SAPPHIRE INTERNATIONAL SCHOOL, NOIDA

Tentative Practical Questions

Grade: XII Accountancy

Max. Marks: 20

BOOK 3
Q.1 Treatment of proposed dividend?
Ans Previous year proposed dividend will be taken in operating(+) and financing activities(-
). Ignore CY proposed dividend.
Q.2 Treatment of taxes in cash flow?
Ans Provision for tax – Added to Operating activities in CFS.
Taxes paid – Minus from Operating activities in CFS.
Q.3 What is cash flow?
Ans Inflow and outflow of cash and cash equivalent.
Q.4 What is cash flow statement?
Ans Inflow and outflow of cash and cash equivalent from operating, investing and financing
activities.
Q.5 What is operating activities?
Ans Principle revenue generating activities
Q.6 What is investing activities?
Ans Acquisition and disposal of fixed assets and investments.
Q.7 What is financing activities?
Ans Change in size and composition of owners fund and borrowed funds.
Q.8 What is cash and cash equivalent? Give four examples.
Ans Cash and cash equivalent are assets that can be converted in to cash quickly, mainly
within 3 months.
Example – Cash in hand, cash at bank, marketable securities and current investments.
Q.9 Formula for all 16 ratios.
Ans Page – 3.96 to 3.95 (book 3)
Q.10 Ideal current ratio
Ans 2:1
Q.11 Ideal quick ratio
Ans 1:1
Q.12 Types of ratio. Explain them.
Ans Page – 3.5 (book 3)
Q.13 Format of statement of P/L
Ans Page – 1.39 (book 3)
Q.14 Four items comes under expenses in St of P/L.
Ans Cost of raw material, purchase of inventory, finance cost, depreciation and amortization.
Q.15 What is contingent liability? Give two examples.
Ans Any liability which may or may not arise in future. It is shown as notes to account
outside the balance sheet.
Example – Proposed dividend of current year, B/R discounted by bank, claim against
companies.
Q.16 Two examples of Other expenses.
Ans Carriage inward and carriage outward.
Q.17 Accounting standard for cash flow statement.
Ans AS7
Q.18 Limitations of ratios:
Ans Ignore qualitative elements, historical cost
Q.19 Format of cash flow statement
Ans Page – 4.60 (Book 3)
Q.20 Difference between comparative and common size.
Ans Comparative – Items of two year are placed side by side and absolute and percentage
change is calculated.
Common Size - Items of two year are placed side by side and percentages are calculated
by taking a common base.
Base –
Balance sheet – Total assets and total liabilities
St of P/L – Revenue from operation
Q.21 Dividend/Interest received by a financing company.
Ans Operating activities
Q.22 Dividend/Interest received by a non-financing company.
Ans Investing activities.
Q.23 Dividend/Interest paid by a financing company.
Ans Financing activities.
Q.24 Dividend/Interest paid by a non-financing company.
Ans Financing activities.
Q.25 Treatment of depreciation.
Ans Refer to book CH 5 Cash flow.
Q.26 Other names of liquid ratio.
Ans Acid test ratio, quick ratio.

BOOK 2
Q.1 What is pro-rata allotment?
Ans Proportionate allotment of shares to all the shareholders. It is done in case of
oversubscription.
Q.2 What is under subscription of shares?
Ans When the number of shares applied are less than number of shares issued.
Q.3 What is over subscription of shares?
Ans When the number of shares applied are more than number of shares issued.
Q.4 What is forfeiture of shares?
Ans When the shares of shareholder forfeited by a company for nonpayment of any call.
Q.5 Give journal entries for forfeiture of shares.
Ans When premium is paid When premium is not paid
Share Capital Dr Share Capital Dr
To Share forfeiture Securities premium Dr
To Call in arrears To Share forfeiture
To Call in arrears
Q.6 Give journal entries for reissue of shares.
Ans Par Premium Discount
Bank A/c Dr Bank A/c Dr Bank A/c Dr
To Share Capital To Share Capital Share forfeited Dr
To Securities Premium To Share Capital
Q.7 Difference between equity shares and preference shares.
Ans Equity shares have voting rights. Rate of dividend is not fixed. Entitled to participate in
management.
Equity shares may or may not have voting rights. Rate of dividend is fixed. Not entitled
to participate in management.

Q.8 What are debentures?

Ans Debentures is a written acknowledgement of a debt taken by a company.
Q.9 Usage of securities premium reserve.
Ans Section 52 specify usage of Securities premium
a) Issue of fully paid bonus shares.
b) Write off premium on redemption of debentures or preference shares.
c) Buy back of own shares.
d) Write-off preliminary expenses.
Q.10 Maximum discount that can be given in case of reissue of shares.
Ans Paid up amount on forfeited shares.
Q.11 Journal entry for consideration other than cash.
Ans Par Premium
Asset Dr Asset Dr
To Vendor To Vendor

Vendor Dr Vendor Dr
To Share Capital To Share Capital
To Securities premium
Q.12 What is consideration other than cash?
Ans When the shares are issued in exchange of any asset or business and cash is not paid.
Q.13 If premium is not specified it will be taken on ________
Ans Allotment.
Q.14 What is authorized capital?
Ans Maximum capital which a company can issue throught life time. Other names of
authorize capital is registered capital, nominal capital.
Q.15 Amount of minimum subscription required.
Ans 90% of issued amount with in 120 days.
Q.16 What is employee stock option plan?
Ans Shares offered to the employees and directors to subscribe for the shares at a
predetermined price.
Q.17 What is sweat equity shares?
Ans Shares issued to employees for consideration other than cash.
Q.18 Can Shares be issued at discount?
Ans No, as per section 53.
Q.19 Alternatives available in case of oversubscription.
Ans a) Full allotment
b) Refund (reject)
c) Prorata
Q.20 What is call in arrears?
Ans When any amount of money a shareholder fails to pay by a specified date.
Q.21 What is call in advance?
Ans When a shareholder pays the company before a call is made for payment.
Q.22 Journal entries for debenture issued as collateral securities.
Ans Debenture suspense Dr.
To Debentures
Q.23 What are collateral securities?
Ans When the debentures are issued as additional security in addition to primary security.
Q.24 What are the different cases for term of issue and redemption of debentures?
Ans Issued at par - Redeem at par
Issued at premium - Redeem at par
Issued at discount - Redeem at par
Issued at par - Redeem at premium
Issued at premium - Redeem at premium
Issued at discount - Redeem at premium
Note - Revise journal entry too.

Book 1
Q.1 What is Partnership?
Ans Relationship between two or more person who agree to share profit or loss of the
business.
Q.2 What is partnership deed?
Ans Written agreement between the partners where all the terms and conditions of
partnership is mentioned.
Q.3 Provisions of partnership act in the absence of partnership deed.
Ans Salary/Commission/Remuneration/Interest on capital/Interest on drawings – NO
Profit sharing – Equal
Interest on loan – 6% p.a (Loan by partner to firm)
Q.4 Can a partner be admitted if one partner disagree?
Ans No
Q.5 Can a partner order goods, if one of the partner disagree?
Ans Yes
Q.6 Format of P/L Appropriation account
Ans Refer to book.
Q.7 Cases for interest on drawings
Ans Monthly (X 12) Quarterly (X 4) Semi Annual (X 2)
Beg – 6.5 Months Beg – 7.5 Months Beg – 3.5 Months
 Mid - 6 Months Mid - 6 Months Mid - 3 Months
End – 5.5 Months End – 4.5 Months End – 2.5 Months
Q.8 If date of drawings is not known, it is calculated for _________ months.
Ans 6 months
Q.9 Interest on capital is calculated on _______ capital
Ans Opening
Q.10 Difference between fixed and fluctuating capital.
Ans Fixed capital is type of capital account remains constant. Fixed capital account has two
accounts which are capital account and current account.
Fluctuating capital is type of capital account fluctuates. Only one account that is
capital account.
Q.11 What is past adjustment?
Ans Sometimes the errors or omissions get detected after the preparation of financial
statements and the distribution of profit among the partners as per the profit sharing ratio
decided in the business. In such cases, the existing entries are not altered instead a new
adjustment entry is passed for rectifying the errors or omissions.
Q.12 What is minimum guarantee?
Ans Guarantee is defined as a surety of a specific amount of gains by one or more partners
and in some cases by the enterprise, where the burden of guarantee is carried by the
party furnishing such a guarantee.
Q.13 Formula for average profit
Ans AP = Sum of profit/No of years
Q.14 Formula for super profit
Ans SP = Average profit - Normal Profit
Q.15 Formula for capitalization of average profit
Ans G/W = Ave Profit x 100/R – Capital Employed
Q.16 Formula for capitalization of super profit
Ans G/W = Super Profit x 100/R
Q.17 Explain the type of goodwill.
Ans Purchased goodwill - Purchased goodwill is the difference between the value paid for an
enterprise as a going concern and the sum of its assets less the sum of its liabilities, each item of
which has been separately identified and valued.
Self generated goodwill - It is the value of the business in excess of the fair value of its
separable net assets. It is referred to as internally generated goodwill, and it arises over a
period of time due to the good reputation of a business. It can also be called as self
generated or non-purchased goodwill.
Q.18 Factors affecting goodwill of the firm.
Ans Location, Favourable Contacts, competition.
Q.19 What are the various forms of reconstitution?
Ans Change in Profit sharing ratio, Admission of a partner, retirement of a partner, death of a
partner.
Q.20 Treatment of goodwill in admission
Ans Refer to book.
Q.21 What are the various types of accumulated profits? Pass Journal entry.
Ans General reserve
Profit and Loss (CR)
Workmen compensation reserve
Investment fluctuation reserve
 Journal Entry
General reserve Dr
Profit and Loss (CR) Dr
Workmen compensation reserve Dr
Investment fluctuation reserve Dr
To Old partners capital account
Q.22 What are the various types of accumulated losses? Pass Journal entry.
Ans Profit and loss (DR)
Advertisement reserve
Journal Entry
Old partners capital account
To Profit and loss (DR)
To Advertisement reserve

Q.23 Adjustment entry for accumulated profit and loss

Ans Gaining partners capital A/c Dr
To Sacrificing partner capital account
Q.24 What is revaluation account?
Ans Revaluation account is a nominal account. A Revaluation Account determine net profit
or loss on revaluation of assets and liabilities and including those items that are
unrecorded into books.
Q.25 Difference between revaluation account and realization account.
Ans Revaluation account: A realisation account records the sale of assets or converts
investments into cash. It is prepared at the time of reconstitution of partnership.
Realisation account: A realisation account records the sale of assets or converts
investments into cash. It is prepared at the time of dissolution of firm.
Q.26 What are the various cases for dissolution?
Ans Dissolution by mutual agreement
Dissolution by expiry
Dissolution by court
Compulsory dissolution
Q.27 Journal entry for profit till death.
Ans Profit Loss
Profit and loss suspense Dr Deceased partner capital account Dr
To Deceased partner capital account To Profit and loss suspense
Q.28 What will be received by the legal heirs of deceased partner?
Ans Capital, share in revaluation profit or loss, goodwill, profit till death, salary,
commission, accumulated profit or loss.
Q.29 Difference between dissolution of partnership and partnership firm.
Ans Refer to book. Use basis point.

Note –

1. Read your project file in details.

2. Study about company profile.