INDEX

ACCOUNTING
[VOLUME I]

1 Theoretical Framework 001 - 002

2 Accounting Process 003 - 018

3 Rectification of Errors 019 - 026

4 Bank Reconciliation Statement 027 - 031

5 Inventories 032 - 034

6 Depreciation & Ammortization 035 - 040

7 Bills of Exchange and Promissory Notes 041 - 050

8 Final Accounts of STC and Manufacturer 051 - 071

9 Final Accounts for Not for Profit Organisations 072 - 081

10 Single Entry System 082 - 098

 INDEX
ACCOUNTING
[VOLUME II]

11 Partnership and LLP Accounts 099 - 144

12 Dissolution of Partnership Firms and LLPs 145 - 162

13 Piecemeal Distribution 163 - 171

14 UNIT I - Company Accounts – Issue of Shares 172 - 178

15 UNIT II - Company Accounts – Issue of Debentures 179 - 181

17 UNIT IV - Company Accounts – Bonus & Right Issue 182 - 187

18 UNIT V - Company Accounts –

188 - 196
Redemption of Preference Shares

19 UNIT VI - Company Accounts –

Redemption of Debentrues
197 - 199
 CAFC ACCOUNTING

1
THEORETICAL FRAMEWORK

HOMEWORK SOLUTION

UNIT II – ACCOUNTING CONCEPTS, CONVENTIONS AND PRINCIPLES

IT I - BASIC

Q.1 Fill in the blanks:

1. Consistency.
2. Matching.
3. Periodicity.
4. Dual-aspect.
5. Generally Accepted Accounting Principles.
6. Going Concern.
7. Conservatism.
8. Materiality.
9. Money measurement.
10. Going Concern.
11. Liabilities.

Q.2 Short Questions:

1 Will remain the same.

2 Matching.
3 Conservatism.
4 Capital and Assets will increase
5 Cash.
6 Other asset will reduce or liabilities will increase.

Theoretical Framework 1
 CAFC ACCOUNTING
7 Asset will increase and cash will decrease.
8 Conservatism.
9 ` 90000 (Cash) + ` 23000 (Creditors) = ` 90000 (Cash) + ` 23000 (Inventories).

UNIT III – CONCEPT OF CAPITAL AND REVENUE

UNIT III –

Q.1 Multiple Choice Questions:

1. (b) 12. (b) 23. (a) 34. (b)

2. (b) 13. (b) 24 (a) 35. (a)
3. (b) 14. (a) 25. (a) 36. (b)
4. (a) 15. (a) 26. (b) 37. (a)
5. (a) 16. (b) 27. (d) 38. (a)
6. (a) 17. (b) 28. (d) 39. (a)
7. (a) 18. (b) 29. (c) 40. (a)
8. (b) 19. (a) 30. (d) 41. (b)
9. (b) 20. (b) 31. (a) 42. (a)
10. (a) 21. (b) 32. (a) 43. (b)
11. (b) 22. (a) 33. (b) 44. (c)

Theoretical Framework 2
 CAFC ACCOUNTING

2
ACCOUNTING PROCESS

HOMEWORK SOLUTION

UNIT I - BASIC ACCOUNTING PROCEDURES – JOURNAL ENTRIES

Q.1 (rupees in ‘00)
Date
Accounts Nature Of
(Dec Explanation Debit Credit
Involved Account
2019)
1. Amount invested in Bank A/c & Personal A/c 4,00,000
business Ajit’s Capital A/c Personal A/c 4,00,000

3 Amount withdrawn Cash A/c & Real A/c 2,000

from bank Bank A/c Personal A/c 2,000
5 Goods Purchased Purchase A/c & Real A/c 15,000
and payment made Bank A/c Personal A/c 15,000
through bank
8 Goods sold and Bank A/c & Personal A/c 16,000
money received in Sales A/c Real A/c 16,000
bank
10 Purchased Furniture & Real A/c 2,500
Furniture and Bank A/c Personal A/c 2,500
payment made by
cheque
12 Sold goods to Arvind A/c & Personal A/c 2,400
Arvind Sales A/c Real A/c 2,400
14 Purchased goods Purchase A/c & Real A/c 10,000
from Amrit Amrit’s A/c Personal A/c 10,000
15 Goods worth Amrit’s A/c & Personal A/c 500
Rs.500 returned to Purchase A/c Real A/c 500
Amrit
Accounting Process 3
 CAFC ACCOUNTING

16 Received Rs.2,300 Bank A/c Personal A/c 2,300

in full & final Discount A/c Nominal A/c 100
settlement from Arvind’s A/c Personal A/c 2,400
arvind
18 Withdrew goods Drawings A/c & Personal A/c 1,000
for personal use Purchase A/c Real A/c 1,000
20 Withdrew cash for Drawings A/c & Personal A/c 2,000
Personal use Cash A/c Real A/c 2,000
24 Paid telephone Telephone Chgs A/c Nominal A/c 110
charges & Bank A/c Personal A/c 110
26 Paid Rs. 9,450 Amrits’s A/c Personal A/c 9,500
to Amrit in full Bank A/c Personal A/c 9,450
settlement Discount A/c Nominal A/c 50
31 Paid Rs. 200 for Stationery A/c Nominal A/c 200
stationery, Rs. 500 Rent A/c Nominal A/c 5,000
for rent and Rs. Salary A/c Nominal A/c 2,000
2000 salary Bank A/c Personal A/c 7,200
31 Goods distributed Advertisement A/c Nominal A/c 2,000
as free samples & Purchase A/c Real A/c 2,000

Q.2
Nature of Account

Sr. Accounting Equation

Account Traditional Approach
No. Approach
A Rent Outstanding Personal Liability
B Closing Inventory Real Asset
C Sales Real Revenue
D Bank Fixed Deposit Personal Asset
E Cash Real Asset
F Bad Debts Nominal (Exp) Temporary Capital (Exp)
G Capital Personal Capital
H GST Payable Personal Liability
I Trade Receivables Personal Asset
J Depreciation Nominal (Exp) Temporary Capital (Exp)
K Drawings Personal Temporary Capital
(Drawings)

Accounting Process 4
 CAFC ACCOUNTING
Q.3
Sr.
Increase (+) / Decrese (-) /
No. Reason
No Change (0) in Assets

a + Furniture has been purchased making it an

increase in asset and also it being purchased on
credit it increases liability and there is no outflow
of asset like cash or bank.
b + Cash has flowed in for services provided, hence
increasing the assets.
C + Here with goods sold there is a decrease in
inventory (asset) but given there is an increase in
debtors there will be net increase in assets.
Though if the goods are sold at cost it will result
in no change whereas at below cost will result in
decrease in assets.
d - Here cash has been withdrawn from business
resulting in decrease in asset.
e 0 Only hiring of an employee has been done
resulting in ni change in asset.
f - Outflow of goods has resulted in decrease in
assets while money owed to creditors reduced on
liability side.
g - Here both assets and liabilities reduce by the
same amounts meaning a decrease in asset.
h 0 Only a purchase agreement has been entered
into with no transaction taking place yet.

Accounting Process 5
 CAFC ACCOUNTING

UNIT II - LEDGERS

Q.1
IN THE BOOKS OF MR.X
Y’s Account

Date Particulars ` Date Particulars `

To Cash 2,000 By Purchases 4,000
To Cash 2,000 By Purchases 4,000
Jan. 31 To Balance c/d 4,000
8,000 8,000

Feb.1 By Balance b/d 4,000

Z’s Account

Date Particulars ` Date Particulars `

To Sales 4,000 By cash 6,000
To Sales 4,000 By cash 2,000

8,000 8,000

Accounting Process 6
 CAFC ACCOUNTING
UNIT III -TRIAL BALANCE

Q.1
Trail Balance Of Anuradha Traders as on 31.03.2019
Dr. Balance ` Cr. Balance `

Purchase 1,50,000 Capital 1,00,000

Sales Return 1,000 Sales 1,66,000

Discount allowed 2,000 Trade Payables 25,000

Expenses 10,000 Interest received on investments 1,500

Trade Receivables 75,000

Investment 15,000

Cash at bank and in hand 37,000

Insurance paid 2,500

Total 2,92,500 Total 2,92,500

Q.2
Trail Balance of Bookkeeper as on 31.03.2019
Dr. Balance ` Cr. Balance `

Furniture 20,000 Capital 2,00,000

Debtors 2,00,000 Creditors 80,000

Stock(1st April,2018) 1,04,000 Sales 8,58,000

Trade /expenses 50,000 Wife’s Loan to business 50,000

Wages 30,000

Machinery 50,000

Purchases 6,25,000

Discount allowed 4,000

Drawings made by the proprietor 45,000

Motor Van 60,000

Total 11,88,000 Total 11,88,000

Accounting Process 7
 CAFC ACCOUNTING
Following errors are noticed:-
1. Machinery is an Assets and it has debit balance, the same was recorded wrongly on
the credit side.

2. Wife has given Loan to business, hence it is the liability of the business to repay the
amount. It should be reflected on the credit side of trial balance.

3. Discount allowed is an expense of the business hence needs to be recorded on the

debit side of trial balance.

4. Drawings made by the proprietor has debit balance and was wrongly shown on the
credit side.

5. Closing Inventory is an item of adjustment.

Q.3
JOURNAL ENTRIES
Date Particulars L.F. Debit (`) Credit (`)
April 1 Cash Account Dr. 1,00,000
To Capital Account 1,00,000
(Being commencement of business)
April 2 Purchase account Dr. 30,000
To B 30,000
(Being purchase of goods on credit)
April 3 Cash Account Dr. 16,000
To Sales 16,000
(Being Goods sold)
April 5 X Dr. 10,000
To Sales 10,000
(Being goods sold to Mr. X)
April 20 Bank account Dr. 9,800
Discount Account 200
To X 10,000
(Being cheque received from X in full
and final settlement)

Accounting Process 8
 CAFC ACCOUNTING
Cash Account

Date Particulars Amount Date Particulars Amount

(`) (`)
April 1 To Capital 1,00,000
April 3 To Sales 16,000 April 30 By Balance c/d 1,16,000
1,16,000 1,16,000

Capital Account

Date Particulars Amount Date Particulars Amount

(`) (`)
April 30 To balance c/d 1,00,000 April 1 By Cash 1,00,000

1,00,000 1,00,000

Purchase Account

Amount Amount
Date Particulars Date Particulars
(`) (`)
April 2 To B 30,000 April 30 By Balance c/d 30,000

30,000 30,000

Sales Account

Date Particulars Amount Date Particulars Amount

(`) (`)
April 30 To balance c/d 26,000 April 3 By Cash 16,000
April 5 By X 10,000
26,000 26,000

Bank Account
Amount Amount
Date Particulars Date Particulars
(`) (`)
April 20 To X 9,800 April 30 By Balance c/d 9,800

9,800 9,800

Accounting Process 9
 CAFC ACCOUNTING
B’s Account

Amount Amount
Date Particulars Date Particulars
(`) (`)
April 30 To Balance c/d 30,000 April 2 By Purchase 30,000

30,000 30,000

X’s Account

Amount Amount
Date Particulars Date Particulars
(`) (`)
April 5 To Sales 10,000 April 20 By Bank 9,800
April 20 By Discount 200
10,000 10,000

Discount Account

Amount Amount
Date Particulars Date Particulars
(`) (`)
April 20 To X 200 April 30 By P/L 200

200 200

Trial Balance as on 30.04.____

Dr. Balance Amount Cr. Balance Amount

Cash 1,16,000 Capital 1,00,000
Bank 9,800 Sale 26,000
Purchase 30,000 Trade Payable (B) 30,000
Discount allowed 200

1,56,000 1,56,000

Accounting Process 10
 CAFC ACCOUNTING
UNIT IV - SUBSIDIARY BOOKS

Q.1
Purchase Book

Date
Particulars L.F. Amount
2019
Feb 1 M/s. Brown & Co.
5 gross pencils @ 100 per gross 500
1 gross registers @240 per doz. 2,880
3,380
Less : 10% trade discount (338) 3,042

Feb 4 The Paper Co.

5 reams white paper @100 per ream 500
10 reams ruled paper @150 per ream 1,500
2,000
Less : 10% trade discount (200) 1,800

Feb 5 M/s. Verma Bros.

1 doz. Gel pens @ Rs.15 each 180 180
Total 5,022

Cash purchase and purchase of computer cannot be entered in the purchase book.

Q.2
Sales Book

Date Particulars L.F. Amount

2019 M/s. Gupta & Verma
30 shirts @ Rs.800 24,000
20 trousers @ Rs.1,000 20,000
44,000
Less : 10% trade discount (4,400)
Sales as per invoice no. dated ….. 39,600

Accounting Process 11
 CAFC ACCOUNTING
M/s Jain & sons
50 shirts @800
Sales as per invoice no. dated ….. 40,000

M/s Mathur & Jain

100 shirts @ Rs.750 75,000
10 over coats @ Rs.5000 50,000
1,25,000
Less : 10% trade discount (12,500)
Sales as per invoice no. dated ….. 1,12,500
Total 1,92,100

Cash sales and sale of furniture cannot be entered in the sales book.

Q.3
Purchase Return Book

Date
Particulars L.F. Amount
2019
Nov 20 Rajindra Prakash & Sons
One 36” Usha Ceiling Fan 1,500
Less : 10% trade discount (150) 1,350

Modern Electric Company 1,000

Total 2,350

Dr. Rajindra Prakash & sons Cr.

Date (2019) Particulars Amount Date(2019) Particulars Amount

Nov 20 To Returns 1,350
Outward A/c

Dr. Modern Electric Company Cr.

Date (2019) Particulars Amount Date(2019) Particulars Amount

Nov 30 To Returns 1,000
Outward A/c

Accounting Process 12
 CAFC ACCOUNTING
Dr. Return outwards A/c Cr.

Date (2019) Particulars Amount Date(2019) Particulars Amount

Nov.20 By Rajindra 1,350
Prakash &
Sons A/c
Nov.30 By Modern 1,000
Electric
Company
A/c

Q.4
Sales Book

Date
Particulars L.F. Amount
2019
Jan 2 Ajanta Electricals
5 colour T.V. @ Rs.6,000 each 30,000
Less : 10% trade discount 3,000
Sales as per invoice no. dated ….. 27,000

Jan 8 Ajanta Electricals Plaza

10 washing machines @Rs.8,000 each 80,000
Less : 5% trade discount (4,000)
Sales as per invoice no. dated ….. 76,000

Jan 15 M/s Haryana Traders

5 Black and white TV @ Rs.3,500 each 17,500
Less : 10% trade discount (1,750)
Sales as per invoice no. dated ….. 15,750
Total 118,750

Cash sales and sale of furniture cannot be entered in the sales book.

Accounting Process 13
 CAFC ACCOUNTING

UNIT V - CASH BOOK

Q.1

Dr. Cash Book Cr.

Date L. Date L.
Receipts Disc Amount Payments Disc Amount
2019 F. 2019 F.
April 1 To Capital A/c 2,000 April 1 By Furniture A/c 250
April 4 To Sales A/c 950 April 2 By Purchases A/c 500
April 6 To Krishna A/c 20 600 April 5 By Ram Mohan A/c 10 560
April 7 By Petty Expenses A/c 15
April 8 By Purchases A/c 150
April 13 By Wages A/c 1,000
April 13 By Ali & Sons 8 400
April 30 By Balance c/d 675

20 3550 18 3550

May 1 To Balance b/d 675

1. The discount columns in cash book are totalled but are not balanced and their
totals are entered in the discount received/paid account in the ledger.

Accounting Process 14
 CAFC ACCOUNTING
Q.2

Date L. Date L.
Receipts Disc Cash Bank Payments Disc Cash Bank
2019 F. 2019 F.
Jan 1 To Capital A/c 20,000 Jan 3 By Bank A/c C 19,000
Jan 3 To Cash C 19,000 Jan 7 By Bank A/c C 600
Jan 4 To Kirti & Co. 600 Jan 10 By Ratan & Co. 20 330
Jan 7 To cash A/c C 600 Jan 25 By Bank A/c C 1,000
Jan 12 To Tripathi & Co. 475 Jan 27 By Purchase A/c 275
By Sundry Exps
Jan 15 To Warshi 35 450 Jan 30 50
A/c
Jan 20 To Sales A/c 175
Jan 25 To Cash A/c C 1,000 Jan 31 By Balance c/d 300 20,745

35 21,225 21,075 20 21,225 21,075

Feb 1 To Bal b/d 300 20,745

Accounting Process 15
 CAFC ACCOUNTING
Q.3
Petty Cash Book

Postage
V.
Receipts Date Particulars Total Conveyance Cartage and Wages Stationery Sundries
No.
Telegram
10,000 Jan 1 To Cash
Jan 2 1 By conveyance 500 500
Jan 2 2 By cartage 250 250
Jan 3 3 By postage and 500 500
telegrams
Jan 3 4 By Wages 600 600
Jan 4 5 By stationery 400 400
Jan 4 6 By conveyance 200 200
Jan 5 7 By repairs to 1,500 1,500
furniture
Jan 5 8 By conveyance 100 100
Jan 5 9 By cartage 400 400
Jan 6 10 By postage and 700 700
telegrams
Jan 6 11 By conveyance 300 300
Jan 6 12 By cartage 300 300
Jan 6 13 By stationery 200 200
Jan 6 14 By General 500 500
Expenses
6,450 1,100 950 1,200 600 600 2,000
By bal c/d 3,550
10,000 10,000

Accounting Process 16
 CAFC ACCOUNTING
Journal Entries

L.
Date Particulars Debit Credit
F.
Jan 1 Petty cash A/c Dr. 10,000
To Cash A/c 10,000
(being petty cash received)
Jan 2 Conveyance A/c Dr. 500
Cartage A/c Dr. 250
To Petty Cash A/c 750
(Being Expenses made)
Jan 3 Postage and Telegrams A/c Dr. 500
Wages A/c Dr. 600
To Petty Cash A/c 1,100
(Being Expenses made)
Jan 4 Stationery A/c Dr. 400
Conveyance A/c Dr. 200
To Petty Cash A/c 600
(Being Expenses made)
Jan 5 Sundry expenses A/c Dr. 1,500
Conveyance A/c Dr. 100
Cartage A/c 400
To Petty Cash A/c 2,000
(Being Expenses made)
Jan 6 Postage and Telegrams A/c Dr. 700
Conveyance A/c Dr. 300
Cartage A/c Dr. 300
Stationery A/c Dr. 200
Sundries A/c Dr. 500
To Petty cash A/c 2,000
(Being Expenses made)

Accounting Process 17
 CAFC ACCOUNTING
Q.4
Dr. Cash Book Cr.

Date Receipts L. Disc Cash Bank Date Payments L. Disc. Cash Bank

2019 F. 2019 F.
Mar 1 To bal b/d 15,000 Mar 1 By Balance b/d 500

Mar 2 To Sales A/c 3,000 Mar 3 By Sushil Bros. 100 3,400

Mar 5 To Sales A/c 2,800 Mar 7 By Adit A/c 6,200

Mar 6 To Srijan A/c 6,200 Mar 9 By Bank A/c C 6,800

Mar 9 To Cash A/c C 6,800 Mar 12 By Adit A/c 6,200

Mar 10 To Aviral A/c 50 3,600 Mar 24 By Cash A/c C 1,800

Mar 12 To Srijan A/c 6,200 Mar 28 By Sanchit A/c 3,000

Mar 15 To Sales A/c 3,200 Mar 30 By Commission A/c 60

Mar 24 To Bank A/c C 1,800 Mar 31 By Balance c/d 19,200 1,440

50 32,200 16,400 100 32,200 16,400

Feb 1 To Bal b/d 19,200 1,440

If the received cheque is endorsed to other party on the same day then no entry is
required. However in the above case posting has been done through cash column as the
endorsement is done on the next day.

Accounting Process 18
 CAFC ACCOUNTING

3
RECTIFICATIONS OF ERRORS

HOMEWORK SOLUTION

Q.13 In the Books of …...

Journal Entries
Date Particulars L.F. Debit (`) Credit (`)
2019
(1) Suspense A/c Dr. 1,00,000
To Mr. A A/c 1,00,000
(Being amount received from Mr.
A, Wrongly debited to his A/c, now
rectified).
(2) Suspense A/c Dr. 40,000
To purchase A/c 20,000
To purchase returns A/c 20,000
(Being purchase returns, wrongly
debited to purchase A/c, now rectified)
(3) Suspense A/c Dr. 16,000
To discount allowed A/c 8,000
To discount received A/c 8,000
(Being discount received, wrongly
posted to debit of discount A/c, now
rectified).
(4) Repairs A/c Dr. 9,060
To Motor car A/c 7,060
To Suspense A/c 2,000
(Being repairs made to Motor car,
wrongly debited to Motor car A/c, with
wrong amount, now rectified).

Rectifications of Errors 19
 CAFC ACCOUNTING

(5) Mr. B A/c Dr. 40,000

To Mr. A A/c 40,000
(Being amount paid to B, wrongly
debited to A, now rectified).

Dr. Suspense A/c Cr.

Particulars Amount Particulars Amount
To Mr. A A/c 1,00,000 By balance b/d (bal fig) 1,54,000
To purchase A/c 20,000 By repairs A/c 2,000
To purchase Returns A/c 20,000
To discount allowed A/c 8,000
To discount received A/c 8,000

Total 1,56,000 Total 1,56,000

Note:
Since it is given that all the errors are rectified & there are no further errors suspense A/c
will not have a closing balance. The difference of suspense A/c will be opening balance.

Q.14
In the Books of …...
Journal Entries
Date Particulars L.F. Debit (`) Credit (`)
2019
(1) Purchase A/c Dr. 15,000
Sales A/c Dr. 15,000
To Ravi A/c 30,000
(Being purchase made from Ravi, wrongly
entered through sales book, now rectified)
(2) Bills Receivable A/c Dr. 25,000
Bills Payable A/c Dr. 25,000
To Arun A/c 50,000
(Being bill receivable of Arun, wrongly recorded
as bills payable, now rectified)

Rectifications of Errors 20
 CAFC ACCOUNTING

(3)A Prepaid Rent A/c Dr. 3,500

To Suspense A/c 3,500
(Being prepaid rent not bought forward, now
rectified).
(3)B Rent A/c Dr. 3,500
To prepaid Rent A/c 3,500
(Being prepaid rent of last year transferred as
expenses of rent in current year)
(4) Suspense A/c Dr. 4,000
To purchase A/c 2,000
To purchase returns A/c 2,000
(Being purchase returns wrongly recorded as
purchases, now rectified). SEE NOTE BELOW
(5) Bills Payable A/c Dr. 25,000
To Harish A/c 25,000
(Being bills payable of Harish paid to him,
wrongly debited to his A/c, now rectified).
(6) Repairs A/c Dr. 2500
Radio A/c Dr. 45000
To Purchases A/c 46000
To Janki A/c 1500
(Being repairs made to radio and
New radio purchased, wrongly debited to
purchase, now rectified).

Note For Entry No. 4:

It is assumed that the posting in creditors A/c is done correctly and difference transferred
to suspense A/c.
However it can be assumed that posting in creditor A/c is also wrong, than the entry
would be:
Creditors A/c Dr. 4,000
To purchase A/c 2,000
To purchase returns A/c 2,000

Rectifications of Errors 21
 CAFC ACCOUNTING
Dr. Suspense A/c Cr.
Particulars Amount Particulars Amount
To purchase A/c 2,000 By balance b/d 1,000
To purchase Returns A/c 2,000 By prepaid rent A/c 3,500
To balance c/d 500
Total 4,500 Total 4,500

Note:
It is assumed that debit of trial balance exceeds by Rs. 1000 and hence opening balance
of suspense is placed on credit side Since opening balance of suspense A/c is already
given and suspense account is not tallying the difference is treated as a closing balance
of suspense A/c.

Q.15 In the Books of …...

Journal Entries
Date Particulars L.F. Debit (`) Credit (`)
(1) Suspense A/c Dr. 420
To Purchase returns A/c 420
(Being total of return onwards book
not posted to ledger now rectified).
(2) Purchase A/c Dr. 350
Sales A/c Dr. 350
To Suspense A/c 700
(Being purchase wrongly entered as
sales, now rectified).
(3) Z A/c Dr. 680
To Suspense A/c 680
(Being sale to Z wrongly credited to his
A/c, now rectified).
(4) Sales A/c Dr. 4,500
Suspense A/c Dr. 900
To Furniture A/c 5,400
(Being furniture sold credited to sales
now rectified).

Rectifications of Errors 22
 CAFC ACCOUNTING
(5) Drawing A/c Dr. 500
To Goods/Purchase A/c 500
(Being goods withdrawn by proprietor
not recorded in books now recorded &
rectified).

Q.16 In the Books of ABC Ltd.

Journal Entries

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

2019
(1) Suspense A/c Dr. 180
To Profit & loss Adjustment A/c 180
(Being sales of Rs. 6531 wrongly carried
forward as Rs. 6351, now rectified).
(2) Profit & loss Adjustment A/c Dr. 2,400
To debtors A/c 1,200
To creditors A/c 1,200
(Being sales returns, recorded as purchase
returns, now rectified)
(3) Drawings A/c Dr. 250
To Profit & loss Adjustment A/c 250
(Being personal car expenses, debited to
trade expenses, now rectified).
(4) Suspense A/c Dr. 2,750
To Profit & loss Adjustment A/c 2,750
(Being sales book undercast, now rectified).
(5) Suspense A/c Dr. 100
To Profit & loss Adjustment A/c 100
(Being discount received debited to
discount allowed, now rectified).
(6) Profit & loss Adjustment A/c Dr. 136
To Creditors A/c 100
To Suspense A/c 36
(Being purchase wrongly recorded in it’s A/c
& creditor A/c, now rectified).

Rectifications of Errors 23
 CAFC ACCOUNTING
(7) Profit & loss Adjustment A/c Dr. 744
To Capital A/c 744
(Being profit transfer to capital A/c)

Once the above errors are rectified there will be either increase or decrease in profit, the
effect of which is shown below:
Particulars Profit increase Profit decrease
1. Under casting of sales. 180
2. Sales returns recorded as purchase returns. 2,400
3. Personal expense debit to trade exps. 250
4. Sales book undercast 2,750
5. Discount received debited to discount 100
6. Wrong recording of purchases 136
Total 3,280 2,536
Net Profit Increase by Rs.744

Q.17
In the Books of RAJESH
Journal Entries
Date Particulars L.F. Debit (`) Credit (`)
2019
(1) Purchase A/c Dr. 1,080
Sales A/c Dr. 1,080
To Suspense A/c 2,160
(Being purchase wrongly posted to sales, now
rectified).
(2) Salaries A/c Dr. 27,720
To Suspense A/c 27,720
(Being salaries of Rs. 25200 wrongly written as Rs.
2520 on credit side, now rectified)
(3) Interest on overdraft A/c Dr. 1,300
To Suspense A/c 1,300
(Being interest on overdraft not posted to its ledger,
now rectified)

Rectifications of Errors 24
 CAFC ACCOUNTING
Dr. Suspense A/c Cr.
Particulars Amount Particulars Amount
To balance b/d (bal Fig) 31,180 By purchase A/c 1,080
By sales A/c 1,080
By salaries A/c 27,720
By interest on o/d A/c 1,300
Total 31,180 Total 31,180

Q.18
In the Books of KAPILDEV
Journal Entries

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

2019

1(A) Furniture A/c Dr. 1,800

To Suspense A/c 1,800

1(B) Profit & loss Adjustment A/c Dr. 270

To Furniture A/c 270

2(A) Patil A/c Dr. 8,000

To Suspense A/c 8,000

2(b) Profit & loss Adjustment A/c Dr. 400

To Reserve for doubtful debts A/c 400

(3) Machinery A/c Dr. 560

Suspense A/c Dr. 90

To Profit & loss Adjustment A/c 650

(4) Profit & loss Adjustment A/c Dr. 1,320

To Binoy A/c 180

To Suspense A/c 1,140

(5) Kapildev Capital A/c Dr. 1,340

To Profit & loss Adjustment A/c 1,340

Rectifications of Errors 25
 CAFC ACCOUNTING
Dr. Suspense A/c Cr.
Particulars Amount Particulars Amount
To suspense opening balance – 10,850 By furniture A/c 1,800
bal fig
To profit/loss adjustment A/c 90 By patil A/c 8,000
By profit / loss adjustment A/c 1,140
Total 10,940 Total 10,940

Q.19
In the Books of RAMA & Co.
Date Particulars L.F. Debit (`) Credit (`)
2019
(1) Purchase A/c should be debited by ` 100

(2) Sales Returns A/c is to be debited by ` 50

(3) Deprecation A/c is to be debited by ` 250

(4) Salaries A/c is to be credited by ` 75

(5) Bills receivable A/c to be debited by ` 3000

(6) Hari’s personal A/c is to be debited by ` 36

(7) Discount allowed A/c is to debited by ` 25

Rectifications of Errors 26
 CAFC ACCOUNTING

4 BANK RECONCILIATION
STATEMENT

HOMEWORK SOLUTION

Q.13
IN THE BOOKS OF GOPI
ADJUSTED CASH BOOK

Receipts ` Payments `
To Balance b/d 44,500.00 By Insurance premium 2,700.00
To Dividend 4,000.00 By Under casting in cash book 50.00
To Rent 6,000.00 By Bank charges 50.00
To Bills Receivable 5,900.00 By Bills Payable 2,000.00
By Balance c/d 55,600.00
60,400.00 60,400.00

IN THE BOOK OF GOPI

BANK RECONCILIATION STATEMENT AS ON 30/06/19

` `
Adjusted Balance as per cash book as on 30/06/19 55,600.00
Add:
1. Cheques issued but not presented for payment 60,000.00
1,15,600.00

Less:
1. Cheques deposited but not cleared 50,000.00
Balance as per Pass Book as on 30/06/19 65,600.00

Bank Reconciliation 27
Statement
 CAFC ACCOUNTING
Q.14
IN THE BOOKS OF MR. X
BANK RECONCILIATION STATEMENT
AS ON 31ST MARCH 2020

Particulars Amt. ` Amt. `

Over draft as per Cash Book 7,640.00

Add
1. Cheques deposited but not cleared 10,000.00
2. Interest debited by the bank not recorded in the Cash Book 1,000.00
3. Bank Charges not recorded in the Cash Book 340.00 11,340.00
18,980.00

Less
1. Interest on Securities collected by the bank not recorded in 1,080.00
Cash Book
2. Credit transfer not recorded in the Cash Book 200.00
3. Dividend collected by the bank not recorded in the cash book 1,000.00
4. Cheques issued but not presented for payment 37,400.00 39,680.00

Balance (Credit) as per Pass Book as on 31/03/20 20,700.00

Q.15
IN THE BOOKS OF
BANK RECONCILIATION STATEMENT
AS ON 30TH SEPTEMBER 2019

Particulars Amt. ` Amt. `

Credit Balance as per Pass book 10,000.00
Add:
1. Cheque received but not sent to the bank 1,200.00
2. Insurance Premium paid by the Bank not recorded in Cash 600.00
Book
3. Cheque received entered twice in the cash Book 1,000.00
(Assumed deposited & cleared by the bank)

Bank Reconciliation 28
Statement
 CAFC ACCOUNTING

4. Bill discounted and dishonored not recorded in the Cash Book 5,200.00 8,000.00
18,000.00
Less:
1. Deposited into the bank not recorded in the Cash Book 500.00
2. Bank charges recorded twice in the Cash book 20.00
3. Cheque issued but not presented for payment 500.00
1,020.00

Balance as per Cash book as on 30/09/19 16,980.00

Q.16 IN THE BOOKS OF

BANK RECONCILIATION STATEMENT
AS ON 30TH SEPTEMBER 2019

Particulars Amt. ` Amt. `

Overdraft as per Pass Book 21,494.00
Add:
1. Cheque deposited but not recorded in the Cash Book 700.00
2. Debit side of bank column being under cost 100.00
3. Bills directly collected by the book not recorded in the 3,500.00
Cash Book
4. Bank charges recorded twice in the Cash Book 25.00
5. Cheque issued but not presented for payment 1,250.00 5,575.00
27,069.00

Less:
1. Cheque deposited ` 5,000.00 but collected only 4.00
` 4,996.00 by the Bank
2. Cheque returned dishonored not recorded in Cash Book 530.00
3. Bill discounted with the bank but dishonored including 8,015.00
noting charges `15
4. Cheque deposited but not cleared 2,320.00 10,869.00

Overdraft as per Cash book as on 30/09/2019 16,200.00

Bank Reconciliation 29
Statement
 CAFC ACCOUNTING

Q.17
IN THE BOOK OF
BANK RECONCILIATION STATEMENT
AS ON 30TH SEPTEMBER 2018

Particulars Amt. ` Amt. `

Overdraft as per Cash book as on 30/09/2018 49,350.00
Add:
1. Cheques deposited but not cleared [1,300.00 + 250.00] 1,550.00
2. Amount paid by the Bank not recorded in the Cash
book:-
- Creditors 320.00
- LIC Premium 160.00
- Call on shares 600.00 1,080.00
3. Bank commission not recorded in Cash book 15.00
4. Wrong debit by the Bank 300.00 2,945.00
52,295.00
Less:
1. Cheques issued but not presented for payment 3,700.00
2. Cheque issued to Abdul returned back by him 750.00
3. Amount credited by the Bank not recorded in the Cash
Book:-
- Dividend 150.00
- Insurance claim 800.00 950.00
4. Wrong credit by the Bank 500.00
5,900.00

Overdraft as per Pass Book as on 30/09/2018 46,395.00

Bank Reconciliation 30
Statement
 CAFC ACCOUNTING
Q.18 IN THE BOOKS OF P RANGARAO
BANK RECONCILIATION STATEMENT AS ON 28th FEBRUARY, 2018
PARTICULARS ` `
Overdraft as per cash book as on 28.02.2018 15,000
Add :
1 Interest charged by the bank not recorded in the cash 50
book
2 Bank charges not recorded in the cash book 12
3 Cheques deposited but not cleared (2500 – 1900) 600 662
15,662
Less :
1 Cheques issued but not presented for payment 1,500
Dividend collected and credited by the bank not
2 recorded in the cash book 650 2,150
Overdraft as per pass book as on 28.02.2018 13,512

Q.19 IN THE BOOKS OF__________

BANK RECONCILIATION STATEMENT AS ON 31ST DECEMBER, 2019
PARTICULARS ` `
Balance as per cash book as per cash book as on 6,000
31.12.2019
Add :
1 Cheques issued but not presented for payment 1,000
2 Direct deposit by customer in Bank A/c, not recorded in
the cash book 500 1,500
7,500
Less :
1 Cheques deposited but not cleared 1,400
2 Cheque not yet deposited in the bank, recorded in the 500
cash book
3 Cheque deposited of Susan but dishonoured by the Bank 400
4 Bank charges debited by the Bank not recorded in
the cash book 20 2,320
Overdraft as per pass book as on 31.12.2019 5,180

Bank Reconciliation 31
Statement
 CAFC ACCOUNTING

5
INVENTORIES

HOMEWORK SOLUTION

Q.13 Calculation of Physical Stock as on 31.03.1996

`
Physical Stock as on 09.04.1996  25,000
(+) Cost of Sales between 31.03.96 to  1,290
09.04.96 (` 1,720 – 25%)
[ on cost = 25% on sales]
(-) Purchases between 31.03.96 to
09.04.96 (` 120 – ` 50 still in transit)  (70)
(-) Goods invoiced during March 1996,
received on 04.04.96.  (100)
Physical Stock as on 31.03.1996  26,120

Q.14 Calculation of Value of Stock as on 31.03.97

Dr. Trading A/c for the year ended 31.03.97 Cr.

Abnormal Normal Abnormal Normal

Particulars goods goods Particulars goods goods
(`) (`) (`) (`)
To Opening Stock 14,000 56,000 By Sales 16,000 5,06,000
To Purchases 3,46,000 By Closing Stock - 67,200
To Manuf. Exp 70,000
To Gross Profit 2,000 1,01,200
(20% on
5,06,000)
16,000 5,73,200 16,000 5,73,200

Inventories 32
 CAFC ACCOUNTING
Value of Stock as on 31.03.97 = ` 67,200
(Note : Gross Profit =25% on cost = 20% on sales)
Alternatively this can be solved in statement format.

Q.15 A Trader
Calculation of Book Value of Stock as on 31.03.02
`
Physical Stock as on 15.04.02  50,000
(+) Cost of Net Sales  32,000
(between 31.03.02 to 15.04.02)
[(41,000 – 1,000) - 20%]
(-) Purchases between 31.03.02  (5,034)
to 15.04.02
(+) Cost of goods with customers on
approval  4,800
[(10,000 × 60%) - 20%]
(-) Stock belonging to consignors  (2,400)
(30% of ` 8,000)
Book Value of Stock as on 31.03.02  79,366

Q.16 M/s P & Co

Calculation of Book Value of Stock as on 31.03.19

Amount (`)
Physical Stock as on 31.03.19  6,25,000
(-) Reduction in value of Stock due to  (35,000)
damaged goods
(40,000 – 5,000)
(+) Goods sent on Approval,
Approval is still awaited  25,000
(+) Goods sent on Consignment
Remains unsold @ cost  62,500

Book Value of Stock as on 31.03.19  6,77,500

Inventories 33
 CAFC ACCOUNTING
Q.17 M/s Polypack & Company
Calculation of closing stock on 31st March, 2006
Particulars ` `
Stock as on 31 March, 2006 62,500
Add: (a) Goods on sale or return basis 25,000
(b) Goods unsold with consignee
1,50,000 50%
X
120% 62,500 87,500
7,12,500
Less: Reduction in value of stock due to badly damaged
goods `(40,000-5,000)
Value of Closing Stock 35,000
6,77,500

Q.18 Statement of Valuation of Stock as on March 31, 2020

Particulars ` `
Stock as on March 31, 2019 3,50,000
Less: Book value of abnormal stock (`55,000 - `20,000) (35,000) 3,15,000
Add: Purchases 12,00,000
Add: Manufacturing expenses 1,00,000
16,15,000
Less: Cost of Sales
Sales as per book 18,50,000
Less: Sales of abnormal item (50,000)
18,00,000
Less: Gross Profit @ 20% stock (3,60,000) (14,40,000)
Value of Inventory as on March 31, 2020 1,75,000
Note: Selling and Distribution expenses and Administration expenses are NOT directly
attributable to bringing the inventories to its present location and condition and
hence, excluded from the above computation as they are not direct expenses.

Inventories 34
 CAFC ACCOUNTING

6 DEPRECIATION AND
AMMORTIZATION

HOMEWORK SOLUTION
Q.13
Books of Ramlal
Machinery A/c
Dr. Cr.

Date Particulars J.F (`) Date Particulars J.F (`)

01.04.18 To Balance b/d 15,000 01.01.19 By Depreciation A/c 225
01.10.18 To Bank A/c 10,000 01.01.19 By Bank A/c 2,000
01.01.19 By P & L A/c 775
(Loss)
31.03.19 By Depreciation A/c 1,700
31.03.19 By Balance c/d 20,300
25,000 25,000

Working : Balance

Date Details Sold Unsold New

01.04.18 Balance 3,000 12,000 -
01.10.18 Purchase - - 10,000
01.01.19 Depreciation (225)
01.01.19 Balance 2,775
01.01.19 Sold (2,000)
01.01.19 Loss 775
31.03.19 Depreciation (1,200) (500)
01.04.19 Balance 10,800 9,500

Depreciation and
Ammortization
35
 CAFC ACCOUNTING
Q.14 Books of Hindustan Petroleum Ltd.
Dr. Machinery A/c Cr.
Date Particulars J.F (`) Date Particulars J.F (`)

01.07.16 To Bank A/c 60,000 31.03.17 By Dept. A/c 5,500

01.01.17 To Bank A/c 40,000 31.03.17 By Balance c/d 94,500
1,00,000 1,00,000
01.04.17 To Balance b/d 94,500 31.03.18 By Dept. A/c 11,000
01.10.17 To Bank A/c 20,000 31.03.18 By Balance c/d 1,03,500
1,14,500 1,14,500
01.04.18 To Balance b/d 1,03,500 01.04.18 By Bank A/c 76,000
01.04.18 To P & L A/c 59,500 31.03.19 By Dept. A/c 10,000
(Profit) 31.03.19 By Balance c/d 77,000
1,63,000 1,63,000
01.04.19 To Balance b/d 77,000

Working : (SLM) M1 Depreciation

Sold
Date Details Unsold M2 M3 Total
(⅓)
01.07.16 Purchase 20,000 40,000 - - -
01.01.17 Purchase - - 40,000 - -
31.03.17 Depreciation@10% (1,500) (3,000) (1,000) - 5,500
01.04.17 Balance 18,500 37,000 39,000 - -
01.10.17 Purchase - - - 20,000 -
31.03.18 Depreciation@10% (2,000) (4,000) (4,000) (1,000) 11,000
01.04.18 Balance 16,500 33,000 35,000 19,000 -
01.04.18 Sold (76,000)
01.04.18 Profit 59,500
31.03.19 Depreciation@10% (4,000) (4,000) (2,000) 10,000
01.04.19 Balance 29,000 31,000 17,000

Depreciation and
Ammortization
36
 CAFC ACCOUNTING
Q.15 Books of A Company
Dr. Machinery A/c Cr.
Date Particulars J.F (`) Date Particulars J.F (`)
01.04.18 To Balance b/d 72,000 01.10.18 By Dept. A/c 385
01.10.18 To P & L A/c 204 01.10.18 By Bank A/c 6,000
(Profit) 01.10.18 By P & L A/c 1,310
01.01.19 To Bank A/c 20,000 (Loss)
01.10.18 By Dept. A/c 684
01.10.18 By Bank A/c 13,200
31.03.19 By Dept. A/c 5,563
31.03.19 By Balance c/d 65,062

92,204 92,204
01.04.19 To Balance b/d 65,062

Working : (10% RBM)

Date Details I (Sold) II (Sold) III (Unsold) IV (New)
01.10.15 Purchase 10,000
31.03.16 Depreciation (500)
01.04.16 Balance 9,500
01.10.16 Purchase 16,000
31.03.17 Depreciation (950) (800)
01.04.17 Balance 8,550 15,200
31.03.18 Depreciation (855) (1,520)
01.04.18 Balance 7,695 13,680 50,625*
01.10.18 Depreciation (385) (684)
01.10.18 Balance 7,310 12,996
01.10.18 Sold (6,000) (13,200)
01.10.18 Loss/(Profit) 1,310 (204)
01.01.19 Purchase 20,000
31.03.19 Depreciation (5,063) (500)
01.04.19 Balance 45,562 19,500

* “Total Balance on” 01.04.18 = ` 72,000, out of which Balance of 1st two asset was
` 7,695 & ` 13,680.

Balance of remaining Assets = 72,000 - 7,695 – 13,680

= ` 50,625

Depreciation and
Ammortization
37
 CAFC ACCOUNTING
Q.16
Books of Laxmi
Machinery A/c
Dr. Cr.

Date Particulars J.F (`) Date Particulars J.F (`)

01.04.15 To Bank A/c 64,000 31.03.16 By Dept. A/c 13,250
01.07.15 To Bank A/c 38,000 31.03.16 By Balance c/d 1,68,750
01.10.15 To Bank A/c 80,000

1,82,000 1,82,000

01.04.16 To Balance b/d 1,68,750 31.03.17 By Dept. A/c 26,800

01.04.16 To Bank A/c 86,000 31.03.17 By Balance c/d 3,27,950
31.03.17 To Bank A/c 1,00,000

3,54,750 3,54,750

01.04.17 To Balance b/d 3,27,950 01.10.17 By Dept. A/c 3,200

01.10.17 By Bank A/c 4,000
01.10.17 By P & L A/c 44,000
(Loss)
31.03.18 By Dept. A/c 30,400
31.03.18 By Balance c/d 2,46,350

3,27,950 3,27,950

01.04.18 To Balance b/d 2,46,350 31.03.19 By Dept. A/c 3,800

31.03.19 To P & L A/c 36,250 31.03.19 By Bank A/c 60,000
(Profit) 31.03.19 By Dept. A/c 26,600
31.03.19 By Balance c/d 1,92,200

2,82,600 2,82,600
01.04.19 To Balance b/d 1,92,200

Depreciation and
Ammortization
38
 CAFC ACCOUNTING
Working : (SLM 10%) Depreciation

Date Details M1 M2 M3 M4 M5 Total

01.04.15 Purchase 64,000
01.07.15 Purchase 38,000
01.10.15 Purchase 80,000
31.03.16 Depreciation (6,400) (2,850) (4,000) 13,250
01.04.16 Balance 57,600 35,150 76,000
01.04.16 Purchase 86,000
31.03.17 Purchase 1,00,000
31.03.17 Depreciation (6,400) (3,800) (8,000) (8,600) - 26,800
01.04.17 Balance 51,200 31,350 68,000 77,400 1,00,000
01.10.17 Depreciation (3,200)
01.10.17 Balance 48,000
01.10.17 Sold (4,000)
01.10.17 Loss 44,000
31.03.18 Depreciation (3,800) (8,000) (8,600) (10,000) 30,400
01.04.18 Balance 27,550 60,000 68,800 90,000
31.03.19 Depreciation (3,800)
31.03.19 Balance 23,750
31.03.19 Sold (60,000)
31.03.19 Profit (36,250)
31.03.19 Depreciation (8,000) (8,600) (10,000) 26,600
01.04.19 Balance 52,000 60,200 80,000

Q.17
Books of LG Transport Company
Motor Truck A/c
Dr. Cr.
Date Particulars J.F (`) Date Particulars J.F (`)
01.01.16 To Balance b/d 2,92,50,000 01.10.16 By Dept. A/c 6,75,000
(29,25,000 + 01.10.16 By Bank A/c 27,00,000
2,63,25,000) 31.12.16 By Dept. A/c 83,50,000
01.10.16 To P & L A/c 4,50,000 31.12.16 By Balance c/d 2,29,75,000
(Profit)
01.10.16 To Bank A/c 50,00,000

Depreciation and
Ammortization
39
 CAFC ACCOUNTING

3,47,00,000 3,47,00,000
01.01.17 To Balance b/d 2,29,75,000 31.12.17 By Dept. A/c 91,00,000
31.12.17 By Balance c/d 1,38,75,000

2,29,75,000 2,29,75,000
01.01.18 To Balance b/d 1,38,75,000

Date Details T1 T2 to T10 T11 Total

(destroyed) (9 Trucks)
01.04.14 Purchase 45,00,000 4,05,00,000 -
31.12.14 Depreciation (6,75,000) (60,75,000) 67,50,000
01.01.15 Balance 38,25,000 3,44,25,000
31.12.15 Depreciation (9,00,000) (81,00,000) 90,00,000
01.01.16 Balance 29,25,000 2,63,25,000
01.10.16 Depreciation (6,75,000)
01.10.16 Balance 22,50,000
01.10.16 Insurance Claim (27,00,000)
01.10.16 Profit (4,50,000)
01.10.16 Purchase 50,00,000
31.12.16 Depreciation (81,00,000) (2,50,000) 83,50,000
01.01.17 Balance 1,82,25,000 47,50,000
31.12.17 Depreciation (81,00,000) (10,00,000) 91,00,000
01.01.18 Balance 1,01,25,000 37,50,000

Q.18
6,00,000
Depreciation p.a = = ` 60,000
10

Depreciation on SLM Charged for 3 years = 60,000 × 3

= ` 1,80,000
BV of the Computer @ end of 3rd year = 6,00,000 – 1,80,000
= ` 4,20,000
Remaining useful life as per Previous estimate = 7 years.
Remaining useful life as per revised estimate = 5 years.

4,20,000
Depreciation from the 4th year onwards = = ` 84,000 p.a
5

Depreciation and
Ammortization
40
 CAFC ACCOUNTING

7 BILLS OF EXCHANGE AND

PROMISSORY NOTES

HOMEWORK SOLUTION

Q.11 In the Books of David.

Date Particulars L.F. Debit (`) Credit (`)
1 / 1 /2019 Bills Receivable (No.1) A/c Dr. 6,000
To Thomas A/c 6,000
(Being bill accepted by Thomas)
1 / 1 /2019 BR (No.2) A/c Dr. 10,000
To Thomas A/c 10,000
(Being bill accepted by Thomas)
4 / 3 /2019 Thomas A/c Dr. 6,000
To BR (No.1) A/c 6,000
(Being bill dishonoured)
4 / 3 /2019 Thomas A/c Dr. 180
To Interest A/c 180
(Being interest receivable)
4 / 3 /2019 BR (No.3) A/c Dr. 6,180
To Thomas A/c 6,180
(Being bill accepted by Thomas)
20 /3 /2019 Bank A/c Dr. 9,900
Discount (Rebate) A/c Dr. 100
To BR (No.2) A/c 10,000
(Being bill received)
? Thomas A/c Dr. 6,180
To BR (No.3) A/c 6,180
(Being bill dishonoured)
? Cash / Bank A/c Dr. 3,090
Bad Debts A/c Dr. 3,090
To Thomas A/c 6,180
(Being Thomas’s insolvency & only
50% recovered)

Bills of Exchange and

Promissory Notes
41
 CAFC ACCOUNTING
Q.12
In the books of Rajendra.
Date Particulars L. F. Debit (`) Credit (`)
1 / 6 /2019 Shubham A/c Dr. 45,000
To BP A/c 45,000
(Being bill accepted)
1 / 6 /2019 Bank A/c Dr. 14,700
Discount A/c Dr. 300
To Shubham A/c 15,000
(Being amt received from Shubham)
4 / 9 /2019 BR A/c Dr. 63,000
To Shubham A/c 63,000
(Being new bill accepted by Shubham)
4 / 9 /2019 Bank A/c Dr. 61,650
Discount A/c Dr. 1,350
To BR A/c 63,000
(Being bill discounted)
4 / 9 /2019 BP A/c Dr. 45,000
To Bank A/c 45,000
(Being bill honoured)
4 / 9 /2019 Shubham A/c Dr. 12,000
To Bank A/c 11,100
To Discount A/c 900
(Being amt remitted to Shubham of new
bill)
7/ 12 /2019 Shubham A/c Dr. 63,000
To Bank A/c 63,000
(Being bill dishonoured due to insolvency)
7/ 12 /2019 Bank A/c Dr. 16,800
Bad debts A/c Dr. 25,200
To Shubham A/c 42,000
(Being Shubham’s insolvency & 40% recovered)

Bills of Exchange and

Promissory Notes
42
 CAFC ACCOUNTING
In the books of SHUBHAM

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

1 / 6 /2019 BR A/c Dr. 45,000
To Rajendra A/c 45,000
(Being bill accepted)
1 / 6 /2019 Bank A/c Dr. 44,100
Discount A/c Dr. 900
To BR A/c 45,000
(Being bill discounted)
1 / 6 /2019 Rajendra A/c Dr. 15,000
To Bank A/c 14,700
To Discount A/c 300
(Being 1/3rd of proceeds remitted)
4 / 9 /2019 Rajendra A/c Dr. 63,000
To BP A/c 63,000
(Being new bill accepted by Shubham)
4 / 9 /2019 Bank A/c Dr. 11,100
Discount A/c Dr. 900
To Rajendra A/c 12,000
(Being amt remitted from Rajendra)
7 /12/2019 BP A/c Dr. 63,000
To Rajendra A/c 63,000
(Being bill dishonoured)
7 /12/2019 Rajendra A/c Dr. 42,000
To Bank A/c 16,800
To Deficiency A/c 25,200
(Being amt paid to the extent of 40%
and declared insolvency)

Q.13 In the books of X.

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

1 / 4 /2019 BR A/c Dr. 4,000
To Y A/c 4,000
(Being bill accepted by Y)
1 / 4 /2019 Bank A/c Dr. 3,920
Discount A/c Dr. 80
Bills of Exchange and
Promissory Notes
43
 CAFC ACCOUNTING

To BR A/c 4,000
(Being bill discounted)
1 / 4 /2019 Y A/c Dr. 2,000
To Bank A/c 1,960
To Discount A/c 40
(Being half of the proceeds sent.)
4 / 8 /2019 Y A/c Dr. 7,000
To BP A/c 7,000
(Being new bill accepted by X)
4 / 8 /2019 Bank A/c Dr. 1,300
Discount A/c (Refer WN) Dr. 200
To Y A/c 1,500
(Being amt received from Y)
? BP A/c Dr. 7,000
To Y A/c 7,000
(Being bill dishonoured)
? Y A/c Dr. 3,500
To Bank A/c 875
To Deficiency A/c 2,625
(Being X’s insolvency % 25% of amt
due paid off)

Working Note:

Bills of Exchange and

Promissory Notes
44
 CAFC ACCOUNTING
Q.14
In the books of Anil.

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

5 / 4 /2019 BR A/c Dr. 9,000
To Sanjay A/c 9,000
(Being Sanjay accepted bill)
5 / 4 /2019 Bank A/c Dr. 8,820
Discount A/c Dr. 180
To BR A/c 9,000
(Being bill discounted)
5 / 4 /2019 Sanjay A/c Dr. 3,000
To Bank A/c 2,940
To Discount A/c 60
(Being 1/3 proceeds of the bill
transfer)
8 / 7 /2019 Sanjay A/c Dr. 12,600
To BP A/c 12,600
(Being acceptance of bill given)
8 / 7 /2019 Bank A/c Dr. 2,220
Discount A/c Dr. 180
[(6,000 + 2,220) / 12,330* 270]
To Sanjay A/c 2,400
(Being amt. received from Sanjay
against 2nd bills.)
? BP A/c Dr. 12,600
To Sanjay A/c 12,600
(Being bill dishonoured due to
insolvency)
15/10/2019 Sanjay A/c Dr. 8,400
To Bank A/c 4,200
To Deficiency A/c 4,200
(Being 50% paid to Sanjay)

Bills of Exchange and

Promissory Notes
45
 CAFC ACCOUNTING
Q.15
In the books of Nisha.
Date Particulars L. F. Debit (`) Credit (`)
1 / 1 /2016 BR A/c Dr. 5,000
To Disha A/c 5,000
(Being bill drawn)
1 / 1 /2016 Bank A/c Dr. 4,850
Discount A/c Dr. 150
To BR A/c 5,000
(Being bill discounted)
1 / 1 /2016 Disha A/c Dr. 2,500
To Bank A/c 2,425
To Discount A/c 75
(Being amt remitted to Disha)
1 / 1 /2016 Disha A/c Dr. 6,000
To BP A/c 6,000
(Being new bill drawn by Disha)
1 / 1 /2016 Bank A/c Dr. 2,850
Discount A/c Dr 150
To Disha A/c 3,000
(Being amt. received from Disha on
accommodation)
4 / 5 /2016 Bank A/c Dr. 500
To Disha A/c 500
(Being balance received from Disha) [Nisha
gives 2500 to Disha]
[Disha gives 3000 to Nisha]
Net Rs. 500 received from Disha]
4 / 5 /2016 BP A/c Dr. 6,000
To Bank A/c 6,000
(Being bill honoured)

Bills of Exchange and

Promissory Notes
46
 CAFC ACCOUNTING
Q.16
In the books of A

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

? BR (I) A/c Dr. 3,000
BR (II) A/c Dr. 2,000
BR (III) A/c Dr. 1,000
To B A/c 6,000
(Being bill accepted by B)
? B A/c Dr. 3,000
To BR (I) A/c 3,000
(Being bill received from B for renewal)
? Cash A/c Dr. 1,500
BR (IV) A/c Dr. 1,600
To B A/c 3,000
To Interest A/c 100
(Being amt received on cancellation of the
1st bill, 50% along with a new bill for 50%
of the amt. plus interest
Rs. 100)
? C A/c Dr. 1,600
To BR (IV) A/c 1,600
(Being A’s acceptance endorsed in
favoring A/c)
? Bank A/c Dr. 1,900
Discount A/c Dr 100
To BR A/c (II) 2,000
(Being bill discounted)
? B A/c Dr. 2,030
To Bank A/c 2,030
(Being BR II dishonoured & noting
charges of Rs. 30)
? Bank A/c Dr. 1,000
To BR (III) A/c 1,000
(Being bill matured)

Bills of Exchange and

Promissory Notes
47
 CAFC ACCOUNTING
Q.17 In the books of Y

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

1 / 1 /2020 BR A/c Dr. 6,000
To X A/c 6,000
(Being bill accepted by X)
1 / 1 /2020 Bank A/c Dr. 5,950
Discount A/c Dr. 50
To BR A/c 6,000
(Being bill discounted)
? X A/c Dr. 6,000
To Bank A/c 6,000
(Being bill dishonoured)
? X A/c Dr. 40
To Interest A/c 40
(Being Interest receivable)
? Bank A/c Dr. 2,000
BR A/c Dr. 4,040
To X A/c 6,040
(Being new bill accepted)
? Bank A/c Dr. 4,040
To BR A/c 4,040
(Being bill honoured)

In the books of X

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

1 / 1 /2020 Y A/c Dr. 6,000

To BP A/c 6,000
(Being bill accepted)
? BP A/c Dr. 6,000
To X A/c 6,000
(Being bill dishonoured)

Bills of Exchange and

Promissory Notes
48
 CAFC ACCOUNTING

? Interest A/c Dr. 40

To Y A/c 40
(Being Interest payable to Y)
? Y A/c Dr. 6,040
To BP A/c 4,040
To Bank A/c 2,000
(Being bill drawn & part payment
made)
? BP A/c Dr. 4,040
To Bank A/c 4,040
(Being new bill honoured)

Q.18 In the books of Pankaj

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

? BR A/c Dr. 8,000
To Anil A/c 8,000
(Being bill receivable from Anil)
? Bank A/c Dr. 7,800
Discount A/c Dr. 200
To BR A/c 8,000
(Being bill discounted)
? Anil A/c Dr. 8,000
To Bank A/c 8,000
(Being bill dishonoured)

? Cash A/c Dr. 4,000

To Anil A/c 4,000
(Being part payment made)
? Anil A/c Dr. 40
To interest A/c 40
(Being interest receivable)
? BR A/c Dr. 4,040
To Anil A/c 4,040
(Being new bill accepted by Anil)

Bills of Exchange and

Promissory Notes
49
 CAFC ACCOUNTING

? Anil A/c Dr. 4,040

To BR A/c 4,040
(Being bill dishonoured)
? Bank A/c Dr. 2,020
Bad debts A/c Dr. 2,020
To Anil A/c 4,040
(Being Anil insolvent)

In the books of Anil

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

? Pankaj A/c Dr. 8,000
To BP A/c 8,000
(Being bill accepted)
? BP A/c Dr. 8,000
To Pankaj A/c 8,000
(Being bill dishonoured)
? Pankaj A/c Dr. 4,000
To cash A/c 4,000
(Being part payment done)
? Interest A/c Dr. 40
To Pankaj A/c 40
(Being interest payable)
? Pankaj A/c Dr. 4,040
To BP A/c 4,040
(Being new bill accepted)

? BP A/c Dr. 4,040

To Pankaj A/c 4,040
(Being bill dishonoured)
? Pankaj A/c Dr. 4,040
To Bank A/c 2,020
To Deficiency A/c 2,020
(Being Anil became insolvent & 50%
paid off)

Bills of Exchange and

Promissory Notes
50
 CAFC ACCOUNTING

8 FINAL ACCOUNTS OF SOLE

PROPRIETORS AND MANUFACTURERS

HOMEWORK SOLUTION

Q.20 Mr. Rishabh

Dr. Trading and Profit & Loss A/c F.Y.E. 31st March, 1999 Cr.
Particulars ` ` Particulars ` `
To Opening Stock 21,300 By Sales 1,40,000
To Purchase 80,000 (–) Return Inward (5,000) 1,35000
(+) Unrecorded 6,000 By Goods 2,000
withdrawn
(–) Return outward (4,000) 82,000 By Closing Stock 27,300
of general goods
To Trade Exp. 800 By Goods 10,000
destroyed by fire
To Carriage inward 10,000
To Gross profit c/d 60,200
1,74,300 1,74,300

To Loss by fire 4,000 By Gross profit 60,200

b/d
To Insurance Exp. 1,000 By R.F.D.D
(as per contra) 38
(–) Prepaid (200) 800 By R.F. Dis. on 360
creditors
To Depreciation By Profit of textile 10,000
Dept.
Land & Build 1,800
Plant & mach. 4,000

Final Accounts of Sole

Proprietors & Manufacturers
51
 CAFC ACCOUNTING

Furniture 250 6,050

To R.D.D.A/c
Bad debts (O) 400
+ Bad debts (N) 400
+ R.D.D. (N) 900
– R.D.D. (O) (1000) 700
To Discount -
allowed
+ R.F.D.D. (N) 342
– R.F.D.D. (O) (380) -
To Int. on Loan. 1,350
To Sundry Exp. 600
To Printing & stat. 500
To Salaries & 18,500
wages
To Net profit 38,098
Total 70,598 Total 70,598

Balance Sheet as at 31st March, 1999

Liabilities ` ` Assets ` `
Capital 1,00,000 Land & Building 90,000
(–) Drawings (2,000) (–) Depreciation (1,800) 88,200
(Goods) (2%)
(–) Drawings (12,000) Plant & Mach. 20,000
+ Net Profit 38,098 1,24,098 (–) Depreciation (4,000) 16,000
(20%)
Furniture 5,000
(–) Depreciation (250) 4,750
(5%)
Creditors 12,000 Cash in hand 1,280
+ Unrecorded 6,000 Closing stock of 8,000
textile goods
18,000 Insurance claim 6,000
(–) R.F.D.C (2%) (360) 17,640 Closing stock of 27,300
general goods

Final Accounts of Sole

Proprietors & Manufacturers
52
 CAFC ACCOUNTING

Loan from 30,000 Prepaid Ins. 200

Gajanand @ 6%
p.a
Accrued Interest 1,350 Cash at Bank 4,600
Debtors 18,400
(–) Bad Debts(N) (400)
18,000
(–) R.D.D (N) (5%) (900)
17,100
(–) [Link]. on (342) 16,758
debtors (2%)
Total 1,73,088 Total 1,73,088

Int. on,loan.
Int. on loan 1350
[3000 ×6%×9/12]
(–) Int. paid 0
Outstanding Int. 1350

As sundry expenses are given in the question, trade expenses being direct expenses will
be recorded in trading account.

Q.21
Mr. K
Dr. Trading and Profit & Loss A/c F.Y.E. 31st March, 2000 Cr.
Particulars ` ` Particulars ` `
To Opening Stock 75,000 By Sales 23,10,000
To Purchase 15,95000 (–) Sale of (1,10,000) 22,00,000
Investment
(–) Purchase on (45,000) 15,50,000
Machinery
To Freight on pur. 25,000 By Closing 2,25,000
Stock
(–) Freight on mac. (5,000) 20,000
To Wages (11m) 66,000

Final Accounts of Sole

Proprietors & Manufacturers
53
 CAFC ACCOUNTING

(+) Outstanding 6,000 72,000

(1m)
To Gross profit c/d 7,08,000
24,25,000 24,25,000

To Commission on 45,000 By Gross profit 7,08,000

sales. b/d
(+) Outstanding 10,000 55,000 By Profit 10,000
[2.5% × 22,00,000] on sale of
Investment
To R.D.D.A/c By Discount 15,000
Received
Bad debts (O) 15,000 By Interest on 12,000
investment
+ Bad debts (N) 10,000
+ R.D.D. (N) 12.000
– R.D.D. (O) (8,000) 29,000
To Depreciation
Machinery 52,500
Building 7,500
Furniture 4,000 64,000
To Salaries 1,40,000
To Postage, 12,000
telegram &
telephone
To Printing & 18,000
Stationery
To Misc. Exp 30,000
To Insurance (12m) 24,000
(–) Prepaid (4m) (8,000) 16,000
To Net profit 3,81,000
Total 7,45,000 Total 7,45,000

Final Accounts of Sole

Proprietors & Manufacturers
54
 CAFC ACCOUNTING
Balance Sheet as at 31st March, 2000

Liabilities ` ` Assets ` `
Capital 8,00,000 Machinery 5,00,000
(–) Drawings (60,000) + Pur. Of 45,000
Machinery
+ Net Profit 3,81,000 11,21,000 + Freight on 5,000
Purchase
5,50,000
(–) Depreciation (52,500) 4,97,500
(W.N.)
Building 3,00,000
(–) Depreciation (7,500) 2,92,500
(2.5%)
Furniture 40,000
Outstanding wages 6,000 (–) Depreciation (4,000) 36,000
(10%)
Commission 10,000 Prepaid Ins. 8,000
payable
Creditors 3,00,000 Closing Stock 2,25,000
Investment 1,00,000
(–) Sold (100000) -
Debtors 2,50,000
(–) Bad Debts(N) (10,000)
2,40,000
(–) R.D.D (N) (5%) (12,000) 2,28,000
Bank Balance 1,50,000

Total 14,37,000 Total 14,37,000

Depreciation on Machinery

Old – 5,00,000 × 10% × 12/12 = 50,000

New – 50,000 × 10% × 6/12 = 2,500

= 52,500

Final Accounts of Sole

Proprietors & Manufacturers
55
 CAFC ACCOUNTING
Q.22
Mr. Neel
Dr. Trading and Profit & Loss A/c F.Y.E. 31st March, 2004 Cr.
Particulars ` ` Particulars ` `
To Opening Stock 5,00,000 By Sales 41,50,000
To Purchase 31,00,000 (–) Returns (55,000)
(–) Purchase of (1,00,000) (–) sale on (1,50,000) 39,45,000
Furniture Approval
(–) Returns (45,000) 29,55,000 By Goods 50,000
withdrawn
To Carriage Inward 10,000 By Closing 1,45,000
stock
To Wages 50,000 (+) Stock with 1,00,000 2,45,000
customer
To Gross profit c/d 7,25,000
42,40,000 42,40,000

To R.D.D.A/c By Gross. 7,25,000

profit b/d
Bad debts (O) - By Discount 75,000
+ Bad debts (N) 50,000 By Net. Loss 5,02,300
(transferred to
balance sheet)
+ R.D.D. (N) 40.000
– R.D.D. (O) - 90,000
To Depreciation
Furniture & fitting 65,000
Motor car 9,600 74,600
To Salesman 78,000
comm.
+ Outstanding (#1) 3,16,500 3,94,500
To Rates & taxes 50,000
To Salaries 95,000
To Postage & 1,05,000
telegram
To Insurance 90,000

Final Accounts of Sole

Proprietors & Manufacturers
56
 CAFC ACCOUNTING

To Printing & Stat. 95,500

To Advertisement 1,70,000
To Discount 50,000
To General Exp. 65,700
To Carriage 22,000
Outward
Total 13,02,300 Total 13,02,300

Balance Sheet as at 31st March,2004

Liabilities ` ` Assets ` `
Capital 22,59,200 Furniture& 5,50,000
Fittings
(–) Drawings (50,000) + Purchase 1,00,000
(Goods)
(–) Drawings (45,000) 6,50,000
(–) Net Loss (5,02,300) 16,61,900 (–) Depreciation (65000) 5,85,000
(10%)
Motor car 48,000
(–) Depreciation (9,600) 38,400
(20%)
Creditors 4,00,000 Closing stock 1,45,000
Salesman’s comm. 3,16,500 + Stock With 1,00,000 2,45,000
payable Customer
Debtors 10,00,000
(–) Sale on (1,50,000)
Approval
8,50,000
(–) Bad debts (N) (50,000)
8,00,000
(–) R.D.D (N) (5%) (40,000) 7,60,000
Cash in hand 2,50,000
Cash at Bank 5,00,000
Total 23,78,400 Total 23,78,400

Final Accounts of Sole

Proprietors & Manufacturers
57
 CAFC ACCOUNTING
1) Outstanding salesman Commission
Salesman Commission 3,94,500
[39,45,000 × 10%]
(–) salesman comm. Paid (78,000)
Outstanding comm. 3,16,500

Q.23
Mr. Shivam
Dr. Trading and Profit & Loss A/c F.Y.E. 31st March, 2004 Cr.
Particulars ` ` Particulars ` `
To Opening Stock 40,000 By Sales 2,64,000
To Purchase 1,70,000 (–) Sale on (1,200) 2,62,800
Returns
To Carriage Inward 400
To Wages 30,000 By Goods 2,000
given as free
sample
(–) Wages for (1,000) 29,000 By Closing 30,000
Installation Stock
To Gross profit c/d 56,400 (+) Stock with 1,000 31,000
customer

2,95,800 2,95,800

To Rent, rates & 7,200 By Gross. 56,400

taxes Profit b/d
To Postage and tax 3,000 By Discount 1,200
To Salaries 14,800
To Machinery lost 2,000
by fire [uninsured
portion]
To Advertisement
[goods distributed] 2,000
To Depreciation on
Plant & Machinery 12,400
Furniture & Fixture 800 13,200

Final Accounts of Sole

Proprietors & Manufacturers
58
 CAFC ACCOUNTING

To R.D.D.A/c
Bad debts (O) 800
+ Bad debts (N) 200
+ R.D.D. (N) 950
– R.D.D. (O) - 1,950
To R.F.D.D. (N) 361
To Amortisation of 4,000
Patents (w/o)
To Interest on loan 300
+ Outstanding 300 600
To Insurance 1,600
To Travelling Exp 1,000
To Sundry Exp 600
To Net Profit 5,289
Total 57,600 Total 57,600

Balance Sheet as at 31st March, 2005

Liabilities ` ` Assets ` `
Shivam ‘s 1,60,000 Plant & Mac. 60,000
Capital
(–) Drawings (24,000) (–) Loss due to (2,000)
fire
(+) Net Profit 5,289 1,41,289 + Purchase of 4,000
machinery
[3,000 +1,000]
62,000
(–) Depreciation (12,400) 49,600
(20%)
Furniture & 8,000
fixture
Sundry creditors 24,000 (–) Depreciation (800) 7,200
(10%)
Creditors for 3,000 Land 28,350
machinery
Loan from 20,000 Closing stock 30,000
shayam

Final Accounts of Sole

Proprietors & Manufacturers
59
 CAFC ACCOUNTING

+ Outstanding 300 20,300 (+) Stock with 1,000 31,000

Interest customers
Bank overdraft 15,000 Debtors 20,400
(–) Sale on (1,200)
return
(–) Bad debts (N) (200)
19,000
(–) R.D.D. (N) (950)
(5%)
18,050
(–) R.F Discount (361) 17,689
on Dr’s (2%)
Patents 40,000
(–) Amortised (4,000) 36,000
[40000 × 1/10]
Cash in hand 13,250
Cash at Bank 20,500
Total 2,03,589 Total 2,03,589

Interest on loan
Interest on loan 600
[20,000 × 6% × 6/12]
(–) Interest paid (300)
Outstanding interest on loan 300

Q.24
Mr. GavaskarVishwanath& Co.
Dr. Trading and Profit & Loss A/c F.Y.E. 31st March,2017 Cr.
Particulars ` ` Particulars ` `
To Opening Stock 6,20,000 By Sales 23,00,000
To Purchase 14,00,000 (–) Sale on (14,000)
Furniture
(-) Purchase of (40,000) (–) Sale (42,000) 22,44,000
type writer Returns

Final Accounts of Sole

Proprietors & Manufacturers
60
 CAFC ACCOUNTING

(–) Purchase (26,000) 13,34,000

returns
To Freight on 12,000 By Closing 4,40,000
purchase stock
To Gross profit c/d 7,18,000
26,84,000 26,84,000

To Salaries 1,10,000 By Gross. 7,18,000

profit b/d
To Depreciation on By Discount 16,000
received from
creditors
Building 30,000
Furniture & fixture 20,000
Office equipment 30,000
Motor car 40,000 1,20,000
To Godown rent 55,000
(10m)
(+) Outstanding 11,000 66,000
(2m)
To Interest on loan 27,000
(+) Outstanding 6,000 33,000
To R.D.D. A/c
Bad Debts (O) 20,000
+ Bad Debts (N) -
+ R.D.D (N) 43,000
- R.D.D (O) (30,000) 33,000
To Insurance 55,000
premium
(–) Life Insurance (40,000)
premium
(15m) 15,000
(–) Prepaid (3m) (3,000) 12,000
To Rates and Taxes 21,000
To Discount 24,000
allowed to Debtors

Final Accounts of Sole

Proprietors & Manufacturers
61
 CAFC ACCOUNTING

To Carriage 20,000
outward
To Printing & 18,000
stationary
To Electric charge 22,000
To General office 30,000
Exp.
To Bank charge 16,000
To Motor Car Exp. 36,000
To Net. Profit 1,73,000
Total 7,34,000 Total 7,34,000

Balance Sheet as at 31st March,2017

Liabilities ` ` Assets ` `
Capital 16,20,000 Building 6,00,000
Less : Life (40,000) (–) Depreciation (30,000) 5,70,000
Insurance (5%)
premium
(Drawings)
Less : Drawings (1,20,000) Furniture & 2,14,000
Fixture
(+) Net Profit 1,73,000 16,33,000 (–)sold (14,000)
2,00,000
(–) Depreciation (20,000) 1,80,000
(10%)
Outstanding 11,000 Office equipment 1,60,000
Godown rent
Loan from 3,00,000 + Purchase 40,000
vishwanath
(+) Outstanding 6,000 3,06,000 2,00,000
Interest
Sundry creditors 4,30,000 (–) Depreciation (30,000) 1,70,000
(15%)
Motor Car 2,00,000
(–) Depreciation (40,000) 1,60,000
(20%)

Final Accounts of Sole

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62
 CAFC ACCOUNTING
Prepaid 3,000
Insurance
Closing stock 4,40,000
Debtors 8,60,000
(–) R.D.D.(N) (5%) (43,000) 8,17,000
Cash in hand 14,000
Cash at Bank 26,000
Total 23,80,000 Total 23,80,000

Outstanding Interest on loan

Interest on loan 33,000
[3,00,000 × 12% × 11/12]
(–) Interest paid (27,000)
Outstanding interest 6,000

Q.25
Mr. ABC Traders
Dr. Trading A/c F.Y.E. 31st March, 2017 Cr.
Particulars ` ` Particulars ` `
To Opening 1,00,000 By Sales 11,00,000
Inventory
To Purchase 6,72,000 (–) Return (1,00,000) 10,00,000
Inward
(–) Returns (72,000) 6,00,000
outward
To Carriage Inward 30,000
To Wages 50,000 By Closing 2,00,000
stock
To Gross profit c/d 4,20,000

12,00,000 12,00,000

Final Accounts of Sole

Proprietors & Manufacturers
63
 CAFC ACCOUNTING
Journal proper in the books of M/s ABC Traders.
Date Particulars L.F. Debit (`) Credit (`)
2017
Mar 31 Return outward A/c Dr. 72,000
To Purchases A/c 72,000
(Being returns outward adjusted in
purchases).
Mar 31 Sale A/c Dr. 1,00,000
To Return inward A/c 1,00,000
(Being Return inward adjusted in sales).
Mar 31 Sale A/c Dr. 10,00,000
To Trading A/c 10,00,000
(Being sale A/c transferred to trading A/c).
Mar 31 Trading A/c Dr. 7,80,000
To opening Inventory 1,00,000
To purchases 6,00,000
To carriage Inward 30,000
To wages 50,000
(Being opening Inventory, purchase, carriage
& wages transferred to Trading A/c).
Mar 31 Closing Inventory A/c Dr. 2,00,000
To Trading A/c 2,00,000
(Being Closing Inventory recorded in Trading
A/c).
Mar 31 Trading A/c Dr. 4,20,000
To Gross profit A/c 4,20,000
Mar 31 Gross profit A/c Dr. 4,20,000
To Profit & loss A/c 4,20,000
(Being Gross profit transferred from Trading
A/c to Profit and loss A/c).

Note:
As per ICAI solution, we have passed Entries for gross profit.
Alternatively following entry can be passed.
Mar 31 Trading A/c Dr. 4,20,000
To Profit & loss A/c 4,20,000

Final Accounts of Sole

Proprietors & Manufacturers
64
 CAFC ACCOUNTING
Q.26
Ms. Shivi
Dr. Revised Manufacturing A/c Cr.
Particulars ` ` Particulars ` `
To Raw materials 10,00,000 By Trading 18,00,000
consumed A/c [Cost of
[Balancing figure] production
#2]
To Wages to 3,00,000
factory workers
To Depreciation 2,00,000
+ Additional
[10,00,000 × 10%] 1,00,000 3,00,000
To Direct Exp. 2,44,000
(–) Electricity
charge
[80,000 × 30%] (24,000)
(–) Delivery charge (20,000) 2,00,000
to customers
Total 18,00,000 Total 18,00,000

Wages for office 50,000

Electricity charge for office 24,000
Delivery charge for customer 20,000
(selling & Distribution)
To be debited to P & L A/c 94,000

Dr. Raw Material A/c (Revised) Cr.

Particulars ` ` Particulars ` `
To Opening Stock 1,00,000 By Raw Material 10,00,000
consumed
To Creditors A/c 13,00,000 By Closing stock 4,00,000
(Purchase) (#1)
Total 14,00,000 Total 14,00,000

Final Accounts of Sole

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65
 CAFC ACCOUNTING
Dr. Creditors A/c Cr.
Particulars ` ` Particulars ` `
To Bank A/c 22,00,000 By balance b/d 15,00,000
To Balance c/d 6,00,000 By purchase of 13,00,000
Raw material
Total 28,00,000 Total 28,00,000

2) Calculation of correct Amount Transferred to Trading A/c

Given cost of production transf. to Trading A/c 17,94,000
Add : Additional Depreciation on machinery 1,00,000
Less : Wages related to office (50,000)
Less : Office Electricity charges [ 80000 × 30%] (24,000)
Less : Delivery charges to customers (20,000)
Correct cost of production transferred to Trading A/c 18,00,000

Q.27
Journal proper in the books of Mr. Popatlal.
Date Particulars L.F. Debit (`) Credit (`)
2017
Apr 1 Fixed Assets A/c Dr. 1,25,600
Inventories A/c Dr. 2,06,400
Trade receivable A/c Dr. 1,88,000
Cash A/c Dr. 36,200
To Provision for doubtful Debts 6,200
To Trade payable A/c 1,64,000
To Bank overdraft A/c 1,46,000
To capital A/c 2,40,000
[ Being opening Entry recorded]

Q.28
Mr. T
Dr. Trading and Profit & Loss A/c F.Y.E. 31st Mar,2018 Cr.
Particulars ` ` Particulars ` `
To Opening Stock 60,000 By Sales 22,00,000
To Purchase 16,00,000 (–) Returns (99,000)

Final Accounts of Sole

Proprietors & Manufacturers
66
 CAFC ACCOUNTING

+ Unrecorded 16,000 + Sales 1000 21,02,000

Returns
wrongly
recorded
(–) Returns (69,000) By closing 1,00,000
stock
(–) Returns
(Unrecorded) (1,000) 15,46,000
To Gross profit c/d 5,96,000

22,02,000 22,02,000

To Depreciation 24,000 By Gross. 5,96,000

[14,000 +10,000] profit b/d
To Business Exp 50,000 By Interest on 20,000
fixed deposit
+ Additional 12,000 By Interest on 20,000
Investment
[2,50,000 ×
12% × 8/12]
62,000
(–) Prepaid Exp. (6,000) 56,000
To Rent [17m] 17,000
(–) Prepaid [5m] (5,000) 12,000
To Net Profit 5,44,000
Total 6,36,000 Total 6,36,000

Balance Sheet as at 31st March,2018

Liabilities ` ` Assets ` `
Capital 6,00,000 Fixed Assets 1,40,000
(–)Drawings (58,000) + Addition 2,00,000
(70,000-12,000)
(+) Net Profit 5,44,000 10,86,000 (–) Depreciation (10,000) 3,30,000
(200000 ×10% ×
6/12)

Final Accounts of Sole

Proprietors & Manufacturers
67
 CAFC ACCOUNTING

12% Investment 2,50,000

Debtors 2,50,000
O/S Int. on Inv. 20,000
Creditors 2,20,000 Prepaid Rent 5,000
+ Unrecorded 16,000 2,36,000 Closing Stock 1,00,000
Bank overdraft 8,000 Prepaid Exp. 6,000
Fixed deposit 2,00,000
with Bank
Cash 1,69,000
Total 13,30,000 Total 13,30,000
Rectification of Error

Wrong Entry
Party A/c Dr. 1,000
Sales Returns A/c Dr. 1,000
To Suspense A/c 2,000

Reverse Entry
Suspense A/c Dr. 2,000
To Party A/c 1,000
To Sales Returns A/c 1,000

Correct Entry
Party A/c Dr. 1,000
To Purchase Return A/c 1,000

Rectification Entry
Suspense A/c Dr. 2,000
To Purchase Return A/c 1,000
To Sales Return A/c 1,000

Effects:
[Suspense A/c – Cancelled]
[Less from Purchase]
[Add to sales]

Final Accounts of Sole

Proprietors & Manufacturers
68
 CAFC ACCOUNTING
Q.29 In the books of Shri Mittal
Trading Account for the year ended 31st March, 2022
Amount Amount
Particulars Particulars
` `
To Opening inventory 72,000 By Sales 12,10,000
To Purchases 6,05,000 Less: Returns (40,000) 11,70,000
Less: Returns (30,000) 5,75,000 By Closing inventory 1,00,000
To Gross Profit 6,23,000
12,70,000 12,70,000

Profit and Loss Account for the year ended 31st March, 2022
Amount Amount
Particulars Particulars
` `
To Salaries 2,70,000 By Gross profit 6,23,000
To Advertisement 1,10,000
To Other expenses 60,000
To Net profit 1,83,000
6,23,000 6,23,000

Balance Sheet as at 31st March, 2022

Amount Amount
Particulars Particulars
` `
Capital 8,70,000 Building 8,90,000
Add: Net profit 1,83,000 10,53,000 Furniture 4,50,000
14% Bank Loan 2,00,000 Trade receivables 90,000
Trade payables 1,70,000 Closing inventory 1,00,000
Overdrafts 1,12,000 Cash in hand 2,000
Input SGST (W.N.) 3,000
15,35,000 15,35,000

Note: As loan and overdraft taken at year end so no interest shown.

Working Note:
Output IGST liability is paid by utilizing Input CGST of ` 9,000 and Input SGST of ` 6,000.
Thereafter, closing balance of Input SGST of ` 3,000 is reported in Balance Sheet.

Final Accounts of Sole

Proprietors & Manufacturers
69
 CAFC ACCOUNTING
Q.30 In the books of Mr. Mohan
Trading Account for the year ended 31st March, 2022
Amount Amount
Particulars Particulars
` `
To Opening Inventory 1,10,000 By Sales 9,70,000
To Purchases 4,30,000 Less: Returns (20,000) 9,50,000
Less: Returns (12,000) 4,18,000 By Closing Inventory 1,80,000
To Freight Inwards 40,000
To Gross profit 5,62,000

11,30,000 11,30,000

Profit and Loss Account for the year ended 31st March, 2022
Amount Amount
Particulars Particulars
` `
To Depreciation 35,000 By Gross profit 5,62,000
To Salaries 2,10,000 By Discount received 9,000
To Administration expenses 1,50,000
To Discount allowed 19,000
To Bad debts 5,000
To Net profit 1,52,000
5,71,000 5,71,000

Balance Sheet as at 31st March, 2022

Amount Amount
Particulars Particulars
` `
Capital 6,50,000 Furniture 3,50,000
Add: Net profit 1,52,000 8,02,000 Less: Depreciation (35,000) 3,15,000
Trade payables 1,90,000 Closing Inventory 1,80,000
Output IGST 2,000 Trade receivables 2,10,000
Investment in Govt
Securities 1,00,000
Cash in Hand and
Cash at Bank 1,89,000

9,94,000 9,94,000

Final Accounts of Sole

Proprietors & Manufacturers
70
 CAFC ACCOUNTING
Working Note:
Summary of Output and Input GST liability (as per Trial Balance)
OUTPUT GST (`) INPUT GST (`)
IGST 6,000
CGST 8,000 10,000
SGST 8,000 10,000

Summary of Output and Input GST liability (as per Trial Balance)
Output liability Paid through ITC Tax paid in
Tax Payable
(Tax head) IGST CGST SGST cash
IGST 6,000 2,000 2,000 2,000
CGST 8,000 8,000
SGST 8,000 8,000

In the above solution, it is assumed that balance IGST liability of ` 2,000 (after utilising
CGST and SGST) is not paid off in cash.
Alternatively, students may assume that the balance liability of ` 2,000 is paid off in
cash.
Accordingly, Output IGST liability of ` 2,000 shall not appear under liability side of the
balance sheet and amount of cash at bank is reported as ` 1,87,000

Final Accounts of Sole

Proprietors & Manufacturers
71
 CAFC ACCOUNTING

9 FINAL ACCOUNTS FOR NOT

FOR PROFIT ORGANISATIONS

HOMEWORK SOLUTION

Q.17 Balance Sheet as on 1st January 2020

Liabilities ` Assets `
Capital Fund 42,200 Building 15,000
Os/ Advertisement 50 Books 10,000
O/s Salary 100 Furniture 4,000
Investments 10,000
Accrued Interest 100
O/s Subscription 600
O/s Rent 150
Cash/Bank Balance 2,500
42,350 42,350

Balance Sheet as on 31st December 2020

Liabilities ` ` Assets ` `
Capital Fund 42,200 Building 15,000
Add: Surplus 5,000 47,200 Less: Dep. (750) 14,250
Donation for Books 10,000
Special Fund 300 Add: Purchased 1,000 11,000
O/s Salary 1,400 Furniture 4,000
O/s Tent Hire 200 Investments 10,000
O/s Subscription 500
O/s Rent 2,000
Cash/Bank Bal. 7,350
49,100 49,100

Final accounts for Not for

Profit Organisations 72
 CAFC ACCOUNTING
Q.18
Income & Expenditure A/c of Mayura Hospital
for the year ended 31st December 2020

Particulars Amt Amt Particulars Amt Amt

To Salaries 15,600 By Subscription 16,000
Less: Op. O/s (3,600) 12,000 Less: Op. O/s (2,550)
To Print. & Stat. 1,200 Less: Cl. Adv. (1,200) 12,250
To Diet Expenses 7,800 By Donations 4,000
To Rent & Rates 1,000 By Govt. Grant
Less: Cl. Prepaid (150) 850 for Maint. 10,000
To Elect. & Water 1,200 By Fees from
To Office Expense 1,000 Patients 2,400
To Bad Debts 500 By Net [Link]
Benefit shows 3,000
To Surplus 7,500 By Interest 400
32,050 32,050

Balance Sheet of Mayura Hospital

as on 31st December 2020

Liabilities Amt Amt Assets Amt Amt

Capital Fund 24,650 Bldg. WIP (Op.) 45,000
Add: Surplus 7,500 32,150 Add: Additions 25,000 70,000
Hosp. Equip. 17,000
Building Fund 40,000 Add: New Purch. 8,500 25,500
Add: [Link] 40,000 80,000 Furniture 3,000
O/s Subscription 200
Advance Subs. 1,200 8% Investments 10,000
Prepaid Rent 150
Interest Accrued 400
Cash Balance 700
Bank Balance 3,400
1,13,350 1,13,350

Final accounts for Not for

Profit Organisations 73
 CAFC ACCOUNTING
Working Note:
Balance Sheet of Mayura Hospital as on 1st January 2020

Liabilities Amt Assets Amt

Capital Fund ([Link].) 24,650 Building WIP 45,000
Building Fund 40,000 Hospital Equipment 17,000
O/s Salaries 3,600 O/s Subscription 3,250
Cash Balance 400
Bank Balance 2,600
68,250 68,250

Q.19
Correct Receipts & Payments A/c of Trustwell Club
for the year ended 31st March 2020

Receipts Amt Payments Amt

To Balance b/d 450 Building WIP 3,600
To Subscription 4,500 Hospital Equipment 2,700
To Other Fees 1,800 O/s Subscription
To Donation for Bldg. 1,800 Cash Balance
To Sale of Furniture 270 Bank Balance 90,720
97,020 97,020

Income & Expenditure A/c of Trustwell Club

for the year ended 31st March 2020

Particulars Amt Amt Particulars Amt Amt

To Expenses 3,600 By Subscription 4,500
To Sports Mat. 2,700 Less: Op. O/s (180)
Add: Op. St. 6,660 Add: Op. Advance 90
Less: Cl. St. (1,800) 7,560 Add: Cl. O/s 270
To Loss on Sale Less: Cl. Advance (90) 4,590
of Furniture 180 By Other Fees 1,800
1,350
3,600
11,340 11,340

Final accounts for Not for

Profit Organisations 74
 CAFC ACCOUNTING
Balance Sheet of Trustwell Club as on 31st March 2020

Liabilities Amt Amt Assets Amt Amt

Capital Fund 36,000 Furniture 1,800
Less: Deficit (3,600) 32,400 Less: Sold (450) 1,350
5% Investments 27,000
Donation for Build. 90,000 Interest Accrued 1,350
Subscription Adv. 90 Subscription Due 270
Sports Mat. Stock 1,800
Cash/Bank Balance 90,720
1,22,490 1,22,490

Working Note:
Balance Sheet Trustwell Club as on 1st April 2019

Liabilities Amt Assets Amt

Capital Fund ([Link].) 36,000 Furniture 1,800
Subscription Advance 90 O/s Subscription 180
5% Investments 27,000
Cash/Bank Balance 450
Stock of Sports 6,660
Material
36,090 36,090

Q.20
Income & Expenditure A/c of Apollo Club for the year ended 31st March 2020

Particulars Amt Amt Particulars Amt Amt

To Salaries 3,000 By Subscription 8,000
To Stationery 1000 Less: Op. O/s (3,000)
Add: Op. Stock 400 Add: Op. Adv. 300
Less: Cl. Stock 500 900 Add: Cl. O/s 700
To Rates & Taxes 300 Less: Cl. Adv. (1,000) 5,000
Add: Op. Prepaid 250
Less: Cl. Prepaid (250) 300 By Interest on
To Sundry Exp. 200 Investments 1,000

Final accounts for Not for

Profit Organisations 75
 CAFC ACCOUNTING
Less: Op. O/s (50) Add: Interest Acc. 200 1,200
Add: Cl. O/s 60 210
To Tel. Charges 1,500 By Profit on
Less: Op. O/s (600) Sports 3,000
Add: Cl. O/s 300 1,200
To Dep. On Bldg. 3,000
To Surplus 590
9,200 9,200

Balance Sheet of Apollo Club as on 31st March 2020

Liabilities Amt Amt Assets Amt Amt

Capital Fund 50,200 Building 30,000
Add: Surplus 590 50,790 Less: Dep.10% (3,000) 27,000
Stock of Stationery 500
Advance Subs. 1,000 O/s Subscription:
O/s [Link] 300 2018 – 19 500
O/s Sundry Exp. 60 2019 – 2020 700 1,200
P/P Rates & Taxes 250
8% Investments 15,000

Add: Purchased 5,000 20,000

Interest Accrued 200
Cash Balance 3,000
52,150 52,150

Working Note:
Balance Sheet of Apollo Club as on 1st April 2019

Liabilities Amt Assets Amt

Capital Fund 50,200 Building 30,000
Advance Subscription 300 O/s Subscription 3,500
O/s Telephone Charges 600 Stock of Stationery 400
O/s Sundry Expenses 50 Prepaid Rates & Taxes 250
8% Investments 15,000
Cash Balance 2,000
51,150 51,150

Final accounts for Not for

Profit Organisations 76
 CAFC ACCOUNTING
Q.21
Correct Receipts & Payments A/c of Citizen Club
for the year ended 31st March 2020

Receipts Amt Particulars Amt

To Balance b/d Less: Op. O/s 30,000
Cash 450 Add: Op. Adv. 11,000
Bank (Cash Book) 24,420 Add: Cl. O/s 2,400
To Subscription 62,130 Less: Cl. Adv. 3,780
To Fair Receipts 7,200 1,410
To Variety Show Receipts 12,810 By Interest on 5,350
To Interest 690 Investments 2,520
To Bar Collection 22,350 Add: Interest Acc. 7,170
17,310
By Profit on 960
Sports 37,800
Less: Op. O/s
Add: Op. Adv. 10,350
1,30,050 1,30,050

Income & Expenditure A/c of Citizen Club

for the year ended 31st March 2020
Particulars Amt Amt Particulars Amt Amt
To Hon. To Sec. 11,000 By Subscription 62,130
Add: O/s 1,000 12,000 Less: Op. O/s (3,600)
To Rent 2,400 Add: Cl. O/s 2,940 61,470
To Rates & Taxes 3,780 By Fair Receipts 7,200
To Print. & Stat. 1,410 By Variety Show 12,810
To Sundry Expense 5,350 By Interest 690
To Wages 2,520 By Bar Collection 22,350
To Fair Expense 7,170 By Profit on
To Repairs 960 Sale of Car 3,300
To Bar Consumed 16,350
To Depreciation:
Premises 3,030
Car 9,360 12,390
To Surplus 43,490
1,07,820 1,07,820
Final accounts for Not for
Profit Organisations 77
 CAFC ACCOUNTING
Balance Sheet of Citizen Club as on 31st March 2020

Liabilities Amt Amt Assets Amt Amt

Capital Fund 65,130 Bank Balance 10,350
Add: Surplus 43,490 1,08,620 O/s Subscription 2,940
Bar Stock 2,610
Creditors for Bar Premises (Cost) 1,17,000
Purchases 1,290 Less: PFD (59,430) 57,570
O/s Hon. To Sec. 1,000 Car (Cost) 46,800
Less: PFD (9,360) 37,440
1,10,910 1,10,910

Working Note:
1)
Balance Sheet of Citizen Club as on 1st April 2019

Liabilities Amt Assets Amt Amt

Capital Fund 65,130 Cash Balance 450
Bank Balance 24,420
Creditors for Bar Purch. 1,770 Subscription Due 3,600
Premises (Cost) 87,000
Less: PFD (56,400) 30,600
Car (Cost) 36,570
Less: PFD (30,870) 5,700
Bar Stock 2,130
66,900 66,900

2)
Creditors for Bar Purchases A/c

Particulars Amount Particulars Amt

To Cash/Bank 17,310 By Balance b/d 1,770
To Balance c/d 1,290 By Purchases 16,830
18,600 18,600

Final accounts for Not for

Profit Organisations 78
 CAFC ACCOUNTING
3)
Bar Stock A/c

Particulars Amount Particulars Amt

To Balance b/d 2,130 By Consumed 16,350
To Purchased 16,830 By Balance c/d 2,610
18,960 18,960

Q.22
Receipts & Payments A/c of Bombay Swimming Club
for the year ended 31st March 2020

Receipts Amt Particulars Amt

To Balance b/d 1,800 By Salaries 24,000
To Subscription 80,000 By Stationery 1,400
To Donation 8,000 By Postage & Telephone 3,300
To Billiard Table Coll. 7,000 By Rates & Taxes 6,000
To Profit on Annual Meet 12,000 By Repairs 8,000
To Income from Invest. 2,700 By Insurance 1,200
By Printing of Souvenir 2,000
By Electricity Charges 5,600
By Billiard Room Expenses 3,000
By Miscellaneous Expense 9,400
By Investments 20,000
By Club Assets 6,000
By Balance c/d 21,600
1,11,500 1,11,500

Final accounts for Not for

Profit Organisations 79
 CAFC ACCOUNTING
Balance Sheet of Bombay Swimming Club as on 31st March 2020

Liabilities Amt Amt Assets Amt Amt

Capital Fund 74,800 Club Assets 48,000
Add: Surplus 41,300 1,16,100 Add: Purchase 6,000
54,000
Adv. Subscription 10,000 Less: Dep. (2,000) 52,000
O/s Telephone 200 O/s Subscription 5,000
Stationery Stock 400
Electricity P/P 300
Cash in Bank 21,600
Investments 47,000
1,26,300 1,26,300

Working Note:
Balance Sheet of Bombay Swimming Club as on 1st April 2019

Liabilities Amt Assets Amt

Capital Fund 74,800 Club Assets 48,000
Advance Subscription 6,000 O/s Subscription 3,000
O/s Telephone 300 Stationery Stock 600
Electricity Prepaid 700
Cash in Bank 1,800
Investments 27,000
81,100 81,100

Q.23
Receipts & Payments A/c of Delhi Club
for the year ended 31st March 2020

Receipts Amt Particulars Amt

To Donation 2,00,000 By Land 10,000
To Entrance Fees 17,000 By Furniture 1,30,000
To Subscription 19,000 By Salaries 4,800
To Locker Rent 600 By Maintenance 1,000
To Sundry Income 1,060 By Rent 8,000
To Refreshment 16,000 By Refreshment 8,000

Final accounts for Not for

Profit Organisations 80
 CAFC ACCOUNTING
By Library Books 25,000
By 9% [Link] 1,60,000
To Balance c/d 1,08,140 By FD with Bank 15,000
3,61,800 3,61,800

Income & Expenditure A/c of Delhi Club

for the year ended 31st March 2020

Receipts Amt Amt Particulars Amt Amt

To Salaries 4,800 By Entrance Fees 17,000
Add: O/s 200 5,000 By Subscription 19,000
To Maintenance 1,000 Add: Cl. O/s 1,000 20,000
Add: O/s 1,000 2,000 By Locker Rent 600
To Rent 8,000 By Sundry Income 1,060
To Refreshments 8,000 Add: Cl. O/s 540 1,600
To Depreciation: By Refreshments 16,000
Furniture 14,600
Library Books 2,500 17,100
To Surplus 15,100
55,200 55,200

Balance Sheet of Delhi Club as on 31st March 2020

Liabilities Amt Amt Assets Amt Amt

Capital Fund Land 10,000
Add: Donation 25,000 Furniture 1,46,000
Add: Surplus 15,100 40,100 Less: Dep. 10% (14,600) 1,31,400
Library Books 25,000
Donation 2,00,000 Less: Dep. 10% (2,500) 22,500
Less: [Link] Cap. 9% Govt. Bonds 1,60,000
Fund (25,000) 1,75,000 FD with Bank 15,000
O/s Salaries 200 Subscription O/s 1,000
O/s Maintenance 1,000 Sundry Income
Bank O/D 1,08,140 Receivable 540
Creditors Furn. 16,000
3,40,440 3,40,440

Final accounts for Not for

Profit Organisations 81
 CAFC ACCOUNTING

10
SINGLE ENTRY SYSTEM

HOMEWORK SOLUTION

Q.14 In the Books of A. Adamjee

Dr. Trading and Profit / Loss Account for the year ended 31.12.16 Cr.
Particulars ` Particulars `
To Opening inventory 3,900 By Sales
To Purchases Cash 11,000
Cash 12,000 Credit 51,100 62,100
Credit 37,100 49,100 By Closing inventory 5,700
To Gross Profit c/d 14,800

67,800 67,800
To Salaries 6,500 By Gross Profit b/d 14,800
To Rent & Taxes 1,500 By interest on investment 200
To General expenses 2,500
To Depreciation:
Machinery 750
Furniture 120
To Profit for doubtful debts 870
To Net being profit 800
Carried to Capital A/c 2,830

15,000 15,000

Balance sheet as on 31.12.16

Liabilities ` ` Assets ` `
A. Adamjee cap. Machinery 7,500
on 01.01.16 29,100 (-) 10%Depreciation (750) 6,750

(+) Fresh capital Furniture 1,200

(+) Net Profit 6,000 (-)10%Depreciation (120) 1,080

Single Entry System 82

 CAFC ACCOUNTING
2,830 Inventory 5,700
(-) Drawings 37,930 34,330 Debtors 17,600
Creditors (3,600) 7,900 (-) R.D.D. (800) 16,800
Investment 5,000
Cash at Bank 6,400
Cash in hand 500
42,230 42,230

Working Notes:

1. Balance sheet of A. Adamjee as on 01.01.16

Liabilities ` Assets `
A. Adamjee’s Capital 29,100 Machinery 7,500
Creditors 5,800 Furniture 1,200
Inventory 3,900
Investment 5,000
Debtors 14,500
Bank balance 2,800
34,900 34,900

2. Dr. Total Debtors Account Cr.

Particulars ` Particulars `

To Balance b/d 14,500 By Cash 48,000

To Credit sales 51,100 By Balance c/d 17,600

65,600 65,600

3. Dr. Total Creditors Account Cr.

Particulars ` Particulars `

To Cash 35,000 By Balance b/d 5,800

To Balance c/d 7,900 By Purchases credit 37,100
42,900 42,900

Single Entry System 83

 CAFC ACCOUNTING

Q.15 In the Books of Mr. Anup

Dr. Trading and Profit / Los Account for the year ended 31.12.16 Cr.
Particulars ` ` Particulars ` `
To Opening Inventory By Sales 9,59,750
1,10,000 (1,200) 9,58,550
To Purchases 4,54,100 By Closing stock 1,90,000
(-) Returns (4,200) 4,49,900
To Wages 1,10,400
To Gross Profit c/d 4,78,250
11,48,550 11,48,550

To Shop expenses 7,200 By Gross Profit b/d 4,78,250

By Discount 2,700
To Electricity & Telephone 18,700
(+) outstanding 2,200 20,900
To Legal expenses 17,000
To Discount 3,150
(2,400 + 750)
To Provision for
claim for damages 1,55,000
To Shop rent 20,000
To Net Profit 2,57,700

4,80,950 4,80,950

Balance sheet as on 31.12.16

Liabilities ` ` Assets ` `
Capital 2,38,200 Building 3,50,000
(+) Expenses 22,000 3,72,000
(+) Fresh capital Furniture 25,000
LIC maturity 20,000 Inventory 1,90,000
Rent 14,000 Sundry debtors 92,000
(+) Net Profit 2,57,700 Bills Receivable 6,000
5,29,900 Cash at Bank 87,000
(-) Drawings (16,800) 5,13,100 Cash in hand 5,300
Rent outstanding 20,000
Sundry Creditors 56,000
Bills Payable 14,000

Single Entry System 84

 CAFC ACCOUNTING

Outstanding Exp.:
Legal expenses 17,000
Electricity &
Telephone 2,200 19,200
Provision for claims
for damages 1,55,000
7,77,300 7,77,300

Working Notes:

1. Statement of Affairs as on 31.03.15

Liabilities ` Assets `
Anup’s Capital Inventory 1,10,000
2,38,200

Creditors 40,000 Debtors 70,000

Bills Payable 12,000 Bank 90,000
Cash 5,200
Bills Receivable 15,000
2,90,200 2,90,200

Dr. Sundry Debtors Account Cr.

Particulars ` Particulars `
To Balance b/d 70,000 By Bills Receivable A/c 40,000
To Bank A/c – By Bank A/c - Cheque 5,700
Cheque dishonoured 5,700 receivable
To Bills Receivable 3,000 By Return inward 1,200
To credit sales By Discount 2,400
9,59,750

By Cash 8,97,150
By Balance c/d 92,000
10,38,450 10,38,450

Single Entry System 85

 CAFC ACCOUNTING
Dr. Bills Receivable Account Cr.
Particulars ` Particulars `
To Balance b/d 15,000 By Sundry creditors
To Sundry debtors 40,000 - - Bill endorsed 10,000
By Bank A/c (20,000 – 750) 19,250
By Discount 750
By Bank A/c – Bill matured 16,000
By Debtors (dishonoured) 3,000
By Balance c/d 6,000
55,000 55,000

Dr. Sundry Creditors Account Cr.

Particulars ` Particulars `
To Bank A/c 3,20,000 By Balance b/d 3,20,000
To Cash A/c 77,200 By Credit purchase 77,200
To Bills receivable 10,000 10,000
To Bills payable 24,000 24,000
To Returns outward 4,200 4,200
To Discount 2,700 2,700
To Balance c/d 56,000 56,000
4,94,100 4,94,100

Dr. Sundry Creditors Account Cr.

Particulars ` Particulars `
To Bank A/c By Balance b/d 12,000
22,000

To Balance c/d 14,000 By Sundry creditors

- Bills accepted 24,000
36,000 36,000

Dr. Cash and Bank Account Cr.

Particulars Cash Bank Particulars Cash Bank
To Balance b/d 5,200 90,000 By Bank 7,62,750 -
To Cash - 7,62,750 By Cash - 1,21,000
To Bank 1,21,000 - By Shop expenses 7,200 -
To Sundry debtors - 5,700 By Wages 1,10,400 -

Single Entry System 86

 CAFC ACCOUNTING

To Bills Receivable - 19,250 By Drawings 16,800 -

To Bills Receivable - 16,000 By Creditors 77,200 3,20,000
To Capital (LIC) - 20,000 By Furniture 25,000 -
To Capital (Rent) - 14,000 By Electricity &
To Debtors 8,97,150 - Telephone 18,700 -

By Debtors - 5,700
By Building - 3,50,000
By Building (Exp.) 22,000
By Bills Payable -
22,000

By Balance c/d 5,300 87,000

10,23,350 9,27,700 10,23,350 9,27,700

Note: Bills receivable and Bills payable honoured can be recorded in cash column.
In that case amount of collection from debtors & building expenses will change.

Q.16
Dr. Trading and Profit / Loss Account for the year ended 31.03.16 Cr.
Particulars ` ` Particulars ` `
To Opening stock 2,80,000 By Sales
To Purchases 3,64,000 Credit 4,80,000
To Gross Profit c/d 1,16,000 Cash 1,20,000 6,00,000
By Closing stock 1,60,000
7,60,000 7,60,000
To Salary 24,000 By Gross Profit b/d 1,16,000
To Office expenses 14,400
To Rent 16,000
To Depreciation 4,000
To Loss of cash 23,600
To Net Profit 34,000
1,16,000 1,16,000

Single Entry System 87

 CAFC ACCOUNTING
Balance sheet as on 31.03.16
Liabilities ` ` Assets ` `

Capital 4,04,000 Furniture 40,000

(+) Net Profit 34,000 (-) Depreciation (4,000) 36,000
(-) Drawings (6,000) 4,32,000 Stock 1,60,000
Creditors 1,46,000 Debtors 1,20,000
Cash at Bank 2,62,000
5,78,000 5,78,000

Working Notes:
1.
Dr. Creditors Account Cr.
Particulars ` Particulars `
To Cash / Bank 3,00,000 By Balance b/d 82,000
To Balance c/d 1,46,000 By Purchases 3,64,000
4,46,000 4,46,000

2. Calculation of total sales

Sales for 2015 - 16 5,00,000
(+) 20% increase 1,00,000
Sales for 2016 – 17 6,00,000

3. Calculation of credit sales

Sales 6,00,000
(-) Cash sales (20% of total sales) (1,20,000)
4,80,000

4.
Dr. Debtors Account Cr.
Particulars ` Particulars `
To Balance b/d 1,00,000 By Bank A/c 4,60,000
To Sales 4,80,000 By Balance c/d 1,20,000
5,80,000 5,80,000

Single Entry System 88

 CAFC ACCOUNTING
5.
Dr. Bank Account Cr.
Particulars ` Particulars `
To Balance b/d 38,000 By Creditors 3,00,000
To Debtors 4,60,000 By Rent 16,000
To Cash 80,000 By Balance c/d 2,62,000
5,78,000 5,78,000

6. Calculation of amount of cash dislocated by cashier

Particulars ` `
Cash balance as on 01.04.16 28,000
(+) Cash sales 1,20,000
1,48,000
(-) Salary 24,000
Office expenses 14,400
Drawings 6,000
Cash deposited 80,000 (1,24,400)
Cash balance as on 31.03.17 (deflected by the cashier) 23,600

Q.17
Projected Balance sheet as on 31.03.16
Particulars ` ` Particulars ` `
Capital 10,00,000 Fixed assets 4,00,000
Profit/Loss A/c 1.4.15 60,000 (+) Additions 1,00,000
(+) Profit for the year 5,00,000
3,74,000 4,34,000 (-) Depreciation (50,000) 4,50,000
Creditors 1,10,000 Stock in trade 3,36,000
Sundry debtors 2,00,000
Cash & Bank 5,58,000
15,44,000 15,44,000

Note: Time lag for payment to creditors & receipt from debtors is one month. It
means March months is credit purchase is closing creditors & march month is credit
sales is closing debtors.
Also payment to creditors = Opening creditors + purchase upto Feb. collection from
debtors = Opening Debtors + Sales upto Feb.

Single Entry System 89

 CAFC ACCOUNTING
Working note:
1.
Dr. Projected Trading and Profit / Los Account for the year ended 31.03.16 Cr.
Particulars ` Particulars `
To Opening stock 3,00,000 By Sales 21,20,000
To Purchases 15,20,000 By Closing stock
3,36,000

To Gross Profit c/d (30%) 6,36,000

24,56,000 24,56,000
To Sundry expenses 2,12,000 By Gross Profit 6,36,000
(10% of sales)
To Depreciation 50,000
To Net Profit
3,74,000

6,36,000 6,36,000

Dr. Cash / Bank Account Cr.

Particulars ` Particulars `
To Balance b/d 3,50,000 By Sundry Creditors 15,50,000
To Sundry Debtors 20,70,000 (1,40,000 + 14,10,000)
(1,50,000 + 19,20,000) By Expenses 2,12,000
By Fixed Asset 1,00,000
By Balance c/d
5,58,000

24,20,000 24,20,000

Q.18
Dr. Trading and Profit / Loss Account for the year ended 31.03.16 Cr.
Particulars ` ` Particulars ` `
To Opening stock 6,10,000 By Sales
To Purchases Credit 73,80,000
84,10,000

To Gross Profit c/d 9,30,000 Cash 19,20,000 93,00,000

(93,00,000 x 10%) By Closing stock 6,50,000
99,50,000 99,50,000
To Sundry expenses 6,20,000 5,80,000 By Gross Profit b/d 9,30,000
(+) L.y. Prepaid insurance 2,000 By discount received 28,000
(-) L.y O/s Expenses (45,000)
(+)C.y O/s Exp. 5,000
(-) C.Y prepaid insurance (2,000) 5,80,000

Single Entry System 90

 CAFC ACCOUNTING
(6,000 x 4/12)
To Discount allowed. 36,000
To Depreciation
(15% on 1,00,000) 15,000
To Net Profit
3,26,300

9,58,000 9,58,000

Balance sheet as on 31.03.16

Liabilities ` ` Particulars ` `
Capital Furniture & Fitting 1,00,000
Opening balance 2,50,000 (-) 5%Depreciation (15,000) 85,000
(-) Drawings (2,40,000) Stock 6,50,000
10,000 Trade Debtors 1,52,000
(+) Net Profit 3,26,300 3,36,300 Bills Receivable 75,000
Bills Payable 1,40,000 Unexpired Insurance. 2,000
Trade Creditors 6,10,000 Cash in hand & Bank 1,27,300
Outstanding exp. 5,000
10,91,300 10,91,300

Working note:
1.
Dr. Bills Receivable Account Cr.
Particulars ` Particulars `
To Balance b/d 60,000 By Cash 3,40,000
To Trade debtors By Trade creditors 15,000
3,70,000

By Balance c/d 75,000

4,30,000 4,30,000

2.
Dr. Trade Debtors Account Cr.
Particulars ` Particulars `
To Balance b/d 1,48,000 By Cash / Bank 15,10,000
To Credit sales 19,20,000 By Discount allowed 36,000
By Bills Receivable 3,70,000
By Balance c/d 1,52,000
20,68,000 20,68,000

Single Entry System 91

 CAFC ACCOUNTING
3.
Dr. Bills Payable Account Cr.
Particulars ` Particulars `
To Cash / Bank 8,15,000 By Balance b/d 1,25,000
To Balance c/d 1,40,000 By Creditors
8,30,000

9,55,000 9,55,000

4.
Dr. Trade Creditors Account Cr.
Particulars ` Particulars `
To Cash / Bank 75,07,000 By Balance b/d 5,80,000
To Discount received 28,000 By Purchases 84,10,000
To Bills Receivable 15,000 (From Trading A/c)
To Bills Payable 8,30,000
To Balance c/d 6,10,000

89,90,000 89,90,000

Q.19 In the books of Lucky

Dr. Trading and Profit / Los Account for the year ended 2011 Cr.
Particulars ` Particulars `
To Opening stock 50,000 By Sales 3,25,000
To Purchases 2,72,500 By Closing stock 62,500
To Gross Profit c/d 65,000
3,87,500 3,87,500
To Loss on sale of FA 750 By Gross Profit b/d 65,000
To Expenses 49,250
To Depreciation 1,000
To Net Profit c/d 14,000
65,000 65,000

Single Entry System 92

 CAFC ACCOUNTING
Balance sheet as on 31.03.11
Liabilities ` ` Assets ` `
Capital 1,69,000 Fixed Assets 7,500
(+) Capital intro. 5,000 (-) Sold (2,500)
(-) Drawings (25,000) 5,000
(+) Net Profit 14,000 1,63,000 (+) Additions 5,000
Creditors 46,000 10,000
(-) Depreciation (1,000) 9,000
Closing stock 62,500
Debtors 87,500
Bank 50,000
2,09,000 2,09,000

Opening Balance sheet

Liabilities ` Assets `
Capital 1,69,000 Debtors 1,02,500

Creditors 53,500 Stock 50,000

Bank balance 62,500
Fixed assets 7,500
2,22,500 2,22,500

Dr. Total Debtors Account Cr.

Particulars ` Particulars `

To Balance b/d 1,02,500 By Cash / Bank 3,40,000

To Sales 3,25,000 By Balance c/d 87,500

4,27,500 4,27,500

Dr. Total Creditors Account Cr.

Particulars ` Particulars `

To Cash / Bank 2,80,000 By Balance b/d 53,500

To Balance c/d 46,000 By Purchases 2,72,500

3,26,000 3,26,000

Single Entry System 93

 CAFC ACCOUNTING
Dr. Cash / Bank Account Cr.
Particulars ` Particulars `

To Balance b/d 62,500 By Creditors 2,80,000

To Debtors 3,40,000 By Expenses 49,250

To Additional capital 5,000 By Drawings 25,000
To Sale of Fixed assets 1,750 By Fixed Asset 5,000
By Balance c/d 50,000
4,09,250 4,09,250

C + P = S
100 + 25 = 125
↓ ↓ ↓
2,60,000 65,000 3,25,000

Q.20 In the books of Lokesh

Dr. Statement of Affairs as on 31.03.04 Cr.
Liabilities ` Assets `
Capital 1,07,712 Furniture & Fittings 22,500

Creditors 32,940 Stock (24,390 ÷ 125%) 19,512

Loan from to Brother 18,000 Debtors 11,025
Cash / Bank 15,615
House 90,000
1,58,652 1,58,652

Dr. Statement of Affairs as on 31.03.10 Cr.

Liabilities ` Assets `
Capital 2,07,113 Furniture & Fixture 40,500
Creditors 37,800 Stock (54,330 – 25%) 40,748
Debtors 26,640
Cash / Bank 29,025
House 90,000
Car 33,750
Debentures in X Ltd. 33,750
Loan to Brother 13,500
3,07,913 3,07,913

Single Entry System 94

 CAFC ACCOUNTING
Statement of Profit
Particulars ` `
Capital as on 31.03.10 2,70,113
(+) Drawings (Living expenses)
2004 – 05 13,500
2005 – 06 18,000
2006 – 07 27,000
2007 – 08 31,500
2008 – 09 31,500
2009 – 10 31,500 1,53,000
4,23,113
(+) Amount stolen in May 2009 (it is as good as joint) 13,500
4,36,613
(-) Capital as on 31.03.04 (1,07,712)
3,28,901
(-) Profits shown in income tax returns
31.03.05 33,075
31.03.06 33,300
31.03.07 35,415
31.03.08 61,875
31.03.09 54,630
31.03.10 41,670 (2,59,965)
Understatement of Income by Lokesh 68,936

Q.21 Mr. Kanubahi

Statement of Profit and Loss for the year ended 31st March 2017.
Particulars ` `
Closing capital 1,60,800
(+) Drawings
Gift 9,000
Advance Tax 6,000
Household & personal Expenses 25,600 40,600
(-) Opening Capital (1,80,200)
Net Profit 21,200

Single Entry System 95

 CAFC ACCOUNTING
Balance Sheet as at 31st March 2017
Liabilities ` ` Assets `
Capital Cash at Bank 4,100
Opening Capital 1,80,200 Debtors 19,100
(+) Net Profit 21,200 Stock of Finished goods 22,200
(-) Drawings (40,600) 1,60,800 Stock of Raw material 12,000
Loan from Banubhai 9,000 Investment 34,000
Creditors 32,500 Cash in Hand 900
Fixed Assets 1,10,000
2,02,300 2,02,300

WN1:
Opening statement of Affairs as on 31.3.16
Liabilities ` Assets `
Capital (Opening) 1,80,200 Cash at Bank [WN 2] 7,100
Creditors 25,000 Stock of Finished Goods [WN3] 23,100
Stock of Raw Material [cost] 7,500
Investment [WN4] 44,000
Cash in Hand 700
Debtors 27,800
Fixed Assets 95,000
2,05,200 2,05,200

WN 2: BRS as on 31.3.16
Bank Balance as per passbook ↓↑ 6,000
(+) Cheque deposited but not cleared* 2,000
(-) Cheque issued but not presented* (900)
7,100

* The effects have already been given in the Cash Book and hence no further effects
are to be given after reconciliation

WN 3: Stock of Finished Goods on 31.3.16

Selling Price 33,000
(-) 30% Profit (9,900)
Cost 23,100

Single Entry System 96

 CAFC ACCOUNTING
WN 4: Investment of 31.3.16 (cost)
A Ltd 27,000
B Ltd 17,000
44,000

WN 5:
Closing statement of Affairs as on 31.3.17
Liabilities ` Assets `
Capital (Closing) 1,60,800 Cash at Bank [WN 6] 4,100
Loan from Banubhai 9,000 Debtors [WN 7] 19,100
Creditor 32,500 Stock of Finished Goods [WN8] 22,200
Stock of Raw Material [cost] 12,000
Investment [WN 9] 34,000
Cash in hand 900
Fixed Assets 1,10,000
2,02,300 2,02,300

WN 6: BRS as on 31.3.17
Bank Balance as per passbook ↑ 4,100
(-) Amount directly deposited by debtor *(4,000)
Bank Balance as per cash book ↓ 100

*I. A. Implied Adjusted

Bank A/c Dr. 4,000
To Debtors 4,000
∴ Revised Bank Balance = 100 + 4,000 = 4,100
Revised Debtors = 20,600 – 4,000 = 16,600

WN 7: Debtors on 31.3.17
Debtors as per WN 6 16,600
(-) Goods on consignment (1,000)
(+) Amount due from debtor in Adj (i) [4,600 -1,100] 3,500
19,100

Single Entry System 97

 CAFC ACCOUNTING
WN 8: Stock of Finished Goods on 31.3.17
Selling Price 36,000
Add: Goods on Consignment (SP) + 1,000
37,000
(-) Profit @ 40% (14,800)
Cost 22,200

WN 9: Investment of 31.3.17 (cost)

A Ltd 27,000
B Ltd 7,000
34,000

Single Entry System 98

 CAFC ACCOUNTING

11 PARTNERSHIP AND LLP

ACCOUNTS

HOMEWORK SOLUTION

UNIT I – GENERAL PARTNERSHIP

Q.1
WN 1: Amt due to Ratan as chief clerk
Salary (500 P.M. x 12 M) 6,000

[ [
Add: Comm. (110,000 – 6,000) x 4 4,000
104
10,000
Less: share of Profit as partner (11,000)
(1/10 x 110,000)
EXCESS CHARGEBLE TO RAM 1,000

WN 2: Distribution of Profit
Total Profit = 110,000

Ram Rahim Ratan

100,000 in 3:2 10,000

60,000 40,000
+1,000 Deficit borne by Ram
(1,000)
11,000
59,000

Partnership and LLP Accounts 99

 CAFC ACCOUNTING
Dr. P/L App. A/c for the year ended 31st Dec 2011 Cr.

Particulars Rs. Particulars Rs.

To Ram’s Cap. A/c 59,000 By P/L A/c 110,000
(Net Profit)
To Rahim’s Cap. A/c 40,000
To Ratan’s Cap. A/c 11,000

110,000 110,000

Q.2 Case 1:
Dr. P/L Appropriation A/c Cr.

Particulars Rs. Particulars Rs.

To Profit trf to By P/L A/c 50,000
A (3/5) 30,000 (NP)
B (2/5) 20,000 50,000
→

50,000 50,000

Note: If the [Link] is silent, no interest will be allowed on Capitals

Case 2:
Dr. P/L Appropriation A/c Cr.

Particulars Rs. Particulars Rs.

To P/L A/c 50,000 By Loss trf to
(NL) A (3/5) 30,000
B (2/5) 20,000 50,000
→

50,000 50,000

Note: If there is Loss, No int on cap will be given.

Partnership and LLP Accounts 100

 CAFC ACCOUNTING
Case 3:
Dr. P/L App A/c Cr.

Particulars Rs. Particulars Rs.

To Int on Cap By P/L A/c 50,000
A (2L x 8%) 16,000 (NP)
B (1L x 8%) 8,000 24,000
To Profit trf to →

A (3/5) 15,600
B (2/5) 10,400
→ 26,000

50,000 50,000

Case 4:
Dr. P/L App A/c Cr

Particulars Rs. Particulars Rs.

To Int on Cap. By P/L A/c 15,000
A (15 000 x 2/3) 10,000 (NP)
B (15,000 x 1/3) 5,000

15,000 15,000

Note: The available Profit is 15,000 whereas Int. on Capital due is 24,000 (16,000 + 8,000).
Since, the profit is less than interest, the available profit will be distributed in the ratio of
interest on cap or Capital Ratio i.e. 16,000: 8,000 or 200,000: 100,000 i.e.2:1

Partnership and LLP Accounts 101

 CAFC ACCOUNTING
Case 5:
Dr. P/L App A/c Cr.

Particulars Rs. Particulars Rs.

To Int on Cap By P/L A/c 15,000
A (2L x 8%) 16,000 (NP)
B (1L x 8%) 8,000 By Loss trf to
A (3/5) 5,400
B (2/5) 3,600 9,000
24,000 → 24,000

Q3. Calculation of Int on Drawings in Various Cases.

Case a:
Int on Drawings: 5,000 pm x 10% x 6.5 = 3,250

Case b:
Int on Drawings = 5,000 pm x 10% x 5.5 = 2,750

Case c:
Int on Drawings = 5,000 pm x 10% x 6 = 3,000

Note: Assuming that the drawing are made in the middle of every month.

Case d:
Int on Drawings = 60,000 x 10% x 6/12 = 3,000

Note: As the date of drawing is not given int will be calculated for an average period
of 6 months.

Case e:
20,000 x 10% x 10/12 = 1,667
10,000 x 10% x 7/12 = 583
18,000 x 10% x 5/12 = 750
12,000 x 10% x 2/12 = 200
Int. on Drawings = 3,200

Partnership and LLP Accounts 102

 CAFC ACCOUNTING
Case f:
Int. on Drawings = 15,000 x 10% x 2.5 =3,750

Case g:
Int. on Drawings = 15,000 x 10% x 1.5 = 2,250

Case h:
Int .on Drawings = 15,000 x 10% x 2 = 3,000

Partnership and LLP Accounts 103

 CAFC ACCOUNTING

UNIT 2 – GOODWILL

Q.1 Change in PSR

G/w = 20,000 A B C
Goodwill distributed in Old Ratio 4:3:3 8,000 6,000 6,000
Cr Cr Cr

G/w reversed in NR = 7:7:6 7,000 7,000 6,000

Dr Dr Dr
Net Effect 1,000 1,000 NIL
Cr Dr

B’s Cap. A/c Dr. 1,000

To A’s Cap. A/c 1,000
(B i.e. gaining partner contributed
To A i.e. sacrificing partner)

Q.2 Change in PSR

G/w = 20,000 A B C D
G/w distributed in OR = 1:1:1:1 5,000 5,000 5,000 5,000
Cr Cr Cr Cr

G/w reversed in NR = 3:3:2:2 6,000 6,000 4,000 4,000

Dr Dr Dr Dr
Net Effect 1,000 1,000 1,000 1,000
Dr Dr Cr Cr

A’s Cap. A/c Dr. 1,000

B’s Cap. A/c Dr. 1,000
To C’s Cap. A/c 1,000
To D’s Cap. A/c 1,000
(Being gaining partners A & B contributed to sacrificing partner C & D for share of goodwill
due to change in PSR.)

Partnership and LLP Accounts 104

 CAFC ACCOUNTING

UNIT 3 – ADMISSION

Q.1
1. Valuation of Goodwill
a. Calculation of Correct Profit /Loss

Particulars 31/3/14 31/3/15 31/3/16

Profit/ [Loss] 20,000 (80,000) 105,000
Add/ Loss: Abnormal items (40,000) 110,000 (25,000)

Net Profit/ (Loss) (20,000) 30,000 80,000

b. Avg. Profit = - 20,000 + 30,000 + 80,000

3
= 30,000
c. Goodwill = 30,000 x 2 years
= 60,000

d. Net Effect of goodwill

G/W = 60,000 Gopal Govind Guru

G/W raised 36,000 24,000 NA
[OR = 60:40] Cr Cr

G/w w/off 21,000 15,000 24,000

[NR = 35:25:40] Dr Dr Dr
15,000 9,000 24,000
Cr Cr Dr

Cash/bank brought in by new partner will be distributed in sacrificing ratio
New partner will bring Cash/bank for his share of goodwill

Partnership and LLP Accounts 105

 CAFC ACCOUNTING
2. Journal Entries

Date Particulars L. Debit Credit

F.
1/4/16 Bank A/c Dr. 100,000
To Guru’s Capital A/c 100,000
(Being Capital brought in by guru)
1/4/16 Bank A/c Dr. 24,000
To Gopal’s Capital A/c. 15,000
To Govind’s Capital A/c 9,000
(Being goodwill brought in by Guru distributed
In sacrificing ratio)
1/4/16 Revaluation A/c Dr. 70,000
To Investment A/c. 50,000
To Current Assets A/c 20,000
(Being Asset revalued)
1/4/16 Fixed Asset A/c Dr. 100,000
To Revaluation A/c 100,000
(Being Fixed Asset revalued)
1/4/16 Revaluation A/c Dr. 30,000
To Gopal’s Capital A/c. 18,000
To Govind’s Capital A/c 12,000
(Being revaluation profit in old ratio 60:40)

3.
Dr. Revaluation A/c Cr.

Particulars Rs. Particulars Rs.

To Investment A/c 50,000 By Fixed Assets 100,000
To Current asset A/c 20,000
To Partners Cap. A/c
(Revaluation Profit)
Gopal (60%) 18,000
Govind (40%) 12,000
100,000 100,000

Partnership and LLP Accounts 106

 CAFC ACCOUNTING
4.
Dr. Partner’s Capital A/c Cr.

Particulars Rs. Rs. Rs. Particulars Rs. Rs. Rs.

Gopal Govind Guru Gopal Govind Guru
By Bal b/d 120,000 80,000
By Bank
A/c 100,000
By Bank
A/c 15,000 9,000
By Reval-
uation A/c 18,000 12,000
To Bal. c/d 153,000 101,000 100,000 (profit)

153,000 101,000 100,000 153,000 101,000 100,000

Balance Sheet (after admission of Guru) as on 1st April 2016

LIABILITIES Rs. ASSETS Rs.

Capital Fixed Assets 400,000
Gopal 153,000 Current Assets 304,000
Govind 101,000 [180,000 + 124,000 ‘including
Guru 100,000 Bank balance]
Loans & Advance 100,000
Long Term Loan 200,000
Current Liab 250,000
804,000 804,000

Partnership and LLP Accounts 107

 CAFC ACCOUNTING
Q.2
Dr. Revaluation A/c Cr.

Particulars Rs. Particulars Rs.

To Provision for Doubtful By Inventory A/c 2,500
Debt A/c 550 By Land & Building A/c 5,000
To Furniture & Fitting A/c 650
To Partner’s cap. A/c
(Revaluation Profit)
Dalal (2/5) 2,520
Banerji (2/5) 2,520
Mallick (1/5) 1,260
7,500 7,500

Dr. Partner’s Capital A/c Cr

Particulars Rs. Rs. Rs. Rs. Particulars Rs. Rs. Rs. Rs.
Dalal Benerji Malick Mistri Dalal Benerji Malick Mistri
To Dalal By Bal. b/d 12,000 12,000 5,000
Cap. A/c 1,000 By General
To Banerji Reserve 2,600 2,600 1,300
Cap. A/c 1,000 By Cash 5,000
By Mistri
Cap. A/c 1,000 1,000
By [Link].
Liab. A/c 1,000
By Reval -
To Bal. c/d 19,120 18,120 7,560 3,000 uation A/c 2,520 2,520 1,260

19,120 18,120 7,560 5,000 19,120 18,120 7,560 5,000

Partnership and LLP Accounts 108

 CAFC ACCOUNTING
Balance Sheet of M/s Dalal, Banerji, Malick & Mistri as on 1st April 2016

LABILITIES Rs. ASSETS Rs.

Capital Land & Building 30,000
Dalal 19,120 Furniture 5,850
Banerji 18,120 Inventory 14,250
Malick 7,560 Trade Receivable 5,500
Mistri 3,000 Less: Provision (550) 4,950
Cash in hand → 140
Trade Payable 12,850 Cash at Bank 5,960
Outstanding Liab. 500
61,150 61,150

WN1: Net Effect of Goodwill

G/w = 15,000 Dalal Banerji Mallick Mistri

G/w raised 6,000 6,000 3,000 NA
(OR – 2:2:1) Cr Cr Cr

G/w W/off 5,000 5,000 3,000 2,000

(NR – 5:5:3:2) Dr Dr Dr Dr
1,000 1,000 NIL 2,000
Net Effect Cr Cr Dr
(given through Capital A/c)

Mistri’s Cap. A/c Dr. 2,000

To Dalal’s Cap. A/c 1,000
To Banerji’s Cap. A/c 1,000

Q.3
Case a.
Old ratio (OR) ± Adjustments = New Ratio (NR)
A 5/10 = 5/10
B 3/10 - 1/10 = 2/10
C 2/10 + 1/10 = 3/10

Partnership and LLP Accounts 109

 CAFC ACCOUNTING
NR = 5:2:3
Sacrifice by ‘B’ = 1/10

Case b.
OR ± Adj = NR
A 5/10 -(1/10 x ½) = 9/20
B 3/10 - (1/10 x ½) = 5/20
C 2/10 + 1/10 = 3/10 x 2/2 = 6/20

NR = 9:5:6
Sacrifice Ratio = 1:1 (A & B)

Case c.
OR ± Adj = NR
A 5/10 - 1/10 = 4/10
B 3/10 = 3/10
C 2/10 + 1/10 = 3/10

NR = 4:3:3
Sacrifice by ‘A’ = 1/10

Case d.
OR ± Adj = NR
A 5/10 = 5/10
B 3/10 - 1/10 = 2/10
C 2/10 + 1/10 = 3/10

NR = 5:2:3
Sacrifice by ‘B’ = 1/10

Case e.
OR ± Adj = NR
A 5/10 - NA = 5/10
B 3/10 - 1/10 = 2/10
C 2/10
+1/10 = 3/10

Partnership and LLP Accounts 110

 CAFC ACCOUNTING
NR = 5:2:3
Sacrifice by ‘B’ = 1/10

Case f.
OR ± Adj = NR
A 5/10 - 3/10 = 2/10
B 3/10 - NA = 3/10
C 2/10 + 3/10 = 5/10

NR = 2:3:5
Sacrifice by A = 3/10

Case g.
OR - NR = Sacrificing Ratio (gaining ratio)
A 5/10 - 2/5 = 1/10
B 3/10 - 1/5 = 1/10
C 2/10 - 2/5 = - 2/10

NR = 2:1:2
Sacrifice by A & B = 1:1
gain by ‘C’ = 2/10

Case h.
OR - NR = Sacrificing Ratio (gaining ratio)
A 5/10 - 1/3 = 5/30
B 3/10 - 1/3 = - 1/30
C 2/10 - 1/3 = - 4/30

NR = 1:1:1
Sacrifice by A = 5/30
gain by B & C = 1/30 & 4/30

Case i.
Ratio of A & B = 5:3
Ratio of B & C should be = 5:3

Partnership and LLP Accounts 111

 CAFC ACCOUNTING
Since B’s share in relation to A is 3/5 or 60 % of A’s share, C’s share should also be 60%
of B’s share
Thus, C’s share = 60 % x 3 = 1.8

B’s share

New Ratio = 5:3:1.8

OR 25: 15: 9

Sacrifice Ratio = OR - NR Sacrificing Ratio (gaining ratio)

A = 5/10 - 25/49 = - 5/490
B = 3/10 - 15/49 = - 3/490
C = 2/10 - 9/49 = 8/490

‘C’ sacrifice by 8/490 and A gains by 5/490 & B gains by 3/490.

Partnership and LLP Accounts 112

 CAFC ACCOUNTING

UNIT 4 – RETIREMENT

Q.1
Dr. Revaluation Cr.

Particulars Rs. Particulars Rs.

To Machinery A/c 40,000 By Land & Building A/c 60,000
To Closing stock A/c 20,000 By Sundry Creditor A/c 10,000
To Provision for Doubtful 10,000
Debt A/c

70,000 70,000

Dr. Partner’s Capital A/c Cr.

Particulars Rs. Rs. Rs. Particulars Rs. Rs. Rs.

Ram Rahul Rohit Ram Rahul Rohit
To Ram’s By Bal b/d 3,00,000 2,00,000 1,00,000
Cap. A/c 30,000 60,000
To Cash/ 2,10,000 By Cash/ 30,000 20,000 10,000
Bank Bank
A/c (JLP)

To Ram 2,10,000 By Rahul 30,000

Loan A/c Cap. A/c
By Rohit 60,000
Cap. A/c

To Bal c/d 3,00,000 3,00,000 By Cash/ *1,10,000 *2,50,000

Bank A/c
4,20,000 3,30,000 3,60,000 4,20,000 3,30,000 3,60,000

Partnership and LLP Accounts 113

 CAFC ACCOUNTING
Dr. Ram’s Loan A/c Cr.

Date Particulars Rs. Date Particulars Rs.

31.03.16 To Bal c/d * 210,000 31.03.16 By Ram’s Capital A/c 210,000

210,000 210,000
01.04.16 By Bal b/d 210,000

Dr. Cash & Bank A/c Cr.

Date Particulars Rs. Date Particulars Rs.

31.03.16 To Bal b/d 100,000 31.03.16 By Ram’s Cap A/c 210,000
To Ram’s Cap A/c 30,000 By Bal c/d * 310,000
To Rahul’s Cap A/c 20,000
To Rohit’s Cap A/c 10,000
[JLP Surrendered]

To Rahul’s Cap A/c 110,000

To Rohit’s Cap A/c 250,000
520,000 520,000

Partnership and LLP Accounts 114

 CAFC ACCOUNTING
M/s Rahul & Rohit
Balance sheet as on 1st April 2016

LIABILITIES Rs. ASSETS Rs.

Capital Land & Building 260,000
Rahul 300,000 Machinery 160,000
Rohit 300,000 Closing stock 80,000
Ram’s Loan 210,000 Debtors 200,000
Sundry Creditors 190,000 Less: Provision for
Doubtful Debt (10,000) 190,000
→

Cash & Bank 310,000

10,00,000 10,00,000

WN 1: Treatment of Goodwill

G/W = 180,000 Ram Rahul Rohit

G/W raised
[old ratio – Cr] 90,000 60,000 30,000
3:2:1 Cr Cr Cr
G/W w/off
[New Ratio – Dr.] NA 90,000 90,000
1:1 Dr Dr
Net Effect 90,000 30,000 60,000
Cr. Dr Dr

Rahul’s cap A/c Dr 30,000 -

Rohit’s cap A/c Dr. 60,000 -
To Ram’s Capital A/c - 90,000

Partnership and LLP Accounts 115

 CAFC ACCOUNTING
WN 2: Treatment of Joint Life Policy received.
[JLP treated as revenue Expenses while paying premium]
a. C/B A/c Dr. 60,000
To JLP A/c 60,000

b. JLP A/c Dr. 60,000

To Ram 30,000
To Rahul 20,000
To Rohit 10,000

Q.2 Journal Entries

[Link] Particulars Debit Credit

1. A’s Capital A/c Dr. 21,000
B’s Capital A/c Dr. 14,000
C’s Capital A/c Dr. 7,000
To P & L Adjustment A/c 42,000
(Being profit written back for making adjustment)
2. P & L Adjustment A/c Dr. 6,000
To B’s Capital A/c 6,000
(Being Bonus credited to B’s capital A/c)
3. P & L Adjustment A/c Dr. 36,000
To A’s Cap. A/c 12,000
To B’s cap. A/c 18,000
To C’s cap. A/c 6,000
(Being remaining profit distributed in the new ratio)
4. Fixtures A/c Dr. 9,800
To Revaluation A/c 9,800
(Being Fixtures revalued)
5. Revaluation A/c Dr. 1,800
To Provision for Doubtful Debt A/c 1,800
(Being Provision created)
6. Revaluation A/c Dr. 8,000
To A’s Cap. A/c 2,667
To B’s cap. A/c 4,000
To C’s cap. A/c 1,333
(Being revaluation profit distributed in 2:3:1)

Partnership and LLP Accounts 116

 CAFC ACCOUNTING
7. A’s cap. A/c Dr. 13,334
B’s cap. A/c Dr. 20,000
C’s cap. A/c Dr. 6,666
To Goodwill A/c 40,000
(Being existing goodwill w/off in 2:3:1)
8. B’s cap A/c Dr. 14,000
C’s cap A/c Dr. 4,667
To A’s cap A/c 18,667
(Being Net Effect of goodwill given)
9. B’s cap A/c Dr. 2,700
C’s cap A/c Dr. 900
To Provision for Doubtful Debt A/c 3,600
(Being raising of Provision by 4%)
10. A’s Capital A/c Dr. 1,49,000
To B’s Capital A/c 1,49,000
(Being amount payable to A paid by B)

Dr. Partner’s Capital A/c Cr.

Particulars Rs. Rs. Rs. Particulars Rs. Rs. Rs.
A B C A B C
To P/L Adj A/c 21,000 14,000 7,000 By Bal b/d 1,50,000 1,00,000 5,0000
To Goodwill A/c 13,334 20,000 6,666 By P/L Adj A/c 6,000
To A’s cap.A/c 14,000 4,667 By P/L Adj a/c 12,000 18,000 6,000
To Provision for By Revaluation
Doubtful Debt 2,700 900 (profit) 2,667 4,000 1,333
To B’s cap.A/c *149,000 By B & C’s
To Cash A/c * 1,300 Cap.A/c 18,667
To Bal. c/d By A’s cap. A/c 149,000
(WN. 3) 225,000 75,000 By Cash A/c *36,900

183,334 277,000 94,233 183,334 277,000 94,233

Partnership and LLP Accounts 117

 CAFC ACCOUNTING
Dr. Cash A/c Cr.

Particulars Rs. Particulars Rs.

To Bal b/d 10,000 By B’s Cap. A/c 1,300
To C’s Cap. A/c 36,900 By Bal. c/d * 45,600

46,900 46,900

Balance Sheet of B & C

As on 31st March 2016 (after retirement of A)
LIABILITIES Rs. ASSETS Rs.
Capital
B 225,000 Fixtures 39,800
C 75,000 Stock 170,000
Sundry Creditors 40,000 Debtors 90,000
Less: Provision for
Doubtful Debts (5,400) 84,600
Cash 45,600
340,000 340,000

WN. 1: Treatment of Goodwill

Average Profit = 15,000 + 23,000 + 25,000 + 35,000 + 42,000
5
= 28,000
∴ Goodwill = 28,000 x 2yrs = 56,000

Goodwill = 56,000 A B C
G/W raised
[old ratio = 2:3:1] 18,667 28,000 9,333
Cr Cr Cr
G/W w/off
[New Ratio = 3:1] NA 42,000 14,000
Dr Dr
Net Effect 18,667 14,000 4,667
Cr. Dr Dr

Partnership and LLP Accounts 118

 CAFC ACCOUNTING
B’s cap A/c Dr 14,000 -
C’s cap A/c Dr. 4,667 -
To A’s Cap.A/c - 18,667

WN.3: Total Cap. = 300,000

3:1

B C
225,000 75,000

Q.3 Journal Entries

[Link] Particulars Debit Credit

1. B’s Capital A/c Dr. 49,500
C’s Capital A/c Dr. 18,000
To A’s Capital A/c 67,500
(Being revaluation profit & goodwill due to A borne
By B & C in gaining ratio 11:4) WN.1
2. A’s Capital A/c Dr. 1,17,500
To A’s Loan A/c (50%) 58,750
To Bank A/c (50%) 58,750
(Being settlement of A’s claim on his retirement by
Payment of 50% in cash & transferring the balance to
his Loan A/c)
3. Bank A/c Dr. 73,750
To B’s cap. A/c 60,333
To C’s cap. A/c 13,417
(Being Cash brought in by continuing partners)WN4

Wn 1: Revaluation Profit & Goodwill Effect

Goodwill 100,000
Sundry Fixed Assets 30,000
Joint life Policy 5,000
135,000

Partnership and LLP Accounts 119

 CAFC ACCOUNTING
A’s share = 135,000 x 5/10 = 67,500

Gaining Ratio
B 11:4 C
49,500 WN 2 18,000

WN. 2 Gaining Ratio = New Ratio - Old Ratio

B = 2/3 - 3/10 = 11/30
C = 1/3 - 2/10 = 4/30

WN. 3. Total Capital after retirement in PSR = 2:1 & maintaining Bank Balance = 25,000
Asset as per B/s 190,000
Bank (Additional) 15,000
205,000
Less: Bank Loan (40,000)
Sundry Creditors (30,000)
A’s Loan (58,750)
76,250

B 2:1 C
50,833 25,417

Partnership and LLP Accounts 120

 CAFC ACCOUNTING
WN.4
Dr. Partner’s Capital A/c Cr.

Particulars Rs. Rs. Rs. Particulars Rs. Rs. Rs.

A B C A B C
To A’s cap.A/c 49,500 18,000 By Bal. b/d 50,000 40,000 30,000
To Bank 58,750 By B’s cap 49,500
To A’s Loan A/c 58,750 By C’s cap 18,000

To Bal. c/d 50,833 25,417 By Bank a/c 60,333 13,417

WN3

117,500 100,333 43,417 117,500 100,333 43,417

Q.4
Case 1
Gaining Ratio = New Ratio - Old Ratio
A = 3/5 - ½ = 1/10
C = 2/5 - 1/5 = 2/10

Gaining Ratio = 1 : 2 ( A & C )

Case 2
W = 1/3 - 1/3 = NIL
A = 1/3 - 1/6 = 1/6
C = 1/3 - 1/6 = 1/6

Gaining Ratio = 1 : 1 ( A & C )

Partnership and LLP Accounts 121

 CAFC ACCOUNTING
Case 3
Ratio of B & C = 15:9 = 5:3
New Ratio of A & C = 5:3
A = 5/8 - 25/49 = 45/392
C = 3/8 - 9/49 = 75/392

Gaining Ratio = 45 : 75 = 3:5 ( A & C )

Case 4
‘B’ surrendered 1/9th to A
‘B’ surrendered 8/9th to C

Gaining Ratio =1 : 8 ( A & C )

Q.5
Retiring Partner’s Loan A/c
Dr. 1st year Cr

Particulars Rs. Particulars Rs.

To Cash A/c [7,500 + 1,800] 9,300 By Capital A/c 30,000
To Bal c/d 22,500 By Int. A/c [30,000 x 6%] 1,800
31,800 31,800

2nd Year

To Cash A/c [7,500 + 1,350] 8,850 By Bal. b/d 22,500

To Bal. c/d 15,000 By Int. A/c [22,500 x 6%] 1,350
23,850 23,850

3rd Year

To Cash A/c [7,500 + 900] 8,400 By Bal. b/d 15,000

To Bal. c/d 7,500 By Int. A/c [15,000 x 6%] 900
15,900 15,900

Partnership and LLP Accounts 122

 CAFC ACCOUNTING
4th Year

To Cash A/c [7,500 + 450] 7,950 By Bal. b/d 7,500

By Int. A/c [7,500 x 6%] 450
7,950 7,950

Q.6 Journal Entries

[Link] Particulars Debit Credit

1. Revaluation A/c Dr. 30,000
To Furniture A/c 10,000
To Inventory A/c 20,000
(Being Assets revalued)
2. K’s Capital A/c Dr. 15,000
L’s Capital A/c Dr. 9,000
M’s Capital A/c Dr. 6,000
To Revaluation A/c 30,000
(Being revaluation Loss distributed in 5:3:2)
3. Reserve’s A/c Dr. 50,000
To K’s Capital A/c 25,000
To L’s Capital A/c 15,000
To M’s Capital A/c 10,000
(Being reserves distributed in 5:3:2)
4. K’s Capital A/c Dr. 15,000
L’s Capital A/c Dr. 9,000
M’s Capital A/c Dr. 6,000
To Goodwill A/c 30,000
(Being old goodwill of balance sheet written off
In 5:3:2)
5. N’s Cap. A/c Dr. 15,000
To L’s cap. A/c 15,000
(Being gaining partner contribution to sacrificing
Partner for goodwill) WN.1
6. L’s Cap. A/c Dr. 72,000
To Cash A/c (50%) 36,000

Partnership and LLP Accounts 123

 CAFC ACCOUNTING

To N’s Capital A/c 36,000

(Being 50% amt. due to ‘L’ paid in cash & balance
Retained in firm as capital of ‘N’)
7. M’s Capital A/c Dr. 14,000
To Bank A/c 14,000
(Being amount paid to ‘M’ to make his capital
Proportionate)

Dr. Partner’s Capital A/c Cr.

Particulars Rs. Rs. Rs. Rs. Particulars Rs. Rs. Rs. Rs.
K L M N K L M N
To
Revaluation 15,000 9,000 6,000 By bal. b/d 40,000 60,000 30,000
A/c (Loss)
To Goodwill By Reserve
15,000 9,000 6,000 25,000 15,000 10,000
A/c A/c
To L’s Cap. By N’s Cap.
15,000 15,000
A/c A/c
To Cash A/c By L’s Cap.
36,000 36,000
A/c
To N’s cap.
36,000
A/c
To Bank A/c 14,000
To Bal. c/d
35,000 14,000 21,000
(WN 2.)
65,000 90,000 40,000 36,000 65,000 90,000 40,000 36,000

Partnership and LLP Accounts 124

 CAFC ACCOUNTING
Balance Sheet of M/s K, M, & N as on 1st April 2015

LIABILITIES Rs. ASSETS Rs.

Capital Furniture 10,000
K 35,000 Trade Receivable 50,000
M 14,000 Inventory 30,000
N 21,000

Trade Payable 20,000

90,000 90,000

WN 1. Treatment of Goodwill

G/w = 50,000 K L M N
G/w raised 25,000 15,000 10,000 NA
(old Ratio) 5:2:3 Cr. Cr. Cr.

G/w W/off 25,000 NA 10,000 15,000

(New Ratio 5:2:3) Dr. Dr. Dr.

NIL 15,000 NIL 15,000

Net Effect Cr. Dr.

WN 2. : Capital Adjustment
K M N
5 : 2 : 3

35,000 14,000 21,000

Q.7 Journal Entries

Dr. Cr.
Date Particulars
` `
(i) Goodwill A/c Dr. 20,000
To Profit and Loss Adjustment A/c 20,000
(Being revaluation of goodwill on L's retirement)

Partnership and LLP Accounts 125

 CAFC ACCOUNTING

(ii) Profit and Loss Adjustment A/c Dr. 30,000

To Furniture A/c 10,000
To Stock in Trade A/c 20,000
(Being revaluation of furniture and stock-in-trade recorded)

(iii) K's Capital A/c Dr. 5,000

L's Capital A/c Dr. 3,000
M's Capital A/c Dr. 2,000
To Profit and Loss Adjustment A/c 10,000
(Being net revaluation loss debited to partners capital account
on the ratio of 5:3:2)

(iv) Reserve A/c Dr. 50,000

To K's Capital A/c 25,000
To L's Capital A/c 15,000
To M's Capital A/c 10,000
(Being reserve transferred to Partners capital accounts)

(v) L's Capital A/c Dr. 72,000

To Cash A/c 36,000
To N's Capital A/c 36,000
(Being 50% of the amount due to L paid off in cash and the
balance retained in the firm as capital of N)

(vi) K's Capital A/c Dr. 25,000

M's Capital A/c Dr. 10,000
N's Capital A/c Dr. 15,000
To Goodwill A/c 50,000
(Being goodwill written off, as agreed after retirement of L and
admission of N in the new profit sharing ratio)

(vii) M's Capital A/c Dr. 14,000

To Bank/Cash A/c 14,000
(Being amount paid to M to make his capital proportionate)

Partnership and LLP Accounts 126

 CAFC ACCOUNTING
Balance Sheet M/s K, M N
As on 1st April, 1999

LIABILITIES Rs. ASSETS Rs.

Capital Account Furniture 10,000
K 35,000 Trade Receivable 50,000
M 14,000 Inventory 30,000
N 21,000 70,000
Sundry Creditors 20,000
90,000 90,000

Working Notes:
Partner's Capital Accounts

K L M N K L M N
Particulars Particulars
` ` ` ` ` ` ` `
To Profit & Loss By Balance b/d 40,000 60,000 30,000 -
Adjustment A/c 5,000 3,000 2,000
To Cash A/c - 36,000 - By Reserve 25,000 15,000 10,000 -
To N's Capital A/c - 36,000 - By L's Capital A/c - - - 36,000
To Goodwill A/ 25,000 - 10,000 15,000
To Bank - - 14,000 -

(Bal. figure)
To Balance c/d 35,000 - 14,000 21,000
65,000 75,000 40,000 36,000 65,000 65,000 40,000 36,000

Q.8 Journal Entry for Goodwill

Dr. Cr.
Particulars
` `
Raghav's Capital A/c Dr. 3,750
Mohan Capital A/c Dr. 1,250
To Madhav's Capital A/c (W.N. 1) 5,000
(Madhav's share of goodwill adjusted to the accounts of
continuing partners in their gaining ratio 3:1)

Partnership and LLP Accounts 127

 CAFC ACCOUNTING
Revaluation Account

Particulars ` Particulars ` `
To Investments A/c 800 By Expense owing A/c 750
To Loose Tools A/c 400 By Factory premises A/c 1,800
To Provision for doubtful 1,950 By Loss transferred to:
debts A/c Raghav 300
Madhav 200
Mohan 100 600
3,150 3,150

Capital Accounts

Raghav Madhav Mohan Raghav Madhav Mohan

Particulars Particulars
` ` ` ` ` `
To Revaluation A/c 300 200 100 By Balance b/d 20,000 15,000 10,000
To Madhav's Capital A/c 3,750 - 1,250 By Reserve Fund A/c 5,250 3,500 1,750
To Investment A/c 7,200 - - By Workmen's 1,500 1,000 500
Compensation fund A/c
To Cash A/c - 5,000 - By Raghav's Capital A/c - 3,750 -
To Madhav loan A/c - 19,300 - By Mohan's Capital A/c - 1,250 -
To Balance c/d 15,500 - 10,900
26,750 24,500 12,250 26,750 24,500 12,250

Balance Sheet

LIABILITIES Rs. ASSETS Rs.

Trade Creditors 3,000 Cash in hand 4,000
Bills Payable 2,700 Debtors 16,000
Expenses owing 3,750 Less: Provision 2,950 13,050
Workmen's Compensation Stock 12,000
Claim 1,800 Factory Premises 24,300
Madhav's Loan 19,300 Loose Tools 3,600
Capitals:
Raghav 15,500
Madhav 10,900 26,400
56,950 56,950

Partnership and LLP Accounts 128

 CAFC ACCOUNTING
Working Notes:
(i) Calculation of Goodwill:

Average Profits of the Past three years = 60,000 + 55,000 + 57,500

3
= ` 57,500
Super Profits = Actual Profits - Normal Profits
= `57,500 -`50,000 = ` 7,500
Goodwill at 2 years purchase of Super Profits
= `7,500 x 2
Profits = `15,000

Q.9 Revaluation Account

Particular ` Particular `
To Machinery A/c 40,000 By Land and Buildings A/c 60,000
To Closing Stock A/c 20,000 By Sundry Creditors A/c 10,000
To Provision for Bad Debts 10,000 By Cash and Bank 60,000
A/c A/c– Joint Life policy
surrendered
To Partners’ Capital A/cs:
Ram 30,000
Rahul 20,000
Rohit 10,000 60,000
1,30,000 1,30,000

Partners’ Capital Accounts

Rahul Rohit Rahul Rohit
31.3.2022 To Ram’s Capital 30,000 60,000 31-3-2022 By Balance b/d 2,00,000 1,00,000
A/c
To Balance c/d 3,00,000 3,00,000 By Revaluation A/c 20,000 10,000
By Cash & bank 1,10,000 2,50,000
A/c – cash
brought in by
Rahul and Rohit
3,30,000 3,60,000 3,30,000 3,60,000
1-4-2022 By Balance b/d 3,00,000 3,00,000

Partnership and LLP Accounts 129

 CAFC ACCOUNTING
Ram’s Loan Account
` `
31-3- To Balance c/d 2,10,000 31-3- By Ram’s Capital A/c 2,10,000
2022 2022
2,10,000 2,10,000
1-4-2022 By Balance b/d 2,10,000

Cash and Bank Account

` `
31-3 2022 To Balance b/d 1,00,000 31-3-2022 By Ram’s capital A/c 2,10,000
To Revaluation A/c 60,000 By Balance c/d 3,10,000
joint life policy
surrendered
To Rahul’s Capital A/c 1,10,000
To Rohit’s Capital A/c 2,50,000
5,20,000 5,20,000
1-4-2022 To Balance b/d 3,10,000

M/s Rahul & Rohit Balance Sheet as on 1stApril, 2022

Liabilities ` ` Assets ` `

Capital accounts: Land and buildings 2,60,000

Rahul 3,00,000 Machinery 1,60,000
Rohit 3,00,000 6,00,000 Closing stock 80,000
Ram’s loan account 2,10,000 Sundry debtors 2,00,000
Sundry creditors 1,90,000 Less: Provision for bad
debts (10,000) 1,90,000
Cash & bank balances 3,10,000
10,00,000 10,00,000

Working Notes:
1. Gaining ratio of existing partners:
Rahul 1/2-1/3=1/6
Rohit 1/2-1/6=2/6

2. Total goodwill of firm is ` 1,80,000

Ram’s share (1/2 x `1,80,000)=` 90,000
Ram’s share of goodwill is to be borne by Rahul and Rohit in their gaining ratios
i.e. Rahul = 1/3 x ` 90,000 = ` 30,000
Rohit = 2/3 x ` 90,000 =` 60,000

Partnership and LLP Accounts 130

 CAFC ACCOUNTING
3. Ram’s Capital Account
` `
31-3-2022 To Cash and Bank A/c 2,10,000 31-3-2022 By Balance b/d 3,00,000
To Ram’s Loan A/c 2,10,000 By Revaluation A/c 30,000
-Transfer By Rahul’s Capital 30,000
A/c - Goodwill
By Rohit’s Capital A/c – 60,000
Goodwill
4,20,000 4,20,000

Q.10 Journal Entries

` `

1. A’s Capital account Dr. 21,000

B’s Capital account Dr. 14,000
C’s Capital account Dr. 7,000
To Profit and loss adjustment account 42,000
(Profit written back for making adjustments)
2. Profit and loss adjustment account Dr. 6,000
To B’s Capital account 6,000
(Bonus credited to B’s capital account)
3. Profit and loss adjustment account Dr. 36,000
To A’s Capital account 12,000
To B’s Capital account 18,000
To C’s Capital account 6,000
(Distribution of profits in the new ratio)
4. Fixtures account Dr. 9,800
To Provision for bad debts account 1,800
To A’s Capital account 2,667
To B’s Capital account 4,000
To C’s Capital account 1,333
(Revaluation of assets on A’s retirement)
5. B’s capital account Dr. 2,700
C’s capital account Dr. 900
To Provision for bad debts account 3,600
(Raising provision for bad debts)
6. A’s capital account 1,62,334
To B’s Capital account 1,62,334
(Amount payable to A paid by B)

Partnership and LLP Accounts 131

 CAFC ACCOUNTING

7. B’s Capital account Dr. 14,000

C’s Capital account Dr. 4,667
To A’s Capital account 18,667
(Adjusting entry of goodwill passed through partners’
capital accounts in gaining/sacrificing ratio)

Partners’ Capital Accounts

A B C A B C
` ` ` ` ` `
To P & L adjustment A/c 21,000 14,000 7,000 By Balance b/d 1,50,000 1,00,000 50,000
To Provision for bad - 2,700 900 By P & L adjustment - 6,000 -
debts A/c A/c
To B’s Capital A/c 1,62,334 - - By P & L adjustment 12,000 18,000 6,000
A/c
To Cash A/c - 34,634 - By Fixtures A/c 2,667 4,000 1,333
To A’s Capital A/c 14,000 4,667 By A’s capital A/c - 1,62,334 -
By B and C’s capital 18,667
A/c
To Balance c/d - 2,25,000 75,000 By Cash A/c 30,234
1,83,334 2,90,334 87,567 1,83,334 2,90,334 87,567

Cash Account
` `
To Balance b/d 50,000 By B’s capital A/c 34,634
To C’s capital A/c 30,234 By Balance b/d 45,600
80,234 80,234

Balance Sheet of B and C as on 31st March, 2022 (after retirement of A)

Liabilities ` Assets ` `
Capital accounts: Fixtures 39,800
B 2,25,000 Stock 1,70,000
C 75,000 3,00,000 Sundry debtors 90,000
Sundry creditors 40,000 Less: Provision for bad (5,400) 84,600

debts
Cash 45,600
3,40,000 3,40,000

Partnership and LLP Accounts 132

 CAFC ACCOUNTING
Working Notes:
Calculation of goodwill:
1. Average of last five year’s profit
Year ended on Profit `
31.3.2018 15,000
31.3.2019 23,000
31.3.2020 25,000
31.3.2021 35,000
31.3.2022 42,000
1,40,000

2. Goodwill at two years’ purchase

` 28,000 x 2 = ` 56,000

3. Calculation for adjustment of Amount of Goodwil

Partner Old Share New Share Gain Sacrifice

A 2 - 2
6 6
B 3 3 3 -
6 4 12
C 1 1 1 -
6 4 12

Partnership and LLP Accounts 133

 CAFC ACCOUNTING

UNIT 5 – DEATH

Q.1 Similar to Nov 2020 Exam sum

i) Ascertainment of N’s share of Profit
Average Profit = 42,000 + 39,000 + 45,000
3
= 14,000
N’s share in Profit = 14,000 x 2/5*
= 5,600
* PSR between B & N = ½ & 1/3 = 3:2

ii) Ascertainment of Goodwill

Avg. Profit = 42,000 + 39,000 + 45,000
3
= 42,000
Goodwill = 42,000 x 3 years
= 126,000
N’s share of Goodwill = 126,000 x 2/5
= 50,400

Dr. N’s Executors A/c Cr.

Date Particulars Rs. Date Particulars Rs.

2016 2016
1/5 To N’s Loan A/c 128,000 1/1 By Capital A/c 60,000
1/5 By Reserve A/c 12,000
[30,000 x 2/5]
1/5 By B’s Cap. A/c 50,400
(share of Goodwill)
1/5 By P/L Suspense A/c 5,600
(share of Profit)

128,000 128,000

Partnership and LLP Accounts 134

 CAFC ACCOUNTING
Q.2 i.
Balance sheet of Firm to find out Capital of Partners

LIABILITIES Rs. ASSETS Rs.

Capital (Bal. Fig) Furniture 18,000
A 60,000 Machine 72,000
B 36,000 Debtor 20,000
C 24,000 Cash 10,000
120,000 120,000

Total Capital = 120,000 - A (5/10) 60,000

- B (3/10) 36,000
- C (2/10) 24,000

ii) Int. on Cap to ‘B’ = 36,000 x 5% x 6/12 = 900

iii) Total Drawings = 600 p.m. x 6 mths = 3,600 = share of Profit
iv) Int. on Drawings
Jan = 600 x 6% x 6/12 = 18
Feb = 600 x 6% x 5/12 = 15
Mar = 600 x 6% x 4/12 = 12
April = 600 x 6% x 3/12 = 9
May = 600 x 6% x 2/12 = 6
June = 600 x 6% x 1/12 = 3
63

v) B’s share in Separate life Policy

Share in own Policy = 60,000 x 3/10 = 18,000
Share in A’s Policy = 50,000 x 50% x 3/10 = 7,500
Share in C’s Policy = 30,000 x 40% x 3/10 = 3,600

This will be contributed

by A & C in gaining ratio = 5:2*

Partnership and LLP Accounts 135

 CAFC ACCOUNTING
A’s Cap. A/c (11,100 x 5/7) Dr. 7,929
C’s Cap. A/c (11,100 x 2/7) Dr. 3,171
To B’s Cap. A/c 11,100
* gaining Ratio = NR - OR
A = 5/7 - 5/10 = 15/70
C = 2/7 - 2/10 = 6/70

gaining Ratio = 15: 6 or 5:2

vi) Treatment of Goodwill

G/w = 3,600 x 2 = 7,200
B’s share = 7,200 x 3/10 = 2,160

Contributed by A & C
In 5:2 gaining Ratio
A’s Cap. A/c (2,160 x 5/7) Dr. 1,543
C’s Cap. A/c (2,160 x 2/7) Dr. 617
To B’s Cap. A/c 2,160

Dr. B’s Capital A/c Cr.

Particulars Rs. Particulars Rs.

To Drawings [ iii ] 3,600 By Bal. b/d [ i ] 36,000
To Int. on Drawings [ iv ] 63 By Int. on Capital [ ii ] 900
By P/L Suspense A/c [ iii ] 3,600

To B’s
Executors A/c 68,097 By Life Policy A/c 18,000
By A’s Cap. [ v ] 7,929
By C’s cap. [ v ] 3.171
By A’s cap. [ vi ] 1,543
By C’s cap. [ vi ] 617

71,760 71,760

Partnership and LLP Accounts 136

 CAFC ACCOUNTING
Q.3
Dr. P & L Appropriation A/c Cr.

Particulars Rs. Particulars Rs.

To Int. on Capital A/c By profit & Loss A/c 3,110
(For 2 mths) (Profit for 2 mths)
A 100
B 60
C 50 210
To Salary A/c
(For 2 mths)
A 600
B 500 1,100
To Profit trf to
A (2/4) 900
B (1/4) 450
C (1/4) 450 1,800
3,110 3,110

Dr. Partner’s Capital A/c Cr.

Particulars Rs. Rs. Rs. Particulars Rs. Rs. Rs.

A B C A B C
To A’s Cap A/c 3,920 1,680 By Bal. b/d 10,000 6,000 5,000
To Loan to A 4,000 By Int. on 100 60 50
Cap.A/c
To A’s Execut - 19,500 By Salary A/c 600 500
ors A/c By P/L App. A/c 900 450 450
By B’s cap. 3,920
By C’s cap. 1,680
To Bal.c/d 6,240 6,970 By Joint Life 6,300 3,150 3,150
Policy
23,500 10,160 8,650 23,500 10,160 8,650

Partnership and LLP Accounts 137

 CAFC ACCOUNTING
Dr. A’s Executors A/c Cr.

Particulars Rs. Particulars Rs.

To Bank A/c 19,500 By A’s cap.A/c 19,500

19,500 19,500

Balance Sheet of B & C as on 28th Feb 1991

LIABILITES Rs. ASSETS Rs.

Capital Sundry Debtors 3,900
B 6,240 Cash 13,100
C 6,970 [20,000 + 12,600 – 19,500]
Crediotrs 3,790

17,000 17,000

WN 1: Treatment of Goodwill
Avg. Profit = 5,500 + 4,800 + 6,500
3
= 5,600
Goodwill = 5,600 x 2 = 11,200
A’s share = 11,200 x 2/4 = 5,600

Contributed by gaining
Partners (B & C) in 7:3*
B’s Cap. A/c Dr. 3,920
C’s Cap. A/c Dr. 1,680
To A’s cap. A/c 5,600

* gaining Ratio = NR - OR
B = 3/5 - ¼ = 7/20
C = 2/5 - 1/4 = 3/20

Partnership and LLP Accounts 138

 CAFC ACCOUNTING
WN2:
Dr. Joint Life Policy Reserve A/c Cr.

Particulars Rs. Particulars Rs.

To Joint Life Policy A/c 3,600 By Balance b/d 3,600

3,600 3,600

Dr. Joint Life Policy A/c Cr.

Particulars Rs. Particulars Rs.

To Bal b/d 3,600 By Joint Life Policy Res. A/c 3,600
To A’s Cap.A/c (2/4) 6,300 By Bank A/c 12,600
To B’s Cap. A/c (1/4) 3,150
To C’s cap. A/c (1/4) 3,150 12,600

16,200 16,200

Q.4
Case 1:

Date Particulars L. F. Debit Credit

1. Bank A/c Dr. 100,000
To Joint Life Policy A/c 100,000
(Being Value received on death)
2. Joint life Policy A/c Dr. 100,000
To A’s Cap.A/c 50,000
To B’s Cap. A/c 30,000
To C’s cap. A/c 20,000
(Being JLP amount distributed in 5:3:2)

Partnership and LLP Accounts 139

 CAFC ACCOUNTING
Case 2:

Date Particulars L. F. Debit Credit

1. Bank A/c Dr. 100,000
To Joint Life Policy A/c 100,000
(Being Value received on death)
2. Joint life Policy A/c Dr. 90,000
To A’s Cap.A/c 45,000
To B’s Cap. A/c 27,000
To C’s cap. A/c 18,000
(Being amount distributed in 5:3:2) WN 1

WN1:
Dr. Joint Life Policy A/c Cr.

Particulars Rs. Particulars Rs.

To Bal b/d 10,000 By Bank A/c 100,000
To A’s Cap.A/c 45,000
To B’s Cap. A/c 27,000
To C’s cap. A/c 18,000 90,000

100,000 100,000

Partnership and LLP Accounts 140

 CAFC ACCOUNTING

Date Particulars L. F. Debit Credit

1. Bank A/c Dr. 100,000
To Joint Life Policy A/c 100,000
(Being Value received on death)
2. Joint life Policy A/c Dr. 90,000
To A’s Cap.A/c 45,000
To B’s Cap. A/c 27,000
To C’s cap. A/c 18,000
(Being balance in JLP distributed in 5:3:2)
3. Joint life Policy Reserve A/c Dr. 10,000
To A’s Cap.A/c 5,000
To B’s Cap. A/c 3,000
To C’s cap. A/c 2,000
(Being JPL Reserve distributed in 5:3:2)

Q.5
P's Capital A/c

Date Particulars Rs. Date Particulars Rs.

2020 2020
31 Dec To P's Drawings A/c 30,000 1 Jan By Bal B/d 30,000
To Profit & Loss Adj. A/c 3,000 31 Dec By P's Current A/c 5,000
(Unrecorded Liability)
To Balance transferred 38,465 By Interest on Capital 2,400
to P's Executor's A/c
By Profit & Loss 4,735
Appropriation A/c
(W.N.2)
By Q and R Capital A/c
(Goodwill) (W.N.1) 11,830
By Insurance Policies 17,500
(W.N. 3)
71,465 71,465

Partnership and LLP Accounts 141

 CAFC ACCOUNTING
Working Notes:

Computation `
(i) Valuation of Goodwill:
Average Profit before Interest on Capital 29,340 + 26,470 + 8,320 15,830
=
3
(Less) Interest on Capital = (30000 + 12000 + 8000) x (4,000)
8%
Average Profit after Interest on Capital 11,830
Goodwill of the Firm = 11830 x 2 23,660
P's Share of Goodwill = 23660 x 2/4 11,830
(ii) Share in Profit for 2020:
Profit for the year 2020 Before 13,470
(Less) Interest on Capital = (30000 + 12000 + 8000) x (4,000)
8%
Profit for the year 9,470
P's Share of Profit = 9470 x 2/4 4,735
(iii) P's Share on Separate Life Insurance Policies:
P's Policy at Maturity Value 25,000
Q's Policy at Surrender Value @ 20% 5,000
R's Policy at Surrender Value @20% 5,000
35,000
P's Share = 35000 x 2/4 17,500

Q.6 Revaluation A/c

Particulars ` ` Particulars `
To Furniture 7,500 By Land & Building 33,000
To Inventory 8,740
To Bad Debts 1,760
To Profit on Revaluation
Diya 6,000
Riya 3,000
Kiya 6,000 15,000
33,000 33,000

Partnership and LLP Accounts 142

 CAFC ACCOUNTING
Partners Capital A/c
Particulars Diya ` Riya ` Kiya ` Particulars Diya ` Riya ` Kiya `
To Kiya capital 40,000 20,000 By Balance b/d 1,50,000 1,80,000 70,000
To Bank 2,79,800 By General Reserve 56,000 28,000 56,000
To Balance c/d 2,28,000 2,19,000 By Joint life Policy 56,000 28,000 56,000
By Interest on Capital 4,200
By revaluation 6,000 3,000 6,000
By Diya & Riya capital 60,000
By Profit & loss 27,600
suspense A/c
2,68,000 2,39,000 2,79,800 2,68,000 2,39,000 2,79,800

Bank A/c
Particulars ` Particulars `
To Balance B/d 1,14,510 By Kiya’s Capital 2,79,800
To Bank 2,00,000 By Balance c/d 34,710
3,14,510 3,14,510

Balance Sheet as on 30th September, 2022

Particulars ` Assets `
Capitals: Land & Building 1,98,000
Diya 2,28,000 Furniture 67,500
Riya 2,19,000 Inventory 80,000
Trade payables 60,000 Trade Receivable 94,990
Bank 34,710
Profit & loss Suspense 31,800
(27,600+4,200)
5,07,000 5,07,000

Working Notes:

1. Goodwill valuation
2018-19 1,62,000
2019-20 1,99,000
2020-21 1,87,000
2021-22 1,96,000
Total 7,44,000

Partnership and LLP Accounts 143

 CAFC ACCOUNTING
Average = 7,44,000/4 = 1,86,000
Less: Interest on Capital = 3,00,000 X 12% = 36,000
Adjusted Average Profit = 1,50,000
Goodwill (1 year’s purchase) = 1,50,000
Kiya’s share (2/5) = 60,000

2. Journal entry for adjustment of goodwill

Particulars ` `
Diya’s Capital A/c Dr. 40,000
Riya’s Capital A/c Dr. 20,000
To Kiya’s Capital A/c 60,000
(Share of goodwill adjusted)

3. Kiya’s share of profit till the date of death

Average profit for full year before interest on capital = 1,86,000
6 month’s profit = 93,000
Less: interest on capital 4,00,000 X 12% X 6/12 = 24,000
Adjusted profit till the date of death = 69,000
Kiya’s share 2/5th = 27,600

4. The Joint life policy in this question is based on the surrender value method- where in the
amount shown in the balance sheet shall be deducted from the JLP proceeds received from
insurance co, on the death of a partner.
` 2,00,000- 60,000 (Balance Sheet value)
= ` 1,40,000 (divided in profit sharing ratio between the partners.)

Partnership and LLP Accounts 144

 CAFC ACCOUNTING

12 DISSOLUTION OF
PARTNERSHIP FIRM & LLP

HOMEWORK SOLUTION
Q.8
Dr. Realisation Account Cr.
Particulars ` ` Particulars ` `
To Sundry Assets: By Sundry Liabilities:
Goodwill 40,000 Sundry Creditors 12,400
Freehold prop. 8,000 By R.D.D. 100
Plant & Equip. 12,800 By Q A/c:
Motor vehicle 700 Motor vehicle 500
Stock 3,900 By Bank A/c:
Debtors 2,000 67,400 Freehold prop. 7,000
To Bank A/c: Plant & Equip. 5,000
Creditors 11,700 Stock 3,000
Diss Expenses 1,500 13,200 Debtors 1,600 16,600
By Partner’s Capital:
P 25,500
Q 17,000
R 8,500 51,000
80,600 80,600

Dr. Partner’s Capital Accounts Cr.

Particulars P Q R Particulars P Q R
To Current A/c 5,500 - 2,400 By Balance b/d 20,000 20,000 10,000
To Realisation 25,500 17,000 8,500 By Current A/c - 5,000 -
(Loss) By Cash/Bank 25,500 17,000 -
To Realisation - 500 - By P & Q capital - - 600
(Motor vehi.) By Cash/Bank - - 300
To R’s Cap. A/c 300 300 -
To Bank A/c 14,200 24,200 -
45,500 42,000 10,900 45,500 42,000 10,900

Dissolution of
Partnership Firm & LLP
145
 CAFC ACCOUNTING

Dr. Cash / Bank Account Cr.

Particulars ` Particulars `
To Balance b/d 200 By Realisation A/c 13,200
To Realisation A/c 16,600 By P’s Loan A/c 8,000
To P’s Capital A/c 25,500 By P’s Capital A/c 14,200
To Q’s Capital A/c 17,000 By Q’s Capital A/c 24,200
To R’s Capital A/c 300
59,600 59,600

P Q R
Current A/c balance 500 9,000 (400)
Profit / Loss (Dr.) (3 : 2 : 1) (6,000) (4,000) (2,000)
Net (Dr.) /Cr. balance (5,500) 5,000 (2,400)

WN: Insolvency of R
Step 1: Solvent partners should bring their share of realization loss
Cash / Bank A/c Dr. 42,500
To P’s Capital A/c 25,500
To Q’s Capital A/c 17,000

Step 2: Capital Ratio of Solvent Partners (Fixed Capital Ratio)

P Q
Capital Balance 20,000 20,000
Capital Ratio 1 : 1

Step 3: Insolvency loss of R = 900 – (Dr. – Cr.)

1/3rd 2/3rd
300 600

P 1:1 Q
300 300
Cash / Bank A/c Dr. 300
P’s Capital A/c Dr. 300
Q’s Capital A/c Dr. 300
To R’s Capital A/c 900

Dissolution of
Partnership Firm & LLP
146
 CAFC ACCOUNTING
Q.9 Realization A/c
To L & B 90,000 By RDD 4,000
To P & M 30,000 By Loan from D 80,000
To Furniture 17,000 By Creditors 20,000
To Investment 10,000 By Bills Payable 8,000
By O/S salary 5,000
To Book Debts 40,000 By R’s Capital (furniture) 8,100
To Stock 24,000 By Bank A/c
To Bank (Expense) 10,000 Stock 28,800
To P’s Capital (Expense) 2,000 L&B 1,10,000
To Bank A/c. Debtors 32,000 1,70,800
Bills payable 7,960
D’s Loan 41,000 By P’s Capital (investment) 8,500
Creditors 12,000
O/s Salary 5,000 65,960
To Profit trf. to
P’s Cap. A/c 6,176
Q’s Cap. A/c 6,176
R’s Cap. A/c 3,088 15,440
3,04,400 3,04,400

Bank A/c
To Balance b/d 9,000 By Realization A/c 10,000
To Realization A/c 1,70,800 By Realization A/c 65,960
To R’s Capital 8,412 By P’s Capital 52,876
By Q’s Capital 59,376
1,88,212 1,88,212

Partners Capital A/c

P Q R P Q R
To Bal. b/d - - 20,000 By Bal. b/d 40,000 40,000 -
To Def. Advt. 3,200 3,200 1,600 By R’s Loan 10,000
Exp. w/off By Gen. Reserve 16,400 16,400 8,200
To Realization 8,500 - - By Realization 2,000 - -
To Realization - - 8,100 By Realization 6,176 6,176 3,088
To Bank A/c. 52,876 59,376 - By Bank A/c. - - 8,412
64,576 62,576 29,700 64,576 62,576 29,700

Dissolution of
Partnership Firm & LLP
147
 CAFC ACCOUNTING
WN1: Payment to B/P
Bills Payable = 8,000
(-) Discount (40)
[8,000 x 6% x 1/12]
Amt. paid in cash 7,960

WN2: D’s Loan

D’s Loan 80,000
50% P & M 30,000
Cash 5,000

50% 40,000 – Discount of 10%

= 36,000
Total cash paid = 5,000 + 36,000 = 41,000

WN3: Payment to Crs.

Creditors 20,000
(-) Furniture (7,200)
12,800
(-) Discount @ 6.25% (800)
Amt. paid in Cash 12,000

WN4: Furniture value T/O by R

Furniture 17,000
(-) Book Value (8,000)
(Accepted by crs.)
9,000
(-) 10% of Book Value (900)
Value of Furniture taken over by R 8,100

Dissolution of
Partnership Firm & LLP
148
 CAFC ACCOUNTING
Q.10 Realization A/c
To Land & Building 2,46,000 By Sundry Creditors 36,000
To Furniture & Fixture 65,000 By Mortgage Loan 1,10,000
To Stock 1,00,000 By Cash A/c
To Debtors 72,500 Land & Building 2,30,000
To Cash A/c Furniture & Fixtures 42,000

Expenses 7,800 Stock 72,000

Creditors 54,000 Debtors 65,000 4,09,000
Mortgage 1,10,000 1,71,800 By Partners Capital A/c
P 40,120
Q 30,090
R 20,060
S 10,030 1,00,300
6,55,300 6,55,300

Cash A/c
To Balance b/d 15,500 By Realization A/c 1,71,800
To Realization A/c 4,09,000 By P’s Capital A/c 2,03,364
To P’ s capital A/c 40,120 By Q’s Capital A/c 1,35,576
To Q’ s capital A/c 30,090
To S’ s capital A/c 10,030
To S’s capital A/c 6,000
5,10,740 5,10,740

Partners Capital A/c

Particulars P Q R S Particulars P Q R S

To Bal.b/d - - 25,000 18,000 By Bal.b/d 1,68,000 1,08,00 - -

To Realiz - 40,120 30,090 20,060 10,030 By Gen. 38,000 28,500 19,000 9,500

ation Res.

To R’s cap. 12,636 8,424 - - By Capital 10,000 7,500 5,000 2,500

Res.

To Cash 2,03,364 1,35,576 - - By Cash 40,120 30,090 - 10,030

By P’s cap. - - 12,636 -

By Q’s cap. - - 8,424 -

By Cash - - - 6,000

2,56,120 1,74,090 45,060 28,030 2,56,120 1,74,090 45,060 28,030

Dissolution of
Partnership Firm & LLP
149
 CAFC ACCOUNTING
WN1: Capital Ratio of Solvent partners
P Q R
Capital Balance 1,68,000 1,08,000 (18,000)
(+) General Reserve 3,80,000 28,500 9,500
(-) Capital Resreve 10,000 7,500 2,500
Adjusted capital 2,16,000 1,44,000 (6,000)

Capital Ratio = 2,16,000 : 1,44,000 = 3:2 Solvent Partner having

Dr. balance will not
share insolvency loss
WN2:
Deficiency of R = 25,000 + 20,060 – 19,000 - 5,000 = Rs. 21,060
Deficiency of R will be shared by P & Q in the capital Ratio of 3:2
P = 21,060 x 3/5 = Rs. 12,636
Q = 21,060 x 2/5 = Rs. 8,424

Q.11
Cash & Bank Account
` `

To Balance b/d 240 By Realisation A/c Creditors 14,040

To Realisation A/c- 19,920 By Realisation A/c Expenses 1,800
To Capital Accounts: By G’s Loan A/c 9,600
G 27,200 By G’s Capital A/c 16,280
S 20,400 By S’s Capital A/c 28,680
J 2,640 52,240
70,400 70,400

Realisation Account
` `
To Goodwill 48,000 By Trade Creditors 14,880
To Land 9,600 By Provision for Bad Debts 120
To Plant and Machinery 15,360 By Bank:
To Motor Car 840 Land 8,400
To Stock 4,680 Plant and
To Sundry Debtors 2,400 Machinery 6,000
To Bank (Creditors) 14,040 Stock 3,600

Dissolution of
Partnership Firm & LLP
150
 CAFC ACCOUNTING
To Bank (Expenses) 1,800 Debtors 1,920 19,920
By G (Car) 600
By Capital Accounts:
(Loss)
G 27,200
S 20,400
J 13,600 61,200
96,720 96,720

Partners’ Fixed Capital Accounts

G S J G S J
` ` ` ` ` `
To Current A/c - - 480 By Balance b/d 24,000 24,000 12,000
To profit & loss A/c 6,400 4,800 3,200 By Current A/c
To Realisation A/c 27,200 20,400 13,600 (Transfer) 600 10,800 -
(Loss) By Bank 2,640
To Realisation A/c 600 - - By Bank 27,200 20,400 -
(Car) (realisation loss)
To J's Capital A/c By G & S
(Deficiency) 1,320 1,320 (Deficiency) - - 2,640
To Bank 16,280 16,280
51,800 55,200 17,280 51,800 55,200 17,280

Note:
1. G, S and J will bring cash to make good their share of the loss on realization.
2. As per Garner Vs. Murray rule, solvent partners- G and S have to bear the loss
due to insolvency of a partner J in their fixed capital ratio 1:1
Insolvency Loss of J
Total Debit 17,280
(-) Total Credit (12,000)
Amount Receivable 5,280
(-) Half Received (2,640)
Insolvency Loss 2,640

1 :1
G S
1,320 1,320

Dissolution of
Partnership Firm & LLP
151
 CAFC ACCOUNTING
Q.12 (a) Realization Account
Particulars ` Particulars `
To Building 1,90,000 By Trade creditors 80,000
To Inventory 1,30,000 By Bills payable 30,000
To Investment 50,000 By Cash
To Trade Debtors 70,000 Building 2,09,000
To Cash - Trade creditors Inventory 1,20,000
paid (W.N.1) 60,300
To Cash-expenses 8,060 Investments (W.N.2) 40,000
To Cash-bills payable 29,500 Trade Debtors (W.N.3) 56,700 4,25,700
(30,000-500) By Sanjay’s Capital A/c
To Partners’ Capital A/cs (Trade Debtor sunrecorded) 7,000
Ajay 6,160 By Sanjay’s Capital A/c 11,000
Vijay 6,160 (Investments unrecorded)
Sanjay 3,520 15,840
5,53,700 5,53,700

Cash and Bank Account

Particulars Amount ` Particulars Amount `
To Balance b/d 26,000 By Realization A/c- 60,300
Trade creditors paid
To Realization A/c– By Realization A/c- 29,500
(Assets realized) bills payable
Building 2,09,000 By Realization A/c- expenses 8,060
Inventory 1,20,000 By Capital accounts:
Investments (W.N.2) 40,000 Ajay 1,80,420
Trade Debtors (W.N.3) 56,700 4,25,700 Vijay 1,80,420
To Sanjay’s capital A/c 7,000
4,58,700 4,58,700

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Partners’ Capital Accounts
Particulars Ajay Vijay Sanjay Particulars Ajay Vijay Sanjay
` ` ` ` ` `
To Balance b/d 40,000 By Balance b/d 1,80,000 1,80,000 -
To Trade Debtors- 7,000 By General reserve 14,000 14,000 8,000
misappropriation
To Investment- 11,000 By Realization profit 6,160 6,160 3,520
misappropriation
To Sanjay’s capital A/c 19,740 19,740 By Cash A/c 7,000
(W.N. 4)
To Cash A/c 1,80,420 1,80,420 By Ajay’s capital A/c 19,740
By Vijay’s capital A/c 19,740
2,00,160 2,00,160 58,000 2,00,160 2,00,160 58,000

Working Notes:
1. Amount paid to Trade creditors
`
Book value 80,000
Less: Creditors taking over investments (13,000)
67,000
Less: Discount @ 10% (6,700)
60,300

2. Amount received from sale of investments

`
Book value 50,000
Less: Misappropriated by Sanjay (8,000)
42,000
Less: Taken over by a trade creditor (9,000)
33,000
Add: Profit on sale of investments 7,000
40,000

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3. Amount received from Trade debtors
`
Book value 70,000
Less: Unrecorded receipt (7,000)
63,000
Less: Discount @ 10% (6,300)
56,700

4. Deficiency of Sanjay
`
Balance of capital as on 31st March, 2021 40,000
Debtors-misappropriation 7,000
Investment-misappropriation 11,000
58,000
Less: Realization Profit (3,520)
General reserve (8,000)
Contribution from private assets (7,000)
Net deficiency of capital 39,480

This deficiency of ` 39,480 in Sanjay’s capital account will be shared by other partners
Ajay and Vijay in their capital ratio of 1:1
Accordingly,
Ajay’s share of deficiency = [39,480/2] = ` 19,740
Vijay’s share of deficiency = [39,480/2] = ` 19,740

(b) Nature of Limited Liability Partnership:

A limited liability partnership is a body corporate formed and incorporated under
the LLP Act, 2008 and is a legal entity separate from that of its partners. A limited
liability partnership shall have perpetual succession and any change in the partners
of a limited liability partnership shall not affect the existence, rights, or liabilities
of the limited liability partnership.

Designated partners:
Every limited liability partnership shall have at least two designated partners who
are individuals and at least one of them shall be a resident in India. In case of a
limited liability partnership in which all the partners are bodies corporate or in which

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one or more partners are individuals and bodies corporate, at least two individuals
who are partners of such limited liability partnership or nominees of such bodies
corporate shall act as designated partners.

Liabilities of Designated partners:

As per the LLP Act, unless expressly provided otherwise in this Act, a designated
partner should be-
(a) responsible for the doing of all acts, matters, and things as are required to
be done by the limited liability partnership in respect of compliance of the
provisions of this Act including filing of any document, return, statement, and
the like report pursuant to the provisions of this Act and as may be specified in
the limited liability partnership agreement; and.
(b) Liable to all penalties imposed on the limited liability partnership for any
contravention of those provisions.

Q.13 Realisation Account

Particulars ` Particulars `
To Building 3,80,000 By Trade creditors 1,60,000
To Stock 2,60,000 By Bills payable 60,000
To Investment 1,00,000 By Cash
To Debtors 1,40,000 Building 4,18,000
To Cash-creditors paid (W.N.1) 1,27,300 Stock 2,40,000
To Cash-expenses 16,000 Investments (W.N.2) 80,000
To Cash-bills payable 59,000 Debtors (W.N. 3) 1,13,400
(60,000-1,000) 8,51,400
To Partners’ Capital A/cs By R – (Receipt from 14,000

Debtors unrecorded)
P 8,366 By R - Receipt from 22,000
Q 8,366 Investments unrecorded
R 5,578
S 2,790 25,100
11,07,400 11,07,400

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Cash Account
Particulars Amount ` Particulars Amount `
To Balance b/d 60,000 By Realisation-creditors paid 1,27,300
To Realisation – assets realised By Realisation-bills payable 59,000
Building 4,18,000 By Realisation-expenses 16,000
Stock 2,40,000 By Capital accounts:
Investments 80,000 P 3,02,264
Debtors 1,13,400 8,51,400 Q 3,02,264
To R’s capital A/c 14,000 S 1,18,572
9,25,400 9,25,400

Partners’ Capital Accounts

Particulars P` Q` R` S` Particulars P` Q` R` S`
To R’s current A/c 80,000 By Balance b/d 3,00,000 3,00,000 - 1,20,000

To Realisation 14,000 By General 26,666 26,666 17,778 8,890

A/c-Debtors reserve
misappropriation
To Realisation 22,000 By Realisation 8,366 8,366 5,578 2,790
A/c-Investment profit
misappropriation
To R’s capital A/c 32,768 32,768 13,108 By Cash A/c 14,000
(W.N. 4)
To Cash A/c 3,02,264 3,02,264 1,18,572 By P’s capital 32,768
A/c
By Q’s capital 32,768
A/c
By S’s capital 13,108
A/c
3,35,032 3,35,032 1,16,000 1,31,680 3,35,032 3,35,032 1,16,000 1,31,680

Working Notes:
1. Amount paid to creditors in cash
`
Book value 1,60,000
Less: Creditors taking over investments (26,000)
1,34,000
Less: Discount @ 5% (6,700)
1,27,300

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2. Amount received from sale of investments
`
Book value 1,00,000
Less: Misappropriated by R (16,000)
84,000
Less: Taken over by a creditor (18,000)
66,000
Add: Profit on sale of investments 14,000
Cash received from sale of remaining investment 80,000

3. Amount received from debtors

`
Book value 1,40,000
Less: Unrecorded receipt (14,000)
1,26,000
Less: Discount @ 10% (12,600)
1,13,400

4. Deficiency of R
`
Balance of capital as on 31st March, 2023 80,000
Debtors-misappropriation 14,000
Investment-misappropriation 22,000
1,16,000
Less: Realisation Profit (5,578)
General reserve (17,778)
Contribution from private assets (14,000)
Net deficiency of capital 78,644

This deficiency of ` 78,644 in R’s capital account will be shared by other partners
P, Q and S in their capital ratio of 15 : 15 : 6.
Accordingly,
P’s share of deficiency = [78,644 x (15/36)] = ` 32,768
Q’s share of deficiency = [78,644 x (15/36)] = ` 32,768
S’s share of deficiency = [78,644 x (6/36)] = ` 13,108

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Q.14 Realization account
Particulars ` Particulars `

To Plant and Machinery 6,00,000 By Trade creditors 2,35,000

To Stock 4,27,500 By Bills payable 1,00,000

To Investment 1,45,000 By Cash

To Debtors 2,10,000 Plant and machinery 6,30,000

To Cash-creditors paid (W.N.1) 2,04,330 Stock (W.N.4) 3,87,500

To Cash-expenses 15,900 Investments (W.N.2) 1,05,600

To Cash-bills payable 98,000 Debtors (W.N.3) 1,58,400 12,81,500

(1,00,000-2,000)

To Q’s capital account 1,75,000 By Mrs. Q’s Loan account 1,75,000

To Partners’ Capital A/cs: By Debtors-unrecorded 30,000

P 885 By Investment sunrecorded 56,000

Q 531

R 354 1,770

18,77,500 18,77,500

Cash Account
Particulars Amount ` Particulars Amount `
To Balance b/d 72,500 By Realization A/c 2,04,330
creditors paid
To Realization A/c– By Realization A/c 98,000
assets realized bills payable
Plant and machinery 6,30,000 By Realization A/c 15,900
expenses
Stock 3,87,500 By Capital accounts:
Investments (W.N.2) 1,05,600 P 4,51,157
Debtors (W.N.3) 1,58,400 Q 6,04,613 10,55,770
To R’s capital A/c 20,000
13,74,000 13,74,000

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Partners’ Capital Accounts
Particulars P` Q` R` Particulars P` Q` R`
To Balance b/d 75,000 By Balance b/d 4,50,000 4,50,000 -
To Debtors 30,000 By General 60,000 36,000 24,000
misappropriation reserve
To Investment 56,000 By Mrs. Q loan 1,75,000
misappropriation
To R’s capital A/c 59,728 56,918 By Realization 885 531 354
(W.N. 5) A/c (profit)
To Cash A/c 4,51,157 6,04,613 By Cash A/c 20,000
By P’s capital A/c 59,728
By Q’s capital A/c 56,918
5,10,885 6,61,531 1,61,000 5,10,885 6,61,531 1,61,000

Working Notes:
1. Amount paid to creditors
`
Book value 2,35,000
Less: Creditors taking over Stock (26,500)
2,08,500
Less: Discount @ 2% (4,170)
2,04,330

2. Amount received from sale of investments

`
Book value 1,45,000
Less: Misappropriated by R (45,000)
1,00,000
Add: Profit on sale of investments 5,600
1,05,600

3. Amount received from debtors

`
Book value 2,10,000
Less: Unrecorded receipt (30,000)
1,80,000
Less: Discount @ 12% (21,600)
1,58,400

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4. Amount received from sale of stock
`
Book value 4,27,500
Less: Taken by creditors (25,000)
4,02,500
Less: Loss on stock (15,000)
3,87,500

5. Deficiency of R
`
Balance of capital as on 31st March, 2022 75,000
Debtors-misappropriation 30,000
Investment-misappropriation 56,000
1,61,000
Less: Realization profit (354)
General reserve (24,000)
Contribution from private assets (20,000)
Net deficiency of capital 1,16,646
The deficiency of ` 1,16,646 in R’s capital account has been shared by other partners
P, Q in their capital ratio (after transfer of general reserve to capital accounts i.e.
5,10,000: 4,86,000).
Hence,
P’s share of deficiency = [1,16,646 x (510/996)] =` 59,728
and Q’s share of deficiency = [1,16,646 x (486/996)] = `56,918.

(b) An LLP may be wound up by the Tribunal in the following circumstances:

• If the LLP decides that it should be wound up by the Tribunal;
• If for a period of more than six months, the number of partners of the LLP
is reduced below two;
• If the LLP is unable to pay its debts;
• If the LLP has acted against the interests of the integrity and sovereignty
of India, the security of the state or public order;
• If the LLP has defaulted in the filing of the Statement of Account and
Solvency with the Registrar for five consecutive financial years;
• If the Tribunal is of the opinion that it is just and equitable that the LLP be
wound up.

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Q.15 (a) In the books of M/s Om
Cash Account (Bank Column)
` `
To Balance b/d 75,000 By Realisation A/c-
To Realization A/c 12,46,600 (Payment of sundry liabilities) 5,75,000
(Realization of Sundry assets) By Partners’ Capital A/cs:
A 2,42,600
B 3,42,600
C 1,61,400 7,46,600
13,21,600 13,21,600

Realization Account
To Land 50,000 By Current Liabilities 70,000
To Building 2,50,000 By Loan from NBFC 5,00,000
To Office equipment 1,25,000 By Cash A/c:
To Computers 70,000 Land 1,00,000
To Debtors 4,00,000 Building 3,00,000
To Stocks 3,00,000 Office Equip. 1,25,000
To Other Current Assets 22,600 Computers 49,000
To Cash A/c: Debtors 3,80,000
Current liabilities 70,000 Stocks 2,70,000
Loan from NBFC 5,05,000 5,75,000 Other Current Assets 22,600 12,46,600
To Partners’ Current A/cs:
Profit on realisation:
A 9,600
B 9,600
C 2,400
D 2,400 24,000
18,16,600 18,16,600

Partners’ Capital Accounts

A B C D A B C D
` ` ` ` ` ` ` `

To Partners’ – – – 85,000 By Balance 2,00,000 2,00,000 1,00,000 –

Current A/cs b/d
Transfer
To D A/c – – 42,500 – By Partners’ 59,600 1,59,600 1,12,400 –
50% of Current A/
deficiency cs transfer
To D A/c - 17,000 17,000 8,500 – By C A/c – – – 42,500
balance – 50% of
of deficiency deficiency
borne in
capital ratio
of other

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partners By A A/c - - - 17,000
(2:2:1)
To Cash 2,42,600 3,42,600 1,61,400 – By B A/c – – – 17,000
A/c - final
Settlement By C A/c – – – 8,500

2,59,600 3,59,600 2,12,400 85,000 2,59,600 3,59,600 2,12,400 85,000

Partners’ Current Accounts

A B C D A B C D

` ` ` ` ` ` ` `

To Balance – – – 87,400 By Balance 50,000 1,50,000 1,10,000 –

b/d b/d
To Partners’ 59,600 1,59,600 1,12,400 – By 9,600 9,600 2,400 2,400
Realisation
A/c
Capital A/cs By Partners’
(transfer) Capital A/ – – – 85,000
cs (transfer)
59,600 1,59,600 1,12,400 87,400 59,600 1,59,600 1,12,400 87,400

(b) A limited liability partnership is a body corporate formed and incorporated under
the LLP Act, 2008 and is a legal entity separate from that of its partners. A limited
liability partnership shall have perpetual succession and any change in the partners
of a limited liability partnership shall not affect the existence, rights, or liabilities of
the limited liability partnership.
Under the LLP Act, 2008 an LLP may be wound up voluntarily or by the Tribunal and
such LLP so wound up may be dissolved. LLP may be wound up by the Tribunal in
the following circumstances:
• If the LLP decides that it should be wound up by the Tribunal;
• If for a period of more than six months, the number of partners of the LLP is
reduced below two;
• If the LLP is unable to pay its debts;
• If the LLP has acted against the interests of the integrity and sovereignty of
India, the security of the state or public order;
• If the LLP has defaulted in the filing of the Statement of Account and Solvency
with the Registrar for five consecutive financial years;
• If the Tribunal is of the opinion that it is just and equitable that the LLP be
wound up.

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13
PIECE MEAL DISTRIBUTION

HOMEWORK SOLUTION

Q.6
STATEMENT OF EXCESS CAPITAL
Steps Particulars Formula Uma Maya Kama
1. Profit Sharing Ratio (PSR) 3 2 1
2. Capital Balances 6,24,000 6,76,000 4,68,000
Add : Reserve 1,56,000 1,04,000 52,000
Adjusted Capitals 7,80,000 7,80,000 5,20,000
3. Unit capital (UC) 2,60,000 3,90,000 5,20,000
4. Base Capital (BC) = Lowest Unit

Capital

= `2,60,000
5. Proportionate Capital = BC x PSR [4 x 1] 7,80,000 5,20,000 2,60,000
6. Excess Capital of Maya and [2-5] - 2,60,000 2,60,000

Kama
7. Profit Sharing Ratio - 2 1
8. New Unit Capital [6/7] - 1,30,000 2,60,000
9. New Base Capital `1,30,000
10. New Proportionate Capita = New Base 2,60,000 1,30,000

Capital x PSR
11. Final Excess Capital of Kama = 6 - 10 1,30,000

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 CAFC ACCOUNTING
STATEMENT OF DISTRIBUTION
Particulars Cash Creditors Uma Maya Kama
Opening Balances 52,000 2,08,000 7,80,000 7,80,000 5,20,000
Less: Remuneration of Uma 26,000
Less: Creditors 26,000 26,000
Balance - 1,82,000
1st Realisation 2,34,000
Less: Creditors 1,82,000 1,82,000
Less: Kama’s Capital 52,000 52,000
- - 7,80,000 7,80,000 4,68,000
2nd Realisation 6,29,200
Less: Kama’s Capital 78,000 78,000
Less: M and K is 2:1 3,90,000 2,60,000 1,30,000
Less: Balance in PSR 1,61,200 80,600 53,733 26,867
- 6,99,400 4,66,267 4,33,133
3rd Realisation 5,92,800
Add: Stock by Kama 26,000
6,18,800
Less: Balance in PSR 6,18,800 3,09,400 2,06,267 1,03,133
Unpaid Balances 3,09,000 2,60,000 1,30,000

Q.7
STATEMENT OF EXCESS CAPITAL
Steps Particulars Formula A (`) B (`) C (`)
1. Profit Sharing Ratio (PSR) 2 1 1
2. Capital Balances 50,000 40,000 23,000
Add: General Reserve 5,000 2,500 2,500
Adjusted Capitals 55,000 42,500 25,500
3. Unit capital (UC) (2/1) 27,500 42,500 25,500
4. Base Capital (BC) = [Lowest UC]
`25,500
5. Proportionate Capital (PC) = BC x PSR (4 x 1) 51,000 25,500 25,500
6. Excess Capital of A & B (2-5) 4,000 17,000 25,500
7. Profit Sharing Ratio of A & B 2 1
8. New Unit Capital (6/7) 2,000 17,000

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 CAFC ACCOUNTING

9. New Base Capital = `2,000 [Lower

New Unit Capital]
10. New Proportionate Capital = New Base 4,000 2,000
Capital x PSR
(9 x 7) [II]
11. Final Excess Capital of B (6 - 10) [I] - 15,000

ORDER OF PAYMENTS
A. Liabilities:
1. First pay to Sundry Creditors (settlement amount) `4,000
2. Next Pay A’s Loan `15,000

B. Partners’ Capitals:
[I] First Pay to B `15,000
[II] Next Pay to A & B `6,000 (2:1)
[III] Balance Pay in PSR

STATEMENT OF DISTRIBUTION
A. Liabilities Cash (`) Creditors (`) A’s Loan (`)
Balance Due .... .... ..... 4,000 15,000
Cash Balance b/d .... .... ..... 3,000
Less: Paid to Creditors .... .... ..... 3,000 3,000 -
Balance Due .... .... ..... - 1,000 15,000
June Realisation .... .... ..... 5,000
Less: Paid to Creditors .... .... ..... 1,000 1,000 -
Balance Due .... .... ..... 4,000 - 15,000
Less: Paid to A against loan .... .... ..... 4,000 4,000
Balance Due - 11,000
July Realisation .... .... ..... 25,000
(15,000 + 10,000)
Less: Paid to A against loan 11,000 11,000
Balance c/d for payment of .... .... .....
Partner’s Capital 14,000 -

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 CAFC ACCOUNTING

B. Partners’ Capitals Cash A B C

Adjusted Capitals .... .... ..... 55,000 42,500 25,500
Cash Balance b/d .... .... ..... 14,000
Less: Paid to B [I] .... .... ..... 14,000 - 14,000 -
Balance Due .... .... ..... - 55,000 28,500 25,500
August Realisation .... .... .....
(20,000 + 25,000) 45,000
Less: Paid to B [I] .... .... ..... 1,000 - 1,000 -
Balance .... .... ..... 44,000 55,000 27,500 25,500
Less: Paid to A &B (2:1) [II] .... .... ..... 6,000 4,000 2,000 -
Balance .... .... ..... 38,000 51,000 25,500 25,500
Less: Paid to A, B & C in PSR .... .... ..... 38,000 19,000 9,500 9,500
Balance Due .... .... ..... - 32,000 16,000 16,000
September Realisation .... .... ..... 40,000
(17,000 + 23,000)
Add: Received from B for Stock .... .... ..... 3,000
.... .... ..... 43,000
Less: Paid to A, B & C in PSR .... .... ..... 43,000 21,500 10,750 10,750
Unpaid Balances .... .... ..... - 10,500 5,250 5,250

Working Notes:
1) Creditors are settled for `4,000. Hence, in the statement for distribution,
creditors are taken at `4,000 and not `5,000 as per Balance Sheet.

2) June realisation is after meeting in full the mortgage loan. Hence, repayment
of loan is not included in the statement of distribution.

3) B takes over stock for `3,000. This amount will be added to September realisation
and will be distributed among the partners (including B) and balance in cash.

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 CAFC ACCOUNTING
Q.8
Statement showing Distribution of Cash
(Maximum Loss Method)
Particulars Cash Creditors X Y Z
Balance 10,000 80,000 40,000 10,000 20,000
Jan.: Asset realised 30,000
Less: prov. for exp. 2,000
38,000
Paid to creditors 38,000 38,000
Balance NIL 42,000 40,000 10,000 20,000
Feb.: Bank 10,000
Assets realised 75,000
85,000
Paid to creditors 42,000
43,000 NIL 40,000 10,000 20,000
Maximum loss
(70000 – 43000) = 27000 (9,000) (9,000) (9,000)
Paid to X, Y and Z 43,000 31,000 1,000 11,000
March: Bal. NIL 9,000 9,000 9,000
Bank 10,000
Asset realisation 44,000
Excess prov. 600
54,600
Profit on realisation
Paid to X, Y and Z 9,200 9,200 9,200
54,600 18,200 18,200 18,200

Q.9
In the books of Py Ra Mides Statement of Excess Capital
Particulars P (4) R (3) M (3)
Capital 80,000 60,000 48,000
Less: Current A/c - 8,000 NIL
Adjusted Capitals 80,000 52,000 48,000
M’s Capital being lowest 64,000 48,000 48,000
taken as base (Note 1)
Excess Capital 16,000 4,000 NIL

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R’s Capital being lowest 5,333 4,000

taken as base (Note 2)
Ultimate Excess Capital 10,667 NIL
Note 1: 80,000 52,000 48,000
= 20,000 = 17,333.33 = 16,000
Capital per unit of profit 4 3 3

Note 2: 16,000 4,000

= 4,000 = 1,333.33
Capital per unit of profit 4 3

Statement of Piecemeal Distribution of Cash

(Highest Relative Capital)
P’s R’s
Date Particulars Cash Crs. M’s Cap.
Cap. Cap.
2003 ` ` ` ` `
Mar. 31 Balances 6,000 74,000 80,000 52,000 48,000
Less: Minimum Balance -4,000
Less: Paid Creditors -2,000 -2,000
Balances - 72,000 80,000 52,000 48,000
Apr. 30 Realisation 69,000
(30,000 + 40,000 - 10,000)
Less: Paid Creditors -69,000
Balance - 3,000 80,000 52,000 48,000
May 31 Realisation (20,000 + 48,000) 68,000
Add: Cash not required +2,000
70,000
Less: Paid Creditors -3,000 -3,000
Less: Paid P -10,667 -10,667
Less: Paid P and R - 9,333 -5,333 -4,000
Less: Paid P,R, and M - 47,000 - 18,800 - 14,100 - 14,100
Balance - - 31,280 23,460 23,460
June 30 Realisation (36,000 + 60,000) 34,800
Less: Paid P, R and M - 34,800 - 13,920 - 10,440 -10,440
Balance - - 31,280 23,460 23,460
July 31 Realisation (20,000 + 60,000) 80,000
(Final)
Add: Cash not required + 2,000
82,000
Less: Paid P, R and M -82,000 -32,800 -24,600 -24,600
Realisation profit - - 1,520 1,140 1,140

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 CAFC ACCOUNTING
Q.10
In the Books of J and K
Statement of Piecemeal Distribution of Cash
(Maximum Loss Method)
Amount Total
Date Particulars Bank Loan Creditors J’s Cap. K’s Cap.
Available Liabilities
2002
Mar. 31 Balances - 4,00,000 1,00,000 1,00,000 1,00,000 1,00,000
Apr. 30 Realisation
(Other assets) 1,00,000
Less: Paid Bank
Loan & Creditors
in 1:1 -1,00,000 -1,00,000 -50,000 -50,000
Balance - 3,00,000 50,000 50,000 1,00,000 1,00,000
May 31 Realisation
(stock) 40,000
Less: Paid Bank
Loan -40,000 -40,000 -40,000
Balance - 2,60,000 10,000 50,000 1,00,000 1,00,000
June 30 Realisation
(other assets) 30,000
Less: Paid Bank
Loan and credi-
tors in 1:5 -30,000 -30,000 -5,000 -25,000
Balance - 2,30,000 5,000 25,000 1,00,000 1,00,000
July 31 Realisation
(Final) (other assets) 1,20,000
Less: Paid Bank
loan and Cred-
itors -30,000 -30,000 -5,000 -25,000
Less: Paid Bank
loan & Creditors 90,000 2,00,000 - - 1,00,000 1,00,000
Maximum loss
`1,10,000
Transferred in
PSR 1: 1 - 55,000 -55,000
Less:
Paid to J and K -90,000 -90,000 45,000 45,000
Realisation loss - 1,10,000 - - 55,000 55,000

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 CAFC ACCOUNTING
Q.11 (a)
Cash Creditors Capitals
Particulars
` ` P (`) Q (`) R (`)
Balance due after loan 16,000 52,000 43,500 32,000
January
Balance available 9,000
Realization less expenses and 10,000
cash retained
Amount available and paid 19,000 (16,000) - - (3,000)
Balance due - - 52,000 43,500 29,000
February
Opening Balance 6,000
Expenses paid and cash carried
forward 3,000
Available for distribution 3,000
Cash paid to Q and
Machinery given to R - 3,000 9,000
Balance due - 52,000 40,500 20,000
March
Opening Balance 2,000
Amount realized less expenses 87,300
Amount paid to partners 89,300 41,689 32,767 14,844
Loss 10,311 7,733 5,156

Working Note:
(i) Highest Relative Capital Basis
P (`) Q (`) R (`)
Scheme of payment for January 2021
Balance of Capital Accounts 65,000 50,500 32,000
Less: Loans (13,000) (7,000) -
(A) 52,000 43,500 32,000
Profit Sharing Ratio 4 3 2
Capital / Profit sharing Ratio 13,000 14,500 16,000
Capital in profit sharing ratio, taking P’s capital as base (B) 52,000 39,000 26,000
Excess of R’s capital and Q’s Capital (A – B) (i) 4,500 6,000
Profit Sharing Ratio 3 2
Capital / Profit sharing Ratio 1,500 3,000
Capital in profit sharing ratio, taking Q’s capital as base (ii) 4,500 3,000
Excess of R’s Capital over Q’s capital (i – ii) 3,000

Piece Meal Distribution 170

 CAFC ACCOUNTING
(ii) Scheme of distribution of available cash for March:
P (`) Q (`) R (`)
Balance of Capital Accounts at end of February (A) 52,000 40,500 20,000
Profit Sharing Ratio 4 3 2
Capital / Profit sharing Ratio 13,000 13,500 10,000
Capital in profit sharing ratio, taking R’s capital as 40,000 30,000 20,000
base (B) (i)
Excess of P’s Capital and Q’s Capital (A – B) (i) 12,000 10,500
Profit Sharing Ratio 4 3
Capital / Profit sharing Ratio 3,000 3,500
Capital in profit sharing ratio taking P’s capital as 12,000 9,000
base (ii)
Excess of Q’s Capital over P’s Capital (i – ii) - 1,500
Payment ` 1500 (C) (1,500)
Balance of Excess Capital (i –C) 12,000 9,000
Payment ` 21000 (D) (12,000) (9,000)
Balance due (A – C – D) 40,000 30,000 20,000
Balance cash Payment (` 89,300 – ` 22,500) (29,689) (22,267) (14,844)
=` 66,800 (E)
Total Payment (` 89,000) (C + D + E) (iii) 41,689 32,767 14,844
Loss (A – iii) 10,311 7,733 5,156

(b) Under section 27 (3) LLP Act, 2008, any obligation of the LLP arising out of a contract
or otherwise shall be the sole obligation of the LLP. The partners of an LLP in the
normal course of business are not liable for the debts of the LLP. The liabilities of
an LLP shall be met out of the assets / properties of the LLP. However, a partner
shall be liable for his own wrongful acts or commissions, but shall not be liable for
the wrongful acts or commissions of other partners of the LLP. Wrongful acts will
include acts of fraud and wilful omissions. Hence, the liability may fall only on that
partner, who is guilty of any wrongful acts or commissions in respect of debts or
liabilities acquired by such acts.

Piece Meal Distribution 171

 CAFC ACCOUNTING

14 COMPANY ACCOUNTS -
ISSUE OF SHARES

HOMEWORK SOLUTION

Q.14 Books of A Ltd.

Journal Entries
Sr.
Date Particular L.F. Debit Credit
No.
1 Bank A/c Dr. 2,40,000
To Equity shares application A/c 2,40,000
(Being equity shares application money
received)
2 Equity Shares Application Dr. 2,40,000
To Bank A/c 40,000
To Equity Share Capital A/c 2,00,000
(Being share application money received on
1,00,000 shares transferred to share capital)
3 Equity Shares Allotment A/c Dr. 4,00,000
To Equity Share Capital A/c 4,00,000
(Being allotment money due)
4 Bank A/c Dr. 4,00,000
To Equity Shares Allotment A/c 4,00,000
(Being allotment money received)
5 Equity Share First call A/c Dr. 3,00,000
To Equity Share Capital A/c
(Being First call money due)
6 Bank A/c Dr. 3,00,000
To Equity Share First call A/c 3,00,000
(Being First call money received)

Company Accounts -
Issue of Shares
172
 CAFC ACCOUNTING

7 Equity Second and Final Call A/c Dr. 1,00,000

To Equity Share Capital A/ 1,00,000
(Being final call money due)
8 Bank A/c Dr. 97,000
Calls in Arrears A/c Dr. 3,000
To Equity Second and Final Call A/c 1,00,000
(Being final call money received except
3,000 shares of Mr. Raju)
9 Equity Share Capital A/c Dr. 30,000
To Calls in Arrears A/c 3,000
To Share Forfeiture A/c 27,000
(Being 3,000 shares of Mr. Raju forfeited)
10 Bank A/c Dr. 21,000
Share Forfeiture A/c Dr. 9,000
To Equity Share Capital A/c 30,000
(Being 3,000 Shares reissued at 7)
11 Share Forfeiture A/c Dr. 18,000
To Capital Reserve A/c 18,000
(Being profit on reissued shares transferred
to Capital Reserve

Q.15 Books of X Ltd.

Journal Entries
Sr.
Date Particular L.F. Debit Credit
No.
1 Equity Share Capital A/c Dr. 24,000
To Calls in Arrears A/c 15,000
To Share Forfeiture A/c 9,000
(Being Shares of Mr. A forfeited on non-
payment of allotment and first call money)
2 Equity Share Capital A/c Dr. 20,000
To Calls in Arrears A/c 8,000
To Share Forfeiture A/c 12,000
(Being 2,000 shares of MR. B forfeited after
2nd call on non-payment of 1st and 2nd call
money)

Company Accounts -
Issue of Shares
173
 CAFC ACCOUNTING
3 Bank A/c Dr. 40,000
Share Forfeiture A/c Dr. 10,000
To Equity Share Capital A/c 50,000
(Being 5,000 equity shares reissued at `
8 per share and difference transferred to
share forfeited A/c)
4 Share Forfeiture A/c Dr. 11,000
To Capital Reserve A/c 11,000
(Being balance of shares forfeited transferred
to Capital Reserve)

Q.16 2000 Shares of `120

(Premium of `20)

Application Allotment Final Call

@ `40 @ `50 @ `30

1,00,000 60,000
Share Capital 80,000
79,800 55,500
Received 1,20,000
Excess 40,000 (A :100 shares
(1,00,000 – 16,000 B: 50 shares
– 4,200 = 79,800) 150 × 30 = 4500)
Calls in Arrears = 4,200 Calls in Arrears = 4500

MR A Applied Allotted
2,400 2,000
120 ? (100)

Amt received from A on application = 4,800

(120 × 40)
Transfer to share capital = (4,000)
(100 × 40)
Excess 800
Amt due from A on allotment 5,000
Excess (800)
Net Amt due from A on allotment 4,200

Company Accounts -
Issue of Shares
174
 CAFC ACCOUNTING
Books of Moon Wonderers Ltd.
Journal Entries
Sr.
Date Particular L.F. Debit Credit
No.
1 Bank A/c Dr. 1,20,000
To Equity Shares Application A/c 1,20,000
(Being application for 3000 shares received
at `40 each)
2 Equity Shares Application A/c Dr 1,20,000
To Equity Share Capital A/c 80,000
To Bank A/c 24,000
To Equity Shares Allotment A/c 16,000
(Being application money transferred to
Capital for 2000 shares and excess money
refunded and adjusted against share
allotment)
3 Equity Shares Allotment A/c Dr. 1,00,000
To Equity Share Capital A/c 60,000
To Securities Premium A/c 40,000
(Being allotment money due on 2000 shares
at ` 50 per share including premium of ` 20)
4 Bank A/c Dr. 79,800
Calls in Arrears A/c 4,200
To Equity Shares Allotment A/c 84,000
(Being allotment money received)
5 Equity share final call A/c Dr. 60,000
To Equity share capital A/c 60,000
(Being final call money due on 2000 shares
at ` 30 each)
6 Bank A/c Dr. 55,500
Call in Arrears A/c Dr. 4,500
To Equity Share Final call A/c 60,000
(Being final call money received except on
100 and 50 shares of A and B respectively)

Company Accounts -
Issue of Shares
175
 CAFC ACCOUNTING

7 Equity share capital A/c Dr. 10,000

(100 × 100)
Securities Premium A/c Dr. 2,000
To Call in Arrears A/c 7,200
To Share Forfeiture A/c 4,800
(Being 100 shares of A forfeited on non-
payment of allotment money and final call
money)
8 Equity share capital A/c Dr. 5,000
(100 × 50)
To Calls in Arrears A/c 1,500
To Share Forfeiture A/c 3,500
(Being 50 shares of Mr. B forfeited on non-
payment of final call money)
9 Bank A/c Dr. 9,000
(100 × 90)
Share Forfeiture A/c Dr. 1,000
(100 × 10)
To Equity share capital A/c 10,000
(Being 100 forfeited shares reissued at `90
per share)
10 Share Forfeiture A/c Dr 4,433
To Capital Reserve A/c 4,433
(Being profit on Shares reissued, transferred
to capital reserve)

Since it is not mentioned that which forfeited shares are reissued, we will have to take weighted
average method for amount to be transferred to capital reserve.
Amount of shares forfeited
Transfer to capital reserve = × shares reissued
Total number of shares forfeited

4,800 + 3,500
= × 100
150
= Rs. 5,533
Transfer to capital reserve
Less: Discount on reissue = Rs. 1,000
Transfer to capital reserve = Rs. 4,433

Company Accounts -
Issue of Shares
176
 CAFC ACCOUNTING
Q.17
(1) Bank A/c Dr. 54,000
To Share Application A/c 54,000
(2) Share application A/c Dr. 54,000
To Share Capital A/c 30,000
To Bank A/c 9,000
To Share allotment A/c 15,000
(3) Share allotment A/c Dr. 60000
To Shares capital A/c 10000
To securities premium A/c 50000
(4) Bank A/c Dr. 44820
Calls in arrears A/c Dr. 180
To Share allotment A/c 45000
(5) Share First call A/c Dr. 30000
To Shares capital A/c 30000
(6) Bank A/c Dr. 29520
Calls in arrears A/c Dr. 480
To share first call 30000
(7) Share capital A/c Dr. 280
Securities premium A/c Dr. 200
To shares forfeiture A/c 180
To shares forfeiture A/c 300
(8) Share final call A/c Dr. 29880
To share capital A/c 29880
(9) Bank A/c Dr. 29520
Calls in arrears A/c Dr. 360
To share final call A/c 29880
(10) Share Capital A/c Dr. 1200
To share forfeiture A/c 480
To calls in arrears A/c 720
(11) Bank A/c Dr. 720
Share forfeiture A/c Dr. 80
To share capital A/c 800
(12) Share forfeiture A/c Dr. 260
To capital Reserve A/c 260

Company Accounts -
Issue of Shares
177
 CAFC ACCOUNTING
Q.18
(1) Bank A/c Dr. 75000
To Share application A/c 75000
(2) Share application A/c Dr. 75000
To Share capital A/c 60000
To Bank A/c 3000
To Share allotment A/c 12000
(3) Share allotment A/c Dr. 1,40,000
To Share capital A/c 1,00,000
To Securities premium A/c 40000
(4) Bank A/c Dr. 126750
Calls in arrears A/c Dr. 1250
To Share capital A/c 128000
(5) Share first & final calls A/c Dr. 40000
To share capital A/c 40000
(6) Bank A/c Dr. 39400
Calls in arrears A/c 600
To Share first & final call A/c 40000
(7) Share capital A/c Dr. 2000
Securities premium A/c Dr. 400
To share forfeiture A/c 750
To calls in arrears A/c 1650
(8) Share capital A/c Dr. 1000
To share forfeiture A/c 800
To calls in arrears A/c 200
(9) Bank A/c Dr. 1800
Share forfeiture A/c 200
To Share Capital A/c 2000
(10) Share forfeiture A/c Dr. 720
To Capital res A/c 720

Company Accounts -
Issue of Shares
178
 CAFC ACCOUNTING

15 COMPANY ACCOUNTS -
ISSUE OF DEBENTURES

HOMEWORK SOLUTION

Q.11
In the books of Fortune Limited
Journal Entries
Sr. Date Particulars L. Debit (`) Credit (`)
No F.
1 Bank A/c Dr. 73,500
To 12% Debenture Application A/c 73,500
(Being application received for 700
12% debentures of Rs. 100 each issued
at 5% premium)
2 12% debenture application A/c Dr. 73,500
Loss on issue of debentures A/c Dr. 7,000
To 12% Debentures A/c 70,000
To Securities Premium A/c 3,500
To Premium on redemption A/c 7,000
(Being debentures issued at 5% premium
redeeemable at a premium of 10%)

Company Accounts -
Issue of Debentures
179
 CAFC ACCOUNTING
Fortune Limited
Balance Sheet

Particulars ` `
EQUITY & LIABILITIES
Share Capital NIL
Reserves & Surplus
Securities Premium 3,500
Less : Loss on issue of debentures 7,000
-3,500
Non Current Liabilities
12% Debentures 70,000
Premium on redemption of debentures 7,000
77,000
TOTAL 73,500
ASSETS
Current Assets
Balance with Bank 73,500
TOTAL 73,500

Company Accounts -
Issue of Debentures
180
 CAFC ACCOUNTING
Q.12
In the books of X Company Limited
Journal Entries

Sr. No Date Particulars L.F. Debit (`) Credit (`)

(a) i Bank A/c Dr. 22,50,000
To Debenture Application A/c 22,50,000
(Being application received for 5,000
debentures @ ` 450 each)
ii Debenture Application A/c Dr. 22,50,000
Discount on issue of Debenture A/c Dr. 2,50,000
To 14% Debentures A/c 25,00,000
(Being the issue of 5,000 14% Debentures
@ 90% as per Board’s Resolution No...
dated...)
(b) i Fixed Assets A/c Dr. 10,00,000
To Vendor A/c 10,00,000
(Being the purchase of fixed assets from
vendor)
ii Vendor A/c Dr. 10,00,000
Discount on Issue of Debentures A/c Dr. 2,50,000
To 14% Debentures A/c 12,50,000
(Being the issue of debentures of `
12,50,000 to vendor to satisfy his claim)
(c) Bank A/c Dr. 10,00,000
To Bank Loan A/c (See Note) 10,00,000
(Being a loan of `10,00,000 taken from
bank by issuing debentures of `12,50,000
as collateral security)

Note : No entry is made in the books of account of the company at the time of making
issue of such debentures. In the Balance Sheet due to the fact that the debentures being
issued as collateral security and outstanding are shown under the respective liability.

Company Accounts -
Issue of Debentures
181
 CAFC ACCOUNTING

17 COMPANY ACCOUNTS -
BONUS AND RIGHT ISSUE

HOMEWORK SOLUTION

Q.13 Journal Entries in the books of abc Ltd.

` `
1-4-2022 Equity share final call A/c Dr. 2,70,000
To Equity share capital A/c 2,70,00
(For final calls of ` 2 per share on 1,35,000 equity
shares due as per Board’s Resolution dated....)
20-4-2022 Bank A/c Dr. 2,70,000
To Equity share final call A/c 2,70,000
(For final call money on1,35,000 equity shares
received)
Securities Premium A/c Dr. 37,500
Capital Redemption Reserve A/c Dr. 60,000
General Reserve A/c Dr. 1,80,000
Profit and Loss A/c (b.f.) Dr. 60,000
To Bonus to shareholdersA/c 3,37,500
(For making provision for bonus issue of one share
for every four shares held)
Bonus to shareholders A/c Dr. 3,37,500
To Equity share capital A/c 3,37,500
(For issue of bonus shares)

Extract of Balance Sheet as at 30th April,2022 (after bonus issue)

`
Share Capital
Authorised Capital
15,000 12% Preference shares of `10 each 1,50,000

Company Accounts -
Bonus and Right Issue
182
 CAFC ACCOUNTING
1,68,750 Equity shares of `10 each (refer working note below) 16,87,500
Issued and subscribed capital
12,000 12% Preference shares of `10 each, fully paid 1,20,000
1,68,750 Equity shares of `10 each, fully paid 16,87,500
(Out of above, 33,750 equity shares @`10 each were
issued by way of bonus)
Reserves and surplus
Securities Premium 37,500
Less: Utilised for bonus issue (37,500) NIL
Capital Redemption Reserve 60,000
Less: Utilised for bonus issue (60,000) NIL
General Reserve 1,80,000
Less: Utilised for bonus issue (1,80,000) NIL
Profit and Loss Account 3,00,000
Less: Utilised for bonus issue (60,000) 2,40,000
Working Notes:
1. Number of Bonus shares to be issued- `
(1,35,000shares/4) x 1= 33,750 shares
2. The authorised capital should be increased as per details given below:
Existing issued Equity share capital 13,50,000
Add: Issue of bonus shares to equity shareholders 3,37,500
16,87,500

Q.14 Journal Entries in the books of Tarun Ltd.

2022 Dr. Cr.
Capital Redemption Reserve A/c Dr. 70,000
Securities Premium A/c Dr. 40,000
General Reserve A/c (b.f.) Dr. 40,000 1,50,000
To Bonus to Shareholders A/c
(Bonus issue of one shares for every three shares held,
by utilising various reserves as per Board’s resolution
dated....)
Bonus to Shareholders A/c Dr. 1,50,000 1,50,000
To Equity Share CapitalA/c (Capitalisation of profit)
Working Note : Number of bonus shares to be issued-4500/ 3 x 1 = 1500 shares

Company Accounts -
Bonus and Right Issue
183
 CAFC ACCOUNTING
Q.15 Journal Entries in the books of XYZ Ltd.
Dr. Cr.
2022
(`in lakhs) (`in lakhs)
April 2 Equity Share Final Call A/c Dr. 2,000
To Equity Share Capital A/c 2,000
(Final call of ` 2 per share on 10 crore equity shares
made due)
Bank A/c Dr. 2,000
To Equity Share Final Call A/c 2,000
(Final call money on 10 crore equity shares received)
June 1 Capital Redemption Reserve A/c Dr. 1,485
Securities Premium A/c Dr. 2,000
General Reserve A/c (b.f.) Dr. 515
To Bonus to Shareholders A/c
(Bonus issue of two shares for every five sharesheld, 4,000
by utilising various reserves as per Board’s resolution
dated......)
Bonus to Shareholders A/c Dr. 4,000
To Equity Share Capital A/c (Capitalisation of profit)
4,000

Notes to Accounts
` in lakhs
1. Share Capital
Authorised share capital:
20 crore shares of `10 each 20,000
Issued, subscribed and fully paid up share capital:
14 crore Equity shares of `10 each, fully paid up 14,000
(Out of the above, 4 crore equity shares @`10 each were
issued by way of bonus)
2 crore, 11% Cumulative Preference share capital of `10 2,000
each, fully paid up
16,000
2. Reserves and Surplus:
Capital Redemption reserve 1,485
Less: Utilised for bonus issue (1,485)

Company Accounts -
Bonus and Right Issue
184
 CAFC ACCOUNTING

Securities Premium 2,000

Less: Utilised for bonus issue (2,000)
General Reserve 1,040
Less: Utilised for bonus issue (515) 525
Surplus (Profit and Loss Account) 273
Total 798

Q.16 Journal Entries in the books of Saral Ltd.

` `
1-4-2022 Equity share final call A/c Dr. 5,40,000
To Equity share capital A/c 5,40,000
(For final calls of ` 2 per share on 2,70,000 equity
shares due as per Board’s Resolution
20-4-2022 Bank A/c Dr. 5,40,000
To Equity share final call A/c 5,40,000
(For final call money on 2,70,000 equity shares
received)
Securities Premium A/c Dr. 75,000
Capital redemption Reserve A/c Dr. 1,20,000
General Reserve A/c Dr. 3,60,000
Profit and Loss A/c (b.f.) Dr. 1,20,000
To Bonus to shareholders A/c 6,75,000
(For making provision for bonus issue of one share
for every four shares held)
Bonus to shareholders A/c Dr. 6,75,000
To Equity share capital A/c 6,75,000
(For issue of bonus shares)

Company Accounts -
Bonus and Right Issue
185
 CAFC ACCOUNTING
Extract of Balance Sheet as at 30th April, 2022 (after bonus issue)
`
Authorised Capital
30,000 12% Preference shares of `10 each 3,00,000
3,37,500 Equity shares of `10 each (refer W.N.) 33,75,000
Issued and subscribed capital
24,000 12% Preference shares of `10 each, fully paid 2,40,000
3,37,500 Equity shares of `10 each, fully paid 33,75,000
(Out of the above, 67,500 equity shares @ `10 each were issued
by way of bonus shares)
Reserves and surplus
Capital Redemption Reserve 1,20,000
Less: Utilised for bonus issue (1,20,000) NIL
Securities premium 75,000
Less: Utilised for bonus issue (75,000) NIL
General Reserve 3,60,000
Less: Utilised for bonus issue (3,60,000) NIL
Profit and Loss Account 6,00,000
Less: Utilised for bonus issue (1,20,000) 4,80,000

Working Note:
1. Number of bonus shares to be issued - 2,70,000/4 x 1 = 67,500 shares

2. The authorised capital should be increased as per details given below: `

Existing issued Equity share capital 27,00,000
Add: Issue of bonus shares to equity shareholders 6,75,000
33,75,000

Q.17 Journal Entries in the books of Raman Ltd.

` `
1-4-2021 Equity share final call A/c Dr. 8,10,000
To Equity share capital A/c 8,10,000
(For final calls of ` 2 per share on 4,05,000 equity
shares due as per Board’s Resolution dated...)

Company Accounts -
Bonus and Right Issue
186
 CAFC ACCOUNTING

20-4-2021 Bank A/c Dr. 8,10,000

To Equity share final call A/c 8,10,000
(For final call money on 4,05,000 equity shares
received)
Securities Premium A/c Dr. 1,12,500
Capital Redemption Reserve A/c Dr. 1,80,000
General Reserve A/c Dr. 5,40,000
Profit and Loss A/c (b.f.) Dr. 1,80,000
To Bonus to shareholders A/c
(For making provision for bonus issue of one share
for every four shares held) 10,12,500
Bonus to shareholders A/c Dr. 10,12,500
To Equity share capital A/c 10,12,500
(For issue of bonus shares)

Company Accounts -
Bonus and Right Issue
187
 CAFC ACCOUNTING

18 COMPANY ACCOUNTS -
REDEMPTION OF PREFERENCE SHARES

HOMEWORK SOLUTION
Q.10 In the books of C Ltd.

Journal Entries
Sr. Debit Credit
Particulars L.F.
No. ` `
1. Bank A/c Dr. 12,00,000
To Equity Share Capital A/c 10,00,000
To Securities Premium A/c 2,00,000
(Being issue of 1,00,000 equity shares of
` 10 each at a premium of ` 2 per share)

2. 10% Redeemable Preference Share

Capital A/c Dr. 10,00,000
To Preference Shareholders A/c 10,00,000
(Being amount payable on redemption of
Preference Shares transferred to Preference
Shareholders A/c)

3. Preference Shareholders A/c Dr. 10,00,000

To Bank A/c 10,00,000
(Being amount paid on Redemption)

Q.11 In the books of X Ltd.

Journal Entries
Sr. Debit Credit
Particulars L.F.
No. ` `
1. Bank A/c Dr. 15,000
Profit / Loss A/c Dr. 3,500
To Investment A/c 18,500
(Being investment sold at loss)
Company Accounts -
Redemption of Preference Shares 188
 CAFC ACCOUNTING

2. Bank A/c Dr. 37,500

To Equity Share Capital A/c [625 × 50] 31,250
To Securities Premium A/c [625 × 10] 6,250
(Being fresh issue made at premium)

3. Profit / Loss A/c Dr. 33,750

To Capital Redemption Reserve A/c 33,750
(Being Capital Redemption Reserve created)

4. Preference Share Capital A/c Dr. 65,000

Premium on Redemption A/c Dr. 6,500
To Preference Shareholders A/c 71,500
(Being amount due to preference shareholder)

5. Preference Shareholders A/c Dr. 71,500

To Bank A/c 71,500
(Being amount paid to preference
shareholders)

6. Profit / Loss A/c Dr. 6,500

To Premium on Redemption A/c 6,500
(Being premium written off)

Balance sheet of Comfortable Ltd. as on 31.03.2018

Particulars Notes No. C.Y. P.Y.
I. EQUITY AND LIABILITIES
(1) Shareholders funds
(a) Share Capital 1 2,56,250
(b) Reserves and Surplus 2 44,250
(2) Current Liabilities -
(a) Trade Payables 56,500
Total 3,57,000
II. ASSETS
(1) Property, Plant and Equipment
(a) Tangible Assets 3,45,000
(2) Current Assets (net)
(a) Cash and Cash equivalent 3 12,000
Total 3,57,000

Company Accounts -
Redemption of Preference Shares 189
 CAFC ACCOUNTING
Notes to Accounts:
(1) Share Capital
Authorized ?
Issued Subscribed & Paid up
5,125 equity share of ` 50 each fully paid 2,56,250

(2) Reserve and Surplus

Profit and Loss Account (48,000 – 6,500 – 33,750 – 3,500) 4,250
Capital Redemption Reserve 33,750
Securities Premium 6,250
44,250
(3) Cash & Cash Equivalent
Balance with Bank [31,000 + 37,500 – 71,500 + 15,000] 12,000

Working Note:
1. Calculation of No. of shares to be issued
Cash required for Redemption of Preference Share (65,000 + 10%) 71,500
(+) Closing Cash Balance 12,000
Total requirements 83,500
(-) Opening balance of cash (31,000)
(-) Investment sold (15,000)
Balance Funds required 37,500
(÷) Issue Price (50 + 10) ÷ 60
No. of equity shares to be issued 625

2. FV of PSC to be redeemed = Proceeds (FV) of F.I. + of shares + DP transfer to CRR

65,000 = 31,250 + 33,750
P&L

Company Accounts -
Redemption of Preference Shares 190
 CAFC ACCOUNTING
Q.12 In the books of ABC Limited
Journal Entries
Date Particulars Dr. (`) Cr. (`)
2023
Jan 1 10% Redeemable Preference Share Capital A/c Dr. 1,00,000
To Preference Shareholders A/c 1,00,000
(Being the amount payable on redemption
transferred to Preference Shareholders Account)
Preference Shareholders A/c Dr. 1,00,000
To Bank A/c 1,00,000
(Being the amount paid on redemption of preference
shares)
General Reserve A/c Dr. 75,000
Profit & Loss A/c Dr. 25,000
To Capital Redemption Reserve A/c 1,00,000
(Being the amount transferred to Capital Redemption
Reserve Account as per the requirement of the Act)
Note: Securities premium and capital reserve (not being distributable profits) cannot
be utilised for transfer to Capital Redemption Reserve.

Q.13 In the books of TATA Steel Ltd.

Journal Entries
Sr. L. Debit Credit
Particulars
No. F. ` `
1. Bank A/c Dr. 3,75,000
To 7.5% cumulative Preference Share Capital A/c 3,00,000
To Securities Premium A/c 75,000
(Being fresh / new issue made)

2. General Reserve A/c Dr. 3,00,000

To Capital Redemption Reserve A/c 3,00,000
(Being Capital Redemption Reserve created)

3. 8% Redeemable Preference Share Capital A/c Dr. 6,00,000

Premium on Redemption A/c Dr. 60,000
To Preference Shareholders A/c 6,60,000
(Being amount due to preference shareholders)

Company Accounts -
Redemption of Preference Shares 191
 CAFC ACCOUNTING

4. Preference Shareholders A/c Dr. 6,60,000

To Bank A/c 6,60,000
(Being amount due to preference shareholders)

5. Securities Premium A/c Dr. 60,000

To Premium on Redemption A/c 60,000
(Being premium on redemption written off)

6. Share final call A/c Dr. 4,00,000

To Equity Share Capital A/c 4,00,000
(Being final call due)

7. Capital Reserve A/c Dr. 85,000

General Reserve A/c 3,15,000
To Bonus to Shareholders A/c 4,00,000
(Being bonus declared)

8. Bonus to Shareholders A/c Dr. 4,00,000

To Share final call A/c 4,00,000
(Being bonus adjusted against share final call)

9. Capital Redemption Reserve A/c Dr. 3,00,000

Securities Premium A/c Dr. 15,000
General Reserve A/c Dr. 1,85,000
To Bonus to Shareholders A/c 5,00,000
(Being bonus declared)

10. Bonus to Shareholders A/c Dr. 5,00,000

To Equity Share Capital A/c 5,00,000
(Being bonus transferred to Equity Share Capital)

Working Notes:
1. FV of PSC to be redeemed = Proceeds (FV) of F.I.+ of shares + DP transfer to CRR
6,00,000 = 3,00,000 +
3,00,000
(6,000 x 100) GR

Company Accounts -
Redemption of Preference Shares 192
 CAFC ACCOUNTING
2.
Premium on Redemption = SP (if Q.s specify) + DP
60,000 = 60,000 + NIL
(6,000 x 10)

3. Final call bonus

Amount of Bonus = Amount of Final call = 4,00,000

Capital Reserve General Reserve

85,000 3,15,000

4. Fully Paid Bonus

Held Bonus Shares
4 1
20,000 ? 5,000 shares

Amount of Bonus = 5,000 x 100 = 5,00,000


Capital Reserve Capital Reserve General Reserve
3,00,000 15,000 1,85,000
(75,000 – 60,000)

Q.14 In the books of Comfortable Ltd.

Journal Entries
Sr. L. Debit Credit
Particulars
No. F. ` `
1. Bank A/c Dr. 4,000
To Calls-in-arrears A/c 4,000
(Being arrears of 200 shares received)

2. 11% Redeemable Preference Share Capital A/c Dr. 10,000

To Calls-in-arrears A/c 2,000
To Share Forfeiture A/c 8,000
(Being remaining 100 shares forfeited)

Company Accounts -
Redemption of Preference Shares 193
 CAFC ACCOUNTING

3. Share forfeiture A/c Dr. 8,000

To Capital Reserve A/c 8,000
(Being amount in share forfeiture account transferred
to capital reserve)

4. Bank A/c Dr. 27,000

Profit / Loss A/c Dr. 3,000
To Investment A/c 30,000
(Being investment sold at loss)

5. Bank A/c Dr. 30,000

To Equity Share Capital A/c 20,000
To Securities Premium A/c 10,000
(Being issue of 2,000 equity shares of ` 10 each at a
premium of ` 5 per share)

6. General Reserve A/c Dr. 31,000

Profit and loss A/c Dr. 17,000
Capital Reserve A/c Dr. 22,000
To Capital Redemption Reserve A/c 70,000
(Being Capital Redemption Reserve created)
7. 11% Redeemable Preference Share
Capital A/c Dr. 90,000
Premium on Redemption A/c Dr. 9,000
To Preference Shareholders A/c 99,000
(Being amount due to preference shareholders)

8. Preference Shareholders A/c Dr. 96,800

To Bank A/c 96,800
(Being amount paid to Preference shareholders)

9. General reserve A/c 9,000

To Premium on Redemption A/c 9,000
(Being premium on redemption written off)

Company Accounts -
Redemption of Preference Shares 194
 CAFC ACCOUNTING
Working Note:
1. FV of PSC to be redeemed = Proceeds of F.I shares + DP transfer to CRR
90,000 = 20,000 + 70,000
(900 x 100)

GR P&L CR
31,000 17,000 22,000

2. Premium on Redemption = 900 x 10 = 9,000GR

Balance sheet of Comfortable Ltd. as on 31.03.2018
Particulars Notes No. C.Y. P.Y.
I. EQUITY AND LIABILITIES
(1) Shareholders funds
(a) Share Capital 1 2,20,000
(b) Reserves and Surplus 2 1,08,000
(2) Current Liabilities -
Total 3,28,000
II. ASSETS
(1) Property, Plant and Equipment
(a) Tangible Assets 2,60,000
(2) Current Assets (net) 3 68,000
Total 3,28,000

Notes to Accounts:
(1) Share Capital
Equity share capital (1,00,000 + 20,000) 1,20,000
10% Redeemable preference share capital 1,00,000
2,20,000
(2) Reserve and Surplus
Capital Redemption Reserve 70,000
Capital Reserve (36,000 – 22,000 + 8000) 22,000
Securities Premium 16,000
1,08,000
(3) Current Assets (NET i.e. current assets – current liablity)
(1,06,000 + 4,000 + 27,000 – 96,800 + 30,000 – 2,200 i.e. amount payable to PSH) 68,000

Company Accounts -
Redemption of Preference Shares 195
 CAFC ACCOUNTING
Q.15
Nominal value of preference shares ` 5,00,000
Maximum possible redemption out of profits ` 3,00,000
Minimum proceeds of fresh issue ` 5,00,000 – 3,00,000 = ` 2,00,000
Proceed of one share =`9
Minimum number of shares = 2,00,000 = 22,222.22 shares
9

As fractional shares are not permitted, the minimum number of shares to be issued is
22,223 shares.
If shares are to be issued in multiples of 50, then the next higher figure which is a multiple
of 50 is 22,250. Hence, minimum number of shares to be issued in such a case is 22,250
shares

Company Accounts -
Redemption of Preference Shares 196
 CAFC ACCOUNTING

19 COMPANY ACCOUNTS -
REDEMPTION OF DEBENTURES

HOMEWORK SOLUTION

Q.9
Calculation of number of equity shares to be allotted
Number of debentures
Total number of debentures 40,000
Less: Debenture holders not opted for conversion (5,000)
Debenture holders opted for conversion 35,000
Option for conversion 20%
Number of debentures to be converted (20% of 35,000) 7,000

Redemption value of 7,000 debentures at a premium of ` 7,35,000

5% [7,000 x (100+5)]
Equity shares of `10 each issued to debenture holders on
redemption
[` 7,35,000/ ` 15] 49,000 shares
Amount of cash to be paid
Amount to be paid into cash [42,00,000 (40,000 x ` 105 ) – ` 34,65,000
7,35,000] on redemption

Company Accounts -
Redemption of Debentures
197
 CAFC ACCOUNTING
Q.10 HINDUSTAN LTD.
Journal
No. Particulars Dr. ` Cr. `
Common Entry
1. 12% Debentures A/c Dr. 5,00,000
To 12% Debentureholders A/c [5,000 x 100] 5,00,000
Option (i)
2. 12% Debentureholders A/c Dr. 1,50,000
To 14% Preference Share Capital [12,500 x 10] 1,25,000
To Securities Premium A/c [12,500 x 2] 25,000
Option (ii)
3. 12% Debentureholders A/c Dr. 1,50,000
To 15% Debentureholders A/c [1,500 x 100] 1,50,000
Option (iii)
4. 12% Debentureholders A/c Dr. 2,00,000
To Bank A/c [2,000 x 100] 2,00,000

Working Note:
1,50,000
Number of Preference Shares Issued = = 12,500
12

Q.11
Number of
debentures
Debenture holders opted for conversion (20,000 /100) 200
Option for conversion 20%
Number of debentures to be converted (20% of 200) 40
Redemption value of 40 debentures at a premium of 5% ` 4,200
[40 x (100+5)]
Equity shares of ` 10 each issued on conversion [` 4,200/ ` 20] 210 shares

Calculation of cash to be paid : `

Number of debentures 200
Less: number of debentures to be converted into equity shares (40)
160
Redemption value of 160 debentures (160 × ` 105) ie. ` 16,800

Company Accounts -
Redemption of Debentures
198
 CAFC ACCOUNTING
Q.12 Journal Entries in the Books of Case Ltd.
Dr. ` Cr. `
Bank A/c Dr. 1,12,500
To Equity Shareholders A/c 1,12,500
(Application money received on 7,500 shares @ ` 15 per share
to be issued as rights shares in the ratio of 1:4)
Equity Shareholders A/c Dr. 1,12,500
To Equity Share Capital A/c 75,000
To Securities Premium A/c 37,500
(Share application money on 7,500 shares @ ` 10 per share
transferred to Share Capital Account, and ` 5 per share to
Securities Premium Account vide Board’s Resolution dated...)
Securities Premium A/c Dr. 37,500
Profit & Loss A/c Dr. 37,500
To Bonus to Shareholders A/c 75,000
(Amount transferred for issue of bonus shares to existing
shareholders in the ratio of 1:5 vide General Body’s resolution
dated...)
Bonus to Shareholders A/c Dr. 75,000
To Equity Share Capital A/c 75,000
(Issue of bonus shares in the ratio of 1 for 5 vide Board’s
resolution dated....)
12% Debentures A/c Dr. 1,80,000
Premium Payable on Redemption A/c (@ 3%) Dr. 5,400
To Debenture holders A/c 1,85,400
(Amount payable to debentures holders)
Profit and loss A/c Dr. 5,400
To Premium Payable on Redemption A/c 5,400
(Premium payable on redemption of debentures charged to
Profit & Loss A/c)
Debenture Redemption Reserve A/c Dr. 18,000
To General Reserve 18,000
(For DRR transferred to general reserve)
Bank A/c Dr. 27,000
To Debenture Redemption Reserve Investment 27,000
(for DRR Investment realised)
Debenture holders A/c Dr. 1,85,400
To Bank A/c 1,85,400
(Amount paid to debenture holders on redemption)

Company Accounts -
Redemption of Debentures
199