SECTION A (60 Marks)

Answer all questions.

Question 1

In subparts (i) to (iv) choose the correct options and in subparts (v) to (x)
answer the questions

As instructed.

(i) The commission due to a partner is closed by: (Understanding) [1]

(a) Debiting it to Partner’s Capital A/c

(b)Crediting it to Partner’s Capital A/c

© Debiting it to P/L Appropriation A/c

(c) Crediting it to P/L Appropriation A/c

(ii) On the admission of Adil as a partner, the capitals of Rohan and

Pavan, after all

Adjustments, were ₹ 50,000 and ₹ 40,000. Their capitals before Adil’s

admission were
₹ 45,000 and ₹ 48,000.

The capital account of the partner having surplus capital was adjusted
through his

Current account by passing the journal entry: (Application)

[1]

(a) Debit Rohan’s Capital A/c ₹ 5,000; Credit Rohan’s Current A/c ₹ 5,000

(b)Debit Pavan’s Capital A/c ₹ 8,000; Credit Pavan’s Current A/c ₹ 8,000

© Debit Rohan’s Current A/c ₹ 5,000; Credit Rohan’s Capital A/c ₹ 5,000

(c) Debit Pavan’s Current A/c ₹ 8,000; Credit Pavan’s Capital A/c ₹ 8,000

(iii) Choose the components required to calculate goodwill of a firm by

Capitalisation of

Average Profits Method. (Recall)

[1]

P The normal profits of a similar firm in the industry

Q The average profits of the firm

R The number of years’ purchase

S The actual capital employed in the business

(a) P, Q, R

(b)Q, R, S

© P, Q, S

(c) P, R, S

Ira (a partner in a firm) was allowed to retain the whole of the stock as her

Remuneration for services rendered by her in the course of dissolution of

the firm. The

Value of stock was ₹ 10,000 which had been transferred to the Realisation
Account.

Complying with the accounting principle of full disclosure, record the

above

Transaction in the books of the partnership firm at the time of its

dissolution.

(Application)
[1]

(vi) Aman and Vinod are partners in a firm. Their Balance Sheet showed:

Gross Debtors: ₹ 1,52,000

Provision for doubtful debts: ₹ 1,000

On Milin’s admission as a new partner, the assets and liabilities are to be

revalued as:

• Unaccounted accrued income of ₹ 10,000 to be provided for

• Bills Payable of ₹ 10,000 which were recorded, to be discharged at a

rebate of

10%

• Debtors of ₹ 2,000 to be irrecoverable

• Provision for doubtful debts to be provided @ 2% of the debtors

What is the net effect of revaluation of assets and liabilities? (Application)

[1]
(vii) Assertion: A company can reissue a forfeited share at an amount
which is less than

The amount not received on it.

[1]

Reason: A company can write off the net loss made on the reissue of a
forfeited share

From its capital reserve.

Which one of the following is correct?

(a) Both Assertion and Reason are true and Reason is the correct
explanation for

Assertion.

(b)Both Assertion and Reason are true but Reason is not the correct
explanation

For Assertion.

© Assertion is false and Reason is true.

(c) Both Assertion and Reason are false. (Evaluate)

(viii) Mention the liability of a partnership firm which is not shown in its
Balance Sheet,

But is paid off at the time of the dissolution of the firm.

Question 2 [3]

Mita, Sita and Rita are partners in a firm. Rita retires from the firm on 31 st
March, 2024.

Her claim, including her capital and her share of goodwill, is determined
at ₹ 2,50,000.

On this date the firm’s books showed:

(a) An unrecorded investment valued at ₹ 60,000 which was given to an

unrecorded

Creditor of ₹ 1,16,000 in settlement of his claim of ₹ 70,000.

(b)An unrecorded vehicle which was given to Rita at the market value of ₹
46,000 in part

Settlement of her claim.

The balance of Rita’s claim was discharged by cheque.

You are required to pass journal entries to record the above transactions
in the books
Of the firm on 31st March, 2024. (Application)

OR

Akshat, Javed and Gaurav are partners in a firm sharing profits in the ratio
of 5:3:7.

Akshat died on 31st March, 2024.

Javed and Gaurav decided to share the profits in reconstituted firm in the
ratio 2:3.

The capital accounts of the partners on 31st March, 2024, before

considering the firm’s

Goodwill were:

Akshat ₹ 1,66,000

Javed ₹ 66,000

Gaurav ₹ 1,41,000

After considering the adjustment for goodwill, Akshat’s share was

determined to be

₹ 1,81,000. It was decided that this amount would be paid to Akshat’s

executor immediately
By the firm through a cheque, the amount being contributed by Javed and
Gaurav in such a

Manner that their capitals would become proportionate to their new profit-
sharing ratio.

You are required to pass journal entries to record:

(i) The adjustment for self-generated goodwill of the firm.

(ii) Cash brought in by Javed and Gaurav to pay off Akshat’s executor.
(iii) Payment made to Akshat’s executor.
(iv) Question 3 [3]
(v) On 1st April, 2023, Ruth Ltd. purchased Plant and Machinery for ₹
11,00,000 from Pablo Ltd.
(vi) payable as to ₹ 1,00,000 by accepting a promissory note and the
balance by an issue of 11%
(vii) Debentures of ₹ 100 each at a premium of 10% to be redeemed at a
premium of 2 % after six
(viii) years.
(ix) You are required to pass journal entries in the books of Ruth Ltd.
only to record the
(x) payment made to Pablo Ltd. (Application)
(xi) OR
(xii) A limited company made an issue, which was fully subscribed, of
2,000, 5% Debentures of
(xiii) ₹ 100 each at ₹ 96, to be redeemed at par after five years. The
debentures were allotted on
(xiv) 31st May 2023, subscriptions being payable:
(xv) 15% on application
(xvi) 30% on allotment
(xvii) 30% on 30th June, 2023
(xviii) Balance on 30th September 2023
(xix) One debenture holder holding 100 debentures paid the allotment
with the first call along with
(xx) interest on calls-in-arrears @ 10% per annum.
(xxi) You are required to:
(xxii) (i) Give the amounts in rupees payable with:
(xxiii) 1. Allotment
(xxiv) 2. Second and Final Call
(xxv) [2]
(xxvi) (ii) Prepare the Interest-on-Calls in Arrears A/c.

Question 5 [3]

Kriti and Atif are partners sharing profits and losses equally. On 31 st
March, 2024, they

Admitted David as a third partner for 1

⁄ share in the profits.

It is decided that on David’s admission:

• Atif would retain his original share

• Goodwill would be valued by the super profit method on the basis of the
following

Information:

(a) Balance Sheet of Kriti and Atif (an extract)

As at 31st March, 2024

Liabilities Amount (₹) Assets Amount (₹)

General Reserve

Capital A/c

25,000 Current A/c

Atif 10,000

Kriti

Atif

2,50,000

1,75,000

4,25,000

Current A/c

Kriti 40,000
 (b)The normal rate of return is 12% per annum.

© Average profits of the firm for last four years are ₹ 74,000.

(Application)

You are required to calculate:

(i) The sacrificing ratio of the partners.

(ii) The value of goodwill of the firm at four years’ purchase of the
super profit.

Alfa and Beta are partners in a firm. Their Balance Sheet as at 31 st March,
2024, is given

Below:

Balance Sheet of Alfa and Beta

As at 31st March, 2024

Liabilities (₹) Assets (₹)

Sundry Creditors 1,16,000 Cash at Bank 93,600

Workmen’s Compensation
Reserve

24,000 Sundry Debtors

Stock

76,400

1,10,000

Capital Accounts:

Alfa 1,00,000

Investment

Goodwill

20.000

20,000

Beta 80,000

1,80,000

3,20,000 3,20,000
(Application)

On 1st April, 2024, they admit Beta’s son Gama, as a partner on the following
terms:

(a) Gama to have 1

⁄ share of profits, half of which is to be gifted to him by his father and

The remaining half to be purchased from Alfa.

Gama to bring in ₹ 60,000 as his capital but would be unable to bring in cash
his share

Of goodwill.

© Goodwill of the firm to be valued at ₹ 40,000.

(c) 50% of the investment to be taken over by Alfa and Beta in their profit-
sharing ratio.

€ The liability on account of Workmen’s Compensation Claim to be ₹ 30,000.

You are required to:

(i) Calculate the new profit-sharing ratio of all the partners. [1]
 (ii) Prepare the Partners’ Capital Accounts.

(Application)

[5]

Question 8 [6]

Atul and Peter were partners in a firm sharing profits and losses in the ratio
of 3:5. They

Dissolved their firm on 31st March, 2024, when their Balance Sheet showed
the following

Balances:

Particulars (₹)

Atul’s Capital 40,000

Peter’s Capital 35,000

Atul’s Current Account 3,000 (Dr)

General Reserve 22,000

Loan from Atul 12,000

On the date of dissolution of the firm:

(a) Peter paid the realisation expenses of ₹ 2,000 on behalf of the firm.

(b)Atul discharged his wife’s loan of ₹ 5,000 which she had given to the
firm.

© The dissolution resulted in a profit of ₹ 24,000 from the realisation of

assets and

Settlement of liabilities.

You are required to pass journal entries to close the books of the firm
(including the

Entries to show the final settlement of the amount due from the partners /
due to the

Partners by the firm). (Application)

Question 9

(A)Deb, Riza and Ved entered into a partnership on 1 st July, 2023,

without any agreement
As to pro• Riza advanced ₹ 40,000 on 1st September, 2023, and was repaid
along with

interest, on 1st December, 2023.

The profit of the firm for the year ended 31st March, 2024, before providing
for any

interest was ₹ 21,000.

You are required to prepare for the year 2023-24:

(i) Profit and Loss Appropriation Account. [4½]

(ii) Riza’s Loan Account. [1½]

(iii) Ved’s Capital Account.

(Application)

[2]fit sharing, except that Deb guaranteed that Ved’s share of profit, after

Considering interest into account, would not be less than ₹ 8,500 per annum.

The initial capital provided by the partners was as follows:

Deb ₹ 60,000;
Riza ₹ 20,000;

Ved ₹ 12,000 (increased on the following 1st January, 2024, to ₹ 16,000)

In addition to the above capital, Deb and Riza gave temporary loans to the
partnership

Firm as follows:

• Deb advanced ₹ 18,000 on 1st October, 2023, and was repaid on 1st April

Following.

Riza advanced ₹ 40,000 on 1st September, 2023, and was repaid along with

Interest, on 1st December, 2023.

The profit of the firm for the year ended 31st March, 2024, before providing
for any

Interest was ₹ 21,000.

You are required to prepare for the year 2023-24:

(i) Profit and Loss Appropriation Account. [4½]

(ii) Riza’s Loan Account. [1½]

(iii) Ved’s Capital Account.

Question 10 [10]

Hero Ltd. Was registered with a capital of ₹ 5,00,000 divided into 20,000
shares of ₹ 25 each,

Payable as:

On Application ₹ 5 per share

On Allotment ₹ 10 per share

On Call The Balance

The company offered to the public for subscription 10,000 shares. It

received applications for

11,100 shares.

From amongst the applicants:

(i) Vimal, who had applied for 1,200 shares, paid ₹ 6,000 on
application. But was allotted

Only 600 shares.

(ii) Mohan applied for 1,000 shares, paid the full amount of ₹ 25,000
with his application

But was allotted only 500 shares.

(iii) Vineet, who had applied for 1,500 shares, paid his application and
allotment money in

Order but did not pay the call money.

(iv) The remaining applicants paid as and when due.

The surplus money paid by both Vimal and Mohan was used towards
allotment and call and

Any surplus beyond the call was refunded.

The company forfeited Vineet’s shares and later re-issued 500 of the
forfeited shares @ ₹ 20

Per share fully paid up.

You are required to pass journal entries in the books of Hero Ltd.