Marks : 100 Master Test Series - 04 17/04/2024
Duration : 3 hrs
Accounting
State with Reasons , whether the following statement is True or False :
1. Depreciation is charged with a constant amount under straight line method and charged with a constant percentage
under diminishing balance method.
(2 Marks)
2. When we start bank reconciliation with a debit balance in cash book, then cheques issued but not yet presented
should be added back to arrive at the balance as per pass book.
(2 Marks)
3. Single Entry System can be adopted by small firms.
(2 Marks)
4. Surplus of non-profit organizations is distributed among its members.
(2 Marks)
5. Raw Material Consumed = Opening inventory of Raw Materials + Purchases - Closing inventory of Raw Materials.
(2 Marks)
6. Interest on calls in arrears is payable by company to shareholders.
(2 Marks)
Subjective
7. Explain Cash and Mercantile system of accounting.
(4 Marks)
8. What are the basic considerations in distinguishing between capital and revenue expenditures?
(4 Marks)
Numerical :
9. Red, White and Black shared profits and losses in the ratio of 5: 3: 2. They took out a Joint Life Policy in 2018 for
₹ 50,000, a premium of ₹ 3,000 being paid annually on 10th June. The surrender value of the policy on 31st
December of various years was as follows: 2018 nil;
2019 ₹ 900: 2020 ₹ 2,000; 2021 ₹3,600. Black retires on 15th April, 2022.
Prepare ledger accounts assuming Joint Life Policy Account is maintained on surrender value basis.
(5 Marks)
10. Mr. Long who was the holder of 2,000 preference shares of ₹ 100 each, on which ₹ 75 per share has been called up
could not pay his dues on Allotment and First call each at ₹ 25 per share. The Directors forfeited the above shares
and reissued 1,500 of such shares to Mr. Short at ₹ 65 per share paid-up as ₹ 75 per share. Give journal entries to
record the above forfeiture and re-issue in the books of the company.
(5 Marks)
11. Ram, Rahim and Karim are partners in a firm. They have no agreement in respect of profit- sharing ratio, interest on
capital, interest on loan advanced by partners and remuneration payable to partners. In the matter of distribution of
profits they have put forward the following claims:
1. Ram, who has contributed maximum capital demands interest on capital at 10% p.a. and share of profit in the
capital ratio. But Rahim and Karim do not agree.
2. 2. Rahim has devoted full time for running the business and demands salary at the rate of ₹ 500 p.m. But Ram
and Karim do not agree.
3. Karim demands interest on loan of ₹ 2,000 advanced by him at market rate of interest which is 12% p.a.
How shall you settle the dispute and prepare Profit and Loss Appropriation Account after transferring 10% of the
divisible profit to Reserve. Net profit before taking into account any of the above claims amounted to ₹ 45,000 at
the end of the first year of their business.
(5 Marks)
12. A Company has the following record of purchases-
Date December 4 December 10 December 24
Quantity Unit 900 700 600
Price p.u. (₹) 50 55 60
Sales were made as under:
Date December 5 December 12 December 29
Quantity Unit 900 700 600
Compute the value of Closing Inventory under –
(a) FIFO,
(b) LIFO
(c) Simple Average Cost,
(d) Weighted Average Cost.
(10 Marks)
13. A and B are partners of X LLP sharing profits and losses in 3:2 ratio between themselves. On 31st March, 2023, the
balance sheet of the firm was as follows:
Balance Sheet of X LLP as at 31.3.2023
Liabilities ₹ Assets ₹
Trade payables 5,000 Plant and Machinery 20,000
Capital Accounts Furniture & Fittings 5,000
A 37,000 Inventories 15,000
B 28,000 65,000 Trade receivables 20,000
Cash 10,000
70,000 70,000
X agrees to join the business on the following conditions as and from 1.4.2023:
1. He will introduce ₹ 25,000 as his capital and pay ₹ 15,000 to the partners as premium for goodwill for 1/3rd
share of the future profits of the firm.
2. A revaluation of assets of the firm will be made by reducing the value of plant and machinery to ₹15,000,
Inventory by 10%, furniture and fitting by ₹1,000 and by making a provision of bad and doubtful debts at ₹ 750
on trade receivables.
Prepare profit and loss adjustment account, capital accounts of partners including the incoming partner X assuming
that the relative ratios of the old partners will be in equal proportion after admission.
(10 Marks)
14. Fashion Garments Ltd invited applications for issuing 10,000 Equity Shares of ₹ 10 each. The amount was payable
as follows:
1. On Application ₹ 1 per share
2. On Allotment ₹ 2 per share
3. On First call ₹ 3 per share
4. On Second and final Call ₹ 4 per share
The issue was fully subscribed. Ram to whom 100 shares were allotted, failed to pay the allotment money and his
shares were forfeited immediately after the allotment. Shyam to whom 150 shares were allotted, failed to pay the
first call. His shares were also forfeited after the first call. Afterwards the second and final call was made. Mohan to
whom 50 shares were allotted failed to pay the second and final call. His shares were also forfeited. Al the forfeited
shares were re-issued at ₹ 9 per share fully paid-up.
Pass necessary Journal entries in the books of Fashion Garments Ltd.
(15 Marks)
15. Vijya Club showed the following position on 31st March, 2022:
Balance Sheet as on 31st March, 2022
Liabilities ₹ Assets ₹
Capital fund 7,93,000 Electrical fittings 1,50,000
Expenses payable 7,000 Furniture 50,000
Books 4,00,000
Investment in securities 1,50,000
Cash at bank 25,000
Cash in hand 25,000
8,00,000 8,00,000
The receipts and payment account for the year ended on 31st March, 2023 is given below:
Receipts ₹ Payments ₹
To Balance b/d By Electric charges 7,200
Cash at bank 25,000 By Postage and stationary 5,000
Cash in hand 25,000 50,000 Telephone charges 5,000
To Entrance fee 30,000 By Books purchased 60,000
To membership 2,00,000 Outstanding expenses paid 7,000
subscription
To sale proceeds of old 1,500 By Rent 88,000
papers
To Hire of lecture hall 20,000 By Investment in securities 40,000
To Interest on securities 8,000 By Salaries 66,000
By Balance c/d
Cash at bank 20,000
Cash in hand 11,300 31,300
3,09,500 3,09,500
You are required to prepare income and expenditure account for the year ended 31st March, 2023 and a balance
sheet as at 31st, March, 2023 after making the following adjustments:
Membership subscription included ₹ 10,000 received in advance.
Provide for outstanding rent ₹ 4,000 and salaries ₹ 3,000.
Books to be depreciated @ 10% including additions. Electrical fittings and furniture are also to be depreciated at
the same rate. 75% of the entrance fees is to be capitalized.
Interest on securities is to be calculated @ 5% p.a. including purchases made on 1.10.2022 for ₹ 40,000.
(15 Marks)
16. The following is the Trial Balance of Hari as at 31st December, 2023:
Dr. (₹) Cr. (₹)
Hari’s capital Account - 76,690
Stock 1st January 2023 46,800 -
Sale - 3,89,600
Returns Inwards 8,600 -
Purchases 3,21,700 -
Returns Outwards - 5,800
Carriages Inwards 19,600 -
Rent & Taxes 4,700 -
Salaries & Wages 9,300 -
Sundry Debtors 24,000 -
Sundry Creditors - 14,800
Bank Loan @ 14% p.a. - 20,000
Bank Interest 1,100 -
Printing and Stationary Expenses 14,400 -
Bank Balance 8,000 -
Discount Earned - 4,440
Furniture & Fittings 5,000 -
Discount Allowed 1,800 -
General Expenses 11,450 -
Insurance 1,300 -
Postage & Telegram Expenses 2,330 -
Cash Balance 380 -
Travelling Expenses 870 -
Drawings 30,000 -
5,11,330 5,11,330
The following adjustments are to be made:
1. Included amongst the Debtors is ₹ 3,000 due from Ram and included among the Creditors ₹ 1,000 due to him.
2. Provision for Bad and Doubtful Debts be created at 5% and for Discount @ 2% on Sundry Debtors.
3. Depreciation on Furniture & Fittings @ 10% shall be written off
4. Personal Purchases of Hari amounting to ₹ 600 had been recorded in the Purchases Day Book.
5. Interest on Bank Loan shall be provided for the whole year.
6. A quarter of the amount of Printing and Stationery Expenses is to be carried forward to the next year.
7. Credit Purchase Invoice amounting to ₹400 had been omitted from the Books.
8. Stock on 31.12.2023 was ₹ 78,600.
Prepare:
1. Trading & Profit and Loss Account for the year ended 31.12.2023 and
2. Balance Sheet as on 31st December, 2023.
(15 Marks)
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