ISC Class 12 Accountancy Sample Paper 2024 with Solutions

SECTION A (60 Marks)
Answer all questions

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

(i) On the date of Som's admission as a partner, it is decided that:
Furniture (book value Rs. 2,50,000) be reduced by 40%
Machinery (book value Rs. 1,50,000) be reduced to 40%
What is the net decrease in the value of the assets? [1 Mark]
(a) Rs. 2,10,000
(b) Rs. 1,90,000
(c) Rs. 1,60,000
(d) Rs. 2,40,000

Answer: (b) Rs. 1,90,000

Furniture reduced BY 40% = 2,50,000 × 40% = Rs. 1,00,000
Machinery reduced TO 40% = 1,50,000 × 60% = Rs. 90,000
Total decrease = 1,00,000 + 90,000 = Rs. 1,90,000

Teacher's Note:
a) 'Reduced by 40%' means the decrease is 40%.
b) 'Reduced to 40%' means the new value is 40%, so the decrease is 60%.
c) Read 'by' and 'to' carefully; this is the trap in the question.
d) Both decreases are losses on revaluation.

(ii) Anita, Benu and Chitra dissolve their partnership firm. Anita had taken a loan of Rs. 10,000 from the firm.
What will be the entry to settle Anita's Loan on the dissolution of the firm? [1 Mark]
(a) Debit Realisation A/c; Credit Anita's Loan A/c
(b) Debit Anita's Loan A/c; Credit Realisation A/c
(c) Debit Anita's Capital A/c; Credit Anita's Loan A/c
(d) Debit Bank A/c; Credit Anita's Loan A/c

Answer: (c) Debit Anita's Capital A/c; Credit Anita's Loan A/c

Teacher's Note:
a) A loan given by the firm to a partner is an asset of the firm.
b) It is not transferred to the Realisation A/c.
c) It is settled by transferring it to the partner's Capital A/c.
d) Compare: a loan given by a partner to the firm is paid in cash before capitals.

(iii) A company issued 5,000, 10% Debentures of Rs. 100 each at a discount of 5%. To write off the capital loss, it has to use its profits in a certain order.
Chose the correct order in which the profits are used by the company to write off the capital loss:
P Statement of Profit & Loss
Q Capital Reserve
R Securities Premium [1 Mark]
(a) P, Q, R
(b) R, P, Q
(c) R, Q, P
(d) Q, P, R

Answer: (b) R, P, Q

Teacher's Note:
a) Securities Premium is used first to write off a discount on issue of debentures (Section 52).
b) Any balance is written off from the Statement of Profit and Loss.
c) Capital Reserve comes last; ISC answer keys write off the balance from the Statement of Profit and Loss before using Capital Reserve.
d) Some books use Capital Reserve before the Statement of Profit and Loss; follow the ISC order in the exam.

(iv) The Subscribed Capital of a company refers to: [1 Mark]
(a) The paid-up value of the shares allotted on the date of the balance sheet.
(b) The called-up value of all shares allotted on the date of the balance sheet.
(c) The nominal value of all shares allotted on the date of the balance sheet.
(d) The paid-up value of all shares allotted on the date of the balance sheet and the balance of shares forfeited account, if any.

Answer: (c) The nominal value of all shares allotted on the date of the balance sheet.

Teacher's Note:
a) Subscribed capital is the part of issued capital taken up by the public.
b) It is measured at nominal (face) value.
c) Called-up and paid-up capital are parts of subscribed capital.
d) Do not mix subscribed capital with paid-up capital.

(v) Jia, Tia, Sia and Bashir are partners sharing profits in the ratio of 3:3:2:1.
Tia retires from the firm.
Bashir retains his original share in the reconstituted firm.
Jia takes over 2/3 of Tia's share and the balance is taken up by Sia.
What is the new profit-sharing ratio of the remaining partners in the reconstituted firm? [1 Mark]

Answer:
Tia's share = 3/9
Jia gets 3/9 × 2/3 = 2/9; Sia gets 3/9 - 2/9 = 1/9
Jia = 3/9 + 2/9 = 5/9; Sia = 2/9 + 1/9 = 3/9; Bashir = 1/9
New ratio (Jia : Sia : Bashir) = 5 : 3 : 1

Teacher's Note:
a) Add the share taken over to each partner's old share.
b) Bashir's share does not change.
c) Check: 5/9 + 3/9 + 1/9 = 1.
d) Write the final answer as a ratio.

(vi) Assertion : Goodwill is a fictitious asset.
Reason : Goodwill has a realisable value.
Which one of the following is correct? [1 Mark]
(a) Both Assertion and Reason are correct, and Reason is the correct explanation for Assertion.
(b) Both Assertion and Reason are correct, but Reason is not the correct explanation for Assertion.
(c) Assertion is false and Reason is true.
(d) Assertion is true and Reason is false.

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

Teacher's Note:
a) Goodwill is an intangible asset, not a fictitious asset.
b) It can be sold along with the business, so it has a realisable value.
c) Fictitious assets, like preliminary expenses, have no realisable value.
d) Judge each statement on its own first.

(vii) At the time of dissolution of a partnership firm, its Balance Sheet showed stock of Rs. 40,000 comprising of easily marketable items, obsolete items and a few miscellaneous other items. These items were realised as:
Easily marketable items: 70% of the total inventory - in full.
Obsolete items: 10% of the remaining inventory - discarded.
The miscellaneous other items in the stock - 20% of their book value.
You are required to calculate the amount realised from the sale of stock. [1 Mark]

Answer:
Easily marketable items = 40,000 × 70% = Rs. 28,000 (realised in full)
Remaining inventory = 40,000 - 28,000 = Rs. 12,000
Obsolete items = 12,000 × 10% = Rs. 1,200 (discarded, nothing realised)
Miscellaneous items = 12,000 - 1,200 = 10,800; realised at 20% = Rs. 2,160
Amount realised from stock = 28,000 + 2,160 = Rs. 30,160

Teacher's Note:
a) Take each percentage on the correct base: total stock or remaining stock.
b) Discarded items realise nothing.
c) Miscellaneous items are what is left after the other two groups.
d) Add only the amounts actually realised.

(viii) As a result of the measure taken by the government in the year 2019-20 of non-creation of Debenture Redemption Reserve by listed companies / NBFCs or HFCs, the investments in the debenture issues from these companies have become riskier. Source (edited): The Hindu, August, 2019
State the adverse impact of this measure on the investors? [1 Mark]

Answer:
Since these companies no longer keep profits aside in a DRR, there is less security for debenture holders. The risk that the company may not have enough funds to repay the debentures on time (risk of default) has increased.

Teacher's Note:
a) DRR keeps part of the profits in the business for redemption.
b) Without it, profits may be paid out as dividends.
c) Key words: less security, higher risk of default.
d) One clear point is enough for one mark.

(ix) Give any one difference between a company's balance sheet and a firm's balance sheet. [1 Mark]

Answer:
A company's balance sheet must be prepared in the vertical form prescribed by Schedule III of the Companies Act, 2013, whereas a firm's balance sheet has no prescribed form and is usually prepared in the horizontal form.

Teacher's Note:
a) Schedule III applies only to companies.
b) A company must also show the previous year's figures; a firm need not.
c) Any one correct difference earns the mark.
d) State both sides of the difference.

(x) Matrix Ltd. (an unlisted construction company) redeems its 7,000, 10% Debentures of Rs. 100 each in instalments as follows:

How much will the company transfer from Debenture Redemption Reserve to General Reserve on 31^st March, 2023? [1 Mark]

Answer:
DRR for an unlisted company = 10% of the debentures outstanding.
Debentures redeemed on 31^st March, 2023 = 3,000 × 100 = Rs. 3,00,000
Amount transferred to General Reserve = 3,00,000 × 10% = Rs. 30,000

Teacher's Note:
a) After redemption, the DRR related to the redeemed debentures is no longer needed.
b) DRR left after the transfer = 10% of the 2,000 debentures still outstanding = Rs. 20,000.
c) Unlisted companies (other than NBFCs and HFCs) must keep DRR.
d) Show the 10% calculation clearly.

Question 2 [3 Marks]
On 31^st March, 2023, Parul retired from active partnership and her share of the following was ascertained on the date of her retirement:

The amount due to Parul was kept with the firm as a loan, bearing interest @ 6% per annum.
It was to be paid in two equal annual instalments along with interest @ 6 % per annum, the first instalment being paid on 31^st March, 2024.
You are required to prepare Parul's Loan Account until the payment of the whole amount due to her is made.

Answer:
Amount due to Parul = 70,000 + 20,000 + 2,000 + 30,000 - 19,000 - 3,000 = Rs. 1,00,000
Each instalment = 1,00,000 / 2 = Rs. 50,000

Parul's Loan Account

Total of the second year: Rs. 53,000 on both sides.

Teacher's Note:
a) Add goodwill, interest on capital and profit; deduct drawings and interest on drawings.
b) Interest each year is on the loan balance at the start of that year.
c) Each payment = equal instalment + interest for that year.
d) After the second payment the loan account has no balance.

OR

Piu and Nina are partners in a firm sharing profits and losses in the ratio of 3:1 respectively.
Nina retires and her claim, including her capital and entitlements from the firm including her share of goodwill of the firm, is Rs. 60,000.
After this amount was determined, it was found that there was some unrecorded office equipment valued at Rs. 18,000 which had to be recorded.
Upon recording this office equipment, the revised amount due to Nina was determined and Piu settled it by giving Nina this office equipment and for the balance she drew a promissory note.
You are required to give the necessary journal entries to record the transactions on the date of Nina's retirement.

Answer:

Journal

Working Notes:
1. Nina's share of gain = 18,000 × 1/4 = Rs. 4,500
2. Revised amount due to Nina = 60,000 + 4,500 = Rs. 64,500
3. Promissory note = 64,500 - 18,000 = Rs. 46,500

Teacher's Note:
a) An unrecorded asset is a revaluation gain shared in the old ratio.
b) The retiring partner's claim rises by her share of the gain.
c) A promissory note given by the firm is recorded as Bills Payable.
d) Check: 18,000 + 46,500 = Rs. 64,500.

Question 3 [3 Marks]
On 1^st April, 2021, Kant Ltd. issued 8,000, 12% Debentures of Rs. 100 each, redeemable at par after five years. The issue was fully subscribed.
According to the terms of issue, interest on debentures is payable annually on 31^st March.
Tax deducted at source is 20%.
You are required to pass journal entries to record the transactions of interest on debentures only for the year 2022-23.

Answer:
Interest = 8,000 × 100 × 12% = Rs. 96,000; TDS = 96,000 × 20% = Rs. 19,200; Net paid = Rs. 76,800

Journal of Kant Ltd.

Teacher's Note:
a) Gross interest is the expense; TDS is only held back and paid to the government.
b) Debentureholders receive the net amount after TDS.
c) Interest is a charge against profit, so it is closed to the Statement of Profit and Loss.
d) Only the entries for 2022-23 are asked.

Question 4 [3 Marks]
Leo Ltd. (a listed NBFC) redeems its 9,000, 10% Debentures of Rs. 100 each at a premium of 5 % in instalments, as follows:

You are required to prepare:
(i) The Debenture Redemption Investment Account for the years 2021-22 and 2022-23.
(ii) 10% Debentures Account for the year 2021-22.

Answer:

Working Notes:
1. A listed NBFC need not create DRR, but must invest 15% of the debentures maturing in the year, by 30^th April.
2. 2021-22: 15% of (2,000 × 100) = Rs. 30,000
3. 2022-23: 15% of (5,000 × 100) = Rs. 75,000
4. The investment is taken as realised at cost on the date of redemption (interest ignored).

(i) Debenture Redemption Investment Account

Total for 2022-23: Rs. 75,000 on both sides.

(ii) 10% Debentures Account (2021-22)

Teacher's Note:
a) Listed companies, NBFCs and HFCs are exempt from DRR but not from the 15% investment rule.
b) The 15% is based on debentures maturing in that year only.
c) The Debentures A/c is debited at face value; the 5% premium goes through a separate Premium on Redemption A/c.
d) Opening balance for 2021-22 = 9,000 - 2,000 already redeemed = 7,000 debentures.

OR

Honesty Ltd., an unlisted manufacturing company, had 30,000, 6% Debentures of Rs. 100 each due for redemption at par on 31^st March, 2023. On this date the company had the required amount of Rs. 3,00,000 in its Debenture Redemption Reserve.
The Debenture Redemption Investment, which was purchased on 30^th April, 2022, was realized at 101% on the date of redemption of the debentures and the debentures were redeemed.
You are required to pass journal entries in the books of the company for the year 2022-23. (Ignore interest on debentures)

Answer:

Journal of Honesty Ltd.

Working Notes:
1. Investment = 30,00,000 × 15% = Rs. 4,50,000
2. Realised = 4,50,000 × 101% = Rs. 4,54,500; profit = Rs. 4,500
3. DRR of Rs. 3,00,000 (10%) is already in the books, so no new transfer is needed.

Teacher's Note:
a) An unlisted manufacturing company needs both DRR (10%) and DRI (15%).
b) The investment must be made by 30^th April of the year of redemption.
c) After redemption, DRR is moved to General Reserve.
d) Profit on sale of the investment goes to the Statement of Profit and Loss.

Question 5 [3 Marks]
From the information given below, find the average profits of the partnership firm of Sudhir and Sana.
(a) The firm has total assets of Rs. 4,80,000.
(b) The partners' capital accounts show a balance of Rs. 4,00,000.
(c) The firm has reserves of Rs. 30,000 and creditors of Rs. 50,000.
(d) The normal rate of return from the capital invested in the same class of business is 10%.
(e) The self-generated goodwill of the firm is valued at Rs. 1,80,000 at 3 years' purchase of super profits.

Answer:
Capital Employed = Total Assets - Creditors = 4,80,000 - 50,000 = Rs. 4,30,000 (= Capitals 4,00,000 + Reserves 30,000)
Normal Profit = Capital Employed × Normal Rate of Return / 100 = 4,30,000 × 10/100 = Rs. 43,000
Super Profit = Goodwill / Number of years' purchase = 1,80,000 / 3 = Rs. 60,000
Average Profit = Normal Profit + Super Profit = 43,000 + 60,000 = Rs. 1,03,000

Teacher's Note:
a) Work backwards: goodwill gives super profit, and super profit plus normal profit gives average profit.
b) Capital employed = Total assets - Outside liabilities.
c) Reserves belong to partners, so they are part of capital employed.
d) Write each formula in full words.

Question 6 [6 Marks]
On 1^st April, 2021, Vintage Ltd. was registered with a capital of Rs. 40,00,000 divided into equity shares of Rs. 100 each.
It offered 12,000 shares to the public which were all subscribed for and allotted and were fully paid.
During the year 2022-23, the company:
Issued 5,500 equity shares to the public on which, till the date of the Balance Sheet as at 31^st March, 2023, Rs. 70 had been called.
Issued equity shares of Rs. 100 each at a premium of Rs. 25 to Style Ltd. from whom it purchased land at a purchase consideration of Rs. 4,50,000.
Paid underwriting commission of Rs. 40,000 to the underwriters.
Suffered a net loss of Rs. 4,00,000.
As per Schedule III of the Companies Act, 2013, you are required to:

(i) Show the Reserves and Surplus in the Notes to Accounts.

Answer:

Working Notes:
Shares issued to Style Ltd. = 4,50,000 / 125 = 3,600 shares; Share Capital = 3,60,000; Securities Premium = 90,000

Teacher's Note:
a) Securities Premium can be used to write off underwriting commission (Section 52).
b) A debit balance in the Statement of Profit and Loss is shown as a negative figure under Reserves and Surplus.
c) Reserves and Surplus can be negative in total.
d) No opening profit balance is given, so only this year's loss is shown.

(ii) Mention the heading and sub-heading under which Land is shown in the Balance Sheet of the company.

Answer:
Heading: Non-Current Assets
Sub-heading: Property, Plant and Equipment and Intangible Assets: (i) Property, Plant and Equipment

Teacher's Note:
a) Land is a tangible fixed asset.
b) Tangible fixed assets are called Property, Plant and Equipment in Schedule III.
c) Give both the main heading and the sub-heading.
d) Land bought for resale would be inventory, not PPE.

(iii) Give the amount of Share Capital in the Balance Sheet of the company prepared as at 31^st March, 2023. (Ignore Notes to Accounts)

Answer:
12,000 shares fully paid = 12,00,000
5,500 shares, Rs. 70 called up = 3,85,000
3,600 shares issued to Style Ltd. = 3,60,000
Share Capital = 12,00,000 + 3,85,000 + 3,60,000 = Rs. 19,45,000

Teacher's Note:
a) Share Capital in the Balance Sheet is the paid-up amount.
b) Only the called-up amount of Rs. 70 is counted on the 5,500 shares (assuming it was all received).
c) Shares issued for land are part of share capital; the premium is not.
d) Authorised capital is shown only in the Notes.

Question 7 [6 Marks]
Sharan and Angad are partners in a firm sharing profits and losses in the ratio of 3:2.
On 1^st April, 2022, they admit Akhil as a partner for 1/5 share in the profits. Akhil acquires 1/5 of his share from Sharan and the balance from Angad.
On the date of Akhil's admission, the goodwill of the firm was valued at Rs. 90,000.
Akhil contributed the following assets towards his capital and his share of goodwill.

You are required to:

(i) Calculate the sacrificing ratio of the partners.

Answer:
Sharan's sacrifice = 1/5 × 1/5 = 1/25
Angad's sacrifice = 1/5 - 1/25 = 4/25
Sacrificing ratio (Sharan : Angad) = 1 : 4

Teacher's Note:
a) The new partner's share is taken from the old partners as stated.
b) Here the sacrifice is not in the old ratio 3:2.
c) New ratio: Sharan 14/25, Angad 6/25, Akhil 5/25.
d) Goodwill is shared in the sacrificing ratio.

(ii) Pass the necessary journal entries on Akhil's admission, ascertaining Akhil's capital contribution and assuming that he brings into the firm his share of goodwill in cash/ kind.

Answer:
Akhil's share of goodwill = 90,000 × 1/5 = Rs. 18,000
Total assets brought in = 60,000 + 20,000 + 1,00,000 + 80,000 = Rs. 2,60,000
Akhil's capital = 2,60,000 - 18,000 = Rs. 2,42,000

Journal

Teacher's Note:
a) Goodwill brought in kind is included in the assets he brings.
b) Capital = Total assets brought in - Share of goodwill.
c) Premium for goodwill is given to the sacrificing partners in the sacrificing ratio.
d) Check: 3,600 + 14,400 = Rs. 18,000.

OR

Amit and Pavan are partners in a firm with capitals of Rs. 35,000 each. They shared profits and losses in the ratio of 3:1.
On 1^st April, 2023, they admit Charu as a new partner for 1/5 share in the profits. Charu brings in Rs. 40,000 as her share of capital.
Goodwill of the firm is based on Charu's share in the profits and the capital contributed by her. Charu brings her share of goodwill in cash.
At the time of Charu's admission:
(a) The firm had a General Reserve of Rs. 60,000 from which Rs. 20,000 is to be set aside as provision for doubtful debts.
(b) Creditors of Rs. 8,000 are paid by Amit privately for which he is not to be reimbursed.
(c) There is no change in the value of other assets and liabilities.
You are required to pass necessary journal entries on Charu's admission.

Answer:

Working Notes:
1. General Reserve left = 60,000 - 20,000 = 40,000, shared 3:1 = Amit 30,000, Pavan 10,000.
2. Capitals after adjustments: Amit = 35,000 + 30,000 + 8,000 = 73,000; Pavan = 35,000 + 10,000 = 45,000; Charu = 40,000. Total = Rs. 1,58,000
3. Total capital based on Charu's capital = 40,000 × 5 = Rs. 2,00,000
4. Goodwill of the firm = 2,00,000 - 1,58,000 = Rs. 42,000; Charu's share = 42,000 × 1/5 = Rs. 8,400
5. No new ratio is given, so old partners sacrifice in the old ratio 3:1: Amit 6,300, Pavan 2,100.

Journal

Teacher's Note:
a) Hidden goodwill = Total capital based on the new partner's capital - Actual total capital after adjustments.
b) A firm's liability paid by a partner privately is credited to that partner's Capital A/c.
c) Only the part of General Reserve left after the provision is shared among partners.
d) When no new ratio is given, the sacrificing ratio is the old ratio.

Question 8 [6 Marks]
Mitesh, Samir and Ajay were partners sharing profits and losses in proportion to their capitals, which on 31^st March, 2023, stood at:
Mitesh - Rs. 1,50,000
Samir - Rs. 1,00,000
Ajay - Rs. 50,000
The firm's recorded liabilities on that date amounted to Rs. 1,00,000.
In addition:
Ajay had given a loan of Rs. 40,000 to the firm on which he was entitled to receive interest @ 6% per annum for the whole year.
A Bills Receivable of Rs. 40,000 discounted with the bank was dishonoured on 31^st March, 2023.
The partners dissolved their partnership firm on 31^st March, 2023, and the assets, apart from cash of Rs. 30,000, realised Rs. 6,00,000.
Expenses of dissolution amounting to Rs. 12,500 were to be borne by Samir. These were paid by the firm on his behalf.
You are required to prepare:

(i) Realisation Account.

Answer:

Working Notes:
1. Profit-sharing ratio = 1,50,000 : 1,00,000 : 50,000 = 3:2:1
2. Total assets = Capitals 3,00,000 + Liabilities 1,00,000 + Ajay's Loan 40,000 = Rs. 4,40,000. Assets other than cash = 4,40,000 - 30,000 = Rs. 4,10,000
3. The dishonoured discounted bill becomes an actual liability of Rs. 40,000 payable to the bank.
4. Dissolution expenses are borne by Samir, so they are debited to his Capital A/c, not to Realisation A/c.

Realisation Account

Teacher's Note:
a) Partners' loans and capitals are not transferred to the Realisation A/c.
b) A discounted bill that is dishonoured becomes a liability the firm must pay.
c) Expenses borne by a partner but paid by the firm are debited to that partner's Capital A/c.
d) Profit on realisation is shared in the capital ratio 3:2:1.

(ii) Ajay's Loan Account.

Answer:

Ajay's Loan Account

Teacher's Note:
a) Interest on the partner's loan is for the whole year at 6%.
b) The loan and interest are paid before the partners' capitals.
c) The interest is a charge against profit, so it is borne by all partners.
d) The loan account closes with no balance.

Question 9
Akhil, Nitin and Suraj are partners in a firm. Their terms of agreement are as follows:

On 1^st April, 2022, their capitals were:
Akhil Rs. 15,000
Nitin Rs. 20,000
Suraj Rs. 6,000 (Dr)
On 1^st December, 2022, Akhil introduced further capital of Rs. 4,000.
The drawings of the partners were:
Suraj withdrew Rs. 300 on 1^st August, 2022 and Rs. 600 on 1^st December, 2022
Nitin withdrew only his salary
Akhil withdrew a certain fixed amount at the beginning of every month on which he was charged an interest of Rs. 52 at the end of the year, at the rate mentioned in the deed.
The profits of the firm for the financial year 2022-23, before any of the above adjustments, were Rs. 27,500.
You are required to:

(i) Calculate the drawings made by Akhil every month. [1 Mark]

Answer:
Drawings at the beginning of every month: average period = 6.5 months
Interest on drawings = Total drawings × 4/100 × 6.5/12 = 52
Total drawings = 52 × 100 × 12 / (4 × 6.5) = Rs. 2,400
Monthly drawings = 2,400 / 12 = Rs. 200

Teacher's Note:
a) For drawings at the beginning of each month, the average period is 6.5 months.
b) At the end of each month it is 5.5 months; in the middle it is 6 months.
c) Work backwards from the interest to find the total drawings.
d) Check: 2,400 × 4% × 6.5/12 = Rs. 52.

(ii) Pass the journal entry for capital introduced by Akhil. [2 Marks]

Answer:

Journal

Teacher's Note:
a) Additional capital is credited to the partner's Capital A/c.
b) Record it on the date it is brought in.
c) It earns interest on capital only from that date.
d) Always add the narration.

(iii) Prepare the Profit and Loss Appropriation Account of the firm for the year 2022-23. [7 Marks]

Answer:

Profit and Loss Appropriation Account for the year ended 31^st March, 2023

Working Notes:
1. Interest on capital: Akhil = 15,000 × 6% + 4,000 × 6% × 4/12 = 900 + 80 = 980; Nitin = 20,000 × 6% = 1,200; Suraj has a debit balance, so nil.
2. Interest on drawings: Suraj = 300 × 4% × 8/12 + 600 × 4% × 4/12 = 8 + 8 = 16; Nitin nil (salary drawings are excluded); Akhil 52.
3. Commission = 27,500 × 10/110 = Rs. 2,500 (10% of the firm's net profit after charging the commission).
4. No profit-sharing ratio is given, so the balance is shared equally.

Teacher's Note:
a) 'After charging such commission' means Commission = Profit × 10/110.
b) No interest on capital is allowed on a debit capital balance.
c) When no ratio is given, profits are shared equally under the Indian Partnership Act.
d) Commission here is worked on the firm's net profit of Rs. 27,500; some teachers work it on the profit left after other appropriations, which gives Rs. 2,199.

OR

Krish and Shail entered into a partnership on 1^st October, 2022, with capital contributions of Rs. 48,000 and Rs. 36,000 respectively.
On 1^st January, 2023, Shail advanced a loan of Rs. 12,000 to the firm.
The terms of the partnership agreement are as follows:
(a) Interest on Capital to be allowed at 12% per annum.
(b) Interest on Drawings to be charged @ 10% per annum.
(c) Krish to be entitled to a commission of 2% on the turnover.
(d) Each partner to get a salary of Rs. 1,200 per month.
(v) Profits and losses to be shared in the ratio of 4:3.
The turnover for the period under consideration was Rs. 2,00,000.
The drawings of the partners were: Krish Rs. 4,000; Shail Rs. 2,000.
The profit of the firm for the year ended 31^st March, 2023, before providing for any interest was Rs. 1,10,000.
You are required to prepare for the year 2022-23:

(i) Profit and Loss Appropriation Account. [9 Marks]

Answer:

Profit and Loss Appropriation Account for the period 1^st October, 2022 to 31^st March, 2023

Working Notes:
1. The firm ran for 6 months (1^st October to 31^st March).
2. Interest on Shail's loan at 6% p.a. (no rate agreed) = 12,000 × 6% × 3/12 = Rs. 180; this is a charge.
3. Interest on capital for 6 months: Krish = 48,000 × 12% × 6/12 = 2,880; Shail = 36,000 × 12% × 6/12 = 2,160.
4. Salary for 6 months: 1,200 × 6 = 7,200 each.
5. Interest on drawings (dates not given, so an average of 3 months is taken): Krish = 4,000 × 10% × 3/12 = 100; Shail = 2,000 × 10% × 3/12 = 50.
6. Divisible profit = 1,09,820 + 150 - 5,040 - 14,400 - 4,000 = Rs. 86,530, shared 4:3.

Teacher's Note:
a) Calculate interest and salary only for the 6 months the firm worked.
b) Interest on a partner's loan is 6% p.a. if no rate is agreed, and it is a charge, not an appropriation.
c) When dates of drawings are not given, charge interest for half the period.
d) Commission on turnover is 2% of Rs. 2,00,000 = Rs. 4,000.

(ii) Shail's Loan Account. [1 Mark]

Answer:

Shail's Loan Account

Teacher's Note:
a) The loan earns interest from 1^st January to 31^st March, that is 3 months.
b) Unpaid interest is added to the loan balance.
c) A partner's loan is shown separately from capital.
d) Closing balance = Rs. 12,180.

Question 10 [10 Marks]
In the year 2022-23, Paresh Ltd. invited applications for 25,000 equity shares of Rs. 10 each payable as follows:
On application Rs. 5 per share
On allotment Rs. 3 per share
On call Rs. 2 per share
Applications were received for 50,000 shares. It was decided:
(i) To allot 50% to Shyam who had applied for 10,000 shares.
(ii) To allot in full to Kevin who had applied for 10,000 shares.
(iii) To allot the balance of the available shares on pro rata basis among the other applicants.
(iv) To utilise the excess application money in part payment of allotment and final call.
Till the Balance Sheet as at 31^st March, 2023, the company had asked the shareholders to pay up to the allotment stage.
The amount due on the allotment was received from all shareholders except from Kevin, whose shares were immediately forfeited by the company.
You are required to pass journal entries in the books of the company to record the above transactions.

Answer:

Working Notes:
1. Shares: Shyam 5,000; Kevin 10,000; others 10,000 (applied 30,000, pro rata 1:3).
2. Application money = 50,000 × 5 = Rs. 2,50,000; needed = 25,000 × 5 = Rs. 1,25,000.
3. Shyam: excess = 5,000 × 5 = 25,000; used for allotment 5,000 × 3 = 15,000 and call 5,000 × 2 = 10,000.
4. Others: excess = 20,000 × 5 = 1,00,000; used for allotment 10,000 × 3 = 30,000 and call 10,000 × 2 = 20,000; the remaining Rs. 50,000 is refunded.
5. Allotment due = 25,000 × 3 = 75,000; adjusted = 45,000; the balance of Rs. 30,000 is due only from Kevin, who did not pay. So no cash is received on allotment.
6. Kevin's forfeiture: called up 10,000 × 8 = 80,000; paid 10,000 × 5 = 50,000; unpaid allotment 30,000.

Journal of Paresh Ltd.

Teacher's Note:
a) Excess application money is used first for allotment, then for calls; any balance is refunded.
b) Calls-in-Advance is credited with excess money kept for the call not yet made.
c) On forfeiture, Share Capital is debited with the amount called up (Rs. 8), not the face value.
d) No bank entry for allotment is needed, since the only unpaid allotment is Kevin's.

OR

(A) Following is an extract from the Journal of MM Ltd. You are required to complete the journal entries filling up the information represented by '?' which is missing from these journal entries.

Journal of MM Ltd. (an extract)

Additional information:
MM Ltd. issued 20,000 Equity shares of the face value of Rs. 10 each at a premium of Rs. 5 per share, payable:
Rs. 5 on application;
Rs. 6 on allotment (including premium);
Rs. 3 on first call;
The balance as and when due
You are required to complete: [8 Marks]
The journal entry for forfeiture of shares.
The journal entry for reissue of shares, clearly mentioning the number of forfeited shares reissued by the company.

Answer:

Working Notes:
1. Called up per share up to first call: Capital = 5 + 1 + 3 = Rs. 9; Premium = Rs. 5 (due on allotment).
2. The shareholder applied for 2,000 shares and got 1,000, so excess application money = 1,000 × 5 = Rs. 5,000, adjusted towards allotment.
3. Allotment due = 1,000 × 6 = 6,000; adjusted 5,000; unpaid 1,000. First call unpaid = 1,000 × 3 = 3,000. Calls-in-arrears = Rs. 4,000.
4. As the allotment was not paid, the premium is treated as not received and Securities Premium is debited (as the journal layout shows).
5. Amount received = application 5,000 + excess 5,000 = Rs. 10,000, credited to Share Forfeiture (Rs. 10 per share).
6. Reissue at Rs. 7 as Rs. 9 paid up: discount = Rs. 2 per share; gain per share = 10 - 2 = Rs. 8. Shares reissued = 2,400 / 8 = 300 shares.

Journal of MM Ltd. (completed)

Teacher's Note:
a) Securities Premium is debited on forfeiture only when the premium has not been received.
b) Share Forfeiture is credited with all money received from the defaulting shareholder.
c) Capital Reserve = Forfeited amount on reissued shares - Discount on reissue.
d) Check: 300 × 10 - 300 × 2 = 3,000 - 600 = Rs. 2,400.

(B) Shiv, the holder of 100 shares paid his first call of Rs. 4 per share, due on 1^st May, 2023, along with his allotment money, on 1^st September, 2023. [2 Marks]
Interest is allowed by the company on calls-in-advance as per the provisions of Table F of the Companies Act, 2013.
You are required to give the adjusting entry and closing entry for interest on calls- in-advance.

Answer:
Calls-in-advance = 100 × 4 = Rs. 400
Period from payment (1^st September) to the due date (1^st May) = 8 months
Interest = 400 × 12/100 × 8/12 = Rs. 32

Journal

Teacher's Note:
a) Table F allows interest on calls-in-advance at 12% p.a.
b) Interest runs from the date of payment to the date the call falls due.
c) The dates as printed are in the wrong order (payment after the due date); the answer takes the payment as made 8 months before the call was due.
d) Interest on calls-in-advance is an expense closed to the Statement of Profit and Loss.

SECTION B (20 Marks)

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

(i) Read the extract given below and answer the question that follows:
Unilever Plc (ULVR.L) said on Thursday (Feb. 9, 2023): It would continue to raise prices for its detergents, soaps and packaged food to offset rising input costs, and ease up those hikes in the second half of 2023. Source: Reuters
Which one of the following is the reason for the decision taken by Unilever Plc? [1 Mark]
(a) To repair the company's Debt-Equity Ratio so that it can derive the benefits of trading on equity.
(b) To repair the company's Trade Receivables Ratio in order to reduce the risk of bad debts.
(c) To repair the company's gross margin as the industry has been battling with COVID-era supply chain issues and raw material expenses.
(d) To repair the company's Inventory Turnover Ratio as the cost of warehousing had increased due to accumulation of stocks.

Answer: (c) To repair the company's gross margin as the industry has been battling with COVID-era supply chain issues and raw material expenses.

Teacher's Note:
a) Rising input costs reduce gross profit.
b) Raising selling prices restores the gross margin.
c) Gross margin = Gross profit / Revenue from operations × 100.
d) The other options are not linked to input costs.

(ii) While preparing a Cash Flow Statement, which one of the following will be added to the Net Profit for the year to get Net Profit before Tax? [1 Mark]
(a) Sale of Plant & Machinery
(b) Interest received on Investments
(c) Increase in Trade Payables
(d) Increase in General Reserve

Answer: (d) Increase in General Reserve

Teacher's Note:
a) Transfer to General Reserve is an appropriation of profit, so it is added back.
b) Provision for tax and proposed dividend are also added back.
c) Increase in trade payables is a working capital change, added later.
d) Sale of machinery and interest received are investing items.

(iii) Sunshine Ltd. had a Current Ratio of 0·7:1; its Current Assets being Rs. 2,00,000 and Current Liabilities being Rs. 2,50,000.
What will be the revised Current Ratio of Sunshine Ltd., after it dishonours one of its Bills Payable of Rs. 30,000? [1 Mark]

Answer:
On dishonour, Bills Payable (a current liability) falls by 30,000 and Creditors (a current liability) rise by 30,000.
Current Liabilities stay at Rs. 2,50,000 and Current Assets at Rs. 2,00,000.
Revised Current Ratio = 2,00,000 / 2,50,000 = 0.8:1 (no change)

Teacher's Note:
a) Dishonour of a bill payable changes one current liability into another.
b) Total current liabilities do not change, so the ratio does not change.
c) The figures give 0.8:1; the 0·7:1 printed in the question is a misprint.
d) Always recalculate the ratio from the given figures.

(iv) The books of accounts of Zebra Ltd. showed:
Change in inventories of raw materials (Rs. 70,000).
Opening inventory of Rs. 2,40,000. [1 Mark]
(a) You are required to give the formula used by the company to calculate the change in inventories.
(b) You have been provided with one component for calculating the change in inventories. Calculate the other component.

Answer:
(a) Change in Inventories = Opening Inventory - Closing Inventory
(b) (70,000) = 2,40,000 - Closing Inventory, so Closing Inventory = 2,40,000 + 70,000 = Rs. 3,10,000

Teacher's Note:
a) A negative change means inventory has increased.
b) An increase in inventory reduces expenses in the Statement of Profit and Loss.
c) Keep the sign of the change when putting it into the formula.
d) Closing inventory is more than opening inventory here.

(v) Mention whether accrued interest on investments would result in inflow, outflow or no flow of cash. [1 Mark]

Answer:
No flow of cash. Accrued interest is income earned but not yet received.

Teacher's Note:
a) Only actual receipts and payments are cash flows.
b) Accrued income is recorded on accrual basis, not cash basis.
c) The cash inflow happens only when the interest is received.
d) The same logic applies to outstanding expenses.

Question 12 [3 Marks]
From the following income statement of ZX Ltd, you are required to prepare a Common Size Income Statement.

Answer:

Common Size Statement of Profit and Loss of ZX Ltd. for the year ended 31.03.2023

Teacher's Note:
a) In a common size income statement, every item is a percentage of Revenue from Operations.
b) Interest on investments is Other Income, shown after Revenue from Operations.
c) Tax is 40% of profit before tax.
d) Total Revenue can be more than 100%.

Question 13 [6 Marks]
From the following Balance Sheets of Platinum Ltd., you are required to prepare a Cash Flow Statement (as per AS 3) for the year 2022-23.

Balance Sheets of Platinum Ltd. As at 31^st March, 2023 and 31^st March, 2022

Additional information:
During the year 2022-23, the company:
(a) Paid share issue expenses of Rs. 25,000.
(b) Sold a machine for Rs. 90,000 at a profit of Rs. 10,000.

Answer:

Working Notes:
1. Share issue expenses of 25,000 are written off: Securities Premium 20,000 + Statement of P&L 5,000.
2. Net profit for the year = (1,30,000 - 1,00,000) + 5,000 = Rs. 35,000
3. Provision for tax: tax paid = last year's provision Rs. 25,000; provision made this year = Rs. 60,000.
4. Net profit before tax = 35,000 + 60,000 = Rs. 95,000
5. Book value of machine sold = 90,000 - 10,000 = 80,000. Depreciation = 7,80,000 - 80,000 - 6,00,000 = Rs. 1,00,000 (no purchase given).
6. Interest on debentures = 2,60,000 × 5% = Rs. 13,000 (on the opening balance, as the date of the new issue is not given).

Cash Flow Statement of Platinum Ltd. for the year ended 31^st March, 2023

Teacher's Note:
a) Add back share issue expenses written off from profit, since they are a financing outflow.
b) Find depreciation from the change in machinery after removing the machine sold.
c) Interest on debentures is added back in operating activities and shown as paid in financing activities.
d) Check: the closing cash of Rs. 3,40,000 matches the Balance Sheet.

OR

Read the following information of Hydrogen Ltd., and answer the questions that follow:

Additional information:
During the year 2022-23, the company:
(a) Issued bonus shares to the shareholders at the beginning of the year in the ratio of 1:4 (that is 1 bonus share for every 4 shares held) by capitalising the Securities Premium.
(b) Purchased office equipment for Rs. 2,40,000, payment made by issuing 20,000 Equity shares of Rs. 10 each to the vendor and the balance in cash.
(c) Paid Rs. 4,000 for interim dividend.
(d) The interest on all borrowings was Rs. 16,000 out of which the amount paid till the end of the year, was Rs. 12,500.
(e) Dividend of Rs. 15,000 proposed in the year 2021-22 was declared and paid.
(f) Paid underwriting commission of Rs. 10,000.

(i) How many bonus shares have been issued by the company to the shareholders? [1 Mark]

Answer:
Shares held = 6,00,000 / 10 = 60,000 shares
Bonus shares = 60,000 × 1/4 = 15,000 shares (Rs. 1,50,000)

Teacher's Note:
a) Bonus shares are based on shares held at the start of the year.
b) Ratio 1:4 means one bonus share for every four held.
c) Check: 6,00,000 + 1,50,000 + 2,00,000 (vendor) = 9,50,000.
d) Bonus shares bring in no cash.

(ii) What is the company's Net Profit before Tax? [1 Mark]

Answer:
Increase in Statement of P&L = 2,00,000 - 1,60,000 = 40,000
Add: Interim dividend 4,000 + Dividend paid 15,000 = 19,000
Net profit after tax = Rs. 59,000
Add: Provision for tax made this year = Rs. 80,000 (last year's Rs. 60,000 taken as paid)
Net Profit before Tax = 59,000 + 80,000 = Rs. 1,39,000

Teacher's Note:
a) Dividends are paid out of profit, so add them back.
b) Underwriting commission is written off from Securities Premium (1,60,000 - 1,50,000 bonus = 10,000), not from profit.
c) Without other details, the closing provision is taken as this year's tax provision.
d) Profit before tax = Profit after tax + Tax provided.

(iii) What is the Cash from Operating Activities of the company before tax paid? [1 Mark]

Answer:
Net Profit before Tax 1,39,000 + Interest on borrowings 16,000 = 1,55,000
Add: Increase in Trade Payables 5,000
Cash from Operating Activities before tax paid = Rs. 1,60,000

Teacher's Note:
a) Interest on borrowings is a finance cost, so it is added back.
b) An increase in trade payables is added.
c) Cash credit is treated as a borrowing, not working capital.
d) After tax paid (Rs. 60,000), net cash from operations is Rs. 1,00,000.

(iv) What is Hydrogen Ltd.'s inflow /outflow of cash from Financing Activities? [1 Mark]

Answer:
Bank loan raised 50,000 + Cash credit 8,000 - Interim dividend 4,000 - Dividend paid 15,000 - Interest paid 12,500 - Underwriting commission 10,000
= Net inflow of Rs. 16,500

Teacher's Note:
a) Bonus shares and shares issued to the vendor involve no cash.
b) Only the interest actually paid (Rs. 12,500) is an outflow.
c) Both dividends paid during the year are outflows.
d) Underwriting commission is a cost of raising capital, so it is financing.

(v) Give the inflow /outflow of cash from Investing Activities, if any. [1 Mark]

Answer:
Purchase of office equipment for cash = 2,40,000 - 2,00,000 (shares issued) = Outflow of Rs. 40,000

Teacher's Note:
a) Only the cash part of the purchase is a cash flow.
b) The shares issued to the vendor are a non-cash transaction.
c) Non-cash transactions are shown in a note, not in the statement.
d) Purchase of fixed assets is an investing outflow.

(vi) The Board of Directors of Hydrogen Ltd. proposed a dividend of Rs. 30,000 at the end of the year 2022-23.
State with reason, the disclosure / non-disclosure of this dividend proposed in the Cash Flow Statement of the company for the year 2022-23. [1 Mark]

Answer:
It will not be shown in the Cash Flow Statement for 2022-23, because no cash is paid in that year. The proposed dividend is paid only after shareholders approve it in the next year, and until then it is shown as a contingent liability in the Notes to Accounts.

Teacher's Note:
a) A cash flow statement shows only actual cash movements.
b) A proposed dividend is not a liability until it is declared.
c) It will appear as an outflow in the year it is paid.
d) Give both the answer and the reason.

Question 14 [6 Marks]
Answer any three of the following questions

(i) From the following information, calculate Inventory Turnover Ratio (up to two decimal places):

Answer:
Cost of Revenue from Operations = Revenue from Operations + Gross Loss = 7,00,000 + 70,000 = Rs. 7,70,000
Average Inventory = (20,000 + 2,00,000) / 2 = Rs. 1,10,000
Inventory Turnover Ratio = Cost of Revenue from Operations / Average Inventory = 7,70,000 / 1,10,000 = 7.00 times

Teacher's Note:
a) With a gross loss, cost is more than revenue, so add the loss.
b) Average inventory = (Opening + Closing) / 2.
c) Answer to two decimal places, as asked.
d) Use cost of revenue, not revenue.

(ii) Calculate the Gross Profit Ratio (up to two decimal places) from the following information:

Answer:
Average Inventory = (80,000 + 1,00,000) / 2 = Rs. 90,000
Cost of Revenue from Operations = 8 × 90,000 = Rs. 7,20,000
Gross Profit = 9,00,000 - 7,20,000 = Rs. 1,80,000
Gross Profit Ratio = Gross Profit / Revenue from Operations × 100 = 1,80,000 / 9,00,000 × 100 = 20.00%

Teacher's Note:
a) Use the inventory turnover ratio to find the cost of revenue.
b) Gross profit = Revenue - Cost of revenue.
c) Gross profit ratio is a percentage.
d) Write the formula before the figures.

(iii) Calculate the Liquid Ratio (up to two decimal places) from the following information:

Answer:
Current Liabilities = Current Assets / Current Ratio = 1,26,000 / 1.5 = Rs. 84,000
Liquid Assets = 1,26,000 - 2,000 = Rs. 1,24,000
Liquid Ratio = Liquid Assets / Current Liabilities = 1,24,000 / 84,000 = 1.48:1

Teacher's Note:
a) Find current liabilities from the current ratio first.
b) Liquid assets = Current assets - Inventories (and prepaid expenses).
c) 1.476 rounds to 1.48.
d) Give the answer as a ratio.

(iv) For the year 2022-23:
The Operating Profit Ratio of Noah Ltd. was 65%
Its Revenue from Operations was Rs. 2,00,000
(a) You are required to give the formula used by the company to calculate the Operating Profit Ratio.
(b) You have been provided with two components for calculating the Operating Profit Ratio. Calculate the remaining component.

Answer:
(a) Operating Profit Ratio = Operating Profit / Revenue from Operations × 100
(b) 65 = Operating Profit / 2,00,000 × 100, so Operating Profit = 2,00,000 × 65/100 = Rs. 1,30,000

Teacher's Note:
a) Operating profit = Revenue from operations - Operating cost.
b) Operating Profit Ratio = 100 - Operating Ratio.
c) Rearrange the formula to find the missing part.
d) Write the formula in full words.

SECTION C (20 Marks)

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

(i) When working on an Excel spreadsheet, what does cell B2 refer to? [1 Mark]
M Row B, Column 2
N Column B, Row 2
O Row B and Column 2
P Column B and Row 2
(a) Only M
(b) Only M and O
(c) Only N and P
(d) All - M, N, O and P

Answer: (c) Only N and P

Teacher's Note:
a) In Excel, columns are letters and rows are numbers.
b) A cell address is written column first, then row.
c) N and P say the same thing in different words.
d) B2 means column B, row 2.

(ii) Which one of the following terms is NOT related to computerised databases? [1 Mark]
(a) Search
(b) Sort
(c) Field names
(d) Record grab

Answer: (d) Record grab

Teacher's Note:
a) Search, sort and field names are common database terms.
b) 'Record grab' is not a database term.
c) Fields are the columns of a table.
d) Sort arranges records in order.

(iii) Which formula will capture the correct number of numerical values from the following range?
A2:A5 & C2:C5 [1 Mark]

Answer:
=COUNT(A2:A5,C2:C5)

Teacher's Note:
a) COUNT counts only cells with numbers.
b) Separate two ranges with a comma.
c) COUNTA would also count text cells.
d) Start with the = sign.

(iv) Give the meaning of the MODE function in Excel with an example. [1 Mark]

Answer:
The MODE function returns the value that occurs most often in a set of numbers. Example: =MODE(2,3,3,5,7) gives 3, or =MODE(A1:A10) gives the most frequent value in that range.

Teacher's Note:
a) Mode is the most frequent value.
b) Give an example with the answer.
c) If no value repeats, MODE shows an error.
d) It can be used on a range of cells.

(v) When editing a cell in Excel, which key or combination of keys is pressed to toggle between relative, absolute and mixed cell references? [1 Mark]

Answer:
The F4 key.

Teacher's Note:
a) Each press of F4 changes A1 to $A$1, A$1, $A1 and back to A1.
b) $ fixes the column or row.
c) Absolute references do not change when copied.
d) The cursor must be on the cell reference in the formula.

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]
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.

Question 18 [6 Marks]
Premier Furniture Ltd. runs a furniture store in city C. The store has three Sales Executives, SE1, SE2 and SE3.
The payroll summary representing the cumulative position for the three executives at the end of the year 2022-23 is as follows:
1. The House Rent Allowance (HRA) is payable @ 25% of the Basic Pay.
2. The Company has a policy of awarding incentives. SE2 was awarded an incentive as from 1^st October, 2022, equal to 10% of his monthly Basic Pay. The incentive is clubbed with Other Allowances.
3. 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, 2022, itself, to 15% of his Basic Pay.

Based on the above transactions and the information given in the spreadsheet, answer any three of the following questions:

(i) Write the formula to calculate PF contribution of SE1 in Cell G2. [2 Marks]

Answer:
=B2*15%
Result: 3,00,000 × 15% = Rs. 45,000

Teacher's Note:
a) SE1 raised his own PF contribution to 15% of Basic Pay.
b) Column G is the employee's contribution, not the employer's.
c) Check: 45,000 + 24,000 + 20,000 = 89,000, the total in G5.
d) =B2*0.15 is also correct.

(ii) Give the formula to calculate Gross Salary of SE1 in Cell J2. [2 Marks]

Answer:
=B2+C2+D2+E2
Or =SUM(B2:E2)
Result: 3,00,000 + 75,000 + 60,000 + 30,000 = Rs. 4,65,000

Teacher's Note:
a) Gross salary = Basic Pay + HRA + Conveyance + Other Allowances.
b) The employer's PF contribution is not part of gross salary here.
c) Check: 4,65,000 - 45,000 - 20,000 - 5,000 = 3,95,000, the net salary in K2.
d) SUM with a range is the shortest formula.

(iii) Write the formula to calculate Other Allowances (excluding the incentives) earned by SE2 in Cell E3. [2 Marks]

Answer:
=J3-(B3+C3+D3)-(B3/12*10%*6)
Other Allowances including incentive = 3,85,000 - (2,40,000 + 60,000 + 48,000) = 37,000
Incentive = 2,40,000 / 12 × 10% × 6 months = 12,000
Other Allowances excluding incentive = 37,000 - 12,000 = Rs. 25,000

Teacher's Note:
a) First find total other allowances from gross salary.
b) The incentive runs from 1^st October, so it is for 6 months.
c) Monthly basic pay = Annual basic pay / 12.
d) Check E5: 30,000 + 37,000 + 30,000 = 97,000.

(iv) Write the formula to calculate Net Salary of SE2 in Cell K3. [2 Marks]

Answer:
=J3-G3-H3-I3
Or =J3-SUM(G3:I3)
Result: 3,85,000 - 24,000 - 25,000 - 4,000 = Rs. 3,32,000

Teacher's Note:
a) Net salary = Gross salary - Employee's PF - Misc deductions - Income tax.
b) The employer's PF is not deducted from the employee's salary.
c) Check K5: 3,95,000 + 3,32,000 + 2,82,000 = 10,09,000.
d) Use brackets or SUM for the deductions.