ASSIGNMENT -2

True and False

1. A concern proposes to discontinue its business from December 2023 and decides to dispose off
all its plants within a period of 3 months. The Balance Sheet as on 31st December, 2023 should
continue to indicate the plants at its historical costs as the assets will be disposed off after the
Balance Sheet date.

2. The Sales book is kept to record both cash and credit sales.

3. Bank reconciliation statement is prepared to arrive at the bank balance.

4. Damaged Inventory should be valued at cost or market price, whichever is lower.

5. Reducing balance method of depreciation is followed to have a uniform charge for depreciation
and repairs and maintenance together.

6. Discount at the time of retirement of a bill is a gain for the drawee.

7. A withdrawal of cash from the business by the proprietor for personal use should be charged to
profit and loss account as an expense.

8. In case of admission of a new partner in a partnership firm, the profit/loss on revaluation

account is transferred to all partners in their new profit sharing ratio.

9. Where a Non-Profit organization separate trading activity, the profit and loss from the trading
account shall be transferred to Income and Expenditure Account at the time of consolidation.

10. In the balance sheet of X Limited, preliminary expenses amounting to ₹ 5 lakhs and securities
premium account of ₹ 35 lakhs are appearing; The accountant can use the balance in securities
premium account to write off preliminary expenses.

11. Debenture interest is payable after the payment of preference dividend but before the payment
of equity dividend.

12. At the end of the accounting year, all the nominal accounts of the ledger book are balanced.

13. Outstanding Expenditure is a nominal Account.

[Link] reconciliation statement is prepared to arrive at the bank balance.

15. The provision for discount on debtors is calculated before deducting the provision for doubtful
debts from debtors.

16. Land is also a depreciable asset.

17. Periodic inventory system is a method of ascertaining inventory by taking an actual physical
count.

18. Both revenue and capital nature transactions are recorded in the Receipts and Payments
Account.

19. Debentures Suspense Account appears on the Liability side of the Balance Sheet of a Company.

20. Accounting Standards for non-corporate entities in India are issued by the Central Government.

21. Cash book is a subsidiary book as well as a principal book.

22. Debit balance as Cash Book is same as overdraft as per passbook.

23. Warehouse rent paid for storage of finished inventory should be included in the cost of finished
inventory.

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24. Reducing balance method of depreciation is followed to have a uniform charge for depreciation
and repairs and maintenance together.

25. A Promissory note can be made payable to bearer.

26. Provision for Bad Debts is debited to Sundry Debtors A/c

27. Goodwill is intangible asset therefore it cannot be valued.

28. Outstanding salaries for the previous year shall be shown as liability in the current year balance
sheet.

29. A person holding preference shares of a company cannot hold equity shares of the same
company.

30. A Company is not allowed to issue shares at a discount to the public in general.

31. The debit notes issued are used to prepare sales return book.

32. Sale of office furniture should be credited to Profit and Loss Account.

33. Outstanding salaries for the previous year shall be shown as liability in the current year balance
sheet.

34. When closing inventory is overstated, net income for the accounting period will be understated.

35. The results and position disclosed by final accounts are not exact.

36. In case of a public holiday, the due date of the bill falls on the next working day.

37. Goodwill is intangible asset therefore it cannot be valued

38. Where a Non-Profit organization is a separate trading activity, the profit / loss from the trading
account shall be transferred to Income Expenditure Account at the time of consolidation.

39. The firm will receive surrender value of the joint life policy on the death of the partner.

40. Company X Ltd. is incurring huge losses; the Board of Directors are of the opinion that in case
of losses, there is no need to pay interest to debenture holders.

41. Accrual concept implies accounting on cash basis.

42. The Sales book is kept to record both cash and credit sales.

43. Bank reconciliation statement is prepared to arrive at the bank balance.

44. The provision for bad debts is debited to sundry debtors account.

45. Periodic inventory system is a method of ascertaining inventory by taking an actual physical
count.

46. Discount at the time of retirement of a bill is a gain for the drawee.

47. The provision for discount on creditors is often not provided in keeping with the principle of
conservatism.

48. Partners can share profits or losses in their capital ratio, when there is no agreement.

49. Both revenue and capital nature transactions are recorded in the Receipts and Payments
Account.

50. A fixed charge generally covers all the assets of the company including future one.

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51. A concern proposes to discontinue its business from December 2023 and decides to dispose off
all its plants within a period of 3 months. The Balance Sheet as on 31st December, 2023 should
continue to indicate the plants at its historical costs as the assets will be disposed off after the
Balance Sheet date.

52. The Sales book is kept to record both cash and credit sales.

53. Bank reconciliation statement is prepared to arrive at the bank balance.

54. Damaged Inventory should be valued at cost or market price, whichever is lower.

55. Reducing balance method of depreciation is followed to have a uniform charge for depreciation
and repairs and maintenance together.

56. Discount at the time of retirement of a bill is a gain for the drawee.

57. A withdrawal of cash from the business by the proprietor for personal use should be charged to
profit and loss account as an expense.

58. In case of admission of a new partner in a partnership firm, the profit/loss on revaluation
account is transferred to all partners in their new profit sharing ratio.

59. Where a Non-Profit organization separate trading activity, the profit and loss from the trading
account shall be transferred to Income and Expenditure Account at the time of consolidation.

60. In the balance sheet of X Limited, preliminary expenses amounting to ₹ 5 lakhs and securities
premium account of ₹ 35 lakhs are appearing; The accountant can use the balance in securities
premium account to write off preliminary expenses.

61. Debenture interest is payable after the payment of preference dividend but before the payment
of equity dividend.

62. If Closing Stock appears in the Trial Balance then it does not enter in Trading Account. It is
shown only in the Balance Sheet.

Theoretical Framework

1. What services can a Chartered Accountant provide to the society?

2. State the advantages of setting Accounting Standards.

3. Briefly explain the following Concepts of Accounting:

(i) Money Measurement Concept

(ii) Periodicity Concept.

4. Differentiate between Provisions and Contingent Liabilities

5. Under what circumstances can an enterprise change its accounting policy?

6. Explain Cash and Mercantile system of accounting.

7. Distinguish between fundamental accounting assumption and accounting policies.

8. Change in accounting policy may have a material effect on the items of financial statements.”
Explain the statement with the help of an example.

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Journal Entries

1. Journalise the following transactions in the books of Gopal Traders:

2023
April,5 Discounted a bill of exchange of ₹20,000 at 2% through bank.
April,8 Sold goods to Malik costing ₹ 20,000 at 25% above cost less trade discount
of 10% plus CGST and SGST @ 6%.
April,10 Purchased goods from trends industries for Rs 8,000 plus CGST and
SGST@6% each.
April,16 Received ₹5,800 form Amar Singh in full settlement of his account for ₹
6,000.
April,19 Goods given as charity costing ₹800, sale price ₹1,000. CGST and SGST
@6% each was paid at the time of purchase of such goods.
April,23 Received ₹510 from Ganesh on his account for ₹600.
April,25 Interest on loan from Akash ₹1,000 due but not paid.

2. You are required to pass necessary journal entries of the following

(i) Employees had taken stock worth ₹ 50,000 (Cost price ₹ 45,000) on the eve of New year
and the same was deducted from their salaries in the subsequent month.

(ii) Wages paid for erection of Machinery ₹ 16,000.

(iii) Withdrawn for personal use: Goods(Sales Price 8,000, Cost6,000) Cash 1,000

(iv) Purchase of goods from Sandeep of the list price of ₹ 60,000. He allowed 10% trade
discount, ₹1,500 cash discount was also allowed for quick payment.

(v) Purchased second hand machinery from Jawahar industries for ₹ 3,00,000 plus CGST
and SGST @ 6% each. Paid ₹ 1,00,000 immediately by cheque and balance to be paid
after two months.

3. Prepare Journal Entries for the following transactions in the books of Harpreet

(i) Customer’s cheque for ₹ 4,000 returned dishonoured for insufficient funds in his
accounts. The customer had availed a cash discount of ₹ 400.

(ii) Income tax liability of proprietor ₹ 8,500 was paid out of petty cash.

(iii) Defective goods worth ₹ 5,000 are sold for 3,000.

(iv) Purchase of goods from Sunny of the list price of ₹ 20,000. He allowed 5% trade
discount, ₹ 200 cash discount was also allowed for quick payment.

(v) Purchased goods from Sarah industries for ₹ 50,000 plus CGST and SGST@6% each.

(vi) Goods given as charity costing ₹ 1,600, sale price ₹ 2,000. CGST and SGST @ 6% each
was paid at the time of purchase of such goods

4. Pass a journal entry in each of the following cases:

(i) A running business was purchased by Mohan with following assets and liabilities:

Cash ₹ 20,000, Land ₹ 40,000, Furniture ₹ 10,000, Stock ₹ 20,000, Creditors ₹ 10,000,
Bank Overdraft ₹ 20,000.

(ii) Sold goods to Gagandeep for ₹ 1,00,000 at trade discount of 20% and charged IGST
@12%

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(iii) Goods distributed by way of free samples, ₹ 10,000.

(iv)goods of list price ₹ 40,000 returned by Gagandeep.

(v) Kuldeep became an insolvent and could pay only 50 paise in a rupee. Amount due from
him ₹ 6,000.

5. You are required to pass necessary journal entries in the books of Kewal:

(i) Cheque amounting ₹ 9,000 from Hari Krishan in full settlement of his account for ₹ 10,000.

(ii) Withdrawn for personal use: Goods (Sales Price ₹ 8,000, Cost ₹ 6,000), cash ₹ 1,000

(iii) Goods costing ₹ 3,000 (Sale price ₹4,000) distributed as free samples.

(iv) Received commission ₹ 10,000, half of which does not relate of current year and is
received in advance.

(v) Purchased second hand machinery from Jawahar industries for ₹ 3,00,000 plus CGST
and SGST @ 6% each. Paid ₹ 1,00,000 immediately by cheque and balance to be paid
after two months.

6. Journalise the following transactions in the books of Gopal Traders:

2023
April,5 Discounted a bill of exchange of 20,000 at 2% through bank.
April,8 Sold goods to Malik costing 20,000 at 25% above cost less trade discount of
10% plus CGST and SGST @ 6%.
April,10 Purchased goods from trends industries for Rs 8,000 plus CGST and SGST@6%
each
April,16 Received 5,800 form Amar Singh in full settlement of his account for 6,000.
April,19 Goods given as charity costing 800, sale price 1,000. CGST and SGST @6%
each was paid at the time of purchase of such goods.
April,23 Received ₹510 from Ganesh on his account for ₹600.
April,25 Interest on loan from Akash ₹1,000 due but not paid.

Capital or Revenue Expenditure

1. Classify the following receipts or expenditures as capital or revenue:

➢ Wages incurred by a factory in manufacturing a part for its plant.

➢ Travelling expenses of the directors for trips abroad for purchase of capital assets.

➢ An expenditure intended to benefit the current period.

➢ Amount paid for removal of stock to a new site.

➢ Amount received from sale of land and building by a real estate dealer

2. Classify each of the following transactions into capital or revenue transactions:

• Inauguration expenses of a new manufacturing unit in an existing Business

• Installation of a new central heating system.

• Providing drainage for a new piece of water-extraction equipment.

• An extension of railways track in the factory.

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3. Classify the following transactions either as capital or revenue expenditures or as capital or
revenue receipts;

(i) Dividend received from XYZ limited during the year.

(ii) Amount spent for replacement of a petrol driven engine by CNG kits.

(iii) Expenses incurred on the repairs and white washing for the first time on purchase of an
old factory.

(iv) Overhauling expenses of second-hand machine purchased.

(v) Insurance claim received on account of inventory damaged by fire.

(vi) Entrance fees of ₹35,000 received by society club.

4. Classify the following expenditures as capital or revenue expenditure/receipt:

(i) An extension of railway tracks in the factory area.

(ii) Amount spent on painting the factory.

(iii) Payment of wages for building a new office extension

(iv)Premium received on issue of shares

(v) Rings and Pistons of an engine were changed to get full efficiency.

(vi)Legal fees paid to acquire a property

5. Classify the following expenditures as capital or revenue expenditure:

(i) Travelling expenses of the directors for trips abroad for purchase of capital assets.

(ii) Amount spent to reduce working expenses.

(iii) Amount paid for removal of stock to a new site.

(iv) Cost of repairs on second-hand car purchased to bring it into working condition.

(v) Amount spent on renewal fee of patent rights.

6. Classify the following receipts or expenditures as capital or revenue:

(i) Wages incurred by a factory in manufacturing a part for its plant.

(ii) Travelling expenses of the directors for trips abroad for purchase of capital assets.

(iii) An expenditure intended to benefit the current period.

(iv)Amount paid for removal of stock to a new site.

(v) Amount received from sale of land and building by a real estate dealer.

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Cash Book

1. The following are some of the transactions of M/s Sameer traders - a garment dealer. Prepare
the sales book.

Sold to M/s. Chawla & Verma on credit:

30 shirts @ ₹ 700 per shirt.

20 trousers @ ₹1,000 per trouser.

Less: Trade Discount @ 10%

Sold furniture to M/s. Mittal & Co. on credit ₹8,000.

Sold 50 shirts to M/s. Nagpal & Sons @ ₹800 per shirt.

Sold typewriter to M/s. Goyal & Co. ₹7,200 for cash

Sold 30 shirts to Cheap Stores @ ₹750 each for cash.

Sold on credit to M/s. Madhu & Garg.

50 shirts @ ₹750 per shirt

20 overcoats @ ₹5,000 per overcoat.

Less: Trade Discount @ 10%

2. One of your clients Mr. Hari Om asked you to finalize his account for the year ended 31st
March,2025. As a basis for the audit, Mr. Hariom furnished you with the following statement:

Dr. Cr.
Hari Om's Capital 23,340
Hari Om's Drawings 8,460
Leasehold Premises 11,250
Sales 41,250
Due from customers 7,950
Purchases 18,885
Purchase Return 3,960
Loan from Bank 3,840
Trade Expense 10,500
Trade Payable 7,920
Bills Payable 1,500
Salaries and Wages 9,000
Cash at Bank 3,390
Opening Inventory 3,960
Rent and Rates 6,945
Sales Return 1,470
81,810 81,810
The closing inventory was ₹ 8,612. Mr. Hari om claims that he has recorded every transaction
correctly as the trial balance is tallied. Check the accuracy of the above trial balance and give
reasons for the errors, if any.

3. Prepare Sales Book of M/s. Alpha of Kanpur for March, 2024

➢ Mar. 5 Sold to M/s. ABC 10 pieces of Chairs @ ₹5,000/- each less Trade Discount 5%.

➢ Mar.12 Sold to M/s. PQR 25 pieces of Tables @₹2,000/- each less Trade Discount 10%.

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➢ Mar.18 Sold to M/s. MTB 5 pieces of Recliner Chairs @ ₹11000/- each less Trade
Discount 10%. Payment received through cash.

➢ Mar.28 Sold to M/s. LMS 50 pieces of cupboards @ ₹10,000/- each less Trade Discount
20%.

4. Prepare a Triple Column Cash Book from the following transactions of M/s Ram Agencies and
bring down the balance for the start of next month:

2024 ₹
March 1 Cash in hand 30,000
1 Cash at bank 1,20,000
2 Paid into bank 10,000
5 Bought furniture and issued cheque 15,000
8 Purchased goods for cash 5,000
12 Received cash from Mohan 9,800
Discount allowed to him 200
14 Cash sales 50,000
16 Paid to Lata by cheque 14,500
Discount received 500
19 Paid into Bank 5,000
23 Withdrawn from Bank for Private expenses 6,000
24 Received cheque from Gupta 14,300
Allowed him discount 200
26 Deposited Gupta's cheque into Bank
28 Withdrew cash from Bank for Office use 20,000
30 Paid rent by cheque 8,000

Rectification of Errors

1. M/s. Beta Chemicals labs were unable to agree the Trial Balance as on 31st March, 2023 and
have raised a suspense account for the difference. Next year the following errors were
discovered:

➢ Repairs made during the year were wrongly debited to the building A/c - ₹ 12,500.

➢ The addition of the 'Freight' column in the purchase journal was short by ₹ 15,000.

➢ Goods to the value of ₹ 4,500 returned by a customer, Shiv & Co., had been posted to
the debit of Shiv & Co. and also to sales returns.

➢ Sundry items of furniture sold for ₹ 30,000 had been entered in the sales book, the total
of which had been posted to sales account.

➢ A bill of exchange (received from Ms. Sapna) for ₹ 75,000 had been returned by the
bank as dishonoured and had been credited to the bank and debited to bills receivable
account.

You are required to pass journal entries to rectify the above mistakes.

2. Write out the Journal Entries to rectify the following errors, using a suspense Account.

➢ Goods of the value of ₹15,000 returned by Mr. Aman were entered in the Sales Day
Book and posted therefrom to the credit of his account;

➢ An amount of ₹7,500 entered in the Sales Returns Book, has been posted to the debit of
Mr. Ashish, who returned the goods;

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➢ The total of “Discount Allowed” column in the Cash Book for the month of June,2025
amounting to ₹27,500 was not posted, though correctly recorded in Debtors Account.

➢ Bad Debts aggregating ₹8,000 were written off during the year was not posted to Bad
Debts Account.

➢ A sale of ₹30,000 made to Ms. Aavya was correctly entered in the Sales Day Book but
wrongly posted to the debit of Ms. Aadya as ₹ 3,000;

➢ Supplier account has been overcast by Rs. 225.

3. Mr. Mathur's trial balance as on 31st March, 2024 did not agree.

The difference was put to a Suspense Account. During the next trading period, the following
errors were discovered:

(i) The total of the Purchases Book of one page, ₹ 7,165 was carried forward to the next
page as ₹ 7,615.

(ii) A sale of ₹ 281 was entered in the Sales Book as ₹ 821 and posted to the credit of the
customer.

(iii) A return to creditor, ₹ 1,595 was entered in the Returns Inward Book; however, the
creditor's account was correctly posted.

(iv) A cheque of ₹ 500 issued to a suppliers A/c (shown under trade payables) towards his
dues has been wrongly debited to purchases.

(v) Goods worth ₹ 1,400 were dispatched to a customer before the close of the year but no
invoice was made out.

(vi) Goods worth ₹ 1,600 were sent on sale or return basis to a customer and entered in the
Sales Book at the close of the year, the customer still had the option to return the
goods. The gross profit margin was 20% on sale.

(vii) Sale of goods to Mr. R for ₹ 3,000 was omitted to be recorded.

You are required to give journal entries to rectify the errors in a way so as to show the current
year's profit or loss correctly.

4. Mr. Satvik was unable to agree the Trial Balance last year and wrote off the difference to the
Profit and Loss Account of that year. Next year, he appointed a Chartered Accountant who
examined the old books and found the following mistakes:

✓ Purchase of a scooter was debited to conveyance account ₹ 30,000. Mr. Ratan charges
10% depreciation on scooter.

✓ The total of return inward book for July, 2024 ₹ 12,400 was not posted to the ledger.

✓ A credit purchase of goods from Mr. X for ₹ 20,000 was entered as sale.

✓ Receipt of cash from Mr. Preetish was posted to the account of Mr. Ravish ₹ 10,000.

✓ Receipt of cash from Mr. Chandu was posted to the debit of his account, ₹ 5,000.

✓ While carrying forward the total in the Purchases Account to the next Page ₹ 65,950 was
written instead of ₹ 55,950.

✓ Sale of goods to Mr. Rohan for ₹ 20,000 was omitted to be recorded.

✓ Freight paid on a machine ₹ 5,600 was posted to the freight Account as ₹ 6,500.

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Pass the necessary rectification entries.

5. Pass the Journal entries to rectify the following errors detected during preparation of the Trial
Balance:

(i) Wages paid for construction of office building debited to wages account ₹ 20,000.

(ii) A credit sale of goods ₹ 1,200 to Ramesh has been wrongly passed through the Purchase
Book.

(iii) An amount of ₹ 2,000 due from Mahesh Chand which had been written off as a bad debit
in the previous year was unexpectedly recovered and has been posted to the personal account
of Mahesh Chand.

(iv) Goods (Cost being ₹ 15,000 and Sales price being ₹ 16,000) distributed as free samples
amount prospective customers were not recorded anywhere.

(v) Goods worth ₹ 1,500 returned by Ritu have not been recorded anywhere.

Bank Reconciliation Statement

1. On 31 December 2023, Bank Statement of Samar & Co. was showing a favourable balance of
₹1,05,980. This did not agree with the balance in the cash book. On scrutiny of the Cash Book
and Bank Statement following discrepancies were found:

✓ A deposit of 30,825 made on 29th December 2023 had not been credited by the bank till
31 December 2023.

✓ Cheques issued for ₹48,400 not presented for payment till 31 December 2023.

✓ On 25th September 2023, the firm had entered into Hire Purchase agreement to pay by
bank order a sum of ₹ 25,000 on the 10th of each month, commencing from October
2023. For this transaction no entries had been made in cash book.

✓ A customer of the firm, who received a cash discount of 4% on his account of ₹2,00,000
paid the firm a cheque on 22 December. The Cashier erroneously entered the gross
amount in the bank column of the Cash Book.

✓ Bank Charges amounting to ₹1,250 had not been entered in Cash Book

✓ Dividend of 25,000 collected by bank was not recorded in cash

Prepare Bank Reconciliation Statement as on 31st December 2023. .

2. The Cash-book of M/s Mazars shows ₹ 27,570 as the balance at Bank as on 31st March, 2025.
But this does not agree with balance as per the Bank Statement. On scrutiny following
discrepancies were found:

✓ Subsidy ₹ 10,250 received from the government directly by the bank, but not advised to
the company.

✓ On 15th March, 2025 the payments side of the Cash-book was under cast by ₹ 350.

✓ On 20th March, 2025 the debit balance of ₹ 2,156 as on the previous day, was brought
forward as credit balance in Cash-book.

✓ A customer of the M/s Mazars, who received a cash discount of 5% on his account of ₹
2,000, paid to M/s Mazars a cheque on 24th March, 2025. The cashier erroneously
entered the gross amount in the Cash-Book.

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✓ On 10th March, 2025 a bill for ₹ 5,700 was discounted from the bank, entered in Cash-
book, but proceeds credited in Bank Statement amounted to ₹ 5,500 only.

✓ A cheque issued amounting to Ravi for ₹ 1,725 returned marked ‘out of date’. No entry
made in Cash-book.

✓ Insurance premium ₹ 900 paid directly by bank under a standing order. No entry made
in cash-book.

✓ A bill receivable for ₹ 1,530 discounted for ₹ 1,500 with the bank had been dishonoured
on 30th March, 2025, but advice was received on 1st April, 2025.

✓ Bank recorded a Cash deposit of ₹ 1,650 as ₹ 1,560.

Prepare Bank Reconciliation Statement on 31st March, 2025.

3. From the following information (as on 31.3.2024), prepare a bank reconciliation statement after
making necessary adjustments in the cash book:

Particulars
Bank balances as per the cash book (Dr.) 16,25,000
Cheques deposited, but not yet credited 22,37,500
Cheques issued but not yet presented for payment 17,81,000
Bank charges debited by bank but not recorded in the cash-book 6,250
Dividend directly collected by the bank 62,500
Insurance premium paid by bank as per standing instruction not intimated 7,950
Cash sales wrongly recorded in the Bank column of the cash-book 1,27,500
Customer’s cheque dishonoured by bank not recorded in the cash-book 65,000
Wrong credit given by the bank 75,000
Also show the bank balance that will appear in the trial balance as on 31.3.2024.

4. From the following particulars of M/s Iqbal enterprises, prepare a Bank reconciliation statement:

• Bank overdraft as per Pass Book as on 31st March, 2024 was ₹ 8,800

• Cheques deposited in Bank for ₹ 5,800 but only ₹ 2,000 were cleared till 31st March.

• Cheques issued were ₹ 2,500, ₹ 3,800 and ₹ 2,000 during the month. The cheque of ₹
5,800 is still with supplier.

• Dividend collected by Bank ₹ 1,250 was wrongly entered as ₹ 1,520 in Cash Book.

• Corporation tax ₹ 1,200 paid by Bank as per standing instruction appears in Pass Book
only.

• Interest on overdraft ₹ 930 was debited by Bank in Pass Book and the information was
received only on 3rd April 2024.

• Direct deposit by M/s Rajesh Trader ₹ 400 not entered in Cash Book.

• Amount transferred from fixed deposit A/c into the current A/c ₹ 2,000 appeared only in
Pass Book.

5. According to the cash-book of Mihir there was balance of ₹ 4,45,000 in his bank on 30th June,
2024 On investigation you find that :

(i) Cheques amounting to 60,000 issued to creditors have not been presented for payment till
the date

(ii) Cheques paid into bank amounting to 1,10,500 out of which cheques amounting to ₹
55,000 only collected by bank up to 30th June 2024

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(iii) A dividend of ₹ 4,000 and rent amounting to 60,000 received by the bank and entered in
the pass-book but not recorded in the cash book.

(iv) Insurance premium (up to 31st December, 2023) paid by the bank ₹ 2,700 not entered in
the cash book.

(v) The payment side of the cash book had been under cast by ₹ 500

(vi) Bank charges ₹ 150 shown in the pass book had not been entered in the cash book.

(vii) A bill payable of ₹ 20,000 had been paid by the bank but was not entered in the cash
book and bill receivable for ₹ 6,000 had been discounted with the bank at a cost of ₹ 100
which had also not been recorded in cash book.

You are required:

(1) To make the appropriate adjustments in the cash book, and

(2) To prepare a statement reconciling it with the bank pass book.

6. On 31 December 2023, Bank Statement of Samar & Co. was showing a favourable balance of
₹1,05,980. This did not agree with the balance in the cash book. On scrutiny of the Cash Book
and Bank Statement following discrepancies were found:

✓ A deposit of 30,825 made on 29th December 2023 had not been credited by the bank till
31 December 2023.

✓ Cheques issued for ₹48,400 not presented for payment till 31 December 2023.

✓ On 25th September 2023, the firm had entered into Hire Purchase agreement to pay by
bank order a sum of ₹ 25,000 on the 10th of each month, commencing from October
2023. For this transaction no entries had been made in cash book.

✓ A customer of the firm, who received a cash discount of 4% on his account of ₹2,00,000
paid the firm a cheque on 22 December. The Cashier erroneously entered the gross
amount in the bank column of the Cash Book.

✓ Bank Charges amounting to ₹1,250 had not been entered in Cash Book

✓ Dividend of 25,000 collected by bank was not recorded in cash book.

Prepare Bank Reconciliation Statement as on 31st December 2023. .

Valuation of Inventories

1. A trader prepared his accounts on 31st March, each year. Due to some unavoidable reasons,
no stock taking could be possible till 15th April, 2023 on which date the total cost of goods in
his godown came to ₹ 50,000. The following facts were established between 31st March and
15th April, 2023.

✓ Sales ₹ 41,000 (including cash sales ₹ 10,000)

✓ Purchases ₹ 5,034 (including cash purchases ₹ 1,990)

✓ Sales Return ₹ 1,000.

✓ On 15th March, goods of the sale value of ₹ 10,000 were sent on sale or return basis to
a customer, the period of approval being four weeks. He returned 40% of the goods on
10th April, approving the rest; the customer was billed on 16th April.

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✓ The trader had also received goods costing ₹ 8,000 in March, for sale on consignment
basis; 20% of the goods had been sold by 31st March, and another 50% by the 15th
April. These sales are not included in above sales.

✓ Goods are sold by the trader at a profit of 20% on sales.

You are required to ascertain the value of Inventory as on 31st March, 2023.

2. From the following particulars ascertain the value of inventories as on 31st March, 2025 :

Inventory as on 1st April, 2024 ₹ 10,50,000

Purchase made during the year ₹ 36,00,000

Sales ₹ 55,50,000

Manufacturing Expenses ₹ 3,00,000

Selling and Distribution Expenses ₹ 1,50,000

Administration Expenses ₹ 2,40,000

At the time of valuing inventory as on 31st March, 2024, a sum of ₹ 60,000 was written off on
a particular item which was originally purchased for ₹ 1,65,000 and was sold during the year
for ₹ 1,50,000.

Except the above mentioned transaction, gross profit earned during the year was 20% on
sales.

3. Closing stock is valued by Zebra Stores on generally accepted accounting principles. Stock
taking for the year ended 31st March, 2024 was completed by 10th April, 2024, the valuation
of which showed a stock figure of ₹ 5,02,500 at cost as on the completion date. After the end
of the accounting year and till the date of completion of stock taking, sales for the next year
were made for ₹ 20,625, profit margin being 33.33 percent on cost. Purchases for the next
year included in the stock amounted to ₹ 27,000 at cost less trade discount 10 percent. During
this period, goods were added to stock of the mark up price of ₹ 900 in respect of sales
returns. After stock taking it was found that there were certain very old slow moving items
costing ₹ 3,375 which should be taken at ₹ 1,575 to ensure disposal to an interested customer.
Due to heavy floods, certain goods costing ₹ 4,650 were received from the supplier beyond the
delivery date of customer. As a result, the customer refused to take delivery and net realizable
value of the goods was estimated to be ₹ 3,750 on 31st March, 2024.

You are required to calculate the value of stock for inclusion in the final accounts for the year
ended 31st March, 2024.

4. The following are the details of material inventory bought and used by manufacturing company:

Date Particulars Unit and Rate

1.10.24 Balance opening inventory NIL
1.10.24 Material bought 200 unit, ₹60 per unit
2.10.24 Issued for use 100 unit
3.10.24 Material bought 400 unit, ₹80 per unit
4.10.24 Issued for use 200 unit
7.10.24 Issued for use 200 unit
You are required to calculate the value of inventory material as on 7.10.24 by applying
weighted average method.

5. From the following information, calculate the historical cost of closing inventories using
adjusted selling price method:

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Purchase during the year ₹ 10,00,000
Sales during the year ₹ 15,00,000
Opening Inventory Nil
Closing Inventory at selling price ₹ 2,00,000

6. From the following particulars ascertain the value of inventories as on 31st March, 2024 :

Inventory as on 1st April, 2023 3,50,000

Purchase made during the year 12,00,000
Sales 18,50,000
Manufacturing Expenses 1,00,000
Selling and Distribution Expenses 50,000
Administration Expenses 80,000
At the time of valuing inventory as on 31st March, 2023, a sum of ₹ 20,000 was written off on
a particular item which was originally purchased for ₹ 55,000 and was sold during the year for
₹ 50,000.

Except the above mentioned transaction, gross profit earned during the year was 20 % on
sales.

7. A trader prepared his accounts on 31st March, each year. Due to some unavoidable reasons,
no stock taking could be possible till 15th April, 2023 on which date the total cost of goods in
his godown came to ₹ 50,000. The following facts were established between 31st March and
15th April, 2023.

• Sales ₹ 41,000 (including cash sales ₹ 10,000)

• Purchases ₹ 5,034 (including cash purchases ₹ 1,990)

• Sales Return ₹ 1,000.

• On 15th March, goods of the sale value of ₹ 10,000 were sent on sale or return basis to
a customer, the period of approval being four weeks. He returned 40% of the goods on
10th April, approving the rest; the customer was billed on 16th April.

• The trader had also received goods costing ₹ 8,000 in March, for sale on consignment
basis; 20% of the goods had been sold by 31st March, and another 50% by the 15th
April. These sales are not included in above sales.

• Goods are sold by the trader at a profit of 20% on sales.

You are required to ascertain the value of Inventory as on 31st March, 2023.

Concept and Accounting of Depreciation

1. M/s. Mohit Transport Company purchased 10 Buses @ ₹ 25,00,000 each on 1st July 2020. On
1st October, 2022, one of the buses is involved in an accident and is completely destroyed and
₹ 17,50,000 is received from the insurance in full settlement. On the same date, another bus
was purchased by the company for the sum of ₹ 30,00,000. The company writes off 20% of
the original cost per annum. The company observes the calendar year as its financial year.

Give the Bus account for two years ending 31st December, 2023.

2. A purchased machinery on 01.01.2021 for ₹1,94,000 and spent ₹6,000 on its erection. On
01.07.2021, additional Machinery costing ₹1,00,000 were purchased. On 01.01.2023, the
Machinery purchased on 01.01.2021 having become obsolete was auctioned for ₹1,00,000. On
01.07.2023, a new machinery was purchased at a cost of ₹1,50,000. Depreciation was

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provided for annually on 31st December at the rate of 10% per annum on the original cost of
the Machinery. In 2024, A changed the method of writing off 15% p.a. in the written down
show the Machinery Account for the Calendar Yare 2021 to 2024.

3. The Machinery Account of a Factory showed a balance of ₹ 95 Lakhs on 1st April,2023. The
Books of Accounts of the Factory are closed on 31st March every year and depreciation @ 10%
per annum is charged under the Diminishing Balance Method. On 1st September,2023 a new
machine was acquired at a cost of ₹ 14 Lakhs and ₹ 44,600 was incurred on the same day as
installation charges for erecting the machine. On 1st September,2023 a machine which had
cost ₹ 21,87,000 on 1st April,2021 was sold for ₹ 3,75,000. Another machine which had cost ₹
21,85,000 on 1st April,2022 was scrapped on 1st September,2023 and it realized nothing.

Prepare Machinery Account for the year ended 31st March,2024. Allow the same rate of
depreciation as in the past and calculate depreciation to the nearest multiple of a rupee. Also
show all the necessary working notes.

4. M/s. Deep lakshmi purchased a second-hand machine on 1st April, 2020 for ₹ 1,60,000.
Overhauling and erection charges amounted to ₹ 40,000.

Another machine was purchased for ₹ 80,000 on 1st Oct, 2020.

On 1st Oct, 2022, the machine installed on 1st April, 2020 was sold for ₹ 1,00,000. Another
machine for ₹30,000 was purchased and was installed on 31st December, 2022.

Under the existing practice the company provides depreciation @ 10%p.a. on original cost.
However, from 1st April,2023 it decided to adopt WDV method and to charge depreciation @
15% p.a. You are required to prepare Machinery account for the years 2020 to 2024.

5. M/s. Deepak Transport Company purchased 10 trucks @ ₹ 50,00,000 each on 1st

October,2020. On 1st January, 2023, one of the trucks is involved in an accident and is
completely destroyed and ₹ 35,00,000 is received from the insurance in full settlement. On the
same date, another truck is purchased by the company for the sum of ₹ 60,00,000. The
company writes off 20% of the original cost per annum.

Give the motor truck account for the years ending 31st March, 2023 and 31st March,2024.

6. M/s. Mohit Transport Company purchased 10 Buses @ ₹ 25,00,000 each on 1st July 2020. On
1st October, 2022, one of the buses is involved in an accident and is completely destroyed and
₹ 17,50,000 is received from the insurance in full settlement. On the same date, another bus
was purchased by the company for the sum of ₹ 30,00,000. The company writes off 20% of
the original cost per annum. The company observes the calendar year as its financial year.

Give the Bus account for two years ending 31st December, 2023.

Bills of Exchange

1. Chavi owed ₹ 1,00,000 to Ritu. Chavi accepted a bill drawn by Ritu for the amount at 3
months. After 3 days, Ritu got the bill discounted with her bank for ₹ 99,000. Before the due
date, Chavi approached Ritu for renewal of the bill. Ritu agreed on the conditions that ₹ 50,000
be paid immediately together with interest on the remaining amount at 12% per annum for 3
months and for the balance, Chavi should accept a new bill at three months. These
arrangements were carried out. But afterwards, Chavi became insolvent and 40% of the
amount could be recovered from his estate.

Pass journal entries (with narration) in the books of Ritu.

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2. Mr. Kabir accepted a bill for ₹ 10,000 drawn on him by Mr. Samarveer on 1st August, 2024 for
3 months. This was for the amount which Kabir owed to Samarveer. On the same date Mr.
Samarveer got the bill discounted at his bank for ₹ 9,800.

On the due date, Kabir approached Samarveer for renewal of the bill. Mr. Kabir agreed on
condition that ₹ 2,000 be paid immediately along with interest on the remaining amount at
12% p.a. for 3 months and that for the remaining balance B should accept a new bill for 3
months. These arrangements were carried through. On 31st December, 2024, Kabir became
insolvent and his estate paid 40%.

Prepare Journal Entries in the books of Mr. Samarveer.

3. On October, 2024, Samar sells goods to Amar for ₹ 25,000 plus IGST @ 18% and draws two
bills of exchange on him; the first bill fort ₹ 15,000 for 2 months and second bill for the
balance for 3 months. Amar accepts and returns these bills to Samar. Both the bills are sent to
the bank for collection on 1st October, 2024. In due course, Samar receives the information
from the bank on the due date of the respective bill that the bill for ₹ 15,000 has been duly
met and the other bill has been dishonored. Noting charges paid on the dishonor of second bill
are ₹ 500. Pass the journal entries in the books of Samar along with narration.

4. On 1st April,2024, X sells goods to Y for ₹25,000 plus IGST@ 18% and draws two bills of
exchange on him; the first bill for ₹15,000 for 2 months and second bill for the balance for 3
months. Y accepts and returns these bills to X. Both the bills are sent to the bank for collection

on 1st April,2024. In due course, X receives the information from the bank on the due date of
the respective bill that the bill for ₹15,000 has been duly met and the other bill has been
dishonored. Noting charges paid on the dishonour of second bill are ₹500. Pass the journal
entries along with narrations in the books of X.

5. Aadya owed ₹ 1,00,000 to Aanya. On 1st October, 2023, Aadya accepted a bill drawn by Aanya
for the amount at 3 months. Aanya got the bill discounted with his bank for ₹ 99,000 on 3rd
October, 2023. Before the due date, Aadya approached Aanya for renewal of the bill. Aanya
agreed on the conditions that ₹ 50,000 be paid immediately together with interest on the
remaining amount at 12% per annum for 3 months and for the balance, Aadya should accept a
new bill at three months. These arrangements were carried out. But afterwards, Aadya became
insolvent and 40% of the amount could be recovered from his estate.

Pass journal entries (with narration) in the books of Aanya (ignore dates).

Final accounts and Rectification of entries

1. The following is the trial balance of Mr. Samuel for the year ended 31st March,2024:

Trial Balance as on 31st March,2024

Dr. Cr.
Capital 9,50,000
Sundry Creditors 3,25,000
Purchase Returns 50,000
Loan from Mr. Sahil 4,00,000
Provision for Bad and Doubtful Debts 25,000
Sales 44,20,000
Bank overdraft 6,00,000
Opening Stock:
Raw Materials 2,50,000
Finished goods 4,25,000
Purchase of Raw Materials 34,00,000
Land 50,000
Building 6,00,000

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Loose tools 1,50,000
Plant & Machinery 3,00,000
Investments 2,50,000
Cash in Hand 15,500
Cash in Bank 43,500
Furniture & Fixtures 1,25,000
Sundry Debtors 3,75,000
Drawings 60,000
Salaries 90,000
Coal and Fuel 1,05,000
Factory rent 77,000
General Expenses 39,000
Sales Return 55,000
Bad Debts 15,000
Direct Wages (Factory) 1,20,000
Power 80,000
Interest Paid on Bank overdraft 90,000
Carriage Inwards 30,000
Carriage Outwards 25,000
67,70,000 67,70,000
Additional Information:

• Stock of Raw materials and finished goods at the end of the year was ₹ 5,00,000 and ₹
4,37,500 respectively.

• A provision for doubtful debts at 5% on Sundry Debtors.

• Depreciate building by 10%, Plant and machinery by 15% and Furniture and fixtures by
10%,

• One month Factory rent is outstanding.

• Interest has accrued on investment and rate of interest is 10% p.a.

• Interest on loan from Mr. Sahil is payable @ 12% per annum. The loan was taken on
01.10.2023.

You are required to prepare Manufacturing Account, Trading Account, Profit and Loss Account
and Balance sheet for the year ended 31 March,2024.

2. The following is the Trial Balance of M/s Thomas & Associates on 31st March,2025:

Dr. Cr.
Capital 45,00,000
Drawings 5,25,000
Fixed Assets (Opening) 10,50,000
Fixed Assets (Additions 01.10.2024) 15,00,000
Opening Stock 4,50,000
Purchases 1,20,00,000
Purchases Returns 5,17,500
Sales 1,65,00,000
Sales Returns 7,42,500
Debtors 18,75,000
Creditors 16,50,000
Expenses 4,80,000
Fixed Deposit with Bank 15,00,000
Interest on Fixed Deposit 1,50,000
Bank Overdraft 60,000
Suspense A/c 15,000
Rent (17 months upto 31.8.2025) 1,27,500

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Investments 12% (01.8.2024) 18,75,000
Bank Balance 12,67,500
2,33,92,500 2,33,92,500
Stock on 31st March,2025 was valued at ₹ 7,50,000. Depreciation is to be provided at 10% per
annum on fixed assets purchased during the year. A scrutiny of the books of account revealed
the following matters:

(i) ₹ 1,50,000 drawn from bank was debited to Drawings account, but out of this amount
withdrawn ₹ 90,000 was used in the business for day-to-day expenses.

(ii) Purchase of goods worth ₹ 1,20,000 was not recorded in the books of account upto
31.03.2025, but the goods were included in stock.

(iii) Purchase returns of ₹ 7,500 was recorded in Sales Return Journal and the amount was
correctly posted to the Party’s A/c on the correct side.

(iv)Expenses include ₹ 45,000 in respect of the period after 31st March,2025.

Give the necessary Journal Entries in respect of (i) to (iv) and prepare the Final Accounts for
the year ended 31st March, 2025.

3. Charu decided to start business of fashion garments under the name of M/s. Bella Wear on 1st
April, 2023. She had a saving of about ₹ 10,00,000. She invested ₹ 3,00,000 out of her
savings and borrowed equal amount from bank. She purchased a commercial space for ₹
5,00,000 and further spent ₹ 1,00,000 on its renovation to make it ready for business.

Loan and interest repaid by her in the first year are as follows:

30th June, 2023 ₹ 15,000 principal+ ₹ 9,000 interest

30th September, 2023 ₹ 15,000 principal+ ₹ 8,550 interest
31st December, 2023 ₹ 15,000 principal+ ₹ 8,100 interest
31st March, 2024 ₹ 15,000 principal+ ₹ 7,650 interest.
In view of further capital requirement, she transferred ₹ 2,00,000 from her saving bank
account to the bank account of the business. She paid security deposit of ₹ 7,000 for telephone
connection. Furniture of ₹ 10,000 was purchased, All payments were made by cheque and all
receipts in cash were deposited in the bank.

At the end of the year, her business showed the following results:

Particulars Amount Particulars Amount

Total Sales 20,00,000 Total Purchases 17,00,000
Electricity Expenses paid 40,000 Telephone Charges 50,000
Cartage Outwards 60,000 Travelling Expenses 45,000
Entertainment Expenses 5,000 Maintenance Expenses 25,000
Misc. Expenses 15,000 Electricity Expenses Payable 20,000
Other Information:

(i) She withdrew ₹ 5,000 by cheque each month for her personal expenses.

(ii) Depreciation on building @ 5% p.a. and oil furniture @ 10% p.a.

(iii) Closing stock in hand as on 31st March, 2024: ₹ 5,50,000

Prepare trading account, profit and loss account for the year ended 31st March, 2024 and
Balance Sheet as on that date.

4. On 31st March, 2024 the trial balance of Mr. Robin was as follows:

Particulars Debit Particulars Credit

Stock on 1/4/2023 Sundry Creditors 4,50,000

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Raw Materials 6,30,000 Bills Payables 2,25,000
Work-in-Progress 2,85,000 Sale of scrap 75,000
Finished Goods 4,65,000 Commission received 13,500
Sundry Debtors 7,20,000 Provision for doubtful 49,500
Carriages on Purchase 45,000 Capital account 30,00,000
Bills Receivables 4,50,000 Sales 50,16,000
Wages 3,90,000 Bank overdraft 2,55,000
Salaries 3,00,000
Telephone and Internet 30,000
Charges

Repairs to office 10,500

Furniture
Cash at Bank 5,10,000
Office Furniture 3,00,000
Repairs to Plant 33,000
Purchases 25,50,000
Plant and Machinery 21,00,000
Rent 1,80,000
Lighting 40,500
General Expenses 45,000
90,84,000 90,84,000
The following additional information is available:

Stocks on 31st March,2024 were:

Raw material ₹ 4,86,000

Finished goods ₹ 5,43,000
Work-in-progress ₹ 2,34,000
Salaries and wages unpaid for the year ended 31st March, 2024 were respectively, ₹ 27,000
and ₹ 60,000. Machinery is to be depreciated by 10% and office furniture by 7½%. A
provision for doubtful debts is to be maintained @1% of sales. Rent is to be charged as to 3/4
to factory and 1/4 to office. Lighting is to be charged as to 2/3 to factory and 1/3 to office.

Prepare the Manufacturing Account, Trading Account and Profit and Loss Account for the year
ended on 31st March,2024.

5. The following is the Trial Balance of Mr. Shekhar on 31st March, 2024 :

Dr. ₹ Cr. ₹
Capital - 6,00,000
Drawings 70,000 -
Fixed Assets (Opening) 1,40,000 -
Fixed Assets (Additions 01.10.2024) 2,00,000 -
Opening Stock 60,000 -
Purchases 16,00,000 -
Purchases Returns - 69,000
Sales - 22,00,000
Sales Returns 99,000 -
Debtors 2,50,000 -
Creditors - 2,20,000
Expenses 50,000 -
Fixed Deposit with Bank 2,00,000 -
Interest on Fixed Deposit - 20,000
Cash - 8,000
Suspense A/c - 2,000
Depreciation 14,000 -
Rent (17 months upto 31.8.2024) 17,000 -
Investments 12% (01.8.2023) 2,50,000 -
Bank Balance 1,69,000 -

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31,19,000 31,19,000
Stock on 31st March, 2024 was valued at ₹ 1,00,000. Depreciation is to be provided at 10%
per annum on fixed assets purchased during the year. A scrutiny of the books of account
revealed the following matters :

(i) ₹ 20,000 drawn from bank was debited to Drawings account, but out of this amount
withdrawn ₹ 12,000 was used in the business for day-to-day expenses.

(ii) Purchase of goods worth ₹ 16,000 was not recorded in the books of account upto
31.03.2024, but the goods were included in stock.

(iii) Purchase returns of ₹ 1,000 was recorded in Sales Return Journal and the amount was
correctly posted to the Party’s A/c on the correct side.

(iv) Expenses include ₹ 6,000 in respect of the period after 31st March, 2024.

Give the necessary Journal Entries in respect of (i) to (iv) and prepare the Final Accounts for
the year ended 31st March, 2024.

Accounts from Incomplete records

1. Ankur keeps his books of accounts by single entry system. However, he is able to give you the
following lists of his assets and liabilities in the beginning as well as at the end of the year ended
31st March, 2024:

On 1st April, 2023 ₹ On 31st March, 2024 ₹

Cash in hand 1,750 1,400
Cash at bank 20,000 -
Bank Overdraft - 1,800
Bills Receivable 15,000 25,000
Stock 93,500 98,700
Debtors 60,000 70,000
Furniture and Fittings 65,000 65,000
Creditors 45,000 31,000
Bills Payable 5,000 Nil
Ankur introduced ₹ 10,000 as fresh capital on 1st October, 2023. He also withdrew ₹ 5,000 every
month for his household expenses.

During the year, there was no sale or fresh purchase of furniture and fittings. Ascertain the profit
earned by Ankur during the year ended 31st March, 2024 after depreciating furniture and fittings
@ 10% per annum and creating a provision for bad debts @ 5% on debtors.

2. Freeze Limited gives you the following information

Particulars ₹ Particulars ₹
Debtors as on 1st April (Opening 1,57,500 Discount allowed by Suppliers 15,750
Balance)
Creditors as on 1st April (Opening 1,82,250 Discount allowed to Customers 20,250
Balance)
Bills Receivable received during 1,05,750 Endorsed Bills Receivable 6,750
the year dishonoured
Bills Payable issued during the 1,19,250 Sales Return 24,750
year
Cash received from Customers 3,51,000 Bills Receivable Discounted 18,000
Cash paid to Suppliers 3,87,000 Discounted Bills Receivable 4,500
Bad Debts Recovered 36,000 Cash Sales 3,79,125
Bills Receivables endorsed to 60,750 Cash Purchases 4,45,050
Creditors
Bills Receivables dishonoured by 11,250 Debtors on 31st March (Closing 1,84,500
Customer Balance)

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Creditors as on 31st March 2,13,750
(Closing Balance)
You are required to calculate total sales and total purchases.

3. Saraswati Enterprises maintain their books of accounts under single entry system. The Balance
Sheet as on 31st March, 2024 was as follows:

Liabilities Assets
Capital A/c 67,500 Furniture & fixtures 15,000
Trade creditors 75,750 Stock 91,500
Outstanding expenses 6,750 Trade debtors 31,200
Prepaid insurance 300
Cash in hand & at bank 12,000
1,50,000 1,50,000
The following was the summary of cash and bank book for the year ended 31st March, 2025:

Receipts ₹ Payments ₹
To Cash in hand & at Bank 12,000 By payment to trade 12,48,300
on 1st April, 2024 creditors
To Cash sales 11,07,000 By Sundry expenses 93,105
To amount paid to debtors 2,77,500 By Drawings 36,000
By Cash in hand & at Bank 19,095
on 31st March, 2025
13,96,500 13,96,500
Additional Information:

(i) Discount allowed to trade debtors and received from trade creditors amounted to ₹5,400
and ₹4,250 respectively, (for the year ended 31st March, 2025)

(ii) Annual fire insurance premium of ₹900 was paid every year on 1st August for the renewal
of the policy. These expenses are included in sundry expenses.

(iii) Furniture & fixtures were subject to depreciation @ 15% p.a. or diminishing balance
method.

(iv) The following are the balances as on 31st March, 2025:

• Stock ₹97,500

• Trade debtors ₹34,300

• Outstanding expenses ₹5,520

Gross profit ratio of 10% on sales in maintained throughout the year.

You are required to prepare Trading and Profit & Loss account for the year ended 31st March,
2025, and Balance Sheet as on that date.

4. Following is the incomplete information of Moonlight Traders:

The following balances are available as on 31.03.2023 and 31.03.2024.

Balances 31.03.2023 31.03.2024

Land 5,00,000 5,00,000
Plant and Machinery 2,20,000 3,30,000
Office equipment Stock 85,000
Debtors ? 2,25,000
Creditors for purchases 95,000 ?
Creditors for office expenses 20,000 15,000
Stock ? 65,000
Long term loan from FBI @ 12%. 1,60,000 100,000

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Bank 25,000 ?

Other Information In ₹
Collection from debtors 9,25,000
Payment to creditors for purchases 5,25,000
Payment of office expenses (excluding interest on loan) 42,000
Salary paid 32,000
Selling expenses 15,000
Cash sales 2,50,000
Credit sales (80% of total sales)
Credit purchases 5,40,000
Cash purchases (40% of total purchases)
GP Margin at cost plus 25%
Discount Allowed 5,500
Discount Received 4,500
Depreciation to be provided as follows:
Plant and Machinery 10%
Office Equipment 15%
Other adjustments:

(i) On 01.10.23 they sold machine having Book Value ₹ 40,000 (as on 31.03.2023) at a loss
of ₹ 15,000. New machine was purchased on 01.01.2024.

(ii) Office equipment was sold at its book value on 01.04.2023.

(iii) Loan was partly repaid on 31.03.24 together with interest for the year.

You are required to prepare Trading, Profit & Loss Account and Balance Sheet as on 31.03.2024.

5. Shivam Enterprises maintain their books of accounts under single entry system. The Balance-
Sheet as on 31st March, 2023 was as follows :

Liabilities Amount (₹) Assets Amount (₹)

Capital A/c 6,75,000 Furniture & fixtures 1,50,000
Trade creditors 7,57,500 Stock 9,15,000
Outstanding expenses 67,500 Trade debtors 3,12,000
Prepaid insurance 3,000
Cash in hand & at bank 1,20,000
15,00,000 15,00,000
The following was the summary of cash and bank book for the year ended 31st March, 2024:

Receipts Amount (₹) Payments Amount (₹)

Cash in hand & at 1,20,000 Payment to trade 1,24,83,000
Bank on 1st April, creditors
2023

Cash sales 1,10,70,000 Sundry expenses paid 9,31,050

Receipts from trade 27,75,000 Drawings 3,60,000
debtors
Cash in hand & at 1,90,950
Bank on 31st March,
2024
1,39,65,000 1,39,65,000
Additional Information:

(i) Discount allowed to trade debtors and received from trade creditors amounted to ₹ 54,000
and ₹ 42,500 respectively (for the year ended 31st March, 2024).

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(ii) Annual fire insurance premium of ₹ 9,000 was paid every year on 1st August for the renewal
of the policy.

(iii) Furniture & fixtures were subject to depreciation @ 15% p.a. on diminishing balance method.

(iv) The following are the balances as on 31st March, 2024:

Stock ₹ 9,75,000
Trade debtors ₹ 3,43,000
Outstanding expenses ₹ 55,200
(v) Gross profit is to be maintained at 10% on total sales.

You are required to prepare Trading and Profit & Loss account for the year ended 31st March,
2024, and Balance Sheet as on that date.

Partnership Accounts

1. On 31st March, 2023, the Balance Sheet of X, Y and Z sharing profits and losses in proportion
to their Capital stood as below:

Liabilities ₹ Assets ₹
Capital Account: Land and Building 90,000
Mr. X 60,000 Plant and Machinery 60,000
Mr. Y 90,000 Stock of goods 36,000
Mr. Z 60,000 Sundry debtors 33,000
Sundry Creditors 30,000 Cash and Bank Balances 21,000
2,40,000 2,40,000
On 1st April, 2023, X desired to retire from the firm and remaining partners decided to carry
on the business. It was agreed to revalue the assets and liabilities on that date on the
following basis:

• Land and Building be appreciated by 20%.

• Plant and Machinery be depreciated by 30%.

• Stock of goods to be valued at ₹ 30,000.

• Old credit balances of Sundry creditors, ₹ 6,000 to be written back.

• Provisions for bad debts should be provided at 5%.

• Joint life policy of the partners surrendered and cash obtained ₹ 22,650.

• Goodwill of the entire firm is valued at ₹ 42,000 and X’s share of the goodwill is adjusted
in the A/cs of Y and Z, who would share the future profits equally. No goodwill account
being raised.

• The total capital of the firm is to be the same as before retirement. Individual capital is
in their profit sharing ratio.

• Amount due to Mr. X is to be settled on the following basis:

• 50% on retirement and the balance 50% within one year.

Prepare (a) Revaluation account, (b) The Capital accounts of the partners, (c) Cash account
and (d) Balance Sheet of the new firm M/s Y & Z as on 1.04.2023.

2. Seema, Meena & Tina are partners sharing profits and losses in the ratio of [Link]. There
capitals were ₹ 13,440, ₹ 8,400, ₹ 11,760 respectively.

Liabilities and assets of the firm are as under:

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Liabilities: ₹
Trade creditors 2,800
Loan from partners 1,400
Assets: ₹
Patent 1,400
Furniture 2,800
Machinery 1,680
Stock 5,600
The assets realized in full in the order in which they are listed above. Meena is insolvent.

You are required to prepare a statement showing the distribution of cash as and when
available, applying maximum possible loss procedure.

3. On 31st March, 2025, the Balance Sheet of P, Q and R sharing profits and losses in proportion
to their Capital stood as below:

Liabilities ₹ Assets ₹
Capital Account: Land and Building 75,000
Mr. P 50,000 Plant and Machinery 50,000
Mr. Q 75,000 Stock of goods 30,000
Mr. R 50,000 Sundry debtors 27,500
Sundry Creditors 25,000 Cash and Bank Balance 17,500
2,00,000 2,00,000
On 1st April, 2025, P desired to retire from the firm and remaining partners decided to carry on
the business. It was agreed to revalue the assets and liabilities on that date on the following
basis:

• Land and Building be appreciated by 20%.

• Plant and Machinery be depreciated by 30%.

• Stock of goods to be valued at ₹25,000.

• Old credit balances of Sundry creditors, ₹5,000 to be written back.

• Provisions for bad debts should be provided at 5%.

• Joint life policy of the partners surrendered and cash obtained ₹ 18,875.

• Goodwill of the entire firm is valued at ₹35,000 and P’s share of the goodwill is adjusted
in the A/cs of Q and R, who would share the future profits equally. No goodwill account
being raised.

• The total capital of the firm is to be the same as before retirement Individual capital is in
their profit sharing ratio.

• Amount due to Mr. P is to be settled on the following basis:

• 50% on retirement and the balance 50% within one year.

Prepare (a) Revaluation account, (b) The Capital accounts of the partners, (c) Cash account
and (d) Balance Sheet of the new firm M/s Q & R as on 1.04.2025.

4. The partnership deed of a firm consisting of 3 partners - Alfa, Beta and Gamma (profit sharing
ratio being [Link]) and whose fixed capitals are ₹ 90,000, ₹ 36,000 and ₹ 24,000 respectively
provides as follows:

(i) The partners are allowed interest @ 8% p.a. on their fixed capitals, but no interest is to
be allowed on undrawn profits or charged on drawings.

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(ii) That upon the death of a partner, the goodwill of the firm be valued at 2 years purchase
of the average net profit (after charging interest on capital) for the 3 years to 31st
December preceding the death of a partner.

(iii) That an insurance policy of ₹ 75,000 each was taken in individual names of each
partner. The premium was charged against the profits of the firm. The surrender value
of the policy was 20% of the sum assured.

(iv)Upon the death of a partner, he is to be credited with his share of the profits, interest
on capitals, etc. calculated upto 31st December following his death.

(v) That the share of the partnership policy and goodwill be credited to a deceased partner
as on 31st December following his death.

(vi)That the partnership books to be closed annually on 31st December.

(vii) Alfa died on 30th September, 2024. The amount standing to the credit of his
current account as on 31st December, 2023 was ₹ 15,000 and from that date to the
date of death he had withdrawn₹ 90,000 from the business.

(viii) An unrecorded liability of ₹ 18,000 was discovered on 30th September, 2024 and
it was decided to record it and immediately pay it off.

The trading results of the firm (before charging interest on capital) had been as follows:

• 2021 Profit ₹ 88,020

• 2022 Profit ₹ 79,410

• 2023 Loss ₹ 24,960

• 2024 Profit ₹ 40,410

You are required to prepare an account showing the amount due to Alfa's legal heir as of 31
December 2024.

Note: Impact for unrecorded liability not to be given in earlier years.

5. Seema, Yedhant and Zoya are in partnership, sharing profits and losses equally. Zoya died on
30th June 2024. The Balance Sheet of Firm as at 31st March 2024 stood as

Liabilities Amount Assets Amount

Creditors 20,000 Land and Building 1,50,000
General Reserve 12,000 Investments 65,000
Capital Accounts: Stock in trade 15,000
Seema 1,00,000 Trade receivables 35,000
Yedhant 75,000 Less: Provision for 33,000
doubtful debt (2,000)
Zoya 75,000 Cash in hand 7,000
Cash at bank 12,000
2,82,000 2,82,000
In order to arrive at the balance due to Zoya, it was mutually agreed that:

(i) Land and Building be valued at ₹ 1,75,000

(ii) Debtors were all good, no provision is required

(iii) Stock is valued at ₹ 13,500

(iv) Goodwill will be valued at one Year's purchase of the average profit of the past five years.
Zoya's share of goodwill be adjusted in the account of Seema and Yedhant.

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(v) Zoya's share of profit from 1st April 2024, to the date of death be calculated on the basis of
average profit of preceding three years.

(vi) The profit of the preceding five years ended 1st March were:

2024 2023 2022 2021 2020

25,000 20,000 22,500 35,000
You are required to prepare:

(1) Revaluation account

(2) Capital accounts of the partners and

(3) Balance sheet of the Firm as at 1st July 2024.

6. Agarwal, Samuel and Khan are partners in a firm. On 1st April 2022 their fixed capital stood at
₹ 2,50,000, ₹ 1,25,000 and ₹ 1,25,000 respectively.

As per the provision of partnership deed:

(1) Khan was entitled for a salary of 25,000 p.a.

(2) All the partners were entitled to interest on capital at 5% p.a.

(3) Profits and losses were to be shared in the ratio of Capitals of the partners.

Net Profit for the year ended 31st March, 2023 of ₹ 1,65,000 and 31st March,2024 of ₹
2,25,000 was divided equally without providing for the above adjustments.

You are required to pass an adjustment journal entry to rectify the above errors.

7. Aman, Yaman and Zaman who were sharing profits in the ratio of 3: 2:1 decided to dissolve
the firm on 31st March,2024 when their Balance Shet was as follows:

Liabilities ₹ Assets ₹
Capital A/cs: Building 1,50,000
Aman 1,80,000 Machinery 90,000
Yaman 1,35,000 Tools 12,000
Zaman 90,000 4,05,000 Car 18,000
Creditors 51,000 Debtors 93,000
Stock 55,500
Bank 37,500
Following transactions took place at the time of dissolution:

Assets realized are : ₹

Tools 7,500
Machinery 1,23,000
Building 1,26,000
Car 37,500
Goodwill 90,000
Debtors 88,500
(a) Creditors accepted stock in settlement of their dues.

(b) There was an unrecorded asset valued at ₹ 4,500 which was taken by Aman for ₹3,000.

(c) There was an old furniture which had been written off from the books. Yaman agreed to
take it at ₹ 12,000.

(d) Firm had to pay ₹ 12,000 for outstanding salary which not provided earlier.

Prepare Realisation Account, Partners’ Capital Accounts and Bank Account.

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8. Akbar and Bali are partners in a firm sharing profits and losses equally. On 1st April, 2023 the
balance of their Capital Accounts were : Akbar ₹ 50,000 and Bali ₹ 40,000. On that date the
balances of their Current Accounts were: Akbar ₹ 10,000 (credit) and Bali ₹ 3,000 (debit).
Interest @ 5% p.a. is to be allowed on the balance of Capital Accounts as on 1.4.2023. Bali is
to get annual salary of ₹ 3,000 which had not been withdrawn. Drawings of Akbar and Bali
during the year were ₹ 1,000 and ₹ 2,000 respectively. The profit for the year ended 31st
March, 2024 before charging interest on capital but after charging Bali salary was ₹ 70,000. It
is decided to transfer 10% of divisible profit to a Reserve Account. Prepare Profit & Loss
Appropriation Account for the year ended 31st March, 2024 and show Capital and Current
Accounts of the Partners for the year.

9. The following information given below:

Total Assets ₹10,00,000

External Liabilities ₹1,80,000

Normal Rate of Return 10%

Average Net Profit of last five years ₹1,00,000

You are required to calculate goodwill by applying:

Capitalization Method and

3 year’s purchase of super profits.

10. Acme & Co. is a partnership firm with partners Mr. X, Mr. Y and Mr. Z, sharing profits and
losses in the ratio of [Link]. The balance sheet of the firm as at 31st March, 2024 is as under:

Liabilities ₹ Assets ₹
Capitals: Land 30,000
Mr. X 2,40,000 Buildings 6,00,000
Mr. Y 60,000 Plant and 3,90,000
machinery
Mr. Z 90,000 3,90,000 Furniture 1,29,000
Reserves Investments 36,000
(un-appropriated profit) 60,000 Inventories 3,90,000
Long Term Debt 9,00,000 Trade receivables 4,17,000
Bank Overdraft 1,32,000
Trade payables 5,10,000
19,92,000 19,92,000
It was mutually agreed that Mr. Y will retire from partnership and in his place Mr. P will be
admitted as a partner with effect from 1st April, 2024. For this purpose, the following
adjustments are to be made:

Goodwill is to be valued at ₹3 lakh but the same will not appear as an asset in the books of the
reconstituted firm.

Buildings and plant and machinery are to be depreciated by 5% and 20% respectively.
Investments are to be taken over by the retiring partner at ₹ 45,000. Provision of 20% is to be
made on Trade receivables to cover doubtful debts.

In the reconstituted firm, the total capital will be ₹ 6 lakhs which will be contributed by Mr. X,
Mr. Z and Mr. P in their new profit sharing ratio, which is [Link].

The surplus funds, if any, will be used for repaying bank overdraft.

The amount due to retiring partner shall be transferred to his loan account.

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You are required to prepare

(a) Revaluation account;

(b) Partners capital accounts;

(c) Bank account; and

(d) Balance sheet of the reconstituted firm as on 1st April, 2024.

11. Neptune, Jupiter, Venus and Pluto had been carrying on business in partnership sharing profits
and losses in the ratio of 3 : 2 : 1 : 1. They decide to dissolve the partnership on the basis of
the following Balance Sheet as on 30th April, 2024:

Liabilities ₹ Assets ₹
Capital Account: Premises 1,20,000
Neptune 1,00,000 Furniture 40,000
Jupiter 60,000 1,60,000
General Reserve 56,000 Stock 1,00,000
Capital Reserve 14,000 Debtors 40,000
Sundry Creditors 20,000 Bank 8,000
Mortgage Loan 80,000 Capital Overdrawn
Venus 10,000
Pluto 12,000 22,000
3,30,000 3,30,000
The assets were realised as under:

₹
Debtors 24,000
Stock 60,000
Furniture 16,000
Premises 90,000
Expenses of dissolution amounted to ₹ 4,000.

Further creditors of ₹ 12,000 had to be met.

General Reserve unlike Capital Reserve was built up by appropriation of profits.

You are required to draw up the Realisation Account, Partners’ Capital Accounts and the Bank
Account assuming that Venus became insolvent and nothing was realised from his private
estate. Apply the principles laid down in Garner vs Murray.

12. A and B are partners in a firm. Their capitals are: A ₹ 6,00,000 and B ₹ 4,00,000. During the
year ended 31st March, 2024 the firm earned a profit of ₹ 3,00,000. Assuming that the normal
rate of return is 20%, calculate the value of goodwill on the firm:

(i) By Capitalization Method; and

(ii) By Super Profit Method if the goodwill is valued at 2 years’ purchase of Super Profit.

13. P and Q are partners, sharing profits and losses in the ratio of 3:1. As at 31st March, 2024,
following is the Balance Sheet of P and Q.

Balance Sheet as at 31st March, 2024

Liabilities (₹) Assets (₹)

Capital accounts Cash in hand 1,15,000
P 2,85,000 Cash at bank 1,10,000
Q 1,55,000 4,40,000 Sundry Debtors 1,60,000
Creditors 3,75,000 Stock 2,00,000
General reserve 60,000 Bills receivable 30,000

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Land and building 2,50,000
office furniture 10,000
8,75,000 8,75,000
They agreed to take R into Partnership on 1st April, 2024 on the following terms:

(i) Goodwill is to be valued at ₹ 2,00,000. R is unable to bring cash for his share of goodwill.
So, it was decided that due credit for goodwill be given to P and Q for their sacrifice in favour
of R through R’s current account.

(ii) R pays ₹ 1,40,000 as his capital for 1/5th share in the future profits.

(iii) Stock and Furniture to be reduced by 10%.

(iv) A provision @ 5% for doubtful debts to be created on debtors.

(v) Land and building to be appreciated by 20%.

(vi) Capital Accounts of the partners be readjusted on the basis of their profit sharing
arrangement and any excess or deficiency is to be transferred to their Current Accounts.

Prepare Revaluation Account and Partners Capital Accounts.

Financial Statements of Not for Profit Organizations

1. Hilfiger Sports club gives the following Receipts and Payments account for the year ended March
31,2023:

Receipts ₹ Payments ₹
To Opening cash and bank balances 1,04,000 By Salaries 3,00,000
To Subscription 6,96,000 By Rent and taxes 1,08,000
To Donations 2,00,000 By Electricity charges 12,000
To Interest on investments 24,000 By Sports goods 40,000
To Sundry receipts 6,000 By Library books 2,00,000
By Newspapers and 21,600
periodicals
By Miscellaneous 1,08,000
expenses
By Closing cash and bank 2,40,400
balances
10,30,000 10,30,000

Liabilities As on 31.3.2022 (₹) As on 31.3.2023 (₹)

Outstanding expense:
Salaries 20,000 40,000
Newspapers and periodicals 8,000 10,000
Rent and taxes 12,000 12,000
Electricity charges 16,000 20,000
Library Books 2,00,000 -
Sports goods 1,60,000 -
Furniture and fixtures 2,00,000 -
Subscription receivable 1,00,000 2,40,000
Investment government securities 10,00,000 -
Accrued interest 12,000 12,000
Provide depreciation as follows:

Furniture and fixtures @ 10%

Sports goods @ 20%

Library books @ 10%

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Provide full depreciation on additions.

Donations are to be capitalised.

You are required to prepare Club's opening Balance Sheet as on 1.4.2022, Income and
expenditure Account for the year ended on 31.3.2023 and Balance sheet as on that date.

2. From the following Receipts and Payments Account of Finance Professionals Club.

Receipts and Payments Account for the year ended 31st March, 2024

Receipts Amount Payments Amount

To Cash in Hand (Opening) 67,500 By Salaries 7,42,500
To cash at Bank (Opening) 18,90,000 By Stationery 1,34,550
To Subscriptions 22,86,000 By Billard Table 8,70,750
To Donations 10,80,000 By Investments 9,29,700
To Interest on Investments 27,000 By Expenses Miscellaneous 1,12,500
To Entrance Fees 2,70,000 By Furniture 18,45,000
To Interest Received from 94,500 By Insurance Premium 40,500
Bank
To Sale of Old Newspapers 13,500 By Cash in Hand (Closing) 49,500
By Cash at Bank (Closing) 10,03,500
57,28,500 57,28,500
(i) Subscriptions in arrears for the year ended 31st March, 2024- ₹2,02,500 and
Subscriptions received in advance during the year ended 31st March,2024 - ₹58,500.

(ii) Insurance Premium prepaid is ₹ 4,500.

(iii) The detail with respect to Stationery of Accountants Club is as follows:

1st April,2023 (₹) 31st March,2024

(₹)
Stock of Stationery 7,500 45,000
Creditors for Stationery 39,000 60,000
Advance paid for Stationery purchased --- 10,500
during the year
Prepare the Income and Expenditure Account for the year ended 31st March, 2024. As
per the club rules, donations are to be capitalized and entrance fees is the income of
club.

3. Dr. Malik started private practice on 1st April, 2024 with ₹ 8,00,000 of his own fund and ₹
12,00,000 borrowed at an interest of 12 p.a. on the security of his life policies. His accounts for
the year were kept on a cash basis and the following is his summarized cash account:

Receipts ₹ Payments ₹
Own Capital 8,00,000 Medicines Purchased 9,80,000
Loan 12,00,000 Surgical Equipment 10,00,000
Prescription Fees 26,40,000 Motor Car 12,80,000
Visiting Fees 10,00,000 Motor Car Expenses 4,80,000
Lecture Fees 96,000 Wages and Salaries 4,20,000
Pension Received 12,00,000 Rent of Clinic 2,40,000
General Charges 1,96,000
Household Expenses 7,20,000
Household Furniture 1,00,000
Expenses on Daughter's Marriage 8,60,000
Interest on Loan 1,44,000
Balance at Bank 4,40,000
Cash in Hand 76,000
69,36,000 69,36,000

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1/3rd of the motor car expenses may be treated as applicable to the private use of car and ₹
30,000 of salaries are in respect of domestic servants. The stock of medicines in hand on 31st
March, 2025 was valued at ₹ 3,80,000.

You are required to prepare his private practice income and expenditure account and capital
account for the year ended 31st March, 2025. Ignore depreciation on fixed assets.

4. The following is the Receipts and payments account of Masters Club for the year ended on 31st
March, 2024

Receipts and payments A/c for the year ended on 31st march 2024

Receipts Amount Payments Amount

To balance b/d 8,450 By Salaries and wages 12,250
To Subscription 23,000 By Supply of 18,250
refreshment
To Sale of refreshments 22,000 By Sports equipment 27,500
To Entrance fees 26,000 By Telephone Charges 2,800
To interest on investments @ 7% 4,550 By Electricity charges 15,600
By Honorarium charges 6,500
By balance c/d 1,100
84,000 84,000
Additional information:

Following are the assets and liabilities on 31st March, 2023:

Assets- Sports equipment- ₹ 32,000; Subscription in arrears-₹ 7,600; furniture- ₹ 12,480

Liabilities- Outstanding Electricity charges- ₹ 5,400; Subscription in advance- ₹ 6,250

Assets- Sports equipment- ₹ 50,500; Subscription in arrears-₹ 5,200; furniture- ₹ 11,180

Liabilities- Outstanding Electricity charges- ₹ 3,800; Subscription in advance- ₹ 4,850

50% of the entrance fees to be capitalized.

Interest on the investments is being received in full, and the investments have been made on
1.4.2022

You are required to prepare Income and Expenditure account and the Closing balance sheet as
of 31st March 2024 in the books of Masters Club.

5. The following information of M/s. Sanyam Club are related for the year ended 31st March,
2024:

Balances As on 01-04-2023 (₹) As on 31-3-2024 (₹)

Stock of Sports Material 75,000 1,12,500
Amount due for Sports Material 67,500 97,500
Subscription due 11,250 16,500
Subscription received in advance 9,000 5,250
Subscription received during the year ₹ 3,75,000

Payments for Sports Material during the year ₹ 2,25,000

You are required to:

(A) Calculate the amount of Subscription and Sports Material that will appear in Income &
Expenditure Account for the year ended 31.03.2024 and

(B) Also show how these items would appear in the Balance Sheet as on 31.03.2024

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Issue and Forfeiture of Shares

1. Y. Ltd issued 20,000 shares of ₹ 10 each at premium of 20% per share. Payables as following:

• On Application ₹ 2 Per share

• On Allotment ₹ 5 per share (including premium)

• On First Call ₹ 3 per share

• On Final Call ₹ 2 per share

Applications were received for 30,000 shares and pro-rata allotment was made to the
application for 24,000 shares. Any excess money paid on application was employed on
account of sum due on allotment.

Kamal, to whom 400 shares were allotted, failed to pay the allotment money and on his
subsequent failure to pay the first call his shares were forfeited.

Tamal, the holder of 600 shares, failed to pay the two calls, and his shares were forfeited
after the final call. Out of the shares forfeited, 800 shares were issued to Ramesh Credited as
fully paid for ₹ 9 per share, the whole of Kamal’s shares being included.

Pass the necessary journal entries to record the above transactions.

2. Ambiance Limited invited applications for issuing 2,25,000 equity shares of ₹ 10 each at a
premium of ₹ 5 per share. The total amount was payable as follows:

₹ 9 per share (including premium) on application and allotment

Balance on the First and Final Call

Applications for 9,00,000 equity shares were received. Applications for 6,00,000 equity shares
were rejected and money refunded. Shares were allotted on pro-rata basis to the remaining
applicants. The first and final call was made. The amount was duly received except on 4,500
shares applied by Mr. Kabir. His shares were forfeited. The forfeited shares were re-issued at
a discount of ₹ 4/- per share.

Pass necessary journal entries· for the above transactions in the books of Ambiance Limited.

3. Kunal Fortune Ltd invited applications for issuing 30,000 Equity Shares of ₹ 10 each. The
amount was payable as follows:

On Application ₹ 1 per share

On Allotment ₹ 2 per share
On First call ₹ 3 per share
On Second and final Call ₹ 3 per share
The issue was fully subscribed. Arun to whom 300 shares were allotted, failed to pay the
allotment money and his shares were forfeited immediately after the allotment. Ajeet to
whom 450 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 150 shares
were allotted failed to pay the second and final call. His shares were also forfeited. All the
forfeited shares were re-issued at ₹ 9 per share fully paid-up.

Pass necessary Journal entries in the books of Kunal Fortune Ltd.

4. On 1st April 2023, Globex Ltd. took over assets of ₹9,00,000 and liabilities of 1,20,000 of
Himalayan Ltd. for the purchase consideration of ₹ 8,80,000. It paid the purchase

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consideration by issuing 8% debenture of ₹ 100 each at 10% premium on same date. XY Ltd.
issued another 6000, 8% debenture of ₹ 100 at discount of 10% redeemable at premium of
5% after 5 years. According to the terms of the issue ₹ 30 is payable on application and the
balance on the allotment on debentures. It has been decided to write off the entire loss on
issue of discount in the current year itself.

You are required to pass the journal entries in the books of XY Ltd. for the financial year
2023-24

Issue of Debentures

1. On 1st April 2023, Sapan Ltd. (an unlisted NBFC) took over assets of ₹ 9,00,000 and liabilities
of 1,20,000 of Plus Herbs Ltd. for the purchase consideration of ₹ 8,80,000. It paid the
purchase consideration by issuing 8% debenture of ₹ 100 each at 10% premium on same
date.

Sapan Ltd. issued another 3000, 8% debenture of ₹ 100 at discount of 10% redeemable at
premium of 5 % after 5 years. According to the terms of the issue ₹ 30 is payable on
application and the balance on the allotment on debentures. It has been decided to write off
the entire loss on issue of discount in the current year itself.

You are required to pass the journal entries in the books of Sapan Ltd. for the financial year
2023-24.

2. On 1st April 2025 Weavers Ltd. issued 5,00,000 12% debentures of ₹ 100 each at a discount
of 5%, redeemable on 31st March, 2030. Issue was oversubscribed by 1,00,000 debentures,
who were refunded their money. Interest is paid annually on 31st March. You are required to
prepare:

Journal Entries at the time of issue of debentures.

Discount on issue of Debenture Account

Interest account and Debenture holder Account assuming TDS is deducted @10%

3. XYZ Ltd. has issued 2,500, 12% convertible debentures of ₹ 100 each redeemable after a
period of five years. According to the terms & conditions of the issue, these debentures were
redeemable at a premium of 5%. The debenture holders also had the option at the time of
redemption to convert 20% of their holdings into equity shares of ₹ 10 each at a price of ₹ 20
per share and balance in cash. Debenture holders amounting ₹ 50,000 opted to get their
debentures converted into equity shares as per terms of the issue. You are required to
calculate the number of shares issued and cash paid for redemption of ₹ 50,000 debenture
holders.

4. Following is the extract of Balance Sheet of Super Ltd. as at 31st March, 2025 :

₹
Authorized capital:
7,50,000 equity shares of ₹10 each 75,00,000
62,500,10% preference shares of ₹10 each 6,25,000
81,25,000
Issued and subscribed capital:
6,75,000 equity shares of ₹ 10 each fully paid up 67,50,000
60,000, 10% preference shares of ₹ 10 each fully paid up 6,00,000
73,50,000
Reserves and surplus:
General reserve 9,00,000
Capital redemption reserve 3,00,000
Securities premium (collected in cash) 1,87,500

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Profit and loss account 15,00,000
28,87,500
On 1st April, 2025, the company decided to capitalize its reserves by way of bonus at the rate
of two shares for every five equity shares held.

Show necessary journal entries in the books of the company and prepare the extract of the
balance sheet after bonus issue.

5. Strawberry farms Ltd. issued 20,000 11% debentures of ₹ 100 each at a discount of 5%,
payable ₹ 50 on application and ₹ 45 on allotment redeemable after 3 years.

(i) at a premium of 2% (ii) at a discount of 2%

Pass necessary journal entries for issue of debentures.

6. Well Done Ltd. issued 3,50,000, 12% Debentures of ₹100 each at par payable in full on
application by 1st April, Application were received for 3,85,000 Debentures. Debentures were
allotted on 7th April. Excess money refunded on the same date.

You are required to prepare necessary Journal Entries (including cash transactions) in the
books of the company.

7. A company had issued 40,000, 12% debentures of ₹ 100 each on 1st April, 2020. The
debentures were due for redemption on 1st March, 2024. The terms of issue of debentures
provided that they were redeemable at a premium of 5%. The company offered an option to
the debenture holders to convert redeemable value of 20% of their holding into equity shares
(nominal value ₹ 10) at a predetermined price of ₹ 15 per share and the payment in cash for
remaining debentures. 50 debentures holders holding totally 5,000 debentures did not
exercise the option. Calculate the number of equity shares to be allotted to the debenture
holders and the amount to be paid in cash on redemption

8. Following is the extract of Balance Sheet of Goldstar Ltd. as at 31st March, 2024 :

Authorized capital:
3,00,000 equity shares of ₹10 each 30,00,000
25,000,10% preference shares of ₹10 each 2,50,000
Issued and subscribed capital: 32,50,000
2,70,000 equity shares of ₹ 10 each fully paid up 27,00,000
24,000, 10% preference shares of ₹ 10 each fully paid up 2,40,000
29,40,000
Reserves and surplus:
General reserve 3,60,000
Capital redemption reserve 1,20,000
Securities premium (collected in cash) 75,000
Profit and loss account 6,00,000
11,55,000

On 1st April, 2024, the company decided to capitalize its reserves by way of bonus at the rate
of two shares for every five equity shares held.

Show necessary journal entries in the books of the company and prepare the extract of the
balance sheet after bonus issue.

Bonus Issue and Right Issue

1. Following are the balances appear in the trial balance of XYZ Ltd. as at 31st March, 2023.

Issued and Subscribed Capital:

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10,000; 10% Preference Shares of ₹ 10 each fully paid 1,00,000
1,00,000 Equity Shares of ₹ 10 each ₹ 8 paid up 8,00,000
Reserves and Surplus:
General Reserve 2,40,000
Securities Premium (collected in cash) 25,000
Profit and Loss Account 1,20,000
On 1st April, 2023 the company has made final call @ ₹ 2 each on 1,00,000 Equity Shares.
The call money was received by 15th April, 2023. Thereafter the company decided to issue
bonus shares to equity shareholders at the rate of 1 share for every 5 shares held and for this
purpose, it decided that there should be minimum reduction in free reserves. Pass Journal
entries.

Redemption of Preference Shares

1. Sushil Limited had 10,000, 10% Redeemable Preference Shares of ₹ 100 each, fully paid
up. The company had to redeem these shares at a premium of 10%.

It was decided by the company to issue the following:

80,000 Equity Shares of ₹ 10 each at par.

4,000 12% Debentures of ₹ 100 each.

The issue was fully subscribed and all accounts were received in full. The payment was
duly made. The company had sufficient profits. Show journal entries in the books of the
company.

2. A Limited is a company with' an authorised share capital of ₹ 2,50,00,000 in equity shares

of ₹ 10 each, of which 15,00,000 shares had been issued and fully paid up on 31st March,
2025. The company proposes to make a further issue of 337,500 of these ₹ 10 shares at a
price of ₹ 14 each, the arrangement of payment being:

₹ 2 per share payable on application, to be received by 31st May, 2025;

Allotment to be made on 10th June, 2025 and a further ₹ 5 per share (including the
premium to be payable);

The final call for the balance to be made, and the money received by 31st December,
2025.

Applications were received for 14,00,000 shares and dealt with as follows:

Applicants for 25,000 shares received allotment in full;

Applicants for 125,000 shares received allotment of 1 share for every 2 applied for; no
money was returned to these applicants, the surplus on application being used to reduce
the amount due on allotment;

Applicants for 12,50,000 shares 'received an allotment of 1 share for every 5 shares
applied for; the money due on allotment was retained by the company, the excess being
returned to the applicants; and

The money due on final call was received on the due date.

You are required to record these transactions (including bank transactions) in the Journal
Book of A Limited.

3. The extract of Balance Sheet of Hari Om Ltd. as on 31st March 2024 is as follows

Sr. No. Particulars Notes ₹ ₹

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I] EQUITY AND LIABILITIES
(1) Shareholders' funds
a) Share Capital 1 350,000
b) Reserve & Surplus 2 64,000
II] ASSETS
(1) Non-current assets
a) PPE & Intangible Assets
(i)PPE 2,25,000
b) Non-Current Investments 60,000
Notes to accounts:

Particulars ₹
1 Share capital
Authorized Share Capital
40,000 Equity shares of ₹ 10 each fully paid up 4,00,000
1,000 8% Preference shares of ₹ 100 each fully paid up 1,00,000
5,00,000
Issued, Subscribed Called Up and Paid up Share Capital
1000, 8% Preference shares of ₹ 100 each fully paid up 1,00,000
25,000 Equity shares of ₹ 10 each fully paid up 2,50,000
Total 3,50,000
2 Reserve and Surplus
Securities Premium Reserves 9,000
Profit and Loss Account 55,000
Total 64,000
In order to redeem its preference shares, the company issued 5,000 equity shares of ₹10
each at a premium of 10% and sold its investment of ₹ 70,800. Preference shares were
redeemed at a premium of 10%.

Show the necessary journal entries in the books of the company.

4. The following is the summarized Balance Sheet of Trinity Ltd. as at 31.3. 2023:

Liabilities ₹ Assets ₹
Share Capital Fixed Assets 3,00,000
Authorised Less:Dep 1,00,000 2,00,000
10,000 10% Redeemable Investments 1,00,000
Preference
Shares of ₹ 10 each 1,00,000
90,000 Equity Shares of ₹10 9,00,000
each
10,00,000
Issued, Subscribed and Paid- Current Assets and 45,000
up Capital Loans and Advances
Inventory
10,000 10% Redeemable Trade receivables 25,000
Preference
Shares of ₹ 10 each 1,00,000 Cash and Bank 50,000
Balances
10,000 Equity Shares of ₹ 10 1,00,000
each
Reserves and Surplus
General Reserve 1,20,000
Securities Premium 70,000
Profit and Loss A/c 18,500
(B) 2,08,500
Current Liabilities and 11,500
Provisions (C)
Total (A + B + C) 4,20,000 Total 4,20,000

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For the year ended 31.3. 2024, the company made a net profit of ₹ 35,000 after providing
₹ 20,000 depreciation.

The following additional information is available with regard to company’s operation :

• The preference dividend for the year ended 31.3. 2024 was paid.

• Except cash and bank balances other current assets and current liabilities as on
31.3. 2024, was the same as on 31.3.2023.

• The company redeemed the preference shares at a premium of 10%.

• The company issued bonus shares in the ratio of two share for every equity share
held as on 31.3.2024.

• To meet the cash requirements of redemption, the company sold investments.

• Investments were sold at 90% of cost on 31.3.2024.

You are required to prepare necessary journal entries to record redemption and issue of
bonus shares.

5. Happy Limited registered with an authorised equity capital of ₹ 4,00,000 divided into
4,000 shares of ₹ 100 each, issued for subscription of 2,000 shares payable at ₹ 25 per
share on application, ₹ 30 per share on allotment, ₹ 20 per share on first call and the
balance as and when required. Application money on 2,000 shares was duly received and
allotment was made to them. The allotment amount was received in full, but when the first
call was made, one shareholder failed to pay the amount on 200 shares held by him and
another shareholder with 100 shares, paid the entire amount on his shares. The company
did not make any other call. Give the necessary journal entries in the books of the
company to record these transactions.

Write short notes on:

1. Fundamental Accounting Assumptions.

2. Objectives of preparing Trial Balance.

3. Tangible Assets vs. Intangible Assets.

4. Liability of LLP and its Partners.

5. Requirement to create Debenture Redemption Reserve.

6. Retirement of bills of exchange.

7. Petty cash book and its advantages.

8. Machine Hour Rate method of calculating depreciation.

9. When Garner V/s Murray rule not applicable incase of dissolution of partnership firm.

10. Double entry system.

11. Importance of bank reconciliation to an industrial unit.

12. Bill of exchange and the various parties to it.

13. Features of Single Entry System.

14. Advantages and Disadvantages of Right Issue.

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15. Going Concern concept.

16. Accounting conventions.

17. Objectives of preparing Trial Balance.

18. posting of journal entries into the Leger.

19. Machine Hour Rate method of calculating depreciation.

[Link] Asset and Contingent Liability

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