CA Foundation Accounts Important Question - Jan 26
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CA Foundation Jan 26 Important Question Other Subjects Blogs :
Question 1:
Outstanding Expenditure is a nominal Account.
Solution:
Question 2:
Book keeping and accounting are not synonymous terms; they are different from each other.
Solution:
Question 3:
Define Measurement and Valuation Principles in brief.
Solution:
Question 4:
(a) Briefly explain the following Concepts of Accounting:
(i) Money Measurement Concept
(ii) Periodicity Concept.
(b) Differentiate between Provisions and Contingent Liabilities
Solution:
Question 5:
M/s Raj Yog & Co. runs a cafe. They renovated. some of the old cabins. Because of this renovation some space was made free and number of cabins was increased from 25 to 28. The total expenditure incurred was ₹ 50,000 and was treated as a revenue expenditure.
Solution:
Question 6:
State With reasons, whether the following statements are True or False:
The debit notes issued are used to prepare Sales Return Book
Solution:
Question 7:
Prepare Sales Book of M/s. Alpha of Kanpur for March, 2024
Mar. 5 Sold to M/s. ABC 10 pieces of Chairs @ ₹5,000/- each less Trade Discount 5%.
Mar.12 Sold to M/s. PQR 25 pieces of Tables @₹2,000/- each less Trade Discount 10%.
Mar.18 Sold to M/s. MTB 5 pieces of Recliner Chairs @ ₹11000/- each less Trade Discount 10%. Payment received through cash.
Mar.28 Sold to M/s. LMS 50 pieces of cupboards @ ₹10,000/- each less Trade Discount 20%.
Solution:
Question 8:
Write out the Journal Entries to rectify the following errors, using a suspense Account.
(1) Goods of the value of ₹15,000 returned by Mr. Aman were entered in the Sales Day Book and posted therefrom to the credit of his account;
(2) An amount of ₹7,500 entered in the Sales Returns Book, has been posted to the debit of Mr. Ashish, who returned the goods;
(3) The total of “Discount Allowed” column in the Cash Book for the month of June,2025 amounting to ₹27,500 was not posted, though correctly recorded in Debtors Account.
(4) Bad Debts aggregating ₹8,000 were written off during the year in the Sales ledger but were not adjusted in the General Ledger.
(5) A sale of ₹30,000 made to Ms. Aavya was correctly entered in the Sales Day Book but wrongly posted to the debit of Ms. Aadya as ₹ 3,000;
(6) Supplier account has been overcast by Rs. 225.
Solution:
Question 9:
Pass the Journal entries to record/rectify the following transactions in the books of Mr. Dutt. Suspense account may be used, if required:
| (i) | Sale of goods to Mahesh at the list price of ₹ 1,80,000/- less 10% trade discount. Out of the amount due 50% is received, out of which two-third is received by cheque and the balance amount is received in cash. CGST and SGST applicable is 6% each. |
| (ii) | One of the debtors, Mr. X has agreed to pay his dues of ₹ 3,000/- to Mr. C who is a creditor of Mr. Dutt with the same amount being due to him. |
| (iii) | Employees have been given inventory having selling price of ₹ 1,00,000 (Cost price ₹ 75,000) on the eve of Deepawali as a gift. CGST and SGST applicable is 6% each. |
| (iv) | Sale of ₹ 2,500/- made to Mr. Kamal Kumar has been debited to Mrs. Kamla Rani. |
| (v) | A second hand machinery was purchased and its overhauling charges paid are ₹ 15,000/-. The accountant debited the overhaul charges to Repairs and Maintenance Account. Depreciation on machinery has been charged at 10%. |
| (vi) | A purchase of ₹ 151 from Mr. X was entered in Purchase Day Book as ₹ 15 and posted to Mr. X account as ₹ 51. |
| (vii) | R has been issued a credit note allowing rebate of ₹ 6,000/- as goods supplied to him was found defective. CGST and SGST charged @ 6% each. |
| (viii) | S was also given a credit note of ₹ 2,000/- for making prompt payment (For outstanding amount of goods sold to him. CGST and SGST charge on the sale was @ 6%). |
| (ix) | An accrual of telephone charges for ₹ 2,538 has been completely omitted. |
| (x) | A cheque of ₹ 25,390 issued to Mr. C. Dass (shown under trade payables) towards his dues has been wrongly debited to the purchases. |
Solution:
Question 10:
Write short note on: Importance of bank reconciliation to an industrial unit.
Solution:
Question 11:
According to the cash-book of Arun there was balance of ₹ 8,90,000 in his bank on 30th June, 2025. On investigation you find that :
(i) Cheques amounting to ₹ 1,20,000 issued to creditors have not been presented for payment till the date.
(ii) Cheques paid into bank amounting to ₹ 2,21,000 out of which cheques amounting to ₹ 1,10,000 only collected by bank up to 30th June 2025.
(iii) A dividend of ₹ 8,000 and rent amounting to ₹ 1,20,000 received by the bank and entered in the pass-book but not recorded in the cash book.
(iv) Insurance premium (up to 31st December, 2024) paid by the bank ₹ 5,400 not entered in the cash book.
(v) The payment side of the cash book had been under cast by ₹ 1,000.
(vi) Bank charges ₹ 300 shown in the pass book had not been entered in the cash book.
(vii) A bill payable of ₹ 40,000 had been paid by the bank but was not entered in the cash book and bill receivable for ₹ 12,000 had been discounted with the bank at a cost of ₹ 200 which had also not been recorded in cash book.
You are required:
(1) To make the appropriate adjustments in the cash book, and
(2) To prepare a statement reconciling it with the bank pass book.
Solution:
Question 12:
Puneet closed his books of account on 31stMarch, each year. Inventory taking for the year ended 31st March, 2025 was completed by 10th April, 2025 on which date value of the stock available in godown was of ₹ 4,50,000 at cost.
Following are the details of transactions that took place between 31st March, 2025 and 10th April, 2025:
(i) Goods sold to customers ₹ 1,10,000.
(ii) Sales return ₹ 10,000.
(iii) Purchases ₹ 85,000 (Including Cash Purchases ₹ 10,000).
(iv) Purchases return amounted to ₹ 2,500.
(v) Goods costing 20,000 received in March, for sale on consignment basis, out of which 60% of goods had been sold by 10th April. These sales are not included in above sales.
(vi) After the stock was taken, it was found that there was certain very old slow- moving items costing ₹ 16,000, which should be taken at ₹ 9,500 to ensure disposal to an interested customer.
Goods are sold at a profit margin of 25% on cost. Ascertain the value of inventory for inclusion in the final accounts for the year ended 31st March, 2025.
Solution:
Question 13:
From the following particulars, ascertain the value of inventories as on 31st March, 2025:
| Inventory as on 1st April, 2024 | 1,76,900 |
| Purchases | 9,64,000 |
| Manufacturing Expenses | 1,90,000 |
| Selling Expenses | 78,500 |
| Administrative Expenses | 25,000 |
| Financial Expenses | 24,900 |
| Sales | 15,37,000 |
(i) At the time of valuing inventory as on 31st March, 2024, a sum of ₹ 7,500 was written off on a particular item remaining in the balance, which was originally purchased for ₹ 70,000 and was sold during the year for ₹ 65,000. Barring the transaction relating to this item, the gross profit earned during the year was 20% on sales.
(ii) On 15th March, 2025, the goods of the sale value of ₹ 20,000 (included in above sales) were sent on sale or return basis to a customer, the period of approval being four weeks. He returned 40% of the goods on 10th April, 2025, approving the rest.
Solution:
Question 14:
The Machinery Account of a Factory showed a balance of ₹ 95 Lakhs on 1st April 2023.
Depreciation is written off if the Factory is closed on 31st March every year and @ 10% per annum under the Diminishing Balance Method. On 1st September 2023 a new machine was acquired at a cost of ₹ 14 Lakhs and ₹ 44,600 was incurred on the same day as installation charges for erecting the machine. On 1st September 2023 a machine which had cost ₹ 21,87,000 on 1st April 2021 was sold for ₹ 3,75,000. Another machine which had cost ₹ 21,85,000 on 1st April 2022 was scrapped on 1st September 2023 and it realized nothing.
Prepare Machinery Account for the year ended 31st March 2024. Allow the same rate of depreciation as in the past and calculate depreciation to the nearest multiple of a rupee. Also show all the necessary working notes.
Solution:
Question 15:
Machine Hour Rate method of calculating depreciation
Solution:
Question 16:
Discuss the expenses directly attributable to the cost of property, plant and equipment. Also, the expenses that do not form a part of cost of cost of asset.
Solution:
Question 17:
On October, 2024, Samar sells goods to Amar for ₹ 25,000 plus IGST @ 18% and draws two bills of exchange on him; the first bill fort ₹ 15,000 for 2 months and second bill for the balance for 3 months. Amar accepts and returns these bills to Samar. Both the bills are sent to the bank for collection on 1st October, 2024. In due course, Samar receives the information from the bank on the due date of the respective bill that the bill for ₹ 15,000 has been duly met and the other bill has been dishonored. Noting charges paid on the dishonor of second bill are ₹ 500. Pass the journal entries in the books of Samar along with narration.
Solution:
Question 18:
For mutual accommodation of himself and Gagan, Aman drew upon Gagan a bill of ₹7,500 at 3 months on 01.04.2024. Gagan accepted the bill and returned to Aman who discounted it immediately @ 8% p.a. According to agreement, Aman and Gagan shared the proceeds as 2 : 1.
On the date of maturity Aman remitted his share to Gagan who honoured the bill by payment.
Show journal entries in the books of Aman and Gagan.
Solution:
Question 19:
Charu decided to start business of fashion garments under the name of M/s. Designer Wear on 1st April, 2023. She had a saving of about ₹ 10,00,000. She invested ₹ 3,00,000 out of her savings and borrowed an equal amount from the bank. She purchased a commercial space for ₹ 5,00,000 and further spent ₹ 1,00,000 on its renovation to make it ready for business.
Loan and interest repaid by her in the first year are as follows:
30th June, 2023 - ₹ 15,000 principal+ ₹ 9,000 interest
30th September, 2023 - ₹ 15,000 principal+ ₹ 8,550 interest
31st December, 2023 - ₹ 15,000 principal+ ₹ 8,100 interest
31st March, 2024 - ₹ 15,000 principal+ ₹ 7,650 interest.
In view of further capital requirement, she transferred ₹ 2,00,000 from her saving bank account to the bank account of the business. She paid a security deposit of ₹ 7,000 for telephone connection. Furniture of ₹ 10,000 was purchased, All payments were made by cheque and all receipts in cash were deposited in the bank.
At the end of the year, her business showed the following results:
| Particulars | Amount | Particulars | Amount |
| Total Sales | 20,00,000 | Total Purchases | 17,00,000 |
| Electricity Expenses paid | 40,000 | Telephone Charges | 50,000 |
| Cartage Outwards | 60,000 | Travelling Expenses | 45,000 |
| Entertainment Expenses | 5,000 | Maintenance Expenses | 25,000 |
| Misc. Expenses | 15,000 | Electricity Expenses Payable | 20,000 |
Other Information:
(i) She withdrew ₹ 5,000 by cheque each month for her personal expenses.
(ii) Depreciation on building @ 5% p.a. and oil furniture @ 10% p.a.
(iii) Closing stock in hand as on 31st March, 2024: ₹ 5,50,000
Prepare trading account, profit and loss account for the year ended 31-3-2024 and Balance Sheet as on that date.
Solution:
Question 20:
One of your clients Mr. Hari Om asked you to finalize his account for the year ended 31st March,2025. As a basis for the audit, Mr. Hariom furnished you with the following statement:
| Dr. | Dr. | |
| Hari Om's Capital | 23,340 | |
| Hari Om's Drawings | 8,460 | |
| Hari Om's Drawings | 11,250 | |
| Sales | 41,250 | |
| Due from customers | 7,950 | |
| Purchases | 18,885 | |
| Purchase Return | 3,960 | |
| Loan from Bank | 3,840 | |
| Trade Expense | 10,500 | |
| Trade Payable | 7,920 | |
| Bills Payable | 1,500 | |
| Salaries and Wages | 9,000 | |
| Cash at Bank | 3,390 | |
| Opening Inventory | 3,960 | |
| Rent and Rates | 6,945 | |
| Sales Return | 1,470 | |
| 81,810 | 81,810 |
The closing inventory was `8,612. Mr. Hari om claims that he has recorded every transaction correctly as the trial balance is tallied. Check the accuracy of the above trial balance and give reasons for the errors, if any.
Solution:
Question 21:
M/s Mcgraw, Profit and loss account showed a net profit of ₹ 32,00,000, after considering the closing stock of ₹ 30,00,000 on 31st March, 2025. Subsequently the following information was obtained from scrutiny of the books:
(i) Purchases for the year included ₹ 1,20,000 paid for new electric fittings for the shop.
(ii) M/s Manas gave away goods valued at ₹ 3,20,000 as free samples for which no entry was made in the books of accounts.
(iii) Invoices for goods amounting to ₹ 20,00,000 have been entered on 25th March, 2025, but the goods were not included in stock.
(iv) In March, 2025 goods of ₹ 16,00,000 sold and delivered were taken in the sales for April, 2025.
(v) Goods costing ₹ 6,00,000 were sent on sale or return in March, 2024 at a margin of profit of 33-1/3% on cost. Though approval was given in April, 2025 these were taken as sales for March, 2025.
You are required to determine the adjusted net profit for the year ended on 31.3.2025 and calculate the value of stock on 31st March, 2025.
Solution:
Question 22:
Summary of Receipts and Payments of AMA Society for the year ended 31st March, 20X2 are as follows:
| Receipts | Amount | Payments | Amount |
| Subscription Received | 5,00,000 | Payment for Medicine Supply | 3,00,000 |
| Donation Raised for meeting revenue expenditure | 1,50,000 | Honorarium to Doctors | 1,00,000 |
| Interest on Investments @ 9% p.a. | 90,000 | Salaries | 2,80,000 |
| Charity Show Collection | 1,25,000 | Sundry Expenses | 10,000 |
| Equipment Purchase | 1,50,000 | ||
| Charity Show Expenses | 15,000 |
Additional Information:
| Particulars | 01.04.20X1 | 31.03.20X2 |
| Subscription due | 15,000 | 22,000 |
| Subscription received in advance | 12,000 | 7,000 |
| Stock of medicine | 1,00,000 | 1,50,000 |
| Amount due for medicine supply | 90,000 | 1,30,000 |
| Value of equipment | 2,10,000 | 3,00,000 |
| Value of building | 5,00,000 | 4,80,000 |
| Cash Balance | 80,000 | 90,000 |
| Opening Balance of Capital Fund | 18,03,000 |
You are required to prepare:
(i) Income and Expenditure Account for the year ended 31st March, 20X2.
(ii) Balance Sheet as on 31st March, 20X2
Solution:
Question 23:
The following is the Receipts and Payments Account of a Sports Club for the year ended 31st December, 2025.
| Receipts | ₹ | Payments | ₹ |
| To Balance b/d | 7,500 | By Salaries | 14,000 |
| To Subscriptions (including ₹ 2,000 for the year 2024) | 40,000 | By Match Expenses | 28,000 |
| To Donations | 15,000 | By Sports Materials | 15,000 |
| To Life Membership Fees | 35,000 | By Printing & Stationery | 12,000 |
| To Sale of Furniture at book value | 5,000 | By Honorarium | 5,000 |
| To Entrance Fees | 10,000 | By Furniture | 15,000 |
| To Interest on 10% Investments for the full year | 20,000 | By Magazines & Journals | 10,000 |
| To Match Fund | 40,000 | By Books | 35,000 |
| To Donation for Building Fund | 45,000 | By Municipal Taxes | 6,000 |
| To Sale of Newspapers | 2,500 | By Balance c/d | 80,000 |
| Total | 2,20,000 | Total | 2,20,000 |
Additional Information:
(i) The position of the Club on January 1, 2025 was as follows :
Subscriptions due ₹ 3,000
Furniture ₹ 10,000
Books ₹ 20,000
Building ₹ 1,25,000
Stock of Sports Materials ₹ 4,500
Creditors for Printing ₹ 2,500
(ii) The Club has 1,000 members each paying an annual subscription of ₹ 50. 20 members paid their subscription in advance in 2024. In the year 2025, subscription was received in advance from 15 members.
(iii) Municipal Taxes paid on 1st April every year.
(iv) One member donated a Billiard Table worth ₹ 50,000.
(v) Books were worth ₹ 46,000 on 31st December, 2025 and stock of sports materials on that date amounted to ₹ 4,000.
Prepare Income and Expenditure Account for the year ended 31st December, 2025 and Balance Sheet as on that date.
Solution:
Question 24:
From the following income and expenditure account of a Club for the year ending 31stMarch, 2024, you are required to prepare receipt and payment account for the year ending 31stMarch, 2024 and Balance Sheet as on 1st April, 2023.
Income and Expenditure Account For the year ending 31st March, 2024
| Expenditure | Amount (₹) | Income | Amount (₹) |
| To Lawn Maintenance | 42,000 | By subscription | 1,05,000 |
| To General Expenses | 13,000 | By Admission fees | 12,000 |
| To Stationery (depreciation) | 1,500 | By Sports material (Sale of second-hand material) | 2,400 |
| To Depreciation on Sport material | 22,000 | By Entertainment | 14,000 |
| To Honorarium | 10,400 | ||
| To Excess of income over Expenditure | 44,500 |
Additional Information:
| Particulars | 1st April, 2023 (₹) | 31st March, 2024 (₹) |
| Cash at bank | 60,000 | |
| Stock of sports material | 30,000 | |
| Tournament fund (after deducting tournament expenses of ₹ 14,000) | 6,000 | |
| Donations for club building | 1,40,000 | |
| Subscription due | 10,000 | 15,000 |
| Stationery stock | 4,000 |
Stationery was depreciated by 25% and Sports material by 50%.
Solution:
Question 25:
Following are the details of Assets and Liabilities of Mr. Sarthak for the year ended 31st March, 2023 and 31 March, 2024:
| 31st March,2023 (₹) | 31st March,2023(₹) | |
| Assets: | ||
| Building | 2,00,000 | ? |
| Furniture | 75,000 | ? |
| Inventory | 1,05,000 | 1,95,000 |
| Sundry Debtors | 68,000 | 94,000 |
| Cash at Bank | 72,500 | 86,800 |
| Cash in hand | 2,400 | 3,800 |
| Liabilities: | ||
| Loans | 1,50,000 | 1,25,000 |
| Sundry Creditors | 58,400 | 79,500 |
It was decided to depreciate Building by 5% p.a. and Furniture by 10% p.a. On 1st June, 2023 an additional capital of ₹ 40,000 was brought in the business. Proprietor has withdrawn @ ₹ 2,500 p.m. for meeting the family expenses.
Prepare Statement of Affairs as on 31stMarch, 2023 and 31stMarch, 2024. Find the profit or loss earned by Mr. Sarthak for the year ended 31stMarch, 2024.
Solution:
Question 26:
Ankur keeps his books of accounts by single entry system. However, he is able to give you the following lists of his assets and liabilities in the beginning as well as at the end of the year ended 31st March, 2024:
| On 1st April, 2023 | On 31st March, 2024 | |
| Cash in hand | 1,750 | 1,400 |
| Cash at bank | 20,000 | - |
| Bank Overdraft | - | 1,800 |
| Bills Receivable | 15,000 | 25,000 |
| Stock | 93,500 | 98,700 |
| Debtors | 60,000 | 70,000 |
| Furniture and Fittings | 65,000 | 65,000 |
| Creditors | 45,000 | 31,000 |
| Bills Payable | 5,000 | Nil |
Ankur introduced ₹ 10,000 as fresh capital on 1st October, 2023. He also withdrew ₹ 5,000 every month for his household expenses.
During the year, there was no sale or fresh purchase of furniture and fittings. Ascertain the profit earned by Ankur during the year ended 31st March, 2024 after depreciating furniture and fittings @ 10% per annum and creating a provision for bad debts @ 5% on debtors.
Solution:
Question 27:
Rama, Krishna and Raghu shared profits and losses in the ratio of 5:3:2. They took out a Joint Life Policy in 20X1 for ₹ 50,000, a premium of ₹ 3,000 being paid annually on 10th June. The surrender value of the policy on 31st December of various years was as follows:
| 20X1 | Nil |
| 20X2 | ₹ 900 |
| 20X3 | ₹ 2,000 |
| 20X4 | ₹ 3,600 |
Rama retired on 15th April 20X5 and the policy was surrendered. You are required to prepare a Joint Life Policy Account from 20X1 to 20X5 (assuming the Policy Account is maintained at surrendered value basis).
Solution:
Question 28:
The partnership deed of a firm consisting of 3 partners - Alfa, Beta and Gamma (profit sharing ratio being 2:1:1) and whose fixed capitals are ₹ 90,000, ₹ 36,000 and ₹ 24,000 respectively provides as follows:
(i) The partners be allowed interest @ 8% p.a. on their fixed capitals, but no interest to be allowed on undrawn profits or charged on drawings.
(ii) That upon the death of a partner, the goodwill of the firm be valued at 2 years purchase of the average net profit (after charging interest on capital) for the 3 years to 31st December preceding the death of a partner.
(iii) That an insurance policy of ₹ 75,000 each was taken in individual names of each partner. The premium was charged against the profits of the firm. The surrender value of the policy was 20% of the sum assured.
(iv) Upon the death of a partner, he is to be credited with his share of the profits, interest on capitals, etc. calculated upto 31st December following his death.
(v) That the share of the partnership policy and goodwill be credited to a deceased partner as on 31st December following his death.
(vi) That the partnership books to be closed annually on 31st December.
Alfa died on 30th September, 2024. The amount standing to the credit of his current account as on 31st December, 2023 was ₹ 15,000 and from that date to the date of death he had withdrawn₹ 45,000 from the business.
An unrecorded liability of ₹ 18,000 was discovered on 30th September, 2024 and it was decided to record it and immediately pay it off.
The trading results of the firm (before charging interest on capital) had been as follows:
| 2021 | Profit ₹ 88,020 |
| 2022 | Profit ₹ 79,410 |
| 2023 | Loss ₹ 24,960 |
| 2024 | Profit ₹ 40,410 |
You are required to prepare an account showing the amount due to Alfa's legal heir as of 31 December 2024.
Note: Impact for unrecorded liability not to be given in earlier years.
Solution:
Question 29:
A, B and C are partners sharing profits and losses in the ratio of 2:2:1 respectively. The Balance Sheet of the firm as at 31st March, 2025 is as follows:
| Liabilities | ₹ | Assets | ₹ | |
| Capital Accounts: | Fixed Assets | 2,00,000 | ||
| A | 1,46,000 | Current Assets: | ||
| B | 54,000 | Stock | 1,25,000 | |
| C | 50,000 | Debtors | 1,25,000 | |
| Total Capital | 2,50,000 | Cash | 5,000 | |
| C’s Loan Account | 25,000 | Advance to B | 20,000 | |
| Mrs. A’s Loan A/c | 50,000 | |||
| Sundry Creditors | 1,25,000 | |||
| Provision for Bad Debts | 25,000 | |||
| Total | 4,75,000 | Total | 4,75,000 |
The firm was dissolved on 31st March, 2025. After preparing the Balance Sheet as on 31st March, 2025; it was discovered that purchases amounting to ₹ 20,000 in March, 2025 were not recorded in the books, though the goods were received during March, 2025.
Fixed Assets realised ₹ 1,00,000, Stock ₹ 1,05,000 and Debtors ₹ 1,02,500. Creditors were paid after deduction of discount @2%. The realisation expenses amounted ₹ 5,400. A agreed to take over the loan of Mrs. A. B is insolvent and his estate is unable to contribute anything. Prepare Realisation A/c, Partners Capital A/c and Cash A/c applying the principles of Garner v. Murray.
Solution:
Question 30:
P, Q and R wee partners sharing profit & losses in the ratio of 3:2:1. They decided to dissolve the business as on 31st Mrach,2024 when their Balance Sheet was as follows:
| Liabilities | Amount (₹) | Assets | Amount (₹) | |
| Capital A/c: | Land & Building | 4,85,000 | ||
| P | 3,55,000 | Machinery | 1,88,000 | |
| Q | 2,20,000 | Furniture | 1,05,000 | |
| R | 1,25,000 | 7,00,000 | Stock | 55,800 |
| General Reserve | 1,50,000 | Trade Debtors | 1,56,000 | |
| Employees Provident Found | 60,000 | Cash & Bank | 44,200 | |
| Trade Creditors | 1,24,000 | |||
| 10,34,000 | 10,34,000 |
The following information is given to you:
(i) There was an unrecorded investment which was sold for ₹ 30,000.
(ii) One of the creditors agreed to take over some items of furniture of Book value ₹ 25,000 at ₹ 24,000. The rest of the creditors were paid at a discount of 5%.
(iii) Out of the trade debtors ₹ 9,000 proved bad, remaining were fully realized.
(iv) The other assets were realised as under:
| Land & Building | ₹ 5,25,000 |
| Machinery | ₹ 1,70,000 |
| Furniture | Remaining taken over by P at ₹ 75,000 |
| Stock | ₹ 60,000 |
(v) Expenses of dissolution amounted to ₹ 18,700.
(vi) There was an outstanding bill for repairs which had to be paid for ₹ 3,500.
You are required to prepare:
(1) Realisation A/c
(2) Cash & Bank A/c
(3) Partner’s Capital A/c in the books of partnership firm
Solution:
Question 31:
Fashion Garments Ltd invited applications for issuing 10,000 Equity Shares of ₹ 10 each. The amount was payable as follows:
| (i) On Application | ₹ 1 per share |
| (ii) On Allotment | ₹ 2 per share |
| (iii) On First call | ₹ 3 per share |
| (iv) On Second and final Call | ₹ 4 per share |
The issue was fully subscribed. Ram to whom 100 shares were allotted, failed to pay the allotment money and his shares were forfeited immediately after the allotment. Shyam to whom 150 shares were allotted, failed to pay the first call. His shares were also forfeited after the first call. Afterwards the second and final call was made. Mohan to whom 50 shares were allotted failed to pay the second and final call. His shares were also forfeited. Al the forfeited shares were re-issued at ₹ 9 per share fully paid-up.
Pass necessary Journal entries in the books of Fashion Garments Ltd.
Solution:
Question 32:
Greenrock Limited is a company with an authorized share capital of ₹ 4,00,00,000 in equity shares of ₹ 10 each, of which 30,00,000 shares had been issued and fully paid on 30th June, 2024. The company proposed to make a further issue of 2,60,000 shares of ₹ 10 each at a price of ₹ 12 each, the arrangements for payment being:
(i) ₹ 2 per share payable on application, to be received by 1st July, 2024;
(ii) Allotment to be made on 10th July, 2024 and a further ₹ 5 per share (including the premium) to be payable;
(iii) The final call for the balance to be made, and the money received by 31th March, 2025.
Applications were received for 8,40,000 shares and were dealt with as follows:
(1) Applicants for 40,000 shares received allotment in full;
(2) Applicants for 2,00,000 shares received an allotment of one share for every two applied for; no money was returned to these applicants, the surplus on application being used to reduce the amount due on allotment;
(3) Applicants for 6,00,000 shares received an allotment of one share for every five shares applied for; the money due on allotment was retained by the company, the excess being returned to the applicants; and
(4) The money due on final call was received on the due date.
You are required to record these transactions (including cash items) in the journal of Greenrock limited.
Solution:
Question 33:
What are the advantages and disadvantages of a rights issue?
Solution:
Question 34:
Following notes pertain to the Balance Sheet of PQR Company Limited as at 31st March, 2024.
| ₹ in lakhs | |
| Authorized capital: | |
| 5,00,000 shares of ₹ 100 each | 500 |
| Total | 500 |
| Issued and Subscribed capital : | |
| 5,00,000 shares of ₹ 100 each | 105 |
| 10,000 11% Preference Shares of ₹ 100 each fully paid | 10 |
| Total | 115 |
| Reserves and Surplus: | |
| Revaluation Reserve | 5.20 |
| General Reserve | 25 |
| Capital Redemption Reserve | 25 |
| Securities premium (collected in cash) | 30 |
| Profit and Loss Account (Cr. Balance) | 20 |
On 30th April, 2024, the Company has made final call @ ₹30 each on 1,50,000 equity shares. The call money was received by 31st May, 2024.
Thereafter, on 1st July, 2024 the company decided to issue bonus shares at the rate of 3 equity shares for every 5 equity shares held by way of capitalising its reserves. It decided that there should be minimum usage of balance in Profit & Loss A/c.
On 1st October, 2024, the Company issued Rights shares at the rate of one equity share for every five shares held on that date at a premium of 10%. All the rights shares were accepted by the existing shareholders and the money was duly received by 31st October, 2024.
Show necessary journal entries in the books of the company for bonus issue and rights issue. Also prepare notes on Share Capital & Reserve & Surplus relevant to the Balance Sheet of the company after the issue of bonus shares & rights share.
Solution:
Question 35:
Alpha Limited has an authorized Equity Share Capital of ₹ 20 lakhs divided into equity shares of ₹ 100 each and 10% Redeemable Cumulative Preference Shares of ₹ 5.00 lakhs divided into ₹ 100/- per share. The paid-up equity capital is of ₹ 13,50,000/- and 10% Redeemable Cumulative Preference Shares of 100 each of ₹ 3,00,000/-. Balances in other accounts are: Securities Premium ₹ 35,000/-, Profit & Loss Account ₹ 80,000/- and General Reserve ₹ 4,00,000/-. The Company has investments of the face value of ₹ 40,000/- being carried in the books at a cost of ₹ 45,000/-.
The Company has decided to redeem the Cumulative Preference Shares at 10% premium, partly by making an issue of equity shares of the face value of ₹ 1,50,000/- at a premium of 10%. Investments are sold at 110% of their face value. All preference shareholders have been paid off except 2 holders holding 500 shares.
You are required to pass the necessary Journal Entries for effecting the above transactions. Working should form part of your answer.
Solution:
Question 36:
The following balances appeared in the Books of Silver Stone Ltd. as on 31st December, 2024:
| Amount (₹) | |
| 1,600,000, 10% Preference shares of ₹ 100 each, ₹ 75 paid up | 1,20,00,000 |
| 4,00,000 Equity share of ₹ 100 each fully paid up | 4,00,00,000 |
| Securities Premium | 13,00,000 |
| Capital Redemption Reserve | 84,00,000 |
| General Reserve | 1,70,00,000 |
Under the terms of their issue, the preference shares are redeemable on 31st March,2025 at a premium of 5%. In order to finance the redemption, the company makes a right issue of 1,20,000 equity shares of ₹ 100 each at a premium of 10%, ₹ 25 being payable on application, ₹ 45 (including premium) on allotment and the balance on 1st August, 2025. The issue was fully subscribed and the allotment made on 1st March,2025. The amount due on allotment was duly received by 25th March,2025.
The preference shares were redeemed after fulfilling the necessary conditions of section 55 of the Companies Act, 2023.
You are required to pass the necessary Journal Entries (including narrations) to give effect to the above arrangement. Also prepare the Notes to accounts on Share Capital Reserves and Surplus relevant to the Balance Sheet immediately after the redemption of preference shares as on 31st March, 2025. Ignore date column in Journal.
Solution:
Question 37:
On 1st April 20X1. H Ltd. issued 442, 10% Debentures of ₹ 1000 each at a discount of 10% redeemable at a premium of 5% after 4 years. It was decided to create a Sinking Fund for the purposes of accumulating sufficient funds to redeem the Debentures and to invest in some radily convertible securities yielding 10% interest p.a. Reference to the table shows that ₹ 1.00 p.a. at 10% compound interest amounts to ₹ 4.641 in 4 years. Investments are to be made in the Bonds of ₹ 1000 each available at par.
On 31st March 20X5, the investments realised ₹ 3,40,000 and debentures were redeemed. The bank balance as on that date was ₹ 50,000. Fund Investments Account for 4 years.
Required: Prepare Debenture Redemption Fund Account and Debenture Redemption
Solution:
Question 38:
XYZ Ltd. has issued 2,500, 12% convertible debentures of ₹ 100 each redeemable after a period of five years. According to the terms & conditions of the issue, these debentures were redeemable at a premium of 5%. The debenture holders also had the option at the time of redemption to convert 20% of their holdings into equity shares of ₹ 10 each at a price of ₹ 20 per share and balance in cash. Debenture holders amounting ₹ 50,000 opted to get their debentures converted into equity shares as per terms of the issue. You are required to calculate the number of shares issued and cash paid for redemption of ₹ 50,000 debenture holders.
Solution:
Question 39:
On 1st April 2023, Sapan Ltd. (an unlisted NBFC) took over assets of ₹ 9,00,000 and liabilities of 1,20,000 of Plus Herbs Ltd. for the purchase consideration of ₹ 8,80,000. It paid the purchase consideration by issuing 8% debenture of ₹ 100 each at 10% premium on same date.
Sapan Ltd. issued another 3000, 8% debenture of ₹ 100 at discount of 10% redeemable at premium of 5 % after 5 years. According to the terms of the issue ₹ 30 is payable on application and the balance on the allotment on debentures. It has been decided to write off the entire loss on issue of discount in the current year itself.
You are required to pass the journal entries in the books of Sapan Ltd. for the financial year 2023-24.
Solution:
Question 40:
Well Done Ltd. issued 3,50,000, 12% Debentures of ₹ 100 each at par payable in full on application by 1st April, Application were received for 3,85,000 Debentures. Debentures were allotted on 7th April. Excess money refunded on the same date.
You are required to prepare necessary Journal Entries (including cash transactions) in the books of the company.
Solution:
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