ISC Class 12 Accountancy Sample Paper 2023 with Solutions

SECTION A (60 Marks)
Answer all questions.

Question 1
In subparts (i) to (iv) chose the correct option and in subparts (v) to (x) answer the questions as instructed.

(i) A firm has an unrecorded liability for workmen compensation of Rs. 10,000. The firm was not prudent enough to create a workmen compensation reserve.
How will this liability be treated in the books of the firm at the time of retirement of a partner? [1 Mark]
(a) By debiting it to the capital accounts of all the partners.
(b) By crediting it to Revaluation A/c
(c) By debiting it to Revaluation A/c
(d) By debiting it to Workmen Compensation Reserve A/c

Answer: (c) By debiting it to Revaluation A/c

Teacher's Note:
a) An unrecorded liability found at retirement is a loss on revaluation.
b) There is no reserve, so it cannot be adjusted against a reserve.
c) Entry: Revaluation A/c Dr. To Workmen Compensation Claim (Liability) A/c.
d) The loss is shared by all partners in the old ratio through the Revaluation A/c.

(ii) Neptune Ltd., an unlisted manufacturing company has to redeem its 3,000, 7% Debentures of Rs. 100 each on 30^th September, 2022.
As per the provisions of the Companies Act, 2013, on which date should the company invest in specified securities? [1 Mark]
(a) On or before 30^th September, 2021
(b) On or before 30^th September, 2022
(c) On or before 30^th April, 2021
(d) On or before 30^th April, 2022

Answer: (d) On or before 30^th April, 2022

Teacher's Note:
a) The investment of 15% must be made by 30^th April of the year in which the debentures mature.
b) The debentures mature in the year 2022-23, so the date is 30^th April, 2022.
c) The amount is 15% of the debentures maturing in that year.
d) This rule is Rule 18(7) of the Companies (Share Capital and Debentures) Rules.

(iii) When a partnership firm dissolves, its losses including deficiencies of capital are to be paid first out of: [1 Mark]
(a) The profits of the firm
(b) The capitals of the partners
(c) From the partners individually in their profit-sharing ratio
(d) From the proceeds from sale of assets

Answer: (a) The profits of the firm

Teacher's Note:
a) Section 48 of the Indian Partnership Act, 1932 sets the order.
b) Losses are met first from profits, then from capital, and lastly by partners individually.
c) Partners contribute individually in their profit-sharing ratio only at the last stage.
d) Remember the order: profits, capital, partners.

(iv) A company forfeits 1,000 shares of Rs. 10 each. It had received Rs. 6,000 on these shares.
What is the maximum discount that can be allowed by the company on the reissue of 400 shares? [1 Mark]
(a) Rs. 4,000
(b) Rs. 400
(c) Rs. 1,600
(d) Rs. 2,400

Answer: (d) Rs. 2,400

Forfeited amount per share = 6,000 / 1,000 = Rs. 6; maximum discount on 400 shares = 400 × 6 = Rs. 2,400

Teacher's Note:
a) The discount on reissue cannot exceed the amount forfeited on those shares.
b) Find the forfeited amount per share first.
c) Multiply by the number of shares reissued, not all forfeited shares.
d) Any unused forfeited amount goes to Capital Reserve.

(v) What is the accounting treatment of Employees Provident Fund appearing in the Balance Sheet of a partnership firm at the time of dissolution of the firm? [1 Mark]

Answer:
Employees Provident Fund is an outside liability. It is transferred to the credit side of the Realisation A/c and, when paid, the payment is debited to the Realisation A/c.

Teacher's Note:
a) EPF belongs to employees, not to partners.
b) It is never shared among partners like a reserve.
c) It is treated like creditors on dissolution.
d) Entry for transfer: Employees Provident Fund A/c Dr. To Realisation A/c.

(vi) Give any one important feature of non- purchased goodwill. [1 Mark]

Answer:
Non-purchased (self-generated) goodwill is not recorded in the books of account, because no money is paid for it (AS 26).

Teacher's Note:
a) Only purchased goodwill is shown in the books.
b) Self-generated goodwill arises from the firm's reputation over time.
c) It is adjusted through partners' capital accounts on reconstitution, not raised in the books.
d) One feature is enough for the mark.

(vii) Mention the heading and sub-heading under which Calls-in Arrears and Calls-in Advance are shown in the Balance Sheet of a company prepared as per Schedule III of the Companies Act,2013. [1 Mark]

Answer:
Calls-in-Arrears: Heading - Shareholders' Funds; Sub-heading - Share Capital (deducted from subscribed capital in the Notes).
Calls-in-Advance: Heading - Current Liabilities; Sub-heading - Other Current Liabilities.

Teacher's Note:
a) Calls-in-arrears reduce paid-up capital.
b) Calls-in-advance are not share capital until the call is made.
c) Interest on calls-in-advance is also an Other Current Liability if unpaid.
d) Give both the heading and the sub-heading for each.

(viii) Give any one difference between Securities Premium Reserve and Premium on Redemption of Debentures. [1 Mark]

Answer:
Securities Premium Reserve is a capital gain of the company, shown under Reserves and Surplus (Shareholders' Funds), whereas Premium on Redemption of Debentures is a liability payable to debentureholders at redemption, shown under Non-Current Liabilities.

Teacher's Note:
a) One is a gain; the other is an amount the company owes.
b) Securities Premium can be used only for purposes in Section 52.
c) Premium on redemption creates a loss on issue of debentures.
d) State both sides of the difference.

(ix) Joy and Deb were partners sharing profits & losses in the ratio of 2:1. They admitted Gopi into partnership for 1/5 share. At the time of Gopi's admission, Furniture (book value Rs. 2,50,000) was reduced by 40% and Machinery (book value Rs. 1,50,000) was reduced to 40%
What was the net decrease in value of assets? [1 Mark]

Answer:
Furniture reduced by 40% = 2,50,000 × 40% = Rs. 1,00,000
Machinery reduced to 40% = 1,50,000 × 60% = Rs. 90,000
Net decrease = 1,00,000 + 90,000 = Rs. 1,90,000

Teacher's Note:
a) 'Reduced by' gives the decrease directly.
b) 'Reduced to' gives the new value; the decrease is the rest.
c) Both are losses on revaluation.
d) The profit-sharing ratio is not needed for this answer.

(x) Gabby Ltd. (a listed NBFC) has 30,000, 5% Debentures of Rs. 100 each due for redemption at par on 31^st March, 2022.
The Debenture Redemption Investment which was purchased on 30^th April, 2021, was realized on the date of redemption at 102% less 0·5% brokerage, and the debentures were redeemed.
You are required to calculate the sale price of the Debenture Redemption Investment. [1 Mark]

Answer:
Investment = 30,00,000 × 15% = Rs. 4,50,000
Sale at 102% = 4,50,000 × 102% = Rs. 4,59,000
Less: Brokerage 0.5% = 4,59,000 × 0.5% = Rs. 2,295
Sale price = 4,59,000 - 2,295 = Rs. 4,56,705

Teacher's Note:
a) A listed NBFC need not create DRR but must invest 15%.
b) Brokerage is deducted from the sale value.
c) Profit on sale = 4,56,705 - 4,50,000 = Rs. 6,705.
d) Show each step for the mark.

Question 2 [3 Marks]
Kavi, Dhruv and Parth are partners in a firm sharing profits and losses in the ratio of 3:1:1.

Balance Sheet of Kavi, Dhruv and Parth (extract) As at 31^st March, 2022

On Kavi's retirement from the firm on 1^st April, 2022, the amount due to him is determined at Rs. 20,000.
The firm took sufficient loan from the bank to pay the amount due to Kavi.
You are required to pass the necessary journal entries to pay the amount due to Kavi.

Answer:
Loan needed = 20,000 - 5,000 (bank balance) = Rs. 15,000

Journal

Teacher's Note:
a) 'Sufficient' loan means only the shortfall, not the whole amount.
b) The firm's own bank balance of Rs. 5,000 is used first.
c) The retiring partner's Capital A/c is debited on payment.
d) The bank loan is a liability of the reconstituted firm.

OR

Gita, Sita and Meena were partners in a firm sharing profits and losses in the ratio of 2: 2:1.
Gita died on 30^th June, 2022.
The firm closes its books on 31^st March every year.
According to their Partnership Deed, the representatives of the deceased partner would be entitled to get Gita's share in the interim profits of the firm calculated on sales basis.
Sales for the year 2020-21 were Rs. 6,00,000 and in the year 2021-22, till the date of her death, sales amounted to Rs. 1,20,000.
The profits of the firm for the year 2020-21 were Rs. 1,80,000.
You are required to:

(i) Calculate Gita's share of interim profit.

Answer:
Profit as a percentage of sales = 1,80,000 / 6,00,000 × 100 = 30%
Profit up to the date of death = 1,20,000 × 30% = Rs. 36,000
Gita's share = 36,000 × 2/5 = Rs. 14,400

Teacher's Note:
a) Use last year's profit-to-sales rate.
b) Apply it to sales up to the date of death.
c) Take the deceased partner's share in the old ratio.
d) The years printed do not match the date of death; the method stays the same.

(ii) Pass the necessary journal entry for giving Gita's representative her share of interim profit.

Answer:

Journal

Teacher's Note:
a) Profit and Loss Suspense A/c is used because the books are not closed on the date of death.
b) The amount is credited to the deceased partner's Capital A/c.
c) It is later transferred to her representative's account.
d) At the year end, the suspense account is closed to the P&L A/c.

Question 3 [3 Marks]
Veena and Soma are partners in a firm. They admit Sara on 1^st April, 2022, for 1/4 share in the profits of the firm.
On an average, the profits earned by Veena and Soma are Rs. 21,000. The average capital employed by the firm is Rs. 1,50,000.
The normal rate of return in the industry is 10%.
It is decided to value goodwill on the basis of four years' purchase of profits in excess of profits @ 10% on the money invested.
You are required to:

(i) Calculate the goodwill of the firm.

Answer:
Normal Profit = Capital Employed × Normal Rate of Return / 100 = 1,50,000 × 10/100 = Rs. 15,000
Super Profit = Average Profit - Normal Profit = 21,000 - 15,000 = Rs. 6,000
Goodwill = Super Profit × Number of years' purchase = 6,000 × 4 = Rs. 24,000

Teacher's Note:
a) 'Profits in excess of 10% on money invested' means super profit.
b) Multiply super profit by the years' purchase.
c) Write each formula in full words.
d) Sara's share of goodwill = 24,000 × 1/4 = Rs. 6,000.

(ii) Pass the journal entries in the books of the firm if Sara brings into the firm her share of goodwill in cash.

Answer:

Journal

Teacher's Note:
a) No profit-sharing ratio is given, so Veena and Soma share equally.
b) With no new ratio given, they sacrifice in their old ratio, 1:1.
c) Premium for goodwill is credited to the sacrificing partners.
d) Check: 3,000 + 3,000 = Rs. 6,000.

Question 4 [3 Marks]
On 31^st March, 2021, the books of Pragya Ltd. (an unlisted manufacturing company) showed the following closing balances:
7% Debentures (redeemable on 30^th September, 2022) Rs. 60,00,000
Debenture Redemption Reserve Rs. 2,00,000
In order to meet the provisions of the Companies Act, 2013, the company transferred the required balance amount to Debenture Redemption Reserve Account on 31^st March, 2022.
It met the requirements of Debenture Redemption Investment.
You are required to prepare the Debenture Redemption Reserve Account for the years 2021-22, 2022-23.

Answer:
Required DRR = 10% of 60,00,000 = Rs. 6,00,000; amount to transfer = 6,00,000 - 2,00,000 = Rs. 4,00,000

Debenture Redemption Reserve Account

Total for 2022-23: Rs. 6,00,000 on both sides.

Teacher's Note:
a) An unlisted manufacturing company must keep DRR of 10% of outstanding debentures.
b) DRR is created out of profits available for dividend.
c) After the debentures are redeemed on 30^th September, 2022, DRR is moved to General Reserve.
d) Show each year's account separately with its own totals.

OR

Barua Ltd. (a listed NBFC) redeems its 9,000, 10% Debentures of Rs. 100 each in instalments as follows

You are required to prepare the Debenture Redemption Investment Account for the years 2020-21, 2021-22.

Answer:
2020-21: 15% of (5,000 × 100) = Rs. 75,000, invested by 30^th April, 2020
2021-22: 15% of (1,000 × 100) = Rs. 15,000, invested by 30^th April, 2021

Debenture Redemption Investment Account

Total for 2021-22: Rs. 15,000 on both sides. The investment is taken as realised at cost on the redemption date (interest ignored).

Teacher's Note:
a) A listed NBFC does not create DRR but must still invest 15%.
b) The 15% is on the debentures maturing in that year only.
c) The investment is realised to pay the debentureholders.
d) Date each investment 30^th April.

Question 5 [3 Marks]
On 1^st February, 2022, Swadesh Ltd. issued to the public 12,000, 10% Debentures of Rs. 100 each at a discount of 3% payable:
Rs. 20 on application.
The balance on allotment being made on 1^st May, 2022.
The public applied for 20,000 debentures. Pro-rata allotment was made on 15,000 debentures.
The debentures were to be redeemed at par after four years.
You are required to pass journal entries for the year 2021-2022.

Answer:
Application money received = 20,000 × 20 = Rs. 4,00,000

Journal of Swadesh Ltd. (2021-22)

Teacher's Note:
a) The allotment is made on 1^st May, 2022, which falls in 2022-23.
b) So in 2021-22 only the receipt of application money is recorded.
c) On 31^st March, 2022 the application money is shown as a current liability (money received pending allotment).
d) The transfer to debentures, the refund and the discount entries are passed in 2022-23.

Question 6 [6 Marks]
The Balance Sheet of Ravi and Kamal as at 31^st March, 2022, was as follows:

Balance Sheet of Ravi and Kamal As at 31^st March, 2022

The partners shared profits in the ratio of 9:7.
The partnership firm was dissolved on the date of the Balance Sheet subject to the following adjustments:
(i) Property realized 75%.
(ii) Bad debts and discount amounted to Rs. 500.
(iii) Stock realized Rs. 2,525.
(iv) Creditors allowed a discount of 2%.
(v) Expenses of dissolution amounted to Rs. 75 which were paid by Ravi.
You are required to prepare the Realisation Account.

Answer:

Realisation Account

Working Notes:
1. No information is given about furniture and investments, so they are taken as realised at book value.
2. Since investments realise their full book value, the Investment Fluctuation Fund of Rs. 300 is shared by partners in 9:7 directly, not through the Realisation A/c.
3. Loss on realisation = 15,125 - 14,375 = Rs. 750, shared 9:7.

Teacher's Note:
a) Cash and partners' capitals are not transferred to the Realisation A/c.
b) Creditors are paid 98% of Rs. 5,000 because of the 2% discount.
c) Expenses paid by a partner are credited to that partner's Capital A/c.
d) State any assumption you make when information is missing.

Question 7 [6 Marks]
Amit and Barun are partners sharing profits in the ratio of 4:1. Their Balance Sheet as at 31^st March, 2022, was as under:

Balance Sheet of Amit and Barun As at 31^st March, 2022

On 1^st April, 2022, Charan is admitted as a new partner on the following terms:
(i) The new profit-sharing ratio of the partners to be 2:1:1.
(ii) Charan to bring in Rs. 16,000 as his capital but would be unable to bring his share of goodwill in cash.
(iii) The value of the goodwill of the firm to be calculated on the basis of Charan's share in the profits and the capital contributed by him.
(iv) Furniture, which had been undervalued by Rs. 600 to be brought up to its revised value.
(v) Out of the total insurance premium paid, Rs. 3,400 to be treated as prepaid insurance. The amount was earlier debited to Profit & Loss Account.
You are required to prepare:

(i) Revaluation Account.

Answer:

Revaluation Account

Teacher's Note:
a) An undervalued asset brought up to its value is a gain.
b) Prepaid insurance is a new asset, so it is also a gain.
c) The gain is shared in the old ratio 4:1.
d) Existing goodwill is not part of the Revaluation A/c; it is written off to capitals.

(ii) Partners' Capital Accounts.

Answer:

Working Notes:
1. Sacrifice/(gain): Amit = 4/5 - 2/4 = 6/20 (sacrifice); Barun = 1/5 - 1/4 = -1/20 (gain); Charan gets 5/20.
2. Total capital on the basis of Charan's capital = 16,000 × 4 = Rs. 64,000
3. Capitals after adjustments: Amit = 20,000 + 3,200 - 800 = 22,400; Barun = 15,000 + 800 - 200 = 15,600; Charan = 16,000. Total = Rs. 54,000
4. Goodwill of the firm = 64,000 - 54,000 = Rs. 10,000
5. Charan's share = 10,000 × 1/4 = 2,500 (debited to his Current A/c); Barun's gain = 10,000 × 1/20 = 500; both credited to Amit.

Partners' Capital Accounts

Teacher's Note:
a) When the new partner cannot bring goodwill in cash, debit his Current A/c so his capital stays at Rs. 16,000.
b) Barun gains in the new ratio, so he also pays Amit for goodwill.
c) Old goodwill of Rs. 1,000 is written off in the old ratio.
d) Hidden goodwill = Total capital based on new partner - Actual capitals after adjustments.

OR

Karan and Vijay are partners in a firm sharing profits and losses in the ratio of 4:3. They admit Shrey for 1/3 share in the profits.
On the date of Shrey's admission:
(a) The capitals of Karan and Vijay are: Rs. 40,000 and Rs. 30,000 respectively.
(b) Profit and Loss Account has a debit balance of Rs. 7,000.
(c) General Reserve shows a balance of Rs. 21,000 which is not to be disturbed.
(d) Goodwill of the firm is valued at Rs. 42,000.
(e) The cash at bank is Rs. 15,000.
(f) Shrey brings in proportionate capital and his share of goodwill in cash.
You are required to prepare:

(i) Partners' Capital Accounts.

Answer:

Working Notes:
1. No new ratio is given, so Karan and Vijay sacrifice in their old ratio 4:3.
2. P&L debit balance of 7,000 written off 4:3 = Karan 4,000, Vijay 3,000.
3. Shrey's share of goodwill = 42,000 × 1/3 = 14,000, credited 4:3 = Karan 8,000, Vijay 6,000.
4. General Reserve stays in the books, so Shrey pays for his 1/3 share of it: 21,000 × 1/3 = 7,000, debited to Shrey's Current A/c and credited 4:3 = Karan 4,000, Vijay 3,000.
5. Adjusted capitals: Karan = 40,000 - 4,000 + 8,000 + 4,000 = 48,000; Vijay = 30,000 - 3,000 + 6,000 + 3,000 = 36,000. Total = 84,000 for a 2/3 share.
6. Shrey's proportionate capital = 84,000 × 1/2 = Rs. 42,000

Partners' Capital Accounts

Teacher's Note:
a) If the reserve is not to be disturbed, the new partner compensates the old partners for his share of it.
b) Proportionate capital is based on the old partners' capitals after all adjustments.
c) Final capitals 48,000 : 36,000 : 42,000 are in the new ratio 8:6:7.
d) The P&L debit balance is written off in the old ratio.

(ii) Cash at Bank Account of the reconstituted firm on the date of Shrey's admission.

Answer:

Cash at Bank Account

Teacher's Note:
a) Both the capital and the goodwill brought by Shrey come into the bank.
b) The premium is then transferred to the old partners, but the cash stays in the firm.
c) No cash is paid out on this date.
d) Closing balance = 15,000 + 42,000 + 14,000 = Rs. 71,000.

Question 8 [6 Marks]
From the information of Prudence Ltd. given below, you are required to show how the relevant items will appear in the company's Balance Sheet (an extract) as at 31^st March 2022.
The authorised capital of Prudence Ltd. consisted of 3,000, 10% Preference Shares of Rs. 100 each and 8,000 Equity Shares of Rs. 100 each, out of which:
(a) 1,000, 6% Preference shares were issued to the public, fully called and paid up
(b) 3,000 Equity shares were issued which were fully called up.
(c) There were arrears of Rs. 20 per share on 400 Equity shares.

Answer:

Balance Sheet (extract) of Prudence Ltd. as at 31^st March, 2022

Notes to Accounts

Teacher's Note:
a) Calls-in-arrears are deducted from the shares that are not fully paid.
b) A debit balance in the Statement of Profit and Loss is shown as a negative figure under Reserves and Surplus.
c) Bank overdraft is a short-term borrowing; mortgage debentures are long-term borrowings.
d) The question calls the preference shares 10% in the authorised capital and 6% when issued; both rates are copied as printed.

Question 9 [10 Marks]
Ajay and Vijay are in partnership sharing profits and losses in the ratio of 3:1.
On 1^st April, 2021, their capitals were Rs. 1,00,000 and Rs. 90,000.
The terms of their partnership are as follows:
(i) Interest on capital to be allowed at @ 6% per annum.
(ii) Interest on drawings to be charged @ 4% per annum.
(iii) Partners to get a salary of Rs. 1,000 each per month.
(iv) Vijay to get a commission of 2% on the correct net profit.
(v) Any partner taking a loan from the firm to be charged interest on it @ 8% per annum.
Ajay had borrowed Rs. 10,000 from the firm on 1^st October, 2021.
Vijay had withdrawn Rs. 8,000 on 1^st July, 2021.
During the year ending 31^st March, 2022, the firm earned a net profit of Rs. 60,000 before any of the provisions mentioned in the partnership deed.
You are required to prepare for the year ending 31^st March, 2022:

(i) Profit and Loss Appropriation Account.

Answer:

Working Notes:
1. Interest on Ajay's loan (income of the firm) = 10,000 × 8% × 6/12 = Rs. 400. Correct net profit = 60,000 + 400 = Rs. 60,400
2. Vijay's commission = 60,400 × 2% = Rs. 1,208
3. Interest on capital: Ajay = 1,00,000 × 6% = 6,000; Vijay = 90,000 × 6% = 5,400
4. Salary: 1,000 × 12 = 12,000 each
5. Interest on Vijay's drawings = 8,000 × 4% × 9/12 = Rs. 240
6. Divisible profit = 60,400 + 240 - 11,400 - 24,000 - 1,208 = Rs. 24,032, shared 3:1 = Ajay 18,024; Vijay 6,008

Profit and Loss Appropriation Account for the year ended 31^st March, 2022

Teacher's Note:
a) Interest charged on a loan given to a partner is an income of the firm, so it is added to profit.
b) Commission is on the correct net profit, that is, after this adjustment.
c) Interest on drawings is for 9 months (1^st July to 31^st March).
d) Check that both sides total Rs. 60,640.

(ii) Ajay's Capital Account.

Answer:

Ajay's Capital Account

Teacher's Note:
a) Capitals are fluctuating, as no current accounts are mentioned.
b) Interest charged on Ajay's loan is debited to him.
c) The loan of Rs. 10,000 itself is shown separately as 'Loan to Ajay', an asset of the firm.
d) Salary is credited because there is no information that it was withdrawn.

OR

The partnership agreement of Rohit, Ali and Sneh provides that:
(i) Profits will be shared by them in the ratio of 2:2:1.
(ii) Interest on capital to be allowed at the rate of 6% per annum.
(iii) Interest on drawings to be charged at the rate of 3% per annum.
(iv) Ali to be given a salary of Rs. 500 per month.
(v) Ali's guarantee to the firm that the firm would earn a net profit of at least Rs. 80,000 per annum and any shortfall in these profits would be personally met by him.
The capitals of the partners on 1^st April, 2021, were:
Rohit - Rs. 1,20,000; Ali- Rs. 1,00,000; Sneh- Rs. 1,00,000.
All the three partners withdrew Rs. 1,000 each at the beginning of every month.
The net profit for the year 2021-22 was Rs. 70,000.
You are required to prepare for the year 2021- 2022:

(i) Profit and Loss Appropriation Account.

Answer:

Working Notes:
1. Shortfall in profit = 80,000 - 70,000 = Rs. 10,000, brought in by Ali.
2. Interest on capital: Rohit 7,200; Ali 6,000; Sneh 6,000. Total = 19,200
3. Interest on drawings (beginning of each month, average 6.5 months): 12,000 × 3% × 6.5/12 = Rs. 195 each; total 585
4. Divisible profit = 80,000 + 585 - 19,200 - 6,000 = Rs. 55,385, shared 2:2:1 = 22,154; 22,154; 11,077

Profit and Loss Appropriation Account for the year ended 31^st March, 2022

Teacher's Note:
a) Ali's guarantee to the firm raises the firm's profit to Rs. 80,000 before appropriations.
b) The shortfall is debited to Ali's Capital A/c and credited to the P&L Appropriation A/c.
c) For drawings at the beginning of each month, use an average of 6.5 months.
d) Check that both sides total Rs. 80,585.

(ii) Ali's Capital Account.

Answer:

Ali's Capital Account

Teacher's Note:
a) Ali both pays the shortfall and receives his share of the increased profit.
b) Drawings and interest on drawings are debited to the Capital A/c.
c) Capitals are taken as fluctuating.
d) Closing balance = 1,34,154 - 22,195 = Rs. 1,11,959.

Question 10 [10 Marks]
In the year 2021-22, Yamuna Limited Co. was registered with an authorized capital of Rs. 1,00,000 in Rs. 10 per Equity share.
Of these, 4,000 equity shares were issued as fully paid to vendor for the purchase of Plant and Machinery and 6,000 shares were subscribed for by the public.
During the first year, Rs. 6 per Equity share was called up, payable:
Rs. 3 on Application
Rs. 1 on Allotment
Rs. 2 on the First Call
The amounts received in respect of these shares were as follows:
On 5,000 shares the full amount called
On 600 shares Rs. 4 per Equity share
On 400 shares Rs. 3 per Equity share.
The company forfeited all those shares on which only Rs. 3 had been received and reissued them at Rs. 4 per share.
You are required to:

(i) Pass journal entries to record the above transactions in the books of the company.

Answer:

Journal of Yamuna Ltd.

Working Notes:
1. Allotment unpaid: 400 shares × 1 = 400. First call unpaid: (600 + 400) × 2 = 2,000.
2. Forfeiture of 400 shares: called up 400 × 6 = 2,400; received 400 × 3 = 1,200; unpaid 400 + 800 = 1,200.
3. Reissue as Rs. 6 paid up at Rs. 4: discount = 400 × 2 = 800; Capital Reserve = 1,200 - 800 = Rs. 400.

Teacher's Note:
a) Shares issued to a vendor are recorded without any cash.
b) Use a Calls-in-Arrears A/c for all unpaid calls.
c) The 600 shares that did not pay the call are not forfeited, as the question asks only about Rs. 3 shares.
d) The shares are taken as reissued as Rs. 6 paid up, the amount called.

(ii) Prepare the Calls-in Arrears Account.

Answer:

Calls-in-Arrears Account

Teacher's Note:
a) The debit side shows all calls not received.
b) Arrears on forfeited shares are cleared on forfeiture.
c) The closing balance is the first call still due on 600 shares (600 × 2).
d) This balance is deducted from share capital in the Balance Sheet.

OR

Tapsi Ltd. invited applications from the public for the issue of 55,000 Equity shares of Rs. 10 each payable as:
Rs. 3 on Application
Rs. 5 on Allotment
Balance on Call
The public applied for 50,000 shares which were duly allotted by the company.
Rs. 2,49,000 were received by the company on allotment and Rs. 99,400 on call.
The company forfeited those shares on which both, allotment and call money was not received.
70% of the forfeited shares were reissued at Rs. 7 per share, fully called up.
The company paid share issue expenses of Rs. 20,000 which were completely written off at the end of the year.
The company had Rs. 15,000 in its Securities Premium Reserve Account.
You are required to pass journal entries to record the above transactions in the books of the company.

Answer:

Working Notes:
1. Allotment due = 50,000 × 5 = 2,50,000; received 2,49,000; unpaid 1,000, so 200 shares did not pay allotment.
2. Call due = 50,000 × 2 = 1,00,000; received 99,400; unpaid 600, so 300 shares did not pay the call (including the same 200 shares).
3. Shares forfeited (both unpaid) = 200. Called up 200 × 10 = 2,000; received 200 × 3 = 600; unpaid 1,000 + 400 = 1,400.
4. Reissued 70% = 140 shares at Rs. 7 fully paid: discount 140 × 3 = 420, equal to the forfeited amount of 140 × 3 = 420, so nothing goes to Capital Reserve.
5. Share issue expenses of 20,000 written off: Securities Premium 15,000 + Statement of Profit and Loss 5,000.

Journal of Tapsi Ltd.

Teacher's Note:
a) Find the unpaid shares by dividing the shortfall by the amount due per share.
b) Only shares with both allotment and call unpaid are forfeited.
c) Here the discount on reissue equals the forfeited amount, so no Capital Reserve arises.
d) Securities Premium is used first to write off share issue expenses.

SECTION B (20 Marks)
Answer all questions

Question 11
In subparts (i) and (ii) chose the correct option and in subparts (iii) to (v) answer the questions as instructed.

(i) What will be the Operating Ratio of Zenia Ltd. from the particulars given below? [1 Mark]
Revenue from Operations: Rs. 9,00,000
Gross Profit: 20% on cost
Operating Expenses: Rs. 60,000
(a) 86·67%
(b) 90%
(c) 76·67%
(d) 20%

Answer: (b) 90%

Cost of Revenue from Operations = 9,00,000 × 100/120 = 7,50,000; Operating Ratio = (7,50,000 + 60,000) / 9,00,000 × 100 = 90%

Teacher's Note:
a) 20% on cost means sales are 120% of cost.
b) Operating cost = Cost of revenue + Operating expenses.
c) Option (a) comes from wrongly taking 20% on sales.
d) Operating ratio is always a percentage of revenue.

(ii) How is interest paid on debentures considered in a Cash Flow Statement? [1 Mark]
(a) As an Operating Activity
(b) As a Financing Activity
(c) As an Investing Activity
(d) Both as an Operating Activity and a Financing Activity

Answer: (b) As a Financing Activity

Teacher's Note:
a) Interest paid is a cost of borrowed funds, so it is a financing outflow for a non-financial company.
b) It is added back to profit in operating activities because it is a non-operating item.
c) For a financial company, interest paid is an operating activity.
d) Dividends paid are also financing activities.

(iii) State the objective of calculating Liquidity Ratios. [1 Mark]

Answer:
Liquidity ratios are calculated to judge the short-term solvency of a business, that is, its ability to pay its current liabilities on time out of its current assets.

Teacher's Note:
a) Current ratio and quick ratio are liquidity ratios.
b) They are used mainly by short-term creditors.
c) Key word: short-term solvency.
d) One clear sentence earns the mark.

(iv) Mention the accounting basis on which a Cash Flow Statement is prepared. [1 Mark]

Answer:
A Cash Flow Statement is prepared on the cash basis of accounting.

Teacher's Note:
a) The Statement of Profit and Loss uses the accrual basis.
b) The Cash Flow Statement converts accrual figures into cash figures.
c) Non-cash items like depreciation are therefore adjusted.
d) Answer in one line.

(v) What is Gross Profit + Cost of Materials consumed? [1 Mark]

Answer:
Revenue from Operations (when the cost of materials consumed is the cost of revenue from operations).

Teacher's Note:
a) Revenue from Operations = Cost of Revenue from Operations + Gross Profit.
b) Cost of materials consumed forms the cost of revenue here.
c) This relationship is used in ratio questions to find sales.
d) Give the name of the item as the answer.

Question 12 [3 Marks]
From the following particulars of Bharti Ltd., you are required to prepare a Common-size Balance Sheet as at 31^st March, 2022.

Answer:

Common Size Balance Sheet of Bharti Ltd. as at 31^st March, 2022

Teacher's Note:
a) Find the missing items from the total first.
b) Each item is a percentage of the Balance Sheet total of Rs. 20,00,000.
c) Total assets equal total equity and liabilities.
d) Both sides must total 100%.

Question 13 [6 Marks]
From the following extracts of a company's Balance Sheets, you are required to calculate:
(i) Cash from Investing Activities.
(ii) Cash from Financing Activities

Note: Dividend proposed in the years 2020-21 and 2021-22 were Rs. 42,000 and Rs. 40,000 respectively.
Additional information:
During the year 2021-22, the company:
(i) Issued the 5% Debentures at a discount of 10% on 1^st April, 2021. The discount on issue of Debentures was written off from Securities Premium Reserve.
(ii) Provided depreciation of Rs. 1,00,000 on Plant and Machinery.
(iii) Sold Plant and Machinery, the book value of which was Rs. 5,00,000 for Rs. 4,50,000.

Working Notes:
1. Accumulated Depreciation: 4,00,000 + 1,00,000 - Depreciation on machine sold = 3,00,000, so depreciation on machine sold = Rs. 2,00,000
2. Cost of machine sold = Book value 5,00,000 + 2,00,000 = Rs. 7,00,000
3. Plant and Machinery (cost): 9,00,000 - 7,00,000 + Purchase = 10,90,000, so Purchase = Rs. 8,90,000
4. Debentures issued = 2,00,000 at 10% discount: cash = Rs. 1,80,000; discount = 20,000
5. Securities Premium: 10,000 - 20,000 (discount written off) + Premium received = 50,000, so premium received on shares = Rs. 60,000
6. Interest on 10% investments = 50,000 × 10% = Rs. 5,000 (on the opening balance, as the date of the new purchase is not given)
7. Interest on debentures = 10,00,000 × 5% = Rs. 50,000 (new debentures issued on 1^st April, 2021)

(i) Cash from Investing Activities

Answer:

Teacher's Note:
a) Hidden purchases of fixed assets are found through the asset and depreciation accounts.
b) Sale proceeds, not book value, are the cash inflow.
c) An increase in goodwill means goodwill was purchased.
d) Interest received on investments is an investing inflow.

(ii) Cash from Financing Activities

Answer:

Teacher's Note:
a) Shares issued at a premium bring in capital plus premium.
b) Debentures issued at a discount bring in only the issue price.
c) Last year's proposed dividend (Rs. 42,000) is paid this year; this year's (Rs. 40,000) is not.
d) Interest paid on debentures is a financing outflow.

OR

You are required to prepare a Cash Flow Statement of Bruno Ltd. (as per AS 3) for the year 2021-22 from the following Balance Sheets.

Balance Sheets of Bruno Ltd. As at 31^st March, 2022 and 31^st March, 2021

Additional information:
During the year 2021-22:
(i) Plant & Machinery of Rs. 1,20,000 was purchased and some machinery was sold at a loss of Rs. 12,000.
(ii) The company charged Rs. 38,000 as depreciation on its Plant and Machinery.
(iii) Interest of Rs. 18,000 was paid on all borrowings
(iv) Tax paid was Rs. 25,000.

Answer:

Working Notes:
1. Provision for tax: 30,000 + Provision made - 25,000 paid = 40,000, so provision made = Rs. 35,000
2. Net Profit before Tax = (1,20,000 - 88,000) + 35,000 = Rs. 67,000
3. Plant and Machinery: 3,30,000 + 1,20,000 - 38,000 - Book value sold = 3,80,000, so book value sold = 32,000; sale price = 32,000 - 12,000 loss = Rs. 20,000
4. The proposed dividend of Rs. 30,000 is only a contingent liability, so it is not added back and is not a cash flow.

Plant and Machinery Account

Cash Flow Statement of Bruno Ltd. for the year ended 31^st March, 2022

Teacher's Note:
a) Find tax provided through the Provision for Tax A/c before finding profit before tax.
b) The proposed dividend shown as a contingent liability is ignored in the cash flow.
c) Bank overdraft is treated here as a short-term borrowing (financing).
d) Check: the closing cash of Rs. 4,69,000 matches the Balance Sheet.

Question 14 [6 Marks]
From the following Statement of Profit and Loss of Swatantra Ltd. for the year 2020-21, calculate any three ratios (up-to two decimal places):
(i) Gross Profit Ratio
(ii) Net Profit Ratio
(iii) Operating Profit Ratio
(iv) Inventory Turnover Ratio

Statement of Profit and Loss of Swatantra Ltd. For the year ending 31^st March, 2022

(i) Gross Profit Ratio

Answer:
Cost of Revenue from Operations = Purchases 2,50,000 + Change in inventories (10,000) + Wages 16,000 + Carriage inward 8,000 = Rs. 2,64,000
Gross Profit = 5,00,000 - 2,64,000 = Rs. 2,36,000
Gross Profit Ratio = Gross Profit / Revenue from Operations × 100 = 2,36,000 / 5,00,000 × 100 = 47.20%

Teacher's Note:
a) Wages and carriage inward are direct expenses, so they are part of cost of revenue.
b) Salaries are an indirect (operating) expense.
c) Change in inventories = Opening - Closing = (10,000).
d) Give the answer to two decimal places.

(ii) Net Profit Ratio

Answer:
Net Profit Ratio = Net Profit after Tax / Revenue from Operations × 100 = 1,26,000 / 5,00,000 × 100 = 25.20%

Teacher's Note:
a) Use profit after tax.
b) The base is Revenue from Operations, not Total Revenue.
c) Other income is included in net profit.
d) Write the formula in full words.

(iii) Operating Profit Ratio

Answer:
Operating Cost = Cost of Revenue 2,64,000 (see part (i)) + Salaries 10,000 + Depreciation 14,000 = Rs. 2,88,000
Operating Profit = 5,00,000 - 2,88,000 = Rs. 2,12,000
Operating Profit Ratio = Operating Profit / Revenue from Operations × 100 = 2,12,000 / 5,00,000 × 100 = 42.40%

Teacher's Note:
a) Leave out non-operating items: finance cost, profit on sale of machinery and loss on sale of furniture.
b) Check: 2,10,000 + 30,000 + 12,000 - 40,000 = 2,12,000.
c) Depreciation and salaries are operating expenses.
d) Operating Profit Ratio = 100 - Operating Ratio.

(iv) Inventory Turnover Ratio

Answer:
Average Inventory = (40,000 + 50,000) / 2 = Rs. 45,000
Inventory Turnover Ratio = Cost of Revenue from Operations (Rs. 2,64,000, see part (i)) / Average Inventory = 2,64,000 / 45,000 = 5.87 times

Teacher's Note:
a) Use cost of revenue from operations, not revenue.
b) Average inventory = (Opening + Closing) / 2.
c) 5.8667 rounds to 5.87.
d) Write the answer in 'times'.

SECTION C (20 Marks)
Answer all questions

Question 15
In subparts (i) and (ii) chose the correct option and in subparts (iii) to (v) answer the questions as instructed.

(i) In Excel, the drag and drop method is used to: [1 Mark]
(a) Copy cell contents
(b) Move cell contents
(c) Add cell contents
(d) (a) and (b)

Answer: (d) (a) and (b)

Teacher's Note:
a) Dragging a selection moves the contents.
b) Dragging while holding Ctrl copies the contents.
c) Drag and drop does not add values.
d) Point to the border of the selection before dragging.

(ii) Which one of the following fields would not make a suitable primary key? [1 Mark]
(a) A date field
(b) An invoice number
(c) An autoNumber field
(d) A customer's social security number.

Answer: (a) A date field

Teacher's Note:
a) A primary key must be unique for every record.
b) Many records can have the same date.
c) Invoice numbers and AutoNumber fields are unique.
d) A primary key also cannot be blank.

(iii) Mention any two types of charts available in a spreadsheet. [1 Mark]

Answer:
Column chart and Pie chart (others: Bar chart, Line chart).

Teacher's Note:
a) A pie chart shows parts of a whole.
b) A column or bar chart compares values.
c) A line chart shows a trend over time.
d) Two names are enough.

(iv) What is meant by sorting of records in an Excel sheet? [1 Mark]

Answer:
Sorting means arranging the records (rows) in ascending or descending order based on the values in one or more columns.

Teacher's Note:
a) Sorting changes the order, not the data.
b) Text sorts A to Z; numbers sort smallest to largest.
c) Select the whole table so rows stay together.
d) Filtering is different: it hides rows.

(v) How can the name of default Sheet 1 be changed to any other name? [1 Mark]

Answer:
Double-click the Sheet1 tab (or right-click it and choose Rename), type the new name and press Enter.

Teacher's Note:
a) The sheet tab is at the bottom of the window.
b) Right-click, then Rename, also works.
c) Sheet names cannot contain some symbols like / or ?.
d) Press Enter to save the new name.

Question 16 [3 Marks]

(i) What is a Database Transaction in DBMS?

Answer:
A database transaction is a logical unit of work made up of one or more operations (such as read, insert, update or delete) on a database. All the operations must be completed fully, or none of them is carried out, so that the database stays correct and consistent.

Teacher's Note:
a) A transaction is 'all or nothing'.
b) Transactions follow the ACID properties: Atomicity, Consistency, Isolation and Durability.
c) If a step fails, the whole transaction is rolled back.
d) Link the definition to keeping data consistent.

(ii) Give an example of a Database transaction.

Answer:
Transfer of Rs. 5,000 from account A to account B in a bank: Rs. 5,000 is deducted from A and added to B. Both steps must happen together, or neither.

Teacher's Note:
a) A money transfer is the standard example.
b) It has two steps that must both succeed.
c) If one step fails, the other is undone.
d) Any similar example is acceptable.

Question 17 [6 Marks]
ABC & Sons run an ice cream parlour. They sell ice creams in cups and cones in four flavours, Vanilla, Butter Scotch, Chocolate and Badaam Pista. The ice cream is purchased in the form of ice cream bricks of 1 litre size and served to the customer in a cup or cone as per his/her preference, by cutting each ice cream brick into ten smaller pieces of 100 ml each.
The ice cream is purchased from the supplier of a well-known brand who as per the sales arrangement, also supplies the cups, cones, spoons and paper napkins in adequate quantity, at no extra cost.
The firm has prepared a summary of its Purchase, Sales and Unsold Stock for the month of March, 2022, in spreadsheet form. It did not have any unsold stock on the last day of February, 2022.

Based on the information and spreadsheet given above, write the formula, for any three, to calculate for the month of March, 2022:

(i) Value of unsold stock of Butter Scotch Ice Cream in cell K3. [2 Marks]

Answer:
=D3-J3
Or =(E3-G3)*F3
Result: 25,000 - 22,500 = Rs. 2,500

Teacher's Note:
a) Unsold stock = Total cost - Cost of items sold.
b) It is also (cups available - cups sold) × unit cost = 100 × 25.
c) Check K6: 10,000 + 2,500 + 3,000 + 15,000 = 30,500.
d) Start every formula with =.

(ii) Total Sales of Chocolate Ice Cream in cell I4. [2 Marks]

Answer:
=G4*H4
Or =J4+L4
Result: 1,900 × 40 = Rs. 76,000

Teacher's Note:
a) Sales = Number sold × Sale price.
b) Sales also = Cost of items sold + Profit.
c) Check I6: 1,22,500 + 31,500 + 76,000 + 1,00,000 = 3,30,000.
d) Refer to cells, not typed numbers.

(iii) Profit made on the sales of Badaam Pista Ice Cream in cell L5. [2 Marks]

Answer:
=I5-J5
Result: 1,00,000 - 75,000 = Rs. 25,000

Teacher's Note:
a) Profit = Sales - Cost of items sold.
b) Cost of unsold stock is not deducted, as it is still an asset.
c) Check L6: 52,500 + 9,000 + 19,000 + 25,000 = 1,05,500.
d) Start with the = sign.

(iv) Percentage of total profit on cost made by ABC & Sons on all the flavours of the Ice Cream. [2 Marks]

Answer:
=L6/J6*100
Result: 1,05,500 / 2,24,500 × 100 = 46.99%

Teacher's Note:
a) Profit on cost uses the cost of items sold (J6), not the total cost of purchases.
b) Use the totals in row 6.
c) Multiply by 100 to get a percentage, or format the cell as %.
d) Round to two decimal places.

Question 18 [6 Marks]
Answer any three of the following questions.

(i) Give the meaning of Database design. [2 Marks]

Answer:
Database design is the process of organising data into tables, fields (attributes), keys and relationships, so that the data can be stored, retrieved and updated efficiently and without repetition.

Teacher's Note:
a) Mention tables, fields, keys and relationships.
b) The aim is to avoid duplicate data.
c) Good design keeps data accurate.
d) A short, clear definition earns the marks.

(ii) List any two attributes to be stored in Payroll Data base. [2 Marks]

Answer:
1. Employee ID (or Employee Name)
2. Basic Pay (other examples: HRA, PF deduction, Designation)

Teacher's Note:
a) An attribute is a detail stored about an entity.
b) Payroll attributes relate to employees and their pay.
c) Employee ID can act as the primary key.
d) Two correct attributes are enough.

(iii) Give any two differences between Generic Software and Specific Software. [2 Marks]

Answer:

Teacher's Note:
a) Generic software is ready-made; specific software is tailor-made.
b) Give an example of each.
c) Compare on the same point in each row.
d) Two differences earn full marks.

(iv) The syntax of the PMT function is
= PMT (rate, nper, pv, [fv], [type])
What do the following stand for in this syntax: Rate, Nper, Pv, Type [2 Marks]

Answer:
Rate: the interest rate per period.
Nper: the total number of payments (periods).
Pv: the present value, that is, the loan amount.
Type: when payments are due: 0 (or omitted) = end of the period; 1 = beginning of the period.

Teacher's Note:
a) PMT gives the equal payment for a loan.
b) For monthly payments, divide the annual rate by 12.
c) Arguments in square brackets are optional.
d) fv is the future value, usually 0 for a loan.