reconciliation Statement as on 31
st
 March, 2024
Particulars Details 
(`) 
Amount 
(`) 
Balance as per Pass Book (Cr.) 3,00,000 
Add: Cheque deposited but not yet cleared 44,000 
Add: Cheque recorded in Cash Book but not yet 
deposited 
10,000 
Add: Bank Charges debited by bank 500 54,500 
Less: Cheque issued but not yet presented (96,000 ) 
Less: Interest allowed by bank (3,000 ) (99,000 ) 
Balance as per Cash Book 2,55,500 
2. (a) Valuation of Physical Stock as at March 31, 2024 
` 
Stock at cost on 31.12.2023 80,000 
Add:  (1)  Undercasting of a page total 400 
(2) Goods purchased and delivered during
January – March, 2024
71,000  ` (70,000 – 6,000 + 7,000) 
(3) Cost of sales return ` (1,500 – 300) 1,200  72,600 
1,52,600 
Less:(1)  Overcasting of a page total 
` (6,000 – 5,000) 
1,000 
(2) Goods sold and dispatched during
January – March, 2024
` (90,000 – 5,000 + 4,000)     89,000
Less: Profit margin ?
?
?
?
?
?
×
125
25
  89,000  17,800 
 71,200   72,200 
Value of stock as on 31st March, 2024  80,400 
Note:  In the above solution, transfer of ownership is assumed to take 
place at the time of delivery of goods.  If it is assumed that transfer of 
There is no sub-field of book-
keeping. 
It has several sub-fields like financial 
accounting, management accounting 
etc. 
Financial position of the 
business cannot be ascertained 
through book-keeping records. 
Financial position of the business is 
ascertained on the basis of the 
accounting reports. 
500
ownership takes place on the date of invoice, then ` 4,000 goods 
delivered in March 2024 for which invoice was received in April, 2024, 
would be treated as purchases of the accounting year 2023-2024 and 
thus excluded.  Similarly, goods dispatched in March, 2024 but invoiced 
in April, 2024 would be excluded and treated as sale of the year 
2023-2024. 
(b) In the books of M/s. Surya Lights 
Machinery Account 
Date Particulars Amount ` Date Particulars Amount ` 
1.1.2020 To Bank A/c 3,20,000 31.12.2020 By Depreciation A/c 96,000 
To Bank A/c 80,000  (`80,000+ ` 16,000) 
(Erection charges) 31.12.2020 By Balance c/d 4,64,000 
1.7.2020 To Bank A/c    1,60,000 (`3,20,000+ `1,44,000) 
5,60,000 5,60,000 
01.01.21 To Balance b/d 4,64,000 31.12.2021 By Depreciation A/c 
(`80,000+ ` 32,000) 
1,12,000 
 31.12.2021 By Balance c/d 3,52,000 
(` 2,40,000 + ` 1,12,000) 
4,64,000 4,64,000 
01.01.22 To Balance b/d 3,52,000 01.07.2022 By Bank A/c 1,60,000 
30.9.22 To Bank A/c 60,000 By Profit and Loss A/c 
(Loss on Sale – W.N.) 
40,000 
 31.12.2022 By Depreciation A/c 
(` 40,000 + ` 32,000 +  
` 3,000) 
75,000 
By Balance c/d 1,37,000 
(` 80,000 + ` 57,000) 
4,12,000 4,12,000 
01.01.23 To Balance b/d 1,37,000 31.12.2023 By Depreciation A/c 
(` 12,000 + ` 8,550) 
20,550 
By Balance c/d 1,16,450 
(` 68,000 + ` 48,450) 
1,37,000 1,37,000 
Working Notes: 
Book Value of machines (Straight line method) 
Machine I Machine II Machine III 
` ` `
Cost 4,00,000 1,60,000 60,000 
Depreciation for 2020   80,000   16,000 
Written down value as on 
31.12.2020 
3,20,000 1,44,000 
Depreciation for 2021   80,000   32,000 
501
Written down value as on 
31.12.2021 
2,40,000 1,12,000 
Depreciation for 2022   40,000   32,000   3,000 
Written down value as on 
31.12.2022 
2,00,000 80,000 57,000 
Sale proceeds 1,60,000 
Loss on sale   40,000 
3. (a) In the books of Mr. Jalaj 
Statement of Affairs 
Liabilities 31.3.23 31.3.24 Assets 31.3.23 31.3.24 
Capital 
(bal fig) 
3,01,500 5,50,875 Furniture 62,500 56,250 
Loans 1,12,500 87,500 Building 1,25,000 1,21,875 
Creditors 62,500 1,00,000 Stock 1,25,000 3,12,500 
Debtors 75,000 1,37,500 
Cash in 
hand 
14,000 16,500 
Cash at 
bank 
75,000 93,750 
4,76,500 7,38,375 4,76,500 7,38,375 
Capital A/c 
Particulars ` Particulars `
To Cash (drawings) 30,000 By Bal b/d 3,01,500 
To Bal c/d  5,50,875 By Cash  50,000 
By Profit (bal fig) 2,29,375 
5,80,875 5,80,875 
(b) Revaluation Account 
` ` 
To Furniture A/c 40,000 By Office equipment 
A/c 
47,000 
To Stock A/c 50,000 By Building A/c 5,00,000 
To Joint life policy  10,000 By Provision for  
To Partners’ capital 
A/cs: 
doubtful debts 15,000 
X 2,31,000 
Y 1,54,000 
Z   77,000 4,62,000 _______ 
5,62,000 5,62,000 
502
Partners’ Capital Accounts 
X Y Z X Y Z 
` ` ` ` ` ` 
To Y’s 
capital A/c 
90,000 – 30,000 By Balance b/d 8,00,000 4,20,000 4,00,000 
To Y’s loan 
A/c 
8,14,000 By General 
Reserve 
1,80,000 1,20,000 60,000 
To Balance 
c/d 
11,21,000 5,07,000 By revaluation A/c 2,31,000 1,54,000 77,000 
By X’s capital A/c 90,000 
By Z’s capital A/c 30,000 
12,11,000 8,14,000 5,37,000 12,11,000 8,14,000 5,37,000 
Balance Sheet as on 1.4.2024 (After Y’s retirement) 
Liabilities ` ` Assets ` ` 
Capital 
accounts: 
Building 15,00,000 
X 11,21,000 Furniture 2,00,000 
Z 5,07,000 16,28,000 Office equipment 3,27,000 
Y’s loan 
account 
8,14,000 Stock 2,00,000 
Sundry 
creditors 
3,70,000 Sundry debtors 3,00,000 
Less: Provision for 
doubtful debts 
(15,000) 2,85,000 
Cash at bank 3,00,000 
28,12,000 28,12,000 
Working Notes: 
Calculation of goodwill: 
1. Average of last 4 year’s profit
= (90,000 + 1,40,000 + 1,20,000 + 1,30,000)/4
= ` 1,20,000
2. Goodwill at three years’ purchase
` 1,20,000 x 3 = ` 3,60,000
Goodwill adjustment 
Share of 
goodwill 
(Old ratio) 
Share of 
goodwill 
(New ratio) 
Adjustment 
X 1,80,000 2,70,000 90,000 (Dr.) 
Y 1,20,000 - 1,20,000 (Cr.) 
Z 60,000 90,000 30,000 (Dr.) 
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