LALA LAJPAT RAI COLLEGE OF COMMERCE & ECONOMICS, MUMBAI – 400 034.

SECOND YEAR [Link]. SEMESTER IV REGULAR EXAMINATION MARCH 2023

Day : Monday Time : 3 Hrs.
Date : 20/03/2023 Marks : 100
SUBJECT: ACCOUNTANCY & FINANCIAL MANAGEMENT

Note : 1) Attempt all the questions. 2) Use of simple calculator is allowed.

3) Working notes should form part of your answer.

Q.01/ (A) Answer by choosing the correct alternative. (Any 10) (10)
1. Interest on debentures is calculated on its __________________________
a) face value b) market value c) issue price d) value payable on redemption
2. Preference shares must be redeemed within ________from the date of issue.
a) 10 years b) 15 years c) 20 years d) 25 years
3. Profit on re-issue of shares is transferred to __________
a) Profit and Loss account b) Capital Redemption Reserve c) General Reserve
d) Capital Reserve
4. When equity shares are issued at a premium by a Company, the amount of premium is
___________________
a) debited to Securities Premium a/c b) credited to Securities Premium a/c
c) credited to Profit and Loss a/c d) credited to General Reserve a/c
5. The loss incurred by a company before incorporation ____________.
a) is debited to Goodwill A/c by the company
b) is normal revenue profit earned by the company.
c) is credited to Capital Reserve A/c by the company.
d) is debited to General Reserve by the company.
6. For the purpose of computing profit prior to incorporation, Gross Profit is _____________
a) distributed equally between pre and post incorporation periods
b) distributed in sales ratio between pre and post incorporation periods
c) distributed in time ratio between pre and post incorporation periods
d) distributed only in post-incorporation period
7. Profit on sale of Sinking Fund Investments is ______________
a) credited to Sinking Fund a/c b) debited to Sinking Fund a/c
c) credited to Profit and Loss a/c d) credited to Capital Reserve a/c
8. The Capital redemption Reserve A/c can be used for ______________
a) payment of dividend
b) payment of premium on redemption of debentures
c) writing off accumulated losses
d) issue of fully paid bonus shares
9. Loss on issue of debentures is treated as _________________
a) Intangible asset b) Current asset c) Tangible asset d) Deferred Revenue Expenditure
10. RBI is a ________ Company.
a) Registered b) Listed c) Chartered d) Statutory
11. ABC Ltd. issued 10,000 12% debentures of Rs.100 each at par, which are redeemable after 5
years at a premium of 10%. The amount of loss on redemption to be written off every year is
_______.
Rs.5,000 b) Rs. 10,000 c) Rs. 15,000 d) Rs.20,000
12. A company is created by ________________
a) Indian Income-Tax Act b) Indian Companies Act c) GST Act d) Indian Contract Act

Q.01/ (B) State whether the following statements are true or false. (Any 10) (10)
1. Shareholders are owners of a Company.
2. Directors’ fees is considered as expenditure only in post-incorporation period of a Company.
3. Dividend can be paid out of General Reserve.
4. The Auditor of a Government Company is appointed by the Comptroller and Auditor General
of India.
5. Shares issued to existing shareholders free of cost are known as Bonus shares.
6. Preference shares can be redeemed only out of proceeds of fresh issue of shares/debentures.
7. Amount payable on redemption of debentures is debited to Debenture-holders a/c.
8. Bearer debentures must be registered in the Register of Debentures.
9. A Company can issue irredeemable preference shares.
10. Goodwill is tangible fixed asset.
11. Issued Capital is a part of Subscribed Capital.
12. If a debenture is issued at an amount lower than its nominal value, then it is said to be issued
at par.

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Q.02 Following is the summarized Balance Sheet of Sun Ltd. as on 31st March, 2022 : (20)

Liabilities Rs. Assets Rs.

10,000 11% preference Shares 10,00,000 Fixed Assets 32,00,000
of Rs. 100 each
2,00,000 Equity Shares of Rs. 10 20,00,000 Investments 10,00,000
each fully paid Market value: Rs.10,80,000
Profit & Loss A/c 11,00,000 Bank 6,00,000
General Reserve 4,00,000 Other current assets 4,90,000
Securities Premium 1,60,000
Current Liabilities 6,30,000
52,90,000 52,90,000
The Preference shares are to be redeemed at 10% premium. For the purpose of redemption of
preference shares, the company made a fresh issue of 50,000 equity shares of Rs. 10 each at
Rs. 14 per share. 50% of the investments were sold at its market value. The company redeemed
the preference shares as per the terms. One preference shareholder holding 100 shares was
untraceable, hence payment could not be made to him. The Company also made a bonus issue
of equity shares at par in the ratio of one share for every five shares held after the new issue.
You are required to
1) Pass journal entries to record the above transactions.
2) Prepare the revised Balance Sheet of the company.
OR
Q.02/ (A) The Balance Sheet of Zee Ltd. contained the following items on 31st March 2022. (10)
8% Preference shares of Rs. 100 each Rs. 8,00,000
Security Premium account Rs. 75,000
General Reserve account Rs. 5,00,000
The company redeemed the shares at a premium of 5%. For the purpose of
redemption, it issued 50,000 equity shares of Rs. 10 each at a premium of 20%.
Pass the necessary journal entries in the books of the company.
AND

Q.02/ (B) Pass Journal Entries for following transactions : (10)

1) 400 7% Debentures of Rs. 100 each issued at 10% discount, redeemable at par after 6 years.
2) 500 8% Debentures of Rs. 100 each issued at 10% premium & redeemable at 15% premium
after 4 years.
3) 600 9% Debentures of Rs. 100 each issued at 10% discount & redeemable at 10% premium
after 5 years.
4) 200 9% Debentures of Rs. 100 each issued at 10% premium redeemable at par after 6 years.

Q.03 Hind Ltd. issued 40,000 12% Debentures of Rs. 100 each at Rs. 96 per debenture. The (20)
debentures are redeemable at par in four annual equal instalments. It is decided to write off
discount in proportion to the amount of debenture fund usage over the various years.
Prepare : a) 12% Debenture A/c b) Debenture Holders A/c c) Loss on issue of Debenture A/c
d) Debenture interest A/c
OR
Q.03 (A) The Surgical Strike Ltd was incorporated on 1st Sept 2021 to take over the business of a (10)
proprietor w.e.f. 1st April 2021. The company’s Profit & Loss account for the year
ended 31st March 2022 is as follows :
Profit and Loss Account for the year ended 31/3/2022
Gross Profit 25,000
Less : Salaries 7,500
General Expenses 4,000
Travelling expenses 13,500
Net Profit Nil
Other information :
1) Sales during the year ended were Rs. 1,50,000 of which Rs. 90,000 relate to the
post incorporation period.
2) Salaries include Rs. 1,500 as Proprietor’s salaries.
3) Rs. 3,000 in general expenses are fixed in nature.
4) Travelling expenses include Rs. 7,500 as salesmen’s travelling expenses and the
balance was incurred for Directors’ official visits.
Prepare statement of Profit & Loss account for the year ended 31/3/2022

AND

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Q.03 (B) PVR Ltd. had issued 2,000 16% Debentures of Rs. 100 each on 1st January, 2018 (10)
On 31st December, 2022, company decides to redeem its debentures at par and
offered the following three options.
I. 15% Preference Shares of Rs. 10 each at Rs. 12.
II. 12% Debentures of Rs. 100 each at par.
III. Redemption in cash.
The holders of 600 Debentures accepted Option I.
The holders of 600 Debentures accepted Option II.
The holders of 800 Debentures accepted Option III.
The redemption is carried out by Company.
Pass Journal Entries to record above transactions on 31st December, 2022 (ignore interest).

Q.04/ Shriram Ltd. was incorporated on 1st August 2021 to take over the business of (20)
Mr. Nishad with effect from 1st April 2021. The following Profit and Loss A/c was
prepared for the year ended 31st March 2022.
Particulars Rs. Particulars Rs.
To Auditors fees 300 By Gross Profit 50,000
To Bad debts 600 By Share transfer fees 1,000
To Commission on sales 3,500
To Preliminary expenses 1,000
To Debenture interest 1,150
To Interest on capital 400
To Depreciation 1,050
To Office salaries 12,000
To Nishad salary 1,000
To Advertisement 9,000
To Printing 750
To Travelling expenses 2,000
To Office Rent 4,800
To Electricity charges 2,550
To Directors fees 600
To Net Profit 10,300
51,000 51,000
Additional Information :
1. Total sales for the year amounted to Rs. 4,00,000 out of which Rs. 1,00,000 arose in the pre-
incorporation period.
2. Office rent was paid @ Rs. 4,200 p.a. upto 30/9/2021 and thereafter it was paid @ Rs. 5,400 p.a.
3. Travelling expenses include Rs. 800 towards sales promotion. The balance of the travelling
expenses are fixed in nature.
4. A debt of Rs. 200 taken over from the vendor.
5. A debt of Rs. 400 in respect of goods sold in September 2021.
6. Audit fees were paid for the entire year.
7. Depreciation includes Rs. 300 for assets acquired in the post incorporation period.
8. Allocate other expenses and income in an appropriate manner.
Prepare statement of Profit and Loss for the year ended 31/3/2022.
OR
st
Q.04 On 1 April 2019, GD Ltd. issued Rs. 60,00,000 14% Debentures of Rs. 100 (20)
each at par redeemable at a premium of 15%.
60% of the debentures are to be redeemed at the end of second year and the balance at
the end of third year. The Board has decided to transfer minimum required amount to
D.R.R. at the end of the First year.
Pass journal entries during the years of issue and redemption of Debentures. (ignore
interest and loss on issue of debentures)
Q.05/ (A) Briefly explain the procedure for calculation of pre-incorporation profits/losses of a
company. (10)
(B) Differentiate between Equity shares and Preference shares. (10)
OR
Q.05/ Write short notes on any 4. (20)
1) Rights issue vs. Bonus issue of shares 2)Government Company
2) SWEAT Equity shares 4)Capital Redemption Reserve
5) Premium on redemption of Debentures

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