ISC Class 12 Accountancy Sample Paper 2026 with Solutions

SECTION A (60 Marks)
Answer all questions.

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

(i) Anil and Sunil are partners in a firm. On 1^st April 2024, their capital balances show as Rs. 3,00,000 and Rs. 2,00,000 respectively. On the same date, firm's goodwill valued by Capitalisation of average profit method is determined at Rs. 3,50,000. Capitalised value of average profits and average profits are Rs. 8,50,000 and Rs. 1,70,000 respectively. What will be the normal commercial yield on capital invested in such business? [1 Mark]
(a) 30%
(b) 10%
(c) 20%
(d) 15%

Answer: (c) 20%

Capitalised Value of Average Profits = Average Profits × 100 / Normal Rate of Return
8,50,000 = 1,70,000 × 100 / Normal Rate of Return
Normal Rate of Return = 1,70,000 × 100 / 8,50,000 = 20%
Check: Goodwill = 8,50,000 - Capital Employed (3,00,000 + 2,00,000) = Rs. 3,50,000, which matches the question.

Teacher's Note:
a) The normal commercial yield is the same as the Normal Rate of Return.
b) Use the capitalised value and the average profit to find the rate.
c) The capital balances are only needed to check the goodwill figure.
d) Always cross-check your rate with the goodwill given in the question.

(ii) Akhil, Viren and Sarla are partners in a firm who share profits in 4:3:3 ratio. On the date of Sarla's retirement from the firm, the books show the Workmen Compensation Reserve of Rs. 12,000.
Akhil and Viren decide to share profit in equal ratio after Sarla's retirement.
Choose the correct journal for the treatment of Workmen Compensation Reserve if the continuing partners decide to show Workmen Compensation Reserve in the reconstituted Balance Sheet. [1 Mark]
(a) Debit Workmen Compensation Reserve A/c Rs. 12,000; Credit Akhil's Capital A/c Rs. 4,800; Credit Viren's Capital A/c Rs. 3,600 and Sarla's Capital A/c Rs. 3,600
(b) Debit Workmen Compensation Reserve A/c Rs. 3,600 and Credit Sarla's Capital A/c Rs. 3,600.
(c) Debit Sarla's Capital A/c Rs. 3,600; Credit Akhil's Capital A/c Rs. 1,200 and Credit Viren's Capital A/c Rs. 2,400.
(d) Debit Akhil's Capital A/c Rs. 1,200; Debit Viren's Capital A/c Rs. 2,400 and Credit Sarla's Capital A/c Rs. 3,600.

Answer: (d) Debit Akhil's Capital A/c Rs. 1,200; Debit Viren's Capital A/c Rs. 2,400 and Credit Sarla's Capital A/c Rs. 3,600.

Sarla's share of the reserve = 12,000 × 3/10 = Rs. 3,600.
Gaining ratio: Akhil = 1/2 - 4/10 = 1/10; Viren = 1/2 - 3/10 = 2/10. So the gaining ratio is 1:2.
Akhil pays 3,600 × 1/3 = Rs. 1,200 and Viren pays 3,600 × 2/3 = Rs. 2,400.

Teacher's Note:
a) When the reserve stays in the books, it is not distributed to all partners.
b) The retiring partner's share is paid by the gaining partners in the gaining ratio.
c) Gaining ratio = New ratio - Old ratio for each continuing partner.
d) Option (a) would be correct only if the reserve were closed and distributed.

(iii) On 1^st April 2023, Anand Limited issued 10%, 50,000 Debentures of Rs. 100 each as collateral security to ABC Bank against a loan raised of Rs. 80,00,000. It also issued 12%, 40,000 Debentures of Rs. 100 each on 1^st October, 2023 in the stock market to invest money in a new line of product.
How much interest on Debentures become payable by the company on 31^st March 2024? [1 Mark]
(a) Rs. 7,40,000
(b) Rs. 2,40,000
(c) Rs. 5,00,000
(d) Rs. 4,80,000

Answer: (b) Rs. 2,40,000

No interest is paid on debentures issued as collateral security.
Interest on 12% Debentures = 40,000 × 100 × 12/100 × 6/12 = Rs. 2,40,000 (1^st October 2023 to 31^st March 2024).

Teacher's Note:
a) Debentures issued as collateral security are only a guarantee, so no interest is payable on them.
b) Interest is paid on the bank loan, not on the collateral debentures.
c) Count interest only for the months the debentures were outstanding (here 6 months).
d) A common mistake is to add Rs. 5,00,000 of interest on the collateral debentures.

(iv) Choose the correct sequence of various types of guarantees of profit used while preparing Profit and Loss Appropriation Account by a partnership firm. [1 Mark]
(P) Guarantee given by the firm to Partners
(Q) Guarantee given by a Partner to the firm
(R) Guarantee given by a Partner to another Partner
(a) P, Q, R
(b) Q, P, R
(c) R, P, Q
(d) Q, R, P

Answer: (b) Q, P, R

First the partner's guarantee to the firm (Q) fixes the profit of the firm. Then the firm's guarantee to a partner (P) is met, and last the guarantee given by one partner to another (R) is adjusted.

Teacher's Note:
a) A guarantee to the firm changes the total profit, so it is applied first.
b) Next, the firm makes good any guaranteed minimum share of a partner.
c) A guarantee by one partner to another is adjusted last, only between those partners.
d) Remember the order: firm's profit first, then partners' shares.

(v) On dissolution of a firm, one of the partners, Abhi demands that his loan of Rs. 1,50,000 be paid before payment of capitals of the partners, whereas other partners, Bobby and Cathy demand that capitals should be paid before the payment of Abhi's loan.
State the correct order of payment. Give a reason for your answer. [1 Mark]

Answer:
Abhi is right. His loan of Rs. 1,50,000 must be paid before the capitals of the partners.
Reason: As per Section 48 of the Indian Partnership Act, 1932, on dissolution the firm first pays outside liabilities, then loans and advances made by partners, and only after that the partners' capitals.

Teacher's Note:
a) Quote Section 48 of the Indian Partnership Act, 1932 for the full mark.
b) Order of payment: outside creditors, then partners' loans, then partners' capitals.
c) A partner's loan is a debt of the firm, while capital is the owner's claim.
d) Do not confuse a partner's loan with a partner's capital.

(vi) Rahul and Nikhil are partners in a firm. They admit Tanvi for 1/5th share. On the date of her admission, the firm's book shows the following balances:
Rahul's Capital: Rs. 2,80,000
Nikhil's Capital: Rs. 2,20,000
Tanvi contributes 20% of the adjusted capital of Rahul and Nikhil. She also contributes Rs. 20,000 as half of her share of goodwill.
Pass the journal entry to record the capital contribution made by Tanvi. [1 Mark]

Answer:
Tanvi's full share of goodwill = 20,000 × 2 = Rs. 40,000 (half brought in cash, half charged to her).
Adjusted capital of Rahul and Nikhil = 2,80,000 + 2,20,000 + 20,000 + 20,000 = Rs. 5,40,000
Tanvi's capital = 5,40,000 × 20% = Rs. 1,08,000

Journal

Teacher's Note:
a) The old partners' capitals are adjusted for the whole of Tanvi's goodwill share, that is Rs. 40,000.
b) Half of it comes in cash and the other half is adjusted through Tanvi's account.
c) Tanvi's capital is 20% of the adjusted capital, as stated in the question.
d) Only the capital brought in is asked here, so the goodwill entry is not needed.

(vii) Priya was a partner in a firm. On the date its dissolution, her loan was appearing on the liability side of the Balance Sheet at Rs. 25,000. Priya accepted an unrecorded asset of Rs. 17,500 and the balance was paid to her in cash.
Give the Journal entry for the above transaction. [1 Mark]

Answer:

Journal

Teacher's Note:
a) The unrecorded asset taken over is a gain, so Realisation A/c is credited.
b) The balance of the loan, 25,000 - 17,500 = Rs. 7,500, is paid in cash.
c) A partner's loan is settled directly and is not closed through her Capital A/c.
d) Check that the debit of Rs. 25,000 equals the total of the two credits.

(viii) Enumerate two methods of redemption of debentures. [1 Mark]

Answer:
1. Redemption in lump sum on maturity (or earlier as per the terms of issue).
2. Redemption in instalments by draw of lots.

Teacher's Note:
a) Two methods are enough for one mark.
b) Other methods include purchase in the open market and conversion into shares.
c) In a draw of lots, the debentures to be redeemed are chosen by lottery.
d) Write each method as a short, clear phrase.

(ix) Manilal Ltd.is a manufacturing company. Its operating cycle is 15 months. On 31^st March, 2025, its trade receivable of Rs. 70,000 includes Rs. 20,000 which is due to be collected on 13^th April, 2026 and the remaining after 30^th June, 2026.
You are required to calculate current and non-current assets of the company as at 31^st March, 2025. [1 Mark]

Answer:
The operating cycle of 15 months ends on 30^th June, 2026.
Current Assets = Rs. 20,000 (due on 13^th April, 2026, within the operating cycle)
Non-Current Assets = 70,000 - 20,000 = Rs. 50,000 (due after the operating cycle)

Teacher's Note:
a) A receivable is current if it is collected within the operating cycle.
b) Here the operating cycle is 15 months, not the usual 12 months.
c) Count 15 months from 31^st March, 2025 to get 30^th June, 2026.
d) Show both figures clearly to get the full mark.

(x) Assertion: Forfeited shares can be reissued at a discount.
Reason: The amount received by a company on forfeited shares can be used to cover the discount on the reissues of forfeited shares.
Which one of the following is correct? [1 Mark]
(a) Both Assertion and Reason are true and Reason is the correct explanation for Assertion.
(b) Both Assertion and Reason are true but Reason is not the correct explanation for Assertion.
(c) Assertion is true and Reason is false.
(d) Both Assertion and Reason are false.

Answer: (a) Both Assertion and Reason are true and Reason is the correct explanation for Assertion.

Teacher's Note:
a) Forfeited shares may be reissued at a discount.
b) The discount on reissue cannot be more than the amount forfeited on those shares.
c) The forfeited amount is what covers the discount, so the Reason explains the Assertion.
d) Any balance left in Share Forfeiture A/c is transferred to Capital Reserve.

Question 2
Amit, Karan and Rakhi were partners in a firm sharing profits and losses in the ratio of 2:2:1. Amit died on 30^th June 2024 while the firm closed its books on 31^st March. According to their partnership deed, Amit's representative would be entitled to get a share in the interim profits of the firm calculated on the basis of turnover. Turnover and profit for the year 2023-24 were Rs. 3,00,000 and Rs. 90,000 respectively and turnover in the year 2024-25 till the date of his death amounted to Rs. 60,000.
You are required to:

(i) Calculate Amit's share of interim profit. [1 Mark]

Answer:
Profit as a percentage of turnover (2023-24) = 90,000 / 3,00,000 × 100 = 30%
Profit till the date of death = 60,000 × 30% = Rs. 18,000
Amit's share of profit = 18,000 × 2/5 = Rs. 7,200

Teacher's Note:
a) First find the profit rate on last year's turnover.
b) Apply that rate to the turnover up to the date of death.
c) Then take the deceased partner's share in the old ratio (2/5).
d) Show all three steps, as each step carries marks.

(ii) Pass the necessary Journal entry showing Amit's share of interim profit. [2 Marks]

Answer:

Journal

Teacher's Note:
a) The firm's books are not closed on the date of death, so Profit and Loss Suspense A/c is debited.
b) The deceased partner's Capital A/c is credited with his share.
c) Write the date of death, 30^th June 2024, against the entry.
d) Always add a narration to every journal entry.

OR

Pratik, Krish and Susan are partners in a firm sharing profits and losses in the ratio of 5:3:2. On 31^st March, 2024, Krish retires and 1/3 of his share is taken by Pratik and the balance by Susan.
The extract of the Balance Sheet as at 31.03.2024 is as follows: [3 Marks]

Balance Sheet (Extract) of Pratik, Krish and Susan As at 31.3.24

Other information:
(a) Bad debts amounted to Rs. 3,000.
(b) Remaining debtors are all good.
(c) Market value of the investments is Rs. 40,000.
(d) Krish was given investments in full settlement.
You are required to pass the journal entries on the date of Krish's retirement.

Answer:

Journal of Pratik, Krish and Susan

Working Notes:
1. Gaining ratio: Pratik gets 3/10 × 1/3 = 1/10; Susan gets 3/10 - 1/10 = 2/10. Gaining ratio = 1:2.
2. Fall in investments = 52,000 - 40,000 = Rs. 12,000. IFR covers Rs. 8,000 and Rs. 4,000 is a revaluation loss.
3. Total revaluation loss = 1,000 + 4,000 = Rs. 5,000.
4. Krish's capital after loss = 32,500 - 1,500 = Rs. 31,000. He receives investments of Rs. 40,000, so hidden goodwill = 40,000 - 31,000 = Rs. 9,000.

Teacher's Note:
a) Hidden goodwill is the amount paid to the retiring partner over his capital balance.
b) The gaining partners bear the goodwill in the gaining ratio (1:2 here).
c) IFR is used first to cover the fall in the value of investments.
d) Employee Provident Fund is a liability, so it is not shared among partners.

Question 3 [3 Marks]
On 1^st April, 2024, Zeba Ltd. purchased a running business having a net worth of Rs. 2,00,000 from Ajay Ltd. for a purchase consideration of Rs. 2,10,000. The payment was made as follows:
(a) By issuing 9,000, 10% Debentures of Rs. 10 each at a premium of 20%.
(b) Balance by accepting a Bills of Exchange payable after 3 months.
You are required to pass journal entries in the books of Zeba Ltd.
(Ignore interest on Debentures).

Answer:

Journal of Zeba Ltd.

Working Notes:
1. Goodwill = Purchase consideration - Net worth = 2,10,000 - 2,00,000 = Rs. 10,000
2. Debentures: 9,000 × 10 = Rs. 90,000; Premium = 90,000 × 20% = Rs. 18,000; Total = Rs. 1,08,000
3. Balance by bill = 2,10,000 - 1,08,000 = Rs. 1,02,000

Teacher's Note:
a) When the purchase price is more than the net assets, the difference is goodwill.
b) Debentures issued at a premium are credited at face value, and the premium goes to Securities Premium A/c.
c) The vendor's account is closed in two parts: debentures and bills payable.
d) Check that the two payments add up to the purchase consideration.

OR

On 1^st April, 2024, Zubin Ltd. issued 3,000, 8% Debentures of Rs. 100 each at a discount of 5% to be redeemed after two years at a premium of 6%.
On 31^st March, 2025, Zubin Ltd. had the following balances in its books before adjustments of capital losses:
Securities Premium Rs. 23,000
Statement of Profit/Loss Rs. 18,000
General Reserve Rs. 20,000
The company writes off all its capital losses in the same year.
You are required to prepare the following for the year 2024-2025:

(i) Loss on Issue of Debentures A/c [2 Marks]

Answer:

Loss on Issue of Debentures Account

Working Notes:
1. Discount = 3,000 × 100 × 5% = Rs. 15,000
2. Premium on redemption = 3,000 × 100 × 6% = Rs. 18,000
3. Total loss = 15,000 + 18,000 = Rs. 33,000. Securities Premium covers Rs. 23,000 and the balance Rs. 10,000 is written off to the Statement of Profit and Loss.

Teacher's Note:
a) Loss on issue = discount on issue + premium payable on redemption.
b) Capital losses are written off first from Securities Premium.
c) The balance is written off from the Statement of Profit and Loss.
d) General Reserve is not used here because the Statement of Profit and Loss has enough balance.

(ii) Securities Premium A/c [1 Mark]

Answer:

Securities Premium Account

Teacher's Note:
a) The whole balance of Securities Premium is used to write off the loss.
b) Section 52 of the Companies Act, 2013 allows this use of Securities Premium.
c) After the transfer the Securities Premium A/c has no balance.
d) Show the opening balance as By Balance b/d on the credit side.

Question 4
APL Ltd., an unlisted construction company has 50,000, 10% Debentures of Rs. 100 each due for redemption at par on 31^st March, 2024. The Debenture Redemption Investment was purchased on 30^th April, 2023 and was sold on the date of redemption at 104% less 0.7% commission. APL Ltd. had sufficient balance in its Debenture Redemption Reserve A/c as per the provisions of the Companies' Act, 2013.
You are required to prepare the following Ledger Accounts for the year 2023-2024:

(i) Debenture Redemption Reserve A/c [1 Mark]

Answer:

Debenture Redemption Reserve Account

DRR for an unlisted company = 10% of the debentures outstanding = 50,00,000 × 10% = Rs. 5,00,000

Teacher's Note:
a) An unlisted company keeps a DRR of 10% of the value of outstanding debentures.
b) After all the debentures are redeemed, the DRR is transferred to General Reserve.
c) The opening balance is shown as By Balance b/d.
d) DRR is the only short form allowed in this answer.

(ii) Debenture Redemption Investment A/c [2 Marks]

Answer:

Debenture Redemption Investment Account

Working Notes:
1. Investment = 50,00,000 × 15/100 = Rs. 7,50,000
2. Sale price = 7,50,000 × 104% = Rs. 7,80,000
3. Commission = 7,80,000 × 0.7% = Rs. 5,460
4. Net amount received = 7,80,000 - 5,460 = Rs. 7,74,540
5. Profit on sale = 7,74,540 - 7,50,000 = Rs. 24,540

Teacher's Note:
a) The company must invest at least 15% of the debentures maturing during the year.
b) Commission is deducted from the sale price to get the net amount received.
c) The profit on sale is credited to the Statement of Profit and Loss.
d) The official key prints the total as 7,74540; the correct figure is Rs. 7,74,540.

Question 5 [3 Marks]
From the following information, calculate Goodwill by Capitalisation of Super profit method for a firm run by Akshay and Baldev:

Other information:
a) Normal rate of return is 10% p.a.
b) Trading profits for the preceding four years are as follows:
2021-2022 - Rs. 40,000
2022-2023 - Rs. 45000
2023-2024 - Rs. 50,000 (including loss by theft 5,000)
2024-2025 - Rs. 60000 (excluding depreciation on machinery Rs. 6,000)

Answer:
1. Adjusted profits:
2021-22 = Rs. 40,000
2022-23 = Rs. 45,000
2023-24 = 50,000 + 5,000 (abnormal loss by theft added back) = Rs. 55,000
2024-25 = 60,000 - 6,000 (depreciation) = Rs. 54,000
Total Profit for four years = 40,000 + 45,000 + 55,000 + 54,000 = Rs. 1,94,000
Average Profit = 1,94,000 / 4 = Rs. 48,500
2. Capital Invested = 1,20,000 + 1,00,000 + 20,000 - 10,000 + 20,000 - 10,000 = Rs. 2,40,000
3. Normal Profit = Capital Invested × Normal Rate of Return / 100 = 2,40,000 × 10/100 = Rs. 24,000
4. Super Profit = Average Profit - Normal Profit = 48,500 - 24,000 = Rs. 24,500
5. Goodwill = Super Profit × 100 / Normal Rate of Return = 24,500 × 100 / 10 = Rs. 2,45,000

Teacher's Note:
a) Add back abnormal losses like theft, and deduct expenses not yet charged like depreciation.
b) Capital invested includes capitals, current accounts and reserves, less fictitious assets.
c) Baldev's debit current account and Advertisement Suspense are deducted.
d) Write every formula in full words, not short forms like SP or NP.

Question 6 [6 Marks]
On 31^st March 2025, Rishiraj Ltd., an unlisted construction company, showed the following balances:

You are required to prepare an extract of Balance Sheet as at 31^st March, 2025, showing the Equity and Liabilities. (Ignore Notes to Accounts)

Answer:

Balance Sheet (Extract) of Rishiraj Ltd. as at 31^st March, 2025

Working Notes:
1. Share Capital = 10,00,000 - 30,000 (calls-in-arrear) = Rs. 9,70,000
2. Reserves and Surplus = Debenture Redemption Reserve Rs. 40,000
3. Long-term Borrowings = 4,00,000 (8% Debentures) + 2,10,000 (6% Bank Loan) + 20,000 (Premium on redemption) = Rs. 6,30,000
4. Short-term Borrowings = 54,000 (Bank Overdraft) + 12,000 (Cash Credit) = Rs. 66,000
5. Other Current Liabilities = Interest accrued and due on debentures Rs. 32,000

Teacher's Note:
a) Calls-in-arrear are deducted from subscribed capital to get the paid-up amount.
b) Bank overdraft and cash credit are short-term borrowings.
c) Unpaid interest due on debentures is an Other Current Liability.
d) The official key adds the premium on redemption to Long-term Borrowings; some books show it under Other Long-term Liabilities instead.

Question 7 [6 Marks]
Anu and Binu were partners sharing profits and losses in the ratio of 4:1. Their Balance sheet as at 31^st March, 2025 was as follows:

Balance sheet of Anu and Binu As at 31^st March 2025

On 1^st April 2025, Tinu is admitted as a new partner on the following terms:
(a) New profit-sharing ratio of the partners to be 2:1:1.
(b) Tinu shall bring in Rs. 16,000 as his capital and the required amount of Goodwill in cash.
(c) Bills payable was overvalued by Rs. 2,000.
(d) The value of Goodwill of the firm to be calculated on the basis of Tinu's share in profit and the capital contributed by him.
(e) Provision for bad and doubtful debts Rs. 1,000 to be created out of General Reserve.
Pass the journal entries for treatment of Goodwill and prepare Capital accounts of all the partners.

Answer:

Working Notes:
1. Sacrificing/(gaining) ratio: Anu = 4/5 - 2/4 = 16/20 - 10/20 = 6/20 (sacrifice); Binu = 1/5 - 1/4 = 4/20 - 5/20 = -1/20 (gain).
2. Total capital of the firm on the basis of Tinu's capital = 16,000 × 4/1 = Rs. 64,000
3. Capitals of all partners after adjustments: Anu = 25,000 + 1,600 + 7,200 - 800 = 33,000; Binu = 10,000 + 400 + 1,800 - 200 = 12,000; Tinu = 16,000. Total = Rs. 61,000
4. Hidden goodwill of the firm = 64,000 - 61,000 = Rs. 3,000
5. Tinu's share of goodwill = 3,000 × 1/4 = Rs. 750 (goes to Anu); Binu's gain = 3,000 × 1/20 = Rs. 150 (paid to Anu).
6. Revaluation gain = Rs. 2,000 (bills payable overvalued), shared 4:1 = 1,600 and 400.
7. General Reserve left = 10,000 - 1,000 (provision) = 9,000, shared 4:1 = 7,200 and 1,800.

Journal

Partners' Capital Accounts

Teacher's Note:
a) Hidden goodwill = Total capital based on the new partner's capital - Actual capitals after all adjustments.
b) Old goodwill in the books is written off before the new goodwill is adjusted.
c) Binu gains in the new ratio, so he also pays Anu for goodwill.
d) Provision for bad debts made out of General Reserve reduces the reserve shared by partners.

OR

Tony and Sony are partners in a firm sharing profits and losses in the ratio of 4:3. On 1^st April, 2025, they admit Ronny for 1/3^rd share in the profits.
Other information:
(a) Ronny brought in Land and Building worth Rs. 5,00,000 and Furniture worth Rs. 50,000 but was unable to contribute any amount for his share of Goodwill.
(b) At the time of Ronny's admission, the firm showed the following balances:
Advertisement Suspense A/c Rs. 49,000
General Reserve Rs. 56,000
Profit and Loss A/c (Dr) Rs. 70,000
Goodwill Rs. 42,000
Employees' Provident Fund Rs. 21,000
Loan from Sony (taken on 1^st January 2025) Rs. 1,00,000
(c) Revaluation loss amounted to Rs. 7,000.
(d) Goodwill of the firm valued at Rs. 21,000.
You are required to:
i) Pass journal entries for the above transactions on the date of Ronny's admission.
ii) Pass journal entries regarding loan taken from Sony for the year 2024-25. (Interest on loan is still due to be paid.)

Answer:

Working Notes:
1. New ratio: Tony = 4/7 × 2/3 = 8/21; Sony = 3/7 × 2/3 = 6/21; Ronny = 7/21. New ratio = 8:6:7. Sacrificing ratio = 4:3.
2. Ronny's share of goodwill = 21,000 × 1/3 = Rs. 7,000, shared 4:3 = 4,000 and 3,000.
3. Accumulated losses = 49,000 + 70,000 = Rs. 1,19,000, shared 4:3 = 68,000 and 51,000.
4. Interest on loan = 1,00,000 × 6/100 × 3/12 = Rs. 1,500 (6% p.a. as per the Indian Partnership Act, 1932, since no rate is agreed).

(i) Journal entries on the date of Ronny's admission

(ii) Journal entries for loan from Sony (2024-25)

Teacher's Note:
a) When the new partner cannot bring goodwill in cash, his Current A/c is debited.
b) Reserves, accumulated losses and old goodwill belong to old partners, so use the old ratio 4:3.
c) Employees' Provident Fund is a liability and needs no entry.
d) If there is no agreement, interest on a partner's loan is 6% p.a. under the Act.

Question 8 [6 Marks]
Hima, Zoya and Bhanu were partners in a firm sharing profits and losses in the ratio of 5:3:2. They decided to dissolve the firm on 1^st April, 2025. Their Balance Sheet as at 31.3.2025 was as follows.

Balance Sheet of Hima, Zoya and Bhanu As at 31.3.2025

Additional information:
(a) Stock was taken by Zoya at 75% of the book value.
(b) Some trade creditors took over furniture at a reduced value of Rs. 18,000 and the remaining creditors were paid by cheque.
(c) Plant was realised at 10% less than the book value and one debtor from whom Rs. 2,000 were due could not pay anything.
(d) An unrecorded liability was settled for Rs. 7,500.
You are required to:

(i) Prepare Realisation A/c [4 Marks]

Answer:

Realisation Account

Working Notes:
1. Stock taken by Zoya = 25,000 × 75% = Rs. 18,750
2. Creditors paid in cash = 28,000 - 18,000 (took furniture) = Rs. 10,000
3. Plant realised = 48,000 - 10% = Rs. 43,200
4. Debtors realised = 17,000 - 2,000 = Rs. 15,000
5. Investments are taken as realised at book value (Rs. 33,000), as in the official key, since the question gives no other value.
6. Loss on realisation = 1,62,500 - 1,59,950 = Rs. 2,550, shared 5:3:2.

Teacher's Note:
a) Creditors who take over an asset need no cash entry for that part.
b) The official key credits the Investment Fluctuation Reserve to the Realisation A/c.
c) Hima's loan is paid directly from the bank and does not go through Realisation A/c.
d) The official key writes 'Joya'; the partner's name in the question is Zoya.

(ii) Calculate the final settlement with the partners [2 Marks]

Answer:

Hima and Zoya will receive Rs. 56,225 and Rs. 64,985 respectively as final payment.
Bhanu will bring in Rs. 27,510 to settle his debit balance.
Check of cash: 32,000 + 43,200 + 15,000 + 33,000 + 27,510 - 10,000 - 7,500 - 12,000 (Hima's loan) = Rs. 1,21,210 = 56,225 + 64,985.

Teacher's Note:
a) Workmen's Compensation Reserve with no claim belongs to partners in their ratio.
b) The asset taken over by a partner is debited to that partner's Capital A/c.
c) A partner with a debit balance must bring in cash to settle.
d) Always check that the bank balance is exactly used up at the end.

Question 9
Raman, Shivam and Namita are partners sharing profits and losses in the ratio of 1:1:2. On 31^st March, 2024, their books showed the following balances:

On 1^st April, 2024, they adopted the fluctuating capital method of accounting, thereby transferring the current account balances to their capital accounts.
Their partnership deed provided for the following:
Interest on capital to be allowed @ 10% per annum.
A monthly allowance of Rs. 8,000, Rs. 6,000 and Rs. 4,000 to be allowed to Raman, Shivam and Namita respectively.
Interest on loan taken from a partner to be allowed at 10% per annum. Additional Loan was taken from Shivam on 1^st October, 2024 amounting to Rs. 50,000.
During the year ending 31^st March, 2025, the firm earned a net profit of Rs. 5,00,000 before allowing interest on Shivam's loan.
For the year ending 31^st March, 2025 you are required to:

(i) Prepare Partners' Capital a/c [6 Marks]

Answer:

Partners' Capital Accounts

Working Notes:
1. Opening capitals after transfer of current accounts: Raman 3,00,000; Shivam 3,50,000; Namita 7,50,000.
2. Interest on capital @ 10%: Raman 30,000; Shivam 35,000; Namita 75,000. Total = Rs. 1,40,000.
3. Allowances for 12 months: Raman 96,000; Shivam 72,000; Namita 48,000. Total = Rs. 2,16,000.
4. Interest on Shivam's loan = 1,50,000 × 10% + 50,000 × 10% × 6/12 = 15,000 + 2,500 = Rs. 17,500.
5. Distributable profit = 5,00,000 - 17,500 - 1,40,000 - 2,16,000 = Rs. 1,26,500, shared 1:1:2 = 31,625; 31,625; 63,250.

Teacher's Note:
a) Under the fluctuating capital method, all items are posted to the Capital A/c.
b) Interest on a partner's loan is a charge, so deduct it before appropriations.
c) Interest on capital is on the capital after the current account transfer.
d) The official key's working line mislabels the figures; 2,16,000 is the allowances and 1,40,000 is interest on capital.

(ii) Pass adjusting entry for interest on loan from Shivam. [1 Mark]

Answer:

Journal

Teacher's Note:
a) Interest on a partner's loan is credited to the Loan A/c, not the Capital A/c.
b) The deed rate of 10% applies, not the 6% rate of the Act.
c) The additional loan earns interest only for 6 months.
d) This interest is charged to the Profit and Loss A/c.

(iii) Prepare Shivam's loan account. [2 Marks]

Answer:

Shivam's Loan Account

Teacher's Note:
a) A loan from a partner is a liability, so the balance is on the credit side.
b) The additional loan is credited on the date it was received.
c) Interest that is due but not paid is added to the loan balance.
d) Check the closing balance: 1,50,000 + 50,000 + 17,500 = Rs. 2,17,500.

(iv) Pass Journal entries for transferring the current account balances of Shivam and Namita to their capital accounts. [1 Mark]

Answer:

Journal

Teacher's Note:
a) A debit balance in the current account reduces capital, so Capital A/c is debited.
b) A credit balance in the current account increases capital, so Capital A/c is credited.
c) Raman's current account is transferred in the same way as Namita's.
d) The official key writes 'Nimita'; the partner's name is Namita.

OR

(A) Saoli and Paoli are partners in a firm sharing profits and losses equally. The trading profit for the year ending 31^st March, 2025 was Rs. 51,800. [4 Marks]
Other information:
(a) Interest on drawings: Saoli Rs. 1,200 and Paoli Rs. 1,000.
(b) Interest on Paoli's loan to the firm, not debited in the Profit & Loss a/c Rs. 6,000.
(c) Interest on capital: Saoli Rs. 20,000 and Paoli Rs. 15,000.
(d) Salary to partners: Saoli Rs. 15,000 and Paoli Rs. 10,000.
Prepare Profit & Loss Appropriation account for the year ended 31^st March, 2025.

Answer:

Profit and Loss Appropriation Account for the year ended 31.03.2025

Working Notes:
1. Profit available = 51,800 - 6,000 + 2,200 = Rs. 48,000
2. Total claims = Interest on capital 35,000 + Salary 25,000 = Rs. 60,000
3. Profit is less than the claims, so each claim is reduced in the ratio 48,000 : 60,000 = 4/5.
4. Interest on capital: Saoli 20,000 × 4/5 = 16,000; Paoli 15,000 × 4/5 = 12,000
5. Salary: Saoli 15,000 × 4/5 = 12,000; Paoli 10,000 × 4/5 = 8,000

Teacher's Note:
a) Interest on a partner's loan is a charge, so deduct it from the profit first.
b) When profit is not enough, reduce interest on capital and salary in proportion.
c) No profit is left to share, so there is no 'profit transferred' line.
d) Check that both sides total Rs. 48,000.

OR

(B) Das, Roy and Sen are partners in a firm. The profit of the firm, for the year ended 31^st March, 2025, was Rs. 1,20,000 which was equally distributed among them, without providing for the following provisions of the partnership deed: [6 Marks]
(a) Roy had guaranteed that the firm would earn a profit of at least Rs. 1,35,000. Any shortfall in these profits would be personally compensated by him.
(b) Profits to be shared in the ratio of 2:2:1.
(c) Sen is guaranteed by the firm that his share of profits, in any given year, would be a minimum of Rs. 30,000.
You are required to pass the necessary Journal entries to rectify the error in accounting on 1^st April 2025.

Answer:

Journal

Working Notes:
1. Shortfall in firm's profit = 1,35,000 - 1,20,000 = Rs. 15,000, brought in by Roy.
2. Profit of Rs. 1,35,000 in 2:2:1: Das 54,000; Roy 54,000; Sen 27,000.
3. Sen's deficiency = 30,000 - 27,000 = Rs. 3,000, borne by Das and Roy equally = 1,500 each.
4. Net effect: Das + 12,500; Roy - 2,500; Sen - 10,000.

Teacher's Note:
a) Apply the partner's guarantee to the firm first, then the firm's guarantee to a partner.
b) A guarantee given by the firm is borne by the other partners in their profit-sharing ratio.
c) The Profit and Loss Adjustment A/c must close with no balance.
d) A single net entry (Roy and Sen debited, Das credited) is also correct.

Question 10

(A) During the year 2023-24, Nikoy Ltd. registered with an authorised capital of 5,00,000 equity shares of Rs. 10 each. It issued 2,00,000 equity shares, the same year, to which 95% applications were subscribed.
During the year 2024-25, Nikoy Ltd.
(a) Purchased Land & Building costing Rs. 5,00,000 from Agro Housing Ltd. Purchase consideration was settled by issuing sufficient number of Equity shares at 25% premium.
(b) Issued 10,000 Equity Shares to promoters at par.
(c) Invited applications for 20,000 Equity Shares of Rs. 10 each at 25% premium. Entire money was payable on applications. Applications were received for 16,000 shares. Since it did not fulfil the provisions of the Companies' Act 2013, regarding Minimum Subscription, the entire application money was refunded within 15 days.
(d) The company incurred Rs. 22,000 as share issue expenses.
You are required to:

(i) Pass necessary journal entries for the year 2024-25. [7 Marks]

Answer:

Journal of Nikoy Ltd.

Working Notes:
1. Shares issued to Agro Housing Ltd. = 5,00,000 / 12.50 = 40,000 shares. Capital = 4,00,000; Premium = 1,00,000.
2. Application money received = 16,000 × 12.50 = Rs. 2,00,000.
3. Minimum subscription is 90% of the issue = 18,000 shares. Only 16,000 shares were applied for, so all money is refunded.
4. Write-off: Securities Premium of Rs. 1,00,000 covers the share issue expenses (22,000) and 78,000 of the incorporation cost. The remaining 22,000 of incorporation cost goes to the Statement of Profit and Loss.

Teacher's Note:
a) Number of shares = Purchase consideration / Issue price (face value + premium).
b) If minimum subscription (90%) is not received, all application money must be refunded.
c) Section 52 allows Securities Premium to write off share issue expenses and preliminary expenses.
d) Part (iii) is consistent with this: the share issue expenses are closed against Securities Premium.

(ii) Calculate the Subscribed Capital of Nikoy Ltd. as at 31^st March, 2025. [2 Marks]

Answer:
Subscribed Capital:
Subscribed and fully paid up
2,40,000 Equity Shares of Rs. 10 each = Rs. 24,00,000
(Shares: 1,90,000 from 2023-24 + 40,000 to Agro Housing Ltd. + 10,000 to promoters = 2,40,000 shares)

Teacher's Note:
a) In 2023-24, 95% of 2,00,000 = 1,90,000 shares were subscribed.
b) Shares issued for assets and to promoters are also part of subscribed capital.
c) The refunded issue of 20,000 shares is not counted, as no shares were allotted.
d) Show the number of shares and the face value clearly.

(iii) Prepare the share issue expenses account. [1 Mark]

Answer:

Share Issue Expenses Account

Teacher's Note:
a) Share issue expenses are first paid in cash and then written off.
b) Securities Premium is used to write them off under Section 52.
c) After the write-off the account has no balance.
d) The debit and credit totals must both be Rs. 22,000.

OR

(B) Maconie Ltd. issued 50,000 Equity Shares of Rs. 10 each at Rs. 15, payable as follows:
(a) On Application, Rs. 6 including premium of Rs. 2
(b) On Allotment, Rs. 5 including balance of premium
(c) Remaining amount on First and Final call after 3 months of shares being allotted
Applications were oversubscribed. Applications for 5,000 shares were rejected and money refunded immediately, and the remaining applications were allotted on pro rata basis in the ratio of 7:5.

Journal of Maconie Ltd.

You are required to:

(i) Complete the entries no. 1, 2, 4 and 7 along with the missing information represented by '?'. [8 Marks]

Answer:

Journal of Maconie Ltd.

Working Notes:
1. Shares applied = 50,000 allotted + pro rata applicants (50,000 × 7/5 = 70,000) + 5,000 rejected = 75,000 shares.
2. Application money = 75,000 × 6 = Rs. 4,50,000
3. Share Capital on application = 50,000 × 4 = Rs. 2,00,000; Premium = 50,000 × 2 = Rs. 1,00,000; Refund = 5,000 × 6 = Rs. 30,000
4. Excess applied to allotment = 70,000 × 6 - 50,000 × 6 = 4,20,000 - 3,00,000 = Rs. 1,20,000
5. Allotment received = 2,50,000 - 1,20,000 + 8,000 (calls in advance) = Rs. 1,38,000
6. Interest on calls in advance = 8,000 × 12/100 × 3/12 = Rs. 240 (Table F rate of 12% p.a. for 3 months)

Teacher's Note:
a) Pro rata ratio 7:5 means 7 shares were applied for every 5 shares allotted.
b) Excess application money is first adjusted against allotment.
c) Calls in advance received at allotment are adjusted when the call becomes due.
d) Table F allows interest on calls in advance at 12% p.a.

(ii) Pass journal entries to pay and close Interest on Calls-in-Advance Account. [2 Marks]

Answer:

Journal

Teacher's Note:
a) Interest on calls in advance is an expense of the company.
b) It is paid to the shareholders through the Shareholders' A/c.
c) At the year end it is transferred to the Statement of Profit and Loss.
d) Interest on calls in advance is payable even if there is no profit.

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) Belrise Industries, an auto ancillary company, plans to raise Rs. 2,150 crore through a public issue of equity shares. The funds will primarily be used to partly repay its debt. (Source: Economic Times)
Which ratios would be impacted by the decision of the Belrise Industries? [1 Mark]
P Debt to Equity Ratio
Q Inventory Turnover Ratio
R Trade Receivable Turnover Ratio
S Interest Coverage Ratio
(a) Only P
(b) Only Q and R
(c) Only R and S
(d) Only P and S

Answer: (d) Only P and S

Teacher's Note:
a) Issuing equity and repaying debt lowers debt and raises equity, so the Debt to Equity Ratio changes.
b) Less debt means less interest, so the Interest Coverage Ratio changes.
c) Inventory and receivables are not affected by this decision.
d) Link each ratio to the items in its formula.

(ii) Equity shares capital of Royal Ltd. increased from Rs. 40,00,000 to Rs. 50,00,000. The percentage change is: [1 Mark]
(a) 25%
(b) 33·33%
(c) 20%
(d) 40%

Answer: (a) 25%

Percentage change = (50,00,000 - 40,00,000) / 40,00,000 × 100 = 25%

Teacher's Note:
a) Percentage change is always calculated on the base (old) figure.
b) Dividing by the new figure gives 20%, which is a common mistake.
c) This is the method used in a comparative statement.
d) Write the formula before putting in the figures.

(iii) State whether interest received on calls-in-arrear by a company is considered as Operating, Investing or Financing activity. [1 Mark]

Answer:
Financing Activity.

Teacher's Note:
a) Calls-in-arrear relate to share capital, which is a financing item.
b) So interest received on calls-in-arrear is shown under financing activities.
c) Do not confuse it with interest received on investments, which is investing.
d) Classify cash flows by the item they come from.

(iv) Given below is an extract of the Cash flow statement of ILO Ltd. [1 Mark]

You are required to find out the missing information represented by '?'.

Answer:
Closing cash and cash equivalent on 31^st March, 2025 = 17,612 - 13 = Rs. 17,599
Opening cash and cash equivalent on 1^st April, 2023 = 17,612 - 23 = Rs. 17,589

Teacher's Note:
a) Closing cash = Opening cash + Net increase (or - net decrease).
b) The closing cash of 2023-24 is the opening cash of 2024-25.
c) A figure in brackets means a decrease.
d) Both missing figures must be found for the mark.

(v) "The current ratio estimates a firm's capacity of paying short-term or current liabilities, including payables and debts, with its short-term or current assets.
A current ratio less than 1.00 implies that the business's debts due within 12 months are more significant than its assets. Conversely, a ratio greater than 1.00 indicates that the company has sufficient assets to cover its short-term obligations." (Source: Economic Times, May 16, 2025)
Based on the above extract, explain why a very high current ratio might not always indicate an optimal financial health. [1 Mark]

Answer:
A high current ratio shows strong liquidity, but a very high ratio may mean the company is not using its assets efficiently. Too much capital may be tied up in current assets like inventory or receivables, which do not earn enough return. So the components of current assets should be studied to judge how well assets are used.

Teacher's Note:
a) Key words examiners look for: idle funds, too much capital tied up in current assets.
b) Very high inventory or receivables can make the ratio look good while cash is stuck.
c) Liquidity and profitability must be balanced.
d) One clear reason is enough for one mark.

Question 12 [3 Marks]
The pie chart below shows the Equity and Liabilities of Moonside Ltd. as at 31^st March, 2025.

[Figure: Pie chart of Equity and Liabilities of Moonside Ltd.: Share Capital 38%; Reserves/Surplus 6%; Short Term Borrowings 8%; Bank Loan 8%; Outstanding Liabilities 10%; Trade Payables 12%; 8% Debentures 18%.]

You are required to prepare the Equity and Liability side of Common Size Statement of Moonside Ltd. as at 31^st March, 2025, when the total of the Equity and Liabilities side is Rs. 10,00,000.

Answer:

Common Size Statement of Moonside Ltd. (Equity and Liabilities) as at 31.03.2025

Teacher's Note:
a) Each amount = Percentage × 10,00,000 / 100.
b) 8% Debentures and the bank loan are combined as Long-term Borrowings (18% + 8% = 26%).
c) Outstanding liabilities are shown as Other Current Liabilities.
d) Check that the percentages add up to 100.

Question 13 [6 Marks]
Answer any three of the following questions:

(i) Calculate the Debt to Equity ratio from the given information:

Answer:
Working Capital = Current Assets - Current Liabilities
2,00,000 = Current Assets - 3,50,000, so Current Assets = Rs. 5,50,000
Total Assets = Non-current Assets + Current Assets = 8,00,000 + 5,50,000 = Rs. 13,50,000
Debt = Total Assets - Shareholders' Funds - Current Liabilities = 13,50,000 - 6,00,000 - 3,50,000 = Rs. 4,00,000
Debt to Equity Ratio = Debt / Equity = 4,00,000 / 6,00,000 = 0.67:1

Teacher's Note:
a) Debt means long-term debt only, so current liabilities are left out.
b) Equity means shareholders' funds.
c) Find current assets from working capital first.
d) Write the answer as a ratio, for example 0.67:1.

(ii) Calculate the inventory turnover ratio if:
Cost of Revenue from operations is Rs. 3,20,000.
Gross profit is 20% of Revenue from Operations.
Closing inventory is 4 times of opening inventory.
Opening inventory is 10% of Revenue from operations.

Answer:
Revenue from Operations = Cost of Revenue from Operations / 80% = 3,20,000 / 0.80 = Rs. 4,00,000
Opening Inventory = 10% of 4,00,000 = Rs. 40,000
Closing Inventory = 4 × 40,000 = Rs. 1,60,000
Average Inventory = (40,000 + 1,60,000) / 2 = Rs. 1,00,000
Inventory Turnover Ratio = Cost of Revenue from Operations / Average Inventory = 3,20,000 / 1,00,000 = 3.2 times

Teacher's Note:
a) Gross profit is 20% of sales, so cost is 80% of sales.
b) Average inventory = (Opening + Closing) / 2.
c) Inventory turnover uses cost of revenue, not revenue.
d) Write the answer in 'times'.

(iii) Calculate the operating ratio from the information given below.

Answer:
Cost of Revenue from Operations = Opening Inventory + Purchases + Direct Expenses - Closing Inventory
= 20,000 + 80,000 + 8,000 + 3,000 - 9,000 = Rs. 1,02,000
Revenue from Operations = Cost of Revenue from Operations + Gross Profit = 1,02,000 + 48,000 = Rs. 1,50,000
Operating Expenses = Depreciation + Amortisation = 18,000 + 6,000 = Rs. 24,000
Operating Ratio = (Cost of Revenue from Operations + Operating Expenses) / Revenue from Operations × 100
= (1,02,000 + 24,000) / 1,50,000 × 100 = 84%

Teacher's Note:
a) Wages and carriage inward are direct expenses and go into cost of revenue.
b) Depreciation and amortisation are both operating expenses.
c) The official key shows 80% because it leaves out amortisation of Rs. 6,000; including it gives 84%.
d) Find revenue from operations by adding gross profit to cost of revenue.

(iv) The Quick ratio of the company is 2:1. State if the following would improve, reduce or not change the ratio:
(a) Bills receivable discounted dishonoured on due date.
(b) Debentures issued for purchase of Plant and machinery

Answer:
(a) No change. Trade receivables (a quick asset) increase and bank (a quick asset) decreases by the same amount.
(b) No change. Plant and machinery is a non-current asset and debentures are a non-current liability, so quick assets and current liabilities are not affected.

Teacher's Note:
a) Quick assets = Current assets - Inventory - Prepaid expenses.
b) If one quick asset rises and another falls by the same amount, the ratio does not change.
c) Non-current items do not affect the quick ratio.
d) Give the reason for each part, not just the answer.

Question 14 [6 Marks]
From the following Balance Sheets of Kiosk Ltd. you are required to prepare a Cash Flow Statement (As per AS 3) for the period ended 2024-25.

Balance Sheets of Kiosk Ltd. As at 31^st March, 2025 and 31^st March, 2024

Additional Information:
(i) A machinery costing Rs. 30,000 (depreciation provided thereon Rs. 10,000) was sold at a loss of Rs. 3,000
(ii) Tax provided for the year 2024 -25 Rs. 32,000
(iii) 8% Debentures were redeemed on 31.3.2025
(iv) Interest received on current investments was Rs. 2,500

Answer:

Cash Flow Statement of Kiosk Ltd. for the year ended 31.3.2025

Working Notes:
1. Net profit before tax = Increase in Statement of P/L (1,80,000 - 1,00,000 = 80,000) + Provision for tax 32,000 = Rs. 1,12,000
2. Tax paid: Opening provision 1,35,000 + Provided 32,000 - Closing provision 95,000 = Rs. 72,000
3. Machinery A/c: Opening 5,85,000 - Cost of machine sold 30,000 + Purchase = Closing 8,15,000, so Purchase = Rs. 2,60,000
4. Sale of machinery = Book value (30,000 - 10,000) - Loss 3,000 = Rs. 17,000
5. Accumulated Depreciation A/c: Opening 35,000 - 10,000 (on machine sold) + Depreciation for the year = Closing 65,000, so Depreciation = Rs. 40,000
6. Interest on debentures = 2,00,000 × 8% = Rs. 16,000 (debentures redeemed only at the year end)

Provision for Tax Account

Machinery Account

Accumulated Depreciation Account

Teacher's Note:
a) Start from net profit before tax, so add back the provision for tax made this year.
b) Find hidden figures (purchase of machinery, depreciation, tax paid) through ledger accounts.
c) The official key treats current investments as a working capital item; some books show them under investing activities, but the net change in cash stays Rs. 35,000.
d) Check: the closing cash of Rs. 1,50,000 must match the balance sheet.

OR

(A) Prepare a Cash flow statement showing cash generated from the operation of Solex Ltd. for the year ended 31.3.2025. [3 Marks]
Net profit for the year ended 31.3.2025 was Rs. 1,25,000 after considering the following items:
Depreciation on plant: Rs. 17,500
Transfer to general reserve: Rs. 13,500
Provision for tax: Rs. 15,000
Provision for doubtful debt: Rs. 1,600
Note: All Debtors are good.
Position of Current assets & current liabilities:

Answer:

Cash Flow Statement of Solex Ltd. (Cash generated from operations) for the year ended 31.03.2025

Teacher's Note:
a) Transfer to reserve and provision for tax are added back to get profit before tax.
b) Depreciation and provision for doubtful debts are non-cash charges, so they are added back.
c) Marketable securities are cash equivalents, so they are not a working capital change.
d) The official key shows the same result, Rs. 1,62,600, by adding the provision into net profit before tax.

OR

(B) Following is the information provided for Creation Ltd. for the year ended 31.3.2025: [3 Marks]
(a) Equity share capital of Rs. 10 each increased from Rs. 10,00,000 to Rs. 15,00,000.
(b) 12%, 3,000 Debentures of Rs. 100 each redeemed on 30.9.2024.
(c) Proposed dividend on equity shares for the previous year was Rs. 1,50,000.
(d) 12%, 20,000 Preference shares of Rs. 100 each issued at par on 31.3.2025.
(e) Out of the equity share capital issued, Rs. 1,00,000 issued for consideration other than cash for purchase of machinery.
You are required to ascertain cash flow from the financing activity.

Answer:

Cash Flow from Financing Activities of Creation Ltd. for the year ended 31.3.2025

Teacher's Note:
a) Shares issued for machinery bring no cash, so only Rs. 4,00,000 of equity is a cash inflow.
b) Interest on debentures is only for 6 months, up to the date of redemption.
c) The official key shows preference shares as Rs. 2,00,000 and the result as Rs. 1,32,000; 20,000 shares × Rs. 100 is Rs. 20,00,000, so the correct net inflow is Rs. 19,32,000.
d) Last year's proposed dividend is paid this year, so it is an outflow.

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) Which one of the following keys is used to uniquely identify a record in a table? [1 Mark]
(a) Foreign Key
(b) Primary Key
(c) Composite Key
(d) Alternate Key

Answer: (b) Primary Key

Teacher's Note:
a) A primary key has a unique value for every record.
b) It cannot be left blank (NULL).
c) A foreign key links two tables; it does not identify records uniquely in its own table.
d) Each table has only one primary key.

(ii) Which one of the following keys is the standard short key in MS Excel to 'Paste'? [1 Mark]
(a) Ctrl + Z
(b) Ctrl + V
(c) Ctrl + X
(d) Ctrl + Y

Answer: (b) Ctrl + V

Teacher's Note:
a) Ctrl + C copies, Ctrl + X cuts and Ctrl + V pastes.
b) Ctrl + Z undoes and Ctrl + Y redoes the last action.
c) These short keys work in most Windows programs.
d) Learn them in pairs to remember them easily.

(iii) What is table in a database? [1 Mark]

Answer:
A table is a structured collection of related data arranged in rows (records) and columns (fields).

Teacher's Note:
a) Mention both rows and columns for the full mark.
b) Rows are called records or tuples.
c) Columns are called fields or attributes.
d) A database can have many related tables.

(iv) How do you write a formula in a spreadsheet? [1 Mark]

Answer:
Select the cell, type the equal sign (=) and then write the formula, for example =A1+B1, and press Enter.

Teacher's Note:
a) Every formula must start with the = sign.
b) Use cell references instead of typing numbers.
c) Press Enter to see the result in the cell.
d) Without the = sign, the entry is treated as text.

(v) How is a cell range specified in a spreadsheet? [1 Mark]

Answer:
A cell range is specified by writing the address of the top-left cell, then a colon (:), then the address of the bottom-right cell of the range, for example A1:C5. It can also be selected by dragging from the first cell to the last cell.

Teacher's Note:
a) The colon (:) joins the first and last cell of a range.
b) A1:C5 covers columns A to C and rows 1 to 5.
c) Ranges are used in functions like =SUM(A1:A10).
d) Give an example to make the answer clear.

Question 16 [3 Marks]

(i) List any three data types used in SQL.

Answer:
1. Numeric data type, for example INT
2. Character and String data type, for example CHAR(n) or VARCHAR(n)
3. Date and Time data type, for example DATE

Teacher's Note:
a) A data type tells the database what kind of value a column can store.
b) Give one example of each data type.
c) CHAR has a fixed length, while VARCHAR has a variable length.
d) Other data types include DECIMAL and TIME.

(ii) Define Composite Attribute with suitable examples.

Answer:
A composite attribute is an attribute that can be divided into smaller, more specific attributes. Examples: Address (House No., Street, City, PIN code) and Name (First Name, Middle Name, Last Name).

Teacher's Note:
a) A composite attribute is made of sub-parts.
b) Show the sub-parts in the example to prove it can be divided.
c) An attribute that cannot be divided is a simple attribute.
d) Two examples make the answer complete.

Question 17
Answer any three of the following questions.

(i) Differentiate between Desktop Database and Server Database. [2 Marks]

Answer:

Teacher's Note:
a) Compare both databases on the same point in each row.
b) Number of users and cost are the key points of difference.
c) MS Access is an example of a desktop database.
d) Two correct points of difference earn full marks.

(ii) What is the use of 'Sort' and 'Filter' option in accounting spreadsheets? [2 Marks]

Answer:
Sort: It arranges the data in ascending or descending order, for example by date or amount.
Filter: It shows only the data that meets a given condition and hides the rest, for example only the entries of one customer.

Teacher's Note:
a) Sort changes the order of the data.
b) Filter hides the rows that do not meet the condition.
c) Filtering does not delete any data.
d) Give one accounting example for each.

(iii) Define Entity and Attribute. [2 Marks]

Answer:
Entity: An entity is a real-world object, person, concept or thing about which data can be stored and managed in a database, for example a Student or an Employee.
Attribute: An attribute is a characteristic or property of an entity that describes it, for example Roll No. or Name of a Student.

Teacher's Note:
a) An entity becomes a table in a database.
b) Attributes become the columns of that table.
c) Give one example of each.
d) Show how the attribute belongs to the entity.

(iv) Why is a Foreign Key used in a database? [2 Marks]

Answer:
1. A foreign key acts as a link between two related tables.
2. It helps to avoid repeating the same data across many tables and keeps the data consistent.

Teacher's Note:
a) A foreign key in one table refers to the primary key of another table.
b) It keeps the relationship between tables correct.
c) Two clear points earn the full 2 marks.
d) A foreign key can have repeated values.

Question 18
Cakes & Bakes runs a bakery that sells sandwiches, cookies, muffins and pastries. The raw material is sourced from a well-known supplier and fresh items are prepared every day for the customers. The cost of each item also includes the cost of cutlery and paper napkins. During the festive season, the bakery gives small discounts to its customers.
The spreadsheet given below is a summary of its Purchases, Sales and Unsold stock for the month of October, 2023:

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 the total sales of sandwiches in cell H2. [2 Marks]

Answer:
=E2*(F2-G2)
Or =I2+K2
Result: 220 × (105 - 5) = Rs. 22,000

Teacher's Note:
a) Sales = Number of items sold × (List price - Discount).
b) The second formula uses Sales = Cost of items sold + Profit.
c) Every formula must begin with the = sign.
d) Use brackets so the subtraction is done first.

(ii) Give the formula to calculate the cost of cookies sold in cell I3. [2 Marks]

Answer:
=B3*C3-(B3-E3)*C3
Or =D3-J3
Or =H3-K3
Or =E3*C3
Result: 220 × 50 = Rs. 11,000

Teacher's Note:
a) Cost of items sold = Total cost - Cost of unsold stock.
b) It can also be found as Number of items sold × Cost price per item.
c) Any one correct formula earns full marks.
d) Check the result: 12,500 - 1,500 = 11,000.

(iii) Write the formula to calculate the cost of unsold stock of Muffins in cell J4. [2 Marks]

Answer:
=(B4*C4)-I4
Or =D4-I4
Result: 13,200 - 12,000 = Rs. 1,200

Teacher's Note:
a) Cost of unsold stock = Total cost - Cost of items sold.
b) It is also (Items prepared - Items sold) × Cost price = 30 × 40.
c) Refer to cells, not typed numbers, so the formula updates itself.
d) Check that the answer is 1,200.

(iv) (a) Give the formula to calculate the festival discount on the sale of pastries in cell G5. [1 Mark]

Answer:
=F5-(H5/E5)
Or =F5-((D5-J5+K5)/E5)

Teacher's Note:
a) Actual selling price per item = Total sales / Number of items sold.
b) Discount = List price - Actual selling price.
c) Put H5/E5 in brackets to make the order of working clear.
d) The second formula rebuilds sales from cost and profit.

(b) Calculate the amount of festival discount per pastry in cell G5. [1 Mark]

Answer:
Discount per pastry = 95 - (18,000 / 200) = 95 - 90 = Rs. 5

Teacher's Note:
a) First find the actual price per pastry: 18,000 / 200 = 90.
b) Then subtract it from the list price of Rs. 95.
c) The answer matches the Rs. 5 discount on other items.
d) Show the working to earn the mark.