Practice Questions

Accounting

Q-1 Prepare Cash Flow from Investing Activities of M/s. Creative Furnishings Limited for the
year ended 31-3-2015.
Particulars Rs.
Plant acquired by the issue of 8% Debentures 1,56,000
Claim received for loss of plant in fire 49,600
Unsecured loans given to subsidiaries 4,85,000
Interest on loan received from subsidiary companies 82,500
Pre-acquisition dividend received on investment made 62,400
Debenture interest paid 1,16,000
Term loan repaid 4,25,000
Interest received on investment 68,000
(TDS of Rs. 8,200 was deducted on the above interest)
Book value of plant sold (loss incurred Rs. 9,600) 84,000

Ans - (1,48,100)

Q-2 On 31st December 2016, the Balance Sheet of A, B, and C who were sharing profits and
losses in proportion to their capital stood as follows:

Liabilities Rs. Assets Rs. Rs.

Creditors 20,000 Cash at bank 16,000
Employees’ provident fund 1,600 Debtors 20,000
A’s capital A/c 72,000 Less: Provision 400 19,600
B’s capital A/c 48,000 Inventory 18,000

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 C’s capital A/c 24,000 Machinery 48,000
Contingency reserve 30,000 Land & building 1,00,000
Workmen compensation
reserve 6,000

2,01,600 2,01,600

B retires and the following adjustments of the assets and liabilities have been agreed upon
before the ascertainment of the amount payable to B:

(a) Out of the amount of insurance which was debited entirely to Profit and Loss Account,
Rs. 2,000 to be carried forward as an unexpired insurance.

(b) Land and building to be appreciated by 10%.

(c) Provision for doubtful debts to be brought up to 5% on debtors.

(d) Machinery to be depreciated by 5%.

(e) Provision of Rs.3,000 to be made in respect of an outstanding bill of repairs.

(f) Goodwill of the entire firm be fixed at Rs.36,000 and B's share of the same be adjusted
into the accounts of AandC who are going to share future profits in the proportion of
3/4 and 1/4 respectively. (No Goodwill account being raised).

(g) The entire capital of the firm as newly constituted be fixed at Rs.1,20,000 between
Aand C in the proportion of 3/4 and 1/4 after passing entries in their accounts for
adjustments i.e. actual cash to be paid off or to be brought in by the continuing

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 partners as the case may be.

(h) B to be paid Rs. 6,000 in cash and the balance to be transferred to his loan account.

Prepare Revaluation Account, Capital Accounts of the partners and the Balance Sheet of
the firm of A and C after retirement.

Ans - Balance Sheet Total – 2,12,600

Q-3 Surya Ltd. has provided you the following particulars. Prepare Cash Flow from operating
activities by indirect method in accordance with AS-3.

Profit and Loss account of Surya Ltd. for the year ended 31.3.2016

Particulars Rs. Particulars Rs.

To Depreciation 86,700 By Operating profit before

depreciation 11,01,600

By Profit on sale of
To Patents written off 35,000 investments 10,000

To Provision for tax 1,25,000 By Refund of tax 3,000

To Proposed Dividend 72,000 By Insurance claim major fire

settlement 1,00,000

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 To Transfer to reserve 87,000

To Net Profit 8,08,900

Total 12,14,600 Total 12,14,600

Additional information : Rs.

31.3.2015 31.3.2016

Stock 1,20,000 1,60,000

Trade Debtors 7,500 75,000

Trade Creditors 23,735 87,525

Provision for tax 1,18,775 1,25,000

Prepaid expenses 15,325 12,575

Marketable securities 11,775 29,325

Cash balance 25,325 35,340

(10 Marks)

Ans - Net cash from operating activities - 10,44,965

Q-4 On 1st April 2016, X Ltd. sells a Truck on hire purchase basis to X Transporters & Co for a
total purchase price of Rs. 18,00,000 payable as to Rs. 4,80,000 as down payment and the
balance in three equal instalments of Rs. 4,40,000 each payable on 31st March 2017, 2018 and
2019. The hire vendor charges interest @ 10% per annum.

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You are required to ascertain the cash price of the truck for X Transporters & Co.

Calculations may be made to the nearest rupee. (6 Marks)

Ans - Total cash price = Rs. 10,94,215 + 4,80,000 (down payment) = Rs. 15,74,215

Q-5 On 1st April, 2016, the details of balances owed by customers are as follows:

Rs.

Om 1,500

Ram (Considered to be 60% bad ; adequate provision maintained) 2,100

Sohan 1,800

Others 35,600

41,000

Less : Advance by Kamal 2,000

39,000

Sales during the month totaled Rs. 1,55,500 including Rs. 1,11,400 as cash sales; Of the credit
sales, a sale of Rs. 2,600 was to Kamal. Om returned goods to the extent of Rs. 500 and sent a
bill receivable accepted by A for the balance. A sum of Rs. 450 was received from Ram and the
balance was written off. On instructions from B, Sohan’s balance was transferred to B’s account

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in the creditor’s ledger. A’s acceptance was dishonoured and noting charges were Rs. 10. R sent
an advance of Rs. 1,800 for supply of goods. Out of the amount due from others, on 1st April
2016, a sum of Rs. 27,300 was received; the customers had earned 2 ½ % discount on the
amount paid. Similarly, out of the sale, in April, a sum of Rs. 9,750 had been received earning
discount at the same rate.

C, who owed Rs. 1,100 and R owed Rs. 800 turned doubtful; a provision of 50% of the amounts
due was created. All other debts were considered good.

Prepare Total Debtors account for April 2016.

Ans - By balance c/d – 40,710

Q-6 A Ltd. was incorporated on 1st July, 2015 to acquire a running business of B Sons with
effect from 1st April, 2015. During the year 2015 -16 , the total sales were Rs. 24,00,000 of
which Rs. 4,80,000 were for the first six months. The gross profit of the company Rs. 3,90,800.
The expenses debited to Profit & Loss account included :
i. Director’s fees Rs. 30,000
ii. Bad debts Rs. 7,200
iii. Advertising Rs. 24,000
iv. Salaries and General expenses Rs. 1,28,000
v. Preliminary expenses written off Rs. 10,000
Prepare a statement showing pre-incorporation and post-incorporation profit for the year
ended 31st March, 2016.

Ans - Net profit – 1,91,600

Pre incorporation profit transfer to Capital reserve – 3,960

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Q-7 Lotus Ltd. was incorporated on 1st July, 2015 to acquire a running business of Feel
goods with effect from 1st April, 2015. During the year 2015-16, the total sales were Rs.
48,00,000 of which Rs. 9,60,000 were for the first six months. The Gross profit of the
company Rs. 7,81,600. The expenses debited to the Profit & Loss Account included:

(i) Director's fees Rs. 60,000

(ii) Bad debts Rs. 14,400

(iii) Advertising Rs. 48,000 (under a contract amounting to Rs. 4,000 per month)

(iv) Salaries and General Expenses Rs. 2,56,000

(v) Preliminary Expenses written off Rs. 20,000

(vi) Donation to a political party given by the company Rs. 20,000.

Prepare a statement showing pre-incorporation and post-incorporation profit for the year
ended 31st March, 2016

Ans - Net Profit - 3,63,200

Net Profit incorporation - 3,62,480

Pre-incorporation profit transferred to Capital Reserve - 720

Q-8 The summarised Balance Sheet of Preet Limited as on 31st March 2016, was as follows:

Liabilities (Rs.) Assets (Rs.)

Authorised and subscribed

capital: Fixed Assets:

20,000 Equity shares of Rs. 20,00,00

100 0 Machineries 7,00,000

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 each fully paid

Unsecured loans: Current Assets:

15% Debentures 6,00,000 Inventory 5,06,000

Trade
Accrued interest 90,000 receivables 4,60,000

Current Liabilities: Bank 40,000

Trade payables 1,04,000 Profit & loss A/c 11,60,000

Provision for income tax 72,000

28,66,00
0 28,66,000

It was decided to reconstruct the company for which necessary resolution was passed and
sanctions were obtained from the appropriate authorities. Accordingly, it was decided that:

(i) Each share be sub-divided into 10 fully paid up equity shares of Rs. 10 each.

(ii) After sub-division, each shareholder shall surrender to the company 50% of
his holding for the purpose of reissue to debenture holders and trade
payables as necessary.
(iii) Out of shares surrendered 20,000 shares of Rs. 10 each shall be converted
into 10% Preference shares of Rs. 10 each fully paid up.

(iv) The claims of the debenture holders shall be reduced by 50%. In

consideration of the reduction, the debenture holder shall receive
Preference Shares of Rs. 2,00,000 which are converted out of shares
surrendered.

(v) Trade payables claim shall be reduced by 25%. Remaining trade payables
are to be settled by the issue of equity shares of Rs. 10 each out of shares
surrendered.

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 (vi) Balance of Profit and Loss account to be written off.

(vii) The shares surrendered and not re-issued shall be cancelled.

Pass Journal Entries giving effect to the above and the resultant Balance Sheet.

Ans - Balance Sheet Total - 17,06,000

Q-9 ‘Mani’ lent Rs. 50,000 to ‘Prem’ on 1st January, 2015. The amount is repayable in 5 half-
yearly installments commencing from 1st January, 2016. Calculate the average due date and
interest @ 10% per annum

Ans - 1st January, 2017

Interest = Rs. 50,000 x 10/100 x 2 years =Rs.10,000

Q-10 Following transactions took place between L and M during the month of April, 2016:

Date Particulars Rs.

1.4.2016 Amount payable by L to M 5,000

7.4.2016 Received acceptance of L to M for 2 months 2,500

Bills receivable (accepted by M) on 7.2.2016 is honoured

10.4.2016 on this 5,000

due date

10.4.2016 L sold goods to M (due date 10.5.2016) 7,500

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 12.4.2016 L received cheque from M (due date 15.5.2016) 3,750

15.4.2016 M sold goods to L (due date 15.5.2016) 3,000

20.4.2016 L returned goods sold by M on 15.4.2016 500

20.4.2016 Bill accepted by M is dishonoured on this due date 2,500

Prepare M’s account in the books of L for the month of April, 2016, taking
interest into account @ 10% p.a.

Ans - Balance of product – 2,08,750

Q-11 The summarized Balance Sheet of M/s. A Ltd. and M/s B Ltd. as on 31.03.2015 were
is as under:

Liabilities A Ltd. B Ltd. Assets A Ltd. B Ltd.

Rs. Rs. Rs. Rs.

Freehold
Share Capital: Property 3,00,000 2,40,000

Plant &
40,000 Equity Share Machinery 60,000 40,000

of Rs. 10 each, Fully 4,00,000 - Motor Vehicle 30,000 20,000

paid Trade

30,000 Equity
Shares Receivables 2,00,000 80,000

of Rs. 10 each, Fully - 3,00,000 Inventory 2,30,000 1,80,000

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 paid

General Reserve 2,40,000 - Cash at Bank 80,000 40,000

Profit & Loss

Account 50,000 50,000

Trade Payables 2,10,000 1,30,000

6% Debentures
(Rs.100) - 1,20,000

9,00,000 6,00,000 9,00,000 6,00,000

M/s. A Ltd. and M/s. B Ltd. carry on business of similar nature and they agreed to
amalgamate. A new Company, M/s. AB Ltd. is formed to take over the Assets and
Liabilities of M/s. A Ltd. and M/s. B Ltd. on the following basis:

Assets and Liabilities are to be taken at Book Value, with the following exceptions:

(a) Goodwill of M/s. A Ltd. and M/s. B Ltd. is to be valued at Rs. 1,40,000 and Rs. 40,000
respectively.

(b) Plant & Machinery of M/s. A Ltd. are to be valued at Rs. 1,00,000.

(c) The Debentures of M/s. B Ltd. are to be discharged at premium of 5% by the issue of
10% Debentures of M/s. AB Ltd. at par (Rs. 100 each).

You are required to:

(i) Compute the basis on which shares in M/s. AB Ltd. will be issued to Shareholders of the
existing Companies assuming nominal value of each share of M/s. AB Ltd. is Rs. 10.
(ii) Draw up a Balance Sheet of M/s. AB Ltd. as on 1st April, 2015, when Amalgamation is
completed.
(iii) Pass Journal entries in the Books of M/s. AB Ltd. for acquisition of M/s. A Ltd. and
M/s. B Ltd.

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Ans - Net Assets taken over – A - 8,70,000, B - 3,84,000
B/S Total – 17,20,000

Q-12 From the following particulars prepare a account current, as sent by Mr. Ram to Mr.
Laxman as on 31st October 2014 by means of product method charging interest @ 5%
p.a.

2014 Particulars Rs.

1st July Balance due from Siva 750

15th August Sold goods to Siva 1,250

20th August Goods returned by Siva 200

22nd Sep Siva paid by cheque 800

15th Oct Received cash from Siva 500

Ans - Interest - 18.48

Q-13 Following is the Receipts and Payments Account of Mayur Club (not registered under
Companies Act, 2013) for the year ended 31st March, 2015:

Receipts Rs. Payments Rs.

Opening balance
(1.4.2014) Payments:

Cash on hand 39,100 Sports materials 3,04,500

Cash at bank 50,000 Salaries 3,15,000

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 Equipment purchased on
Receipts: 1.10.2014 60,000

Bank fixed deposits on

Subscriptions 31.3.2015 1,50,000

For the year 2013-

14 18,000 Rent 1,48,500

For the year 2014-

15 9,63,000 Ground maintenance 22,120

For the year 2015-

16 4,500 Insurance 38,400

Interest on bank Stationery 3,450

Fixed deposits
@10% 45,000 Sundry expenses 5,880

Closing balance as on
31.3.2015

Cash on hand 31,750

Cash at bank 40,000

11,19,600 11,19,600

Following additional information is provided to you:

(i) The club has 220 members. The annual subscription is Rs. 4,500 per member.

(ii) Depreciation to be provided on furniture at 10% p.a. and on sports

equipment at 15% p.a.
(iii) On 31st March, 2015, stock of sports material in hand (after members use
during the year) is valued at Rs. 78,000 and stock of stationery at Rs. 3,150.
Rent for 1 month is outstanding. Unexpired insurance amounts to Rs. 9,600.

(iv) On 31st March, 2014 the club had the following assets:

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 Rs
Furniture . 2,70,000

Rs
Sports equipment . 1,80,000

Rs
Bank fixed deposit . 4,50,000

Rs
Stock of stationery . 1,500

Rs
Stock of sports material . 73,500

Rs
Unexpired insurance . 8,400

Rs
Subscription in arrear . 22,500

Note: There was no liability on 31.3.2014.

You are required to prepare:

(I) Income and Expenditure Account; and

(II) Balance Sheet as at 31st March, 2015.

Ans - B/S Total -12,45,500

Q-14 A firm acquired two tractors under hire purchase agreements, details of which were
as follows:

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 Tractor A Tractor B

Date of Purchase 1st April, 2013 1st Oct., 2013

(Rs.) (Rs.)

Cash price 14,000 19,000

Both agreements provided for payment to be made in twenty-four monthly instalments

(of Rs. 600 each for Tractor A and Rs. 800 each for Tractor B), commencing on the last day
of the month following purchase, all instalments being paid on due dates.

On 30th June, 2014, Tractor B was completely destroyed by fire. In full settlement, on
10th July, 2014 an insurance company paid Rs. 15,000 under a comprehensive policy. Any
balance on the hire purchase company’s account in respect of these transactions was to
be written off.

The firm prepared accounts annually to 31st December and provided depreciation on
tractors on a straight-line basis at a rate of 20 per cent per annum rounded off to nearest
ten rupees, apportioned as from the date of purchase and up to the date of disposal.

You are required to record these transactions in the following accounts, carrying down
the balances on 31st December, 2013 and 31st December, 2014:

(a) Tractors on hire purchase.

(b) Provision for depreciation of tractors.

Ans - By Balance c/d - 14,000

Q- 15 Smart Investments made the following investments in the year

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2013-14: 12% State Government Bonds having face value Rs. 100
Date Particulars

Opening Balance (1200 bonds) book value of Rs.

01.04.2013 126,000

02.05.2013 Purchased 2,000 bonds @ Rs. 100 cum interest

30.09.2013 Sold 1,500 bonds at Rs. 105 ex interest

Interest on the bonds is received on 30th June and 31st Dec. each year.

Equity Shares of X Ltd.

Purchased 5,000 equity shares @ Rs. 200 on cum

15.04.2013 right
basis

Brokerage of 1% was paid in addition (Face Value

of

shares Rs. 10)

The company announced a bonus issue of 2 shares

03.06.2013 for

every 5 shares held.

The company made a rights issue of 1 share for

16.08.2013 every 7

shares held at Rs. 250 per share.

The entire money was payable by 31.08.2013.

Rights to the extent of 20% was sold @ Rs. 60.

22.8.2013 The

remaining rights were subscribed.

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 Dividend @ 15% for the year ended 31.03.2013
02.09.2013 was

received on 16.09.2013

Sold 3,000 shares @ Rs. 300. Brokerage of 1%

15.12.2013 was

incurred extra.

Received interim dividend @ 10% for the year

15.01.2014 2013-14

The shares were quoted in the stock exchange @

31.03.2014 Rs. 220

Prepare Investment Accounts in the books of Smart Investments. Assume that the
average cost method is followed.

Ans - To P & L A/c - 8,437.50

Q-16 What are the advantages of customized accounting packages?

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