Book Recommended --- Ultimate Book of Accountancy Class 12th CBSE

Ultimate Sample Paper – 4

CBSE Examination – 2022-23
1. Yuvraj and Vinod are partners, sharing profits in the ratio of 5:3. Mayank is admitted as a new [1]
partner for 2/10th share of profit half of which is gifted by Yuvraj and the remaining share is taken
by Mayank from Yuvraj and Vinod equally.
Goodwill of the firm was calculated Rs.60,000.
[Source: Ultimate Book of Accountancy]
How much premium for goodwill is to be credited to Yuvraj’s Capital Account?
(a) Rs. 9,000 (b) Rs. 3,000
(c) Rs. 6,000 (d) Rs. 7,500

2. Choose the correct sequence of the following transactions in context of admission of a partner in [1]
the partnership firm:
(i) Calculation of Self-Generated Goodwill
(ii) Adjustment of Accumulated Profits and Reserves
(iii) Preparation of Profit and loss Adjustment Account
(iv) Adjustment of Capital
[Source: Ultimate Book of Accountancy]
The correct sequence will be:
(a) (iii), (ii), (i), (iv) (b) (i), (iii), (iv), (ii)
(c) (iv), (ii), (iii), (iv) (d) (i), (iii), (ii), (iv)

3. Read the following statements carefully: [1]

(i) Application money should not be less than 25% of the issue price
(ii) Minimum Subscription should be at least 90% of the shares at the time of IPO
(iii) Securities Premium can be used to write off the underwriters’ commission
Which of the above is mentioned in Companies Act, 2013?
[Source: Ultimate Book of Accountancy]
(a) Only (i) and (ii) (b) Only (ii) and (iii)
(c) Only (i) and (iii) (d) Only (iii)

OR
On 1st April 2022, Vinod Ltd. issued 10,000, 9% Debentures of Rs.100 each at a discount of 10%
redeemable after 5 years at a premium of 10%. Company pays Interest on debentures half yearly
basis (30th September and 31st March every year).
How much interest company will pay on 30th September 2022?
[Source: Ultimate Book of Accountancy]
(a) Rs. 1,00,000 (b) Rs. 90,000
(c) Rs. 45,000 (d) Rs. 40,500

4. X, Y and Z were partners sharing profits and losses: X 40% ; Y 40% and Z 20%. They decided to [1]
share future profits in the ratio of 7:5:3 with effect from 1st April 2022. After the Revaluation of
assets and reassessment of liabilities, Revaluation Account showed a loss of Rs.60,000. The amount
to be debited in the capital account of X due to loss:

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[Source: Ultimate Book of Accountancy]

(a) Rs. 28,000 (b) Rs. 20,000
(c) Rs. 24,000 (d) Rs. 60,000

OR
Keshav and Vinod are equal partners. As per the partnership deed:
(i) Keshav is to get commission of 10% of net profit before charging any commission.
(ii) Vinod is to get a commission of 10% on net profit after charging all commissions.
Keshav’s commission was Rs.16,500. [Source: Ultimate Book of Accountancy]
What was the commission of Vinod?
(a) Rs. 16,500 (b) Rs. 14,850
(c) Rs. 14,500 (d) Rs. 13,500

5. Assertion (A): [1]

Commission paid to partner should be shown in the Profit and Loss Appropriation Account.
[Source: Ultimate Book of Accountancy]
Reason (R):
Commission paid to partner is a charge against the profit

In the context of the above statements, which of the following option is correct:
(a) Both (A) and (R) are correct and (R) is correct explanation of (A)
(b) Both (A) and (R) are correct but (R) is not correct explanation of (A)
(c) Both (A) and (R) are incorrect
(d) Only (A) is correct and (R) is wrong

6. Vinod Ltd. issued 12,000, 9% Debentures of Rs.100 each at a premium of 5% redeemable at 10% [1]
premium after 5 years. Securities Premium Account is to be credited with __________ [Source:
Ultimate Book of Accountancy]
(a) Rs. 12,00,000 (b) Rs. 60,000
(c) Rs. 1,80,000 (d) Rs. 1,20,000

OR
VK Ltd. issued 4,000, 10 % Debentures of Rs.100 each at a discount of 5%. The amount was payable
as: Rs.80 on Application and remaining amount on Allotment. The debentures were fully
subscribed and all money was duly received.
[Source: Ultimate Book of Accountancy]
How much amount was received on Allotment?
(a) Rs. 60,000 (b) Rs. 80,000
(c) Rs. 40,000 (d) Rs. 90,000

7. Vinod Ltd. purchased a running business of AXN Ltd. and paid Rs.30,000 by a bank draft and [1]
balance by issuing equity shares of Rs.10 each at a premium of 60%. Company has acquired Total
Assets of Rs.2,80,000; Creditors Rs.20,000 and a balancing figure was credited as Capital Reserve
Rs.10,000. [Source: Ultimate Book of Accountancy]
Number of Shares to be issued _____________________
(a) 13,750 (b) 22,000
(b) 25,000 (d) 15,625

8. X, Y and Z were partners sharing profits in the ratio of 2:2:1. At the time of retirement of Y, [1]
Workmen Compensation Reserve Rs.70,000 was given in the Balance Sheet. There was a claim of
Rs.25,000 against it. [Source: Ultimate Book of Accountancy]
Y’s Capital Account is to be Debited by:
(a) Nil (b) Rs. 18,000

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(c) Rs. 28,000 (d) Rs. 9,000

OR
Vinod, Krish and Madhav started a business in partnership on 1st December 2020 by introducing
capital of Rs.6,00,000; 4,20,000 and Rs.3,00,000. On 1st February 2021 they decided that their
capital should be Rs.4,50,000 each. As per the partnership deed interest on capital is to be provided
@5% p.a. and a salary of Rs.2,000 per month to Madhav. Partnership deed is silent on profit sharing
ratio.
[Source: Ultimate Book of Accountancy]
Profit at the end of the year 31st March 2021 before providing the above was Rs. 12,100.
Amount transferred to partners’ capital account in ______________
(a) 1 : 1 : 1 (b) 35 :29 : 57
(b) 20: 21: 15 (d) 25 : 30 : 48

Read the following hypothetical situation, Answer Question No. 9 and 10

X and Y are partners sharing profits in the ratio of 3:2. After closing the accounts for the year 31st
March 2021, following information is available: [Source: Ultimate Book of Accountancy]
Particulars X Y
Partners’ Capital Account 7,00,000 6,00,000
Partners’ Current Account 80,000 50,000
Y had introduced Rs.1,00,000 as additional capital on 1st October 2020. As per the partnership
deed partners were allowed interest on capital @10% p.a. Profit for the year was Rs.50,000
which was divided by the partners without providing interest on capital.
9. Interest on Y’s Capital should be: [1]
(a) 22,000 (b) 60,000
(c) 55,000 (d) 28,000

10. If the above error is rectified by passing a Single adjustment entry, The Current Account of X will [1]
be :
(a) Credit by Rs.2,000 (b) Debit with Rs.2,000
(c) Credit by Rs.4,000 (d) No effect on Current Account

11. Choose the correct sequence of the following transactions in context of Division of Profits: [1]
[Source: Ultimate Book of Accountancy]
(i) Transfer to Reserve
(ii) Interest on loan by partner
(iii) Distribution of Profit among the partners
(iv) Transfer of Net Profit to Profit and Loss Appropriation Account
(a) (iv), (i), (ii), (iii) (b) (iv), (ii), (i), (iii)
(c) (ii), (iv), (i), (iii) (d) (ii), (iv), (iii), (i)
.
12. Vinod Ltd. issued 10,000 Equity Shares of Rs.10 each at a premium of 20% payable as: On [1]
Application Rs.3 per share; On Allotment Rs.4 (including premium); On First & Final call Balance.
Company continues with Calls-in-Arrears and Calls- in- Advance Account.
Gullu to whom 100 Shares were allotted, failed to pay allotment and call money.
[Source: Ultimate Book of Accountancy]
Share Capital amount to be shown in the Balance Sheet of the Company:
(a) 99,300 (b) 99,700
(c) 1,00,000 (d) 1,19,100

13. Securities Premium Reserve ……………………………….. 5,00,000 [1]

Advertisement Suspense ………………………………………1,00,000
Share issue Expenses ……………………………………………80,000

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Old Machinery to be written off …………………………….1,20,000

Bad Debts …………………………………………………………….40,000
[Source: Ultimate Book of Accountancy]
If Securities Premium Reserve is utilized as per the Section 52 (2) of the Companies Act, 2013,
Balance of Securities Premium Reserve will be ___________
(a) 5,00,000 (b) 4,00,000
(c) 1,60,000 (d) 3,20,000

14. X and Y are partners sharing profits in the ratio of 7:3. They admit K as a new partner for 1/6th [1]
share. At the time of admission of K the following situation was found:
Stock given in Balance Sheet Rs. 55,000, Some part of the goods costing Rs.8,000 has been badly
damaged and only 10% is realized.
[Source: Ultimate Book of Accountancy]
Furniture was undervalued by 20% (Given book value of Furniture is Rs.28,800)
Y’s share in Gain/Loss on Revaluation will be__________________
(a) Nil (b) 240 Loss
(b) 432 Loss (d) 672 Loss

15. Ajay and Vinod started a business in partnership on 1st September 2020 with a profit-sharing ratio [1]
of 3:2. Vinod withdrew Rs.4,000 at the end of every month for personal use. As per the Partnership
Deed, interest on his drawings is to be charged @8% p.a. but it was found at the end of the year
that Interest on drawings was charged @5% p.a. by mistake. They decided to pass an adjustment
entry for the same.
[Source: Ultimate Book of Accountancy]
Effect of adjustment entry on partners’ capital account:
(a) No effect on Ajay’s Capital Account and Vinod’s Capital A/c was debited with Rs.126
(b) Ajay’s Capital A/c Dr. 126 and Vinod’s Capital A/c Cr 126
(c) Ajay’s Capital A/c Dr. 210 and Vinod’s Capital A/c Cr 210
(d) Vinod’s Capital A/c Dr 126 and Ajay’s Capital A/c Cr. 126

OR
Identify the wrong statement from the following?
(a) When a firm provides loan to a partner, rate of interest on such loan is 6% p.a. if partnership
deed is silent on interest rate.
(b) Partnership firm does not have a separate legal entity from its partners as par law.
(c) The Liability of a partner is unlimited jointly and severally.
(d) Rent paid to a partner is not shown in his Capital/Current Account.

16. X and Y are sharing profits in the ratio of 5:3. At the time of dissolution of their partnership firm, [1]
Debtors given in the Balance Sheet Rs. 1,90,000 (Gross) and Provision for doubtful debts was
Rs.10,000. An amount of Rs.2,000 could not recovered from a debtor and was treated as bad debt.
Remaining debtors were realized at full value.
[Source: Ultimate Book of Accountancy]
Y’s Share of Gain/Loss on realisation will be:
(a) Gain Rs. 3,000 (b) Loss Rs. 3,000
(c) Gain Rs. 5,000 (d) Loss Rs. 750

17. X, Y and Z were sharing profits/losses in the ratio of 4:3:1. Y died in a car accident on 12 June 2021. [3]
As per the agreement, on death of a partner, his share of profit is to be calculated on the basis of
average profit of last 4 years irrespective of profit or loss in the current year. X and Z decided to
share future profits in the ratio of 3:2. Profits/loss for the last 4 years were as follows:
[Source: Ultimate Book of Accountancy]

Year 31st March 2018 31st March 2019 31st March 2020 31st March 2021

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Profit 2,00,000 2,50,000 2,00,000 (66,000) Loss

Calculate Y’s Share of profit and give entry for the same.

18. VK, GK and MK are partners sharing profits in the ratio of 5:3:2. Their capitals on 1st April, 2019 [3]
were Rs.2,00,000; Rs.2,00,000 and Rs.1,00,000 respectively. MK is an active partner and looking
after the firm. The partnership deed provides that:
[Source: Ultimate Book of Accountancy]
(i) Active partner is to be paid a salary of Rs.5,000 per month as a charge (irrespective of
profit/loss).
(ii) Rent is paid to VK Rs.4,000 per month (for the use of a portion of his building for the firm,
starting from 1st October, 2019).
(iii) VK has advanced a loan of Rs.50,000 to the firm on 1st April 2019 on which he gets interest
@8% p.a. Firm has advanced a loan to MK Rs.40,000 @10% p.a. on 1st October 2019.
(iv) Manager is entitled to a commission of 10% on the net profit after charging such commission.
(v) Interest on capital @5% p.a. (as an appropriation).
Trading profit of the firm on 31st March 2020 was Rs.99,750.
As an accountant you are required to prepare appropriate accounts and show the distribution of
profit among the partners.
OR
X and Y prepared the following Profit and Loss Appropriation Account on 31st March 2022:
Particulars Amount Particulars Amount

To Interest on Capital A/c By Profit and Loss A/c (Net 90,000

Profit)
X 34,000
By Interest on Drawings A/c
Y 20,000 54,000
X 2,000
Distribution of Profit in 3:2: 4,000
Y 2,000
To X’s Capital A/c 24,000
[Source: Ultimate Book of
To Y’s Capital A/c 16,000 Accountancy]

94,000 94,000

There was no partnership deed among the partners. So, it was decided to pass a single adjustment
entry to rectify the errors.

19. STBD Ltd. (Satish Top Brand Delhi Ltd) has decided to start one more new venture under this [3]
name. The finance manager of the company has estimated the capital requirements at Rs.
12,50,000. The company has arranged Rs. 5,00,000 from the internal sources to start the venture.
[Source: Ultimate Book of Accountancy]
It has also decided to call the unpaid amount of Rs. 3 per share on 10,000 Equity Shares.
The requirement of the remaining capital was fulfilled by raising a loan from the Bank of India
payable after 5 years. 8% Debentures of Rs.100 each were issued for 1.5 Times of loan as collateral
security.
You are required to answer the following questions:

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(i) What is meant by ‘Issue of Debentures as Collateral Security’?

(ii) What will be the total requirement of the loan raised by the Company?
(iii) What will be the total number of debentures issued by the company?
OR
Pass necessary entries for the following transactions in the books of Vinod Ltd.
Purchased the following items from M/s Satish Furniture Mart.
Items Total Price
50 Cushion Chairs @ Rs. 3,200 each 1,60,000
04 Sofa Sets @ Rs. 15,000 each 60,000
02 Center Table @ Rs. 15,000 each 30,000
The payment to M/s Satish Furniture Mart was made by issuing Equity Shares of Rs.10 each at a
premium of 25%. [Source: Ultimate Book of Accountancy]

20. X and Y were partners in a firm sharing profits and losses in the ratio of 2:1. It is decided on 1 st [3]
April 2022, that they will share future profits in the ratio of 1:1. Following is the extract of their
Balance Sheet on that date:
Liabilities Amount Assets Amount
General Reserve 60,000 Advertisement Suspense 1,10,000
Workmen Compensation Reserve 20,000 [Source: Ultimate Book of
Employee Provident Fund 1,20,000 Accountancy]

They decided to continue with all above balances given in the Balance Sheet without affecting their
book values, by passing an adjustment entry.

21. Vinod Ltd. has an authorized capital of Rs.60,00,000 divided into 4,00,000 Equity Shares of Rs.10 [4]
each and 2,00,000, 9% Preference Shares of Rs.10 each. The company invited applications for all
the preference shares and only 3,60,000 Equity Shares were offered. All the preference Shares
were subscribed, called and paid while subscription received for only 3,40,000 Equity Shares.
During the first year Rs.8 per share were called. Ram holding 4,000 shares and Shyam holding
8,000 shares did not pay first call of Rs.2. Shyam’s shares were forfeited after the first call and later
on 6,000 of the forfeited shares were reissued at Rs.6 per share Rs.8 called up.
[Source: Ultimate Book of Accountancy]
(a) Show Share Capital of the company in the Balance Sheet
(b) Prepare Notes to Accounts

22. Give the necessary Journal Entries for the following transactions in case of dissolution of a [4]
partnership firm after various assets (other than cash and bank) and third-party liabilities have
been transferred to Realisation Account: [Source: Ultimate Book of Accountancy]
(i) A Creditor for Rs. 2,80,000 accepted Furniture valued at Rs. 3,60,000 and paid to the firm Rs.
80,000
(ii) An unrecorded Laptop not appearing in the books of accounts realized Rs. 4,000.
(iii) Bills payable of Rs. 40,000 falling due on 30th April 2022 were discharged immediately at
Rs.39,500.
(iv) A liability under a suit for damages included in creditors was settled at Rs. 32,000 as against
only Rs. 13,000 provided in the books. Total creditors of the firm were Rs. 50,000.

23. Rishi Ltd. forfeited 1,500 equity shares of Rs. 100 each for the non-payment of first call Rs. 20 per [6]
share. Second and final call of Rs. 25 per share was not yet made.
[Source: Ultimate Book of Accountancy]
You are required to answer the following questions:

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(i) How much amount of share capital to be debited in the entry of forfeiture of shares?
(ii) If 70% of the forfeited shares are reissued at maximum discount then what is the amount of
share forfeiture is to be debited in the entry of reissue of shares?
OR
Vinod Mills Ltd. Invited applications for 30,000 equity shares of Rs. 10 each (with premium Re. 1
per share), payable as follows: On Application Rs. 2 per share On Allotment Rs. 4 per share
(including premium) On First call Rs. 3 per share and On Second and final call Rs. 2 per share.
Applications were received for 40,000 shares and directors decided to deal with the applications
as:
[Source: Ultimate Book of Accountancy]
(i) To refuse allotment to applicants of 4,000 shares.
(ii) To allot 100% basis to applicants for 12,000 shares.
(iii) To allot the remaining shares among remaining applicants on pro-rata basis.
(iv) To adjust the surplus applications money against the amount due on allotment.
(v) Whole of the money was received except two calls on 150 shares, which were forfeited. Out of
these forfeited shares, 100 shares were re-issued at Rs. 7 per share.
Pass Journal Entries recording the above transaction from the stage of receipt of application money
till the reissue of forfeited shares.

24. SK and NK are partners in a firm. They share profits & losses in ratio of 2:1. Since both of them [6]
are specially abled sometimes they find it difficult to run a business so admitted GK a common
friend decided to help them. Therefore, they admitted her into partnership for 1/3 share. GK
brought share of goodwill in cash & proportionate capital. At the time GK’s admission Balance
Sheet of SK and NK was as under : [Source: Ultimate Book of Accountancy]
Liabilities Amount Assets Amount

SK’s Capital 6,00,000 Machinery 6,00,000

NK’s Capital 4,00,000 Furniture 4,00,000
General Reserve 1,50,000 Stock 2,50,000
Creditors 1,50,000 Sundry Debtors 1,50,000
Employees Provident Fund 2,00,000 Cash 1,00,000
15,00,000 15,00,000

Following took place at the time of admission :

(a) Reduce the value of stock by 25,000
(b) Depreciate furniture by 10% and appreciate machinery by 5%.
(c) 15,000 of the debtors proved bad. A provision of 5% was to be created on Sundry Debtors for
doubtful debts.
(d) Goodwill of the firm was valued at 2,25,000
Prepare Revaluation Account, Partner’s Capital Accounts and Balance Sheet of reconstituted firm.
OR
Following is the Balance Sheet of X, Y and Z as on 31.3.2008. They shared profits in the ratio
3:3:2. [Source: Ultimate Book of Accountancy]

Liabilities Amount Assets Amount

Sundry Creditors 1,25,000 Cash at Bank 25,000

Contingency Reserve 40,000 Bills Receivable 30,000
Partners Loan A/c’s Debtors 40,000

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X 25,000 Less: Provision 2,000 38,000

Y 20,000 45,000 Stock 62,000
Capitals : X 50,000 Fixed Assets 1,50,000
Y 30,000 Advertisement Suspense A/c 8,000
Z 25,000 1,05,000 Profit & Loss A/c 2,000
3,15,000 3,15,000
On 1 April, 2008, Y decided to retire from the firm on the following terms:
st

(a) Stock to be depreciated by Rs.6,000.

(b) Advertisement Suspense A/c to be written off.
(c) Provision for bad and doubtful debts to be increased to Rs.3,000.
(d) Fixed Assets be appreciated by 10%.
(e) Goodwill of the firm, valued at Rs.40,000 & the amount due to the retiring partners be
adjusted in X’s & Z’s Capital A/c’s.
Prepare Revaluation A/c, Partners Capital A/c and Balance Sheet of new firm.

25. X, Y and Z were partners sharing profits in the ratio of 1:1:1. Z died on 30th June 2021 due to [6]
Covid Pandemic. X and Y agreed to share future profits in the ratio of 3:2.
As per the partnership deed, in the event of death of a partner during the year, his share of profit
is to be calculated on the basis of last 3 years average profits plus 20% by considering the time
period up to date of his death. [Source: Ultimate Book of Accountancy]
The Last Balance Sheet of the firm 31.3.2021 was as follows (Extract):

Liabilities Amount Assets Amount

Capitals: X 5,00,000 Fixed Assets 12,00,000

Y 4,00,000 Current Assets (Except Cash) 4,50,000
Z 4,50,000 13,50,000 Cash in Hand 50,000
Creditors 2,80,000 Profit and Loss A/c 30,000
Bank Loan 1,00,000

The profits of last few years were as follows:

Years 31.3.2017 31.3.2018 31.3.2019 31.3. 2020

Profits 2,00,000 2,60,000 3,00,000 1,80,000

Calculate Z’s share of profit and give entry for the same.
26. Raghav Ltd. decided to raise funds by issuing 8% Debentures of Rs.10,00,000 of Rs.100 each at a [6]
discount of 5% redeemable after 5 years at par.
The amount per debenture was payable as follows:
On Application …………………………….. Rs.80 per Debenture
On Allotment ……………………………….. Balance amount
The debentures were fully subscribed and all money was duly received.
You are required to prepare: [Source: Ultimate Book of Accountancy]
(i) 8% Debenture Account (b) Discount on Issue of Debentures Account

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27. Choose the correct sequence of the following transactions in context of Balance Sheet as per the [1]
Schedule III of the Companies Act, 2013: [Source: Ultimate Book of Accountancy]
(i) Inventories
(ii) Trade Receivables
(iii) Cash and Cash Equivalents
(iv) Current Investments
The correct order:
(a) (iv), (i), (ii), (iii) (b) (iv), (i), (iii), (ii)
(c) (i), (ii), (iii), (iv) (d) (ii), (i), (iii), (iv)

28. If Net working capital of a company is Zero and Current Liabilities are Rs.3,50,000. Current [1]
Assets of the firm will be _____ [Source: Ultimate Book of Accountancy]
(a) Rs.3,50,000 (b) Rs.7,00,000
(c) Nil (d) Rs. 1,75,000

29. Vinod Ltd. issued Fresh Equity Shares and paid Rs. 1,80,000 as ‘Underwriting Commission’. [1]
[Source: Ultimate Book of Accountancy]
Under which of following ‘Underwriting Commission’ will be treated?
(a) Deduct as outflow of Cash under Operating Activities
(b) Inflow of Cash under Investing Activities
(c) Outflow of Cash under Financing Activities
(d) Outflow of Cash under Investing Activities
OR
9% Debentures given in the Balance Sheet under the heading Long-term Borrowings for the year
31st March 2021 Rs.2,00,000 and at the end of the year 31st March 2022 Rs.3,00,000. [Source:
Ultimate Book of Accountancy]
Cash flow from Financing Activities, if 9% debentures were issued on 1st April 2021:
(a) Outflow from Financing Activities Rs. 73,000
(b) Inflow from Financing Activities Rs. 1,00,000
(c) Inflow from Financing Activities Rs. 1,27,000
(d) Inflow from Financing Activities Rs. 73,000

30. Following information is provided by Vinod Ltd: [1]

Particulars 31st March 2022 31st March 2023

Machinery 3,00,000 2,00,000
Additional Information: A machine costing Rs.40,000 (depreciation provided thereon Rs.12,000)
was sold for Rs.35,000. Depreciation charged during the year on machinery Rs.60,000. [Source:
Ultimate Book of Accountancy]
Cash flow from Investing Activities:
(a) Outflow from Investing Activities Rs. 1,53,000
(b) Outflow from Investing Activities Rs. 1,88,000
(c) Outflow from Investing Activities Rs. 2,23,000
(d) Outflow from Investing Activities Rs. 35,000
31. Classify the following items under Major heads and Sub-head (if any) in the Balance Sheet of a [3]
Company as per the Schedule III of the Companies Act, 2013.
[Source: Ultimate Book of Accountancy]
(i) Shares purchased for investment in State Bank of India
(ii) Shares purchased for Trading in HDFC Bank
(iii) 10% Debentures maturity due in this current year

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(iv) Mining Rights

(v) Cheques in hand
(vi) Capital Advance

32. Give any three limitations of Financial Statement Analysis. [3]

33. Vinod Ltd. has provided the following information at the end of the year 31.3.2022: [4]
Revenue from Operations …………………………….. 48,00,000
Debentures ……………………………………………………6,00,000
Bank Loan (Term Loan) …………………………………4,00,000
Short-Term Borrowings………………………………….1,50,000
[Source: Ultimate Book of Accountancy]
Trade Payables ………………………………………………3,50,000
Non-current Assets ……………………………………….16,00,000
Current Assets ……………………………………………… 9,00,000
Calculate:
(i) Debt to Capital Employed on Long-term Debts
(ii) Fixed Assets Turnover Ratio
OR
If Debt to Equity Ratio of a company is 0.50:1, then following transactions will Increase, decrease
or not change the existing Ratio:
[Source: Ultimate Book of Accountancy]
(i) Further Issue of 20,000 Equity Shares @ 10 each
(ii) Further issue of 1,000 Debentures @ 100 each
(iii) Availed Bank overdraft of Rs.50,000
(iv) Outstanding Expenses Rs.20,000

34. From the following information and extracts of Balance Sheets of Mokshi Ltd. as at 31st March 2021 [6]
and 31st March 2022, calculate for the year 2022-23:
(i) Cash flow from Operating Activities
(ii) Cash from Investing Activities
Particulars 31.3.2022 31.3.2021
Statement of Profit and Loss 2,40,000 1,40,000
General Reserve 40,000 30,000
Provision for Tax 1,20,000 90,000
Trade Payables 32,000 44,000
Patents 50,000 1,50,000
10% Debentures 1,20,000 10,000
Software 15,000 12,000
Machinery (at cost) 2,90,000 2,45,000
Accumulated Depreciation on Machinery 30,000 40,000
Note: Proposed Dividends for the year 2020-21 and 2021-22 were Rs. 40,000 and Rs.50,000
respectively. [Source: Ultimate Book of Accountancy]
Additional Information:
During the year 2021-22
(i) A Machine had been condemned and scrapped and company provided depreciation on that
Machine amounting to Rs.24,000.
(ii) Interest of Rs.12,000 paid on Debentures.
(iii) Tax Paid Rs.50,000
(iv) Patents worth Rs.30,000 were written off while some patents were sold for Rs. 75,000 at a
profit of Rs. 5,000. No new patents were purchased.
(v) Dividend proposed in 2020-21 was approved and paid by the company.

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Answers of Ultimate Sample Paper – 4

1. (b)
2. (d)
3. (d) and answer of OR part is (c)
4. (c) and answer of OR part is (d)
5. (d)
6. (b) and answer of OR part is (a)
7. (a)
8. (a) and answer of OR part is (b)
9. (a)
10. (b)
11. (c)
12. (a)
13. (d)
14. (a)
15. (d) and answer of OR part is (a)
16 (a)
17. Gain of X and Z = 4 : 11 and Average Profit = 1,46,000
Profit of the firm up to the date of Y’s death = 1,46,000 x 73/365 = 29,200
Y’s Share of Profit = 29,200 x 3/8 = 10,950
Journal
Date Particulars L.F. Debit Credit
12 X’s Capital A/c Dr. 2,920
June Z’s Capital A/c Dr. 8,030
2021 To Y’s Capital A/c 10,950
(Being Y’s share of profit estimated till the date of
his death)

18. Profit and Loss Account

Particulars Amount Particulars Amount

To MK’s Salary 60,000 By Profit B/d 99,750
To Rent 24,000 By Interest on MK’s Loan 2,000
To Interest on VK’s Loan 4,000
To Manager’s Commission 1,250
To Net Profit 12,500
1,01,750 1,01,750

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Profit and Loss Appropriation Account

Particulars Amount Particulars Amount

To Interest on Capital: By Net Profit b/d 12,500
VK 5,000
GK 5,000
MK 2,500
12,500 12,500
Note: Interest on Capital VK 10,000 GK 10,000 MK 5,000
Ratio of appropriation (interest on capital) will be 2 : 2 : 1 (so, 12,500 is divided in 2:2:1)
OR
X’s Capital A/c Dr. 11,000
To Y’s Capital A/c 11,000

Adjustment Table
Particulars X Y

A. Profit 90,000 Should get in 1:1 ratio 45,000 45,000

B. Wrongly done: Interest on capital 34,000 20,000

Interest on drawing (2,000) (2,000)
Profit 24,000 16,000

Total 56,000 34,000

Net effect A – B 11,000 Dr. 11,000 Cr.

19. (i) Issue of Debentures as collateral security means issuing debentures as an additional
security that may be offered against the loan in addition to the principal security.
(ii) Requirement of loan = 12,50,000 – 5,30,000 (5,00,000 + 30,000) = 7,20,000
(iii) Debentures to be issued as collateral security = 10,800
i.e.,7,20,000 x 1.5 = 10,80,000
OR

Date Particulars L.F. Debit Credit

Furniture A/c Dr. 2,50,000
To M/s Satish Furniture Mart 2,50,000
(Being Furniture purchased)

M/s Satish Furniture Mart Dr. 2,50,000

To Equity Share Capital A/c 2,00,000
To Securities Premium A/c 50,000
(Being purchase consideration paid)
No. of Shares issued = 2,50,000/12.50 = 20,000 shares

20. Sacrifice of X 1/6 and Gain of Y 1/6

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Net effect = 60,000 General Reserve + 20,000 WCR – 1,10,000 Advertisement Suspense =
(30,000)
Adjustment Entry:
X’s Capital A/c 30,000 x 1/5 Dr. 5,000
To Y’s Capital A/c 30,000 x 1/5 5,000

21. Balance Sheet (Extract)

Particulars Note No. Current Year Previous Year
Shareholders Funds
(a) Share Capital 1 47,08,000

Notes to Accounts:
Particulars Current
Year
1. Share Capital
Authorised Capital 4,00,000 Equity Shares @10 each 40,00,000
2,00,000, 9% Preference Shares @ 10 each 20,00,000 60,00,000
Issued Capital
3,40,000 Equity Shares @10 each 34,00,000
2,00,000, 9% Preference Shares @ 10 each 20,00,000 54,00,000

Subscribed, Called up and Paid up Capital

Subscribed and Fully paid up
2,00,000, 9% Preference Shares @ 10 each 20,00,000
Subscribed but not Fully paid up
3,38,000 Equity Shares @ 10 each, 8 Called up 27,04,000
Less: Calls in Arrears 4,000 x 2 (8,000)
Add: Share Forfeiture A/c 12,000 27,08,000 47,08,000

22. Entries
(i) Bank Dr. 80,000 and Credit Realisation A/c 80,000
(ii) Cash/Bank A/c Dr. 4,000 and Realisation A/c Cr. 4,000
(iii) Realisation A/c Dr. 39,500 and Bank A/c Cr. 39,500
(iv) Realisation A/c Dr. 69,000 and Bank A/c Cr. 69,000
23. (i) 1,12,500 (ii) 57,750
OR
Allotment Received Rs.1,08,000; 1st Call Rs.89,550; 2nd Call 59,700 and Capital Reserve
Rs.200

24. Revaluation Loss Rs.56,750; Capital Accounts: 7,12,165; 4,56,085; 5,84,125 and B/S
21,02,375.
OR
Revaluation Profit Rs.8,000; X’s Capital A/c Rs.55,250; Y’s Loan A/c Rs. 59,250; Z’s Capital A/c
Rs. 28,500; Y’ Loan to be shown in Balance Sheet Rs. 20,000 + 59,250 = 79,250 and B/S Total
3,13,000.

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25. Entry

Date Particulars L.F. Debit (Rs.) Credit (Rs.)

30 June X’s Capital A/c Dr. 12,000

2021
Y’s Capital A/c Dr. 3,000
To Z’s Capital A/c 15,000

Average Profit = 3,00,000 + 1,80,000 – 30,000 loss in current year = 4,50,000

= 4,50,000/ 3 = 1,50,000
= 1,50,000 + 20% = 1,80,000
= Estimated Profit for 3 months = 1,80,000 x 3/12 = 45,000
= Z’s Share of profit = 45,000 x 1/3 = 15,000
Gain Share of X and Y = 4:1

26. 8% Debenture Account

Particulars Amount Particulars Amount
By Deb. Application A/c 8,00,000
To Balance c/d 10,00,000 By Deb. Allotment A/c 1,50,000
By Discount on Issue of Debentures 50,000
A/c
10,00,000 10,00,000

Discount on Issue of Debenture Account

Particulars Amount Particulars Amount
To 8% Debentures A/c 50,000 By Statement of P/L 50,000
50,000 50,000

27. (a)
28. (a)
29. (c) and answer of OR part is (d)
30. (a)
31. Major heads and Sub-heads:
(i) Shares purchased for investment in State Bank of India – Non-current Assets – Non-current
Investment
(ii) Shares purchased for Trading in HDFC Bank --- Current Assets ---Current Investment
(iii) 10% Debentures maturity due in this current year –Current Liabilities – Short-term
borrowings
(iv) Mining Rights--- Non-current Assets --- Fixed Intangible Assets
(v) Cheques in hand --- Current Assets – Cash and Cash Equivalents
(vi) Capital Advance --- Non-current Assets – Long-term Loans and Advances

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32. Limitations: (any three)

1. Financial analysis does not consider price level changes.
2. Financial analysis may be misleading without the knowledge of the changes in accounting
procedure followed by a firm.
3. Financial analysis is just a study of reports of the company.
4. Monetary information alone is considered in financial analysis while non-monetary aspects
are ignored.
5. The financial statements are prepared on the basis of accounting concept, as such, it does not
reflect the current position.

33. (i) Debt to Capital Employed Ratio = Long-term Debt/Capital Employed

= 10,00,000/20,00,000 = 0.5:1
Long-term Debt = Debentures + Bank loan
Capital Employed = Non-current Assets + Current Assets – Current Liabilities
Current Liabilities = Short-term Borrowings + Trade payables
(ii) Fixed Assets Turnover Ratio = Revenue from operations/Fixed Assets
= 48,00,000/16,00,000 = 3 Times
OR

I. Decrease Because only increase in Equity (No effect on long-term Debt)

II. Increase Because only increase in long-term Debt (No effect on Equity)
III. No Change No Effect on Equity and Long-term Debt
IV. No Change No Effect on Equity and Long-term Debt

34. Cash Flow from Operating Activities

Particulars Details Amount

Profit before tax and extraordinary items 2,30,000
Profit 1,00,000 + 10,000 General Reserve + 40,000 Dividend
+ Tax provision made 80,000
Adjustment of Non-cash and Non-Operating Expenses:
Add: Depreciation 14,000
Add: Interest on Debentures 12,000
Add: Patents Written off 30,000
Less: Gain on Sale of Patents (5,000)
Operating Profit before Working Capital Changes 2,81,000
Less: Decrease in Current Liabilities
Trade Payables (12,000)
Cash Generated from Operating Activities 2,69,000
Less: Tax paid 50,000
Cash flow from Operating Activities 2,19,000

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Cash Flow from Investing Activities

Particulars Details Amount

Purchase of Machinery (69,000)
Software Purchased (3,000)
Sale of Patents 75,000
Cash flow from Investing Activities 3,000

Provision for Tax Account

Particulars Amount Particulars Amount

To Bank A/c (Tax paid) 50,000 By Balance b/d 90,000
To Balance c/d 1,20,000 By Statement of P/L (Provision 80,000
for Tax)
1,70,000 1,70,000

Machinery Account

Particulars Amount Particulars Amount

To Balance b/d 2,45,000 By Depreciation A/c 24,000
To Bank A/c (Purchase, Bal. 69,000 By Balance c/d 2,90,000
Fig.)
3,14,000 3,14,000
Provision for Depreciation Account

Particulars Amount Particulars Amount

To Machinery A/c 24,000 By Balance b/d 40,000
To Balance c/d 30,000 By Depreciation (Bal. fig.) 14,000
54,000 54,000

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