14. Himanshu and Vikrant are partners in a firm and share profits equally. Their Balance Sheet as on March 31, 2017 is as follows:
Balance Sheet
as at March 31, 2017
Liabilities |
Rs. |
Assets |
Rs. |
Capitals: |
|
Fixed Assets |
3,60,000 |
Himanshu 2,00,000 |
|
Current Assets |
40,000 |
Vikrant 1,40,000 |
|
|
|
|
3,40,000 |
|
|
Creditors |
60,000 |
|
|
|
4,00,000 |
|
4,00,000 |
During the year 2016-17, Himanshu’s Drawings were Rs. 30,000 and Vikrant’s Drawings were Rs. 40,000. During the year 2016-17 the firm earned profits ofRs. 1,00,000. While distributing profits for the year 2016-17, interest on capital @ 5 % per annum and interest on drawings @ 12 % per annum were ignored.
Showing your workings clearly, pass necessary rectifying entry. 6
Solution:
Statement of Opening Capital
Particulars |
Himanshu |
Vikrant |
Closing Capital |
2,00,000 |
1,40,000 |
Add: Drawings |
30,000 |
40,000 |
|
2,30,000 |
1,80,000 |
Less: Profit already Distributed |
50,000 |
50,000 |
Opening Capital |
1,80,000 |
1,30,000 |
Statement Showing Adjustment
Himanshu Vikrant Total
5 % Interest on Capital (Cr.) |
9,000 |
6,500 |
15,500 |
12 % Interest on Drawings (Dr.) |
1,800 |
2,400 |
4,200 |
Profit to be recovered (Dr.) |
5,650 |
5,650 |
11,300 |
Total (Dr.) |
7,450 |
8,050 |
15,500 |
Adjustment |
1,550(Cr.)1,550 (Dr.) |
|
Journal
Date | Particulars | L F | Dr. Amount (Rs.) | Cr. Amount (Rs.) |
2017 Apr 1 |
Vikrant’s Capital Account Dr. | 1,550 | ||
To Himanshu’s Capital Account | 1,550 | |||
(Adjustment of interest on Capital and interest on drawings for previous year) |
15. On April 1, 2013, XY Limited issued Rs. 9,00,000 10% debentures at a discount of 9%. The debentures were to be redeemed in three equal annual instalments starting from March 31, 2015. Prepare ‘Discount on Issue of Debenture Account’ for the first three years starting from April 1, 2013. Also show your workings clearly. 6
Solution:
Discount on Issue of 10 % Debentures Account
Date | Particulars | JF | Amount (Rs) | Date | Particulars | JF | Amount (Rs) |
2013 Apr 1 |
To 10 % Debentures A/C | 81,000 | 2014 Mar 31 |
By Statement of Profit & Loss | 27,000 | ||
By Balance c/d | 54,000 | ||||||
81,000 | 81,000 | ||||||
2014 Apr 1 |
To Balance b/d | 54,000 | 2015 Mar 31 |
By Statement of Profit & Loss | 27,000 | ||
By Balance c/d | 27,000 | ||||||
54,000 | 54,000 | ||||||
2015 Apr 1 |
To Balance b/d | 27,000 | 2016 Mar 31 |
By Statement of Profit & Loss | 18,000 | ||
By Balance c/d | 9,000 | ||||||
27,000 | 27,000 |
1.5+1.5+1.5=4.5
Working Notes
1.5
Year ended |
Debentures Outstanding |
Ratio |
Discount amount written off |
31 March 2013 |
9,00,000 |
3 |
3/9x 81000 = 27,000 |
31 March 2014 |
9,00,000 |
3 |
3/9x 81000 = 27,000 |
31 March 2015 |
6,00,000 |
2 |
2/9x 81000 = 18,000 |
31 March 2016 |
3,00,000 |
1 |
1/9x 81000 = 9,000 |
16. ZX Limited invited applications for issuing 5,00,000 Equity shares of Rs. 10 each payable at a premium of Rs. 10 each payable with Final call. Amount per share was payable as follows:
Rs. | |
On Application | 2 |
On Allotment | 3 |
On First Call | 2 |
On Second & Final Call | Balance |
Applications for 8,00,000 shares were received. Applications for 50,000 shares were rejected and the application money was refunded. Allotment was made to the remaining applicants as follows:
Category | Number of Shares Applied | Number of Shares Allotted |
I | 2,00,000 | 1,50,000 |
II | 5,50,000 | 3,50,000 |
Excess application money received with applications was adjusted towards sums due on allotment. Balance, if any was adjusted towards future calls. Govind, a shareholder belonging to category I, to whom 1,500 shares were allotted, paid his entire share money with allotment. Manohar belonging to category II, who had applied for 11,000 shares failed to pay ‘Second & Final Call money’. Manohar’s shares were forfeited after the final call. The forfeited shares were reissued at Rs. 10 per share as fully paid up.
Assuming that the company maintains “Calls in Advance Account” and “Calls in Arrears Account”, pass necessary Journal entries for the above transactions in the books of ZX Limited. 8
OR
(a) AX Limited forfeited 6,000 shares of Rs. 10 each for non-payment of First call of Rs. 2 per share. The Final call of Rs. 3 per share was yet to be made. The Final call was made after Forfeited of these shares. Of the forfeited shares, 4,000 shares were reissued at Rs. 9 per share as fully paid up.Assuming that the company maintains ‘Calls in Advance Account’ and ‘Calls in Arrears Account’, prepare “Share Forfeited Account” in the books of AX Limited.
(b) BG Limited issued 2,00,000 equity shares of Rs. 20 each at a premium of Rs. 5 per share. The shares were allotted in the proportion of 5 : 4 of shares applied and allotted to all the applicants. Deepak, who had applied for 900 shares, failed to pay Allotment money of Rs. 7 per share (including premium) and on his failure to pay ‘First & Final Call’ of Rs. 2 per share, his shares were forfeited. 400 of the forfeited shares were reissued at Rs. 15 per share as fully paid up.Showing your working clearly, pass necessary Journal entries for the Forfeited and reissue of Deepak’s shares in the books of BG Limited. The company maintains ‘Calls in Arrears’ Account’.
(c) ML Limited forfeited 1,200 shares of Rs. 10 each allotted to Ravi for Non-payment of ‘Second & Final Call’ of Rs. 5 per share (including premium of Rs. 2 per share). The forfeited shares were reissued for Rs. 10,800 as fully paid up. Pass necessary Journal entries for reissue of shares in the books of ML Limited.
Solution:
Journal
Date | Particulars | L F | Dr. Amount | Cr. Amount |
Bank Account Dr. | 16,00,000 | |||
To Equity Share Application Account | 16,00,000 | |||
(Application money received ) | ||||
Equity Share Application Account Dr. | 16,00,000 | |||
To Equity Share Capital Account | 10,00,000 | |||
To Equity Share Allotment Account | 5,00,000 | |||
To Bank Account | 1,00,000 | |||
(Application money transferred to Equity Share Capital account, Equity Share Allotment account and remaining amount refunded) | ||||
Equity Share Allotment Account Dr. | 15,00,000 | |||
To Equity Share Capital Account | 15,00,000 | |||
(Allotment money due on 5,00,000 equity shares @ Rs. 3 each) | ||||
Bank Account Dr. | 10,22,500 | |||
To Equity Share Allotment Account | 10,00,000 | |||
To Calls in Advance Account | 22,500 | |||
(Allotment money received along with Calls in Advance on 1,500 Shares) | ||||
Equity Share First Call Account Dr. | 10,00,000 | |||
To Equity Share Capital Account | 10,00,000 | |||
(First Call money due on 5,00,000 equity shares @ Rs. 2 each) | ||||
Bank Account Dr. | 9,97,000 | |||
Calls in Advance Account Dr. | 3,000 | |||
To Equity Share First Call Account | 10,00,000 | |||
(First call money received) | ||||
Equity Share Final Call Account Dr. | 65,00,000 | |||
To Equity Share Capital Account | 15,00,000 | |||
To Securities Premium Reserve Account | 50,00,000 | |||
(Final Call money due on 5,00,000 equity shares @ Rs. 13 each including premium of Rs. 10 each) | ||||
Bank Account Dr. | 63,89,500 | |||
Calls in Advance Account Dr | 19,500 | |||
Call in Arrears Account Dr. | 91,000 | |||
To Equity Share Final Call Account | 65,00,000 | |||
(Final call money received) | ||||
Equity Share Capital Account Dr. | 70,000 | |||
Securities Premium Reserve Account Dr. | 70,000 | |||
To Share Forfeited Account | 49,000 | |||
To Calls in Arrears Account | 91,000 | |||
(Manohar’s Shares forfeited) | ||||
Bank Account Dr. | 70,000 | |||
To Equity Share Capital Account | 70,000 | |||
(Forfeited Shares of Manohar re-issued) | ||||
Share Forfeited Account Dr. | 49,000 | |||
To Capital Reserve Account | 49,000 | |||
(Share forfeited account transferred to capital reserve account) |
OR
(a) Share Forfeited Account
Date | Particulars | JF | Amount (Rs.) | Date | Particulars | JF | Amount (Rs.) |
To Share Capital Account | 4,000 | By Share Capital A/C | 30,000 | ||||
To Capital Reserve A/C | 16,000 | ||||||
To Balance c/d | 10,000 | ||||||
30,000 | 30,000 |
½ X 4 =2
(b) Journal
Date |
Particulars |
L F |
Dr. Amount (Rs.) |
Cr. Amount (Rs.) |
|
|
Share Capital Account |
Dr. |
|
14,400 |
|
|
Securities Premium Reserve |
Dr. |
|
2,160 |
|
|
To Share Forfeited Account |
|
|
|
12,960 |
|
To Calls in Arrears Account |
|
|
|
3,600 |
|
( 720 Shares forfeited ) |
|
|
|
|
|
Bank Account |
Dr. |
|
6,000 |
|
|
Share Forfeited Account |
Dr. |
|
2,000 |
|
|
To Share Capital Account |
|
|
|
8,000 |
|
(400 Shares re-issued @ Rs. 15 each) |
|
|
|
|
|
Share Forfeited Account |
Dr. |
|
5,200 |
|
|
To Capital Reserve Account |
|
|
|
5,200 |
|
(Gain on re-issue of forfeited shares transferred to capital reserve account) |
|
|
|
|
Working Notes:
(i) Since the Shares are allotted in the proportion of 5 : 4, therefore for 900 applied shares, shares allotted are 4/5 X 900 = 720 Shares.
(ii) Application Money Received on 900 Shares = 900 X 16 = 14,400
Amount adjusted on Application = 720 X 16 =11,520
Amount to be adjusted on Allotment = 2,880
(iii) Allotment Money due on 720 Shares = 720 X 7 = 5,040
Less: Already received = 2,880
Allotment Money not received = 2,160
(iv) Calls in Arrears:
Allotment Money = 2,160
First & Final Call Money
= 1,440
3,600
(1 mark for each correct Journal Entry and 1 mark for Working Notes)
(c) Journal
Date | Particulars | L F | Dr. Amount (Rs.) | Cr. Amount (Rs.) |
Bank Account Dr. | 10,800 | |||
Share Forfeited Account Dr. | 1,200 | |||
To Share Capital Account | 12,000 | |||
(1,200 Shares re-issued for Rs. 10,800 as fully paid up) | ||||
Share Forfeited Account Dr. | 7,200 | |||
To Capital Reserve Account | 7,200 | |||
(Gain on re-issue of forfeited shares transferred to capital reserve account) |
1 X 2 = 2
17. A, B & C were partners in a firm sharing profits & losses in proportion to their fixed capitals. Their Balance Sheet as at March 31, 2017 was as follows:
Balance Sheet
as at March 31, 2017
Liabilities |
Rs. |
Assets |
Rs. |
|
Capitals: |
|
|
Bank |
21,000 |
A |
5,00,000 |
|
Stock |
9,000 |
B |
3,00,000 |
|
Debtors 15,000 |
|
C |
2,00,000 |
10,00,000 |
Less: Provision for Doubtful Debts 1,500 |
13,500 |
General Reserve |
|
75,000 |
A's Loan |
35,500 |
Creditors |
|
23,000 |
Plant & Machinery |
2,00,000 |
Outstanding Salary |
|
7,000 |
Land & Building |
6,00,000 |
B's Loan |
|
15,000 |
Profit & Loss Account (For the year ending 31st March 2017) |
2,41,000 |
|
|
11,20,000 |
11,20,000 |
On the date of above Balance Sheet, C retired from the firm on the following terms:
(i) Goodwill of the firm will be valued at two years purchase of the Average Profits of last three years. The Profits for the year ended March 31, 2015 & March 31, 2016 were Rs. 4,00,000&Rs. 3,00,000 respectively.
(ii) Provision for Bad Debts will be maintained at 5% of the Debtors.
(iii) Land & Building will be appreciated by Rs. 90,000 and Plant & Machinery Will be reduced to Rs. 1,80,000.
(iv) A agreed to repay his Loan.
(v) The loan repaid by A was to be utilized to pay C. The balance of the amount payable to C was transferred to his Loan Account bearing interest @ 12% per annum.
Prepare Revaluation Account, Partners’ Capital Accounts, Partners’ Current Accounts and the Balance Sheet of the reconstituted firm. 8
OR
P & K were partners in a firm. On March 31, 2017 their Balance Sheet was as follows:
Balance Sheet
as at March 31, 2017
Liabilities |
Rs. |
Assets |
Rs. |
|
Capitals: |
|
Bank |
18,000 |
|
p 3,00,000 |
|
Stock |
19,000 |
K 2,00,000 |
5,00,000 |
Debtors |
22,000 |
|
General Reserve |
1,00,000 |
Less: Provision for Doubtful Debts |
1,500 |
20,500 |
Creditors |
50,000 |
Unexpired Insurance |
|
5,000 |
Outstanding Expenses |
8,000 |
Shares in X Limited |
|
65,000 |
C's Loan |
1,20,000 |
Plant & Machinery |
|
1,45,500 |
Profit & Loss Account (Profit for 2016-17) |
55,000 |
Land & Building |
|
5,60,000 |
|
8,33,000 |
|
|
8,33,000 |
On April 1, 2017, they decided to admit C as a new partner for 1/4th share in profits on the following terms:
(i) C’s Loan will be converted into his capital.
(ii) C will bring his share of goodwill premium by cheque. Goodwill of the firm will be calculated on the basis of Average Profits of previous three years. Profits for the year ended March 31, 2015 and March 31, 2016 were Rs. 55,000 and Rs. 1,00,000 respectively.
(iii) 10% depreciation will be charged on Plant & Machinery and Land & Building will be appreciated by 5%.
(iv) Capitals of P & K will be adjusted on the basis C’s capital. Adjustments be done through bank and in case required overdraft facility be availed.
Pass necessary Journal entries on C’s admission. 8
Solution:Revaluation Account
Particulars |
Amount (Rs.) |
Particulars |
Amount (Rs.) |
|
To Plant & Machinery |
|
20,000 |
By Provision for Doubtful Debts |
750 |
To Profit transferred to Partners' Current Accounts |
|
|
By Land & Building |
90,000 |
|
|
|
|
|
A |
35,375 |
|
|
|
B |
21,225 |
|
|
|
C |
14,150 |
|
|
|
|
|
70,750 |
|
|
|
|
90,750 |
|
90,750 |
Partners’ Current Accounts
Date |
Particulars |
A |
B |
C |
Date |
Particulars |
A |
B |
C |
2017 |
To C's Current Account |
38,250 |
22,950 |
|
2017 |
By Revaluation Account |
35,375 |
21,225 |
14,150 |
Mar 31 |
To Profit & Loss A/C |
1,20,500 |
72,300 |
48,200 |
Mar 31 |
By A's Current Account |
|
|
38,250 |
|
To C's Capital Account |
|
|
42,150 |
|
By B's Current Account |
|
|
22,950 |
|
|
|
|
|
|
By General Reserve |
37,500 |
22,500 |
15,000 |
|
|
|
|
|
|
By Balance c/d |
85,875 |
51,525 |
|
|
|
1,58,750 |
95,250 |
90,350 |
|
|
1,58,750 |
95,250 |
90,350 |
Partners' Capital Accounts
Date | Particulars | A | B | C | Date | Particulars | A | B | C |
2017 Mar 31 |
To Bank Account | 35,500 | 2017 Mar 31 |
By Balance b/d | 5,00,000 | 3,00,000 | 2,00,000 | ||
To C’s Loan Account | 2,06,650 | By C’s Current Account | 42,150 | ||||||
To Balance c/d | 5,00,000 | 3,00,000 | |||||||
5,00,000 | 3,00,000 | 2,42,150 | 5,00,000 | 3,00,000 | 2,42,150 |
Balance Sheet
as at March 31, 2017
Liabilities |
Amount (Rs.) |
Assets |
Amount (Rs.) |
|||
Capitals: |
|
|
|
Bank |
|
21,000 |
A |
|
5,00,000 |
|
Stock |
|
9,000 |
B |
|
3,00,000 |
|
Debtors |
15,000 |
|
|
|
|
8,00,000 |
Less: Provision for D. Debts |
750 |
14,250 |
C's Loan |
|
|
2,06,650 |
Plant & Machinery |
|
1,80,000 |
Creditors |
|
|
23,000 |
Land & Building |
|
6,90,000 |
Outstanding Salary |
|
7,000 |
A's Current Account |
|
85,875 |
|
B's Loan |
|
|
15,000 |
B's Current Account |
|
51,525 |
|
|
|
10,51,650 |
|
|
10,51,650 |
OR
Journal
Date | Particulars | L F | Dr. Amount (Rs.) | Cr. Amount (Rs.) |
C’s Loan Account Dr. | 1,20,000 | |||
To C’s Capital Account | 1,20,000 | |||
(C’s Loan account transferred to his capital account) | ||||
Bank Account Dr. | 17,500 | |||
To Premium for Goodwill Account | 17,500 | |||
(New partner C brings in his share of goodwill) | ||||
Premium for Goodwill Account Dr. | 17,500 | |||
To P’s Capital Account | 8,750 | |||
To K’s Capital Account | 8,750 | |||
(Premium for Goodwill transferred to old partners’ capital accounts in their sacrificing ratio) | ||||
Revaluation Account Dr. | 14,550 | |||
To Plant & Machinery Account | 14,550 | |||
(Revaluation of Plant & Machinery on admission of new partner) | ||||
Land & Building Account Dr. | 28,000 | |||
To Revaluation Account | 28,000 | |||
(Revaluation of Land & Building on admission of new partner ) | ||||
Revaluation Account Dr. | 13,450 | |||
To P’s Capital Account | 6,725 | |||
To K’s Capital Account | 6,725 | |||
(Profit on revaluation transferred to partners’ capital accounts) | ||||
General Reserve Account Dr. | 1,00,000 | |||
To P’s Capital Account | 50,000 | |||
To K’s Capital Account | 50,000 | |||
(General Reserve transferred to partners’ capital account) | ||||
Profit & Loss Account Dr. | 55,000 | |||
To P’s Capital Account | 27,500 | |||
To K’s Capital Account | 27,500 | |||
(Profit & Loss account transferred to partners’ capital account) | ||||
P’s Capital Account Dr. | 2,12,975 | |||
K’s Capital Account Dr. | 1,12,975 | |||
To Bank Account | 3,25,950 | |||
(Cash paid to P and K for adjustment of capital) |
8
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