SOLUTION TO QUESTION BOOK

CA

FOUNDATION

PRINCIPLES AND

PRACTICE OF

ACCOUNTING

SOLUTION

TO

QUESTION BOOK

INDEX

ACCOUNTING PROCESS

Chapter No. 2 Chapter Name Page No.

UNIT – 6 RECTIFICATION OF ERRORS 1-10

BANK RECONCILIATION STATEMENT

Chapter No. Chapter Name Page No.

3 BANK RECONCILIATION STATEMENT 11-14

INVENTORIES


4 INVENTORIES 15-17

DEPRECIATION ACCOUNTING


5 DEPRECIATION ACCOUNTING 18-21

ACCOUNTING FOR SPECIAL TRANSACTIONS


UNIT – 1 BILLS OF EXCHANGE AND PROMISSORY NOTES 22-26

UNIT – 2 SALE OF GOODS ON APPROVAL OR RETURN BASIS 27-29

UNIT – 3 CONSIGNMENT 30-35

UNIT – 4 AVERAGE DUE DATE 36-39

UNIT – 5 ACCOUNT CURRENT 40-42

PREPARATION OF FINAL ACCOUNTS OF SOLE PROPRIETORS


UNIT – 1 Final Accounts Of Non-Manufacturing Entities 43-55

UNIT – 2 Final Accounts Of Manufacturing Entities 56

PARTNERSHIP ACCOUNTS


UNIT – 1 INTRODUCTION TO PARTNERSHIP ACCOUNTS 57-58

UNIT – 2 TREATMENT OF GOODWILL IN PARTNERSHIP

ACCOUNTS 59-60

UNIT – 5 DEATH OF PARTNER 61-62

FINANCIAL STATEMENTS OF NOT-FOR PROFIT ORGANIZATIONS


9

FINANCIAL STATEMENTS OF NOT-FOR PROFIT

ORGANIZATIONS 63-68

COMPANY ACCOUNTS


UNIT – 2 ISSUE, FORFEITURE AND REISSUE OF SHARES 69-77

UNIT – 3 ISSUE OF DEBENTURES 78-86

CHAPTER - 2 - ACCOUNTING PROCESS UNIT-VI: RECTIFICATION OF ERRORS

Answer 13:

RECTIFIED JOURNAL ENTRIES

Transaction Particulars Debit (Rs.) Credit (Rs.)

(1) Suspense A/c Dr.

To Purchase Return A/c

(Being rectification of omission of amount not posted to Return

Outward Book)

420

420

(2) Sales A/c Dr.

Purchase A/c Dr.

To Suspense A/c

(Being rectification of purchase

amount entered in the sales book)

350

350

700

(3) Z's A/c Dr.

To Suspense

(Being rectification of wrong amount

and wrong side of account)

680

680

(4) Sales A/c Dr.

Suspense A/c Dr.

To Furniture A/c

(Being rectification of wrongly

entered amount)

4,500

900

5,400

(5) Drawings A/c Dr.

To Purchase A/c

(Being recording of the omission of

goods taken by proprietor)

500

500

SUSPENSE A/C

Particulars Rs. Particulars Rs.

To Difference in trial Balance 60 By Sales A/c 350

To Purchase Return A/c 420 By Purchase A/c 350

To Furniture A/c 900 By Z's A/c 680 1,380 1,380

Answer 14:


(1) Purchase A/c Dr.

Sales A/c Dr.

To Ravi's A/c

(Being rectification of purchases

wrongly entered to sales book)

15,000

15,000

30,000

1

(2) Bills Receivable A/c Dr.

Bills Payable A/c Dr.

To Arun A/c

(Being rectification of bills receivable

wrongly recorded in bills payable

books)

25,000

25,000

50,000

(3) Prepaid Rent A/c Dr.

To Suspense A/c

(Being rectification of omission of prepaid rent a/c to be brought

forward)

3,500

3,500

(4) Customer A/c Dr.

To Purchase A/c



return wrongly entered in purchase

book)

4,000

2,000

2,000

(5) Repair A/c Dr

To Purchase A/c

To Janki A/c

(Being recording of the amount

wrongly entered in purchase book as

46000)

2,500

1,000

1,500

SUSPENSE A/C


To Balance b/d 1,000 By Prepaid Rent A/c 3,500

To Balance c/d 2,500

3,500

3,500

Answer 15:



To A's A/c

(Being rectification of amount

received from A wrongly debited to

his account)

10,000

10,000


To Purchase A/c



return wrongly posted to purchase

a/c)

40,000

20,000

20,000


To Discount A/c (Being rectification of discount

16,000

16,000

2

received wrongly debited to Discount

A/c

(4) Motor Car Repairs A/c Dr.

To Motor Car A/c

To Suspense A/c

(Being rectification motor car repairs of Rs. 9060 wrongly debited to

motor car A/c as 7060)

9,060

7,060

2,000

(5) B's A/c Dr.

To A's A/c

(Being rectification of amount paid to B

wrongly debited to A)

40,000

40,000

SUSPENSE A/C


To A's A/c 1,00,000 By Difference in trial 1,54,000

To Purchase A/c 20,000 Balance (Bal. fig.)

To Purchase Return A/c 20,000 By Motor Car Repairs A/c 2,000

To Discount A/c 16,000

1,56,000

1,56,000

Answer 16:


(I) Suspense A/c Dr.

To Mr. A's A/c

(Being rectification of receipt from A

wrongly posted to A's Debit A/c)

10,800

10,800

(II) Suspense A/c Dr.


To Purchase A/c


return wrongly posted to purchase

A/c)

2,000

2,000

(III) Suspense A/c Dr.

To Discount A/c

(Being rectification of wrong posting

of discount received to debit of

discount A/c)

4,000

4,000

(IV) Repairs of Motor Car A/c Dr.

To Motor Car A/c

To Suspense A/c

(Being rectification of motor car

repairs wrongly debited motor car

A/c

2,740

2,740

(V) B's A/c Dr.

To A's A/c

4,000

4,000

3

(Being rectification of payment to B

wrongly debited to A's A/c)

SUSPENSE A/C


To Mr. A A/c 10,800 By Difference in Trial Balance 15,800

To Purchase Return A/c 1,000 BY Repairs A/c 1,000

To Purchase A/c 1,000

To Discount A/c 4,000

16,800 16,800

Answer 17:

RECTIFIED JOURNAL ENTRIES


(I) Suspense A/c Dr.

To P&L Adjustment A/c

(Being rectification of under-

valuation of sales book)

180

180

(II) P&L Adjustment A/c Dr.

To Customer A/c

(Being rectification of personal car

expenses wrongly debited to trade

expenses)

2,400

2,400

(III) Drawings A/c Dr.


(Being rectification of personal car

expenses wrongly debited to trade

expenses)

250

250

(IV) P&L Adjustment A/c Dr.

To Customer A/c

(Being rectification of sales return

undervalued by Rs. 2740)

2,750

2,750

(V) Suspense A/c Dr.


(Being rectification of discount

allowed wrongly debited to discount

A/c)

100

100

(VI) P&L Adjustment A/c Dr.

To Suspense A/c

To Creditors A/c

(Being rectification of undervaluation

of purchase book and wrong posting to

suppliers A/c as Rs. 51)

136

36

100

4

Answer 18:


1 Purchase A/c Dr.

Sales A/c Dr.

To Suspense A/c

(Being purchase was recorded by

mistake in sales day book)

1,080

1,080

2,160

2 Salary ac/ (25,200 + 2,520) Dr.

To Suspense A/c

(Being total of salary a/c Bal. of Rs.

25,200 written as 2,520 on the

wrong side.)

27,720

27,720

3 Interest on Overdraft A/c Dr.

To Suspense A/c

(Being posting of entry to the ledger

ommitted)

1,300

1,300

SUSPENSE A/C

Dr. Cr.


To Bal. b/d 31,180 By Purchase 1,080 By Sales 1,080 By Salary 27,720 By Interest on overdraft 1,300 31,180 31,180

Answer 19:

Journal Entries

Particulars L.F. Dr.

(Rs.)

Cr.

(Rs.)

(i) Subham A/c Dr. 300

Furniture A/c Dr. 2,700

To Nigam A/c 3,000

(ii) Sales Returns A/c Dr. 5,000

To Jyothy A/c 5,000

(iii) Sales A/c Dr. 75,000

To P & L A/c (Gain on sale of investments) 15,000

To Investments A/c 60,000

(iv) Drawings A/c Dr. 10,000

To Trade Expenses A/c 10,000

Answer 20:

Journal Entries in the books of Miss Daisy

Date Particulars Dr. (Rs.) Cr. (Rs.)

(i) Profit & Loss Adjustment A/c Dr. 8,000

To Suspense*A/c 8,000

(Purchase Account under cast in the previous year;

error now rectified)

5

(ii) Rahim’s Account Dr. 2,500

To Profit & Loss Adjustment A/c 2,500

(Sales to Rahim omitted last year; now adjusted)

(iii) Anbu’s Account Dr. 1,200

To Asok’s Account 1,200

(Amount received from Asok wrongly posted to the

account of Anbu; now rectified)

(iv) Profit & Loss Adjustment A/c Dr. 450

To Suspense* A/c 450

(Excess posting to sales account last year, Rs. 4,617,

instead of Rs. 4,167 now adjusted)

(v) Profit & Loss Adjustment A/c Dr. 1,800

To Machinery A/c 1,800

(Repairs to machinery was wrongly debited to

machinery account, now rectified)

(vi) Profit & Loss Adjustment A/c Dr. 6,000

To Mr. Paul Account 6,000

Credit purchase of goods from Mr. Paul sale last

year, now rectified)

(vii) Daisy’s Capital A/c Dr. 13,750

To Profit and Loss Adjustment Account 13,750

(Being balance in P & L Adjustment Account

transferred to Daisy’s Capital A/c – Refer W.N. 1)

(viii) Suspense A/c Dr. 8,450

To Daisy’s Capital A/c 8,450

(Being balance of Suspense A/c transferred to

Capital A/c– Refer W.N. 2)

*Considering that the difference was posted to Suspense account.

Working Notes:

1. Profit and Loss Adjustment Account

Rs. Rs.

To Suspense A/c 8,000 By Rahim’s A/c 2,500

To Suspense A/c 450 By Daisy’s Capital A/c 13,750

To Machinery A/c 1,800 (Bal. Transfer)

To Mr. Paul’s A/c 6,000

16,250 16,250

2. Suspense Account

Rs. Rs.

To Daisy’s Capital A/c 8,450 By P & L Adj. A/c 8,000

(Balance Transfer) By P & L Adj. A/c 450

8,450 8,450

Answer 21:

(i) P & L Adjustment A/c Dr. 1,000

To Suspense A/c 1,000

(Correction of error by which sales account was

overcast last year)

6

(ii) X Dr. 5,000

To Y 5,000

(Correction of error by which sale of Rs. 5,000 to X

was wrongly debited to Y’s account)

(iii) Suspense A/c Dr. 630

To P & L Adjustment A/c 630

(Correct of error by which general expenses of Rs. 180

was wrongly posted as Rs. 810)

(iv) Bills Receivable A/c Dr. 1,550

Bills Payable A/c Dr. 1,550

To P 3,100

(Correction of error by which bill receivable of Rs. 1,550

was wrongly passed through BP book)

(v) P & L Adjustment A/c Dr. 1,190

To Mrs. Neetu 1,190

(Correction of error by which legal expenses paid to

Mrs. Neetu was wrongly debited to her personal

account)

(vi) Suspense A/c Dr. 3,000

To Ram 1,500

To Shyam 1,500

(Removal of wrong debit to Shyam and giving credit to

Ram from whom cash was received)

(vii) Suspense A/c Dr. 90

To P&L Adjustment A/c 90

(Correction of error by which Purchase A/c was excess

debited by Rs. 90/-, ie: Rs. 1,325 – Rs. 1,235)

Suspense A/c

Rs. Rs.

To P & L Adjustment A/c 630 By P & L Adjustment A/c 1,000

To Ram 1,500 By Difference in Trial Balance 2,720

To Shyam 1,500 (Balancing figure)

To P&L Adjustment A/c 90

3,720 3,720

Answer 22:

S.

No.

Debit

(Rs.)

Credit

(Rs.)

1 Commission A/c Dr. 4,500

To Interest Received 4,500

(Correcting wrong entry of interest received into

commission account)

2 M/s Sobhag Traders A/c Dr. 90

To Suspense A/c 90

(Being credit sale of Rs. 2,760 posted as Rs. 2,670 i.e.

debiting M/s Sobhag Traders A/c less by 90, now rectified)

3 Drawing A/c Dr. 35,000

To Machinery A/c 35,000

(Correction of wrong debit to machinery account for

purchase of air-conditioner for personal use)

7

4 Return Inward A/c Dr. 5,000

To Debtors (Personal) A/c 5,000

(Correction of omission to record return of goods by

customers)

Answer 23:

(i) If a Suspense Account is not opened.

(a) Since sales book has been cast Rs. 2,100 short, the Sales Account has been

similarly credited Rs. 2,100 short. The correcting entry is as follows:

Sales A/c

Dr. Cr.

Date Particulars Rs. Date Particulars Rs.

By Wrong Totaling of Sales

Book

2,100

(b) To rectify the omission, the Returns Inwards Account has to be debited and

the account of Gaurav & Co. credited. The entry is:

Returns Inward Account Dr. Rs. 1,800

To Gaurav & Co. Rs. 1,800

(Goods returned by the firm,

previously omitted from the Returns

Inward Book)

(c) Sen Brothers have been debited Rs. 2,250 instead of being credited. This

account should now be credited by Rs. 4,500 to remove the wrong debit and to

give the correct credit. The entry will be done as follows:

Sen Brothers A/c


By errors in posting 4,500

(d) By this error Purchases Account has to be debited by Rs. 15,000 whereas the

debit should have been to the Furniture Account. The correcting entry will be:

Furniture Account Dr. Rs. 15,000

To Purchases Account Rs. 15,000

(Correction of the mistake by which

purchases Account was debited

instead of the Furniture Account)

(e) The discount of Rs. 1,200 received from Black & White should have been

entered on the credit side of the cash book. Had this been done, the Discount

Account would have been credited (through the total of the discount column)

and Black & White would have been debited. This entry should be made :

Black & White Dr. Rs. 1,200

To Discount Account Rs. 1,200

(Rectification of the error by which

the discount allowed by the firm was

not entered in Cash Book)

8

(f) In this case the account of the customer has been correctly posted; the

Discount Account has been debited Rs.180 short since it has been omitted

from the discount column on the debit side of the cash book. The discount

account should now be rectified as follows:

Discount A/c


To Omission of entry in

the Cash Book

180

(ii) If a Suspense Account is opened:

Particulars L.F. Dr.

Rs.

Cr.

Rs.

(a) Suspense Account Dr. 2,100

To Sales Account

2,100

(Being the correction arising from under-

casting of Sales Day Book)

(b) Return Inward Account Dr.

1,800

To Gaurav & Co .

1,800

(Being the recording of unrecorded returns)

(c) Suspense Account Dr.

4,500

To Sen Brothers

4,500

(Being the correction of the error by

which Sen Brothers was debited instead

of being credited by Rs.2,250).

(d) Furniture Account Dr.

15,000

To Purchases Account

15,000

(Being the correction of recording purchase of

furniture as ordinary purchases)

(e) Black & White Dr.

1,200

To Discount Account

1,200

(Being the recording of discount omitted to be

recorded)

(f) Discount Account Dr.

180

To Suspense Account

180

(Being the correction of omission of the discount

allowed from Cash Book customer’s account

already posted correctly).

Answer 24: Particulars L.F. Dr.

Rs. Cr.

Rs.

(1) Sales Account Dr. 5,000

Sales Returns Account Dr.

5,000

To Suspense Account

10,000 (The value of goods returned by Mr. Sharma wrongly posted

to Sales and omission of debit to Sales Returns Account, now rectified)

(2) Suspense Account Dr.

15,000

To Mr. Hari

15,000 (Wrong debit to Mr. Hari for goods returned by him, now

9

rectified)

(3) Mr. Amit Dr.

20,000

To Mr. Sumit

2,000 To Suspense Account 18,000 (Omission of debit to Mr. Amit and wrong credit to Mr.

Sumit for sale of Rs.20,000, now rectified)

(4) Bad Debts Account Dr.

15,000

To Suspense Account

15,000 (The amount of Bad Debts written off not adjusted in General

Ledger, now rectified)

(5) Discount Account Dr.

12,500

To Suspense Account

12,500 (The total of Discount allowed during September, 2020 not

posted from the Cash Book; error now rectified)

__**__

10

CHAPTER – 3 - BANK RECONCILIATION STATEMENT

Answer 16:

BANK RECONCILIATION STATEMENT AS ON 31ST MARCH, 1997 Particulars +Items

Rs.

–Items

Rs.

Overdraft as per Cash Book 7,640

Add: Cheques deposited but not credited by the bank 10,000

Interest debited by the bank but not recorded in the cash book 1,000

Bank Charges not recorded in the cash book 340

Less: Interest on securities collected by the bank but not recorded

in cash book

1,080

Credit transfer not recorded in the cash book 200

Dividend collected by the bank directly but not recorded in the cash

book

1,000

Cheques issued but not presented for payment 37,400

Balance as per Bank Statement (bal. fig.) 20,700 39,680 39,680

Answer 17:

BANK RECONCILIATION STATEMENT (AS ON 30TH SEPTEMBER, 2005) Particulars +Items

Rs.

–Items

Rs.

1. Overdraft as per Bank Pass-Book 21,494

2. Cheque deposited but not yet entered in Cash Book 700

3. Under cast of debit side of the Bank column 100

4. Cheque deposited Rs. 5,000 but entire in Pass Book as Rs.

4,996

4

5. Cheque dishonoured but not recorded in Cash Book 530

6. Bills collected by bank but not recorded in Cash-Book 3,500

7. Bank Charges recorded twice in Cash-Book 25

8. Bills dishonured but not yet recorded in Cash Book 8,025

9. Cheque deposited but not yet Collected by Bank 2,320

10. Cheque issued but not yet presented for payment 1,250

11. Over draft as per Cash-Book 16,200

27,069 27,069

Answer 18:

BANK RECONCILIATION STATEMENT AS ON 31ST MARCH, 2018

Particulars Rs.

Bank balance (Debit i.e. overdraft) as per Bank Pass book 33,575

(i) No adjustment required as there would be no difference on 31.3.18

(ii) Add: No entry in Cash book for interest collection by Bank 2,800

(iii) Less: Amount debited in cash book for pending cheques in collection but

not credited in Pass Book

(7,500)

(iv) Add: Cheque credited in cash book but not debited in pass book 2,500

(v) Add: Reversal of wrong Credit 500

11

Less: Reversal of wrong debit (300)

(vi) Less: Cheque of Rs. 1,0000 entered in cash book but omitted to be banked (1,000)

(vii) Less: Discounted dishonored but no entry in Cash book (5,200)

(viii) Add: Rebate on bill retired not entered in cash book 175

(ix) Add: Cheques deposited in bank not yet recorded in cash book 2,400

Balance (Cr. i.e. overdraft) as per Cash book 27,950

Note: A cheque of Rs. 1,080 credited in Pass Book on 28th March, 2018 and later debited

in Pass Book on 1st April, 2018 has no effect on Bank Reconciliation statement as at 31 st

March, 2018.

Answer 19:

BANK RECONCILIATION STATEMENT AS ON 31ST MARCH, 2018

Particulars Details

Rs.

Amount

Rs.

Debit balance as per Cash Book 18,60,000

Add: Cheque issued but not yet presented to bank for

payment

3,60,000

Dividend received by bank not entered in cash book 2,50,000

Interest credited by bank 6,250 6,16,250

24,76,250

Less: Cheques deposited into bank but not yet collected 7,70,000

Bank charges debited by Bank 1,000

Cheque deposited into bank was dishonoured 1,60,000

House tax paid by bank 1,75,000

(11,06,000)

Credit balance as per Pass Book 13,70,250

Answer 20:

BANK RECONCILIATION STATEMENT AS ON 30TH JUNE 2018

Particulars Amount Amount

Overdraft as per Pass Book (Dr. Balance) 25,000

Add: Cheques issued but not presented Rs. (34,000-

20,000)

14,000

Cheques deposited into the Bank by Customer but not

entered in Cash Book

400

Bank charges written twice in Cash Book 80 14,480

39,480

Less: Cheques received, recorded in cash Book but not sent

to the Bank

4,000

Cheques sent to the Bank but not collected 6,000

Direct payment made by the bank not recorded in the

Cash book

600

Interest on Overdraft charged by Bank 1,600

Insurance charges not entered in Cash Book 70

Credit side of bank column of Cash Book was

undercast

2,000

14,270

Overdraft as per Cash Book 25,210

12

Answer 21:

CASH BOOK (BANK COLUMN)

Date Particulars Amount Date Particulars Amount

2018 Rs. 2018

Sept. 30 To Party A/c 18,000 Sept. 30 By Balance b/d 8,062

To Customer A/c By Bank charges 280

(Direct

deposit)

1,15,400 By Customer A/c

To B/R collected 59,000 (B/R dishonoured) 1,60,000

To Balance c/d 1,75,942 By Bills payable 2,00,000

3,68,342 3,68,342

BANK RECONCILIATION STATEMENT AS ON 30TH SEPTEMBER, 2018

Particulars Amount

Rs.

Overdraft as per Cash Book 1,75,942

Add: Cheque deposited but not collected up to 30th Sept., 2018 11,14,000

12,89,942

Less: Cheques issued but not presented for payment up to 30th Sept., 2018 (13,46,000)

Credit by Bank erroneously on 6th Sept. (30,000)

Balance as per bank statement 86,058

Answer 22: Cash Book as on 31.3.2020

(After making necessary adjustments)

Dr. Cr.

Particulars Amount

Rs. Particulars Amount

Rs.

To Balance b/d 32,50,000 By Bank charges 12,500

To Dividend 1,25,000 By Insurance premium 15,900 By Trade receivables

(cheque dishonoured) 1,30,000

By Cash A/c (wrongly recorded cash sales)

2,55,000

By Balance c/d 29,61,600 33,75,000 33,75,000

Bank Reconciliation Statement as on 31.3.2020

Particulars Details Amount

Rs.

Bank balance as per the cash book 29,61,600

Add: Cheques issued but not yet presented for payment 35,62,000

Wrong credit given by bank 1,50,000 37,12,000 66,73,600

Less: Cheques deposited but not yet credited by bank

(44,75,000)

Balance as per the pass book

21,98,600

The bank balance of Rs. 29,61,600 will appear in the trial balance as on 31st March, 2020.

13

Note: Cash sales should have been recorded by passing the following entry:

Cash A/c Dr. 2,55,000 To Sales A/c 2,55,000

But it has been wrongly debited to Bank A/c, so following rectification entry has been

passed: Cash A/c Dr. 2,55,000

To Bank A/c 2,55,000

__**__

14

CHAPTER – 4 - INVENTORIES

Answer 17:

NAVKAR LTD. STOCK LEDGER UNDER FIFO METHOD

Date

Receipts Issues Balance

Unit (MT)

Rate Rs.

Amount Rs.

Unit (MT)

Rate Rs.

Amount Rs.

Unit (MT)

Rate Rs.

Amount Rs.

Opening

Balance 5,000 22 1,10,000 5,000 22 1,10,000

1.6.99 1,000 30 30,000 5,000 22 1,10,000 1,000 30 30,000

5.6.99 2,000 35 70,000 2,000 22 44,000 3,000 22 66,000 1,000 30 30,000

10.6.99 1,500 38 57,000 3,000 22 66,000 1,000 30 30,000 2,000 35 70,000 1,500 38 57,000

15.6.99 1,500 35 52,500 1,000 30 30,000 2,000 35 70,000 1,500 38 57,000 1,500 35 52,500

20.6.99 2,000 32 64,000 1,000 30 30,000 500 38 19,000 2,000 35 70,000 1,500 35 52,500 1,000 38 38,000 2,000 32 64,000

25.6.99 500 38 19,000 1,000 32 32,000 1,500 35 52,500

1,000 32 32,000

28.6.99 2,000 35 70,000 1,000 32 32,000 2,000 35 70,000

30.6.99 1,500 30 45,000 1,000 32 32,000 1,500 30 45,000 2,000 35 70,000

16,500 4,98,500 15,000 4,53,500

Answer 18:

VALUATION OF STOCK AS ON 31ST MARCH 2002

Particulars Rs. Rs.

1. Stock of Godown on 15th April 50,000

2. Add: (a) Cost of goods sold after 31st March til stock taking 32,000

(b) Cost of stock with customer on approval

[(Rs. 10,000 - Rs. 4,000) × 80/100] 4,800 36,800

86,800

3. Less: (a) Cost of goods purchased after 31st March till stock

taking is made

5,034

(b) Stock belonging to consignors (Rs. 8,000 ×

30/100) 2,400 7,434

Stock as on March 31, (at cost) 79,366

15

Answer 19:

STATEMENT OF VALUATION OF PHYSICAL STOCK AS ON 31ST MARCH,2019

Rs. Rs.

Value of stock as on 10th April, 2019 1,25,000

Add: Cost of sales during the intervening period

Sales made between 1.4.2019 and 9.4.2019 20,000

Less: Gross profit @20% on sales (4,000) 16,000

Free sample 4,000

1,45,000

Less: Purchases actually received during the intervening

period:

Purchases from 1.4.2019 to 9.4.2019 10,000

Less: Goods not received upto 9.4.2019 (2,000) (8,000)

1,37,000

Add: Purchases during March, 2019 but not recorded in stock 20,000

Value of physical stock as on 31.3.2019 1,57,000

Answer 20:

Valuation of Physical Stock as at March 31, 2018

Rs.

Stock at cost on 31.12.2017 80,000

Add: (1) Undercasting of a page total 200

(2) Goods purchased and delivered during January –

March, 2018

Rs. (70,000 – 3,000 + 4,000) 71,000

(3) Cost of sales return Rs. (1,000 – 200) 800 72,000

1,52,000

Less: (1) Overcasting of a page total Rs. (6,000 – 5,000) 1,000

(2) Goods sold and dispatched during January – March, 2018

Rs. (90,000 – 5,000 + 4,000) 89,000

Less: Profit margin 125

25x89,000

17,800

71,200

72,200

Value of stock as on 31st March, 2018 79,800

Note: In the above solution, transfer of ownership is assumed to take place at the time

of delivery of goods. If it is assumed that transfer of ownership takes place on the date

of invoice, then Rs. 4,000 goods delivered in March 2018 for which invoice was received in

April, 2018, would be treated as purchases of the accounting year 2017-2018 and thus

excluded. Similarly, goods dispatched in March, 2018 but invoiced in April, 2018 would be

excluded and treated as sale of the year 2017-2018.

Answer 21:

Statement showing the valuation of stock

as on 31st March, 2020 Rs.

A Value of Stock as on 10th April, 2020 5,02,500

B Add: Cost of sales after 31st March, till stock taking (Rs. 20,625

– Rs. 5,156)

15,469

C Less: Purchases for the next period (net) (24,300)

16

D Less: Cost of Sales Returns (900-675) (675)

E Less: Loss on revaluation of slow moving inventories (1800)

F Less: Reduction in value on account of default (900)

G Value of Stock on 31st March, 2020 4,90,294

Note: Profit margin of 33.33 percent on cost means 25 percent on sale price.

__**__

17

CHAPTER – 5 - CONCEPT AND ACCOUNTING OF DEPRECIATION

Answer 16:


1993 1993

Jan. 1 To Bank A/c 1,94,000 Dec. 31 By Dep. A/c 25,000

To Bank A/c

(Erection cost)

6,000 By Balance c/d

2,75,000

July 1 To Bank A/c 1,00,000

3,00,000 3,00,000

1994 1994

Jan. 1 To Balance b/d 2,75,000 Dec. 31 By Dep. A/c 30,000

Dec. 31 By Balance c/d 2,45,000

2,75,000 2,75,000

1995 1995

Jan. 1 To Balance b/d 2,45,000 July 1 By Bank A/c

(Sales Proceeds)

1,00,000

Dec. 31 By P & L A/c

(Loss on sale)

60,000

By Dep. A/c 17,500

By Balance c/d 2,17,500

3,95,000 3,95,000

1996 1996

Jan. 1 To Balance b/d 2,17,500 Dec. 31 By Dep. A/c

(15% on 2,17,500)

32,625


2,17,500 2,17,500

Notes:

(1) Calculation of Depreciation

(10% per annum on

the original cost)

Machinery I Machinery II Machinery III

[Date of Purchase:

1993

1st Jan. 1993 (Rs.)

20,000

1st July 1993

(Rs.)

5,000

1st July 1993

(Rs.)

– (10/100 X 2,00,000) (1,00,000 X 6/12 X

10/100)

–

1994 20,000 10,000 –

1995 – 10,000 75,000 (1,50,000 X 6/12 X

10/100)

(2) Loss as Sale: Rs.

Cost (Purchase) 2,00,000

Less: Total Depreciation (on First Machinery) 40,000

W.D.V. on the date of sale 1,60,000

Less: Sale Value 1,00,000

Loss on sale 60,000

18

Answer 18:

IN THE BOOKS OF FIRM

MACHINERY ACCOUNT

Rs. Rs.

1.1.2015 To Bank A/c 37,000 31.12.2015 By Depreciation A/c 4,000

To Bank A/c

(overhauling charges)

3,000 31.12.2015 By Balance c/d 36,000

40,000 40,000

1.1.2016 To Balance b/d 36,000 31.12.2016 By Depreciation A/c

(Rs. 5,400 + Rs. 750)

6,150

1.7.2016 To Bank A/c 10,000 31.12.2016 ByBalance c/d

(Rs. 30,600 + Rs. 9,250)

39,850

46,000 46,000

1.1.2017 To Balance b/d 39,850 1.7.2017 By Bank A/c (sale) 28,000

1.7.2017 To Bank A/c 25,000 1.7.2017 By Profit and Loss A/c

(Loss on Sale – W.N. 1)

305

31.12.2017 By Depreciation A/c

(Rs. 2,295 + Rs. 1,388 +

Rs. 1,875)

5,558

By Balance c/d

(Rs. 7,862 + Rs. 23,125)

30,987

64,850 64,850

1.1.2018 To Balance b/d 30,987 1.7.2018 By Bank A/c (sale) 2,000

1.7.2018 By Profit and Loss A/c

(Loss on Sale – W.N. 1)

5,272

31.12.2018 By Depreciation A/c

(Rs. 590 + Rs. 3,469)

4,059

31.12.2018 By Balance c/d 19,656

30,987 30,987

Working Note:

BOOK VALUE OF MACHINES

Machine Machine Machine

I II III

Rs. Rs. Rs.

Cost of all machinery 40,000 10,000 25,000

(Machinery cost for 2015)

Depreciation for 2015 4,000

Written down value as on 31.12.2015 36,000

Purchase 1.7.2016 (6 months) 10,000

Depreciation for 2016 5,400 750

Written down value as on 31.12.2016 30,600 9,250

Depreciation for 6 months (2017) 2,295


Sale proceeds 28,000

Loss on sale 305

Purchase 1.7.2017 25,000

Depreciation for 2017 (6 months) 1,388 1,875

Written down value as on 31.12.2017 7,862 23,125

Depreciation for 6 months in 2018 590


19

Sale proceeds 2,000

Loss on sale 5,272

Depreciation for 2018 3,469


Answer 19:

MACHINERY ACCOUNT

Dr. Cr.

2017 Rs. 2017 Rs.

Jan. 1 To Bank A/c 4,80,000 Dec. 31 By Depreciation A/c 60,000

Jan. 1 To Bank A/c –

erection charges

20,000 By Balance c/d 6,40,000

July 1 To Bank A/c 2,00,000

7,00,000 7,00,000

2018 2018

Jan. 1 To Balance b/d 6,40,000 July 1 By Depreciation on sold

machine

22,500

July 1 To Bank A/c 5,00,000 By Bank A/c 2,90,000

By Profit and Loss A/c 1,37,500

Dec. 31 By Depreciation A/c 44,000


11,40,000 11,40,000

Working Note:

BOOK VALUE OF MACHINES Machine Machine Machine

I II III Rs. Rs. Rs.

Cost 5,00,000 2,00,000 5,00,000

Depreciation for 2017 50,000 10,000

Written down value 4,50,000 1,90,000

Depreciation for 2018 22,500 19,000 25,000

Written down value 4,27,500 1,71,000 4,75,000

Sale Proceeds 2,90,000

Loss on Sale 1,37,500

Answer 20: In the books of M/s Roxy

Machinery A/c

Date Account (in Rs.) Date Account (in Rs.)

01.01.2019 To Balance b/d 4,56,000 01.07.2019 By Bank A/c 2,50,000

By P&L A/c – 50,000

Loss on Sale

30.09.2019 To Bank A/c 60,000 31.12.2019 By Depreciation 37,500


5,16,000 5,16,000

01.01.2020 To Balance b/d 1,78,500 31.12.2020 By Depreciation By

26,775 31.12.2020 Balance c/d 1,51,725

1,78,500 1,78,500

20

Working Note: Calculation of Book Value of Machines under SLM Machine 1 Machine 2 Machine 3 (in Rs.) (in Rs.) (in Rs.)

Date of Purchase 01.01.2017 01.07.2017 30.09.2019

Original Cost 4,00,000 1,60,000 60,000

Depreciation for 2017 (SLM) (40,000) (8,000)

WDV on 31.12.2017 3,60,000 1,52,000

Depreciation for 2018 (SLM) (40,000) (16,000)

WDV on 31.12.2018 3,20,000 1,36,000

Depreciation for 2019 (SLM) (20,000) (16,000) (1,500)

WDV on 31.12.2019 (30th June for

Machine 1)

3,00,000 1,20,000 58,500

Sale Proceeds (2,50,000)

Loss on Sale 50,000

Depreciation for 2020 (WDV @ 15%) - (18,000) (8,775) WDV on 31.12.2020 - 1,02,000 49,725

__**__

21

CHAPTER – 6 - ACCOUNTING FOR SPECIAL TRANSACTIONS UNIT-I: BILLS OF EXCHANGE AND PROMISSORY NOTES

Answer 16:

BOOKS OF SHUBHAM JOURNAL ENTRIES

Date Particulars Amount

(Dr) Rs.

Amount

(Cr) Rs.

1998 Bills Receivable A/c Dr. 45,000

June 1 To Rajendra A/c 45,000

(Being Acceptance received from Rajendra for

Mutual accommodation)

June 1 Bank A/c Dr. 44,100

Discount A/c Dr. 900

To Bills Receivable A/c 45,000

(Being Bill discounted)

June 1 Rajendra Dr. 15,000

To Bank A/c 14,700

To Discount A/c 300

(Being one-third of proceeds remitted to

Rajendra)

Sept. 4 Rajendra Dr. 63,000 63,000

To Bills Payable A/c

(Being Acceptance given to Rajendra on failure of

remittance of the amount due)

Sept. 4 Bank A/c Dr. 11,100

Discount A/c Dr. 900 12,000

To Rajendra

(Being receipt of Amount from Rajendra and

discount amount credited to him.)

Dec. 7 Bills Payable A/c Dr. 63,000 63,000

To Rajendra

(Beings Acceptance to Rajendra dishonoured on

insolvency.)

Dec. 7 Rajendra Dr. 42,000

To Bank A/c 16,800

To Deficiency A/c 25,200

(Being Amount paid @ 40% and balance credited

to Deficiency A/c on failure of payment)

BOOKS OF RAJENDRA JOURNAL ENTRIES


(Dr) Rs.

Amount

(Cr) Rs.

1998 Shubham Dr. 45,000

June 1 To Bills Payable A/c 45,000

(Being Acceptance given for the bill)

June 1 Bank A/c Dr. 14,700


To Shubham 15,000

(Being one third of the proceeds of bill after

discounting received from shubham

22

Sept. 4 Bill Receivable A/c Dr. 63,000

To Shubham 63,000 (Being Acceptance received from Shubham to cover

the amount due from him)

Sept. 4 Bank A/c Dr. 61,650

Discount A/c Dr. 1,350

To Bills Receivable A/c 63,000

(Being Shubham's Acceptance discounted)

Sept. 4 Bills Payable A/c Dr. 45,000

To Bank A/c 45,000

(Being own acceptance due on the date met)

Sept. 4 Shubham Dr. 12,000

To Bank A/c 11,100

To Discount A/c 900

(Being Amount remitted to Shubham, after getting

the bill discounted)

Dec. 7 Shubham Dr. 63,000

To Bank A/c 63,000

(Being Shubham's Acceptance dishonoured on

insolvency)

Dec. 7 Bank A/c Dr. 16,800

Bad Debts A/c Dr. 25,200

To Shubham 42,000

(Beings Amount and bad debts written off in respect

of amount due from Shubham)

Working Note:

Calculation of discount to be borne by Mr. Shubham:

Rs. 15,000 paid to Rajendra out of bill of Rs. 45,000 as such Rs. (45,000 - 15,000) =

30,000 due to Rajendra and Rs. 11,100 further received from Rajendra. Therefore 30,000 +

11,100 = Rs. 41,100 are shared by Shubham, out of total Discount shared by Shubham.

900.Rs.1,350X61,650

41,10061,650)(63,000X

61,650

41,100

Answer 17:

BOOKS OF H


(Dr) Rs.

Amount

(Cr) Rs.

1.7.99 G's A/c Dr. 80,000

To Bills Payable A/c 80,000

(Being Acceptance of bill drawn by G)

1.9.99 J's A/c Dr. 90,000

To Sales A/c 90,000

(Being Sales made to J)

1.9.99 Bills Receivable A/c Dr. 80,000

Banks A/c Dr. 9,000

Discount A/c Dr. 1,000

To J's A/c 90,000

(Being Acceptance received from J's endorsement of

bill received from G and Rs. 9,000 received in full

settlement of the amount due)

23

1.9.99 Bills Payable A/c Dr. 80,000

To Bills Receivable A/c 80,000 (Being Own acceptance received from Ji's

Endorsement cancelled)

1.10.99 Purchase A/c Dr. 1,00,000

To G's A/c 1,00,000 (Being purchase made from G) G's A/c Dr. 20,000

To Bank A/c 20,000 (Being Amount paid to G after adjustment of Rs.

80,000 for accommodation extended to him)

Answer 18:

RAM'S JOURNAL


(Dr) Rs.

Amount

(Cr) Rs.

2001 Hari's A/c Dr. 1,00,000

Jan. 1 To Sales A/c 1,00,000

(Being Sale of goods to Hari on credit)

Jan. 1 Bills Receivable A/c Dr. 1,00,000

To Hari's A/c 1,00,000 (Being Bill accepted by Hari for the amount due)

Jan. 4 Bank A/c Dr. 97,000

Discount Dr. 3,000

To Bills Received A/c 1,00,000 (Being Bill accepted by Hari Discounted with the

bank @ 12% p.a.)

Jan. 4 Hari's A/c Dr. 1,00,250

To Bank A/c 1,00,250 (Being the amount the amount of bill dishonoured

and nothing charges paid thereon, debited to Hari's

account)

HARI'S JOURNAL


(Dr) Rs.

Amount

(Cr) Rs.

2001 Purchase Account Dr. 1,00,000

Jan 1 To Ram's A/c 1,00,000

(Being purchases of goods from Ram on credit)

Jan 1 Ram's A/c Dr. 1,00,000

To Bills Payable A/c 1,00,000 (Being Acceptance given on the bill drawn by Ram)

April 4 Bills Payable A/c Dr. 1,00,000

Trade Expenses A/c Dr. 250

To Ram's A/c

1,00,250 (Being Dishonour of the bill drawn by Ram on the

due date)

24

Answer 19:

JOURNAL ENTRIES IN THE BOOKS OF AKSHAY 2018 Dr. Cr.

(Rs.) (Rs.)

Jan. 1 Bills receivable (No. 1) A/c Dr. 16,000

Bills receivable (No. 2) A/c Dr. 25,000

To Vishal A/c 41,000

(Being drawing of bills receivable No. 1 due for

maturity on 4.3.2018 and bills receivable No. 2

due for maturity on 4.4.2018)

March 4 Vishal’s A/c Dr. 16,000

To Bills receivable (No.1) A/c 16,000

(Being the reversal entry for bill No.1 on renewal)

March 4 Bills receivable (No. 3) A/c Dr. 16,400

To Interest A/c 400

To Vishal ’s A/c 16,000

(Being the drawing of bill of exchange no. 3 due

for maturity on 7.5.2018 together with interest

at 15%p.a. in lieu of the original acceptance of

Vishal)

March 25 Bank A/c Dr. 24,750


To Bills receivable (No. 2) A/c 25,000

(Being the amount received on retirement of bills

No.2 before the due date)

May 7 Vishal’s A/c Dr. 16,400

To Bills receivable (No. 3) A/c 16,400

(Being the amount due from Vishal on dishonour

of his acceptance on presentation on the due

date)

May 7 Bank A/c Dr. 8,200

To Vishal’s A/c 8,200

(Being the amount received from official assignee

of Vishal at 50 paise per rupee against

dishonoured bill)

May 7 Bad debts A/c Dr. 8,200

To Vishal’s A/c 8,200

(Being the balance 50% debt in Vishal’s Account

arising out of dishonoured bill written off as bad

debts)

Answer 20:

Books of S. Samarth Journal Entries

Dr. Cr.

Rs. Rs.

(i) Bills Payable Account Dr. 1,250

Interest Account Dr. 25

To Cash A/c 500 To Bills Payable Account 775

25

(Bills Payable to Aarav discharged by cash payment of Rs.

500 and a new bill for Rs.1,250 including Rs. 25 as

interest)

(ii) (a) G. Gupta Dr. 4,020

To Sahni 4,020 (G. Gupta’s acceptance for Rs. 4,000 endorsed to Sahni

dishonoured, Rs. 20 paid by Sahni as noting charges)

(b) Sahni Dr. 4,020

To Bank Account 4,020 (Payment to Sahni on withdrawal of bill earlier received from

Mr. G. Gupta)

(iii) Bank Account Dr. 4,980

Discount Account Dr. 20

To Bills Receivable Account 5,000 (Payment received from Harshad against his acceptance

for Rs. 5,000. Allowed him a discount of Rs. 20)

(iv) Bills Payable Account Dr. 19,000

To Bills Receivable Account 19,000 (Bills Receivable from Patel endorsed to Sandeep in

settlement of bills payable issued to him earlier)

__**__

26

CHAPTER – 6 – UNIT – II – SALE OF GOODS ON APPROVAL OR RETURN BASIS

Answer 11:

JOURNAL ENTRIES IN THE BOOKS OF MR. A

Particulars Rs. Rs.

(i) Mr. B's (Debtor) A/c Dr. 20,000

To Sales A/c 20,000

(Being goods are approved by Mr B)

(ii) Mr. B's (Debtor) A/c Dr. 20,000

To Sales A/c 20,000

(Being goods are sold)

Sales Return A/c Dr. 20,000

To Mr. B's A/c 20,000

(Being goods are rejected by the customer)

(iii) Mr. B's A/c Dr. 20,000

To Sales 20,000

(Being goods are sold)

Sales Return A/c Dr. 10,000

To Mr. B's A/c 10,000

(Being half of goods rejected by the customer)

Answer 12:

IN THE BOOKS OF MR. BADHRI JOURNAL ENTRIES

Date Particulars L.F. Dr.

(in Rs.)

Cr.

(in Rs.)

2017

Dec. 2 Trade receivables A/c Dr.

80,000

To Sales A/c

80,000

(Being the goods sent to customers on sale or

return basis)

Dec. 10 Return Inward A/c (Note 1) Dr.

35,000

To Trade receivables A/c

35,000

(Being the goods returned by customers to

whom goods were sent on sale or return basis)

Dec. 23 Sales A/c Dr.

15,000

To Trade receivables A/c

15,000

(Being the cancellation of original entry of sale

in respect of goods on sale or return basis)

Dec. 31 Inventories with customers on Sale or Return

A/c

Dr.

12,000

To Trading A/c (Note 3)

12,000

(Being the adjustment for cost of goods lying

with customers awaiting approval)

Note:

(1) Alternatively, Sales account or Sales returns can be debited in place of Return

Inwards account.

(2) No entry is required for receiving letter of approval from customer.

(3) Cost of goods with customers = Rs. 15,000 x 100/125 = Rs. 12,000

(4) It has been considered that the transaction values are at involve price (including

profit margin).

27

Answer 13:

IN THE BOOKS OF MR. GANESH JOURNAL ENTRIES

Date Particulars L.F. Dr. Cr.

Rs. Rs.

2018 Sales A/c Dr. 6,500

March 31 To Trade receivables A/c 6,500

(Being the cancellation of original entry for

sale in respect of goods lying with

customers awaiting approval)

March 31 Inventories with Customers on Sale or

Return A/c

Dr.

5,000

To Trading A/c (Note 1)

5,000

(Being the adjustment for cost of goods lying

with customers awaiting approval)

April 25 Trade receivables A/c Dr.

3,900

To Sales A/c

3,900

(Being goods costing worth Rs. 3,900 sent to Mr. Aditya on sale or return basis has been accepted by him)

BALANCE SHEET OF MR. GANESH AS ON 31ST MARCH, 2018 (EXTRACTS)

Liabilities Rs. Assets Rs. Rs.

Trade receivables (Rs. 75,000 - Rs.

6,500)

68,500

Inventories-in-trade 50,000

Add: Inventories with customers on Sale

or Return

5,000

55,000

1,23,500

Notes:

(1) Cost of goods lying with customers = 100/130 x Rs. 6,500 = Rs. 5,000

(2) No entry is required on 15th April, 2018 for goods returned by Mr. Bakkiram. Goods

should be included physically in the Inventories.

Answer 14:

In the books of ‘Madhu’ Goods on sales or return, sold and returned day book.

Date 2020

Party to whom goods sent

L.F Amount

Rs.

Date 2020

Sold

Rs. Returned

Rs.

Mar 01 M/s. Priya 20,000 Mar 11 20,000 -

Mar 08 M/s. Riya

25,000 Mar. 16 - 25,000

Mar 15 M/s. Chiya

24,000 Mar. 20 20,000 4,000

Mar 19 M/s. Diya

22,500 Mar. 24 22,500 -

Mar 25 M/s. Tiya

18,250 Mar. 28 18,250 -

Mar 30 M/s. Bhavya

23,000 Pending approval

1,32,750 80,750 29,000

28

Goods on Sales or Return Total Account


Rs. Date Particulars Amount

Rs.

2020 2020

Mar. 31 To Returns 29,000 Mar. 31 By Goods sent on sales or return

1,32,750

To Sales 80,750

To Balance c/d 23,000

1,32,750

1,32,750

__**__

29

CHAPTER – 6 - UNIT - III - CONSIGNMENT

Answer 13:

IN THE BOOKS OF M/S RAM & CO., DELHI

CONSIGNMENT ACCOUNT Dr. Cr.

Particulars Amt. (Rs.) Particulars Amt. (Rs.) To Goods sent on Consignment A/c (12,000 × 240)

28,80,000 By Laxman Traders A/c (10,000× 250)

25,00,000

To Bank 6,000 By Goods sent on Consignment

(12000 × 40)

4,80,000

To Laxman Traders (expenses) 2,000 By Stock on consignment 4,40,900

To Laxman Traders 1,45,000

To Stock Reserve 80,000

To Net Profit (Profit on Consignment Transferred)

3,07,900

34,20,900

34,20,900

LAXMAN TRADERS ACCOUNT

Particulars Amt. (Rs.) Particulars Amt. (Rs.) To Consignment A/c (sales) 25,00,000 By Consignment A/c 2,000 By Consignment A/c (1) 1,45,000 By Bank A/c 10,00,000 By Balance c/d 13,53,000 25,00,000 25,00,000

Working Note:

1. Calculation of Commission Payable

5% on 25,00,000 = 1,25,000

20% on 1,00,000 = 20,000

1,45,000

2. Valuation of closing stock on consignment

2000 sarees @ Rs. 240 = 4,80,000

Add: Proportionate expenses

6,000 X 2,000 1,000

12,000 ________

4,81,000

Less: Reduction in cost by 10% 40,100

Value of closing stock 4,40,900

Answer 14:

CONSIGNMENT ACCOUNT

Dr. Cr. Date Particulars Rs. Date Particulars Rs. 1997 1997

Jan 15 To Goods sent on Consignment A/c

25,00,000 March 4 By Y A/c (Sales) 21,00,000

Jan 15 To Bank A/c 7,000 April 10 By Y A/c (Sales) 10,80,000 Jan 30 To Y A/c

(Clearance expenses) 4,500 April 30 By Stock on

Consignment A/c (2) 2,51,150

Mar. 4 To Y A/c (Selling Expenses)

75,000

April 10 To Y A/c (Selling Expenses)

37,500

30

April 30 To Y A/c (Commission) (1)

1,63,500

April 30 To Net Profit 6,43,650 34,31,150 34,31,150

Y (Bombay) Account

Dr. Cr.


1997 1997

March 4 To Consignment A/c 21,00,000 Jan 30 By Consignment A/c 4,500

April 10 To Consignment A/c 10,80,000 March 4 By Consignment A/c 75,000

April 1 By Consignment A/c 37,500

April 30 By Consignment A/c

(1)

1,63,500

April 30 By Bank A/c 28,99,500

31,80,000 31,80,000

Working Notes:

1. Computation of commission

Let Total Commission be x

x = 225 × 500 + 1/4 [(21,00,000 + 10,80,000) – × – (12,500 × 225)]

x = 1,12,500 + 1/4 [31,80,000 – × – 28,12,500

x = 1,12,500 + 91,875 – 4

X; x +

4

X= 1,12,500 + 91,875

4

5X= 2,04,375

X = 1,63,500

Total Commission = Rs. 1,63,500

2. Valuation of closing stock

25 televisions @ Rs. 10,000 2,50,000

Add: Proportionate expenses of the consignor 250

25X7000 700

Add: Proportionate clearance expenses paid by the consignee 250

25X4500 450

2,51,150

Answer 15:

IN THE BOOKS OF A CONSIGNMENT ACCOUNT

Dr. Cr.

Date Particulars Amt.

(Rs.)

Date Particulars Amt.

(Rs.)

2004 2004

Feb. 18 To Goods sent on

consignment account

1,00,000

By B's account (Sales)

(600 × Rs. 160)

96,000

Feb. 18 To Cash Account

(Expenses)

1,500

By B's account (Sales)

(300 × Rs. 170

51,000

To B's Account

(Clearance charges)

3,000 By Consignment stock

(W.N.-2)

10,450

June 30 To B's account 18,000

31

(Selling expenses) i.e.

(900 × Rs. 20)

Commission (W.N-1) 24,900

June 30 To Profit and loss account 10,050

1,57,450 1,57,450

B'S ACCOUNT

Date Particulars Amt. (Rs.)

Date Particulars Amt. (Rs.)

2004 2004 Mar. 15 To Consignment

account (Sales) 96,000 Feb. 18 By Consignment Account

(Clearance charge) 3,000

May 20 To Consignment account (Sales)

51,000 June 30 By Consignment account

18,000

(Selling expenses, & Commission)

24,900

June 30 By Cash account 1,01,100

1,47,000 1,47,000

Working Notes:

1. Computation of total commission:

Let total commission paid/payable be X.

X=900 x Rs. 25 + 4

1 [Rs. 96,000 + Rs. 51,000] – x – (900 x Rs. 125)

X = Rs. 22,500 + 4

1 [Rs. 1,47,000 – x – Rs. 1,12,500]

X = Rs. 22,500 + 4

1 [Rs. 34,500 – x]; 4X = Rs. 90,000 + Rs. 34,500 – x –

4x + x = Rs. 90,000 + Rs. 34,500

5x = Rs. 1,24,500 x = Rs. 24,900

2. Computation of value of the stock:

Rs.

100 DVD players @ Rs. 100 each 10,000

Add: Proportionate expenses of A 1000

100)X1,500 (Rs. 150

Proportionate expenses paid by B 1000

100)X3,000 (Rs. 300

10,450

Answer 16:

In the books of Shri Ganpath Consignment to Rawat of Jaipur Account


To Goods sent on Consignment 7,50,000 By Rawat (Sales) 7,35,000

To Bank (Expenses:

15,000+45,000+15,000) 75,000

By Goods lost in Transit 50 cases

@ Rs. 1,650 each*

82,500

To Rawat (Expenses:

18,000+25,000+7,000)

50,000 By Consignment Inventories:

In hand 50 @ Rs. 1,695 each

84,750

To Rawat (Commission) 73,500 By Consignment Inventories: In

transit 50 @ Rs. 1,650 each**

82,500

32

To Profit on Consignment ts/f to

Profit & Loss A/c

36,250

9,84,750 9,84,750

*Considered as abnormal loss.

** The goods in transit (50 cases) have not yet been cleared. Hence the proportionate

clearing charges on those goods have not been included in their value.

RAWAT’S ACCOUNT


To Consignment to Jaipur A/c 7,35,000 By Consignment A/c (Expenses) 50,000

By Consignment A/c (Commission) 73,500


7,35,000 7,35,000

Working Notes:

(i) Consignor’s expenses on 500 cases amounts to Rs. 75,000; it comes to Rs. 150 per

case. The cost of cases lost will be computed at Rs. 1,650 per case.

(ii) Rawat has incurred Rs. 18,000 on clearing 400 cases, i.e., Rs. 45 per case; while

valuing closing inventories with the agent Rs. 45 per case has been added to cases

in hand with the agent.

(iii) It has been assumed that balance of Rs. 6,11,500 is not yet paid.

Answer 17:

CONSIGNMENT ACCOUNT Rs. Rs.

To Goods sent on consignment A/c

(15,000 kg x Rs. 30)

4,50,000 By Consignee’s A/c-Sales

(7,500 kg x Rs. 60)

4,50,000

To Cash A/c

(Expenses 15,000 kg x Rs.5)

75,000 By Abnormal Loss A/c

(Insurance claim - WN) 9,000

To Consignee’s A/c:

Advertisement & Recurring expenses

33,000

Add: Abnormal Loss (WN)

(Profit and Loss Account)

5,000 14,000

Commission @ 5% on Rs. 4,50,000 22,500 By Consignment Stock A/c 2,46,690

To Profit and loss A/c

(Profit on Consignment)

1,30,190

7,10,690 7,10,690

Working Notes:

1.

Abnormal Loss:

Cost of goods lost: 400 kg

Total cost (400 x Rs. 30) 12,000

Add: expenses incurred by the consignor @ Rs.5 per kg 2,000

Gross Amount of abnormal loss 14,000

Less: Insurance claim (9,000)

Net abnormal loss 5,000

2. Valuation of Inventories

Quantity (Kgs) Amount (Rs.)

Total Cost (15,000 kg x Rs.30) 15,000 4,50,000

Add: Expenses incurred by the consignor

75,000

33

Less: Value of Abnormal Loss – 400 kgs (WN 1) (400)

(14,000)

14,600

5,11,000

Less: Normal Loss (100)

14,500

5,11,000

Less: Quantity of ghee sold (7,500)

Quantity of Closing Stock 7,000 Rs.

Value of 7,000 kgs – (5,11,000/14,500) x 7,000

2,46,690

Answer 18:

BOOKS OF ANAND

CONSIGNMENT TO RAJ (PUNE) ACCOUNT

Dr. Cr.


To Goods sent on Consignment

A/c

1,50,000 By Goods sent on Consignment

A/c(loading)

30,000

To Cash A/c 12,000 By Abnormal Loss (out of which Rs.

12,000 received from insurance co.)

13,200

To Raj (Expenses) 9,600 By Raj (Sales) 1,20,000

To Raj (Commission) 13,125 By Inventories on Consignment A/c 24,300

To Inventories Reserve A/c 4,500 By General Profit & Loss A/c 1,725 1,89,225 1,89,225

RAJ’S ACCOUNT Dr. Cr.


To Consignment A/c 1,20,000 By Consignment A/c 9,600

By Consignment A/c 13,125

By Bank A/c 97,275

1,20,000 1,20,000

Working Notes:

1. Calculation of Loading of goods sent on consignment:

Abnormal Loss at Invoice price = Rs. 15,000.

Abnormal Loss as a percentage of total consignment = 10%. Hence the value of goods sent on consignment = Rs. 15,000 x 100/ 10 = Rs. 1,50,000.

Loading of goods sent on consignment = Rs. 1,50,000 X 25/125 = Rs. 30,000.

2. Calculation of abnormal loss (10%):

Abnormal Loss at Invoice price = Rs. 15,000

Abnormal Loss at cost = Rs. 15,000 x 100/125 = Rs. 12,000

Proportionate expenses of Anand (10 % of Rs. 12,000) = Rs. 1,200

Rs. 13,200

3. Calculation of closing Inventories (15%):

Anand’s Basic Invoice price of consignment = Rs. 1,50,000

Anand’s expenses on consignment = Rs. 12,000

Rs. 1,62,000

Value of closing Inventories = 15% of Rs. 1,62,000 = Rs. 24,300

Loading in closing Inventories = Rs. 4,500 (30,000 x 15%)

34

4. Calculation of commission:

Invoice price of the goods sold = 75% of Rs. 1,50,000 = Rs. 1,12,500

Excess of selling price over invoice price = (Rs. 1,20,000 - Rs. 1,12,500) = 7,500

Total commission = 10% of Rs. 1,12,500 + 25% of Rs. 7,500

= Rs. 11,250 + Rs. 1,875

= Rs. 13,125

Note: Abnormal loss is calculated at cost and value of inventories is valued at invoice

price as invoice price is given.

Answer 19:

In the Books of Mr. Divik Consignment A/c

Rs. Rs.

To Goods sent on 18,00,000 By Manoj’s A/c – Sales 15,62,500 Consignment A/c

(3,000 Rs. 600)

(2500 Rs. 625)

To Bank A/c – Packing, Freight charges

30,000

By Goods sent on Consignment

A/c (3000 Rs. 100) 3,00,000

To Manoj’s A/c – Selling expenses

10,000

To Manoj’s Account –

Commission

By Consignment stock account 3,05,000

5% on Rs. 15,62,500= 78,125 (Refer working note)

20% on Rs. 62,500= 12,500 90,625

To Stock reserve A/c

(500 Rs. 100)

50,000

To Profit and Loss account 1,86,875

21,67,500 21,67,500

In the Book of Mr. Manoj

Mr. Divik’s Account Rs. Rs.

To Bank – Selling expense 10,000 By Sales 15,62,500

To Commission 90,625

To Bank 5,00,000

To Balance c/d 9,61,875

15,62,500

15,62,500

Working Note: Closing Stock valuation:

Rs.

Cost price of 500 sarees (500 600) 3,00,000

Add: Proportionate expenses (30,000 500/3,000) 5,000 3,05,000

__**__

35

CHAPTER – 6- UNIT – IV - AVERAGE DUE DATE

Answer 15:

Due Dates Amount Rs. No. of Days from April 1 Products.

April 1, 1996 2,000 0 0

April 10, 1996 5,000 9 45,000

May 16, 1996 10,000 45 4,50,000

June 9, 1996 3,000 69 2,07,000

Total 20,000 7,02,000

Average Due Date = Base Date + Days equal to AmountofTotal

ProductofTotal

Average Due Date = 1st April + 20,000

7,02,000

= 1st April + 35 days

= 6th May, 1996

Interest therefore has been calculated on Rs. 20,000 from 6th May, 1996 i.e.,

Interest = 20,000 x 366

55x

100

15= Rs. 450.82

Answer 16:

CALCULATION OF AVERAGE DUE DATE

Taking 10th March, 1999 as the base date:

Due Dates Amount Rs. No. of days from the

base date, i.e., 10th March

Products

10th March 5,000 0 0

2nd April 18,000 23 4,14,000

30th April 60,000 51 30,60,000

10th June 2,000 92 1,84,000

Total 85,000 36,58,000

Average Due Date = Base Date + Days equal to AmountofSum

Productof Sum

= 10th March + 85,000

36,58,000 i.e. 43 days (approx.)

= 22nd April, 1999

Computation of Interest: Interest can be calculated on Rs. 85,000 from 22nd April, 1999

to 30th June, 1999 at 10% p.a. i.e., interest on Rs. 85,000 for 69 days at 10%

= Rs. 85,000 x 100

10 x

365

69

= Rs. 1,608 (approx.)

36

Answer 17:

Average Due Date = 1 Jan. 2000 + 5

36 30 24 18 12 months

= 1 Jan. 2000 + 24 months

= 1 Jan. 2002

Interest to be charged = 25,000 x 100

10x 2

= Rs. 5,000

Answer 18:

Bill Date (A) Amount

(Rs.) (B)

Term (C) Due date (D)

(including

grace period)

No. of days

(Taking (E) 19

Nov. 03

as base)

Product

(F) = (B) ×

(E) (Rs.)

16 Aug, 2003 3,000 3 Months 19 Nov., 03 0 0

20 Oct, 2003 2,500 60 Days 22 Dec., 03 33 82,500

14 Dec, 2003 2,000 2 Months 17 Feb., 04 90 1,80,000

24 Jan. 2004 1,000 60 Days 27 Mar., 04 129 1,29,000

06 March, 2004 1,500 2 Months 09 May, 04 172 2,58,000

10,000 6,49,500

Average Due Date = Base Date + Days equal to AmountofSum

Productof Sum

= 19 Nov., 03 + 10,000

6,49,500

= 19 Nov, 03 + 65 days (approx.)

= 23 Jan. 200

Answer 19:

Calculation of average due date

Alok pays the whole amount on 31st March, 2018 together with interest at 6% per annum.

Due Date Amount No. of days from Jan. 1 Product

2018 Rs.

Jan. 1 650 0 0

Jan. 15 1,200 14 16,800

Feb. 10 850 40 34,000

March 7 1,500 65 97,500

4,200 1,48,300

Average due date = Base date + days equal to AmounttheofSum

Productof Sum

37

= Jan. 1 + 4,200

1,48,300

= Jan. 1 + 35.31*days

= Feb. 6

Interest therefore has been calculated on Rs. 4,200 from 6th Feb. to 31st March, i.e., for

54 days.

4,200 x 6% x 54/365= Rs. 37.28

Answer 20:

Taking May 21 as the zero or base date

For Yusuf’s payments:

Date of Transactions Due Date Amount No. of days from

the base date

Products

(1) (2) (3) (4) (5)

April 18 May 21 12,000 0 0

May 15 June 18 14,000 28 3,92,000

June 16 July 19 16,000 59 9,44,000

Amount Due to Yogesh 42,000 Sum of products 13,36,000

For Yogesh’s payments

Taking same base date i.e. May 21

Date of Transactions Due Date Amount No. of days from

the base date

Products

(1) (2) (3) (4) (5)

April 23 May 26 10,600 5 53,000

May 24 June 27 10,000 37 3,70,000

Amount Due to Y 20,600 Sum of products 4,23,000

Excess of Yusuf’s products over Yogesh’s = Rs. 13,36,000 – Rs. 4,23,000

= Rs. 9,13,000

Excess amount due to Yogesh Rs. 42,000 – Rs. 20,600 = Rs. 21,400

Number of days from the base date to the date of settlement is

9,13,000/ 21,400= 42.66 days i.e. 43 days

Hence the date of settlement of the balance amount is 43 days after May 21 i.e., on 3rd

July. Yusuf has to pay Yogesh, Rs. 21,400 to clear the account.

Note: Due date is calculated after considering 3 day of grace period.

Answer 21:

Taking 10th January as the base date

Due Date Due Date No. of days Amount Product

(Normal) (Actual) from 10th January. . Rs.

10th January 10th January 0 750 0

26th January 25th January 15 1,200 18,000

23rd March 23rd March 72 3,300 2,37,600

18th August 17th August 219 4,100 8,97,900

9,350 11,53,500

Average Due Date = 10th Jan. + 9,350

11,53,500

= 10th Jan + 124 days (rounded off upward) = 14th May

38

(b) If the payment is deferred to 10th July, interest is to be paid from 14th May to 10th

July i.e., for 17 + 30 + 10 = 57 days.

Interest = 9,350 x 131.41365

57x

100

9

The amount to be paid on 10th July: Rs. 9,350+ 131.41 = Rs. 9481.41

Answer 22: Calculation of Average Due Date

(Taking 3rd March, 2020 as base date)

Date of bill 2020 Term Due date 2020 Amount

(Rs.)

No. of days from the base

date i.e. 3rd

March,2020

(Rs.)

Product

(Rs.)

28th January 1 month 3rd March 2,500 0 0

20th March 2 months 23rd May 2,000 81 1,62,000

12th July 1 month 14th Aug. 3,500 164 5,74,000

10th August 2 months 13th Oct. 3,000 224 6,72,000 11,000 14,08,000

Average due date = Base date + Days equal to Sum of Products

Sum of Amounts

= 3rd March, 2020 +

= 3rd March, 2020 + 128 days = 9th July, 2020

Working Note:

Bill dated 12th July, 2020 has the maturity period of one month, due date (after adding 3

days of grace) falls on 15th August, 2020. 15th August being public holiday, due date

would be preceding date i.e. 14th August, 2020. Note: 365 days are taken for calculation.

__**__

39

CHAPTER – 6 - UNIT – V – ACCOUNT CURRENT

Answer 11:

MR. A IN ACCOUNT CURRENT WITH MR. X

Date Particulars Amount Days Product Date Particulars Amount Days Product

2004 2004

Jan. 01 To Balance b/d 4,000 75 3,00,000 Jan. 29 By Purchase account

1,200 46 55,200

Jan. 15 To Sale account 2,230 60 1,33,800 Feb. 10 By Cash Account 1,000 34 34,000

Mar. 13 To Red lnk product

(Rs. 2,000 × 29)

58,000 Mar. 13 By Bills Receivable

account

2,000

Mar. 15 To Interest Account

4,02,600 x100

10x

366

1

110 Mar. 15 By Balance of product

4,02,600

By Balance c/d (amount to be paid)

2,140

6,340 4,91,800 6,340 4,91,800

Note: Interest is charged @ 10% p.a. upto 15th March 2004

Answer 12: Date Particulars Dr.

(Rs.)

Cr.

(Rs.)

Balance (Rs.)

Dr. or

Cr.

Days Dr. Product (Rs.)

Cr. Product (Rs.)

1.4.15 To Balance b/d 2,40,000 2,40,000 Dr. 13* 31,20,000

14.4.15 By Cash A/c 1,20,000 1,20,000 Dr. 15 18,00,000

29.4.15 To Self 97,000 2,17,000 Dr. 1 2,17,000

30.4.15 By Cash A/c 3,00,000 83,000 Cr. 9 7,47,000

9.5.15 To Self 1,71,000 88,000 Dr. 9 7,92,000

18.5.15 By Cash A/c 1,23,000 35,000 Cr. 14* 4,90,000

31.5.15 To Interest A/c 1,353 Dr.

31.5.15 By Balance c/d 33,647

5,43,000 5,43,000 59,29,000 12,37,000

Interest Calculation:

On Rs. 59,29,000 × 10% × 1/365 = Rs. 1,624

On Rs. 12,37,000 × 8% × 1/365 = (Rs. 271)

Net interest to be debited = (Rs. 1,353)

Note: *In the given answer, starting/transaction date has been considered and the date of

next transaction has been ignored for the purpose of calculation of number of days.

However, it may be assumed otherwise and in the case, 14 days will be considered for the

first transaction i.e. 14.4.15 and 13 days for the last transaction of the month i.e. 18.5.15.

The Dr. product total and Cr. Product total will be Rs. 61,69,000 and Rs. 12,02,000

respectively. Net amount of interest to be debited will also get changed and will amount to

Rs. 1,427 on the basis of this assumption.

40

Answer 13:

B in Account Current with A (Interest to 31st March, 2017 @ 10% p.a.) Date Particulars Due

Date

Amount

(Rs.)

Day Product

(Rs.)

date Particulars Due

Date

Amount

(Rs.)

Day Product

(Rs.)

1.1.17 To Bal. b/d – 1,00,000 – – 15.1.17 By Cash – 2,00,000 15 30,00,000

10.1.17 To Sales – 2,00,000 10 20,00,000 1.3.17 By Cash – 1,00,000 60 60,00,000

15.2.17 To Sales – 2,00,000 46 92,00,000 31.3.17 By Bal. of

Product

– 1,80,00,000

31.3.17 To Bal. of Prod. – - – 1,58,00,000 [2,00,000 ×

90]

31.3.17 To Int. on Bal.

15800000 x

100

10x

365

1

4,329 31.3.17 By Bal. c/d 2,04,329

5,04,329 2,70,00,000 2,70,00,000

Answer 14:

BHUVANESH

IN ACCOUNT CURRENT WITH AVINASH

FOR THE PERIOD ENDING ON 31ST MARCH 2018 Date Particulars Amount Days Products Date Particulars Amount Days Products

2018 Rs. 2018 Rs.

Jan.1 To Balance b/d 1,800 90* 1,62,000 Jan. 15 By Sales Returns 650 75 48,750

Jan. 10 To Sales A/c 1,500 80 1,20,000 Feb. 12 By Bank A/c 1,000 47 47,000

March, 11 To Sales A/c 720

20 14,400 Feb. 20 By B/R A/c

(due date: March 23)

1,500 8 12,000

March, 31 To Interest A/c 24 March, 14 By Cash A/c 800 17 13,600

March, 31 By Balance of products 1,75,050

By Balance c/d 94

4,044 2,96,400 4,044 2,96,400

*Calculation of interest

Interest = (1,75,050 x 5%)/365= Rs. 24

*Opening day considered in calculation of no. of days.

Answer 15:

RAMESH’S CURRENT ACCOUNT WITH PARTNERSHIP FIRM (AS ON 30.9.2018) Date Particulars Dr. (Rs.) Cr. (Rs.) Balance

(Rs.) Dr.or Cr. Days Dr. Product

(Rs.) Cr. Product

(Rs.)

01.07.18 To Bal. b/d 85,000 85,000 Dr. 13 11,05,000

14.07.18 By Cash A/c 1,23,000 38,000 Cr. 15 5,70,000

29.07.18 To Self 92,000 54,000 Dr. 20 10,80,000

18.08.18 By Cash A/c 21,000 33,000 Dr. 22 7,26,000

09.09.18 To Self 11,500 44,500 Dr. 22 9,79,000

30.09.18 To Interest A/c 941

30.09.18 By Bal. c/d 45,441 45,441 Dr.

1,89,441 1,89,441 38,90,000 5,70,000

Interest Calculation:

On Rs. 38,90,000 x 10% x 1/365 = 1,066

On Rs. 5,70,000 x 8% x 1/365 = Rs. 125

Net interest to be debited = Rs. 941

41

Answer 16: In the books of Vimal

Kamal in Account Current with Vimal

(Interest to 31st March, 2020 @ 10% p.a.) Date Particulars Amount Days Product Date Particulars Amount Days Product

2020 Rs. Rs. 2020 Rs. Rs.

Jan.1 To Balance b/d 15,000 91 13,65,000 Jan.24 By Promissiory Note (due date 26th April)

15,000 (26) (3,90,000)

Jan.11 To Sales 18,000 80 14,40,000 Feb. 1 By Purchases 30,000 59 17,70,000

Feb. 4 To Sales 24,600 56 13,77,600 Feb. 7 By Sales Return 3,000 53 1,59,000

Mar.18 To Sales 27,600 13 3,55,800 Mar. 1 By Purchases 16,800 30 5,04,000

Mar.31 To Interest 442 Mar.23 By Purchases 12,000 8 96,000

Mar.31 By Balance of Products

16,19,400

Mar.31 By Bank 8,842

85,642 45,38,400 85,642 45,38,400

Working Note:

Calculation of interest:

Interest = = 16,19,400/366 x 10/100 = Rs.442.45 (approx.)

Note: 366 days are taken for calculation since year 2020 is a leap year.

__**__

42

CHAPTER-7 - Preparation of Final Accounts of Sole Proprietors

Unit - I Final Accounts of Non-Manufacturing Entities

Answer 19: Trading and Profit and Loss Account of Mr. Hari

(for the year ended 31st December, 1994) Particulars Amount Particulars Amount

To

To

Opening Stock

Purchases

Add: Omitted Invoice

3,21,700

400

46,800 By

By

Sales

Less: Returns

Closing Stock

3,89,600 8,600

3,81,000

78,600

Less:Returns

3,22,100 5,800

To

To

Less:Drawing

Freight &

Carriage Gross Profit c/d

3,16,300 600

3,15,700

19,600

77,500

1,100

1,700

4,59,600 4,59,600

To

To

To

To

Rent and taxes

Salaries and

wages

Bank Interest

Add: Due

Printing &

Stationary Less: Prepaid

4,700

9,300

2,800

10,800

1,800 11,450

1,300

2,330

870

1,150

437

500

34,503

By

By

Gross Profit b/d

Discount

77,500

4,440

14,400

3,600

To

To

To

To

To To

To

To

To

Discount allowed

General Expenses

Insurance

Postage & Telegram Expenses

Traveling Expenses

Provision for Bad Debts

(New)

Provision for Discount on Debtors

Depreciation on Furniture &

Fittings

Net Profit transferred to

Capital A/c 81,940 81,940

Balance Sheet of Hari as at 31st December, 1994

Liabilities Amount Assets Amount

Capital 76,690 Furniture & Fittings 5,000

43

Add: Net Profit

Less: Drawings:

Cash 30,000

Goods 600

Bank Loan

Bank Interest Due

Sundry Creditors (1)

34,503

80,593

20,000

1,700

14,200

Less: Dep.

Sundry Debtors Less: Prov. for D/D

Less: Provision for

Disount

500

4,500

21,413

78,600

3,600 8,000

380

1,11,193

30,600

23,000

1,150

21,850

437

Stock

Prepaid: Printing & Stationery Bank Balance

Cash Balance 1,16,493 1,16,493

(1) Sundry Creditors Balance as per Trial Balance 14,800 Less: Set off in respect of Ram 1,000

13,800

Add: Purchases Invoice which were omitted 400

14,200

Answer 20: Trading and Profit and Loss Account of Mr. R

for the year ended 31st March, 1997

Particulars Amount Particulars Amount

To Opening stock 1,20,000 By Sales 32,20,000

To Purchases 25,00,000 Less: Return 1,20,000 31,00,000 Less: Returns 1,00,000 24,00,000 By Closing Stock

8,10,000 (1) 2,30,00 33,30,000 33,30,000

To Rent 60,000 By Gross Profit b/d 8,10,000

To Establishment expenses 1,80,000

To Electricity charges 15,000

To Telephone Charges 10,000

To Commission on sales 30,000

To Insurance on sales 10,000

To Bad debts 20,000

To Provision for doubtful debts 25,000

To Interest on loan 45,000

To Depreciation (2) 85,000

To Manager's Commission (3) 30,000

To Net profit transferred to

capital account 3,00,000

8,10,000 8,10,000

Balance Sheet of R (as at 31st March, 1997)


Capital Account Building 5,00,000

44

Opening Balance

Add: Profit

5,20,000 3,00,000

8,20,000

3,00,000

45,000

4,00,000

30,000

Less: Dep. 25,000

Machineries 2,00,000

Less: Dep. 50,000

Furniture 1,00,000

Less: Dep. 10,000 Closing Stock

Sundry Debtors 5,00,000

Less: Prov. for D/D 25,000 Bills Receivable

Cash at Bank Cash in Hand

4,75,000

1,50,000

90,000

2,30,000

4,75,000

75,000

90,000 10,000

18% Mortgage Loan

Interest accured on loan

Sundry Creditors

Commission due to Manager

15,95,000 15,95,000

Working Notes:

(1) Value of closing Stock

Rs.

Stock (As on 7th April 1997) 1,80,000

Add: Cost of Sales Sales (1.4.1997 to 7.4.1997)

2,50,000

Less: Gross Profit @20% on Sales 50,000 2,00,000 3,80,000

Less: Purchases 1,50,000

Closing Stock 2,30,000

(2) Depreciation On Building (5% of 5,00,000)

25,000

On Machineries (35% of 2,00,000) 50,000

On Furniture (10% of 1,00,000) 10,000 85,000

(3) Manager's Commission Profit before charging commission

3,30,000

Commission (3,30,000 × 10/110) 30,000

Answer 21: Trading and Profit and Loss Account

(For the year ended 31st March, 1998) Particulars Amount Particulars Amount

To Opening stock

To Purchases Less: Returns

25,000 300

7,400

24,700

5,400 18,100

By Sales 49,800

Less: Sales of Approval Basis 1,200

By Closing Stock 6,000

1,000

By Gross Profit b/d

By Discount on Purchases

By Provision for Bad Debts(2)

48,600

7,000

To Wages

To Gross Profit c/d

To Repairs to Plant To Salaries To Rent

To Bad Debts (200+600)

To Depreciation on plant & Machinery 400 Building 500

55,600 55,600

520 2,100

240 800

900

18,100 708

752

45

To Commission to work Manager

To Commission to General

Manager (3)

To Net Profit

1,800

1,200 12,000

19,560 19,560

Balance Sheet of Mr. X

(as at 31st March, 1998)


Capital Account 10,000 Land and Building 14,900

3,600

7,000

4,712

400

300

3,000

Less: Income Tax 100 Plant and Machinery

9,900 Stock in Hand 6,000

Add: Net Profit 12,000 21,900 Add: Stock with 1,000

Bank Overdraft 760 Customers

Bills Payable 1,600 Debtors(1) 4,960

Sundry Creditors 6,252 Less: Provision 248 Salaries Outstanding 400 Cash in hand & bank Outstanding Commission: Accrued Income Works Manager 1,800 Bill receivable General Manager 1,200 3,000

33,912 33,912

Working Notes:

Rs.

(1) Debtors as per Trial Balance 7,000 Less: Debtors on account of goods sold on approval basis 1,200

Landlord account wrongly taken as debtor 240 1,440

5,560 Less: Bad Debts Written off 600

4,960

(2) Provision for Bad Debts Required (Adjusted Debtor): 5% on Debtors Rs. 4,960 = Rs. 248 = 1,000 - 248 = 752

(3) Calculation of Commission of General Manager: 10/10 × Rs. (15,000 – 1,800) = 1200

Answer 22:

Trading and Profit and Loss Account of Mr. Rishabh (For the year ended 31st March, 1998)


To Opening Stock

To Purchases (1)

Less: Returns

Outward

84,000

4,000

21,300

80,000

10,000 61,000

By Sales

Less: Returns

Inward

1,40,000

5,000

1,35,000

10,000

27,300

By Loss of stock by

Fire

By Closing Stock To Carriage To Gross Profit c/d

1,72,300 1,72,300

46

Balance Sheet

As at 31st March, 1999


Capital Account 1,00,000 Land and Buildings 90,000

Add: Net Profit 38,098 Less: Depreciation 1,800 88,200 1,38,098 Plant & Machinery 20,000

Less: Drawings 14,000 1,24,098 Less: Depreciation 4,000 16,000

Loan from Gajanand 30,000 Furniture 5,000

Interest Accrued 1,350 Less: Depreciation 250 4,750

Creditors 18,000 Stock:

Less: Provision for General Goods 27,300

Discount 360 17,640 Textile Goods 8,000 35,300 Debtors (less bad

debts.) 18,000

Less: Provision for

bad and Doubtful

Debts. 900

17,100

Less: Provision for

Discount 342 16,758 Insurance Claim 6,000 Prepaid Insurance 200 Cash at Bank 4,600 Cash in Hand 1,280 1,73,088 1,73,088

Working Notes:

Rs.

(1) Purchases 8,000

Add: Unrecorded Goods 6,000

86,000

Less: Drawings 2,000 47

84,000

(2) Creditors 12,000

Add: For unrecorded Purchases 6,000

18,000

Provision for discount creditors (2%) of 18,000 = Rs. 360

(3) Loss by fire 10,000

Less: Insurance claim 6,000

Amount charged to profit and loss Account 4,000

Answer 23:

Trading and Profit and Loss Account of Mr. James (For the year ended 31st March, 2001)

Particulars Rs. Particulars

To Opening Stock 1,50,500 By Sales 6,25,000 To Purchase 4,37,000 By Closing Stock 1,64,500 To Manufacturing 85,000

expenses

To Gross Profit c/d 1,17,000

7,89,500 7,89,500

To Administration 18,000 By Gross Profit b/d 1,17,000 Expenses

To Selling expenses 33,000

To Financial Charges 6,000

To Net profit transferred

to capital account 60,000

1,17,000 1,17,000

Answer 24:

Trading and Profit & Loss Account (For the year ended 31st March, 2004)


To Opening Stock

To Purchases

Less: Return

Less: Furniture

Less:Drawings

31,00,000 45,000

5,00,000

29,05,000

10,000 50,000

7,25,000

By Sales

Less:Returns

Less: Goods

sent on appro.

41,50,000 55,000

39,45,000

1,00,000

1,45,000

40,95,000

1,50,000 30,55,000

1,00,000

29,55,000 50,000

By Goods sent on Approval

By Closing Stock

By Gross profit b/d

To Carnage Inward

To Wages To Gross Profit c/d

To Salaries

41,90,000 41,90,000

95,000 7,25,000 To Rates & Taxes 50,000 By

By

Discount received Net Loss transferred to Capital A/c

75,000

To Postage & Telegram 1,05,000

To Insurance 90,000 5,02,300

To Printing & Stationary 95,500

To Advertisement 1,70,000

To Discount allowed 50,000

To General Expenses 65,700

To Carriage Outward 22,000

48

To Bad debts 50,000

To Provision for Doubtful debts 40,000

To Salesman

Commission 78,000

Add: Outstanding 3,16,500 3,94,500

To Depreciation on:

Furniture 65,000

Motor Car 9,600 74,600

13,02,300 13,02,300

Balance Sheet

As at 31st March, 1999


Capital

Less: Drawings

Less: Goods with-

Drawn

Less: Net Loss

22,59,200

45,000

50,000

16,61,900

4,00,000

3,16,500

Furniture

Add: Purchases

Less: Dep.

Motor Car

Less: Dep.

Stock in hand

Goods sent on

Approval

Sundry Debtors Less: Goods sent on approval

5,50,000 1,00,000

5,85,000

38,400

1,45,000

1,00,000

7,60,000

2,50,000 5,00,000

6,50,000 65,000

48,000 9,600

21,64,200 5,02,300

10,00,000

1,50,000

Sundry Creditors

Outstanding Salesman's

Commission

Less: Bad Debts

8,50,000 50,000

8,00,000

Less: Provision for

Doubtful debts

Cash in Hand

Cash in Bank

40,000

23,78,400 23,78,400

Answer 25:

In the books of Mr. XYZ

Rectification Entries

Date

Particulars

L.F.

Dr.

Amount Rs.

Cr.

Amount Rs.

(i) Returns in ward account Dr. Sales Account Dr.

To Purchases account To Returns outward account

2,575

1,725

2,575 1,725

(ii)

(Being sales return and purchases return wrongly

included in purchases and sales respectively, now it is rectified)

3,500

3,500

Drawings account Dr.

To Purchases account

(Being goods withdrawn for own consumption

included in purchases, now it is rectified)

49

(iii)

(iv)

Plant and machinery account Dr. To Wages account

(Being wages paid for installation of plant and

machinery wrongly debited to wages, now it is rectified)

450

825

450

825

Advertisement expenses account Dr.

To Purchases account

(Being free samples distributed for publicity out

of purchases, now it is rectified)


Trading and profit and loss account for the year ended 31st March, 2004


To Opening stock 32,250 By Sales

Less: Sales return

Closing stock

Rs.80, 000 100 100

80 80

Gross profit b/d Bad debits recovered

2,13,575

To Purchase 1,53,100 2,575 2,11,000 Less: Purchases return 1,725 1,51,375 By

To Carriage inward 1,125

To Wages 11,715 1,25,000

To Gross profit c/d

1,39,535

3,36,000 3,36,000

To Salaries 22,550 By 1,39,535 To Rent 4,300 By 450 To Bad debts 1,100

To Carriage outward 1,350

To Advertisement 4,175

expenses

To Printing and stationary 1,250

To Provision for doubtful

debts 5% of Rs.

1,20,000 6,000

Less: Existing prov. 3,200 2,800

To Provision for discount

on debtors

2.5% of Rs. 1,14,000 2,850

Less: Existing prov. 1,375 1,475

To Depreciation

Plant and machinery 3,000

Furniture and fittings 1,025 4,025

To Office expenses 10,160


To Net Profit 83,800

1,39,985 1,39,985


Balance Sheet of Mr. XYZ (as on 31st March, 2004) Liability Rs. Amount

Rs.

Assets Rs. Amount Rs.

Capital account Add: Net Profit

Less: Drawings

65,000 83,800

1,37,300 80,000

Plant and machinery Less: Depreciation

Furniture and fittings Less: Depreciation

20,000 3,000

17,000

9,225 1,25,000

1,48,800 11,500

10,250 1,025

Bank overdraft Closing stock

50

Sundry creditors Payable salaries

47,500

2,450

Sundry debtors

Less: Provision for doubtful debts

provision for bad debts

Prepaid rent Cash in hand Cash at bank

1,20,000

6,000

1,11,150

300 1,450 3,125

2,850

2,67,250 2,67,250

Answer 26:

In the books of Shri Shivam

Trading and profit and loss a/c

(For the year ended 31.03.05) Particulars Amount Particulars Amount

To Opening stock 40,000 By Sales 2,64,000

To Purchases 1,70,000 (–) Sale or Return bases (1200) 2,62,800

To Wages 29,000 By Goods given as free

To Carriage Inward 400 sample 2,000 To Gross Profit 56,400 By Closing stock

- Given 30,000

- With Costumer 1,000 31,000 2,95,800 2,95,800

To Depreciation By Gross profit 56,400 Furniture & Fixtures 800 By Discount 1,200 Plant & Machinery 12,400 13,200

To Loss by fire 2,000

To Patent written-off 4,000

To Salaries 14,800

To Bad Debts 800

(+) Additional 200 1,000

To Prov. for Doubtful 950

debts

To Prov. for Discount 360

To Postage & Fax 3,000

To Rent, Rates & Taxes 7,200

To Interest on Loan

Paid 300

(+) Outstanding 300 600

To Insurance 1,600

To Travailing exp. 1,000

To Sundry Exp. 600

To Advertisement (Goods 2,000

gives as Sample)

To Net Profit transfer to 5,290

Capital A/c

57,600 57,600

Balance Sheet (as on 31.03.2005) Liabilities Amount Assets Amount

Capital Furniture & Fittings 8,000

Op. Balance 1,60,000 (-) Depreciation 800 7,200

(-) Drawings (24,000) Plant & Mach. (Note-1) 62,000

(+) NP 5,290 1,41,290 (-) Depreciation 12,400 49,600 Patent 40,000

(-) Written-off (4,000) 36,000 Land 28,350

Creditor for Plant & Stock. 31,000

Mach. [Note-] 3,000 Deptor (Note-2) 19,000

Loan for shyam 20,000 (-) Prov. for D/D (950)

(+) Interest 300 20,300 (-) Prov. for discount (360) 17,690

Sundry Creditors 24,000 Cash in hand 13,250 Bank Overdraft 15,000 Cash at Bank 20,500

2,03,590 2,03,590

51

Working Notes:

(1) Computation of Plant & Machinery Rs. Balance given 60,000 (+) New Machinery (1.4.04) 4,000 (-) Machinery Sold. (2,000)

62,000

(2) Computation of Debtor Balance 20,400 (-) Bad Debts (200) (-) Sale or return (1,200)

19,000

Answer 27: M/s Raghuram & Associates

Trading Account for the year ended 31st March 2018

Particulars Details Amount Particulars Details Amount

Rs. Rs.

To Opening Stock 3,20,000 By Sales 15,00,000

To Purchases 12,00,000 Less: Sales Returns (24,000) 14,76,000

Less: Purchase

Returns

(18,000) 11,82,000 By Closing Stock

4,10,000

To Freight

62,000

To Gross Profit c/d

3,22,000

18,86,000

18,86,000

M/s Raghuram & Associates

Profit and Loss Account for the year ended 31st March 2018

Particulars Details Amount Particulars Details Amount

Rs. Rs.

To Salaries 72,000 By Gross profit b/d 3,22,000

To Rent for Godown 55,000 By Discount received 12,000

Add: Outstanding 5,000 60,000

To Provision for Doubtful

Debts (W.N.4)

16,200

To Rent and Taxes 24,000

To Discount Allowed 7,500

To Carriage outwards 8,500

To Printing and stationery 6,000

To Electricity charges 14,000

To Insurance premium

(W.N. 1)

4,800

To Depreciation (W.N. 2) 80,000

To General expenses 11,000

To Bank Charges 3,800


Add: Outstanding (W.N.

3)

100 4,500

To Motor car expenses

(Repairs)

13,000

To Net Profit transferred

8,700

52

to Capital A/c

3,34,000

3,34,000

Balance Sheet of M/s Raghuram & Associates

as at 31st March 2018

Liabilities Details Amount Assets Details Amount

Rs. Rs.

Capital 14,11,400 Land & Building 5,00,000

Add: Net Profit 8,700 Less: Depreciation (25,000) 4,75,000

Less: Drawings (20,000) Motor Vehicles 1,00,000

Less: proprietor’s

Insurance Premium

(42,000)

13,58,100 Less: Depreciation (20,000) 80,000

Loan from Rajan 60,000 Office equipment 2,00,000

Add: Outstanding

Interest

100 60,100 Less: Depreciation (30,000) 1,70,000

Sundry Creditors

62,000 Furniture & Fixture 50,000

Outstanding rent

5,000 Less: Depreciation (5,000) 45,000

Stock in Trade 4,10,000

Sundry Debtors 2,80,000

Less: Provision for

doubtful debts

(14,000) 2,66,000

Cash at hand

22,000

Cash in bank 16,000

Prepaid insurance

(W.N. 1)

1,200

14,85,200 14,85,200

Working Notes:

(1) Insurance premium Rs.

Insurance premium as given in trial balance 48,000

Less: Personal premium (42,000)

Less: Prepaid for 3 months

315

000,6 (1,200)

Transfer to Profit and Loss A/c 4,800

(2) Depreciation

Building @ 5% on 5,00,000 25,000

Motor Vehicles @ 20% on 1,00,000 20,000

Furniture & Fittings @ 10% on 50,000 5,000

Office Equipment @ 15% on 2,00,000 30,000

Total 80,000

(3) Interest on Loan

Interest on Loan Rs. 60,000 X 10% X 9/12 = 4,500

Less: interest as per Trial Balance = (4,400)

Amount (Outstanding) 100

53

(4) Provision for bad debts A/c

Particulars Amount

(Rs.)

Particulars Amount

(Rs.)

To bad debts a/c 12,200 By balance b/d 10,000

To balance c/d

(5% of 2,80,000)

14,000 By P&L A/c 16,200

26,200

26,200

Answer 28:

Trading & Profit and Loss Account of

Mr. Sandeep for the year ended 31st December, 2018

Particulars Rs. Rs. Particulars Rs. Rs.

To Opening Stock 1,400 By Sales 9,000

To Purchase 12,000 Less: Sales return (1,000) 8,000

Less: Purchase return (2,000) 10,000 By Closing stock 4,500

To Gross Profit 1,100

12,500 12,500

To Salary 2,500 By Gross Profit

1,100

Add: Outstanding

salary

100 2,600 By Commission

500

To Tax & Insurance 500 Less: Advance (100) 400

Add: Outstanding 200 By Accrued interest

210

Prepaid insurance (50) 650 By Net Loss

2,500

To Bad debt 500

Opening provision (1,000)

Closing provision 1,000 500

To Interest on overdraft 300

To Depreciation on

furniture

160

4,210

4,210

Balance Sheet of Mr. Sandeep as on 31.3.2018

Particulars Rs. Rs. Particulars Rs. Rs.

Capital 16,000 By Furniture 1,600

Less: drawing (2,000) Less: Depreciation (160) 1,440

Net loss (2,500) 11,500 Bill receivable 3,000

Bank overdraft 2,000 Investment 4,000

Add: interest 300 2,300 Add: accrued interest 210 4,210

Creditors 2,000 Debtors 5,000

Bills payable 2,500 Less: Provision on bad

debts

(1,000) 4,000

Outstanding expenses: Closing stock 4,500

Salary 100 Cash in hand 1,500

Tax 200 300 Prepaid insurance 50

Commission received in

advance

100

18,700 18,700

54

Answer 29:

Profit and Loss Account (Revised)


To Outstanding expenses 1,85,000 By Balance b/d 15,10,000

To Net profit 13,50,000 By Prepaid insurance 25,000

15,35,000 15,35,000

Balance Sheet of Mittal as on 31st December, 2018

Liabilities Rs. Assets Rs. Rs.

Capital 51,00,000 Cash at Bank 5,20,000

Add: Net Profit 13,50,000 Trade receivables 21,00,000

64,50,000 Less: Provision for

doubtful debts (1,05,000) 19,95,000

Less: Drawings (6,20,000) Plant and Machinery 31,00,000

58,30,000 Less: Depreciation (3,10,000) 27,90,000

Add: Interest on

capital

3,06,000 61,36,000 Furniture & Fixtures 4,00,000

Outstanding

expenses

1,85,000 Less: Depreciation (20,000) 3,80,000

Trade payables 13,84,000 Inventories 19,95,000

Prepaid insurance 25,000

77,05,000 77,05,000

__**__

55

CHAPTER – 7 Preparation of Final Accounts of Sole Proprietors Unit - II Final Accounts of Manufacturing Entities

Answer 7:

In the Books of Mr. Shyamal

Manufacturing Account for the Year ended 31.03.2019

Particulars Units Amount Particulars Units Amount

Rs. Rs.

To Opening Work- in-

Process

9,000 26,000 By Closing Work- in-

Process

14,000 48,000

To Raw Materials Consumed:

By Trading A/c – Cost of finished

goods transferred

5,00,000 19,33,600

Opening Inventory 2,60,000

Add: Purchases 8,20,000

10,80,000

Inventory (3,20,000)

7,60,000

To Direct Wages – W.N. (1)

4,05,600

To Direct expenses:

Hire charges on Machinery– W.N. (2)

3,50,000

To Indirect expenses:

Hire charges of Factory

2,60,000

Repairs & Maintenance

1,80,000

19,81,600

19,81,600

Working Notes:

(1) Direct Wages – 5,00,000 units @ Rs. 0.80 = Rs. 4,00,000

14,000 units @ Rs.0.40 = Rs. 5,600

Rs. 4,05,600

(2) Hire charges on Machinery – 5,00,000 units @ Rs. 0.70 = Rs. 3,50,000

__**__

56

CHAPTER- 8 - Partnership Account

Unit-I: Introduction of Partnership Account

Answer 13:

Profit and Loss Appropriation Account for the year ended 31st December, 2004 Particulars Rs. Rs. Particulars Rs.

To Interest on capital By Net profit b/d (Profit (before interest) 1,59,000 A (5% on Rs. 3,20,000) 16,000 B (5% on Rs. 2,00,000) 10,000 C (5% on Rs. 1,60,000) 8,000 34,000 To Partner's capital account

A 10

5to Rs. 1,25,000

62,500

Less: Transferred to C 5,000 57,500

A 10

3to Rs. 1,25,000

37,500

A 10

2to Rs. 1,25,000

25,000

Less: Transferred to A 5,000 30,000 1,59,000 1,59,000

Answer 14:

Let the total share be = 1

Share of new partner G = 4

1

Remaining share of profit = 1 - 4

1=

4

3

New ratio of (A) = 4

3 x

5

3 =

20

9

New ratio of (M) = 4

3 x

5

2 =

20

6

New ratio of A : M : G = 9 : 6 : 5

Again, let the total share at the time of admission of N = 1

Share of new partner N is 20% i.e. 1 - 5

1=

5

4

Remaining share

New ratio of (A) = 5

4 x

20

9 =

25

9

New ratio of (M) = 5

4 x

20

6 =

25

6

New ratio of (G) = 5

4 x

20

5 =

25

5

New ratio of A : M : G : N = 9 : 6 : 5 : 5

57

Answer 15:

When the partnership deed is silent on the matter of interest on capitals and salary to

partners, on partner can claim interest on capital and salary. Therefore, claim of X and Z is

not correct. However, inclusion of specific provision regarding the said issues in partnership

deed can entitle them for interest on capital and salary.

Answer 16:

In the absence of a partnership deed, the following provisions are applied.

(a) The partners will share profits/losses equally; and

(b) Interest @ 6% per annum is to be paid on the loan advanced to the firm by a

partner.

Answer 17:

In the Books of Rose, Lilly and Lotus

Profit and Loss Appropriation A/c for the Year ended 31st March, 2020 Particulars Rs. Particulars Rs.

To Salary to Lotus 50,000 By Net Profit b/d 3,34,600

To Interest on capital Rose 24,000 Lilly 36,000 Lotus 48,000

1,08,000

Add: Drawings of Lotus wrongly debited as salaries 10,000

3,44,600

To Net Profit transferred to Rose 50,000 Lilly 64,000 Lotus 78,000

1,92,000

By Interest on drawings Rose 2,400 Lilly 1,800 Lotus 1,200

5,400

3,50,000

3,50,000

Partners’ Capital Accounts

Particulars Rose Lilly Lotus Particulars Rose Lilly Lotus

To Balance c/d 2,00,000 3,00,000 4,00,000 By Bank 2,00,000 3,00,000 4,00,000

2,00,000 3,00,000 4,00,000 2,00,000 3,00,000 4,00,000

By balance b/d 2,00,000 3,00,000 4,00,000

Partners’ Current Accounts

Particulars Rose Lilly Lotus Particulars Rose Lilly Lotus

To Tuition Fees 10,000 By Interest on capital

24,000 36,000 48,000

To Drawings 40,000 30,000 20,000 By Salary 50,000

To Interest on drawings

2,400 1,800 1,200 By Net Profit 50,000 64,000 78,000

To Balance c/d 31,600 68,200 1,44,800

74,000 1,00,000 1,76,000 74,000 1,00,000 1,76,000

By balance b/d 31,600 68,200 1,44,800

__**__

58


Unit-II: Treatment of Goodwill in Partnership

Answer 13:

Computation of Goodwill

C brings capital for 1/6th share in profit = Rs. 25,000

Total capital of the firm = Rs. 25,000 × 6 = Rs. 1,50,000

Capital of old partners should be = Rs. 1,50,000 - Rs. 25,000 = Rs. 1,25,000

Actual combined capital of old partners = Rs. 60,000 + Rs. 40,000 = Rs. 1,00,000

So, the goodwill of the firm = Rs. 1,25,000 - Rs. 1,00,000 = Rs. 25,000

Answer 14:

Valuation of goodwill

(1) 5 years purchase of super profit.

Particulars Amount

(Rs.)

Average Profit 1,36,000

Less: Normal profit @ 20% of (Rs. 3,00,000 + Rs. 2,00,000) (1,00,000)

Super profit 36,000

Value of goodwill = 5 × Super profit

= 5 × 36,000

= Rs. 1,80,000 Value of goodwill of the firm will be Rs. 1,80,000.

(2) Capitalization method

Normal Value of business = profitofrateNormal

profitAverage

= 6,80,000Rs.20%

1,36,000

Particulars Amount (Rs.)

Normal value of business 6,80,000

Less: Actual capital employed - Shiv 3,00,000

- Mohan 2,00,000 (5,00,000)

Value of goodwill of the firm will be 1,80,000

(3) 3 years purchase of average profit.

Goodwill = 3 × Average profit

= 3 × 1,36,000

= Rs. 4,08,000

Value of goodwill of the firm will be Rs. 4,08,000.

59

Answer 15:

Total Profit for 4 years = Rs. 5000+ Rs. (8,500) + Rs. 25,000+ Rs. 37,500= Rs. 59,000.

Average profits = Total Profit = Rs. 59,000 = Rs. 14,750

No of Years 4

Average Profits for Goodwill = Rs. 14,750 – Proprietor Remuneration

= Rs. 14,750 – Rs. 3,000 = Rs. 11,750

Normal Profit = Interest on Capital employed

= Rs. 10,000 (i.e. Rs. 1,00,000 x10/100) = Rs. 10,000

Super Profit = Average Profit-Normal Profit = Rs. 11,750 – Rs. 10,000 = Rs. 1,750

Goodwill = Super Profit x No of years purchases = Rs. 1,750 x 3 = Rs. 5,250

__**__

60


Unit-V: Death of a Partner

Answer 8:

Revaluation Account


To Stock 1,500 By Land & Building 25,000

To Partners: (Revaluation

Profit)

By Provision for doubtful debt 2,000

Monika 8,500

Yedhant 8,500

Zoya 8,500

27,000 27,000

Partners’ Capital Accounts

Particular s Monika Yedhant Zoya Particular s Monika Yedhant Zoya

To Zoya 4,375 4,375 - By Bal b/d. 1,00,000 75,000 75,000

To Zoya’s - - 98,125 By General reserve 4,000 4,000 4,000

Executor By Monika & Yedhant - - 8,750

To Bal. c/d 1,08,125 83,125 By Profit and Loss

Adjustment*

(suspense) A/c

- - 1,875

By Revaluation 8,500 8,500 8,500

1,12,500 87,500 98,125 1,12,500 87,500 98,125

*Profit and Loss Adjustment = [(25,000 + 20,000 + 22,500)/3] x 3/12 x 1/3 = 1,875

Balance Sheet of Firm as on 1.7.2018


Monika 1,08,125 Land & Building 1,75,000

Yedhant 83,125 Investment 65,000

Zoya Executor 98,125 Stock 13,500

Creditors 20,000 Trade receivable 35,000

Profit & Loss Adjustment 1,875

Cash in hand 7,000

Cash at bank 12,000

3,09,375 3,09,375

Calculation of goodwill and Zoya’s share

Average of last five year’s profits and losses for the year ended on 31st March

31.3.2014 28,750

31.3.2015 35,000

31.3.2016 22,500

31.3.2017 20,000

31.3.2018 25,000

Total 1,31,250

Average profit 26,250

Goodwill at 1 year purchase = Rs. 26,250 x 1 = Rs. 26,250

Zoya’s Share of Goodwill = Rs. 26,250 x 1/3

61

= Rs. 8,750

Which is contributed by Monika and Yedhant in their gaining Ratio

Monika = Rs. 8750 x 1/2 = Rs. 4375

Yedhant =Rs. 8750 x 1/2 = Rs. 4375

Answer 9:

(i) Ascertainment of Swarup’s

Share of Profit

(ii) Ascertainment of Value of Goodwill

2016 51,000

2016 51,000

2017 39,000

2017 39,000

2018 45,000

2018 45,000

Total Profit 1,35,000

Total Profit for 3 years 1,35,000

Average Profit 45,000

Average Profit 45,000

4 months’ Profit 15,000

Goodwill - 3 years

Swarup’s Share in Profit

(2/5th of Rs.15,000)

6,000

Purchase of Average

Profit

1,35,000

Swarup’s Share of goodwill

(2/5 of Rs.1,35,000)

54,000

Working Note:

Profit sharing ratio between Arup and Swarup = ½; 1/3; = 3: 2, Therefore

Swarup’s share of Profit = 2/5

Swarup’s Executors Account


2019 2019

May 1 To Swarup’s Loan A/c 1,38,000 Jan. 1 By Capital A/c 60,000

May 1 By Reserves

(2/5th of Rs.45,000) 18,000

May 1 By Arup’s Capital A/c

(Share of goodwill) 54,000

May 1 By P&L Suspense A/c 6,000

(Share of Profit)

1,38,000 1,38,000

__**__

62

CHAPTER–9- FINANCIAL STATEMENT OF NOT-FOR-PROFIT ORGANIZATION

Answer 16:

RECREATION CLUB

INCOME AND EXPENDITURE ACCOUNT

(FOR THE YEAR ENDED 31ST MARCH, 1996)

Expenditure Rs. Income Rs.

To Secretary's Salary 12,000 By Subscription 17,100

To Salaries to staff 25,000 By Sales of old newspapers 2,500

To Charities 1,000 By Interest on securities 2,000

To Printing & Stationary 600 Add: Outstanding 400 2,400

To Upkeep of land 2,000 By Proceeds of sport and

concerts

4,020

To Sport materials written off 10,000 By Advertisement in the year

book

5,000

To Telephone expenses 3,480 By Excess of Expenditure over

Income

24,880

To Postage expenses 120

To Rates and taxes 1,500

To Depreciation on furniture 200

55,900 55,900

BALANCE SHEET OF EXCELLENT RECREATION CLUB

AS ON 31ST MARCH, 1996

Liabilities Rs. Assets Rs.

Capital fund opening balance Land 10,000

Less: Excess of Expenditure 36,680 Furniture 2,000

Over income 24,480 Less: Depreciation 200 1,800

11,800 Sports Materials 10,000

Add: Legacies 4,000 15,800 Less: Written off 10,000 Nil

Endowment Fund 20,000 Investment in securities 20,000

Subscription received in Advance 400 Subscriptions Receivable 1,000

Interest Due 400

Cash in hand and at Bank 3,000

36,200 36,200

Workings Notes:

1. Balance Sheet of Excellent Recreation Club as on 31st March 1995


Capital Fund (Balancing) Amount 36,680 Land 10,000

Subscription Received in Advance 500 Furniture 2,000

Arrears of Subscription 2,000

Investments in Securities 20,000

Cash in hand and at Bank 3,180 37,180 37,180

63

2. Subscription pertaining to the period ended 31st March 1996

Rs.

Subscription received during the year 18,000

Add: Outstanding Subscription on 31.03.1996 1,000

19,000

Add: Received in Advanced as on 31.03.1995 500

19,500

Less: Outstanding subscription as on 31.03.1995 2,000

17,500

Less: Received in advance as on 31.03.1996 400

17,100

Answer 17:

INCOME AND EXPENDITURE ACCOUNT OF MUMBAI CLUB

(FOR THE YEAR ENDED 31ST DECEMBER 1996)

Expenditure Rs. Income Rs.

To Salary 2,000 By Donation 5,000

To Repair Expenses 500 Less: Capitalised 2,500 2,500

To Misc Expenses 500 By Subscriptions 12,000

Less: Prepaid 90 410 Add: Outstanding 900

To Insurance Premium 200 12,900

Add: Outstanding 40 240 Less: Advance 350 12,550

To Paper, ink, etc. 150 By Entrance Fees 1,000

To Drama Expenses 500 By Interest on Investment 100

To Surplus 14150 Add: Outstanding

6000 x 100

8 x

12

5

200 300

By Interest received from Bank 400

By Sale of Old News Paper 150

By Sale of Drama Tickets 1,050

17,950 17,950

BALANCE SHEET OF MUMBAI CLUB

(FOR THE YEAR ENDED 31ST DECEMBER 1996) Liabilities Rs. Assets Rs.

Capital Fund Billiard Table 30,000 Opening Balance 36,000 Furniture 6,000 Add: Surplus 14,150 Investments 6,000 Add: Donations 2,500 52,650 Interest Accrued 200

Outstanding Insurance Premium 40 Prepaid Expenses 90 Subscriptions Received in Advance 350 Subscriptions Receivable 900 Cash in Hand 2,650 Cash at Bank 7,200 53,040 53,040

Working Notes:

BALANCE SHEET OF MUMBAI CLUB (AS ON 31ST DECEMBER, 1995) Liabilities Rs. Assets Rs.

64

Capital Fund (Balancing Figure) 36,000 Billiard Table 30,000

Creditors for Billiard table 8,000 Cash in Hand 4,000 Cash at Bank 10,000

44,000 44,000

Answer 18:

BALANCE SHEET OF MAHAVEER SPORTS CLUB

(AS ON 1ST APRIL, 1997) Liabilities Rs. Assets Rs.

Capital Fund (Balancing Figure) 86,000 Library Books 10,000

Outstanding Expenses: Sports Goods 8,000 Salaries 1,000 Furniture and Fixtures 10,000

Newspapers and Periodicals 400 Subscriptions Receivable 5,000 Electricity charges 800 Investment:

Rent and taxes 600 2,800 Govt. Securities 50,000

Accrued Interest 600 Cash and Bank Balance 5,200 88,800 88,800

INCOME AND EXPENDITURE ACCOUNT

FOR THE YEAR ENDED ON 31ST MARCH 1998


To Salaries 16,000 By Subscription 41,800

To Electricity Charges 800 By Interest on investments 1,200

To Rent and Taxes 5,400 By Sundry Receipts 300

To Newspapers and periodicals 1,180

To Misc. Expenses 5,400

To Depreciation on fixed assets 5,000

To Excess of income over Expenditure 9,520

43,300 43,300

BALANCE SHEET OF MAHAVEER SPORTS CLUB

AS ON 31ST MARCH 1998


Capital Fund Fixed Assets:

Opening Balance 86,000 Furniture and Fixtures 9,000

Add: Excess of Income over Exp. 9,520 Sport Goods 8,000

Add: Donations 10,000 1,05,520 Library Books 18,000

Outstanding Expenses (W.N.3) Investment:

Salaries 2,000 Govt. Securities 50,000

Newspapers and Periodicals 500 Accrued Interest 600

Electricity Charges 1,000 Subscription Receivable 12,000

Rent and taxes 600 4,100 Cash and Bank Bal. 12,020

1,09,620 1,09,620

Workings Notes: Rs.

(1) Subscription for the year ended 31st March 1998: Subscription received during the year 34,800 Add: Subscriptions received on 31.3.98 12,000

65

46,800 Less: Subscriptions receivable on 31.3.97 5,000 41,800

(2) Expenses Calculation:

Expenses Salaries

Rs.

Electricity

Charges

Rs.

Rent

and

taxes

Rs.

Newspaper

and

Periodicals

Rs.

Paid During the year 15,000 600 5,400 1,080

Add: Outstanding (as on 31.3.98) 2,000 1,000 600 500

17,000 1,600 6,000 1,580

Less: Outstanding (as on 31.3.97) 1,000 800 600 400

Expenses for the year 16,000 800 5,400 1,180

(3) Depreciation Calculation:

Assets Book value (31.397)

Additions during the

year

Total

Rate of Depreciation

p.a.

Depreciation W.D.V. on as

(31.3.98)

Rs. Rs. Rs. Rs. Rs.

Furniture & fixtures

10,000 - 10,000 10% 1,000 9,000

Sports goods 8,000 2,000 10,000 20% 2,000 8,000

Library books 10,000 10,000 20,000 10% 2,000 18,000 28,000 12,000 40,000 5,000 35,000

Answer 19:

In the books of Rotary Club Dr Income and expenditure Account for the year ended on 31st March, 2020 Cr

Expenditure Amount (Rs.)

Income Amount (Rs.)

To Salaries and wages 12,250 By Subscriptions (W.N. 4) 22,000

To Depreciation (W.N. 3) 10,300 By Net proceeds from refreshments

(22,000-18,250)

3,750

To Telephone Charges 2,800 By Entrance fees (50% x 26,000) 13,000

To Electricity charges (W.N. 5) 14,000 By Interest on investments 4,550

To Honorarium charges 6,500 By Excess of expenditure over income

2,550

45,850 45,850

Balance sheet as on 31st March, 2020

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Opening capital fund 1,13,880 Sports Equipment 50,500

Less: Deficit (2,550) 1,11,330 Furniture 11,180

Entrance fees 13,000 7% Investments 65,000

Outstanding electricity charges 3,800 Subscription in arrears 5,200

66

Subscription in advance 4,850 Cash 1,100 1,32,980 1,32,980

Working notes

1. Investments made- Income earned during the year = 4,550 = 65,000

Rate of interest 7%

2. Balance sheet as on 31st March, 2019

Liabilities Amount

(Rs.)

Assets Amount

(Rs.)

Opening capital fund (B/f) 1,13,880 Sports Equipment 32,000

Accrued electricity charges 5,400 Furniture 12,480

Subscription in advance 6,250 7% Investments 65,000 Subscription Outstanding 7,600 Cash 8,450

Total 1,25,530 1,25,530

3. Computation of depreciation-

Sports equipment

Particulars Amt (Rs)

Sports equipment as on 31st, March 2019 32,000

Add: Purchases during the year 27,500

Less: Closing balance of equipment as on 31st, March 2020 (50,500)

Depreciation on sports equipment for the year ended 31st, March 2020 9,000

Furniture

Particulars Amt (Rs.)

Furniture as on 31st, March 2019 12,480

Add: Purchases during the year -

Less: Closing balance of equipment as on 31st, March 2020 (11,180)

Depreciation on furniture for the year ended 31st, March 2020 1,300

Total Depreciation = Rs. 10,300 (9,000+1,300)

4. Subscription to be credited to income and expenditure account for the

year 2020

Dr Subscription A/c (year ended on 31st March, 2020) Cr



To Outstanding at the

beginning (2019)

7,600 By Advance at the beginning

(2019)

6,250

To Income and Expenditure

A/c

22,000 By Receipts and payments A/c 23,000

To Advance at the end

(2021)

4,850 By Outstanding at the end

(2020)

5,200

34,450 34,450

67

5. Electricity charges to be debited to Income and expenditure Account-

Electricity charges paid for year 2020 15,600

Add: Outstanding charges for year 2020 3,800

Less: Outstanding charges for year 2019 5,400

Electricity charges to be debited to Income and Expenditure A/c 14,000

__**__

68

CHAPTER- 10 - COMPANY ACCOUNTS UNIT-II ISSUE, FORFEITURE AND REISSUE OF SHARES

Answer 21:

JOURNAL ENTRIES

Particulars Dr.(Rs.) Cr.(Rs.)

Share Capital A/c (200 × Rs.8) Dr. 1,600

To Share Forfeited A/c (200 × Rs.5) 1,000

To Share First Call A/c (200 × Rs.3) 600

(Forfeiture of 200 shares of Rs. 10/- each Rs. 8 being called

up for non-payment of first call money of Rs. 3 per share as

per Board's resolution dated )

Bank A/c (150 × Rs.8) Dr. 1,200

Share Forfeited A/c Dr. 300 1,500 To Share Capital A/c

(Re-issue of 150 forfeited shares of Rs. 10 each as fully paid

for Rs. 8 per share i.e. at a discount of Rs. 2 per share as per

Board's Resolution dated )

Share Forfeited A/c Dr. 450

To Capital Reserve A/c 450

(Transfer of capital profit proportionate to forfeited shares re-

issued i.e. on 150 shares to Capital Reserve A/c)

Answer 22:

JOURNAL ENTRIES FORFEITURE

Equity Share Capital A/c (1,000 × 7) Dr. 7,000

Security Premium A/c (1,000 × 2) Dr. 2,000

To Share Forfeiture A/c (1,000 × 3) 3,000

To Equity Share Allotment A/c (1,000 × 4) 4,000

To Equity Share First Call A/c (1,000 × 2) 2,000

(Being 1,000 share forfeited)

Re issue

Bank A/c (600 × 8.5) Dr. 5,100

Share Forfeiture A/c (600 × 1.5) Dr. 900

To Equity Share competed A/c (600 × 10) 6,000

(Being 600 share re-issued as fully paid up for 8.5 per share)

Share Forfeiture A/c Dr. 900


(Being transfer of net gain on Re-issue of 600 forfeited share to

capital reserve)

i.e. 900x600x1,000

3,000

69

Answer 23

JOURNAL ENTRIES FORFEITURE

Equity Share Capital A/c (360 × 8) Dr. 2,880

Security Premium A/c (360 × 2) Dr. 720

To Share Forfeiture A/c (360 × 5) 1,800

To Equity Share Allotment A/c (360 × 4) 1,800

(Being 360 shares forfeited)

Re issue

Bank A/c (320 × 8) Dr. 2,560

Share Forfeiture A/c (320 × 2) Dr. 640

To Equity Share competed A/c (320 × 10) 3,200

(Being 320 share re-issued as fully paid up for 8 per share)

Share Forfeiture A/c Dr. 960


(Being transfer of net gain on Re-issue of 600 forfeited share to

capital reserve)

i.e. 960640x320x360

1,800

Answer 24:

IN THE BOOKS OF DELHI CHEMICALS LTD.

JOURNAL ENTRIES


Bank A/c Dr.

To Share Application A/c

(Being receipt of application money on 80,000 shares @ Rs.

2 per share)

Share Application A/c Dr. 1,60,000

To Share Capital A/c 1,20,000

To Share Allotment A/c 16,000

To Bank A/c 24,000

(Being application money on 60,000 shares @ Rs. 2 each

transferred to Share Capital A/c, surplus application money

of 60,000 shares transferred to Share Allotment A/c and

application money of 12,000 shares refunded to the

unsuccessful applicants)

Share Application A/c Dr. 3,00,000


To Securities Premium A/c 1,20,000

(Being Share allotment money due on 60,000 shares @ Rs.

(including premium of Rs. 2 per share)

Share First & Final Call A/c Dr. 3,00,000


(Being first & final call due on 60,000 shares @ Rs. 5 per

share)

Bank A/c Dr. 3,00,000

To Share First & Final Call A/c 3,00,000

(Being call money received on shares)

70

Notes

1. Share Capital

Authorized Share Capital

15,00,000

Issued, Subscribed, called up and paid-up share capital

(60,000 equity shares of Rs. 10 each fully paid up)

6,00,000

2. Reserves and Surplus

Securities Premium

1,20,000

Answer 25:

JOURNAL OF PIYUSH LIMITED Date

Particulars Dr. Cr.

2017 Rs. Rs.

July 1 Bank A/c (Note 1 – Column 3) Dr. 8,40,000

To Equity Share Application A/c 8,40,000 (Being application money received on 4,20,000 shares @

Rs. 2 per share)

July 10 Equity Share Application A/c Dr. 8,40,000 To Equity Share Capital A/c 2,60,000 To Equity Share Allotment A/c (Note 1 - Column 5) 4,00,000

To Bank A/c (Note 1–Column 6) 1,80,000 (Being application money on 1,30,000 shares transferred

to Equity Share Capital Account; on 2,00,000 shares adjusted with allotment and on 90,000 shares refunded as per Board’s Resolution No…..dated…)

Equity Share Allotment A/c Dr. 6,50,000

To Equity Share Capital A/c 3,90,000

To Securities Premium a/c 2,60,000

(Being allotment money due on 1,30,000 shares @ Rs. 5 each including premium at Rs. 2 each as per Board’s Resolution No….dated….)

Bank A/c (Note 1 – Column 8) Dr. 2,50,000

To Equity Share Allotment A/c 2,50,000

(Being balance allotment money received)

Equity Share Final Call A/c Dr. 6,50,000


(Being final call money due on 1,30,000 shares @ Rs. 5

per share as per Board’s Resolution No….. dated….)

April 30 Bank A/c Dr. 6,50,000

To Equity Share Final Call A/c 6,50,000

(Being final call money on 1,30,000 shares@ Rs. 5 each received)

Working Note:

CALCULATION FOR ADJUSTMENT AND REFUND

Category No. of

Shares Applied

for

No. of Shares Allotted

Amount Received on Application (1x Rs. 2)

Amount Required on

Application (2 x Rs. 2)

Amount adjusted

on Allotment

Refund [3-4-5]

Amount due on

Allotment

Amount received

on Allotment

(1) (2) (3) (4) (5) (6) (7) (8)

(i) 20,000 20,000 40,000 40,000 Nil Nil 1,00,000 1,00,000

(ii) 1,00,000 50,000 2,00,000 1,00,000 1,00,000 Nil 2,50,000 1,50,000

71

(iii) 3,00,000 60,000 6,00,000 1,20,000 3,00,000 1,80,000 3,00,000 Nil

TOTAL 4,20,000 1,30,000 8,40,000 2,60,000 4,00,000 1,80,000 6,50,000 2,50,000

Answer 26:

Journal Entries in the books of X Ltd.

Date Dr.

Rs.

Cr.

Rs.

(a) Equity Share Capital A/c Dr. 3,000

To Equity Share Allotment money A/c (300 x Rs. 3) 900

To Equity Share Final Call A/c (300 x Rs. 4) 1,200

To Forfeited Shares A/c (300 x Rs. 3) 900

(Being the forfeiture of 300 equity shares of Rs. 10 each for

non-payment of allotment money and final call, held by

Ramesh as per Board’s resolution No……..…dated)

(b) Bank Account (300 x 8) Dr. 2,400

Forfeited Shares Account (300x 2) Dr. 600

To Equity Share Capital Account 3,000

(Being the re-issue of 300 forfeited shares @ Rs. 8 each

as fully paid up to Suresh as per Board’s resolution

No……….dated)

(c) Forfeited Shares Account Dr. 300

To Capital Reserve Account 300

(Being the profit on re-issue, transferred to capital reserve)

Answer 27:

In the books of Bhagwati Ltd.

Journal Entries

Dr.

Rs.

Cr.

Rs.

Bank A/c Dr. 9,00,000

To Equity Share Application A/c 9,00,000

(Being the application moneyreceived for 3,00,000 shares at

Rs. 3 per share)

Equity Share Application A/c Dr. 9,00,000

To Equity Share Capital A/c (2,00,000 x Rs. 3) To Share

allotment A/c

6,00,000

3,00,000

(Being share allotment made for 2,00,000 shares and excess

adjusted towards allotment)

Equity Share Allotment A/c Dr. 10,00,000


(Being allotment amount due on 2,00,000 equity shares at

Rs. 5 per share as per Directors’ resolution no... dated...)

Bank A/c Dr. 7,00,000

To Equity Share Allotment A/c 7,00,000

(Being balance allotment money received for 2,00,000

shares at Rs. 5 per share.)

Equity Share first and final call A/c Dr. 4,00,000


(Being first and final call amount due on 2,00,000 equity

shares at Rs. 2 per share as per Directors’ resolution no...

72

dated...)

Bank A/c Dr. 3,94,000

Calls in arrears A/c 6,000

To Equity Share first and final call A/c 4,00,000

(Being final call received on 1,97,000 shares)

Share capital A/c (3,000 x Rs. 10) Dr. 30,000

To Forfeited share A/c (3,000 x Rs. 8) 24,000

To Calls in arrears A/c (3,000 xRs. 2) 6,000

(Being forfeiture of 3,000 shares of Rs. 10 each fully called-

up for non payment of first and final call @ Rs. 2 as per

Directors’ resolution no... dated..)

Bank A/c (2,500 x Rs.6) . Dr. 15,000

Forfeited share A/c (2,500 x Rs.4) 10,000

To Equity Share Capital A/c (2,500 x Rs. 10) (Being re-

issue of 2,500 shares @6)

25,000

Forfeited share A/c (2,500 x Rs. 4) 10,000

To capital reserve A/c (2,500 x Rs. 4) 10,000

(Being profit on re-issue transferred to capital reserve)

Working Note:

Calculation of amount to be transferred to Capitalto Capital reserve A/c Rs.

Forfeited amount per share = 24,000/3,000 = 8

Loss on re issue (8-4) 4

Surplus per share 4

Transfer to capital reserve 4 x 2,500 Rs. 10,000

Answer 28:

In the books of B Ltd.

Journal Entries

Date Particulars Dr. Cr.

Rs. Rs.

Bank A/c

To Equity Share Application A/c

(Application money on 50,000 shares @ Rs. 3 per

share received.)

Dr. 1,50,000

1,50,000

Equity Share Application A/c

To Equity Share Capital A/c

(Transfer of application money to Equity Share Capital

on 50,000 shares @ Rs. 3 per share as per Directors

resolution no… dated…)

Dr. 1,50,000

1,50,000

Equity Share Allotment A/c


To Securities Premium A/c

(Amount due from members in respect of allotment on

50,000 shares @ Rs. 5 per share including premium

Rs. 2 per share as per Directors resolution no…

dated…)

Dr. 2,50,000

1,50,000

1,00,000

Bank A/c

To Equity Share Allotment A/c

(Amount received against allotment on 49,000 shares

@ Rs. 5 per share including premium Rs. 2 per share.)

Dr. 2,45,000

2,45,000

‘OR’

73

Bank A/c

Calls in Arrear A/c


(Amount received against allotment on 49,000 shares

@ Rs. 5 per share including premium Rs. 2 per share.

X, holding 1,000 shares failed to pay allotment

money.)

Dr.

Dr.

2,45,000

5,000

2,50,000

Equity Share Call A/c


(Amount due from members in respect of call on

50,000 shares @ Rs. 4 per share as per Directors

resolution no… dated…)

Dr. 2,00,000

2,00,000

Bank A/c

To Equity Share Call A/c

(Amount received against the call on 47,000 shares @

Rs. 4 per share.)

Dr. 1,88,000

1,88,000

‘OR’

Bank A/c

Calls in Arrear A/c

To Equity Share Call A/c

(Amount received against the call on 47,000 shares @

Rs. 4 per share. X, holding 1,000 shares and Y,

holding 2,000 shares failed to pay call money.)

Dr.

Dr.

1,88,000

12,000

2,00,000

Equity Share Capital A/c (3,000 x Rs. 10) Dr. 30,000

Securities Premium A/c (1,000 x Rs. 2) Dr. 2,000

To Equity Share Allotment A/c (1,000 X Rs. 5) 5,000

To Equity Share Call A/c (3,000 X Rs. 4) 12,000

To Forfeited Shares A/c 15,000

(Being forfeiture of 3,000 equity shares for non-

payment of allotment and call money on 1,000 shares

and for non-payment of call money on 2,000 shares as

per Board’s Resolution No….. dated ….)

‘OR’

Equity Share Capital A/c (3,000 x Rs. 10) Securities

Premium A/c (1,000 x Rs. 2)

To Calls in Arrear A/c (Rs. 5,000 + Rs. 12,000)

To Forfeited Shares A/c

(Being forfeiture of 3,000 equity shares for non-

payment of allotment and call money on 1,000 shares

and for non-payment of call money on 2,000 shares as

per Board’s Resolution No… dated…)

Dr.

Dr.

30,000

2,000

17,000

15,000

Bank A/c Dr. 20,000

Forfeited Shares A/c Dr. 5,000

To Equity Share Capital A/c 25,000

(Being re-issue of 2,500 shares @ Rs.8 each as per

Board’s Resolution No…..dated….)

Forfeited Shares A/c Dr. 7,000

To Capital Reserve A/c 7,000

(Being profit on re-issue transferred to Capital

Reserve)

74

Balance Sheet of B Limited as at……

Particulars Notes No. Rs.

EQUITY AND LIABILITIES

Shareholders’ funds

Share capital 1 4,98,000

Reserves and Surplus 2 1,05,000

Total 6,03,000

ASSETS

Current assets

Cash and cash equivalents (bank) 6,03,000*

Total 6,03,000

*(5,83,000 +20,000)

Notes to accounts

Rs. Rs.

1. Share Capital

Equity share capital

Issued share capital

50,000 Equity shares of Rs. 10 each 5,00,000

Subscribed, called up and paid up share capital

49,500 Equity shares of Rs. 10 each 4,95,000

Add: Forfeited shares 3,000 4,98,000

2. Reserves and Surplus

Securities Premium 98,000

Capital Reserve 7,000 1,05,000

Working Notes: (1) Calculation of Amount to be Transferred to Capital Reserve

Amount forfeited per share of X Rs. 3 Amount forfeited per share of Y Rs. 6

Less: Loss on re-issue per share (Rs. 2) Less: Loss on re-issue per share (Rs. 2) Surplus Rs. 1 Surplus Rs. 4

Transferred to Capital Reserve: X share (1,000 x Rs. 1) Rs. 1,000 Y’s Share (1,500 x Rs. 4) Rs. 6,000 Total Rs. 7,000

(2) Balance of Security Premium: Total Premium amount receivable on allotment = 1,00,000 less: Amount reversed on forfeiture = (2,000) Balance remaining = 98,000

Answer 29: Book of Alankit Limited

Journal

Date Particulars L.F. Debit Amount

(Rs.) Credit Amount

(Rs.) Bank A/c Dr. 50,00,000

To Equity Share Application A/c

50,00,000

(Money received on applications for 2,00,000 shares @Rs. 25 per share)

Equity Share Application A/c Dr.

50,00,000


50,00,000

(Transfer of application money on 2,00,000

75

shares to share capital)

Equity Share Allotment A/c Dr.

60,00,000


60,00,000

(Amount due on the allotment of 2,00,000 shares @ Rs. 30 per share)

Bank A/c Dr.

60,00,000


60,00,000

(Allotment money received)

Equity Share First Call A/c Dr.

40,00,000


40,00,000

(Being first call made due on 2,00,000

shares at Rs. 20 per share)

Bank A/c Dr.

50,00,000

To Equity Share First Call A/c

40,00,000

To Calls in Advance A/c 10,00,000

(Being first call money received along with

calls in advance on 2,00,000 shares at Rs.25 per share)

Equity Share Final Call A/c Dr.

50,00,000

To Equity Share capital A/c

50,00,000

(Being final call made due on 2,00,000

shares at Rs.25 each)

Bank A/c Dr.

39,00,000

Calls in Advance A /C Dr. 10,00,000 Calls in Arrears A/c Dr. 1,00,000

(Being final call received for 1,56,000 shares and calls in advance for 40,000

shares adjusted)

50,00,000

Interest on Calls in Advance A/c Dr.

30,000

To shareholders A/c 30,000

Being interest made due on calls in

advance of Rs. 10,000,00 at the rate of

12% p.a.)

Shareholders A/c Dr.

30,000

To bank A/c 30,000

(Being payment of Interest made to

shareholders)

Shareholders A/c Dr.

1,667

To Interest on Calls in Arrears A/c 1,667

(Being interest on calls in arrears made due

at the rate of 10%)

Bank A/c Dr.

1,01,667

To Calls in Arrears A/c 1,00,000 To Shareholders A/c 1,667

(Being money received from shareholder for calls in arrears and interest thereupon)

76

Answer 30:

Particulars Dr.

Rs.

Cr.

Rs.

Preference Share Capital A/c (12,000 x Rs.75) Dr. 9,00,000

To Preference Share Allotment A/c 3,00,000

To Preference Share First Call A/c 3,00,000

To Forfeited Share A/c 3,00,000

(Being the forfeiture of 12,000 preference shares Rs.75 each being

called up for non-payment of allotment and first call money as per Board’s Resolution No....dated )

Bank A/c (10,000 x Rs.65) Dr. 6,50,000

Forfeited Shares A/c (10,000 x Rs.10) Dr. 1,00,000

To Preference Share Capital A/c 7,50,000

(Being re-issue of 10,000 shares at Rs 65 per share paid-up as Rs.

75 as per Board’s Resolution No…..dated….)

Forfeited Shares A/c Dr. 1,50,000

To Capital Reserve A/c (Working Note)

1,50,000

(Being profit on re-issue transferred to Capital/Reserve)

Working Note:

Calculation of amount to be transferred to Capital Reserve

Forfeited amount per share =Rs. 3,00,000/12,000 = Rs. 25

Loss on re-issue =Rs. 75 – Rs. 65 = Rs. 10

Surplus per share re-issued Rs. 15

Transferred to capital Reserve Rs. 15 x 10,000 = Rs. 1,50,000.

__**__

77

CHAPTER- 10 - UNIT-III: ISSUE OF DEBENTURES

Answer 18:

Journal Entries


Bank A/c

Loss on issue of Debentures A/c

To 15% Debentures A/c To Premium of Redemption of Debentures A/c

(Being the issue of debentures at a discount of 5% to be

redeemed at 5% premium)

Dr. Dr.

95,000 10,000

1,00,000

5,000

Profit & Loss Appropriation A/c

To General Reserve A/c (Being transfer of amount equivalent of the nominal value of debenture redeemed out of profit)

Dr. 1,00,000

1,00,000

15% Debentures A/c

Premium on Redemption of Debenture A/c To Debenture holders A/c

(Being amount due on redemption)

Dr.

Dr.

1,00,000 5,000

1,05,000

Debenture holders A/c To Bank A/c

(Being the payment made to debenture holders

Dr. 1,05,000

1,05,000

Answer 19:

S. N.


Dr.

Amount

Cr.

1 1.1.2010 Bank A/c Dr. 1,80,000

Debenture discount A/c Dr. 20,000 Loss on Issue of Debentures A/c Dr. 10,000

To 12% Debentures A/c 2,00,000 To Premium on Redemption of

Debenture A/c 10,000

(For issue of debentures at

discount redeemable at Premium)

2 30.6.2010 Debentures Interest A/c Dr. 12,000

To Debentures holders A/c 10,800

To Tax deducted at Source A/c 1,200 (Being TDS deducted and debenture

interest is recognised)

3 30.6.2010 Debentures Holders A/c Dr. 10,800

Tax Deducted at Source A/c Dr. 1,200 To Bank A/c 12,000

(Being TDS and Interest Paid)

78

4 31.12.2010 Debentures Interest A/c Dr. 10,800

To Debentures holders A/c 10,800 To Tax deducted at Source 1,200 (Being TDS deducted and debenture

interest is recognised)

5. 31.12.2010 Debenture Holders A/c Dr. 10,800

Tax Deducted at Source A/c Dr. 1,200

To Bank A/c 12,000 (Being TDS and interest paid)

6. 31.12.2010 Profit & Loss A/c Dr. 6,000

To Loss on issue of Debentures A/c 6,000 (Being proportionate Loss on issue of

debenture written off (i.e. 30,000 ×

1/5)

7. 31.12.2010 Profit & Loss A/c Dr. 24,000

To Debentures Interest 24,000

(Being transfer of debenture interest

to P&L A/c)

8. 31.12.2014 Debentures A/c Dr. 2,00,000

Premium on Redemption of Dr. 10,000

debentures A/c

To Debenture holders A/c 2,10,000

(Being redemption of Debentures)

9. 31.12.2014 Debenture Holders A/c Dr. 2,10,000


(Being Payment to Debenture holders)

Entries no. 2, 3, 4, 5, 6, 7 to be repeated every year till 31.12.2014. In 2014

following extra entries to be passed.

Answer 20:

(i) Bank A/c Dr. 73,500 Loss on issue of Debenture A/c Dr. 7,000 To 12% Debenture A/c 70,000 To Security Premium A/c 3,500 To Premium on Redemption of Debenture A/c 7,000

(i) Fortune Limited Balance Sheet

I. Equities and Liabilities

Reserve and Surplus Securities premium

3,500

Amount in Rs.

Less: Loss on issue of debentures (7,000) (3,000) Non - Current Liabilities

79

12% Debenture 70,000 Debenture redemption premium 7,000

Total 73,500

II. Assets Current Assets Cash and cash equivalent

73,500

Total 73,500

Answer 21:

Debenture Suspense A/c To Debentures A/c

Dr. 40,00,000 40,00,000

(Being issue of 0% 40,000, 14% debenture of Rs. 100 each as collateral security

for a bank loan of Rs. 25,00,000 as per Board Resolution dated)

Particulars Amount Rs.

I Equities & Liabilities Non current liabilities

Long term borrowings 1 40,00,000

Current liabilities Short term borrowings 2 25,00,000

65,00,000

II. Assets

1. Non Current Assets Other non current asset 3 40,00,000

2. Current Assets Cash and cash equivalents 25,00,000

Total Note:

65,00,000

1. Long term borrowings 40,000; 14% Debentures of Rs. 100 each

40,00,000

(issued as callateral security as per contra)

2. Short term borrowings Bank Loan

25,00,000

(Secured by issue of 40,000, 14% debenture of

Rs. 100 each as collateral security) 3. Other not current assets

Debenture Suspense A/c

40,00,000

(Issued as collateral security as per contra)

Answer 22:

Date Particulars Amount Dr.

Amount Cr.

31.12.12 Interest on Debentures A/c To Debentures holders A/c

Dr. 37,500 37,500

(Being 3 months interest due on

Debentures

80

31.12.12 Debentures holders A/c To Bank A/c

(Being Interest on debenture paid)

Dr. 37,500

37,500

31.03.13 Interest on Debentures A/c

To Accrued interest on Debentures A/c (Being 3 months debenture interest accrued but not due)

Dr. 37,500

37,500

31.03.13 Profit and Loss A/c To Interest on debentures A/c

(Being interest on debentures transferred to profit and loss A/c)

Dr. 75,000

75,000

01.04.13 Profit and Loss A/c

To Interest on debentures A/c

(Being opening entry made)

Dr. 37,500

37,500


To Debenture holders A/c (Being 6 months interest due)

Dr. 75,000

75,000

30.06.13 Debenture holders A/c

To Bank A/c (Being 6 months interest paid)

Dr. 75,000

75,000


To Debenture holders A/c

(Being 6 months interest due on Debentures)

Dr. 75,000

75,000

31.12.13 Debenture holders A/c

To Bank A/c (Being interest on debenture paid)

Dr. 75,000

75,000


To Accrued interest on Debentures A/c

(Being 3 months debenture interest

accrued but not due)

Dr. 37,500

37,500

31.03.14 Profit and Loss A/c

To Interest on debentures A/c

(Being interest on debentures transferred to profit and loss A/c)

Dr. 1,50,000

1,50,000

Answer 23: :

Journal Entry

Particulars Dr. (Rs.) Dr. (Rs.)

Bank A/c Dr. 9,50,000

Loss on Issue of Debentures A/c Dr. 1,50,000

To 12% Debentures A/c 10,00,000 To Premium on Redemption of Deb. A/c 1,00,000

(Allotment of 10,000 12% debentures of Rs.

100) each issued at a discount of 5% and redeemable at a premium of 10% after 5 years as per Board's Resolution dated…..)

81

Note: Total loss on issue of debentures has been arrived at as follows: Loss on

issue of debentures = Discount on issue + Premium on redemption

= Rs. (50,000 + 1,00,000) = Rs. 1,50,000

This total loss of Rs. 1,50,000 has to be written off over a period of 5 years.

Therefore, every year 1/5 of Rs. 1,50,000 = Rs. 30,000 have to be written off.

Loss on issue of Debentures A/c

Dr. Cr.


1st year (at

the beginning)

To 12% Debentures

A/c To Premium on

50,000

1,00,000

1st year (at

the end)

By Profit and Loss

A/c By Balance c/d

30,000

1,20,000

Redemption A/c

1,50,000 1,50,000

2nd year (at the beginning)

To Balance b/d 1,20,000

2nd year (at the end)

By Profit and Loss A/c By Balance c/d

30,000 90,000

1,20,000 1,20,000

3rd year (at the beginning)

To Balance b/d 90,000

3rd year (at the end)


30,000

60,000

90,000 90,000

4th year (at the beginning)


4th year (at the end)


30,000 30,000

60,000 60,000

5th year (at the beginning)


5th year (at the end)

By Profit and Loss A/c

30,000

30,000 30,000

Answer 24:

(a) Bank A/c Dr. 9,00,000

Discount on Issue of Debentures A/c Dr. 1,00,000 To 12% Debentures A/c 10,00,000

(Being the issue of 10,000 12%

debentures of Rs. 100 each at discount of

10% but redeemable at per)

(b) Bank A/c Dr. 10,50,000

To 12% Debentures A/c 10,00,000 To Securities / Debenture Premium A/c 50,000


debentures of Rs. 100 each at a premium

of 5% but redeemable at per)

(c) Bank A/c Dr. 10,00,000

Loss on Issue of debentures A/c Dr. 50,000 To 12% Debentures A/c 10,00,000

To Premium on Redemption 50,000 Debentures A/c


Dr.

Amount

Cr.

82


debentures of Rs. 100 each at per but redeemable at a premium of 5%)

(d) Bank A/c Dr. 9,50,000

Loss on Issue of debentures A/c Dr. 1,50,000

To 12% Debentures A/c 10,00,000 To Premium on Redemption 1,00,000

debenturesA/c (Being the issue of 10,000 12%

debentures of Rs. 100 each at a discount

of 5% but redeemable at a premium of

10%)

(e) Bank A/c Dr. 11,00,000

Loss on Issue of debentures A/c Dr. 1,00,000

To 12% Debentures A/c 10,00,000 To Premium on Redemption 2,00,000

debenturesA/c

(Being the issue of 10,000 12% debentures of Rs. 100 each at per but redeemable at a

premium of 20%)

Answer 25:

Total Amount of discount and expenses is Rs. 70,000

5, 00, 000 10% 50, 000 (exp)

20, 000

70, 000

It should be written-off each year according to the ratios of the amount

outstanding.

Years Ration

1 5

2 5

3 5

4 5

5 5

6 4

7 3

8 2

9 1

Total of Ratio 35

In each of the first 5 years discount to be written-off will be:

83

70, 000 5

= Rs. 10,000

35

6th year 70, 000 4 = Rs. 8,000 35

7th year 70, 000 3

= Rs. 6,000 35

8th year 70, 000 2

35

9th year 70, 000 1

35

= Rs. 4,000

= Rs. 2,000

Answer 26:

Journal Entry:

1. Debentures Suspense A/c Dr. 6,00,000

To 12% Debentures A/c 6,00,000

2. Bank A/c Dr. 5,00,000

To Bank Overdraft A/c 5,00,000

Balance Sheet of Mars Ltd. as at 31.03.2016

I Equities & Liabilities

Non current liabilities Long term borrowings

1

6,00,000

Current liabilities

Short Term Loan

2

5,00,000

II Assets

11,00,000

Non Current Assets

Other non current asset

3

6,00,000

Current Assets Bank

5,00,000

11,00,000

Notes:

1 Long term borrowings 6,00,000 6,000, 12% Debentures of Rs. 100 each

(issued as collateral security as per Contra)

2. Short Term Borrowings:

Bank Overdraft 5,00,000 (Secured by the issue of 6,000, 12% Debentures of Rs. 100

each as collateral security)

3. Other Non-Current Assets:

Debentures Suspense A/c 6,00,000 (Issued as collateral security as per Contra)

84

Answer 27:

Journal Entries

(1) Bank A/c Dr. 1,80,000 Discount on Issue of 10% Debentures A/c Dr. 20,000 Loss on Issue of 10% Debentures A/c Dr. 20,000 To 10% Debentures A/c 2,00,000 To Premium on Redemption of Debentures A/c 20,000 Note: Total Loss on Issue = Rs. 20,000 + Rs. 20,000

= Rs. 40,000

Answer 28:

Journal Entries

Dr. (Rs.) Cr. (Rs.)

01-01-2018 Bank A/c Dr. 18,00,000

Discount/Loss on Issue of Debentures A/c Dr. 3,00,000


To Premium on Redemption of Debentures

A/c

1,00,000

(For issue of debentures at discount

redeemable at premium)

30-06-2018 Debenture Interest A/c Dr. 1,00,000

To Debenture holders A/c 90,000

To Tax Deducted at Source A/c 10,000

(For interest payable)

Debenture holders A/c Dr. 90,000



(For payment of interest and TDS)

31-12-2018 Debenture Interest A/c Dr. 1,00,000

To Debenture holders A/c 90,000

To Tax Deducted at Source A/c 10,000

(For interest payable)

Debenture holders A/c Dr. 90,000



(For payment of interest and tax)

Profit and Loss A/c Dr. 2,00,000

To Debenture Interest A/c 2,00,000

(For transfer of debenture interest to profit and

loss account at the end of the year)

Profit and Loss A/c Dr. 60,000

To Discount / Loss on issue of debenture A/c 60,000

(For proportionate debenture discount and

premium on redemption written off, i.e.,

3,00,000 x 1/5)

85

Answer 29: Books of Priya Ltd.

Journal

Particulars L.F. Debit Credit

(Rs.) (Rs.) Bank A/c Dr. 1,00,00,000

To Debenture Application A/c 1,00,00,000

(Debenture application money received)

Debenture Application A/c Dr. 1,00,00,000

To 12% Debentures A/c 1,00,00,000

(Application money transferred to 12% debentures

account consequent upon allotment)

Debenture allotment A/c Dr. 1,25,00,000

Discount on issue of debentures A/c Dr. 25,00,000


(Amount due on allotment)

Bank A/c Dr. 1,25,00,000

To Debenture Allotment A/c 125,00,000

(Money received consequent upon allotment)

__**__

86

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