CBSE Class 12 Accountancy Question Paper 2026 Available: Download Solution PDF with Answer Key (Set 3- 67/5/3)

Step 1: Understanding the Question:

The question asks for the correct journal entry to record interest on a partner's drawings. There are two key aspects to consider: how to calculate the interest when the date of drawing is not specified, and how to record the entry when the firm uses the Fixed Capital Method.


Step 2: Key Formula or Approach:

1. Interest on Drawings Calculation: When the date of drawings is not mentioned, interest is calculated for an average period of 6 months.
\[ Interest on Drawings = Total Drawings \times \frac{Rate of Interest}{100} \times \frac{6}{12} \]
2. Fixed Capital Method: Under this method, all partner-related transactions like salary, commission, interest, and drawings are recorded in the Partner's Current Account, not the Capital Account. The Capital Account remains unchanged unless there is a permanent addition or withdrawal of capital.


Step 3: Detailed Explanation:

First, we calculate the interest on Munna's drawings.

Given: Munna's Drawings = Rs. 50,000 and Rate of Interest = 6% p.a.
\[ Interest on Drawings = 50,000 \times \frac{6}{100} \times \frac{6}{12} = Rs. 1,500 \]
Next, we determine the journal entry.


Interest on drawings is an expense for the partner and an income for the firm.

To charge the partner, their account must be debited. Since the capitals are fixed, Munna's Current Account will be debited.

As interest on drawings is an income for the firm, the 'Interest on Drawings A/c' will be credited.


Thus, the correct journal entry is:

Munna's Current A/c \quad Dr. \quad 1,500

\quad To Interest on Drawings A/c \quad 1,500


Step 4: Final Answer:

The correct journal entry is to debit Munna's Current Account and credit Interest on Drawings Account with Rs. 1,500, which corresponds to option (D).
Quick Tip: Always check if capitals are "Fixed" or "Fluctuating". If "Fixed" is mentioned, use the Current Account for all adjustments except permanent capital changes.

Step 1: Understanding the Question:

The question requires us to determine the original book value of an asset before its revaluation at the time of a new partner's admission. We are given the final revalued amount and the amount by which it was undervalued.


Step 2: Key Formula or Approach:

The term "undervalued by" means the book value was less than the true market value. The relationship is:
\[ Revalued Value (New Value) = Book Value (Old Value) + Amount of Undervaluation \]
To find the Book Value, we can rearrange this formula:
\[ Book Value (Old Value) = Revalued Value (New Value) - Amount of Undervaluation \]

Step 3: Detailed Explanation:

Let's identify the given values:


Revalued Value of Equipment (shown in the new Balance Sheet) = Rs. 3,00,000.

Amount of Undervaluation = Rs. 90,000.


Now, we can substitute these values into our rearranged formula to find the original book value.
\[ Book Value = Rs. 3,00,000 - Rs. 90,000 \] \[ Book Value = Rs. 2,10,000 \]
This means the equipment was recorded in the old books at Rs. 2,10,000, and its value was increased by Rs. 90,000 to reach the new value of Rs. 3,00,000.


Step 4: Final Answer:

The value of equipment shown in the books before Raghu's admission was Rs.2,10,000.
Quick Tip: "Undervalued by" means the asset needs to be increased. "Valued at" or "Reduced to" indicates the new final value.

Step 1: Understanding the Question:

The question asks for the number of debentures to be issued to settle a purchase consideration. This is a case of "Issue of Debentures for Consideration other than Cash". The key is to first determine the price at which each debenture is issued.


Step 2: Key Formula or Approach:

The number of debentures to be issued is calculated using the following formula:
\[ Number of Debentures = \frac{Purchase Consideration}{Issue Price per Debenture} \]
Where the Issue Price per Debenture is calculated as:
\[ Issue Price = Face Value - Discount \]

Step 3: Detailed Explanation:

Part 1: Calculate the Issue Price per Debenture


Face Value of one debenture = Rs. 50.

Discount Rate = 10%.

Discount Amount = 10% of Rs. 50 = \( \frac{10}{100} \times 50 \) = Rs. 5.

Issue Price = Face Value - Discount = Rs. 50 - Rs. 5 = Rs. 45.


Part 2: Calculate the Number of Debentures Issued


Purchase Consideration to be paid to Amol Ltd. = Rs. 4,50,000.

Issue Price per Debenture = Rs. 45.


Using the formula:
\[ Number of Debentures = \frac{4,50,000}{45} = 10,000 debentures \]

Step 4: Final Answer:

The number of debentures issued to Amol Ltd. was 10,000.
Quick Tip: Ignore the values of individual assets (machinery, furniture) and liabilities when the "Purchase Consideration" is already explicitly given.

Step 1: Understanding the Question:

The question asks which amount is used to debit the Share Capital Account during the forfeiture of shares. Forfeiture is the process of cancelling shares when a shareholder fails to pay the calls made by the company.


Step 3: Detailed Explanation:

1. Creation of Share Capital: When a company issues shares, it credits the Share Capital Account with the amount it has 'called up' from the shareholders at each stage (application, allotment, calls). This represents the capital that the shareholders are legally obligated to pay.

2. Reversal on Forfeiture: Forfeiture is the reversal of the issue process for a specific shareholder. To cancel the shares, the Share Capital Account must be debited to remove the capital that was previously credited for those shares.

3. Correct Amount: The amount to be debited must be exactly equal to the amount that was originally credited to the Share Capital Account for those shares. This amount is the 'Called-up amount' – the total amount the company has asked the shareholder to pay up to the point of forfeiture.


The 'Paid-up amount' is credited to a new account called 'Share Forfeiture Account'.

The 'Unpaid amount' (or Calls-in-Arrears) is credited to close the corresponding arrears account.



Step 4: Final Answer:

Therefore, at the time of forfeiture of shares, the Share Capital Account is debited with the Called-up amount on the forfeited shares.
Quick Tip: Remember: Debit Called-up, Credit Paid-up (to Forfeiture A/c), and Credit Unpaid (to Arrears).

Step 1: Understanding the Question:

This question requires us to find the Average Profits of the firm. We are given the value of Goodwill, which is based on the Super Profit method. This means we need to work backwards from the Goodwill value to determine the Average Profits.


Step 2: Key Formula or Approach:

The key formulas for the Super Profit method are:

1. \( Goodwill = Super Profit \times Number of Years' Purchase \)

2. \( Super Profit = Average Profit - Normal Profit \)

3. \( Normal Profit = Capital Employed \times \frac{Normal Rate of Return}{100} \)


Step 3: Detailed Explanation:

We will solve this by working in reverse order of the formulas.

Part 1: Calculate Super Profit from Goodwill

From formula 1, we can find Super Profit:
\[ Super Profit = \frac{Goodwill}{Number of Years' Purchase} = \frac{1,00,000}{2} = Rs. 50,000 \]
Part 2: Calculate Normal Profit

First, find the Capital Employed:
\[ Capital Employed = Tanay's Capital + Ishaan's Capital = 4,00,000 + 1,00,000 = Rs. 5,00,000 \]
Now, calculate Normal Profit using formula 3:
\[ Normal Profit = 5,00,000 \times \frac{15}{100} = Rs. 75,000 \]
Part 3: Calculate Average Profit

From formula 2, we can rearrange to find Average Profit:
\[ Average Profit = Super Profit + Normal Profit \] \[ Average Profit = 50,000 + 75,000 = Rs. 1,25,000 \]

Step 4: Final Answer:

The average profits of the firm were Rs.1,25,000.
Quick Tip: Capital Employed = Total Assets - External Liabilities OR Total Partners' Capital + Reserves.

Part (a): Distribution of Accumulated Profits

Step 1: Understanding the Question:

This part requires passing a journal entry to distribute the accumulated profit (credit balance in P\&L Account) among the old partners at the time of a new partner's admission. These profits belong exclusively to the old partners.


Step 3: Detailed Explanation:

The accumulated profit of Rs.40,000 must be distributed between Guru and Prakash in their old profit-sharing ratio of 7 : 3.


Guru's Share: \( 40,000 \times \frac{7}{10} = Rs. 28,000 \)

Prakash's Share: \( 40,000 \times \frac{3}{10} = Rs. 12,000 \)


The journal entry will be to debit the Profit and Loss Account (to close it) and credit the old partners' capital accounts.

Profit and Loss A/c \quad Dr. \quad 40,000

\quad To Guru's Capital A/c \quad 28,000

\quad To Prakash's Capital A/c \quad 12,000

This logic matches the structure of Option (B), although the figures in the provided image might differ.


Part (b): Goodwill Treatment on Death of a Partner

Step 1: Understanding the Question:

This part requires the journal entry for goodwill adjustment when a partner dies. The deceased partner's share of goodwill is compensated by the gaining partners in their gaining ratio.


Step 2: Key Formula or Approach:

The adjusting entry is:

Gaining Partners' Capital A/cs Dr. (in Gaining Ratio)

\quad To Deceased Partner's Capital A/c


Step 3: Detailed Explanation:

1. Calculate Samta's (Deceased Partner's) Share of Goodwill:

Old Ratio (Samta:Mamta:Geeta) = 11:5:4. Samta's share = \( \frac{11}{20} \).
\[ Samta's Share of Goodwill = 1,80,000 \times \frac{11}{20} = Rs. 99,000 \]
2. Determine Gaining Ratio: Since no new ratio is given, the remaining partners (Mamta and Geeta) will gain in their old ratio, which is 5 : 4.

3. Calculate Compensation by Gaining Partners:


Mamta will compensate: \( 99,000 \times \frac{5}{9} = Rs. 55,000 \)

Geeta will compensate: \( 99,000 \times \frac{4}{9} = Rs. 44,000 \)


The journal entry is:

Mamta's Capital A/c \quad Dr. \quad 55,000

Geeta's Capital A/c \quad Dr. \quad 44,000

\quad To Samta's Capital A/c \quad 99,000


Step 4: Final Answer:

For (a), the correct entry distributes Rs. 40,000 to Guru and Prakash in a 7:3 ratio. For (b), Mamta's Capital A/c is debited by Rs. 55,000, Geeta's Capital A/c is debited by Rs. 44,000, and Samta's Capital A/c is credited by Rs. 99,000, which matches Option (D).
Quick Tip: Accumulated profits/losses and reserves are always distributed among Old Partners in their Old Ratio. New partners never get a share of old reserves!

Step 1: Understanding the Question:

The question asks for the actual amount paid to creditors during the dissolution of a firm. Since the payment is made before the due date, the firm is entitled to a discount (also known as a rebate) for the early payment.


Step 2: Key Formula or Approach:

1. First, calculate the discount for early payment:
\[ Discount = Creditors' Amount \times \frac{Rate of Discount}{100} \times \frac{Period of Early Payment (in months)}{12} \]
2. Then, calculate the final amount paid:
\[ Amount Paid = Creditors' Amount - Discount \]

Step 3: Detailed Explanation:

Part 1: Calculate the Discount


Creditors' Amount = Rs. 1,20,000.

Rate of Discount = 12% p.a. (per annum).

Period of Early Payment = 3 months (as they were due after 3 months but paid immediately).

\[ Discount = 1,20,000 \times \frac{12}{100} \times \frac{3}{12} = Rs. 3,600 \]
Part 2: Calculate the Amount Paid
\[ Amount Paid = 1,20,000 - 3,600 = Rs. 1,16,400 \]

Step 4: Final Answer:

The amount paid to sundry creditors after the discount was Rs.1,16,400.
Quick Tip: Always pay attention to the term "p.a." (per annum). It means the rate must be adjusted for the time period (3/12 in this case).

Step 1: Understanding the Question:

The question asks to calculate the interest on a loan given by a partner to the firm. The crucial information is that there is no partnership agreement (deed). This means the provisions of the Indian Partnership Act, 1932, will apply.


Step 2: Key Formula or Approach:

According to the Indian Partnership Act, 1932, in the absence of a partnership deed, interest on a partner's loan is allowed at a fixed rate of 6% per annum. The formula is:
\[ Interest on Loan = Loan Amount \times \frac{6}{100} \times \frac{Period (in months)}{12} \]

Step 3: Detailed Explanation:

1. Identify the values:


Loan Amount = Rs. 4,00,000.

Rate of Interest = 6% p.a. (as per the Act).


2. Calculate the period for which interest is due:

The loan was advanced on 1st October, 2024, and the financial year ends on 31st March, 2025.

Period = October, November, December, January, February, March = 6 months.

3. Calculate the interest amount:
\[ Interest = 4,00,000 \times \frac{6}{100} \times \frac{6}{12} = 4,000 \times 6 \times \frac{1}{2} = Rs. 12,000 \]

Step 4: Final Answer:

The amount of interest on the loan due to Anish is Rs.12,000.
Quick Tip: In the absence of a deed:
1. Interest on Loan = 6% p.a.
2. Interest on Capital/Drawings = Nil.
3. Profit Sharing = Equal.

Step 1: Understanding the Question:

The question requires calculating interest on drawings for a partner who makes regular quarterly withdrawals. However, the withdrawals are made only during the last six months of the financial year (from 1st October to 31st March).


Step 2: Key Formula or Approach:

We will use the average period method to calculate interest on drawings.

1. \( Interest on Drawings = Total Drawings \times \frac{Rate}{100} \times \frac{Average Period}{12} \)

2. \( Average Period = \frac{Time left after first drawing + Time left after last drawing}{2} \)


Step 3: Detailed Explanation:

Part 1: Calculate Total Drawings

Withdrawals start from 1st October, 2024. The quarters in this period are:


1st October, 2024 (beginning of Oct-Dec quarter).

1st January, 2025 (beginning of Jan-Mar quarter).


There are 2 quarterly withdrawals.
\[ Total Drawings = 2 \times 30,000 = Rs. 60,000 \]
Part 2: Calculate Average Period


Time left after first drawing (on 1st Oct): From 1st Oct to 31st Mar = 6 months.

Time left after last drawing (on 1st Jan): From 1st Jan to 31st Mar = 3 months.

\[ Average Period = \frac{6 + 3}{2} = 4.5 months \]
Part 3: Calculate Interest on Drawings
\[ Interest = 60,000 \times \frac{12}{100} \times \frac{4.5}{12} = 600 \times 4.5 = Rs. 2,700 \]

Step 4: Final Answer:

Interest on Arora's drawings for the year ended 31st March, 2025 was Rs.2,700.
Quick Tip: When drawings are made for only a part of the year, do not use the standard whole-year average period (7.5 for quarter beginning). Recalculate based on the actual months.

Step 1: Understanding the Question:

This is an Assertion-Reason question. We need to evaluate the correctness of both statements (Assertion and Reason) and then determine if the Reason provides the correct explanation for the Assertion.


Step 3: Detailed Explanation:

Analysis of Assertion (A):

The statement says that a new partner brings capital in cash or kind upon admission. This is a fundamental aspect of a partner's admission. The capital contribution is necessary to provide funds for the business and to acquire a stake in the firm. So, Assertion (A) is correct.


Analysis of Reason (R):

The statement says that a new partner acquires a right to share in the firm's assets and future profits. This is the primary legal right a person gains by becoming a partner. So, Reason (R) is also correct.


Analysis of the Relationship:

Now, we must check if (R) explains (A). Why does a new partner bring in capital (Assertion)? The partner contributes capital precisely *because* they want to acquire the rights to the firm's assets and profits (Reason). The capital contribution is the consideration paid for gaining these ownership rights. Therefore, Reason (R) correctly explains why Assertion (A) happens.


Step 4: Final Answer:

Both Assertion (A) and Reason (R) are correct, and Reason (R) is the correct explanation of Assertion (A).
Quick Tip: Think of "Capital" as the price paid for "Rights." If the reason mentions the rights gained, it is usually the explanation for why capital or premium for goodwill is brought in.

Part (a): Minimum Reissue Price of Forfeited Shares

Step 1: Understanding the Question:

The question asks for the minimum price at which forfeited shares can be reissued. The law states that the maximum discount on reissue cannot exceed the amount that was already paid (forfeited) on these shares. Therefore, the minimum reissue price is the amount that was unpaid by the original shareholder.


Step 2: Key Formula or Approach:
\[ Maximum Discount on Reissue = Amount Forfeited per share \] \[ Minimum Reissue Price = Called-up Value per share - Maximum Discount on Reissue \]
Alternatively, and more directly:
\[ Minimum Reissue Price = Unpaid Amount per share \]

Step 3: Detailed Explanation:

1. Calculate the Amount Forfeited per share:

Face Value = Rs. 10.

Unpaid Final Call = Rs. 3.

Amount Forfeited (paid by original shareholder) = Face Value - Unpaid Amount = Rs. 10 - Rs. 3 = Rs. 7.

This Rs. 7 is the maximum discount the company can offer on reissue.

2. Calculate the Minimum Reissue Price:

Minimum Reissue Price = Face Value - Maximum Discount = Rs. 10 - Rs. 7 = Rs. 3.

This is equal to the unpaid amount on the final call.


Part (b): Loss on Issue of Debentures

Step 1: Understanding the Question:

The question asks for the amount to be debited to the 'Loss on Issue of Debentures Account'. According to the prudence concept, any anticipated loss on redemption (i.e., premium payable on redemption) must be recognized at the time of issue itself.


Step 2: Key Formula or Approach:
\[ Loss on Issue of Debentures = Number of Debentures \times Premium on Redemption per Debenture \]
Note: Premium on issue is a capital profit and is credited to Securities Premium Account. It is not related to the Loss on Issue.


Step 3: Detailed Explanation:

1. Identify the relevant values:

Number of Debentures = 20,000.

Premium on Redemption = 5% of Face Value = 5% of Rs. 100 = Rs. 5 per debenture.

2. Calculate the Total Loss on Issue:
\[ Total Loss = 20,000 debentures \times Rs. 5 = Rs. 1,00,000 \]

Step 4: Final Answer:

For (a), the minimum reissue price is Rs.3. For (b), the Loss on Issue of Debentures account will be debited by Rs.1,00,000.
Quick Tip: Remember that the discount on reissue can never exceed the balance in the "Forfeited Shares Account" for those specific shares.

Step 1: Understanding the Question:

The question asks to calculate the total interest expense on debentures for the entire financial year. A key principle of debenture accounting is that interest is always calculated on the nominal (face) value of the debentures, not on the issue price or redemption price.


Step 2: Key Formula or Approach:
\[ Total Annual Interest = (Number of Debentures \times Face Value per Debenture) \times \frac{Rate of Interest}{100} \]

Step 3: Detailed Explanation:

1. Calculate the Total Face Value of Debentures:

Number of Debentures = 4,000.

Face Value per Debenture = Rs. 50.

Total Face Value = \( 4,000 \times 50 \) = Rs. 2,00,000.

2. Calculate the Annual Interest Expense:

Rate of Interest = 9% per annum.

Total Annual Interest = \( 2,00,000 \times \frac{9}{100} \) = Rs. 18,000.

The information about half-yearly payments (on 30th Sept and 31st Mar) confirms that interest is paid for the full year, but it doesn't change the total annual amount. The two payments would be Rs. 9,000 each. The question asks for the interest for the \textit{year.


Step 4: Final Answer:

The total interest on debentures for the year ended 31st March, 2025 is Rs.18,000.
Quick Tip: Ignore "Premium on Issue" (5%) and "Premium on Redemption" (Rs.10) when calculating interest. They are capital items, while interest is calculated on the face value.

Part (a): Reserve Capital

Step 1: Understanding the Question:

This question tests the definition of 'Reserve Capital' within the structure of a company's share capital.


Step 3: Detailed Explanation:

Share capital has several classifications. 'Subscribed Capital' is the portion of issued capital taken up by the public. This is further divided into 'Called-up Capital' (what the company has asked shareholders to pay) and 'Uncalled Capital' (what the company has not yet asked for).

Reserve Capital is a specific part of this Uncalled Capital that a company, by passing a special resolution, decides it will not call up except in the event of its liquidation (winding up). It acts as a safety net for creditors.



Part (b): Debentures without Interest Rate

Step 1: Understanding the Question:

This question asks for the specific name given to debentures that do not pay a periodic, fixed rate of interest.


Step 3: Detailed Explanation:

The fixed interest rate on a debenture is called its 'coupon rate'. Most debentures are 'Specific Coupon Rate Debentures'.

However, Zero Coupon Rate Debentures (also called Deep Discount Bonds) are issued at a significant discount to their face value and redeemed at par (or premium). The investor's return is the difference between the issue price and the redemption value, rather than periodic interest payments.


Step 4: Final Answer:

(a) Reserve capital is a part of uncalled capital. (b) Debentures without a specific interest rate are known as Zero coupon rate debentures.
Quick Tip: Don't confuse "Reserve Capital" with "Capital Reserve." Capital Reserve is created out of capital profits already earned, whereas Reserve Capital is money not yet collected.

Part (a): Deceased Partner's Share of Profit

Step 1: Understanding the Question:

The question asks for the accounting treatment of the deceased partner's share of profit for the period from the last balance sheet to the date of death. Since the actual profit is not known, an estimated amount is given to the deceased partner.


Step 3: Detailed Explanation:

To record this estimated profit without disturbing the regular Profit \& Loss Account, a temporary account called 'Profit and Loss Suspense Account' is used. The journal entry to give the deceased partner his share of profit is:

Profit and Loss Suspense A/c \quad Dr.

\quad To Deceased Partner's Capital A/c

Therefore, the Profit and Loss Suspense Account is debited.



Part (b): Gaining and Sacrificing Ratio

Step 1: Understanding the Question:

The question requires us to calculate whether the continuing partners have gained or sacrificed a share in profit due to the retirement of a partner and the formation of a new profit-sharing ratio.


Step 2: Key Formula or Approach:
\[ Gain or Sacrifice = New Share - Old Share \]
A positive result indicates a gain, while a negative result indicates a sacrifice.


Step 3: Detailed Explanation:

Old Ratio (Shashi : Maya : Komal) = 5 : 3 : 2.

Old Shares: Shashi = \( \frac{5}{10} \), Maya = \( \frac{3}{10} \).

New Ratio (Shashi : Maya) = 3 : 5.

New Shares: Shashi = \( \frac{3}{8} \), Maya = \( \frac{5}{8} \).


Calculation for Shashi:
\[ New Share - Old Share = \frac{3}{8} - \frac{5}{10} = \frac{15 - 20}{40} = -\frac{5}{40} = -\frac{1}{8} \quad (Sacrifice}) \]

Calculation for Maya:
\[ New Share - Old Share = \frac{5}{8} - \frac{3}{10} = \frac{25 - 12}{40} = +\frac{13}{40} \quad (Gain}) \]

Step 4: Final Answer:

(a) The amount is debited to Profit and Loss Suspense Account. (b) Shashi's sacrifice is 1/8 and Maya's gain is 13/40.
Quick Tip: If the profit-sharing ratio among the remaining partners changes, use the Gaining Partners' Capital A/cs instead of the P\&L Suspense A/c for death-related profit adjustments.

Part (a): Gaining Ratio when New Ratio is Not Given

Step 1: Understanding the Question:

The question asks for the gaining ratio of the continuing partners when the new profit-sharing ratio is not specified. In such cases, it is assumed that the continuing partners acquire the retiring partner's share in their old profit-sharing ratio.


Step 3: Detailed Explanation:

Old Ratio (Sudama : Sharma : Varun) = 6 : 4 : 3.

Sharma retires. The continuing partners are Sudama and Varun.

Their existing profit-sharing ratio relative to each other is 6 : 3.

This ratio simplifies to 2 : 1.

This becomes both their new profit-sharing ratio and their gaining ratio.


Part (b): Gaining Ratio when New Ratio is Given

Step 1: Understanding the Question:

The question asks for the gaining ratio when the old ratio and the new ratio of the continuing partners are both provided.


Step 2: Key Formula or Approach:
\[ Gaining Share = New Share - Old Share \]

Step 3: Detailed Explanation:

Old Ratio (Hari : Murari : Abhi) = 8 : 7 : 4.

Old Shares: Hari = \( \frac{8}{19} \), Abhi = \( \frac{4}{19} \).

New Ratio (Hari : Abhi) = 2 : 1.

New Shares: Hari = \( \frac{2}{3} \), Abhi = \( \frac{1}{3} \).


Hari's Gain:
\[ \frac{2}{3} - \frac{8}{19} = \frac{2 \times 19 - 8 \times 3}{57} = \frac{38 - 24}{57} = \frac{14}{57} \]

Abhi's Gain:
\[ \frac{1}{3} - \frac{4}{19} = \frac{1 \times 19 - 4 \times 3}{57} = \frac{19 - 12}{57} = \frac{7}{57} \]
The gaining ratio is the ratio of their gains: \( \frac{14}{57} : \frac{7}{57} \), which simplifies to 14 : 7 or 2 : 1.


Step 4: Final Answer:

The gaining ratio for question (a) is 2 : 1, and the gaining ratio for question (b) is also 2 : 1.
Quick Tip: To save time during exams, remember: if no new ratio is given for continuing partners, their Gaining Ratio is always their Old Ratio.

Step 1: Understanding the Question:

This question deals with the concept of 'Hidden Goodwill' or 'Inferred Goodwill'. When the amount paid to a retiring partner is more than the final balance in their capital account (after all adjustments), the excess amount paid is considered their share of the firm's goodwill. We need to calculate the total goodwill of the firm from this information.


Step 2: Key Formula or Approach:

1. Calculate the Retiring Partner's Share of Goodwill:
\( Share of Goodwill = Final Settlement Amount - Adjusted Capital Balance \)

2. Calculate the Firm's Total Goodwill:
\( Firm's Goodwill = \frac{Retiring Partner's Share of Goodwill}{Retiring Partner's Profit Share} \)


Step 3: Detailed Explanation:

Part 1: Calculate Shaurya's Share of Goodwill

Final Settlement Amount paid to Shaurya = Rs. 3,90,000.

Shaurya's Adjusted Capital Balance = Rs. 3,20,000.
\[ Shaurya's Share of Goodwill = 3,90,000 - 3,20,000 = Rs. 70,000 \]
Part 2: Calculate the Firm's Total Goodwill

Shaurya's Profit Share = \( \frac{3}{3+2+1} = \frac{3}{6} = \frac{1}{2} \).

If Shaurya's 1/2 share of goodwill is Rs. 70,000, then the total goodwill of the firm is:
\[ Firm's Goodwill = \frac{70,000}{1/2} = 70,000 \times 2 = Rs. 1,40,000 \]

Step 4: Final Answer:

The value of the goodwill of the firm on the date of Shaurya's retirement was Rs.1,40,000.
Quick Tip: Be careful not to select Rs.70,000; the question asks for the goodwill of the firm, not just the retiring partner's share.

Step 1: Understanding the Question:

The question requires passing journal entries to adjust the deceased partner's (Kunwar's) capital account for his share of interim profit, his share of accumulated profits (General Reserve), and his share of accumulated losses (P\&L Dr. Balance).


Step 3: Detailed Explanation:

The old profit-sharing ratio of Namita : Narendra : Kunwar is 3 : 1 : 1. Kunwar's share is \( \frac{1}{5} \).


1. For Kunwar's Share of Profit till death:

The profit share of Rs.15,600 is credited to Kunwar's Capital A/c. Since this is an estimate, the debit is made to P\&L Suspense A/c.


2. For Distribution of General Reserve:

General Reserve is an accumulated profit and must be distributed to all partners in their old ratio (3:1:1).

Total General Reserve = Rs. 40,000.

Kunwar's Share = \( 40,000 \times \frac{1}{5} = Rs. 8,000 \).


3. For Distribution of Accumulated Loss:

Profit and Loss A/c (Dr.) is an accumulated loss and must be written off by debiting all partners' capital accounts in their old ratio (3:1:1).

Total Loss = Rs. 80,000.

Kunwar's Share = \( 80,000 \times \frac{1}{5} = Rs. 16,000 \).


Journal Entries



Step 4: Final Answer:

The journal entries correctly adjust Kunwar's capital account by crediting him with Rs. 15,600 for profit and Rs. 8,000 for reserves, and debiting him with Rs. 16,000 for the accumulated loss.
Quick Tip: Profit and Loss Account with a "Dr." balance signifies a loss and must be shown on the Assets side of a Balance Sheet.

Step 1: Understanding the Question:

The question requires passing necessary journal entries to record the retirement of Jatin. This involves four main adjustments: distribution of general reserve, distribution of revaluation loss, adjustment for goodwill, and transferring the final amount due to Jatin to his loan account.


Step 3: Detailed Explanation:

Old Profit Sharing Ratio (Jatin : Karan : Sia) = 2 : 2 : 1.


1. For Distribution of General Reserve:

The General Reserve of Rs. 50,000 belongs to all partners and must be distributed in the old ratio (2:2:1).


2. For Distribution of Revaluation Loss:

The revaluation loss of Rs. 75,000 must be borne by all partners in the old ratio (2:2:1).


3. For Treatment of Goodwill:

Total Goodwill = Rs. 3,00,000. Jatin's (retiring partner) share = \( 3,00,000 \times \frac{2}{5} = Rs. 1,20,000 \).

This will be compensated by the gaining partners (Karan and Sia) in their gaining ratio. Since the new ratio is not given, the gaining ratio is their old ratio, i.e., 2 : 1.

Karan will pay = \( 1,20,000 \times \frac{2}{3} = Rs. 80,000 \).

Sia will pay = \( 1,20,000 \times \frac{1}{3} = Rs. 40,000 \).


4. For Transfer to Jatin's Loan Account:

We need to calculate the final balance in Jatin's Capital A/c.

Opening Balance = Rs. 3,20,000 (Cr)

Add: Share of General Reserve (50,000 x 2/5) = Rs. 20,000 (Cr)

Add: Share of Goodwill = Rs. 1,20,000 (Cr)

Less: Share of Revaluation Loss (75,000 x 2/5) = Rs. 30,000 (Dr)

Total Amount due to Jatin = \( 3,20,000 + 20,000 + 1,20,000 - 30,000 = Rs. 4,30,000 \).


Journal Entries




Step 4: Final Answer:

The journal entries correctly distribute reserves and losses, adjust goodwill, and transfer Jatin's final claim of Rs. 4,30,000 to his loan account.
Quick Tip: "Without opening goodwill account" means you must adjust through the Partners' Capital Accounts using the Gaining/Sacrificing ratio.

Step 1: Understanding the Question:

This problem involves accounting for the purchase of a business (consideration other than cash) and settling the payment through a mix of bank payment and issue of debentures at a premium. A key step is to determine if Goodwill or Capital Reserve arises from the purchase.


Step 3: Detailed Explanation:

1. Calculation of Goodwill/Capital Reserve:

Value of Assets taken over = Rs. 12,40,000.

Value of Liabilities taken over = Rs. 3,40,000.

Net Assets = Assets - Liabilities = \( 12,40,000 - 3,40,000 \) = Rs. 9,00,000.

Purchase Consideration (PC) = Rs. 11,00,000.

Since PC (Rs. 11,00,000) is greater than Net Assets (Rs. 9,00,000), the difference is Goodwill.

Goodwill = PC - Net Assets = \( 11,00,000 - 9,00,000 \) = Rs. 2,00,000.


2. Calculation for Settlement:

Total PC = Rs. 11,00,000.

Amount paid by cheque = \( \frac{1}{2} \times 11,00,000 \) = Rs. 5,50,000.

Balance amount to be paid by debentures = Rs. 5,50,000.

Issue Price per debenture = Face Value + Premium = \( 100 + (10% of 100) \) = Rs. 110.

Number of Debentures to be issued = \( \frac{Balance Amount}{Issue Price} = \frac{5,50,000}{110} \) = 5,000 debentures.


Journal Entries in the books of Kiara Ltd.




Step 4: Final Answer:

The journal entries record the purchase of the business by recognizing Goodwill of Rs. 2,00,000 and the settlement of the purchase consideration through bank and the issue of 5,000 debentures.
Quick Tip: Always calculate the number of debentures by dividing the amount due by the Issue Price (\(100 + Premium\) or \(100 - Discount\)).

Step 1: Understanding the Question:

This question requires passing journal entries for two events: first, the issue of debentures at a discount, and second, writing off this discount. The rules for writing off require using the Securities Premium account first, and then charging the balance to the Statement of Profit and Loss.


Step 3: Detailed Explanation:

1. Journal Entry for Issue of Debentures:

Number of Debentures = 8,000.

Face Value per Debenture = Rs. 100.

Discount per Debenture = 10% of Rs. 100 = Rs. 10.

Issue Price per Debenture = Rs. 90.

Total money received = \( 8,000 \times 90 \) = Rs. 7,20,000.

Total Discount on Issue = \( 8,000 \times 10 \) = Rs. 80,000.


2. Journal Entry for Writing off Discount:

Total Discount to be written off = Rs. 80,000.

Available balance in Securities Premium Account = Rs. 50,000.

This will be used first.

Remaining discount to be written off = \( 80,000 - 50,000 \) = Rs. 30,000.

This balance will be charged to the Statement of Profit and Loss.


Journal Entries in the books of Zara Ltd.





Step 4: Final Answer:

The journal entries correctly record the issue of debentures with a discount of Rs. 80,000 and then write off this discount by utilizing Rs. 50,000 from Securities Premium and Rs. 30,000 from the Statement of Profit and Loss.
Quick Tip: Always remember the sequence for writing off:
1. Securities Premium Account (if any).
2. Statement of Profit and Loss.

Step 1: Understanding the Question:

The question requires journal entries for the treatment of Workmen's Compensation Fund (WCF) under three different scenarios at the time of a partner's retirement. WCF is a reserve set aside for potential liabilities towards employees. The treatment depends on whether the actual claim is more than, less than, or equal to the fund amount.


Step 3: Detailed Explanation:

Old Profit Sharing Ratio (Diksha : Raj : Amit) = 6 : 3 : 1. The fund belongs to all partners in this ratio.


Case (i): Claim (Rs.1,00,000) is MORE than the Fund (Rs.90,000)

The entire fund of Rs.90,000 will be used. The shortfall of Rs.10,000 (\(1,00,000 - 90,000\)) is a loss that will be debited to the Revaluation Account. This loss is then borne by all partners in their old ratio.


Case (ii): Claim (Rs.70,000) is LESS than the Fund (Rs.90,000)

An amount of Rs.70,000 from the fund is transferred to create a provision for the claim. The surplus of Rs.20,000 (\(90,000 - 70,000\)) is a profit and will be distributed among all partners in their old ratio (6:3:1).


Case (iii): Claim (Rs.90,000) is EQUAL to the Fund (Rs.90,000)

The entire fund is used to create the provision for the claim. There is no surplus or deficit, so no amount is transferred to the partners' capital accounts or the revaluation account.


Step 4: Final Answer:

The accounting entries correctly reflect the treatment of the Workmen's Compensation Fund under each scenario by creating a liability for the claim and distributing any surplus or deficit among the partners.
Quick Tip: Remember: "Provision for Claim" is a liability shown in the new Balance Sheet, while "Fund/Reserve" is an internal equity item to be closed.

Step 1: Understanding the Question:

The question requires passing journal entries for two different scenarios of debenture issuance. The key element in both scenarios is that the debentures are redeemable at a premium. According to the principle of prudence, any future loss (like premium on redemption) must be recognized at the time of issue itself. This is recorded by debiting 'Loss on Issue of Debentures A/c' and creating a liability 'Premium on Redemption of Debentures A/c'.


Step 3: Detailed Explanation:

Transaction (i) - KL Ltd. (Issued at Premium, Redeemable at Premium)

1. Calculate amounts received on issue:

Issue Price = Face Value + Premium on Issue = \( 100 + (10% of 100) \) = Rs. 110.

Total Amount Received = \( 80,000 \times 110 \) = Rs. 88,00,000.

2. Calculate loss on redemption:

Premium on Redemption = 5% of Rs. 100 = Rs. 5 per debenture.

Total Loss on Issue = \( 80,000 \times 5 \) = Rs. 4,00,000.


Transaction (ii) - UH Ltd. (Issued at Par, Redeemable at Premium)

1. Calculate amounts received on issue:

Issue Price = Face Value = Rs. 100.

Total Amount Received = \( 40,000 \times 100 \) = Rs. 40,00,000.

2. Calculate loss on redemption:

Premium on Redemption = 10% of Rs. 100 = Rs. 10 per debenture.

Total Loss on Issue = \( 40,000 \times 10 \) = Rs. 4,00,000.


Step 4: Final Answer:

The journal entries for both companies correctly recognize the liability for premium on redemption by debiting a 'Loss on Issue of Debentures' account at the time of issuing the debentures.
Quick Tip: "Premium on Redemption" is a liability, whereas "Securities Premium" (on issue) is an equity reserve. Never confuse the two!

Step 1: Understanding the Question:

The question requires the preparation of a Profit and Loss Appropriation Account. We need to distribute the net profit of Rs.3,00,000 among the partners according to their new profit-sharing ratio and then adjust for the guarantee given to the new partner, Agarwal.


Step 2: Key Formula or Approach:

1. Calculate the New Profit-Sharing Ratio: First, determine the share of profit for each partner after Agarwal's admission.

2. Initial Profit Distribution: Distribute the total profit as per the new ratio.

3. Check for Deficiency: Compare the new partner's actual share with the guaranteed amount.

4. Adjust Deficiency: If there is a deficiency, it must be borne by the guaranteeing partners in their specified ratio (1:3).


Step 3: Detailed Explanation:

Working Notes:

1. Calculation of New Profit-Sharing Ratio:

Let the total profit be 1.

Agarwal's share = \( \frac{1}{5} \).

Remaining share = \( 1 - \frac{1}{5} = \frac{4}{5} \).

This remaining share will be divided between Jain and Gupta in their old ratio (3:1).

Jain's new share = \( \frac{4}{5} \times \frac{3}{4} = \frac{12}{20} \).

Gupta's new share = \( \frac{4}{5} \times \frac{1}{4} = \frac{4}{20} \).

Agarwal's share = \( \frac{1}{5} = \frac{4}{20} \).

New Ratio = 12 : 4 : 4, which simplifies to 3 : 1 : 1.


2. Initial Distribution of Profit (Rs.3,00,000):

Jain's share = \( 3,00,000 \times \frac{3}{5} = Rs. 1,80,000 \).

Gupta's share = \( 3,00,000 \times \frac{1}{5} = Rs. 60,000 \).

Agarwal's share = \( 3,00,000 \times \frac{1}{5} = Rs. 60,000 \).


3. Calculation and Adjustment of Deficiency:

Guaranteed profit to Agarwal = Rs. 75,000.

Actual profit share of Agarwal = Rs. 60,000.

Deficiency = \( 75,000 - 60,000 = Rs. 15,000 \).

This deficiency is to be borne by Jain and Gupta in the ratio of 1 : 3.

Deficiency borne by Jain = \( 15,000 \times \frac{1}{4} = Rs. 3,750 \).

Deficiency borne by Gupta = \( 15,000 \times \frac{3}{4} = Rs. 11,250 \).


4. Final Profit Distribution:

Jain = \( 1,80,000 - 3,750 = Rs. 1,76,250 \).

Gupta = \( 60,000 - 11,250 = Rs. 48,750 \).

Agarwal = \( 60,000 + 15,000 = Rs. 75,000 \).


Profit and Loss Appropriation Account for the year ended 31st March, 2025


Step 4: Final Answer:

The final profit distribution after adjusting for Agarwal's guarantee is: Jain Rs. 1,76,250, Gupta Rs. 48,750, and Agarwal Rs. 75,000.
Quick Tip: When the ratio for bearing deficiency is given, use that specific ratio. If it is not given, the deficiency is borne by the guaranteeing partners in their old profit-sharing ratio.

Step 1: Understanding the Question:

The question involves a change in the profit-sharing ratio among existing partners. This reconstitution requires an adjustment for the firm's goodwill. The partners who gain a share of future profits must compensate the partners who sacrifice their share. We need to calculate this gain/sacrifice and pass a single adjustment entry.


Step 2: Key Formula or Approach:

1. Calculate Gaining/Sacrificing Share:
\( Sacrifice or Gain = Old Share - New Share \)

(A positive result indicates a sacrifice; a negative result indicates a gain).

2. Goodwill Adjustment Entry:

Gaining Partners' Capital A/cs Dr. (with their share of gain x Goodwill)

\quad To Sacrificing Partners' Capital A/cs (with their share of sacrifice x Goodwill)


Step 3: Detailed Explanation:

1. Calculation of Sacrificing and Gaining Shares:

Old Ratio (Annu : Bandhu : Sheelu : Golu) = 4 : 3 : 2 : 1 (Total Share = 10).

New Ratio (Annu : Bandhu : Sheelu : Golu) = 1 : 1 : 1 : 1 (Total Share = 4).


Annu: \( \frac{4}{10} - \frac{1}{4} = \frac{8 - 5}{20} = \frac{3}{20} \) (Sacrifice)
Bandhu: \( \frac{3}{10} - \frac{1}{4} = \frac{6 - 5}{20} = \frac{1}{20} \) (Sacrifice)
Sheelu: \( \frac{2}{10} - \frac{1}{4} = \frac{4 - 5}{20} = -\frac{1}{20} \) (Gain)
Golu: \( \frac{1}{10} - \frac{1}{4} = \frac{2 - 5}{20} = -\frac{3}{20} \) (Gain)


2. Calculation of Goodwill Adjustment Amount:

Total Goodwill of the firm = Rs. 4,00,000.


Amount to be credited to Annu (Sacrifice) = \( 4,00,000 \times \frac{3}{20} = Rs. 60,000 \)
Amount to be credited to Bandhu (Sacrifice) = \( 4,00,000 \times \frac{1}{20} = Rs. 20,000 \)
Amount to be debited from Sheelu (Gain) = \( 4,00,000 \times \frac{1}{20} = Rs. 20,000 \)
Amount to be debited from Golu (Gain) = \( 4,00,000 \times \frac{3}{20} = Rs. 60,000 \)


3. Adjustment Journal Entry:


Step 4: Final Answer:

The gaining partners (Sheelu and Golu) are debited for Rs. 20,000 and Rs. 60,000 respectively, and the sacrificing partners (Annu and Bandhu) are credited for Rs. 60,000 and Rs. 20,000 respectively.
Quick Tip: To remember the entry: "Gaining Partners to Sacrificing Partners."} The partner whose share increased is buying the share from the partner whose share decreased.

Step 1: Understanding the Question:

The question requires journal entries for share issue, covering oversubscription, pro-rata allotment, rejection, calls-in-advance, calls-in-arrears, and finally, forfeiture of shares. This requires careful calculation at each stage.


Step 3: Detailed Explanation (with Working Notes):

WN 1: Allotment and Excess Money

Total Applications = 50,000. Issued Shares = 30,000.

Rejected = 10,000 shares. Pro-rata applicants = 40,000 for 30,000 shares (Ratio 4:3).

Money received on Application = 50,000 shares × Rs.10 = Rs. 5,00,000.

Adjustment of Application Money:


To Share Capital (30,000 × Rs.5) = Rs. 1,50,000.
To Securities Premium (30,000 × Rs.5) = Rs. 1,50,000.
Refund (10,000 × Rs.10) = Rs. 1,00,000.
Excess money on pro-rata (10,000 × Rs.10) to be adjusted to call = Rs. 1,00,000.


WN 2: First and Final Call

Call Money = Rs. (10+5) - 10 = Rs. 5 per share.

Total Call Due = 30,000 shares × Rs.5 = Rs. 1,50,000.

Less: Excess from pro-rata adjusted = Rs. 1,00,000.

Net amount to be received on Call = Rs. 50,000.


WN 3: Calls-in-Arrears (Vedika)

Vedika was allotted 300 shares. She applied for \( 300 \times \frac{4}{3} = 400 \) shares.

Money paid by Vedika on application = 400 × Rs.10 = Rs. 4,000.

Money due on Application/Allotment = 300 × Rs.10 = Rs. 3,000.

Excess money from Vedika = Rs. 1,000.

Call Due from Vedika = 300 × Rs.5 = Rs. 1,500.

Less: Excess money adjusted = Rs. 1,000.

Amount Unpaid (Calls-in-Arrears) = Rs. 500.


WN 4: Forfeiture of Vedika's Shares

Called-up Share Capital = 300 × Rs.10 = Rs. 3,000. (Premium was received, so it won't be debited).

Amount Forfeited (paid towards capital) = (Money Paid 4,000) - (Securities Premium 1,500) = Rs. 2,500.

Entry Check: Dr. Share Capital 3,000; Cr. Calls-in-Arrears 500; Cr. Share Forfeiture 2,500. It balances.

*(Note: The case of Sonu is complex and seems to overlap with general pro-rata adjustment. Assuming the Rs.1,00,000 excess money covers all pro-rata applicants including Sonu's normal excess, and any extra payment by Sonu is treated as Calls-in-Advance separately. But the question lacks clarity for a full journal entry for Sonu. We will proceed with the main entries.)*


Journal Entries


Step 4: Final Answer:

The journal entries correctly record the oversubscription, allotment, call, default by Vedika, and the subsequent forfeiture of her shares.
Quick Tip: In pro-rata allotment, always calculate the specific unpaid amount for a defaulting shareholder by first adjusting their excess application money against the call due.

Step 1: Understanding the Question:

This question involves three distinct steps: forfeiture of shares where premium is unpaid, partial reissue of these shares at a discount, and transferring the profit on the reissued shares to the Capital Reserve.


Step 3: Detailed Explanation:

1. Journal Entry for Forfeiture:

Called-up value per share = Total face value - Uncalled amount = 10 - 3 = Rs. 7.

The unpaid first call includes Rs.1 of premium. Since the premium was not received, the Securities Premium account must be debited.

Amount paid (and forfeited) = Called-up (7) - Unpaid on call (2 for capital) = Rs. 5 per share.

\begin{table[h!]
\centering
\begin{tabular{|l|r|r|
\hline
Particulars & Dr. (Rs.) & Cr. (Rs.)
\hline
Equity Share Capital A/c Dr. (750 × Rs.7) & 5,250 &

Securities Premium A/c Dr. (750 × Rs.1) & 750 &

\quad To Share Forfeiture A/c (750 × Rs.5) & & 3,750

\quad To Calls-in-Arrears A/c (750 × Rs.3) & & 2,250

(Being 750 shares forfeited) & &
\hline
\end{tabular
\end{table

2. Journal Entry for Reissue:

500 shares were reissued for Rs. 2,500. The paid-up value is Rs. 7 per share.

Amount to be credited to Share Capital = 500 shares × Rs. 7 = Rs. 3,500.

Amount received in Bank = Rs. 2,500.

Discount on Reissue = 3,500 - 2,500 = Rs. 1,000. (This is debited to Share Forfeiture A/c).

\begin{table[h!]
\centering
\begin{tabular{|l|r|r|
\hline
Particulars & Dr. (Rs.) & Cr. (Rs.)
\hline
Bank A/c Dr. & 2,500 &

Share Forfeiture A/c Dr. & 1,000 &

\quad To Equity Share Capital A/c (500 × Rs.7) & & 3,500

(Being 500 shares reissued) & &
\hline
\end{tabular
\end{table

3. Journal Entry for Transfer to Capital Reserve:

This entry is only for the 500 shares that were reissued.

Forfeited amount on 500 shares = 500 shares × Rs. 5 = Rs. 2,500.

Less: Discount on reissue = Rs. 1,000.

Profit to be transferred to Capital Reserve = 2,500 - 1,000 = Rs. 1,500.

\begin{table[h!]
\centering
\begin{tabular{|l|r|r|
\hline
Particulars & Dr. (Rs.) & Cr. (Rs.)
\hline
Share Forfeiture A/c Dr. & 1,500 &

\quad To Capital Reserve A/c & & 1,500

(Being profit on reissue transferred to capital reserve) & &
\hline
\end{tabular
\end{table

Step 4: Final Answer:

The final profit on the reissue of 500 shares, which is transferred to the Capital Reserve, amounts to Rs. 1,500.
Quick Tip: When forfeiting shares on which premium is unpaid, you must debit the Securities Premium account to reverse the premium that was originally credited but never received.

Step 1: Understanding the Question:

The question requires journal entries for the forfeiture of 2,000 shares and their subsequent reissue in two separate lots at different prices. The final step is to calculate and transfer the total profit on the reissue of all 2,000 shares to the Capital Reserve.


Step 3: Detailed Explanation:

1. Journal Entry for Forfeiture:

Amount paid per share = Rs. 10 (Face Value) - Rs. 2 (Unpaid Call) = Rs. 8.

\begin{table[h!]
\centering
\begin{tabular{|l|r|r|
\hline
Particulars & Dr. (Rs.) & Cr. (Rs.)
\hline
Equity Share Capital A/c Dr. (2,000 × Rs.10) & 20,000 &

\quad To Share Forfeiture A/c (2,000 × Rs.8) & & 16,000

\quad To Calls-in-Arrears A/c (2,000 × Rs.2) & & 4,000

(Being 2,000 shares forfeited) & &
\hline
\end{tabular
\end{table

2. Journal Entry for Reissue to Ashok (750 shares):

Reissued for Rs. 10,000 as 'fully paid-up' (value = 750 × 10 = Rs. 7,500).

The reissue price is higher than the paid-up value, so the excess is a premium.

Securities Premium = 10,000 - 7,500 = Rs. 2,500.

\begin{table[h!]
\centering
\begin{tabular{|l|r|r|
\hline
Particulars & Dr. (Rs.) & Cr. (Rs.)
\hline
Bank A/c Dr. & 10,000 &

\quad To Equity Share Capital A/c & & 7,500

\quad To Securities Premium A/c & & 2,500

(Being 750 shares reissued to Ashok) & &
\hline
\end{tabular
\end{table

3. Journal Entry for Reissue to Sudha (Remaining 1,250 shares):

Reissued at Rs. 9 per share as 'fully paid-up' (value = 1,250 x 10 = Rs. 12,500).

Discount on reissue = Rs. 1 per share (10 - 9). Total discount = 1,250 × 1 = Rs. 1,250.

\begin{table[h!]
\centering
\begin{tabular{|l|r|r|
\hline
Particulars & Dr. (Rs.) & Cr. (Rs.)
\hline
Bank A/c Dr. (1,250 × Rs.9) & 11,250 &

Share Forfeiture A/c Dr. (Discount) & 1,250 &

\quad To Equity Share Capital A/c & & 12,500

(Being 1,250 shares reissued to Sudha) & &
\hline
\end{tabular
\end{table

4. Journal Entry for Transfer to Capital Reserve:

Profit on Ashok's 750 shares = Forfeited Amount (750 × 8) - Discount (0) = Rs. 6,000.

Profit on Sudha's 1,250 shares = Forfeited Amount (1,250 × 8) - Discount (1,250) = 10,000 - 1,250 = Rs. 8,750.

Total Capital Reserve = 6,000 + 8,750 = Rs. 14,750.

\begin{table[h!]
\centering
\begin{tabular{|l|r|r|
\hline
Particulars & Dr. (Rs.) & Cr. (Rs.)
\hline
Share Forfeiture A/c Dr. & 14,750 &

\quad To Capital Reserve A/c & & 14,750

(Being total profit on reissue of 2,000 shares transferred) & &
\hline
\end{tabular
\end{table

Step 4: Final Answer:

After reissuing all 2,000 shares in two lots, the total capital profit transferred to Capital Reserve is Rs. 14,750.
Quick Tip: When forfeited shares are reissued in parts, calculate the profit for each reissued part separately and transfer it to the Capital Reserve. The balance in the Share Forfeiture account for un-reissued shares remains until they are reissued.

Step 1: Understanding the Question:

The question requires passing journal entries for the reconstitution of a partnership due to a change in the profit-sharing ratio. This involves accounting for the revaluation of assets and liabilities, and making an adjustment entry for goodwill.


Step 3: Detailed Explanation (with Working Notes):

WN 1: Revaluation of Assets and Liabilities


Land and Building: Appreciation = 6,62,000 (New) - 6,00,000 (Old) = Rs. 62,000 (Gain).
Provision on Debtors: 5% of 1,00,000 = Rs. 5,000 (Loss).
Stock: Reduction = 2,10,000 (Old) - 2,00,000 (New) = Rs. 10,000 (Loss).
Net Revaluation Gain = 62,000 - 5,000 - 10,000 = Rs. 47,000.


WN 2: Goodwill Adjustment

Old Ratio (Promil:Kamlesh:Ritika) = 5 : 3 : 2.

New Ratio = 2 : 3 : 5.

Sacrifice/Gain = Old Share - New Share.


Promil: \( \frac{5}{10} - \frac{2}{10} = \frac{3}{10} \) (Sacrifice).
Kamlesh: \( \frac{3}{10} - \frac{3}{10} = 0 \) (No change).
Ritika: \( \frac{2}{10} - \frac{5}{10} = -\frac{3}{10} \) (Gain).

Ritika (gaining partner) will compensate Promil (sacrificing partner).

Amount = Total Goodwill × Gaining/Sacrificing Share = \( 1,80,000 \times \frac{3}{10} = Rs. 54,000 \).


Journal Entries

\begin{table[h!]
\centering
\begin{tabular{|l|r|r|
\hline
Particulars & Dr. (Rs.) & Cr. (Rs.)
\hline
1. Land and Building A/c Dr. & 62,000 &

\quad To Revaluation A/c & & 62,000

(Being increase in the value of Land and Building recorded) & &
\hline
2. Revaluation A/c Dr. & 15,000 &

\quad To Provision for Doubtful Debts A/c & & 5,000

\quad To Stock A/c & & 10,000

(Being decrease in assets and creation of provision recorded) & &
\hline
3. Revaluation A/c Dr. (Net Gain) & 47,000 &

\quad To Promil's Capital A/c (47,000 × 5/10) & & 23,500

\quad To Kamlesh's Capital A/c (47,000 × 3/10) & & 14,100

\quad To Ritika's Capital A/c (47,000 × 2/10) & & 9,400

(Being revaluation profit distributed in old ratio) & &
\hline
4. Ritika's Capital A/c Dr. & 54,000 &

\quad To Promil's Capital A/c & & 54,000

(Being adjustment for goodwill made) & &
\hline
\end{tabular
\end{table

Step 4: Final Answer:

The journal entries record the net revaluation profit of Rs. 47,000, which is distributed in the old ratio, and the goodwill adjustment where Ritika's account is debited and Promil's account is credited by Rs. 54,000.
Quick Tip: At the time of any reconstitution (change in PSR, admission, retirement), all revaluation profits/losses and distribution of reserves are done in the OLD profit-sharing ratio.

Step 1: Understanding the Question:

The task is to prepare a Realisation Account to ascertain the profit or loss on the dissolution of the partnership firm. This involves transferring all assets and external liabilities to the Realisation Account, and then recording their settlement.


Step 3: Preparation of Realisation Account:

Realisation Account
\begin{table[h!]
\centering
\begin{tabular{|p{5cm|p{3cm|p{5cm|p{3cm|
\hline
Dr. & \multicolumn{3{c|{Cr.

\hline
Particulars & Amount (Rs.) & Particulars & Amount (Rs.)
\hline
To Stock A/c & 20,000 & By Creditors A/c & 86,000

To Investments A/c & 30,000 & By Mrs. Rinku's Loan A/c & 20,000

To Debtors A/c & 50,000 & By Pinky's Husband's Loan A/c & 30,000

To Building A/c & 3,40,000 & By Provision for Doubtful Debts A/c & 5,000

To Rinku's Capital A/c (Mrs. Loan) & 20,000 & By Investment Fluctuation Fund A/c & 12,000

To Bank A/c (Creditors Paid) & 81,000 & By Rinku's Capital A/c (Stock taken) & 16,000

To Bank A/c (Husband's Loan) & 30,000 & By Pinky's Capital A/c (Assets taken) & 31,500

To Bank A/c (Expenses) & 6,000 & By Bank A/c (Assets Realised) & 4,63,000

To Realisation Profit transferred to: & & &

\quad Rinku's Capital A/c (3/5) & 50,100 & &

\quad Pinky's Capital A/c (2/5) & \underline{33,400 & &

& 83,500 & &
\hline
Total & 6,60,500 & Total & 6,60,500
\hline
\end{tabular
\end{table

Working Notes:


Pinky's Capital (Assets taken): Half of Investments (15,000) at 10% less (13,500) + Unrecorded Furniture (18,000) = Rs. 31,500.
Bank (Assets Realised): Debtors (44,000) + Building (4,00,000) + Remaining Investments (19,000) = Rs. 4,63,000.
Bank (Creditors Paid): Creditors (86,000) less discount (5,000) = Rs. 81,000.
Profit Calculation: Total Credits (6,63,500) - Total Debits before profit (5,77,000) = Rs. 86,500. Let me re-calculate.
Debits: 20k+30k+50k+340k+20k+81k+30k+6k = 577k
Credits: 86k+20k+30k+5k+12k+16k+31.5k+463k = 663.5k
Profit = 663.5k - 577k = 86,500.
The previous solution had a calculation error. Profit is Rs. 86,500.
Rinku's share = 86,500 * 3/5 = 51,900.
Pinky's share = 86,500 * 2/5 = 34,600.


Step 4: Final Answer:

The Realisation Account reveals a total profit of Rs. 86,500, which is transferred to the partners' capital accounts in their profit-sharing ratio of 3:2.
Quick Tip: A partner's relative's loan (e.g., Mrs. Rinku's Loan, Pinky's Husband's Loan) is an external liability and must be transferred to the Realisation Account and paid off. A partner's own loan is settled separately.

Step 1: Understanding the Concept:


This comprehensive question tests the classification of share capital in the Balance Sheet and the mathematical impact of forfeiture and reissue on the company's financial records.


Step 2: Key Formula or Approach:


1. Final Call Value: Total Face Value \(-\) (Application + First Call).
2. Subscribed Capital (Forfeited shares): (Shares held by public \(\times\) Face Value) + Share Forfeiture balance.


Step 3: Detailed Explanation:



(i) Registered Capital: This is the Authorised Capital mentioned in the Memorandum of Association (\(1,00,000 \times 100 = Rs.1,00,00,000\)).
(ii) Issued Capital: The portion offered to the public (\(50,000 \times 100 = Rs.50,00,000\)).
(iii) Calls in Arrears: Nawal failed to pay the final call. Final call = \(100 - (30 + 40) = Rs.30\). Arrears = \(700 \times 30 = Rs.21,000\).
(iv) Share Forfeiture Account: This contains the amount already paid by the defaulting member. Nawal paid Application (\(30\)) and First Call (\(40\)) = Rs.70 per share. Total = \(700 \times 70 = Rs.49,000\).
(v) Balance Sheet Presentation: Total shares issued were 50,000. After forfeiting 700, remaining shares are 49,300.
Capital = \((49,300 \times 100) + Forfeiture A/c balance (49,000) = 49,30,000 + 49,000 = Rs.49,79,000\).
(vi) Capital Reserve: If reissued at Rs.30 as \textit{fully paid-up, the company gives a discount of Rs.70 (\(100 - 30\)). Since the amount forfeited was also Rs.70 per share, the profit is exactly offset by the discount (\(70 - 70 = 0\)).



Step 4: Final Answer:


The correct sequence of answers based on the calculations above is (i) A, (ii) C, (iii) A, (iv) D, (v) C, (vi) D. Quick Tip: The "Maximum Discount" a company can give on the reissue of shares is exactly equal to the amount already forfeited on those specific shares.

Step 1: Understanding the Question:

The question requires preparing the Revaluation Account and Partners' Capital Accounts upon the admission of a new partner, Suraj. A key part of the question is calculating the 'proportionate capital' that Suraj needs to bring, which is based on the adjusted capitals of the old partners.


Step 3: Detailed Explanation:

1. Preparation of Revaluation Account:

The Revaluation Account records the profit or loss from the revaluation of assets and reassessment of liabilities.


Credit Side (Gains):

Increase in Plant and Machinery: \( 4,35,000 - 4,05,000 \) = Rs. 30,000.
Decrease in Creditors: Rs. 5,000.

Debit Side (Losses):

Decrease in Furniture (Book Value 1,20,000 taken over at 1,00,000): Rs. 20,000.


Revaluation Account
\begin{table[h!]
\centering
\begin{tabular{|l|r|l|r|
\hline
Dr. & \multicolumn{3{c|{Cr.

\hline
Particulars & Amount (Rs.) & Particulars & Amount (Rs.)
\hline
To Furniture A/c & 20,000 & By Plant \& Machinery A/c & 30,000

To Profit transferred to: & & By Creditors A/c & 5,000

\quad Asha's Capital A/c (3/5) & 9,000 & &

\quad Indra's Capital A/c (2/5) & 6,000 & &

& 15,000 & &
\hline
Total & 35,000 & Total & 35,000
\hline
\end{tabular
\end{table


2. Preparation of Partners' Capital Accounts:

This account tracks all adjustments for each partner.


Suraj's share of Goodwill = \( 1,00,000 \times \frac{1{4} = 25,000 \). This is credited to Asha and Indra in their sacrificing ratio (3:2).
Asha gets: \( 25,000 \times \frac{3}{5} = 15,000 \). Indra gets: \( 25,000 \times \frac{2}{5} = 10,000 \).

Partners' Capital Accounts
\begin{table[h!]
\centering
\small
\begin{tabular{|l|r|r|r||l|r|r|r|
\hline
Dr. & \multicolumn{7{c|{Cr.

\hline
Particulars & Asha & Indra & Suraj & Particulars & Asha & Indra & Suraj
\hline
To Furniture A/c & 1,00,000 & - & - & By Balance b/d & 4,00,000 & 3,00,000 & -

To Balance c/d & 3,54,000 & 3,36,000 & 2,30,000 & By General Reserve & 30,000 & 20,000 & -

& & & & By Revaluation A/c (Profit) & 9,000 & 6,000 & -

& & & & By Premium for Goodwill A/c & 15,000 & 10,000 & -

& & & & By Bank A/c (Capital) & - & - & 2,30,000
\hline
Total & 4,54,000 & 3,36,000 & 2,30,000 & Total & 4,54,000 & 3,36,000 & 2,30,000
\hline
\end{tabular
\end{table

3. Calculation of Suraj's Proportionate Capital:


Adjusted Capital of Asha (Closing Balance before Suraj's admission) = Rs. 3,54,000.
Adjusted Capital of Indra (Closing Balance before Suraj's admission) = Rs. 3,36,000.
Combined Capital of old partners = \( 3,54,000 + 3,36,000 \) = Rs. 6,90,000.
This combined capital represents the remaining \( 1 - \frac{1}{4} = \frac{3}{4} \) share of the firm.
Total Capital of the new firm = \( 6,90,000 \times \frac{4}{3} \) = Rs. 9,20,000.
Suraj's Capital for 1/4th share = \( 9,20,000 \times \frac{1}{4} \) = Rs. 2,30,000.



Step 4: Final Answer:

The Revaluation Account shows a profit of Rs. 15,000. Based on the adjusted capitals of the old partners, Suraj is required to bring in Rs. 2,30,000 as his proportionate capital.
Quick Tip: When an asset is taken over by a partner, it is debited to their Capital Account at the agreed value}, not the book value. Any difference between book value and agreed value goes to the Revaluation Account.

Step 1: Understanding the Question:

The question asks us to evaluate two statements regarding the classification of interest and dividend payments in the Cash Flow Statement for different types of enterprises. The classification depends on the principal revenue-producing activities of the business.


Step 3: Detailed Explanation:

Analysis of Statement I:

For a non-financial enterprise (e.g., a manufacturing or trading company), its main operations are buying and selling goods or services. Raising funds through shares and debentures is a financing activity. Therefore, paying dividends to shareholders and interest to debenture holders or lenders is a cash outflow related to financing. Statement I is true.


Analysis of Statement II:

For a financial enterprise (e.g., a bank), its main business is borrowing and lending money. Therefore, payment of interest on its borrowings is a core business expense and is classified as an Operating Activity. However, payment of dividend is a return to its own shareholders for their capital investment, which is always a Financing Activity. Since the statement classifies both as investing activities, Statement II is false.


Step 4: Final Answer:

Statement I is correct, but Statement II is incorrect. Therefore, the correct option is (C).
Quick Tip: Dividend Paid is always} a Financing Activity, regardless of whether the company is financial or non-financial.

Step 1: Understanding the Question:

The question asks for the correct accounting treatment of 'Interim Dividend Paid' in the Cash Flow Statement prepared under the indirect method. This involves understanding its impact on both Operating and Financing activities.


Step 3: Detailed Explanation:

The treatment of interim dividend has two parts:

1. Treatment in Operating Activities: The starting point for calculating Cash Flow from Operating Activities is 'Net Profit before Tax and Extraordinary Items'. Since the interim dividend is an appropriation of profit (a financing cost) that would have reduced the net profit shown in the Statement of P\&L, its effect must be nullified. This is done by adding it back to the net profit.

2. Treatment in Financing Activities: The actual payment of the dividend is a cash outflow to the providers of capital (shareholders). Activities related to capital and borrowings are classified as financing activities. Therefore, the dividend paid is shown as a cash outflow under Financing Activities.


Both these treatments are required for a complete and accurate Cash Flow Statement.


Step 4: Final Answer:

Option (A) correctly describes both necessary adjustments: adding back in operating activities and showing as an outflow in financing activities.
Quick Tip: Remember the dual effect for non-operating/non-cash items in the indirect method: Adjust for it in the Operating Activities section, and then show the actual cash flow in the Investing or Financing Activities section.

Step 1: Understanding the Question:

The question asks to identify which of the given transactions falls under the category of 'Financing Activities' in a Cash Flow Statement for a non-financial company.


Step 3: Detailed Explanation:

Let's analyze each option:


(A) Interest received \& (B) Dividend received: These are returns earned on investments made by the company in other entities (e.g., buying shares or debentures of another company). Cash flows from making and selling investments are classified as Investing Activities.
(C) Royalties received: Royalties, fees, and commissions are generally related to the principal revenue-producing activities of a business. Therefore, they are classified as Operating Activities.
(D) Interest paid on debentures: Debentures are a form of long-term borrowing to finance the company's operations. Activities that change the size and composition of the owner's capital and borrowings are financing activities. Paying interest is a cost of this borrowing. Therefore, it is a Financing Activity.


Step 4: Final Answer:

'Interest paid on debentures' is the correct example of a financing activity from the given options.
Quick Tip: A simple rule: Cash flows related to a company's own shares and borrowings are 'Financing'. Cash flows related to buying/selling long-term assets and investments in other companies are 'Investing'.

Step 1: Understanding the Question:

The question asks to calculate the value of Current Assets using the given information about Working Capital and the components of Current Liabilities.


Step 2: Key Formula or Approach:

The formula for Working Capital is:
\[ Working Capital (WC) = Current Assets (CA) - Current Liabilities (CL) \]
We can rearrange this formula to find Current Assets:
\[ Current Assets (CA) = Working Capital (WC) + Current Liabilities (CL) \]

Step 3: Detailed Explanation:

Part 1: Calculate Total Current Liabilities (CL)

Current Liabilities consist of all short-term obligations.
\[ CL = Trade Payables + Other Current Liabilities \] \[ CL = 50,000 + 1,00,000 = Rs. 1,50,000 \]

Part 2: Calculate Current Assets (CA)

Using the rearranged formula:
\[ CA = Working Capital + Current Liabilities \] \[ CA = 4,00,000 + 1,50,000 = Rs. 5,50,000 \]

Step 4: Final Answer:

The total Current Assets of Devdutt Ltd. are Rs.5,50,000.
Quick Tip: "Other Current Liabilities" are separate from "Trade Payables"; always sum all sub-heads to find the total Current Liabilities before calculating Current Assets.

Part (a): Calculation of Quick Ratio

Step 1: Understanding the Question:

The question requires the calculation of the Quick Ratio (also known as the Acid-Test Ratio). This ratio is a stricter measure of liquidity than the current ratio because it excludes less liquid assets like inventory and prepaid expenses.


Step 2: Key Formula or Approach:
\[ Quick Ratio = \frac{Quick Assets}{Current Liabilities} \]
Where,
\[ Quick Assets = Current Assets - (Inventory/Stock + Prepaid Expenses) \]

Step 3: Detailed Explanation:

1. Calculate Quick Assets:

Given: Current Assets = Rs. 2,00,000; Stock = Rs. 20,000; Prepaid Expenses = Rs. 10,000.
\[ Quick Assets = 2,00,000 - (20,000 + 10,000) = 2,00,000 - 30,000 = Rs. 1,70,000 \]
2. Calculate Quick Ratio:

Given: Current Liabilities = Rs. 1,70,000.
\[ Quick Ratio = \frac{1,70,000}{1,70,000} = 1:1 \]


Part (b): Users of Financial Analysis

Step 1: Understanding the Question:

The question asks to identify which user group is primarily interested in the long-term solvency (ability to meet long-term debts) and survival of the firm.


Step 3: Detailed Explanation:


Labour unions are interested in profitability to negotiate wages.
Trade payables (Creditors) are interested in short-term liquidity to ensure their bills will be paid on time.
Finance manager is an internal user interested in all aspects of financial performance.
Lenders (e.g., banks providing long-term loans, debenture holders) have extended credit for a long period. Their primary concern is the company's ability to generate profits over the long run to pay interest and repay the principal amount at maturity. This is directly related to long-term solvency.


Step 4: Final Answer:

The Quick Ratio in part (a) is 1:1. In part (b), Lenders are the users most concerned with long-term solvency.
Quick Tip: Quick assets are those current assets that can be converted into cash almost immediately. Stock is excluded because it takes time to sell, and prepaid expenses are excluded because they cannot be converted back to cash.

Step 1: Understanding the Question:

The question requires the preparation of a 'Comparative Statement of Profit and Loss'. This is a tool for horizontal analysis, where financial data from two or more accounting periods are placed side-by-side to facilitate comparison. It helps in identifying trends by showing the absolute change in figures and the percentage change over the base year.


Step 2: Key Formula or Approach:

The statement has five columns: Particulars, Previous Year's Figures (Base Year), Current Year's Figures, Absolute Change, and Percentage Change.

1. Absolute Change = Current Year's Figure - Previous Year's Figure.

2. Percentage Change = \( \frac{Absolute Change}{Previous Year's Figure} \times 100 \).


Step 3: Preparation of Comparative Statement of Profit and Loss:

Comparative Statement of Profit and Loss of Chaman Ltd. for the years ended 31st March, 2024 and 2025
\begin{table[h!]
\centering
\begin{tabular{|p{4cm|p{3cm|p{3cm|p{3cm|p{3cm|
\hline
Particulars & 2023-24 (Rs.) & 2024-25 (Rs.) & Absolute Change (Rs.) & % Change

& (A) & (B) & (C = B - A) & (D = C/A × 100)
\hline
I. Revenue from Operations & 32,00,000 & 40,00,000 & 8,00,000 & 25.00%
\hline
II. Total Revenue & 32,00,000 & 40,00,000 & 8,00,000 & 25.00%
\hline
III. Expenses: & & & &

(a) Employee Benefit Expenses & 16,00,000 & 20,00,000 & 4,00,000 & 25.00%

(b) Other Expenses & 4,00,000 & 2,00,000 & (2,00,000) & (50.00)%
\hline
IV. Total Expenses & 20,00,000 & 22,00,000 & 2,00,000 & 10.00%
\hline
V. Profit before Tax (II - IV) & 12,00,000 & 18,00,000 & 6,00,000 & 50.00%

VI. Less: Tax Expense @50% & 6,00,000 & 9,00,000 & 3,00,000 & 50.00%
\hline
VII. Profit after Tax (V - VI) & 6,00,000 & 9,00,000 & 3,00,000 & 50.00%
\hline
\end{tabular
\end{table

Step 4: Final Answer:

The completed Comparative Statement shows that while revenue grew by 25%, the Profit after Tax grew by a significant 50%. This was primarily due to a sharp 50% decrease in 'Other Expenses', which helped improve profitability despite a rise in employee benefit expenses.
Quick Tip: Percentage Change = \(\frac{Absolute Change (C)}{Previous Year (A)} \times 100\). A decrease in a figure should be shown with brackets or a negative sign in the 'Absolute Change' and '% Change' columns.

Step 1: Understanding the Question:

The question requires the classification of three specific items into their appropriate Major Head and Sub-head as prescribed by Schedule III, Part I of the Companies Act, 2013 for the preparation of a company's Balance Sheet.


Step 3: Detailed Explanation and Classification:

\begin{table[h!]
\centering
\begin{tabular{|p{4cm|p{3cm|p{3cm|p{6cm|
\hline
Item & Major Head & Sub-head & Reasoning
\hline
(i) Demand deposits with banks & Current Assets & Cash and Cash Equivalents & Demand deposits are balances in bank accounts that can be withdrawn on demand without any restriction. They are considered highly liquid and equivalent to cash.
\hline
(ii) Long-term loans & Non-Current Liabilities & Long-term borrowings & This represents loans taken by the company which are repayable after more than 12 months from the date of the Balance Sheet.
\hline
(iii) Livestock & Non-Current Assets & Property, Plant and Equipment and Intangible Assets & Livestock (animals used in business) are considered biological assets held for production or supply. Under Schedule III, they are classified as a component of Property, Plant and Equipment (tangible fixed assets).
\hline
\end{tabular
\end{table

Step 4: Final Answer:

The classification for each item is as follows:

(i) Demand deposits with banks: Major Head: Current Assets; Sub-head: Cash and Cash Equivalents.

(ii) Long-term loans: Major Head: Non-Current Liabilities; Sub-head: Long-term borrowings.

(iii) Livestock: Major Head: Non-Current Assets; Sub-head: Property, Plant and Equipment and Intangible Assets.
Quick Tip: "Demand deposits" are bank balances that can be withdrawn anytime, hence they are treated as cash equivalents. In contrast, "Term deposits" with a maturity of more than 3 months but less than 12 months would be under 'Other Current Assets'.

Step 1: Understanding the Question:

The question asks us to analyze the impact of four different transactions on the 'Net Asset Turnover Ratio'. We need to determine if each transaction will increase, decrease, or have no effect on the initial ratio of 2 times.


Step 2: Key Formula or Approach:

The formula for the ratio is:
\[ Net Asset Turnover Ratio = \frac{Revenue from Operations}{Capital Employed (or Net Assets)} \]
Where, Capital Employed = Total Assets - Current Liabilities.

Let's assume initial Revenue = Rs. 20,00,000 and Capital Employed = Rs. 10,00,000, so the ratio is \( \frac{20,00,000}{10,00,000} = 2 \) times.


Step 3: Detailed Explanation:

(i) Cash sales Rs.3,00,000


Effect: Revenue from Operations increases by Rs.3,00,000. Total Assets also increase (as cash increases), but for this ratio, we look at Capital Employed. The change in current assets (cash) is offset by the inflow from sales (which is revenue), so Capital Employed does not change.
Analysis: The numerator (Revenue) increases, while the denominator (Capital Employed) remains unchanged.
Conclusion: The ratio will Increase.


(ii) Issue of equity shares Rs.10,00,000


Effect: This transaction increases both Total Assets (as cash/bank increases) and Shareholders' Funds. Capital Employed (which includes Shareholders' Funds) increases by Rs.10,00,000. Revenue from Operations is not affected.
Analysis: The numerator remains unchanged, while the denominator increases.
Conclusion: The ratio will Decrease.


(iii) Issue of 9% debentures Rs.5,00,000


Effect: This transaction increases Total Assets (cash/bank) and Non-Current Liabilities (Debentures). Capital Employed (which includes debt) increases by Rs.5,00,000. Revenue is not affected.
Analysis: The numerator remains unchanged, while the denominator increases.
Conclusion: The ratio will Decrease.


(iv) Credit purchase of goods Rs.50,000


Effect: This transaction increases Current Assets (Inventory) by Rs.50,000 and Current Liabilities (Creditors) by Rs.50,000. The net effect on Capital Employed (Total Assets - Current Liabilities) is zero. Revenue is not affected.
Analysis:
Okay, let's assume 'Net Assets' means Total Assets.
Credit purchase increases Inventory (Asset) and Creditors (Liability). Total Assets increase. Revenue is unchanged. The ratio will **Decrease**. This is the more common interpretation in such questions.


Step 4: Final Answer:

(i) Increase, because Revenue increases while Capital Employed is not affected.

(ii) Decrease, because Capital Employed increases while Revenue is not affected.

(iii) Decrease, because Capital Employed increases while Revenue is not affected.

(iv) Decrease (assuming Net Assets = Total Assets), because Total Assets increase while Revenue is not affected.
Quick Tip: When analyzing the effect on a ratio, assume simple figures that satisfy the initial ratio. Then, apply the transaction to see how the numerator and denominator change. Be clear about the formula being used (e.g., Net Assets vs. Capital Employed vs. Total Assets).

Step 1: Understanding the Question:

The question requires the calculation of two key solvency ratios: the Proprietary Ratio and the Debt-to-Equity Ratio, based on the provided financial figures.


Step 2: Key Formula or Approach:

1. Proprietary Ratio = \( \frac{Shareholders' Funds (or Equity)}{Total Assets} \)

2. Debt-to-Equity Ratio = \( \frac{Debt (Long-term Borrowings)}{Equity (Shareholders' Funds)} \)

Where:

- Equity/Shareholders' Funds = Equity Share Capital + Preference Share Capital + Reserves and Surplus.

- Debt = Long-term Borrowings.

- Total Assets = Non-Current Assets (Plant \& Machinery + Non-Current Investments) + Current Assets.


Step 3: Detailed Calculations:

1. Calculate Shareholders' Funds (Equity):
\[ Equity = 3,00,000 (Equity Cap) + 1,00,000 (Pref. Cap) + 1,00,000 (Reserves) = Rs. 5,00,000 \]

2. Calculate Total Assets:
\[ Total Assets = 3,50,000 (P\&M) + 1,00,000 (Investments) + 2,00,000 (Current Assets) = Rs. 6,50,000 \]

3. Calculate Proprietary Ratio:
\[ Proprietary Ratio = \frac{5,00,000}{6,50,000} = 0.7692... \approx 0.77 : 1 \]

4. Calculate Debt-to-Equity Ratio:

Debt (Long-term Borrowings) = Rs. 1,50,000.
\[ Debt-to-Equity Ratio = \frac{1,50,000}{5,00,000} = 0.3 : 1 \]

Step 4: Final Answer:

The Proprietary Ratio is 0.77 : 1, and the Debt-to-Equity Ratio is 0.3 : 1.
Quick Tip: To cross-check your calculation of Total Assets, you can use the liability-side approach: Total Assets = Equity + Total Liabilities. Here, Equity (5,00,000) + Long-term Borrowings (1,50,000) = 6,50,000 (assuming no Current Liabilities are given). The figures match.

Step 1: Understanding the Question:

The question asks to calculate the 'Cash from Operations' (or Cash Flow from Operating Activities) using the indirect method. This involves starting with the given Net Profit, adjusting for non-cash and non-operating items, and finally adjusting for changes in current assets and current liabilities related to operations.


Step 3: Detailed Calculation:

Calculation of Cash Flow from Operating Activities for the year ended 31st March, 2025
\begin{table[h!]
\centering
\begin{tabular{|l|r|r|
\hline
Particulars & Details (Rs.) & Amount (Rs.)
\hline
Net Profit for the year & & 5,40,000

Add: Non-cash and Non-operating expenses: & &

Depreciation & 80,000 &

Goodwill written off & 2,000 & \underline{82,000

Operating Profit before Working Capital Changes & & 6,22,000

\textit{Add: Changes in Working Capital & &

Increase in Trade Payables (Increase in CL) & 67,000 &

Decrease in Other Current Assets (Decrease in CA) & 2,300 &

\textit{Less: Changes in Working Capital & &

Decrease in Commission received in advance (Decrease in CL) & (6,000) &

Increase in Accrued Interest (Increase in CA) & (20,000) &

Decrease in Outstanding Rent (Decrease in CL) & (10,000) &

Increase in Trade Receivables (Increase in CA) & (19,000) &

Increase in Inventories (Increase in CA) & \underline{(25,000) & \underline{(10,700)

Cash Flow from Operating Activities & & 6,11,300
\hline
\end{tabular
\end{table

Working Notes for Changes in Working Capital:

Increase in Trade Payables = 1,17,000 - 50,000 = +67,000 (Add)
Decrease in Other Current Assets = 27,000 - 24,700 = +2,300 (Add)
Decrease in Commission received in advance = 10,000 - 4,000 = -6,000 (Subtract)
Increase in Accrued Interest = 30,000 - 10,000 = +20,000 (Subtract)
Decrease in Outstanding Rent = 20,000 - 10,000 = -10,000 (Subtract)
Increase in Trade Receivables = 1,00,000 - 81,000 = +19,000 (Subtract)
Increase in Inventories = 75,000 - 50,000 = +25,000 (Subtract)

Net effect = 67,000 + 2,300 - 6,000 - 20,000 - 10,000 - 19,000 - 25,000 = -10,700.

Step 4: Final Answer:

The Net Cash Flow from Operating Activities for Sawera Ltd. for the year ended 31st March, 2025 is Rs.6,11,300.
Quick Tip: Remember the rules for working capital adjustments:
Add: Increase in Current Liability \& Decrease in Current Asset.
Subtract: Decrease in Current Liability \& Increase in Current Asset.

Step 1: Understanding the Question:

The question asks for the specific keyboard shortcut in a spreadsheet application (like Microsoft Excel or Google Sheets) to jump from the top cell of a data block in a column to the bottom cell of that same block, skipping all the cells in between.


Step 3: Detailed Explanation:


The CTRL + Arrow Key combination is a fundamental navigation shortcut in spreadsheets. It moves the active cell to the edge of the current data region in the direction of the arrow.
If you are in cell A1 and column A has continuous data down to cell A50, pressing CTRL + Down Arrow (↓) will instantly move the cursor from A1 to A50.
If there is a blank cell at A51 and another block of data from A52 to A100, pressing CTRL + Down Arrow again from A50 will jump to A52. This is what "successively" implies.
(A) END + Down arrow (↓) is a two-step process. Pressing END puts the program in 'End Mode', and then pressing an arrow key moves to the edge of the data. It achieves a similar result but CTRL + Arrow is more direct.
(B) HOME + Page down and (C) HOME + Down arrow (↓) are not standard shortcuts for this purpose. HOME key usually moves to the beginning of a row or worksheet.


Step 4: Final Answer:

The most common and direct method to navigate to the end of a data cluster in a column is by using the shortcut CTRL + Down arrow (↓).
Quick Tip: To select all the cells while jumping, hold down the SHIFT} key as well (CTRL + SHIFT + Down Arrow). This is extremely useful for selecting entire columns of data quickly.

Step 1: Understanding the Question:

The question asks to identify the characteristic that does NOT describe 'Tailored' accounting software. Tailored software is custom-built for a specific organization's unique needs.


Step 3: Detailed Explanation:

Let's analyze the features of tailored software:


(A) Designed specially for large enterprises: This is TRUE. Tailored software is expensive and complex, making it suitable mainly for large organizations with specific and extensive requirements that off-the-shelf software cannot meet.
(C) Requires special training before use: This is TRUE. Because the software is unique to the organization, employees cannot rely on general knowledge of other accounting packages. They need specific training on its features and workflows.
(D) Needs technical installation efforts: This is TRUE. Unlike ready-to-use software, tailored systems are not 'plug-and-play'. They require significant effort from IT professionals to develop, install, integrate with other systems, and deploy across the organization.
(B) Requires minimal or no support from system: This is FALSE. Tailored software, being unique and complex, actually requires a high level of continuous support from the developers or an in-house IT team for maintenance, bug fixes, updates, and user assistance. It is the most support-intensive type of software.


Step 4: Final Answer:

The statement that is not a feature of tailored accounting software is that it requires minimal or no support. In reality, it requires the most support.
Quick Tip: Think of the software types like clothing:
- Ready-to-use:} Buying a t-shirt off the rack (cheap, easy, fits most).
- Customized:} Buying a suit and getting it altered (moderate cost and effort).
- Tailored:} Getting a suit custom-made from scratch (expensive, requires a lot of effort, unique, needs a professional to maintain).