FINANCIAL ACCOUNTING –II

SUBJECT CODE: 14U3CMC6

Time: 3 Hours Max. Marks: 75
Section – A (10 X 2 = 20)
Answer all the Questions:
1. Define “Branch.
2. What is goods in transit?
3. Explain the term partnership.
4. What is a partnership deed?
5. What is goodwill?
6. What is a joint life policy?
7. Define dissolution of a firm.
8. What is piece-meal distribution?
9. What is purchase consideration?
10. What is meant by amalgamation of partnership firms?

Section – B (5 X 5 = 25)
Answer all the Questions:
11. (a) What are the objectives of branch accounting.
(or)
(b) A firm is having its Head Office at Delhi and Branch at Chandigarh. The following are
the transactions of the Head Office with Branch for the year ended 31st December, 2007.
Rs.
Petty Cash at Branch 1-1-2007 12,500
Stock at Branch on 1-1-2007 7,50,000
Furniture at Branch on 1-1-2007 4,50,000
Goods supplied to Branch during the year 37,755,000
Goods returned by branch 25,000
Cash sales at Branch 52,50,000
Cheque sent to branch for:
Establishment Expenses 2,50,000
Petty Cash 75,000
Salary Outstanding on 31-12-2007 25,000
Petty Expenses incurred by Branch 67,500
Stock at Branch on 31-12-2007 10,00,000
Depreciate furniture @ 10% per annum
Prepare Branch Account after passing necessary journal entries and also show the
relevant items of the Branch in the Balance sheet in the books of the Head office.
12. (a) On 31.3.2007 on the closing of accounts the capital accounts of X, Y and Z stood at
Rs.80,000, Rs.60,000 and Rs.40,000 respectively.
Subsequently it was discovered that interest on capital at 6% p.a. has been
omitted. Profits for the year amounted to Rs.1,20,000 and the drawing of the partners

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 amounted to X Rs.20,000, Y Rs.15,000 and Z Rs.9,000. Their profit-sharing ratio was
3:2:1. Calculate the interest on capital.
(or)
(b) Show how the following items will appear in the capital account of the partner GUna
and Gopal when their capitals are fluctuating.
Guna Gopal
Rs. Rs.
Capital as on 1-1-2004 40,000 35,000
Drawings during 2004 8,000 7,000
Int. on capital @ 6% p.a. 2,400 2,100
Int. on Drawings @ 5% p.a. 200 100
Share of profits for 2004 4,200 3,300
Partners salary 3,600 2,000

13. (a) Give the format of memorandum revaluation account.

(or)
(b) A and B are partners sharing profits in the ratio of 7:3. In view of his admission, they
decided to revalue their assets and liabilities below.
(i) The value of land & buildings was to be increased by Rs.30,000.
(ii) To bring into record at Rs.5,000 investments which have not so for being
brought into account.
(iii) To decrease stock by Rs.3,000 and furniture.
(iv)A provision for outstanding expenses was to be created for Rs.500.
Prepare revaluation account.

14. (a) The following was the Balance Sheet of Radha, Krishna and Sankar as on
31.12.2003.
Liabilities Rs. Assets Rs.
Creditors 12,000 Machinery 25,000
General Reserve 3,000 Stock 11,000
Capitals: Radha 20,000 Debtors 9,500
Krishna 15,000 Goodwill 13,000
Sankar 10,000 Cash 1,500
60,000 60,000
On the above date the firm was dissolved. The assets realized Rs.50,000. The
creditors were settled at Rs.11,5000. Dissolution expenses amounted to Rs.1,000.
The partners had 3:2:1 as their profit sharing ratio.
Give the necessary journal entries and ledger a/c’s to close the books.
(or)
(b) Give the format of a realization account in case of dissolution of a firm.

15. (a) A, B and C share profits in the ratio of 4:3:2. They have decided to sell their firm to
a limited company on June 30, 2003. Their balance sheet on that date was.

Liabilities Rs. Assets Rs.

Creditors 12,000 Land and Building 18,000

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 Capitals: Machinery 12,000
A - 20,000 Debtors 15,000
B - 15,000 Stock 13,000
C - 13,000 48,000 Cash 2,000
60,000 60,000
The purchase consideration agreed upon was Rs.50,000 of this, company has paid
Rs.32,000 in its own shares and the balance in cash. Dissolution expenses of the firm
Rs.600 was paid by the company.
Give the necessary journal entries.
(or)
(b) Explain the accounting procedure to be followed in amalgamation of firms.

Section – C (3 X 10 = 30)
Answer any THREE Questions:
16. A Delhi merchant has a Branch at Chennai to which he charges out the goods at cost plus 25%.
The Chennai Branch keeps its own Sales Ledger and transmits all cash received to the Head
Office every day. All expenses are paid from the Head office. The transactions for the Branch
were as follows:
Rs. Rs.
Stock (1-4-2007) at I.P. 11,000 Returns Inwards 500
Debtors (1-4-2007) 100 Cheques sent to Branch:
Petty cash 100 Rent 600
Cash sales 2,650 Wages 200
Credit sales 23,950 Salaries and other expenses 900
Goods sent to Branch at I.P. 20,000 Stock (31-3-2008) 13,000
Collection on ledger accounts 21,000 Debtors 2,000
Goods returned to H.O. at I.P. 300 Petty cash (31-3-2008) including
Bad Debts 300 miscellaneous income Rs.25,
Allowances to Customers 250 not remitted 125

Prepare the Branch Trading and Profit & Loss Account and Branch Account for the
year 31-3-2008.

17. On 1st January 2002 X and Y entered into a partnership and contributed Rs. 40,000 and
Rs.30,000 respectively. They share profits and losses in the ratio of 3:2. Y is to be allowed a
salary of Rs.8,000 per year. Interest on capital is to be allowed at 5% per annum. 5% interest is
to be charged on drawings.
During the year X withdrew Rs.6,000 and Y Rs.12,000, interest being X Rs.140 and Y
Rs.100. share of profit for 2002, X Rs. 5,940 and Y Rs. 3960.
Prepare Capital a/c when a) they are fluctuating b) they are fixed.

18. The following is the Balance Sheet of A and B, who share profits and loss as 3:2 respectively, as
at 31-12-2004:

Liabilities Rs. Assets Rs. Rs.

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 Capitals: Land and Building 30,000
A 35,000 Plane and Machinery 20,000
B 30,000 Stock 10,000
Reserve 10,000 Debtors 20,000
Creditors 25,000 Less: Provision for
Doubtful Debts 1,000 19,000
Bank 11,000
Cash 10,000
1,00,000 1,00,000
On 1-1-2005, C joins the firm and brings in the following assets:
Stock Rs.21,000; Investments Rs.12,000; Cash Rs.15,000; Debtors Rs.10,000.
Following were agreed upon:
(i) The profit sharing ratio among A, B and C will be equal.
(ii) The capitals of the partners should also be equal taking C’s capital as base.
(iii) The reserve for the new firm will be Rs.15,000.
(iv) Provision for doubtful debts is to be created @ 10% of total debtors.
(v) An investment provision of Rs.2,000 is to be created.
You are required to prepare the Capital Accounts of the Partners and the Balance
Sheet of the new firm.

19. The Balance Sheet of A, B and C who are sharing profits and loss in the ratio of 2:2:1 was as
follows on 31st March 2008, the date of dissolution.
Balance Sheet of A, B & C
Liabilities Rs. Assets Rs.
Creditors 1,20,000 Cash 1,000
Bank Loan - Charge on stock 50,000 Stock 60,000
Capital Other assets 1,09,000
A 30,000 Goodwill 30,000
B 20,000 Capital -C 20,000
2,20,000 2,20,000
Stock realized Rs. 52,000 and other assets were sold for Rs.90,000. Expenses on
realization amounted to Rs.3,000.
Assuming all the partners are insolvent, prepare necessary ledger accounts to close the book
of the firm.

20. Two firms A and B & X and Y agree to amalgamate their business on 31st December 2000.
Their Balance Sheet was:
A&B X&Y A&B X&Y
Rs. Rs. Rs. Rs.
Creditors 1,04,000 52,000 Bank 1,56,000 65,000
Capitals: Debtors 1,30,000 1, 04,000
A 1,82,000 -- Stock 42,000 26,000
B 1,30,000 -- Furniture 10,000 13,000
X -- 91,000 Building 78,000 --
Y -- 65,000
4,16,000 2,08,000 4,16,000 2,08,000
Debtors and Creditors were not taken over by the new firm. Buildings were retained by A
and B. The capital of new firm Rs. 2,60,000 is to be brought in by partners in the ratio of
3:3:2:2. Close the books of the old firms and give the Balance Sheet of the new firm.

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