ISC Class 12 Accountancy Board Exam Question Paper 2025 with Solutions

ISC Class 12 Accounts Board Exam Question Paper with Solutions

SECTION - A (14 MARKS)
Answer all questions.

Question 1. [14 Marks]
In subparts (i) to (v) choose the correct options and in subparts (vi) to (x) answer the questions as instructed.

(i) Shiv, Ravi and Roshan are partners in a firm following the fixed capital method. During the year 2023-24, Shiv withdrew Rs. 15,000 in the middle of each half year; Ravi withdrew Rs. 20,000 to pay for premium of his life insurance policy; Roshan withdrew Rs. 12,000 from his capital. [1 Mark]
What is the interest on drawings charged from the partners at the end of the year, if the rate of interest on drawings mentioned in the partnership deed is 6% per annum?
(A) Shiv - 900; Ravi - Nil; Roshan - 360
(B) Shiv - 900; Ravi - 600; Roshan - Nil
(C) Shiv - 1,800; Ravi - 1,200; Roshan - 720
(D) Shiv - 900; Ravi - 1,200; Roshan - 360

Answer: (B) Shiv - 900; Ravi - 600; Roshan - Nil

Average time for Shiv's drawings = ((9 + 3) / 2) = 6 months.
Interest on Shiv's drawings = 15,000 \times 2 \times (6 / 100) \times (6 / 12) = Rs. 900.
Interest on Ravi's drawings = 20,000 \times (6 / 100) \times (6 / 12) = Rs. 600 (Life insurance premium paid from firm is treated as drawings).
Interest on Roshan's drawings = Nil (Withdrawal of capital does not attract interest on drawings).

Teacher's Note:
a) Remember that withdrawal against capital is a reduction of capital and does not attract interest on drawings.
b) Personal expenses like life insurance premium paid by the firm are treated as drawings and charged interest.

(ii) To value the goodwill of a partnership firm at the time of its reconstitution, which one of the following items is added back to the previous year's profit to find the normal profit? [1 Mark]
(A) Gain from sale of shares
(B) Insurance premium paid
(C) Undervaluation of closing stock
(D) Overvaluation of closing stock

Answer: (C) Undervaluation of closing stock

Undervaluation of closing stock leads to understatement of profit, hence it is added back.

Teacher's Note:
a) Abnormal or non-recurring gains are deducted, whereas abnormal losses or understated assets/closing stock are added back to determine normal profit.
b) Students often confuse closing stock adjustments with opening stock adjustments; ensure stock valuation rules are revised thoroughly.

(iii) Read the following news item regarding issue of shares by TVS Supply Chain and answer the question that follows: [1 Mark]

TVS Supply Chain IPO subscribed 2.8 times
(Source: The Hindu, Business Line, 15 August, 2023)
Which of the following options can TVS Supply Chain avail to deal with its over-subscribed shares?
P. Reject all the over-subscribed shares and refund the excess application money.
Q. Allot all shares applied for on a pro-rata basis.
R. Allot all shares applied for.
S. Allot in full to some applicants, allot shares on a pro-rata basis to a few applicants and refund the application money to some applicants.
(A) P, Q and R
(B) Q, R and S
(C) P, R and S
(D) P, Q and S

Answer: (D) P, Q and S

Subscribed capital cannot exceed issued capital; hence option R is incorrect as all shares applied for cannot be allotted.

Teacher's Note:
a) Over-subscription can be handled by full rejection and refund, pro-rata allotment, or a combination of both.
b) Total allotment can never exceed the total number of shares offered to the public.

(iv) Premium on Redemption of Debentures is debited to: [1 Mark]
(A) Debentures Account
(B) Loss on issue of Debentures Account
(C) Debenture holders' Account
(D) Debenture Application and Allotment Account

Answer: (B) Loss on issue of Debentures Account

At the time of issue, anticipated loss on redemption is debited to Loss on Issue of Debentures Account.

Teacher's Note:
a) Premium payable on redemption is a liability and is credited as 'Premium on Redemption of Debentures Account'.
b) The corresponding debit is given to 'Loss on Issue of Debentures Account'.

(v) Assertion: A partnership firm is said to maintain its accounts by the fixed capital account method when it has a separate capital account and current account for every partner. [1 Mark]
Reason: A fixed capital method is maintained to ensure that the balance in the current account of any partner is not overdrawn at any point of time.
Which one of the following is correct?
(A) Both Assertion and Reason are true and Reason is the correct explanation for Assertion.
(B) Both Assertion and Reason are true but Reason is not the correct explanation for Assertion.
(C) Assertion is true and Reason is false.
(D) Both Assertion and Reason are false.

Answer: (C) Assertion is true and Reason is false.

Current account can show both credit or debit balance, so the reason is false.

Teacher's Note:
a) Fixed capital method maintains separate capital and current accounts to keep original capital fixed.
b) Current accounts can have debit or credit balances.

(vi) What does a new partner acquire by contributing his share to the self-generated goodwill of the firm? [1 Mark]

Answer: A new partner acquires a right to share future profits of the firm.

Teacher's Note:
a) Goodwill brought in is compensation to sacrificing partners for giving up their share of future profits.
b) Ensure students mention 'share in future profits' clearly.

(vii) At the time of dissolution of a partnership firm on 31^st March 2024, its Bills Payable of Rs. 42,000 due to be paid on 31^st July 2024, was settled at a rebate of Rs. 350. [1 Mark]
Calculate the per annum percentage of rebate at which the Bills Payable was settled.

Answer: 2.5% per annum.

Rebate = 42,000 \times (4 / 12) \times (Rate / 100) = 350.
Rate = (350 \times 12 \times 100) / (42,000 \times 4) = 2.5%.

Teacher's Note:
a) Apply simple interest formula: Interest = Principal \times Rate \times Time.
b) Time period from 31^st March to 31^st July is 4 months.

(viii) At the time of the dissolution of the partnership firm of Sanjay and Mitali, its Balance Sheet showed Deferred Revenue Expenditure of Rs. 30,000. Give the journal entry to treat this item. [1 Mark]

Answer:

Teacher's Note:
a) Fictitious assets/deferred revenue expenditures are written off among partners in their old profit sharing ratio on dissolution.
b) Debited directly to partners' capital accounts, not to Realisation Account.

(ix) Read the following news item and answer the questions that follow: [1 Mark]

In a strong display of innovation, IIT Kanpur filed a total of 122 intellectual property rights (IPR) applications in 2023. To date, it has 1,039 successful IPRs. The patents for inventions are varied domains such as MedTech and Nano Technology.
(Source (edited): Financial Express, 11, January, 2024)
(a) Mention the sub-head under which patents would be shown in the Balance Sheet of a company prepared as per Schedule III of the Companies Act, 2013.
(b) Give any one other item under the same sub-head.

Answer:
(a) Property, Plant and Equipment and Intangible Assets (Intangible Assets).
(b) Copyrights / Trademarks / Goodwill.

Teacher's Note:
a) Patents are classified as Intangible Assets under Non-Current Assets.
b) Exact sub-heading names as per Schedule III must be memorized.

(x) Why is it advisable for an unlisted manufacturing company to start transferring its profits to Debenture Redemption Reserve from the year of the issue of its non-convertible debentures? [1 Mark]

Answer:
1. Financial Security: Ensures funds for debenture redemption.
2. Smoother Cash Flow: Avoids large, sudden payouts.

Teacher's Note:
a) DRR creation spreads out the financial burden over the life of debentures.
b) It ensures liquidity and compliance with statutory requirements.

Question 2. [3 Marks]
Ajay and Bijoy are two partners sharing profits and losses in the ratio of 2:1.
Balance Sheet of Ajay and Bijoy (extract)
As at 31^st March 2024

Additional information:
(a) On 1^st April 2024, they admitted Sujay as a partner with 1/4 share in the profits.
(b) The Workmen Compensation Reserve to be reduced to Rs. 900 in the reconstituted firm.
You are required to give the accounting treatment of Workmen Compensation Reserve on the date of Sujay's admission.

OR

Gita and Mita are partners in a firm sharing profits and losses in the ratio of 3:2. An extract of their Balance Sheet as at 31^st March 2024, is as follows: [3 Marks]
Balance Sheet of Gita and Mita (extract) as at 31^st March 2024

On the admission of Rita as a third partner for 1/4 share in the profits, the assets and liabilities of the firm were revalued as under:
(i) Creditors include an amount of Rs. 5,000 received as commission from Ajay. The necessary adjustment to be made.
(ii) Creditors include Rs. 1,000 due to Nikhil paid by partner Gita privately for which she is not to be reimbursed.
(iii) The value of machinery, overvalued by Rs. 20,000 in the Balance Sheet, to be revised.
(iv) Out of the total insurance premium paid, Rs. 6,000 to be treated as prepaid insurance. The amount was earlier debited to Profit & Loss A/c.
(v) Rs. 20,000 for damages claimed by a customer had been disputed by the firm. It was agreed at 70% by a compromise between the customer and the firm.
(vi) The provision for doubtful debts to be increased to Rs. 20,000.
You are required to prepare the Revaluation Account.

Answer:

Working Note:
1. Excess reserve = 1,200 - 900 = Rs. 300 distributed between Ajay and Bijoy in 2:1 ratio (Ajay: Rs. 200, Bijoy: Rs. 100).
2. Sujay's share of goodwill = 1/4th of 900 = Rs. 225 debited to Sujay's capital and credited to old partners in sacrificing ratio (2:1).

Teacher's Note:
a) Workmen Compensation Reserve in excess of actual claim is distributed among old partners in old profit sharing ratio.
b) The retained portion of WCR (Rs. 900) is carried forward to the new balance sheet.

OR

Answer:

Revaluation A/c

Working Note: Claim for damages accepted at 70% of 20,000 = Rs. 14,000 debited to Revaluation Account.

Teacher's Note:
a) Decrease in liabilities and increase in assets are credited to Revaluation Account.
b) Loss on revaluation is transferred to old partners' capital accounts in their old profit sharing ratio (3:2).

Question 3. [3 Marks]
On 1^st April 2023, Vishesh Co. Ltd. made an issue, which was fully subscribed, of 8,000, 5% Debentures of Rs. 100 each at a premium of 10% repayable at par at the end of 10 years. The debentures were allotted on 31^st August 2023, subscriptions being payable:
10% with Application
50% (along with premium) on Allotment
20% with First Call
Balance on the Second & Final Call
One debenture holder holding 200 debentures paid the First call with Allotment.
You are required to prepare the Cash Book for the year 2023-24 to record the above issue of debentures. (Ignore interest on debentures).

OR

Mint Ltd. issued 5,000, 6% Debentures of Rs. 100 each to be redeemed at par after five years. [3 Marks]
The issue price was payable as follows:
Rs. 25 on Application payable on 1^st May 2023
Rs. 25 on Allotment payable on 1^st July 2023
Rs. 20 on First Call payable on 1^st October 2023
Balance on Second & Final Call payable on 1^st February 2024
All these debentures were subscribed and amounts due on them duly received.
One debenture holder holding 1,000 debentures, paid the amount of both the calls with allotment. According to the Articles of Association of the company, interest @ 12% per annum is payable on calls-in-advance. The interest on calls-in-advance was paid by the company to the debenture holder on 1^st February 2024.
The company follows the financial year and closes its books accordingly.
You are required to prepare the following for the year 2023-24:
(i) Interest on Calls-in-Advance Account. [1 Mark]
(ii) Second & Final Call Account. [2 Marks]

Answer:

Cash Book (Dr. side)

Teacher's Note:
a) Application money = 8,000 \times 10 = Rs. 80,000.
b) Allotment money including premium = 8,000 \times 60 = Rs. 4,80,000.

OR

Answer:

Interest on Calls in Advance A/c

Working Note:
Interest = (20,000 \times (12 / 100) \times (3 / 12)) + (30,000 \times (12 / 100) \times (7 / 12)) = 600 + 2,100 = Rs. 2,700.

Second and Final Call A/c

Teacher's Note:
a) Calls-in-advance is a liability and carries interest as per Articles of Association.
b) When calls are made, calls-in-advance account is adjusted against the respective call account.

Question 4. [3 Marks]
Shyla Ltd., an unlisted manufacturing company, had 30,000, 6% Debentures of Rs. 100 each due for redemption at par on 31^st March 2024. On this date, the company had the required amount in its Debenture Redemption Reserve.
Investment, as required by the law, made on 1^st April 2023, earning interest @ 5% per annum, was realised at 97% on the date of redemption and the debentures were redeemed on the due date.
Tax @ 10% on the interest was deducted at the source of the investment.
You are required to prepare the following for the year 2023-24:
(i) Debenture Redemption Investment Account. [1.5 Marks]
(ii) Interest on Debenture Redemption Investment Account. [1.5 Marks]

Answer:

Debenture Redemption Investment A/c

Interest on Debenture Redemption Investment A/c

Teacher's Note:
a) DRI must be at least 15% of the face value of debentures to be redeemed.
b) Interest is calculated on investment value (15% of 30,00,000 = 4,50,000 at 5% = 22,500).

Question 5. [3 Marks]
Anu, Benu and Sara are partners in a firm sharing profits and losses in the ratio of 4:9: 2/9: 1/3. Anu retires from the firm on 1^st April 2024. She gives half of her share to Benu and the remaining half to Sara. On Anu's retirement, it is decided that goodwill of the firm be valued at two years' purchase of the average profits of the preceding four years which were as follows:

You are required to calculate:
(i) The new profit-sharing ratio of the remaining partners in the reconstituted firm. [1 Mark]
(ii) The firm's goodwill on the date of Anu's retirement. (Show the workings clearly with the formula) [2 Marks]

Answer:
(i) Old Ratio of Anu, Benu and Sara = 4/9 : 2/9 : 1/3 (or 3/9) = 4:2:3.
Anu's share = 4/9.
Half of Anu's share = (1/2) \times (4/9) = 2/9.
Benu's new share = 2/9 + 2/9 = 4/9.
Sara's new share = 3/9 + 2/9 = 5/9.
New profit sharing ratio of Benu and Sara = 4:5.

(ii) Adjusted Profit for 2020-21 = 40,000 - 4,000 (abnormal gain) = Rs. 36,000.
Adjusted Profit for 2021-22 = 80,000 - 6,000 (repair of machinery) = Rs. 74,000.
2022-23 = Rs. 1,10,000.
2023-24 = Rs. 40,000 (Loss).
Average Profit of the preceding four years = (36,000 + 74,000 + 1,10,000 - 40,000) / 4 = Rs. 45,000.
Goodwill = Average Profit \times No. of year's purchase = 45,000 \times 2 = Rs. 90,000.

Teacher's Note:
a) Abnormal items (gain/loss) must be adjusted before calculating average normal profit.
b) New share is calculated by adding the acquired share from the retiring partner to the old share of the remaining partners.

Question 6. [6 Marks]
Hoody Ltd. made the following borrowings in the year 2023-24:
On 1^st April 2023: Rs. 25,00,000 Ten year, 10% Bank Loan from AZ Bank secured by a primary security and 20,000, 6% Debentures of Rs. 100 each as collateral security, the issue of which was recorded in the books.
On 1^st October 2023: Rs. 5,00,000, 8% Debentures of Rs. 100 each, redeemable at par in five equal annual instalments.
The terms of the borrowings were:
- The redemption of 8% Debentures to begin from 30^th September 2024.
- Interest on Bank Loan and Debentures to be paid annually.
Additional information:
In the year 2023-24, the company defaulted on the payment of the interest on bank loan.
You are required to show the above items in Notes to Accounts accompanying the Balance Sheet of Hoody Ltd. prepared as per Schedule III of the Companies Act, 2013. as at 31^st March 2024.

Answer:

Hoody Ltd.
Balance Sheet (An Extract)
as at 31^st March 2024

Notes to Accounts:

Teacher's Note:
a) Collateral security debentures are recorded by opening Debentures Suspense Account.
b) Defaulted interest on loans is shown under Other Current Liabilities.

Question 7. [6 Marks]
Uma and Aman were partners in a firm sharing profits and losses in the ratio of 2:1. They closed their books on 31^st March every year. Uma died on 31^st July 2024, when the Balance Sheet of the firm was as follows:
Balance Sheet of Uma and Aman as at 31^st July 2024

According to the terms of their partnership deed:
(a) Interest on capital to be allowed to the partners @ 4% per annum.
(b) Uma to be allowed a salary of Rs. 250 per month. The firm's non-purchased goodwill on the date of Uma's death was valued at Rs. 12,000.
The amounts due to Uma were transferred to her representative's loan account.
You are required to prepare:
(i) Uma's Capital Account. [5 Marks]
(ii) Uma's Loan Account. [1 Mark]

OR

Ravi, Ali and Siya are partners in a firm sharing profits and losses in the ratio of 4:3:2. [6 Marks]
Ali retired from the firm on 31^st March 2024, when the capitals of the partners before the following necessary adjustments stood at:
Ravi Rs. 23,000
Ali Rs. 12,000
Siya Rs. 9,000
Adjustments:
(a) The firm's goodwill to be valued at Rs. 21,600.
(b) Loss on revaluation of assets and liabilities to be Rs. 2,700.
On the date of Ali's retirement, the firm had:
General Reserve of Rs. 6,300
Cash & Bank Balance of Rs. 18,600
It was decided that Ali be paid through cash brought in by Ravi and Siya in such a manner so as to make their capitals proportionate to their new profit-sharing ratio and a minimum Cash & Bank Balance of Rs. 10,000 to be maintained in the reconstituted firm.
You are required to pass journal entries to record the above transactions.

Answer:

Profit and Loss Appropriation A/c

Uma's Capital A/c

Uma's Loan A/c

Teacher's Note:
a) Deceased partner is entitled to share in profits, reserves, and goodwill up to the date of death.
b) Balance in deceased partner's capital account is transferred to Executor's Loan Account.

OR

Answer:

Partner's Capital A/c

Working Note: Amount to be paid = 20,400 and cash balance to be maintained = 10,000. Total cash required = 30,400. Available cash = 18,600. Cash to be brought in = 11,800.

Teacher's Note:
a) Retiring partner's share of goodwill is debited to remaining partners in their gaining ratio.
b) Capital adjustment is done by bringing in or paying cash to maintain proportionate capitals.

Question 8. [6 Marks]
Mihir and Farhan were partners in a firm sharing profits and losses equally. They dissolved their partnership firm on 31^st March 2024.
On this date, the Balance Sheet of their firm, apart from the realisable assets and outside liabilities, showed the following:

On the date of dissolution:
(a) The firm, upon realisation of assets and settlement of liabilities, suffered a loss of Rs. 10,000.
(b) The amount paid to settle the liabilities exceeded the amount realised from the sale of the assets by Rs. 8,000.
(c) Stock worth Rs. 3,000 was taken over by Farhan.
(d) Mihir discharged the Bills Payable, recorded in the books at Rs. 5,000, at a rebate of Rs. 100.
(e) There was a workmen compensation claim of Rs. 4,000.
You are required to prepare on the date of dissolution of the firm:
(i) The Partners' Capital Accounts.
(ii) The Bank Account to determine its balance at bank

Answer:

Partner's Capital A/c

Bank A/c

Teacher's Note:
a) Realisation loss and accumulated profits/reserves are transferred to partners' capital accounts in profit-sharing ratio.
b) Final payment to partners or cash brought in is balanced through Bank Account.

Question 9. [10 Marks]
Tim and Leena started a partnership business on 1^st July 2023, with fixed capital contributions of Rs. 3,00,000 and Rs. 2,50,000 respectively.
On 1^st January 2024, they decided that:
The total fixed capital of the firm to be Rs. 6,00,000 contributed by the partners in the profit-sharing ratio. Accordingly on 1^st January 2024, Tim and Leena introduced or withdrew capital.
Their partnership deed contained the following clauses:
(a) Interest on capital to be allowed @ 10% per annum to both the partners.
(b) Rent @ Rs. 2,000 per month to Tim for the use of his premises for business purposes.
(c) 10% of the Trading Profit to be transferred to General Reserve.
(d) The profit-sharing ratio of the partners to be 3:2.
The trading profit of the firm for the first year of the partnership after considering all charges against profits was Rs. 1,50,000.
You are required to pass journal entries for the year 2023-24.

OR

(A) Nida and Pia, each doing business as sole proprietors, started a partnership on 1^st April 2023, with capital contributions of Rs. 5,00,000 and Rs. 4,000,000 (Note: Rs. 4,00,000). [10 Marks]
Their partnership deed contained the following clauses:
(a) Interest on capital to be allowed @ 10% per annum to both the partners.
(b) Annual commission of Rs. 30,000 to be allowed to Nida.
(c) Interest on drawings to be charged @ 4% per annum.
(d) The profit-sharing ratio to be 3:2.
Nida withdrew Rs. 10,000 during the year 2023-24.
The trading profit of the firm for the year ending 31^st March 2024, was 70,640 before considering accrued interest on investments of Rs. 1,600.
Although the accountant had recorded the drawings made by the partners, he distributed the profits before charging interest on drawings from Nida but after considering the following:
- Accrued interest on investments of Rs. 1,600.
- Allowing the appropriations of interest on capital and commission.
You are required to prepare the following for the year 2023-24:
(i) Profit and Loss Appropriation Account as prepared by the accountant of the firm. [5.5 Marks]
(ii) Nida's Drawings Account. [2 Marks]
(B) At the beginning of the next financial year, the accountant realised his error of not having charged interest on drawings from Nida. He rectified the error by passing a single adjustment entry. [2.5 Marks]
You are required to give the rectified adjustment entry passed by the accountant.
(Show your workings clearly)

Answer:

In the Books of Tim and Leena
Journal Entries

Working Note:
Interest on Tim's capital: (3,00,000 \times 10% \times 6/12) + (3,60,000 \times 10% \times 3/12) = 15,000 + 9,000 = Rs. 24,000.
Interest on Leena's capital: (2,50,000 \times 10% \times 6/12) + (2,40,000 \times 10% \times 3/12) = 12,500 + 6,000 = Rs. 18,500.

Teacher's Note:
a) Rent is a charge against profit and is debited to Profit and Loss Account, not P&L Appropriation.
b) Under fixed capital method, adjustments are routed through partner's current accounts.

OR

Answer: (A)

Profit and Loss Appropriation A/c

Working Note:
Interest on capital: Nida = 50,000; Pia = 40,000.
Commission to Nida = 30,000.
Total appropriation = 50,000 + 40,000 + 30,000 = Rs. 1,20,000 (which is more than available profit). Hence, profit to be distributed in the ratio of appropriations (5:4:3).

Nida's Drawings A/c

(B) Table Showing Adjustment

Adjustment Entry

Teacher's Note:
a) When profits are insufficient to meet appropriations, profits are distributed in the ratio of appropriations.
b) Past adjustments are routed through partner's capital/current accounts using a single adjustment entry.

Question 10. [10 Marks]
Cosmic Ltd. issued 40,000 equity shares of Rs. 10 each at a premium of Rs. 1 per share payable:
On Application Rs. 3
On Allotment Rs. 4 (including premium)
On First and Final Call Balance 3
The public applied for 60,000 shares. Pro-rata allotment was made to the applicants of 50,000 shares. Where no allotment was made, money was to be refunded in full.
One shareholder who had applied for 500 shares did not pay the allotment money and his shares were forfeited after the allotment stage. The company was able to immediately reissue all the forfeited shares at Rs. 5 per share.
Three months later, the First and Final Call was made to all the shareholders.
You are required to:
(i) Draw the ledger accounts given above filling up the missing information represented by '?'. [3 Marks]
(ii) What is the balance left in the Securities Premium A/c after all the transactions relating to the shares have been completed by NM Co. Ltd? [1 Mark]
(iii) Give the journal entries for:
(a) The amount due on allotment.
(b) The amount received on allotment.
(c) Transferring the net gain made on reissue of shares to Capital Reserve Account. [6 Marks]

SECTION - B (20 MARKS)

Question 11. [7 Marks]
In subparts (i) and (ii) choose the correct options and in subparts (iii) to (v) answer the questions as instructed.

(i) Red Health, an ambulance aggregator has paid its employees only half their January salaries. The company has gone in for funding. In response to queries from Mint, Red Health's founder and CEO said, "Our funding round is closed and we are waiting money to be wired by this week. On the basis of that, and to manage our working capital, we had given a choice to our old employees to hold their salaries back." [1 Mark]
(Source (edited): Mint, 14 February, 2024)
The original Current Ratio and Quick Ratio of Red Health are more than one. Which one of the following will be correct for the month of January 2024 if the company had held back the salaries of its employees for the same month?
(A) Both Current Ratio and Quick Ratio will decrease.
(B) Both Current Ratio and Quick Ratio will increase.
(C) No change in the Quick Ratio but the Current Ratio will increase.
(D) No change in the Current Ratio but the Quick Ratio will increase.

Answer: (B) Both Current Ratio and Quick Ratio will increase.

Salaries unpaid will increase Current Liabilities while Current Assets remain unchanged. Since initial ratio > 1, decreasing liabilities increases the ratio.

Teacher's Note:
a) Unpaid salary creates an outstanding expense which is a current liability.
b) When current ratio is greater than 1, a decrease in current denominator (or increase in liability) changes the ratio inversely.

(ii) On 1^st April 2023, Tarzan Ltd. purchased 7,000, 7% Debentures of Rs. 100 each of Tintin Ltd. It received interest of Rs. 7,000 on these debentures on 31^st March 2024. [1 Mark]
How will this information be presented in the Cash Flow Statement of Tarzan Ltd. for the year 2023-24?
P. Rs. 70,000 as cash outflow in Investing Activity
Q. Rs. 70,000 as cash outflow in Financing Activity
R. Rs. 7,000 as cash inflow in Investing Activity
S. Rs. 7,000 as cash inflow in Operating activity
(A) Only P and R
(B) Only P and S
(C) Only P and Q
(D) Only R and S

Answer: (A) Only P and R

Debenture purchased by the company is like an investment by Tarzan Ltd. in Tintin Ltd. and interest received on this investment is also an investing activity.

Teacher's Note:
a) Purchase of debentures of another company is classified under Investing Activities.
b) Interest received on investment in debentures is an operating/investing cash inflow (investing for non-financial enterprises).

(iii) According to the ratings agency, Crisil, the food and grocery players will cap their debt raising in FY 25 in order to ensure that one of the key debt protection metrics, the interest cover, remains healthy in line with the previous fiscal's level of 13 times. [1 Mark]
(Source (edited): Financial Express, 23 December, 2023)
You are required to give the formula to calculate the interest cover.

Answer: Interest Coverage Ratio = (Earnings Before Interest and Taxes (EBIT)) / (Interest Expenses)

Teacher's Note:
a) Interest coverage ratio measures how easily a company can pay interest on outstanding debt.
b) Formula uses EBIT divided by total interest expense on borrowings.

(iv) While preparing the Cash Flow Statement, the accountant of Red Hill Co. Ltd. was undecided about the impact of amortisation of discount on issue of debentures of Rs. 10,000 on the company's Net Operating Profit before working capital changes. [1 Mark]
What should the accountant do to resolve this issue? Give a reason for your answer.

Answer: Amortisation of discount on issue of debentures is a non-cash expense that reduces the company's accounting profit. Hence, it is adjusted (added to) with net profit before tax and extraordinary items to calculate Net Operating Profit before Working Capital Changes.

Teacher's Note:
a) Non-cash expenses like discount amortisation are added back to operating profit.
b) They do not involve any cash outflow.

(v) Read the news item given below and answer the questions that follow: [1 Mark]

Online news aggregator, InShorts, saw its loss widen by over a third during the year ended March 2023, to Rs. 309.7 crore, from Rs. 231.8 crore in fiscal 2022, as expense rose faster than revenue. Advertisement income - the company gets most of its ads on its app - increased 4.3% to Rs. 147 crore. The remainder of its income came from support services.
(Source: Economic Times, November 26, 2023)
(a) Mention whether Advertising income is an operating income or a non-operating income for InShorts.
(b) What is the percentage increase in loss of InShorts in the fiscal year 2022-23 as compared to 2021-22?

Answer:
(a) Operating income.
(b) Percentage increase in loss = ((309.7 - 231.8) / 231.8) \times 100 = 33.60%.

Teacher's Note:
a) Advertising income is core revenue for an app-based aggregator, hence operating.
b) Percentage increase is calculated on the base of the previous year's loss.

Question 12. [3 Marks]
Following are the particulars of Richmond Ltd.

You are required to calculate the absolute change and percentage change of the following items at the end of the year 2023-24 vis-a-vis the closing amounts of the year 2022-23:
(i) Revenue from operations [1 Mark]
(ii) Purchases of stock in trade [1 Mark]
(iii) Closing inventory of stock-in-trade [1 Mark]

Answer:

Working Note: Closing inventory = Opening Inventory + Purchases - COGS = 1,40,000 + 3,00,000 - 4,10,000 = Rs. 30,000 for 2023-24.

Teacher's Note:
a) Absolute change = Current Year - Previous Year.
b) Percentage change = (Absolute Change / Previous Year Amount) \times 100.

Question 13. [2 Marks each = 6 Marks]
Answer any three of the following questions:
(i) Calculate the Gross Profit of Saturn Ltd. from the particulars given below: [2 Marks]

(ii) Calculate the Trade Receivables Turnover Ratio of Planet Ltd. from the particulars given below: [2 Marks]

(iii) Bajaj Hindustan Sugar, one of the largest sugar and ethanol producers, in order to revive the company, has offered to invest Rs. 2,500 crore as fresh equity of which Rs. 1,000 crore has already been infused. [2 Marks]
(Source(edited): Economic Times, Mumbai Edition 08, August 2023)
What will be the effect of this decision of Bajaj Hindustan Sugar on its following ratios?
(a) Proprietary Ratio
(b) Debt to Total Assets Ratio
(iv) Calculate the Earning per share of Hemisphere Ltd. from the particulars given below: [2 Marks]

Answer: (i)
Cost of Revenue from Operations = Inventory Turnover Ratio \times Average Inventory = 6 \times 8,000 = Rs. 48,000.
Selling Price = 48,000 + 25% of 48,000 = 48,000 + 12,000 = Rs. 60,000.
Gross Profit = 60,000 - 48,000 = Rs. 12,000.

Teacher's Note:
a) Cost of Goods Sold is calculated using Inventory Turnover Ratio.
b) Gross profit is the difference between Revenue from Operations and Cost of Goods Sold.

Answer: (ii)
Credit Revenue from Operations = Revenue from Operations - Cash Revenue from Operations = 3,60,000 - 90,000 = Rs. 2,70,000.
Average Trade Receivables = Net Closing Trade Receivables = Rs. 45,000.
Trade Receivables Turnover Ratio = Credit Revenue from Operations / Average Trade Receivables = 2,70,000 / 45,000 = 6 times.

Teacher's Note:
a) Credit sales = Total sales - Cash sales.
b) Trade receivables are taken net of provision for doubtful debts.

Answer: (iii)
(a) It will increase the proprietary ratio as both shareholders' funds as well as total assets are increased by the same amount.
(b) It will decrease the debt to total assets ratio as debt will not change but total assets will increase.

Teacher's Note:
a) Proprietary ratio = Proprietor's Funds / Total Assets.
b) Fresh equity infusion increases numerator and denominator equally, improving the ratio.

Answer: (iv)
Net profit after interest, tax and preference dividend = 2,44,000 - (50,000 + 24,000 + 20,000 + 10,000) = Rs. 1,40,000.
Number of Equity Shares = 8,00,000 / 10 = 80,000.
Earning per share = 1,40,000 / 80,000 = Rs. 1.75 per share.

Teacher's Note:
a) Earnings per share (EPS) = Net Profit available to equity shareholders / Number of Equity Shares.
b) Deduct interest on debt, tax, and preference dividend from EBIT to get earnings for equity.

Question 14. [6 Marks]
From the following information of Realty Ltd., you are required to calculate the company's Cash and Cash Equivalent as on 31^st March 2024, by preparing a Cash Flow Statement (as per AS 3).
Information pertaining to the year 2023-24:
(i) Net profit before tax was Rs. 14,00,000.
(ii) Tax of Rs. 5,00,000 was paid.
(iii) The opening inventory was higher than the closing inventory by Rs. 50,000.
(iv) The Trade Creditors showed a decrease of Rs. 20,000 on 31^st March 2024, when compared to the amount of Trade Creditors on 31^st March 2023.
(v) Plant & Machinery on 31^st March 2023, and 31^st March 2024, amounted to Rs. 20,00,000 and Rs. 26,00,000 respectively.
(vi) New machinery was purchased for Rs. 9,00,000; the purchase consideration being 4% debentures of the face value of Rs. 100 each issued at a discount of 10%.
(vii) The 4% debentures on 31^st March 2024, amounted to Rs. 5,00,000 and 31^st March 2024, (Note: 31st March 2023) amounted to Rs. 20,00,000 respectively.
(viii) Rs. 60,000 was paid by the company for interest on debentures against the amount due of Rs. 80,000.
(ix) Investments of Rs. 5,00,000 were purchased on 30^th November 2023, on which interest of Rs. 40,000 was earned and received.
(x) The cash and cash equivalent as on 31^st March 2023, was Rs. 3,15,000.

OR

Read the following information of Celestial Ltd., and answer the questions that follow:
Statement of Profit and Loss for the year ended 31^st March 2024

Notes to Accounts:

Additional information:
1. During the year 2023-24, the company paid tax of Rs. 2,50,000.
2. An extract of the Balance Sheets of the company as at 31^st March 2023, and as at 31^st March 2024 is as follows:

(i) State the reason for a part of the accumulated depreciation being written off by the company. [1 Mark]
(ii) What is the cash flow of interest on debentures? [1 Mark]
(iii) Calculate Cash from Investing Activities. [1.5 Marks]
(iv) Calculate Cash from Operating Activities. [2.5 Marks]

Answer:

In the Books of Realty Ltd.
Cash Flow Statement

Teacher's Note:
a) Cash flow statement classifies cash flows into Operating, Investing, and Financing activities as per AS 3.
b) Non-cash operating items are adjusted to operating profit before working capital changes.

SECTION - B (20 MARKS - COMPUTERS)
(Attempt either Section B or Section C. Here Section B is presented as per paper sequence.)

Question 15. [5 Marks]
In subparts (i) and (ii) choose the correct options and in subparts (iii) to (v) answer the questions as instructed.

(i) What is the cell reference for a range of cells that starts in cell B1 and goes over to column G and down to row 10? [1 Mark]
(A) B1-G10
(B) B1.G10
(C) B1;G10
(D) B1:G10

Answer: (D) B1:G10

Spreadsheet ranges are indicated by a colon separating the top-left and bottom-right cells.

Teacher's Note:
a) The colon operator is standard for range references in spreadsheets like Excel.
b) Do not confuse with semicolons or hyphens.

(ii) Which property describes the various characteristics of an entity in DBMS? [1 Mark]
(A) ER Diagram
(B) Column
(C) Relationship
(D) Attribute

Answer: (D) Attribute

Attributes describe the properties or characteristics of an entity.

Teacher's Note:
a) Entities represent objects, and attributes describe them.
b) Columns in relational tables correspond to attributes.

(iii) Name the spreadsheet which can be used to manage online records like Signup Form or Registration Form. [1 Mark]

Answer: Google Sheets (or Microsoft Forms / Microsoft Excel linked online).

Teacher's Note:
a) Online spreadsheets allow real-time collection of form responses.
b) Google Sheets integrates natively with Google Forms.

(iv) How can the records of a spreadsheet be: [1 Mark]
(a) Imported?
(b) Exported?

Answer:
(a) Imported: By using File -> Open or File -> Import to load external files like CSV, XML, or XLSX.
(b) Exported: By using File -> Save As or File -> Download / Export to formats like PDF, CSV, or XLS.

Teacher's Note:
a) Importing brings external data into the current worksheet.
b) Exporting saves or converts the worksheet into a different file format.

(v) Give the description of the following two errors in Excel: [1 Mark]
(a) #NULL!
(b) #NUM!

Answer:
(a) #NULL! occurs when you specify an intersection of two areas that do not intersect or use an incorrect range operator.
(b) #NUM! occurs when a formula or function contains invalid numeric values.

Teacher's Note:
a) #NULL! usually arises from missing space in range intersections.
b) #NUM! indicates mathematical domain errors such as square root of negative numbers.

Question 16. [3 Marks]
(i) Give the meaning of Database design. [1.5 Marks]
(ii) What does the PMT function calculate? [1.5 Marks]

Answer:
(i) Database design is the organization of data according to a database model, determining what data must be stored and how the data elements interrelate.
(ii) The PMT function calculates the payment for a loan based on constant payments and a constant interest rate.

Teacher's Note:
a) Proper database design ensures data integrity and eliminates redundancy.
b) PMT is widely used in financial modeling for loan amortisation schedules.

Question 17. [8 Marks]
Answer any three of the following questions:
(i) What is the utility of Freeze Panes in spreadsheets? [2 Marks]
(ii) What is a Data Model? [2 Marks]
(iii) List the components of storage manager. [2 Marks]
(iv) Give any two differences between DELETE command and TRUNCATE command. [2 Marks]

Answer: (i) Freeze Panes allows users to lock specific rows or columns in place so they remain visible while scrolling through a large spreadsheet.

Answer: (ii) A Data Model is a conceptual tool used to describe data, data relationships, data semantics, and consistency constraints.

Answer: (iii) Components of storage manager include Authorization and Integrity manager, Transaction manager, File manager, and Buffer manager.

Answer: (iv)
1. DELETE is a DML (Data Manipulation Language) command, whereas TRUNCATE is a DDL (Data Definition Language) command.
2. DELETE can use a WHERE clause to remove specific rows, while TRUNCATE removes all rows and cannot use a WHERE clause.

Teacher's Note:
a) Freeze panes improves readability of extensive data sets.
b) TRUNCATE resets table identity counters and cannot be rolled back easily in some SQL dialects.

Question 18. [8 Marks]
Premier Furniture Ltd. runs a furniture store in city C. The store has three Sales Executives, SE1, SE2 and SE3.
The company has a policy of awarding incentives. SE2 was awarded an incentive as from 1^st April 2023, equal to 10% of his monthly Basic Pay. The incentive was combined with Other Allowances.
Another policy of Premier Furniture Ltd., is that an employee can increase his portion of PF contribution from 10% to 15% of the Basic Pay. The contribution of the employer remains the same at 10% of the Basic Pay.
SE1 accordingly increased his PF contribution from 1^st April 2023, itself, to 15%.
The payroll summary representing the cumulative position of the three executives at the end of the year 2023-24 is as follows:

Payroll Summary of Premier Furniture Ltd. for the year ended 31^st March 2024

Based on the above transactions and the information given in the spreadsheet, answer any three of the following questions:
(i) PF contribution of SE1 in Cell G2. [2 Marks]
(ii) Net Salary of SE1 in Cell K2. [2 Marks]
(iii) Other Allowances (excluding the incentive) earned by SE2 in Cell E3. [2 Marks]
(iv) Gross Salary of SE3 in Cell J4. [2 Marks]

Answer: (i) 30,000 (Employer's PF contribution remains 10% of Basic Pay for SE1 = 3,00,000 \times 10% = 30,000 / 10% note: wait, basic pay in table is 30,00,000 / annual or monthly? As per table, SE1 basic is 30,00,000; employer contribution is 10% = 30,000).

Answer: (ii) Gross Salary minus total deductions = 3,84,000 - (30,000 + 20,000 + 5,000) = Rs. 3,29,000.

Answer: (iii) SE2 basic pay is 2,40,000. Incentive is 10% of Basic Pay = 24,000. Total allowance given is in E3 (let total be X, incentive included is 24,000).

Answer: (iv) Gross Salary of SE3 = Basic + HRA + Conveyance + Other Allowances = 2,00,000 + 50,000 + 40,000 + 30,000 = Rs. 3,20,000.

Teacher's Note:
a) Gross salary is the sum of all earnings including basic, HRA, conveyance, and allowances.
b) Net salary is calculated by subtracting employee PF, miscellaneous deductions, and income tax from gross salary.