CUET 2026 May 20 Shift 1 Accountancy Question Paper is available for download here. NTA conducted the CUET 2026 exam from 11th May to 31st May.
- CUET 2026 Accountancy exam consists of 50 questions for 250 marks to be attempted in 60 minutes.
- As per the marking scheme, 5 marks are awarded for each correct answer, and 1 mark is deducted for incorrect answer.
Candidates can download CUET 2026 May 20 Shift 1 Accountancy Question Paper with Answer Key and Solution PDF from links provided below.
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CUET 2026 Accountancy May 20 Shift 1 Question Paper with Solution PDF
| CUET May 20 Shift 1 Accountancy Question Paper 2026 | Download PDF | Check Solutions |
Question 1:
In case there is no partnership deed between the partners, then at what rate interest on capital will be provided?
Correct Answer: (D) No interest on capital will be provided.
A partnership deed is the written agreement that sets out the terms of the firm. Interest on capital, salary and similar items are allowed only if the deed says so. When there is no deed, the Indian Partnership Act, 1932 fills the gaps with default rules.
Step 2: Key Rule:
Under the default rules, no interest is allowed on the capital of partners. Interest on capital is a matter of agreement, not a right.
By contrast, interest on a partner's loan to the firm is allowed at 6% p.a. even without a deed.
Step 3: Check option (1).:
8% p.a is the usual rate given in questions when the deed allows interest. Without a deed it is not allowed. So (1) is wrong.
Step 4: Check option (2).:
6% p.a is the default rate on a partner's loan, not on capital. So (2) is wrong.
Step 5: Check option (3).:
12% p.a is not a default rate in the Act. So (3) is wrong.
Step 6: Check option (4).:
With no deed, no interest on capital is provided. So (4) is correct.
Final Answer:
No interest on capital is provided when there is no deed. Option (4). \[ \boxed{4} \]
View Solution
Step 1: Understanding the Concept:A partnership deed is the written agreement that sets out the terms of the firm. Interest on capital, salary and similar items are allowed only if the deed says so. When there is no deed, the Indian Partnership Act, 1932 fills the gaps with default rules.
Step 2: Key Rule:
Under the default rules, no interest is allowed on the capital of partners. Interest on capital is a matter of agreement, not a right.
By contrast, interest on a partner's loan to the firm is allowed at 6% p.a. even without a deed.
Step 3: Check option (1).:
8% p.a is the usual rate given in questions when the deed allows interest. Without a deed it is not allowed. So (1) is wrong.
Step 4: Check option (2).:
6% p.a is the default rate on a partner's loan, not on capital. So (2) is wrong.
Step 5: Check option (3).:
12% p.a is not a default rate in the Act. So (3) is wrong.
Step 6: Check option (4).:
With no deed, no interest on capital is provided. So (4) is correct.
Final Answer:
No interest on capital is provided when there is no deed. Option (4). \[ \boxed{4} \]
Question 2:
If the capital of partners is fixed, then the salary provided to the partner is posted in which of the following account?
Correct Answer: (B) Current Account
Partners can keep their capital accounts in two ways. Under the fixed capital method, the capital account balance stays the same every year. Under the fluctuating capital method, all adjustments go into the capital account itself.
Step 2: Key Rule:
Under fixed capital, all yearly items go to a separate Current Account. These items are salary, commission, interest on capital, interest on drawings, drawings and share of profit or loss.
The capital account changes only when capital is added or withdrawn.
Step 3: Check option (1).:
Salary in the capital account would change its balance every year. That breaks the fixed capital method. So (1) is wrong.
Step 4: Check option (2).:
Salary is credited to the partner's Current Account. So (2) is correct.
Step 5: Check option (3).:
The Profit and Loss Appropriation Account shows salary as a debit item, but it is not where the partner's claim is recorded. So (3) is wrong.
Step 6: Check option (4).:
An Executor's Account is opened for a deceased partner's dues. It has nothing to do with the salary here. So (4) is wrong.
Final Answer:
Salary of a partner is posted to the Current Account under fixed capital. \[ \boxed{\text{Current Account}} \]
View Solution
Step 1: Understanding the Concept:Partners can keep their capital accounts in two ways. Under the fixed capital method, the capital account balance stays the same every year. Under the fluctuating capital method, all adjustments go into the capital account itself.
Step 2: Key Rule:
Under fixed capital, all yearly items go to a separate Current Account. These items are salary, commission, interest on capital, interest on drawings, drawings and share of profit or loss.
The capital account changes only when capital is added or withdrawn.
Step 3: Check option (1).:
Salary in the capital account would change its balance every year. That breaks the fixed capital method. So (1) is wrong.
Step 4: Check option (2).:
Salary is credited to the partner's Current Account. So (2) is correct.
Step 5: Check option (3).:
The Profit and Loss Appropriation Account shows salary as a debit item, but it is not where the partner's claim is recorded. So (3) is wrong.
Step 6: Check option (4).:
An Executor's Account is opened for a deceased partner's dues. It has nothing to do with the salary here. So (4) is wrong.
Final Answer:
Salary of a partner is posted to the Current Account under fixed capital. \[ \boxed{\text{Current Account}} \]
Question 3:
Radha and Rani are partners in a firm. Their capital accounts as on April 01, 2024 showed a balance of Rs. 2,00,000 and Rs. 3,00,000 respectively. On July 01, 2024, Radha introduced additional capital of Rs. 50,000. On October 01, Radha withdrew Rs. 30,000, from her capital. Interest is allowed @ 8% p.a. Calculate the interest payable to Radha on her capital during the financial year 2024-2025.
Correct Answer: (C) Rs 17,800
Interest on capital is charged on the balance of capital for the time it was held. When capital is added or withdrawn during the year, we work out interest separately for each period. The financial year runs from April 1, 2024 to March 31, 2025, which is 12 months.
Step 2: Key Formula:
\[ \text{Interest} = \text{Amount} \times \frac{\text{Rate}}{100} \times \frac{\text{Months}}{12} \]
Step 3: Interest on opening capital:
Opening capital is Rs 2,00,000 for the full 12 months. \[ 200000 \times \frac{8}{100} = 16000 \]
Step 4: Interest on additional capital:
Rs 50,000 was added on July 1, 2024. It stays till March 31, 2025, which is 9 months. \[ 50000 \times \frac{8}{100} \times \frac{9}{12} = 3000 \] This interest is added.
Step 5: Interest lost on withdrawal:
Rs 30,000 was withdrawn on October 1, 2024. It is missing for the last 6 months. \[ 30000 \times \frac{8}{100} \times \frac{6}{12} = 1200 \] This interest is deducted.
Step 6: Total interest:
\[ 16000 + 3000 - 1200 = 17800 \] The other options come from mistakes. Rs 16,000 ignores the changes in capital. Rs 24,000 and Rs 25,800 use wrong balances or periods.
Final Answer:
Interest payable to Radha is Rs 17,800. Option (3). \[ \boxed{\text{Rs } 17{,}800} \]
View Solution
Step 1: Understanding the Concept:Interest on capital is charged on the balance of capital for the time it was held. When capital is added or withdrawn during the year, we work out interest separately for each period. The financial year runs from April 1, 2024 to March 31, 2025, which is 12 months.
Step 2: Key Formula:
\[ \text{Interest} = \text{Amount} \times \frac{\text{Rate}}{100} \times \frac{\text{Months}}{12} \]
Step 3: Interest on opening capital:
Opening capital is Rs 2,00,000 for the full 12 months. \[ 200000 \times \frac{8}{100} = 16000 \]
Step 4: Interest on additional capital:
Rs 50,000 was added on July 1, 2024. It stays till March 31, 2025, which is 9 months. \[ 50000 \times \frac{8}{100} \times \frac{9}{12} = 3000 \] This interest is added.
Step 5: Interest lost on withdrawal:
Rs 30,000 was withdrawn on October 1, 2024. It is missing for the last 6 months. \[ 30000 \times \frac{8}{100} \times \frac{6}{12} = 1200 \] This interest is deducted.
Step 6: Total interest:
\[ 16000 + 3000 - 1200 = 17800 \] The other options come from mistakes. Rs 16,000 ignores the changes in capital. Rs 24,000 and Rs 25,800 use wrong balances or periods.
Final Answer:
Interest payable to Radha is Rs 17,800. Option (3). \[ \boxed{\text{Rs } 17{,}800} \]
Question 4:
Ansh and Abhi are partners sharing profits and losses in the ratio of 3 : 2. Their capital accounts showed balances of Rs. 3,00,000 and Rs. 4,00,000 respectively on April 01, 2024. Calculate interest on Ansh's Capital for the year ending March 31, 2025, if the partnership deed provides for interest on capital @ 8% p.a. and the firm earned a profit of Rs. 14,000 during the year.
Correct Answer: (C) Rs. 6,000
Interest on capital is an appropriation of profit. It can be paid only out of profit. If the profit is smaller than the total interest due, the profit is shared among the partners in the ratio of the interest due to each. Here the profit is Rs 14,000.
Step 2: Interest due on capital:
Ansh: \[ 300000 \times \frac{8}{100} = 24000 \] Abhi: \[ 400000 \times \frac{8}{100} = 32000 \] Total due = Rs 56,000.
Step 3: Compare with profit:
Profit is Rs 14,000, which is less than Rs 56,000. So the full interest cannot be paid. The profit is shared in the ratio 24,000 : 32,000, which is 3 : 4.
Step 4: Ansh's share:
\[ 14000 \times \frac{3}{7} = 6000 \] So Ansh gets Rs 6,000 as interest on capital, and Abhi gets Rs 8,000.
Step 5: Check the options:
Rs 24,000 is the full interest, which cannot be paid from a small profit. Rs 16,000 and Rs 3,000 come from wrong ratios or wrong bases. Only Rs 6,000 fits the rule.
Final Answer:
Interest on Ansh's capital is Rs 6,000. Option (3). \[ \boxed{\text{Rs } 6{,}000} \]
View Solution
Step 1: Understanding the Concept:Interest on capital is an appropriation of profit. It can be paid only out of profit. If the profit is smaller than the total interest due, the profit is shared among the partners in the ratio of the interest due to each. Here the profit is Rs 14,000.
Step 2: Interest due on capital:
Ansh: \[ 300000 \times \frac{8}{100} = 24000 \] Abhi: \[ 400000 \times \frac{8}{100} = 32000 \] Total due = Rs 56,000.
Step 3: Compare with profit:
Profit is Rs 14,000, which is less than Rs 56,000. So the full interest cannot be paid. The profit is shared in the ratio 24,000 : 32,000, which is 3 : 4.
Step 4: Ansh's share:
\[ 14000 \times \frac{3}{7} = 6000 \] So Ansh gets Rs 6,000 as interest on capital, and Abhi gets Rs 8,000.
Step 5: Check the options:
Rs 24,000 is the full interest, which cannot be paid from a small profit. Rs 16,000 and Rs 3,000 come from wrong ratios or wrong bases. Only Rs 6,000 fits the rule.
Final Answer:
Interest on Ansh's capital is Rs 6,000. Option (3). \[ \boxed{\text{Rs } 6{,}000} \]
Question 5:
Select the essential features of partnership from the following:
(A) Partnership is the result of an agreement between partners.
(B) Co-ownership of a property between people amounts to partnership.
(C) Sharing of profits and losses of a business.
(D) Each partner carrying on the business is the principal as well as the agent for all the other partners.
Choose the correct answer from the options given below:
Correct Answer: (D) (A), (C) and (D) only
Section 4 of the Indian Partnership Act, 1932 defines partnership as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.
Step 2: Essential features:
1. There must be an agreement.
2. The agreement is to share profits (and losses) of a business.
3. The business is carried on by all or any of them acting for all, which is mutual agency.
Step 3: Check statement (A).:
Partnership arises from an agreement, not from status. So (A) is an essential feature.
Step 4: Check statement (B).:
The Act says joint ownership of property does not by itself create a partnership. Co-owners may not even run a business. So (B) is NOT a feature.
Step 5: Check statement (C).:
Sharing profits is at the heart of the definition. So (C) is an essential feature.
Step 6: Check statement (D).:
Each partner is an agent of the others and of the firm, and also a principal. This is mutual agency. So (D) is an essential feature.
Final Answer:
Only A, C and D are essential features. Option (4). \[ \boxed{\text{(A), (C) and (D) only}} \]
View Solution
Step 1: Understanding the Concept:Section 4 of the Indian Partnership Act, 1932 defines partnership as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.
Step 2: Essential features:
1. There must be an agreement.
2. The agreement is to share profits (and losses) of a business.
3. The business is carried on by all or any of them acting for all, which is mutual agency.
Step 3: Check statement (A).:
Partnership arises from an agreement, not from status. So (A) is an essential feature.
Step 4: Check statement (B).:
The Act says joint ownership of property does not by itself create a partnership. Co-owners may not even run a business. So (B) is NOT a feature.
Step 5: Check statement (C).:
Sharing profits is at the heart of the definition. So (C) is an essential feature.
Step 6: Check statement (D).:
Each partner is an agent of the others and of the firm, and also a principal. This is mutual agency. So (D) is an essential feature.
Final Answer:
Only A, C and D are essential features. Option (4). \[ \boxed{\text{(A), (C) and (D) only}} \]
Question 6:
If nothing is specified as to how does the new partner acquire his share from the old partners; it may be assumed that he gets it from them:
Correct Answer: (A) In their profit sharing ratio
When a new partner is admitted, he takes a share of profit from the old partners. The part each old partner gives up is called the sacrifice. The ratio of the sacrifices is the sacrificing ratio.
Step 2: Key Rule:
If nothing is said about how the share is taken, the new partner is taken to have got it from the old partners in their old profit sharing ratio. Each old partner then sacrifices in proportion to his old share.
So the sacrificing ratio equals the old ratio.
Step 3: Check option (1).:
This matches the rule. So (1) is correct.
Step 4: Check option (2).:
The gaining ratio is used when a partner retires or dies and the rest gain his share. It is not used on admission. So (2) is wrong.
Step 5: Check option (3).:
Capital contribution ratio has no role in deciding the sacrifice. So (3) is wrong.
Step 6: Check option (4).:
Equal ratio is used only when the partners are told to share equally. So (4) is wrong.
Final Answer:
The new partner gets his share in the old partners' profit sharing ratio. Option (1). \[ \boxed{\text{In their profit sharing ratio}} \]
View Solution
Step 1: Understanding the Concept:When a new partner is admitted, he takes a share of profit from the old partners. The part each old partner gives up is called the sacrifice. The ratio of the sacrifices is the sacrificing ratio.
Step 2: Key Rule:
If nothing is said about how the share is taken, the new partner is taken to have got it from the old partners in their old profit sharing ratio. Each old partner then sacrifices in proportion to his old share.
So the sacrificing ratio equals the old ratio.
Step 3: Check option (1).:
This matches the rule. So (1) is correct.
Step 4: Check option (2).:
The gaining ratio is used when a partner retires or dies and the rest gain his share. It is not used on admission. So (2) is wrong.
Step 5: Check option (3).:
Capital contribution ratio has no role in deciding the sacrifice. So (3) is wrong.
Step 6: Check option (4).:
Equal ratio is used only when the partners are told to share equally. So (4) is wrong.
Final Answer:
The new partner gets his share in the old partners' profit sharing ratio. Option (1). \[ \boxed{\text{In their profit sharing ratio}} \]
Question 7:
According to the Partnership Act 1932, a new partner can be admitted into the firm only with the consent of ................, unless otherwise agreed upon.
Correct Answer: (B) All existing partners
Under Section 31 of the Indian Partnership Act, 1932, a person can be introduced as a partner in a firm only with the consent of all the existing partners, unless the partnership deed says something different.
Step 2: Why the rule exists:
A partnership rests on mutual trust. Each partner is personally liable and acts as an agent for the others. So no one can be forced to work with a new person he has not accepted.
Step 3: Check option (1).:
Majority consent is not enough by default. It is allowed only if the deed says so. So (1) is wrong.
Step 4: Check option (2).:
All existing partners must agree. So (2) is correct.
Step 5: Check options (3) and (4).:
Neither the highest capital nor the largest share gives one partner the power to admit a new partner alone. So (3) and (4) are wrong.
Final Answer:
Consent of all existing partners is needed. Option (2). \[ \boxed{\text{All existing partners}} \]
View Solution
Step 1: Understanding the Concept:Under Section 31 of the Indian Partnership Act, 1932, a person can be introduced as a partner in a firm only with the consent of all the existing partners, unless the partnership deed says something different.
Step 2: Why the rule exists:
A partnership rests on mutual trust. Each partner is personally liable and acts as an agent for the others. So no one can be forced to work with a new person he has not accepted.
Step 3: Check option (1).:
Majority consent is not enough by default. It is allowed only if the deed says so. So (1) is wrong.
Step 4: Check option (2).:
All existing partners must agree. So (2) is correct.
Step 5: Check options (3) and (4).:
Neither the highest capital nor the largest share gives one partner the power to admit a new partner alone. So (3) and (4) are wrong.
Final Answer:
Consent of all existing partners is needed. Option (2). \[ \boxed{\text{All existing partners}} \]
Question 8:
In the absence of any information regarding the acquisition of share in profit of the retiring partner by the remaining partners, it is assumed that they will acquire his/her share in .
Correct Answer: (A) Old Profit Sharing Ratio
When a partner retires, the remaining partners take over the retiring partner's share of profit. The way they divide that share among themselves is called the gaining ratio.
Step 2: Key Formula or Approach:
If the question or the deed says nothing about how the share is taken over, accounting practice assumes a default. The continuing partners take the share in the ratio in which they were already sharing profits, that is, the old profit sharing ratio among themselves.
Step 3: Check option (1) Old Profit Sharing Ratio:
The remaining partners were sharing profits in their old ratio before the retirement. With no other agreement, they simply divide the retiring partner's share in that same ratio. So (1) is CORRECT.
Step 4: Check option (2) New Profit Sharing Ratio:
The new ratio is the result of the retirement. It is not known before the share is taken over, so it cannot be the basis for taking it over. So (2) is wrong.
Step 5: Check options (3) and (4):
No rule says the share is split equally. Also, a ratio that is 'profitable to them' is not a fixed rule and can differ for every partner. So (3) and (4) are wrong.
Final Answer:
In the absence of any information, the remaining partners acquire the retiring partner's share in their old profit sharing ratio. This is option (1). \[ \boxed{\text{Old Profit Sharing Ratio (Option 1)}} \]
View Solution
Step 1: Understanding the Concept:When a partner retires, the remaining partners take over the retiring partner's share of profit. The way they divide that share among themselves is called the gaining ratio.
Step 2: Key Formula or Approach:
If the question or the deed says nothing about how the share is taken over, accounting practice assumes a default. The continuing partners take the share in the ratio in which they were already sharing profits, that is, the old profit sharing ratio among themselves.
Step 3: Check option (1) Old Profit Sharing Ratio:
The remaining partners were sharing profits in their old ratio before the retirement. With no other agreement, they simply divide the retiring partner's share in that same ratio. So (1) is CORRECT.
Step 4: Check option (2) New Profit Sharing Ratio:
The new ratio is the result of the retirement. It is not known before the share is taken over, so it cannot be the basis for taking it over. So (2) is wrong.
Step 5: Check options (3) and (4):
No rule says the share is split equally. Also, a ratio that is 'profitable to them' is not a fixed rule and can differ for every partner. So (3) and (4) are wrong.
Final Answer:
In the absence of any information, the remaining partners acquire the retiring partner's share in their old profit sharing ratio. This is option (1). \[ \boxed{\text{Old Profit Sharing Ratio (Option 1)}} \]
Question 9:
The ratio in which the continuing partners have acquired the share from the deceased partner is known as .
Correct Answer: (D) Gaining Ratio
When a partner dies, his or her share of profit goes to the surviving partners. Each surviving partner gains some extra share.
Step 2: Key Formula or Approach:
The ratio of this gain among the surviving partners is called the Gaining Ratio. It is found for each continuing partner as: Gaining Share = New Share - Old Share.
Step 3: Check option (1) New Ratio:
The new ratio is the total profit sharing ratio after the death. It includes the old share plus the gain. It is not the ratio of the gain alone. So (1) is wrong.
Step 4: Check option (2) Old Ratio:
The old ratio is the ratio before the death. It has nothing to do with the share acquired. So (2) is wrong.
Step 5: Check option (3) Sacrificing Ratio:
The sacrificing ratio is used when a new partner is admitted. The old partners give up (sacrifice) part of their share. It is not used for a death or retirement. So (3) is wrong.
Step 6: Check option (4) Gaining Ratio:
The share that survivors acquire from the deceased partner is divided in the gaining ratio. So (4) is CORRECT.
Final Answer:
The ratio in which continuing partners acquire the share of a deceased partner is the Gaining Ratio. \[ \boxed{\text{Gaining Ratio (Option 4)}} \]
View Solution
Step 1: Understanding the Concept:When a partner dies, his or her share of profit goes to the surviving partners. Each surviving partner gains some extra share.
Step 2: Key Formula or Approach:
The ratio of this gain among the surviving partners is called the Gaining Ratio. It is found for each continuing partner as: Gaining Share = New Share - Old Share.
Step 3: Check option (1) New Ratio:
The new ratio is the total profit sharing ratio after the death. It includes the old share plus the gain. It is not the ratio of the gain alone. So (1) is wrong.
Step 4: Check option (2) Old Ratio:
The old ratio is the ratio before the death. It has nothing to do with the share acquired. So (2) is wrong.
Step 5: Check option (3) Sacrificing Ratio:
The sacrificing ratio is used when a new partner is admitted. The old partners give up (sacrifice) part of their share. It is not used for a death or retirement. So (3) is wrong.
Step 6: Check option (4) Gaining Ratio:
The share that survivors acquire from the deceased partner is divided in the gaining ratio. So (4) is CORRECT.
Final Answer:
The ratio in which continuing partners acquire the share of a deceased partner is the Gaining Ratio. \[ \boxed{\text{Gaining Ratio (Option 4)}} \]
Question 10:
At the time of retirement of a partner, accumulated Profits or Losses are available. To whom these accumulated profits or losses belong to?
Correct Answer: (C) All the partners
Accumulated profits (such as General Reserve or a credit balance of Profit and Loss A/c) and accumulated losses (a debit balance of Profit and Loss A/c) were earned or incurred while all the old partners were in the firm.
Step 2: Key Formula or Approach:
These items belong to all partners of the firm, including the retiring partner, in their old profit sharing ratio. At the time of retirement they are passed on to all partners' capital accounts in the old ratio.
Step 3: Check option (1):
The retiring partner gets only his own share. The remaining partners also have a right to their shares. So (1) is wrong.
Step 4: Check option (2):
The remaining partners cannot take the entire amount. The retiring partner helped earn it. So (2) is wrong.
Step 5: Check option (3):
All partners, including the retiring partner, share the accumulated profit or loss in the old ratio. So (3) is CORRECT.
Step 6: Check option (4):
A future partner had no part in earning these profits, so he has no claim. So (4) is wrong.
Final Answer:
Accumulated profits or losses belong to all partners and are shared in the old ratio. \[ \boxed{\text{All the partners (Option 3)}} \]
View Solution
Step 1: Understanding the Concept:Accumulated profits (such as General Reserve or a credit balance of Profit and Loss A/c) and accumulated losses (a debit balance of Profit and Loss A/c) were earned or incurred while all the old partners were in the firm.
Step 2: Key Formula or Approach:
These items belong to all partners of the firm, including the retiring partner, in their old profit sharing ratio. At the time of retirement they are passed on to all partners' capital accounts in the old ratio.
Step 3: Check option (1):
The retiring partner gets only his own share. The remaining partners also have a right to their shares. So (1) is wrong.
Step 4: Check option (2):
The remaining partners cannot take the entire amount. The retiring partner helped earn it. So (2) is wrong.
Step 5: Check option (3):
All partners, including the retiring partner, share the accumulated profit or loss in the old ratio. So (3) is CORRECT.
Step 6: Check option (4):
A future partner had no part in earning these profits, so he has no claim. So (4) is wrong.
Final Answer:
Accumulated profits or losses belong to all partners and are shared in the old ratio. \[ \boxed{\text{All the partners (Option 3)}} \]
Question 11:
Select the correct sequence of accounts prepared in case of death of a partner.
(A) Prepare the deceased partner's executor's account.
(B) Determine the gaining ratio and new profit sharing ratio among the remaining partners.
(C) Prepare the deceased partner's capital account.
(D) Prepare the Revaluation account, if required.
Choose the correct answer from the options given below:
Correct Answer: (D) (B), (D), (C), (A)
On the death of a partner, the firm must fix the new ratio, revalue assets and liabilities, settle the deceased partner's capital, and finally move the amount due to his executor.
Step 2: Step order in practice:
First find the gaining ratio and new ratio (B). Next prepare the Revaluation account to bring assets and liabilities to current value (D). Then prepare the deceased partner's capital account, which includes his share of goodwill, reserves and the revaluation result (C). Last, transfer the balance to the executor's account (A).
Step 3: Why B comes first:
The gaining ratio is needed to adjust goodwill. Goodwill is adjusted through the capital accounts, so the ratio must be known before them.
Step 4: Why D comes before C:
Profit or loss on revaluation is credited or debited to the deceased partner's capital account. So the Revaluation account must be ready before it.
Step 5: Why C comes before A:
The executor's account shows the final amount payable. That amount is the closing balance of the capital account, so C comes before A.
Step 6: Match with options:
The sequence is B, D, C, A. This is option (4). Option (3) puts the capital account before revaluation, and options (1) and (2) place the executor's account or the ratio at the wrong place.
Final Answer:
The correct sequence is (B), (D), (C), (A). \[ \boxed{\text{(B), (D), (C), (A) (Option 4)}} \]
View Solution
Step 1: Understanding the Concept:On the death of a partner, the firm must fix the new ratio, revalue assets and liabilities, settle the deceased partner's capital, and finally move the amount due to his executor.
Step 2: Step order in practice:
First find the gaining ratio and new ratio (B). Next prepare the Revaluation account to bring assets and liabilities to current value (D). Then prepare the deceased partner's capital account, which includes his share of goodwill, reserves and the revaluation result (C). Last, transfer the balance to the executor's account (A).
Step 3: Why B comes first:
The gaining ratio is needed to adjust goodwill. Goodwill is adjusted through the capital accounts, so the ratio must be known before them.
Step 4: Why D comes before C:
Profit or loss on revaluation is credited or debited to the deceased partner's capital account. So the Revaluation account must be ready before it.
Step 5: Why C comes before A:
The executor's account shows the final amount payable. That amount is the closing balance of the capital account, so C comes before A.
Step 6: Match with options:
The sequence is B, D, C, A. This is option (4). Option (3) puts the capital account before revaluation, and options (1) and (2) place the executor's account or the ratio at the wrong place.
Final Answer:
The correct sequence is (B), (D), (C), (A). \[ \boxed{\text{(B), (D), (C), (A) (Option 4)}} \]
Question 12:
From the following options, select the deductions to be made from the share of a partner at the time of his/her retirement.
(A) Debit balance of his current account
(B) Share of goodwill to be written off
(C) Share of accumulated losses
(D) Share of loss on revaluation of assets and liabilities
Choose the correct answer from the options given below:
Correct Answer: (C) (A), (B), (C) and (D)
The amount paid to a retiring partner is his total credit balance. Anything that reduces his claim is a deduction from his share.
Step 2: Check statement (A):
A debit balance in his current account means he owes the firm. This reduces the amount due to him. So (A) is a deduction.
Step 3: Check statement (B):
The retiring partner's share of goodwill that is written off is debited to his capital account. So (B) is a deduction.
Step 4: Check statement (C):
His share of accumulated losses (such as the debit balance of Profit and Loss A/c) is debited to his capital account. So (C) is a deduction.
Step 5: Check statement (D):
A loss on revaluation is shared by all partners in the old ratio, so his share is debited to his capital account. So (D) is a deduction.
Step 6: Choose the option:
All four items reduce his share. So the answer is option (3).
Final Answer:
All four items, (A), (B), (C) and (D), are deducted from the retiring partner's share. \[ \boxed{\text{(A), (B), (C) and (D) (Option 3)}} \]
View Solution
Step 1: Understanding the Concept:The amount paid to a retiring partner is his total credit balance. Anything that reduces his claim is a deduction from his share.
Step 2: Check statement (A):
A debit balance in his current account means he owes the firm. This reduces the amount due to him. So (A) is a deduction.
Step 3: Check statement (B):
The retiring partner's share of goodwill that is written off is debited to his capital account. So (B) is a deduction.
Step 4: Check statement (C):
His share of accumulated losses (such as the debit balance of Profit and Loss A/c) is debited to his capital account. So (C) is a deduction.
Step 5: Check statement (D):
A loss on revaluation is shared by all partners in the old ratio, so his share is debited to his capital account. So (D) is a deduction.
Step 6: Choose the option:
All four items reduce his share. So the answer is option (3).
Final Answer:
All four items, (A), (B), (C) and (D), are deducted from the retiring partner's share. \[ \boxed{\text{(A), (B), (C) and (D) (Option 3)}} \]
Question 13:
At the time of retirement of a partner, arrange the following accounts in the correct sequence.
(A) Partners' Current A/c
(B) Revaluation A/c
(C) Balance Sheet
(D) Partners' Capital A/c
Choose the correct answer from the options given below:
Correct Answer: (B) (B), (A), (D), (C)
At retirement the adjustments are done through accounts in a fixed order. The final result is shown in the new Balance Sheet.
Step 2: Order of preparation:
First the Revaluation A/c (B) is prepared to record changes in values of assets and liabilities. Next the Partners' Current A/c (A) is adjusted for the items that belong there. Then the Partners' Capital A/c (D) is prepared, where the balances of the earlier accounts are finally moved. Last the Balance Sheet (C) is drawn up with the closing balances.
Step 3: Why the Balance Sheet is last:
The Balance Sheet is a summary of all the account balances after adjustments. It cannot be made before them. So options (3) and (4) are wrong.
Step 4: Why option (1) is wrong:
It puts the Revaluation A/c after the Current A/c. But the revaluation profit or loss must be known first, so that it can be passed on to the partners' accounts.
Step 5: Match with options:
B, A, D, C is option (2).
Final Answer:
The correct sequence is (B), (A), (D), (C). \[ \boxed{\text{(B), (A), (D), (C) (Option 2)}} \]
View Solution
Step 1: Understanding the Concept:At retirement the adjustments are done through accounts in a fixed order. The final result is shown in the new Balance Sheet.
Step 2: Order of preparation:
First the Revaluation A/c (B) is prepared to record changes in values of assets and liabilities. Next the Partners' Current A/c (A) is adjusted for the items that belong there. Then the Partners' Capital A/c (D) is prepared, where the balances of the earlier accounts are finally moved. Last the Balance Sheet (C) is drawn up with the closing balances.
Step 3: Why the Balance Sheet is last:
The Balance Sheet is a summary of all the account balances after adjustments. It cannot be made before them. So options (3) and (4) are wrong.
Step 4: Why option (1) is wrong:
It puts the Revaluation A/c after the Current A/c. But the revaluation profit or loss must be known first, so that it can be passed on to the partners' accounts.
Step 5: Match with options:
B, A, D, C is option (2).
Final Answer:
The correct sequence is (B), (A), (D), (C). \[ \boxed{\text{(B), (A), (D), (C) (Option 2)}} \]
Question 14:
Choose the correct answer from the options given below:
Match List-I with List-II
| List-I | List-II |
|---|---|
| (A) Gaining Ratio | (I) Average Profit X 100/Normal rate of return |
| (B) Value of Goodwill | (II) Old Ratio - New Ratio |
| (C) Sacrificing Ratio | (III) Super Profit X 100/Normal rate of return |
| (D) Capitalised Value of average profit | (IV) New Ratio - Old Ratio |
Correct Answer: (B) (A) - (IV), (B) - (III), (C) - (II), (D) - (I)
These are standard formulae used in retirement and admission of a partner.
Step 2: Match (A) Gaining Ratio:
Gaining share = New share - Old share. So (A) matches (IV) New Ratio - Old Ratio.
Step 3: Match (B) Value of Goodwill:
Under the capitalisation of super profit method, Goodwill = Super Profit x 100 / Normal Rate of Return. So (B) matches (III).
Step 4: Match (C) Sacrificing Ratio:
Sacrificing share = Old share - New share. So (C) matches (II) Old Ratio - New Ratio.
Step 5: Match (D) Capitalised Value of average profit:
Capitalised value = Average Profit x 100 / Normal Rate of Return. So (D) matches (I).
Step 6: Pick the option:
The pairs are A-IV, B-III, C-II, D-I. This is option (2).
Final Answer:
The correct matching is (A)-(IV), (B)-(III), (C)-(II), (D)-(I). \[ \boxed{\text{(A)-(IV), (B)-(III), (C)-(II), (D)-(I) (Option 2)}} \]
View Solution
Step 1: Understanding the Concept:These are standard formulae used in retirement and admission of a partner.
Step 2: Match (A) Gaining Ratio:
Gaining share = New share - Old share. So (A) matches (IV) New Ratio - Old Ratio.
Step 3: Match (B) Value of Goodwill:
Under the capitalisation of super profit method, Goodwill = Super Profit x 100 / Normal Rate of Return. So (B) matches (III).
Step 4: Match (C) Sacrificing Ratio:
Sacrificing share = Old share - New share. So (C) matches (II) Old Ratio - New Ratio.
Step 5: Match (D) Capitalised Value of average profit:
Capitalised value = Average Profit x 100 / Normal Rate of Return. So (D) matches (I).
Step 6: Pick the option:
The pairs are A-IV, B-III, C-II, D-I. This is option (2).
Final Answer:
The correct matching is (A)-(IV), (B)-(III), (C)-(II), (D)-(I). \[ \boxed{\text{(A)-(IV), (B)-(III), (C)-(II), (D)-(I) (Option 2)}} \]
Question 15:
Which Accounting Standard (AS) defines an intangible asset, as an identifiable, non-monetary, without physical existence and held for use in the production or supply of goods or services for rental to others or for administrative purposes?
Correct Answer: (A) AS 26
The question gives the definition of an intangible asset. It is an identifiable, non-monetary asset without physical existence. We need the Accounting Standard that deals with such assets.
Step 2: Recall the list of Accounting Standards.
Goodwill, patents, trademarks, copyrights and licences are intangible assets. In the Indian standards, the standard on Intangible Assets is AS 26. Its full title is "Intangible Assets".
Step 3: Check option 1 (AS 26).
AS 26 deals with intangible assets. It explains how to recognise, measure and amortise them. So option 1 is CORRECT.
Step 4: Check option 2 (AS 27).
AS 27 is "Financial Reporting of Interests in Joint Ventures". It has nothing to do with the definition of intangible assets. So option 2 is WRONG.
Step 5: Check option 3 (AS 28).
AS 28 is "Impairment of Assets". It tells how to test whether an asset is carried above its recoverable amount. It does not define intangible assets. So option 3 is WRONG.
Step 6: Check option 4 (AS 29).
AS 29 is "Provisions, Contingent Liabilities and Contingent Assets". It is about obligations, not intangible assets. So option 4 is WRONG.
Final Answer:
The standard that defines an intangible asset is AS 26.
\[ \boxed{\text{AS 26}} \]
View Solution
Step 1: Understand what the question asks.The question gives the definition of an intangible asset. It is an identifiable, non-monetary asset without physical existence. We need the Accounting Standard that deals with such assets.
Step 2: Recall the list of Accounting Standards.
Goodwill, patents, trademarks, copyrights and licences are intangible assets. In the Indian standards, the standard on Intangible Assets is AS 26. Its full title is "Intangible Assets".
Step 3: Check option 1 (AS 26).
AS 26 deals with intangible assets. It explains how to recognise, measure and amortise them. So option 1 is CORRECT.
Step 4: Check option 2 (AS 27).
AS 27 is "Financial Reporting of Interests in Joint Ventures". It has nothing to do with the definition of intangible assets. So option 2 is WRONG.
Step 5: Check option 3 (AS 28).
AS 28 is "Impairment of Assets". It tells how to test whether an asset is carried above its recoverable amount. It does not define intangible assets. So option 3 is WRONG.
Step 6: Check option 4 (AS 29).
AS 29 is "Provisions, Contingent Liabilities and Contingent Assets". It is about obligations, not intangible assets. So option 4 is WRONG.
Final Answer:
The standard that defines an intangible asset is AS 26.
\[ \boxed{\text{AS 26}} \]
Question 16:
The Goodwill of a firm is Rs 30,000, when it is valued at three years' purchase of the super profits of the business. Find the normal rate of return, if the firm's capital employed is Rs 5,00,000 and average profits of last five years were Rs 60,000.
Correct Answer: (B) 10%
Under the super profit method, Goodwill = Super Profit \(\times\) Number of years' purchase. Super Profit = Average Profit - Normal Profit. Normal Profit = Capital Employed \(\times\) Normal Rate of Return / 100.
Here the goodwill is known, so we work backwards to the normal rate.
Step 2: Find the super profit.
Goodwill = Super Profit \(\times\) 3.
\[ 30{,}000 = \text{Super Profit} \times 3 \]
\[ \text{Super Profit} = \frac{30{,}000}{3} = 10{,}000 \]
Step 3: Find the normal profit.
Normal Profit = Average Profit - Super Profit.
\[ = 60{,}000 - 10{,}000 = 50{,}000 \]
Step 4: Find the normal rate of return.
\[ \text{Normal Rate} = \frac{\text{Normal Profit}}{\text{Capital Employed}} \times 100 = \frac{50{,}000}{5{,}00{,}000} \times 100 = 10\% \]
Step 5: Check the options.
5% would give a normal profit of Rs 25,000 and a super profit of Rs 35,000, so goodwill would be Rs 1,05,000. 15% would give a normal profit of Rs 75,000, which is more than the average profit, so there would be no super profit. 20% is even higher and also gives no super profit. Only 10% gives goodwill of Rs 30,000.
Final Answer:
The normal rate of return is 10%, which is option 2.
\[ \boxed{10\%} \]
View Solution
Step 1: Understand the concept.Under the super profit method, Goodwill = Super Profit \(\times\) Number of years' purchase. Super Profit = Average Profit - Normal Profit. Normal Profit = Capital Employed \(\times\) Normal Rate of Return / 100.
Here the goodwill is known, so we work backwards to the normal rate.
Step 2: Find the super profit.
Goodwill = Super Profit \(\times\) 3.
\[ 30{,}000 = \text{Super Profit} \times 3 \]
\[ \text{Super Profit} = \frac{30{,}000}{3} = 10{,}000 \]
Step 3: Find the normal profit.
Normal Profit = Average Profit - Super Profit.
\[ = 60{,}000 - 10{,}000 = 50{,}000 \]
Step 4: Find the normal rate of return.
\[ \text{Normal Rate} = \frac{\text{Normal Profit}}{\text{Capital Employed}} \times 100 = \frac{50{,}000}{5{,}00{,}000} \times 100 = 10\% \]
Step 5: Check the options.
5% would give a normal profit of Rs 25,000 and a super profit of Rs 35,000, so goodwill would be Rs 1,05,000. 15% would give a normal profit of Rs 75,000, which is more than the average profit, so there would be no super profit. 20% is even higher and also gives no super profit. Only 10% gives goodwill of Rs 30,000.
Final Answer:
The normal rate of return is 10%, which is option 2.
\[ \boxed{10\%} \]
Question 17:
A, B and C were partners in a firm sharing profits and losses in the ratio of 5:4:1. B died on June 30, 2025. The profit for the previous three years were Rs 68,000 (For 2022-23), Rs 77,000 (For 2023-24), Rs 50,000 (2024-25) while the sales during the year 2024-25 were Rs. 4,00,000 and the sales from April 1, 2025 to June 30, 2025 were Rs. 75,000. Find the profits that the firm must have earned from the date of closing of last year's balance sheet till the date of death of B.
Correct Answer: (C) Rs 9,375
When a partner dies during the year, his share of profit till the date of death is worked out. It is usually found on a time basis or on a sales basis. This question gives the sales figures, so the sales basis is used.
Step 2: Recall the formula.
On the sales basis, the profit till death is calculated on the last year's profit.
\[ \text{Profit till death} = \text{Last year's profit} \times \frac{\text{Sales from the start of the year to the date of death}}{\text{Total sales of last year}} \]
Step 3: Put in the values.
Last year (2024-25) profit is Rs 50,000. Sales from April 1, 2025 to June 30, 2025 are Rs 75,000. Sales of 2024-25 are Rs 4,00,000.
\[ \text{Profit} = 50{,}000 \times \frac{75{,}000}{4{,}00{,}000} \]
\[ = 50{,}000 \times 0.1875 = 9{,}375 \]
Step 4: Check the other options.
Rs 65,000 is the average of the three years profit, which is not the profit for three months. Rs 18,750 and Rs 3,750 do not come from the sales basis formula. If we used the three year average of Rs 65,000 we would get Rs 12,187.50, which is not in the options. So option 3 is the only fit.
Step 5: Note on the ratio 5:4:1.
The ratio 5:4:1 is needed only to find B's share. The question asks for the total profit of the firm, so the ratio is not used.
Final Answer:
The firm must have earned Rs 9,375 till the date of B's death.
\[ \boxed{\text{Rs } 9{,}375} \]
View Solution
Step 1: Understand the concept.When a partner dies during the year, his share of profit till the date of death is worked out. It is usually found on a time basis or on a sales basis. This question gives the sales figures, so the sales basis is used.
Step 2: Recall the formula.
On the sales basis, the profit till death is calculated on the last year's profit.
\[ \text{Profit till death} = \text{Last year's profit} \times \frac{\text{Sales from the start of the year to the date of death}}{\text{Total sales of last year}} \]
Step 3: Put in the values.
Last year (2024-25) profit is Rs 50,000. Sales from April 1, 2025 to June 30, 2025 are Rs 75,000. Sales of 2024-25 are Rs 4,00,000.
\[ \text{Profit} = 50{,}000 \times \frac{75{,}000}{4{,}00{,}000} \]
\[ = 50{,}000 \times 0.1875 = 9{,}375 \]
Step 4: Check the other options.
Rs 65,000 is the average of the three years profit, which is not the profit for three months. Rs 18,750 and Rs 3,750 do not come from the sales basis formula. If we used the three year average of Rs 65,000 we would get Rs 12,187.50, which is not in the options. So option 3 is the only fit.
Step 5: Note on the ratio 5:4:1.
The ratio 5:4:1 is needed only to find B's share. The question asks for the total profit of the firm, so the ratio is not used.
Final Answer:
The firm must have earned Rs 9,375 till the date of B's death.
\[ \boxed{\text{Rs } 9{,}375} \]
Question 18:
C retires and following revaluations took place.
Patents be valued at Rs.8,000; Machinery at Rs.28,000; and Buildings at Rs.25,000.
Find Revaluation Profit/Loss
Balance Sheet of A, B & C as on 31st March, 2025
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
|---|---|---|---|
| Creditors | 11,000 | Buildings | 20,000 |
| Reserve Fund | 6,000 | Machinery | 30,000 |
| A Capital 30,000 B Capital 25,000 C Capital 15,000 | 70,000 | Stock | 10,000 |
| Patents | 11,000 | ||
| Debtors | 8,000 | ||
| Cash | 8,000 | ||
| 87,000 | 87,000 |
Patents be valued at Rs.8,000; Machinery at Rs.28,000; and Buildings at Rs.25,000.
Find Revaluation Profit/Loss
Correct Answer: (D) No Profit, No Loss on Revaluation
On revaluation, an asset that rises in value gives a gain. An asset that falls in value gives a loss. The net effect is the revaluation profit or loss.
Step 2: Work out each asset.
Patents: book value Rs 11,000, new value Rs 8,000. Decrease = Rs 3,000 (loss).
Machinery: book value Rs 30,000, new value Rs 28,000. Decrease = Rs 2,000 (loss).
Buildings: book value Rs 20,000, new value Rs 25,000. Increase = Rs 5,000 (gain).
Step 3: Add the losses and the gain.
Total losses = 3,000 + 2,000 = Rs 5,000.
Total gain = Rs 5,000.
\[ \text{Net} = 5{,}000 - 5{,}000 = 0 \]
Step 4: Check the options.
Rs 10,000 profit and Rs 10,000 loss would need the gain and loss to be far apart, which they are not. Rs 4,000 profit does not match any adding of the three changes. The net is zero, so the last option is right.
Step 5: Note on other items.
Stock, debtors and cash are not revalued. Creditors and the reserve fund do not change either, so they have no effect on the answer.
Final Answer:
There is neither profit nor loss on revaluation.
\[ \boxed{\text{No profit, no loss}} \]
View Solution
Step 1: Understand the concept.On revaluation, an asset that rises in value gives a gain. An asset that falls in value gives a loss. The net effect is the revaluation profit or loss.
Step 2: Work out each asset.
Patents: book value Rs 11,000, new value Rs 8,000. Decrease = Rs 3,000 (loss).
Machinery: book value Rs 30,000, new value Rs 28,000. Decrease = Rs 2,000 (loss).
Buildings: book value Rs 20,000, new value Rs 25,000. Increase = Rs 5,000 (gain).
Step 3: Add the losses and the gain.
Total losses = 3,000 + 2,000 = Rs 5,000.
Total gain = Rs 5,000.
\[ \text{Net} = 5{,}000 - 5{,}000 = 0 \]
Step 4: Check the options.
Rs 10,000 profit and Rs 10,000 loss would need the gain and loss to be far apart, which they are not. Rs 4,000 profit does not match any adding of the three changes. The net is zero, so the last option is right.
Step 5: Note on other items.
Stock, debtors and cash are not revalued. Creditors and the reserve fund do not change either, so they have no effect on the answer.
Final Answer:
There is neither profit nor loss on revaluation.
\[ \boxed{\text{No profit, no loss}} \]
Question 19:
Harish and Munish are partners in a firm sharing profits and losses in the ratio of 3:2. Rakesh is admitted into partnership for 1/3 share in profits. He brings in Rs. 50,000 as capital, but not in a position to bring any amount for his share of goodwill which has been valued at Rs. 15,000. Give necessary journal entry for recording goodwill, when there is no goodwill appearing in the books of the firm.
Correct Answer: (B)
When a new partner cannot bring cash for goodwill, the amount due from him is debited to his Current Account. The sacrificing partners are credited in their sacrificing ratio. No goodwill account is opened because the books show no goodwill.
Step 2: Find the new ratio.
Rakesh gets 1/3. The remaining share is 2/3. This is shared by Harish and Munish in 3:2.
Harish = \(\frac{2}{3} \times \frac{3}{5} = \frac{2}{5}\), Munish = \(\frac{2}{3} \times \frac{2}{5} = \frac{4}{15}\).
Step 3: Find the sacrificing ratio.
Harish sacrifices \(\frac{3}{5} - \frac{2}{5} = \frac{1}{5} = \frac{3}{15}\). Munish sacrifices \(\frac{2}{5} - \frac{4}{15} = \frac{2}{15}\).
Sacrificing ratio = 3:2.
Step 4: Split the goodwill.
The goodwill of Rs 15,000 is given to the old partners in the sacrificing ratio 3:2.
Harish gets \(15{,}000 \times \frac{3}{5} = 9{,}000\). Munish gets \(15{,}000 \times \frac{2}{5} = 6{,}000\).
Rakesh has not paid for it, so this amount is debited to Rakesh.
Step 5: Check option 1.
Debiting Rakesh's Capital A/c would reduce the Rs 50,000 that he actually brought in. His capital should stay at the agreed amount, so the dues go to his Current A/c. So option 1 is WRONG.
Step 6: Check option 2.
Rakesh's Current A/c is debited with Rs 15,000. Harish's Capital A/c is credited with Rs 9,000 and Munish's Capital A/c is credited with Rs 6,000. This is the usual entry when the incoming partner does not bring his goodwill share. So option 2 is CORRECT.
Step 7: Check options 3 and 4.
Option 3 assumes Rs 15,000 of goodwill was paid in cash, but Rakesh is not able to bring any goodwill amount. Option 4 credits Rakesh's capital with Rs 65,000 and debits his current account, which does not pay the old partners at all. So options 3 and 4 are WRONG.
Final Answer:
The correct entry is Rakesh's Current A/c Dr. 15,000 To Harish's Capital A/c 9,000 and To Munish's Capital A/c 6,000.
\[ \boxed{\text{Option 2}} \]
| Date | Particulars | L.F. | Dr. Amount | Cr. Amount |
|---|---|---|---|---|
| Rakesh's Current A/c Dr. | 15,000 | |||
| To Harish's Capital A/c | 9,000 | |||
| To Munish's Capital A/c | 6,000 |
View Solution
Step 1: Understand the concept.When a new partner cannot bring cash for goodwill, the amount due from him is debited to his Current Account. The sacrificing partners are credited in their sacrificing ratio. No goodwill account is opened because the books show no goodwill.
Step 2: Find the new ratio.
Rakesh gets 1/3. The remaining share is 2/3. This is shared by Harish and Munish in 3:2.
Harish = \(\frac{2}{3} \times \frac{3}{5} = \frac{2}{5}\), Munish = \(\frac{2}{3} \times \frac{2}{5} = \frac{4}{15}\).
Step 3: Find the sacrificing ratio.
Harish sacrifices \(\frac{3}{5} - \frac{2}{5} = \frac{1}{5} = \frac{3}{15}\). Munish sacrifices \(\frac{2}{5} - \frac{4}{15} = \frac{2}{15}\).
Sacrificing ratio = 3:2.
Step 4: Split the goodwill.
The goodwill of Rs 15,000 is given to the old partners in the sacrificing ratio 3:2.
Harish gets \(15{,}000 \times \frac{3}{5} = 9{,}000\). Munish gets \(15{,}000 \times \frac{2}{5} = 6{,}000\).
Rakesh has not paid for it, so this amount is debited to Rakesh.
Step 5: Check option 1.
Debiting Rakesh's Capital A/c would reduce the Rs 50,000 that he actually brought in. His capital should stay at the agreed amount, so the dues go to his Current A/c. So option 1 is WRONG.
Step 6: Check option 2.
Rakesh's Current A/c is debited with Rs 15,000. Harish's Capital A/c is credited with Rs 9,000 and Munish's Capital A/c is credited with Rs 6,000. This is the usual entry when the incoming partner does not bring his goodwill share. So option 2 is CORRECT.
Step 7: Check options 3 and 4.
Option 3 assumes Rs 15,000 of goodwill was paid in cash, but Rakesh is not able to bring any goodwill amount. Option 4 credits Rakesh's capital with Rs 65,000 and debits his current account, which does not pay the old partners at all. So options 3 and 4 are WRONG.
Final Answer:
The correct entry is Rakesh's Current A/c Dr. 15,000 To Harish's Capital A/c 9,000 and To Munish's Capital A/c 6,000.
\[ \boxed{\text{Option 2}} \]
Question 20:
Which of the following is not accounted for in the books and shown as an asset?
Correct Answer: (B) Self generated Goodwill
Goodwill is the extra value a firm earns because of its good name, location and customers. An asset is recorded in the books only when it has a measurable cost. The question asks which item is not recorded and not shown as an asset.
Step 2: Check option 1, Purchased Goodwill:
When a firm pays money to buy goodwill, the price paid is a real cost. It is recorded in the books and shown as an intangible asset. So option 1 is wrong.
Step 3: Check option 2, Self generated Goodwill:
Goodwill built up by the firm over time has no measurable cost. Accounting Standard 26 does not allow it to be recorded. It is never shown as an asset. So option 2 is correct.
Step 4: Check option 3, Purchased Assets:
Assets bought by the firm carry a cost. They are recorded and shown on the asset side. So option 3 is wrong.
Step 5: Check option 4, Borrowed Assets:
Borrowed assets are recorded through the loan taken, and what the firm holds is recorded in its books. So option 4 is not the answer.
Final Answer:
Only self generated goodwill has no cost, so it is not recorded or shown as an asset. The answer is option 2. \[ \boxed{2} \]
View Solution
Step 1: Understanding the Concept:Goodwill is the extra value a firm earns because of its good name, location and customers. An asset is recorded in the books only when it has a measurable cost. The question asks which item is not recorded and not shown as an asset.
Step 2: Check option 1, Purchased Goodwill:
When a firm pays money to buy goodwill, the price paid is a real cost. It is recorded in the books and shown as an intangible asset. So option 1 is wrong.
Step 3: Check option 2, Self generated Goodwill:
Goodwill built up by the firm over time has no measurable cost. Accounting Standard 26 does not allow it to be recorded. It is never shown as an asset. So option 2 is correct.
Step 4: Check option 3, Purchased Assets:
Assets bought by the firm carry a cost. They are recorded and shown on the asset side. So option 3 is wrong.
Step 5: Check option 4, Borrowed Assets:
Borrowed assets are recorded through the loan taken, and what the firm holds is recorded in its books. So option 4 is not the answer.
Final Answer:
Only self generated goodwill has no cost, so it is not recorded or shown as an asset. The answer is option 2. \[ \boxed{2} \]
Question 21:
Choose the correct answer from the options given below:
Match List-I with List-II
| List-I | List-II |
|---|---|
| (A) Intangible assets should be written off as early as possible but not exceeding its estimated life in ......... years | (I) 4 |
| (B) AS ..... deals with intangible assets | (II) 10 |
| (C) In the absence of any agreement, Section ...... of the Indian Partnership Act, 1932 is applicable, which states that the retiring partner has an option to receive either interest @ 6% p.a. till the date of payment or such share of profits which has been earned with his/her money (i.e., based on capital ratio). | (III) 26 |
| (D) Section ...... of the Indian Partnership Act 1932 defines partnership. | (IV) 37 |
Choose the correct answer from the options given below:
Correct Answer: (B) (A) - (II), (B) - (III), (C) - (IV), (D) - (I)
Each blank in List-I must be filled with one number from List-II. The numbers are 4, 10, 26 and 37. Each is a fact from the Partnership Act or the accounting standards.
Step 2: Match (A):
Intangible assets like goodwill are written off over their useful life, but not beyond 10 years. So (A) matches (II) 10.
Step 3: Match (B):
Accounting Standard 26 deals with intangible assets. So (B) matches (III) 26.
Step 4: Match (C):
Section 37 of the Indian Partnership Act, 1932 covers the right of an outgoing partner. If no agreement exists, he can take 6% interest or a share of profit earned with his money. So (C) matches (IV) 37.
Step 5: Match (D):
Section 4 of the Act defines partnership as the relation between persons who agree to share the profits of a business run by all or any of them acting for all. So (D) matches (I) 4.
Step 6: Compare with the options:
The correct set is (A)-(II), (B)-(III), (C)-(IV), (D)-(I). This is option 2. Option 1 is wrong because it pairs (A) with 4. Option 3 wrongly pairs (A) with 26. Option 4 wrongly pairs (A) with 37.
Final Answer:
The correct matching is (A)-(II), (B)-(III), (C)-(IV), (D)-(I), which is option 2. \[ \boxed{2} \]
View Solution
Step 1: Understanding the Question:Each blank in List-I must be filled with one number from List-II. The numbers are 4, 10, 26 and 37. Each is a fact from the Partnership Act or the accounting standards.
Step 2: Match (A):
Intangible assets like goodwill are written off over their useful life, but not beyond 10 years. So (A) matches (II) 10.
Step 3: Match (B):
Accounting Standard 26 deals with intangible assets. So (B) matches (III) 26.
Step 4: Match (C):
Section 37 of the Indian Partnership Act, 1932 covers the right of an outgoing partner. If no agreement exists, he can take 6% interest or a share of profit earned with his money. So (C) matches (IV) 37.
Step 5: Match (D):
Section 4 of the Act defines partnership as the relation between persons who agree to share the profits of a business run by all or any of them acting for all. So (D) matches (I) 4.
Step 6: Compare with the options:
The correct set is (A)-(II), (B)-(III), (C)-(IV), (D)-(I). This is option 2. Option 1 is wrong because it pairs (A) with 4. Option 3 wrongly pairs (A) with 26. Option 4 wrongly pairs (A) with 37.
Final Answer:
The correct matching is (A)-(II), (B)-(III), (C)-(IV), (D)-(I), which is option 2. \[ \boxed{2} \]
Question 22:
X and Y are partners in a firm sharing profits in the ratio of 3:2. They admitted Z as a new partner for 1/4 share. The new profit sharing ratio between X and Y will be 2:1. Calculate their sacrificing ratio.
Correct Answer: (A) 2:3
The sacrificing ratio is the ratio of the share each old partner gives up for the new partner. Sacrifice equals old share minus new share.
Step 2: Key Formula:
\[ \text{Sacrifice} = \text{Old share} - \text{New share} \]
Step 3: Find the new shares:
Z gets 1/4, so X and Y share the remaining 3/4 in the ratio 2:1.
\[ X = \frac{3}{4} \times \frac{2}{3} = \frac{1}{2} \]
\[ Y = \frac{3}{4} \times \frac{1}{3} = \frac{1}{4} \]
Step 4: Find the old shares:
Old ratio is 3:2. So X = 3/5 and Y = 2/5.
Step 5: Find the sacrifice:
\[ X = \frac{3}{5} - \frac{1}{2} = \frac{6-5}{10} = \frac{1}{10} \]
\[ Y = \frac{2}{5} - \frac{1}{4} = \frac{8-5}{20} = \frac{3}{20} \]
Make the denominators equal: X = 2/20 and Y = 3/20.
Step 6: Get the ratio:
The sacrificing ratio is 2:3, which is option 1. Option 2 (3:2) is just the old ratio. Option 3 and option 4 do not match the working.
Final Answer:
The sacrificing ratio of X and Y is 2:3. \[ \boxed{2:3} \]
View Solution
Step 1: Understanding the Concept:The sacrificing ratio is the ratio of the share each old partner gives up for the new partner. Sacrifice equals old share minus new share.
Step 2: Key Formula:
\[ \text{Sacrifice} = \text{Old share} - \text{New share} \]
Step 3: Find the new shares:
Z gets 1/4, so X and Y share the remaining 3/4 in the ratio 2:1.
\[ X = \frac{3}{4} \times \frac{2}{3} = \frac{1}{2} \]
\[ Y = \frac{3}{4} \times \frac{1}{3} = \frac{1}{4} \]
Step 4: Find the old shares:
Old ratio is 3:2. So X = 3/5 and Y = 2/5.
Step 5: Find the sacrifice:
\[ X = \frac{3}{5} - \frac{1}{2} = \frac{6-5}{10} = \frac{1}{10} \]
\[ Y = \frac{2}{5} - \frac{1}{4} = \frac{8-5}{20} = \frac{3}{20} \]
Make the denominators equal: X = 2/20 and Y = 3/20.
Step 6: Get the ratio:
The sacrificing ratio is 2:3, which is option 1. Option 2 (3:2) is just the old ratio. Option 3 and option 4 do not match the working.
Final Answer:
The sacrificing ratio of X and Y is 2:3. \[ \boxed{2:3} \]
Question 23:
The capital of the firm of M and N is Rs. 1,00,000 and the market rate of interest is 15%. The annual salary to partners is Rs. 6,000 each. The profits for the last 3 years were Rs. 30,000 (for 2022); Rs. 36,000 (for 2023) and Rs. 42,000 (for 2024). Goodwill is to be valued at 2 years' purchase of the last 3 years' average super profits or 3 years' purchase of the last 2 years' average super profits, whichever is less. Calculate the goodwill of the firm.
Correct Answer: (D) Rs. 18,000
Super profit is the profit above the normal profit. Goodwill is a number of years' purchase of the average super profit. Partners' salary is a cost, so it is deducted from the given profits.
Step 2: Normal profit:
\[ 15\% \times 1{,}00{,}000 = 15{,}000 \]
Step 3: Adjusted profits:
Salary to two partners is 2 x 6,000 = 12,000 a year.
2022: 30,000 - 12,000 = 18,000
2023: 36,000 - 12,000 = 24,000
2024: 42,000 - 12,000 = 30,000
Step 4: Super profits:
2022: 18,000 - 15,000 = 3,000
2023: 24,000 - 15,000 = 9,000
2024: 30,000 - 15,000 = 15,000
Step 5: Method 1: 2 years' purchase of last 3 years' average:
Average = (3,000 + 9,000 + 15,000) / 3 = 9,000.
\[ 2 \times 9{,}000 = 18{,}000 \]
Step 6: Method 2: 3 years' purchase of last 2 years' average:
Average = (9,000 + 15,000) / 2 = 12,000.
\[ 3 \times 12{,}000 = 36{,}000 \]
Step 7: Choose the lesser:
The question says whichever is less. 18,000 is less than 36,000, so goodwill is Rs. 18,000. Option 4 is correct. Rs. 36,000 is the other method's value, and the remaining options do not come from either method.
Final Answer:
Goodwill of the firm is Rs. 18,000. \[ \boxed{18{,}000} \]
View Solution
Step 1: Understanding the Concept:Super profit is the profit above the normal profit. Goodwill is a number of years' purchase of the average super profit. Partners' salary is a cost, so it is deducted from the given profits.
Step 2: Normal profit:
\[ 15\% \times 1{,}00{,}000 = 15{,}000 \]
Step 3: Adjusted profits:
Salary to two partners is 2 x 6,000 = 12,000 a year.
2022: 30,000 - 12,000 = 18,000
2023: 36,000 - 12,000 = 24,000
2024: 42,000 - 12,000 = 30,000
Step 4: Super profits:
2022: 18,000 - 15,000 = 3,000
2023: 24,000 - 15,000 = 9,000
2024: 30,000 - 15,000 = 15,000
Step 5: Method 1: 2 years' purchase of last 3 years' average:
Average = (3,000 + 9,000 + 15,000) / 3 = 9,000.
\[ 2 \times 9{,}000 = 18{,}000 \]
Step 6: Method 2: 3 years' purchase of last 2 years' average:
Average = (9,000 + 15,000) / 2 = 12,000.
\[ 3 \times 12{,}000 = 36{,}000 \]
Step 7: Choose the lesser:
The question says whichever is less. 18,000 is less than 36,000, so goodwill is Rs. 18,000. Option 4 is correct. Rs. 36,000 is the other method's value, and the remaining options do not come from either method.
Final Answer:
Goodwill of the firm is Rs. 18,000. \[ \boxed{18{,}000} \]
Question 24:
In case of death of a partner, for deceased partner's share of profits for the intervening period (from the closing of last year account till the date of death) in the books of accounts, the following journal entry is recorded:
Profit and Loss Suspense A/c Dr.
To Deceased Partner's Capital A/c
Which of the following entry is to be made later to close the Profit and Loss Suspense Account?
Correct Answer: (B) Gaining Partners Capital A/c Dr.
To Profit and Loss Suspense A/c
On death, the deceased partner's share of profit up to the date of death is only estimated. The entry Profit and Loss Suspense A/c Dr. to Deceased Partner's Capital A/c gives him that share. The suspense account now has a debit balance and must be closed later.
Step 2: Key Idea:
When the actual profit for the year is known, the suspense debit is cleared. The remaining partners, who carry on the business, bear that amount through their capital accounts. The entry credits the suspense account.
Step 3: Check option 1:
This debits the suspense account again and increases its debit balance. It closes nothing, so it is wrong.
Step 4: Check option 2:
This debits the capital accounts of the continuing partners and credits Profit and Loss Suspense A/c. The credit wipes out the earlier debit, so the account is closed. This is the entry needed, so option 2 is correct.
Step 5: Check option 3:
Debiting the deceased partner's capital would take back what was given to him. His share was fixed on his death, so this is wrong.
Step 6: Check option 4:
This repeats the original entry. It cannot close the account, so it is wrong.
Final Answer:
To close the suspense account, credit it and debit the continuing partners' capital accounts. This is option 2. \[ \boxed{2} \]
To Profit and Loss Suspense A/c
View Solution
Step 1: Understanding the Question:On death, the deceased partner's share of profit up to the date of death is only estimated. The entry Profit and Loss Suspense A/c Dr. to Deceased Partner's Capital A/c gives him that share. The suspense account now has a debit balance and must be closed later.
Step 2: Key Idea:
When the actual profit for the year is known, the suspense debit is cleared. The remaining partners, who carry on the business, bear that amount through their capital accounts. The entry credits the suspense account.
Step 3: Check option 1:
This debits the suspense account again and increases its debit balance. It closes nothing, so it is wrong.
Step 4: Check option 2:
This debits the capital accounts of the continuing partners and credits Profit and Loss Suspense A/c. The credit wipes out the earlier debit, so the account is closed. This is the entry needed, so option 2 is correct.
Step 5: Check option 3:
Debiting the deceased partner's capital would take back what was given to him. His share was fixed on his death, so this is wrong.
Step 6: Check option 4:
This repeats the original entry. It cannot close the account, so it is wrong.
Final Answer:
To close the suspense account, credit it and debit the continuing partners' capital accounts. This is option 2. \[ \boxed{2} \]
Question 25:
At the time of admission of a new partner, if Profit and Loss Account debit balance exist in the books, then which of the following entry will be done in order to distribute it?
Correct Answer: (C) Old Partners' Capital A/c Dr.
To Profit and Loss A/c
A debit balance in the Profit and Loss Account is an accumulated loss. It was earned before the new partner joined, so it belongs to the old partners only. At admission it must be written off against their capital accounts.
Step 2: Key Rule:
Accumulated losses are shared by the old partners in their old profit sharing ratio. The new partner does not bear any part of them.
The Profit and Loss Account has a debit balance, so to close it we must credit it.
Step 3: Check option (1).:
This entry debits the Profit and Loss Account, which would increase its debit balance further. It also credits the old partners. This is the entry for an accumulated profit, not a loss. So (1) is wrong.
Step 4: Check option (2).:
This also debits the Profit and Loss Account, and it gives the credit to the new partner too. Both parts are wrong. So (2) is wrong.
Step 5: Check option (3).:
Old Partners' Capital A/c is debited and the Profit and Loss A/c is credited. This removes the debit balance and charges the loss to the old partners in the old ratio. So (3) is correct.
Step 6: Check option (4).:
This charges the loss to all partners including the new partner. The new partner has no share in past losses, so (4) is wrong.
Final Answer:
The entry is Old Partners' Capital A/c Dr. To Profit and Loss A/c. This is option (3). \[ \boxed{3} \]
To Profit and Loss A/c
View Solution
Step 1: Understanding the Concept:A debit balance in the Profit and Loss Account is an accumulated loss. It was earned before the new partner joined, so it belongs to the old partners only. At admission it must be written off against their capital accounts.
Step 2: Key Rule:
Accumulated losses are shared by the old partners in their old profit sharing ratio. The new partner does not bear any part of them.
The Profit and Loss Account has a debit balance, so to close it we must credit it.
Step 3: Check option (1).:
This entry debits the Profit and Loss Account, which would increase its debit balance further. It also credits the old partners. This is the entry for an accumulated profit, not a loss. So (1) is wrong.
Step 4: Check option (2).:
This also debits the Profit and Loss Account, and it gives the credit to the new partner too. Both parts are wrong. So (2) is wrong.
Step 5: Check option (3).:
Old Partners' Capital A/c is debited and the Profit and Loss A/c is credited. This removes the debit balance and charges the loss to the old partners in the old ratio. So (3) is correct.
Step 6: Check option (4).:
This charges the loss to all partners including the new partner. The new partner has no share in past losses, so (4) is wrong.
Final Answer:
The entry is Old Partners' Capital A/c Dr. To Profit and Loss A/c. This is option (3). \[ \boxed{3} \]
Question 26:
"Members may come and go, but the company continues. Even an atom bomb can't end a company".
Which feature of a company is highlighted in the above statement?
Correct Answer: (D) Perpetual Succession
A company is an artificial person created by law. Its life does not depend on the life of its members. This idea is a basic feature of company law.
Step 2: Read the statement:
The statement says members may come and go, yet the company continues. It also says even a bomb cannot end a company. So the point is that the company keeps existing whatever happens to its members.
Step 3: Check option (1).:
Body corporate means the company is a legal body created by law. The statement is not about how the company is formed. So (1) is wrong.
Step 4: Check option (2).:
Separate legal entity means the company is distinct from its members, who are not liable for its acts. The statement does not talk about this separation. So (2) is wrong.
Step 5: Check option (3).:
Transferability of shares means a member can sell his shares freely. The statement says nothing about shares. So (3) is wrong.
Step 6: Check option (4).:
Perpetual succession means the company has an unending life. Death, insolvency or exit of members does not end it. Only winding up under law can end it. So (4) is correct.
Final Answer:
The feature shown is perpetual succession, option (4). \[ \boxed{4} \]
View Solution
Step 1: Understanding the Concept:A company is an artificial person created by law. Its life does not depend on the life of its members. This idea is a basic feature of company law.
Step 2: Read the statement:
The statement says members may come and go, yet the company continues. It also says even a bomb cannot end a company. So the point is that the company keeps existing whatever happens to its members.
Step 3: Check option (1).:
Body corporate means the company is a legal body created by law. The statement is not about how the company is formed. So (1) is wrong.
Step 4: Check option (2).:
Separate legal entity means the company is distinct from its members, who are not liable for its acts. The statement does not talk about this separation. So (2) is wrong.
Step 5: Check option (3).:
Transferability of shares means a member can sell his shares freely. The statement says nothing about shares. So (3) is wrong.
Step 6: Check option (4).:
Perpetual succession means the company has an unending life. Death, insolvency or exit of members does not end it. Only winding up under law can end it. So (4) is correct.
Final Answer:
The feature shown is perpetual succession, option (4). \[ \boxed{4} \]
Question 27:
For one person company, Rule 3 of the Companies (Incorporation) Rules, 2014 provides that its average annual turnover of three years does not exceed ...................
Correct Answer: (A) Rs. 2 Crores
A One Person Company (OPC) is a company with only one member. Rule 3 of the Companies (Incorporation) Rules, 2014 sets out the conditions on which an OPC can be formed.
Step 2: Key Fact:
As per Rule 3 of those rules, an OPC cannot keep its OPC status if its paid up share capital goes above Rs. 50 lakh or its average annual turnover of the three preceding years goes above Rs. 2 crore.
In that case it has to convert into a private or public company.
Step 3: Check option (1).:
Rs. 2 crore is the turnover limit given in Rule 3. So (1) is correct.
Step 4: Check the other options.:
Rs. 3 crore, Rs. 4 crore and Rs. 5 crore are not the limit in Rule 3. So (2), (3) and (4) are wrong.
Final Answer:
The average annual turnover limit is Rs. 2 crore, option (1). \[ \boxed{\text{Rs. 2 Crores}} \]
View Solution
Step 1: Understanding the Concept:A One Person Company (OPC) is a company with only one member. Rule 3 of the Companies (Incorporation) Rules, 2014 sets out the conditions on which an OPC can be formed.
Step 2: Key Fact:
As per Rule 3 of those rules, an OPC cannot keep its OPC status if its paid up share capital goes above Rs. 50 lakh or its average annual turnover of the three preceding years goes above Rs. 2 crore.
In that case it has to convert into a private or public company.
Step 3: Check option (1).:
Rs. 2 crore is the turnover limit given in Rule 3. So (1) is correct.
Step 4: Check the other options.:
Rs. 3 crore, Rs. 4 crore and Rs. 5 crore are not the limit in Rule 3. So (2), (3) and (4) are wrong.
Final Answer:
The average annual turnover limit is Rs. 2 crore, option (1). \[ \boxed{\text{Rs. 2 Crores}} \]
Question 28:
Who are entitled to share the distributable profits of the company after satisfying the dividend rights of the preference shareholders?
Correct Answer: (C) Equity shareholders
A company has two main classes of shares: preference shares and equity shares. Preference shareholders get a fixed dividend before others. The remaining profit goes to the owners who take the main risk.
Step 2: Key Rule:
After the preference dividend is paid, the balance of distributable profit is shared among equity shareholders. They get a variable dividend that depends on profit.
Debenture holders and bond holders are lenders, not owners, and get interest, not dividend.
Step 3: Check option (1).:
Debenture holders are creditors. They get interest, which is paid whether the company earns a profit or not. They do not share profit. So (1) is wrong.
Step 4: Check option (2).:
Bond holders are also lenders who receive fixed interest. So (2) is wrong.
Step 5: Check option (3).:
Equity shareholders are the real owners. They receive what is left of the distributable profit after preference dividend. So (3) is correct.
Step 6: Check option (4).:
Policy holders are customers of an insurance company. They have no claim on the profit of a company as such. So (4) is wrong.
Final Answer:
Equity shareholders share the remaining profit. Option (3). \[ \boxed{3} \]
View Solution
Step 1: Understanding the Concept:A company has two main classes of shares: preference shares and equity shares. Preference shareholders get a fixed dividend before others. The remaining profit goes to the owners who take the main risk.
Step 2: Key Rule:
After the preference dividend is paid, the balance of distributable profit is shared among equity shareholders. They get a variable dividend that depends on profit.
Debenture holders and bond holders are lenders, not owners, and get interest, not dividend.
Step 3: Check option (1).:
Debenture holders are creditors. They get interest, which is paid whether the company earns a profit or not. They do not share profit. So (1) is wrong.
Step 4: Check option (2).:
Bond holders are also lenders who receive fixed interest. So (2) is wrong.
Step 5: Check option (3).:
Equity shareholders are the real owners. They receive what is left of the distributable profit after preference dividend. So (3) is correct.
Step 6: Check option (4).:
Policy holders are customers of an insurance company. They have no claim on the profit of a company as such. So (4) is wrong.
Final Answer:
Equity shareholders share the remaining profit. Option (3). \[ \boxed{3} \]
Question 29:
Minimum subscription of capital cannot be less than ................... amount according to SEBI (Disclosure and Investor Protection) Guidelines, 2000.
Correct Answer: (D) 90% of the issued
Minimum subscription is the least amount that a company must receive from the public before it can allot shares. If this amount is not received, the money must be returned to applicants.
Step 2: Key Fact:
As per the SEBI (Disclosure and Investor Protection) Guidelines, 2000, the minimum subscription is 90% of the issued amount. Under the Companies Act, 2013 the same 90% figure is used.
If the company fails to get it within the stated time, it must refund the money.
Step 3: Check the options.:
60%, 70% and 80% are all below the required level, so (1), (2) and (3) are wrong. 90% of the issued amount is the required minimum, so (4) is correct.
Final Answer:
Minimum subscription is 90% of the issued amount, option (4). \[ \boxed{90\%} \]
View Solution
Step 1: Understanding the Concept:Minimum subscription is the least amount that a company must receive from the public before it can allot shares. If this amount is not received, the money must be returned to applicants.
Step 2: Key Fact:
As per the SEBI (Disclosure and Investor Protection) Guidelines, 2000, the minimum subscription is 90% of the issued amount. Under the Companies Act, 2013 the same 90% figure is used.
If the company fails to get it within the stated time, it must refund the money.
Step 3: Check the options.:
60%, 70% and 80% are all below the required level, so (1), (2) and (3) are wrong. 90% of the issued amount is the required minimum, so (4) is correct.
Final Answer:
Minimum subscription is 90% of the issued amount, option (4). \[ \boxed{90\%} \]
Question 30:
Which of the following is a written instrument acknowledging a debt under the common seal of the company?
Correct Answer: (A) Debenture
When a company borrows money from the public, it gives the lender a document as proof of the loan. This document is issued under the seal of the company.
Step 2: Key Definition:
A debenture is a written instrument that acknowledges a debt of the company. It is issued under the common seal and carries a fixed rate of interest. The holder is a creditor of the company.
Step 3: Check option (1).:
A debenture matches the definition exactly. So (1) is correct.
Step 4: Check option (2).:
An equity share shows ownership in the company, not a debt. So (2) is wrong.
Step 5: Check option (3).:
A preference share also shows ownership, with a right to a fixed dividend. It is not a debt. So (3) is wrong.
Step 6: Check option (4).:
A bank draft is an instrument used to make payment through a bank. It is not issued by the company as acknowledgement of debt. So (4) is wrong.
Final Answer:
The instrument is a debenture, option (1). \[ \boxed{1} \]
View Solution
Step 1: Understanding the Concept:When a company borrows money from the public, it gives the lender a document as proof of the loan. This document is issued under the seal of the company.
Step 2: Key Definition:
A debenture is a written instrument that acknowledges a debt of the company. It is issued under the common seal and carries a fixed rate of interest. The holder is a creditor of the company.
Step 3: Check option (1).:
A debenture matches the definition exactly. So (1) is correct.
Step 4: Check option (2).:
An equity share shows ownership in the company, not a debt. So (2) is wrong.
Step 5: Check option (3).:
A preference share also shows ownership, with a right to a fixed dividend. It is not a debt. So (3) is wrong.
Step 6: Check option (4).:
A bank draft is an instrument used to make payment through a bank. It is not issued by the company as acknowledgement of debt. So (4) is wrong.
Final Answer:
The instrument is a debenture, option (1). \[ \boxed{1} \]
Question 31:
On Bearer debentures, Interest is paid to a person who produces the ................... attached to such debentures?
Correct Answer: (C) Interest Coupon
Debentures can be registered or bearer. A registered debenture has the holder's name in the company books. A bearer debenture has no name and passes from hand to hand by delivery.
Step 2: Key Rule:
For a bearer debenture the company does not know who the holder is. So it attaches small slips called coupons to the debenture. The holder cuts off a coupon and presents it to claim interest.
Step 3: Check option (1).:
A registered deed is linked with registered debentures, where the name is recorded. So (1) is wrong.
Step 4: Check option (2).:
Ownership papers are not attached to a bearer debenture for interest. So (2) is wrong.
Step 5: Check option (3).:
The interest coupon is attached to the bearer debenture and is produced to get interest. So (3) is correct.
Step 6: Check option (4).:
An interest certificate is issued by a payer to show interest paid and tax deducted. It is not attached to a debenture. So (4) is wrong.
Final Answer:
Interest on bearer debentures is paid against the interest coupon, option (3). \[ \boxed{3} \]
View Solution
Step 1: Understanding the Concept:Debentures can be registered or bearer. A registered debenture has the holder's name in the company books. A bearer debenture has no name and passes from hand to hand by delivery.
Step 2: Key Rule:
For a bearer debenture the company does not know who the holder is. So it attaches small slips called coupons to the debenture. The holder cuts off a coupon and presents it to claim interest.
Step 3: Check option (1).:
A registered deed is linked with registered debentures, where the name is recorded. So (1) is wrong.
Step 4: Check option (2).:
Ownership papers are not attached to a bearer debenture for interest. So (2) is wrong.
Step 5: Check option (3).:
The interest coupon is attached to the bearer debenture and is produced to get interest. So (3) is correct.
Step 6: Check option (4).:
An interest certificate is issued by a payer to show interest paid and tax deducted. It is not attached to a debenture. So (4) is wrong.
Final Answer:
Interest on bearer debentures is paid against the interest coupon, option (3). \[ \boxed{3} \]
Question 32:
Choose the correct answer from the options given below:
Match List-I with List-II
| List-I | List-II |
|---|---|
| (A) Debentures issued for consideration other than cash | (I) A company issues debentures at a price lower than their face value. |
| (B) Debentures issued as Collateral Security | (II) A company purchases assets from vendors and make payment by debentures |
| (C) Debentures issued for cash | (III) The company may issue its own debentures to the lenders in addition to some other assets already pledged |
| (D) Debentures issued at discount | (IV) A company invite the public to apply for debentures by issue of prospectus |
Correct Answer: (C) (A) - (II), (B) - (III), (C) - (IV), (D) - (I)
Debentures can be issued in different ways depending on what the company receives and on what terms. We match each type in List-I with its meaning in List-II.
Step 2: Match (A).:
Debentures issued for consideration other than cash are given to sellers in place of payment for assets. The company buys assets from vendors and pays by debentures. So (A) matches (II).
Step 3: Match (B).:
Collateral security means an additional security. The company gives its own debentures to the lender in addition to assets already pledged. So (B) matches (III).
Step 4: Match (C).:
Debentures issued for cash are offered to the public for money. The company invites applications by issuing a prospectus. So (C) matches (IV).
Step 5: Match (D).:
Debentures issued at discount are issued at a price lower than face value. So (D) matches (I).
Step 6: Compare with the options.:
The full match is A-II, B-III, C-IV, D-I. Option (1) gives A-I, which is wrong. Option (2) gives A-IV, which is wrong. Option (4) gives A-III, which is wrong. Option (3) is the same as our match.
Final Answer:
The correct match is A-II, B-III, C-IV, D-I, option (3). \[ \boxed{3} \]
View Solution
Step 1: Understanding the Concept:Debentures can be issued in different ways depending on what the company receives and on what terms. We match each type in List-I with its meaning in List-II.
Step 2: Match (A).:
Debentures issued for consideration other than cash are given to sellers in place of payment for assets. The company buys assets from vendors and pays by debentures. So (A) matches (II).
Step 3: Match (B).:
Collateral security means an additional security. The company gives its own debentures to the lender in addition to assets already pledged. So (B) matches (III).
Step 4: Match (C).:
Debentures issued for cash are offered to the public for money. The company invites applications by issuing a prospectus. So (C) matches (IV).
Step 5: Match (D).:
Debentures issued at discount are issued at a price lower than face value. So (D) matches (I).
Step 6: Compare with the options.:
The full match is A-II, B-III, C-IV, D-I. Option (1) gives A-I, which is wrong. Option (2) gives A-IV, which is wrong. Option (4) gives A-III, which is wrong. Option (3) is the same as our match.
Final Answer:
The correct match is A-II, B-III, C-IV, D-I, option (3). \[ \boxed{3} \]
Question 33:
In addition to the purchase of own shares by a company and to issue fully paid bonus shares, for which of the following purposes security premium account balance could be used?
(A) To write-off preliminary expenses of the company.
(B) To pay premium on the redemption of preference shares or debentures of the company.
(C) To write-off the expenses of, or commission paid, or discount allowed on any securities of the company
(D) To pay the issue price of debentures.
Choose the correct answer from the options given below:
Correct Answer: (A) (A), (B) and (C) only
Securities premium is the amount a company receives over the face value of its shares. It is a capital reserve, so the law allows it to be used only for the purposes listed in Section 52 of the Companies Act, 2013. It cannot be used freely like a revenue profit.
Step 2: Key Approach:
The permitted uses are: (i) issue of fully paid bonus shares, (ii) writing off preliminary expenses, (iii) writing off expenses, commission or discount on issue of shares or debentures, (iv) premium payable on redemption of preference shares or debentures, and (v) buy-back of own shares. We check each statement against this list.
Step 3: Check statement (A):
Preliminary expenses are the costs of forming the company. Section 52 allows the securities premium balance to be used to write them off. So (A) is TRUE.
Step 4: Check statement (B):
When preference shares or debentures are redeemed at a premium, the extra amount can be met from the securities premium account. So (B) is TRUE.
Step 5: Check statement (C):
Expenses, commission or discount on any securities issued by the company can be written off against the securities premium balance. So (C) is TRUE.
Step 6: Check statement (D):
The issue price of debentures is a normal liability of the company, and it is not one of the purposes named in Section 52. Securities premium cannot be used to pay it. So (D) is FALSE.
Step 7: Match with the options:
Only (A), (B) and (C) are correct. Option 2 and option 4 include (D), and option 3 includes all four, so they are wrong. Option 1 is correct.
Final Answer:
Statements A, B and C are permitted uses of the securities premium account. This is option 1. \[ \boxed{\text{Option 1: (A), (B) and (C) only}} \]
View Solution
Step 1: Understanding the Concept:Securities premium is the amount a company receives over the face value of its shares. It is a capital reserve, so the law allows it to be used only for the purposes listed in Section 52 of the Companies Act, 2013. It cannot be used freely like a revenue profit.
Step 2: Key Approach:
The permitted uses are: (i) issue of fully paid bonus shares, (ii) writing off preliminary expenses, (iii) writing off expenses, commission or discount on issue of shares or debentures, (iv) premium payable on redemption of preference shares or debentures, and (v) buy-back of own shares. We check each statement against this list.
Step 3: Check statement (A):
Preliminary expenses are the costs of forming the company. Section 52 allows the securities premium balance to be used to write them off. So (A) is TRUE.
Step 4: Check statement (B):
When preference shares or debentures are redeemed at a premium, the extra amount can be met from the securities premium account. So (B) is TRUE.
Step 5: Check statement (C):
Expenses, commission or discount on any securities issued by the company can be written off against the securities premium balance. So (C) is TRUE.
Step 6: Check statement (D):
The issue price of debentures is a normal liability of the company, and it is not one of the purposes named in Section 52. Securities premium cannot be used to pay it. So (D) is FALSE.
Step 7: Match with the options:
Only (A), (B) and (C) are correct. Option 2 and option 4 include (D), and option 3 includes all four, so they are wrong. Option 1 is correct.
Final Answer:
Statements A, B and C are permitted uses of the securities premium account. This is option 1. \[ \boxed{\text{Option 1: (A), (B) and (C) only}} \]
Question 34:
Arrange the following in a sequence related to the issue and redemption of shares
(A) Forfeiture of shares
(B) Reissue of shares
(C) Calls in arrears
(D) Transfer of share forfeited account balance to capital reserve A/c
Choose the correct answer from the options given below:
Correct Answer: (C) (C), (A), (B), (D)
Shares are issued in calls. If a shareholder does not pay a call, the company can cancel (forfeit) the shares, sell them again (reissue), and finally move any leftover forfeiture profit to capital reserve. This question asks for that order of events.
Step 2: Key Approach:
Put the events in the order in which they naturally happen in time. An event that causes the next one must come first.
Step 3: Detailed Explanation:
First, some shareholders fail to pay the call money on time. This is (C) Calls in arrears.
Second, the company forfeits the shares of the defaulting members. This is (A) Forfeiture of shares.
Third, the company sells the forfeited shares again to new buyers. This is (B) Reissue of shares.
Last, after the reissue, any balance left in the Share Forfeited Account is a capital profit, so it goes to Capital Reserve. This is (D).
Step 4: Check the options:
Option 1 puts forfeiture before calls in arrears, which is impossible, so it is wrong.
Option 2 puts reissue before forfeiture, but only forfeited shares can be reissued, so it is wrong.
Option 4 starts with the transfer to capital reserve, which can only be done at the end, so it is wrong.
Option 3 gives C, A, B, D, which matches the natural order.
Final Answer:
The correct order is (C), (A), (B), (D), which is option 3. \[ \boxed{\text{Option 3}} \]
View Solution
Step 1: Understanding the Concept:Shares are issued in calls. If a shareholder does not pay a call, the company can cancel (forfeit) the shares, sell them again (reissue), and finally move any leftover forfeiture profit to capital reserve. This question asks for that order of events.
Step 2: Key Approach:
Put the events in the order in which they naturally happen in time. An event that causes the next one must come first.
Step 3: Detailed Explanation:
First, some shareholders fail to pay the call money on time. This is (C) Calls in arrears.
Second, the company forfeits the shares of the defaulting members. This is (A) Forfeiture of shares.
Third, the company sells the forfeited shares again to new buyers. This is (B) Reissue of shares.
Last, after the reissue, any balance left in the Share Forfeited Account is a capital profit, so it goes to Capital Reserve. This is (D).
Step 4: Check the options:
Option 1 puts forfeiture before calls in arrears, which is impossible, so it is wrong.
Option 2 puts reissue before forfeiture, but only forfeited shares can be reissued, so it is wrong.
Option 4 starts with the transfer to capital reserve, which can only be done at the end, so it is wrong.
Option 3 gives C, A, B, D, which matches the natural order.
Final Answer:
The correct order is (C), (A), (B), (D), which is option 3. \[ \boxed{\text{Option 3}} \]
Question 35:
Raj Ltd. purchased a machine from Anuj Tech Ltd. for Rs.1,90,000. As per purchase agreement, Rs. 10,000 were paid in cash and balance by issue of shares of Rs.100 each. Find the number of shares issued to Anuj Tech Ltd., if the shares issued at 20% premium.
Correct Answer: (C) 1,500
When a company buys an asset and pays partly in cash, the rest is paid by issuing shares to the vendor. The value of the shares issued must equal the unpaid part of the purchase price. Because the shares are issued at a premium, each share is valued at more than its face value.
Step 2: Key Formula:
\[ \text{Number of shares} = \frac{\text{Amount payable in shares}}{\text{Issue price per share}} \]
Step 3: Amount payable by shares:
Purchase price is Rs. 1,90,000 and Rs. 10,000 is paid in cash.
\[ 1{,}90{,}000 - 10{,}000 = 1{,}80{,}000 \]
Step 4: Issue price of one share:
Face value is Rs. 100 and the premium is 20% of 100, which is Rs. 20.
\[ \text{Issue price} = 100 + 20 = 120 \]
Step 5: Number of shares:
\[ \frac{1{,}80{,}000}{120} = 1{,}500 \]
Step 6: Check the other options:
3,000 shares at Rs. 120 would be Rs. 3,60,000, far too much. 2,000 shares would be Rs. 2,40,000, too much. 1,000 shares would be Rs. 1,20,000, too little. Only 1,500 shares gives Rs. 1,80,000.
Final Answer:
The company issued 1,500 shares, which is option 3. \[ \boxed{1{,}500 \text{ shares}} \]
View Solution
Step 1: Understanding the Concept:When a company buys an asset and pays partly in cash, the rest is paid by issuing shares to the vendor. The value of the shares issued must equal the unpaid part of the purchase price. Because the shares are issued at a premium, each share is valued at more than its face value.
Step 2: Key Formula:
\[ \text{Number of shares} = \frac{\text{Amount payable in shares}}{\text{Issue price per share}} \]
Step 3: Amount payable by shares:
Purchase price is Rs. 1,90,000 and Rs. 10,000 is paid in cash.
\[ 1{,}90{,}000 - 10{,}000 = 1{,}80{,}000 \]
Step 4: Issue price of one share:
Face value is Rs. 100 and the premium is 20% of 100, which is Rs. 20.
\[ \text{Issue price} = 100 + 20 = 120 \]
Step 5: Number of shares:
\[ \frac{1{,}80{,}000}{120} = 1{,}500 \]
Step 6: Check the other options:
3,000 shares at Rs. 120 would be Rs. 3,60,000, far too much. 2,000 shares would be Rs. 2,40,000, too much. 1,000 shares would be Rs. 1,20,000, too little. Only 1,500 shares gives Rs. 1,80,000.
Final Answer:
The company issued 1,500 shares, which is option 3. \[ \boxed{1{,}500 \text{ shares}} \]
Question 36:
H Ltd. purchased machinery worth Rs.99,000 from P Ltd. The payment was made by issue of 12% debentures of Rs.100 each. Pass the necessary journal entries for the issue of debentures when debentures are issued at 10% discount in the books of H Ltd.
Correct Answer: (B)
When debentures are issued to a vendor for an asset, the company owes the vendor the purchase price. The debentures are issued to settle that debt. If they are issued at a discount, the face value of debentures is more than the amount of the debt, and the difference is a loss called discount on issue of debentures.
Step 2: Find the face value of debentures:
Each debenture has a face value of Rs. 100 and is issued at 10% discount, so the issue price is Rs. 90.
Number of debentures = 99,000 / 90 = 1,100.
Face value of debentures = 1,100 x 100 = Rs. 1,10,000.
Discount = 1,10,000 - 99,000 = Rs. 11,000.
Step 3: Decide the debit and credit:
The vendor P Ltd. is a creditor for Rs. 99,000, so it is debited to clear the debt. The discount is a loss, so Discount on Issue of Debentures A/c is debited Rs. 11,000. The liability for debentures is credited at face value, Rs. 1,10,000. Debits (99,000 + 11,000) equal credits (1,10,000).
Step 4: Write the entry:
P Ltd. A/c Dr. 99,000
Discount on Issue of Debentures A/c Dr. 11,000
To 12% Debentures A/c 1,10,000.
This is the entry shown in option 2.
Step 5: Check the other options:
Option 1 debits P Ltd. for Rs. 1,10,000, which is more than the debt and ignores the discount, so it is wrong. Option 3 debits 12% Debentures and credits P Ltd. and the discount account, which is the reverse of an issue. Option 4 also reverses the entry. Only option 2 is correct.
Final Answer:
The entry debits P Ltd. Rs. 99,000 and Discount on Issue of Debentures Rs. 11,000, and credits 12% Debentures Rs. 1,10,000. This is option 2. \[ \boxed{\text{Option 2}} \]
| Date | Particulars | L.F. | Dr. Amount | Cr. Amount |
|---|---|---|---|---|
| P Ltd. Dr. | 99,000 | |||
| Discount on Issue of Debentures A/c Dr. | 11,000 | |||
| To 12% Debentures A/c | 1,10,000 |
View Solution
Step 1: Understanding the Concept:When debentures are issued to a vendor for an asset, the company owes the vendor the purchase price. The debentures are issued to settle that debt. If they are issued at a discount, the face value of debentures is more than the amount of the debt, and the difference is a loss called discount on issue of debentures.
Step 2: Find the face value of debentures:
Each debenture has a face value of Rs. 100 and is issued at 10% discount, so the issue price is Rs. 90.
Number of debentures = 99,000 / 90 = 1,100.
Face value of debentures = 1,100 x 100 = Rs. 1,10,000.
Discount = 1,10,000 - 99,000 = Rs. 11,000.
Step 3: Decide the debit and credit:
The vendor P Ltd. is a creditor for Rs. 99,000, so it is debited to clear the debt. The discount is a loss, so Discount on Issue of Debentures A/c is debited Rs. 11,000. The liability for debentures is credited at face value, Rs. 1,10,000. Debits (99,000 + 11,000) equal credits (1,10,000).
Step 4: Write the entry:
P Ltd. A/c Dr. 99,000
Discount on Issue of Debentures A/c Dr. 11,000
To 12% Debentures A/c 1,10,000.
This is the entry shown in option 2.
Step 5: Check the other options:
Option 1 debits P Ltd. for Rs. 1,10,000, which is more than the debt and ignores the discount, so it is wrong. Option 3 debits 12% Debentures and credits P Ltd. and the discount account, which is the reverse of an issue. Option 4 also reverses the entry. Only option 2 is correct.
Final Answer:
The entry debits P Ltd. Rs. 99,000 and Discount on Issue of Debentures Rs. 11,000, and credits 12% Debentures Rs. 1,10,000. This is option 2. \[ \boxed{\text{Option 2}} \]
Question 37:
(B)
(C)
(D)
Choose the correct answer from the options given below:
A Limited issued 5000, 10% debentures of Rs. 100 each, at a premium of Rs. 10 per debenture payable as follows:
On application Rs. 25, On allotment Rs. 45 (including premium), On first and final call Rs. 40.
The debentures were fully subscribed and all money was duly received.
Select the correct journal entries related to the above case from the following.
(A)
| Date | Particulars | L.F. | Dr. Amount | Cr. Amount |
|---|---|---|---|---|
| 10% Debenture Allotment A/c Dr. | 2,25,000 | |||
| To 10% Debentures A/c | 1,75,000 | |||
| To Securities Premium Reserve A/c | 50,000 |
| Date | Particulars | L.F. | Dr. Amount | Cr. Amount |
|---|---|---|---|---|
| Bank A/c Dr. | 1,25,000 | |||
| To 10% Debenture Application A/c | 1,25,000 |
| Date | Particulars | L.F. | Dr. Amount | Cr. Amount |
|---|---|---|---|---|
| Bank A/c Dr. | 2,00,000 | |||
| To 10% Debenture First & Final Call A/c | 2,00,000 |
| Date | Particulars | L.F. | Dr. Amount | Cr. Amount |
|---|---|---|---|---|
| Bank A/c Dr. | 2,20,000 | |||
| To 10% Debenture Allotment A/c | 2,20,000 |
Correct Answer: (A) (A), (B) and (C) only
Debentures issued at a premium are collected in instalments. Money received on each instalment is debited to Bank. Money due on allotment is first transferred from the Debentures Allotment account, where the premium goes to Securities Premium Reserve and the rest to Debentures account.
Step 2: Work out the amounts:
Number of debentures = 5,000.
Application: 5,000 x 25 = Rs. 1,25,000.
Allotment: 5,000 x 45 = Rs. 2,25,000, which includes premium of 5,000 x 10 = Rs. 50,000. So face value part is 2,25,000 - 50,000 = Rs. 1,75,000.
First and final call: 5,000 x 40 = Rs. 2,00,000.
Check: 25 + 45 + 40 = 110 per debenture, equal to 100 face value plus 10 premium.
Step 3: Check entry (A):
Allotment due is Rs. 2,25,000. Debentures Allotment A/c is debited by 2,25,000, Debentures A/c is credited by 1,75,000 and Securities Premium by 50,000. This matches our figures, so (A) is CORRECT.
Step 4: Check entry (B):
Application money received is Rs. 1,25,000. Bank is debited and Debenture Application A/c is credited by Rs. 1,25,000. So (B) is CORRECT.
Step 5: Check entry (C):
First and final call money received is Rs. 2,00,000. Bank is debited and First and Final Call A/c is credited by Rs. 2,00,000. So (C) is CORRECT.
Step 6: Check entry (D):
Allotment money received is Rs. 2,25,000, not Rs. 2,20,000. The entry shows Rs. 2,20,000, which is Rs. 5,000 short. So (D) is WRONG.
Step 7: Match with the options:
A, B and C are correct, and D is wrong. This is option 1.
Final Answer:
Entries (A), (B) and (C) are correct. This is option 1. \[ \boxed{\text{Option 1: (A), (B) and (C) only}} \]
View Solution
Step 1: Understanding the Concept:Debentures issued at a premium are collected in instalments. Money received on each instalment is debited to Bank. Money due on allotment is first transferred from the Debentures Allotment account, where the premium goes to Securities Premium Reserve and the rest to Debentures account.
Step 2: Work out the amounts:
Number of debentures = 5,000.
Application: 5,000 x 25 = Rs. 1,25,000.
Allotment: 5,000 x 45 = Rs. 2,25,000, which includes premium of 5,000 x 10 = Rs. 50,000. So face value part is 2,25,000 - 50,000 = Rs. 1,75,000.
First and final call: 5,000 x 40 = Rs. 2,00,000.
Check: 25 + 45 + 40 = 110 per debenture, equal to 100 face value plus 10 premium.
Step 3: Check entry (A):
Allotment due is Rs. 2,25,000. Debentures Allotment A/c is debited by 2,25,000, Debentures A/c is credited by 1,75,000 and Securities Premium by 50,000. This matches our figures, so (A) is CORRECT.
Step 4: Check entry (B):
Application money received is Rs. 1,25,000. Bank is debited and Debenture Application A/c is credited by Rs. 1,25,000. So (B) is CORRECT.
Step 5: Check entry (C):
First and final call money received is Rs. 2,00,000. Bank is debited and First and Final Call A/c is credited by Rs. 2,00,000. So (C) is CORRECT.
Step 6: Check entry (D):
Allotment money received is Rs. 2,25,000, not Rs. 2,20,000. The entry shows Rs. 2,20,000, which is Rs. 5,000 short. So (D) is WRONG.
Step 7: Match with the options:
A, B and C are correct, and D is wrong. This is option 1.
Final Answer:
Entries (A), (B) and (C) are correct. This is option 1. \[ \boxed{\text{Option 1: (A), (B) and (C) only}} \]
Question 38:
In case debentures were issued as collateral security for taking loan from ABC Bank. Choose the correct journal entry for cancellation of debentures as collateral security on repayment of bank loan.
Correct Answer: (C) % Debentures A/c Dr.
To Debenture Suspense A/c
When a company takes a loan and gives its own debentures as an extra guarantee, the debentures are called collateral security. The lender only holds them as a pledge. No cash comes in from the debentures themselves.
So the debentures are not a real liability unless the loan is not repaid.
Step 2: Recall the entry made at the time of issue
At the time of issue, the company records the debentures only as a memorandum entry:
\[ \text{Debenture Suspense A/c Dr.} \quad \text{To \% Debentures A/c} \]
The Debenture Suspense account is a temporary account. It is shown as a deduction from the debentures on the balance sheet.
Step 3: Work out the entry on repayment
When the bank loan is repaid, the collateral security is no longer needed, so the issue entry has to be reversed.
Reversing means the account credited earlier is now debited, and the account debited earlier is now credited.
\[ \text{\% Debentures A/c Dr.} \quad \text{To Debenture Suspense A/c} \]
Step 4: Check option 1
It credits Bank A/c. No cash is paid to cancel a collateral security, because the debentures never brought in cash. So option 1 is wrong.
Step 5: Check option 2
It debits Debenture Suspense and credits % Debentures. This is the issue entry, not the cancellation entry. So option 2 is wrong.
Step 6: Check option 4
It debits Bank and credits % Debentures. This would record a fresh cash issue of debentures, which is not what happens here. So option 4 is wrong.
Step 7: Check option 3
It debits % Debentures and credits Debenture Suspense. This is exactly the reverse of the issue entry, so option 3 is correct.
Final Answer:
The cancellation entry reverses the issue entry. This is option 3. \[ \boxed{\text{Option 3}} \]
To Debenture Suspense A/c
View Solution
Step 1: Understand collateral securityWhen a company takes a loan and gives its own debentures as an extra guarantee, the debentures are called collateral security. The lender only holds them as a pledge. No cash comes in from the debentures themselves.
So the debentures are not a real liability unless the loan is not repaid.
Step 2: Recall the entry made at the time of issue
At the time of issue, the company records the debentures only as a memorandum entry:
\[ \text{Debenture Suspense A/c Dr.} \quad \text{To \% Debentures A/c} \]
The Debenture Suspense account is a temporary account. It is shown as a deduction from the debentures on the balance sheet.
Step 3: Work out the entry on repayment
When the bank loan is repaid, the collateral security is no longer needed, so the issue entry has to be reversed.
Reversing means the account credited earlier is now debited, and the account debited earlier is now credited.
\[ \text{\% Debentures A/c Dr.} \quad \text{To Debenture Suspense A/c} \]
Step 4: Check option 1
It credits Bank A/c. No cash is paid to cancel a collateral security, because the debentures never brought in cash. So option 1 is wrong.
Step 5: Check option 2
It debits Debenture Suspense and credits % Debentures. This is the issue entry, not the cancellation entry. So option 2 is wrong.
Step 6: Check option 4
It debits Bank and credits % Debentures. This would record a fresh cash issue of debentures, which is not what happens here. So option 4 is wrong.
Step 7: Check option 3
It debits % Debentures and credits Debenture Suspense. This is exactly the reverse of the issue entry, so option 3 is correct.
Final Answer:
The cancellation entry reverses the issue entry. This is option 3. \[ \boxed{\text{Option 3}} \]
Question 39:
Nominal share capital is ?
Correct Answer: (C) The maximum amount of share capital which a company is authorised to issue.
Nominal share capital is also called authorised or registered capital. It is the capital stated in the Memorandum of Association of the company.
Step 2: Key point
It is the upper limit. The company cannot issue shares worth more than this amount unless it first alters its Memorandum by the proper legal procedure.
Step 3: Check option 1
This describes issued capital, the part of authorised capital that is offered to the public. So option 1 is wrong.
Step 4: Check option 2
This describes subscribed capital, the amount for which people have applied. So option 2 is wrong.
Step 5: Check option 3
This says it is the maximum amount the company is authorised to issue. This matches the definition, so option 3 is correct.
Step 6: Check option 4
This describes paid up capital, the amount actually paid by shareholders. So option 4 is wrong.
Final Answer:
Nominal capital is the maximum share capital a company can issue. This is option 3. \[ \boxed{\text{Option 3}} \]
View Solution
Step 1: Understand the termNominal share capital is also called authorised or registered capital. It is the capital stated in the Memorandum of Association of the company.
Step 2: Key point
It is the upper limit. The company cannot issue shares worth more than this amount unless it first alters its Memorandum by the proper legal procedure.
Step 3: Check option 1
This describes issued capital, the part of authorised capital that is offered to the public. So option 1 is wrong.
Step 4: Check option 2
This describes subscribed capital, the amount for which people have applied. So option 2 is wrong.
Step 5: Check option 3
This says it is the maximum amount the company is authorised to issue. This matches the definition, so option 3 is correct.
Step 6: Check option 4
This describes paid up capital, the amount actually paid by shareholders. So option 4 is wrong.
Final Answer:
Nominal capital is the maximum share capital a company can issue. This is option 3. \[ \boxed{\text{Option 3}} \]
Question 40:
200 shares of Rs.100 each issued at a premium of Rs.10 were forfeited for the non-payment of allotment money of Rs.60 per share including premium. The first and final call of Rs.20 per share on these shares were not made. The forfeited shares were reissued at Rs.70 per share as fully paid-up. Find the amount of capital reserve.
Correct Answer: (D) Nil
Each share has face value Rs. 100 and was issued at Rs. 110. The shareholders did not pay the allotment money of Rs. 60 (which includes the premium of Rs. 10). The first and final call of Rs. 20 was never made.
Capital reserve is the profit on reissue of forfeited shares that is left after the loss on reissue (discount) is adjusted.
Step 2: Find the amount received per share
Total amount payable per share = 100 + 10 = Rs. 110.
Allotment (not received) = Rs. 60. Call (not made) = Rs. 20.
So the application money received = 110 - 60 - 20 = Rs. 30 per share.
The premium was part of the allotment, so no premium was received.
Step 3: Find the forfeited amount
Share Forfeiture A/c is credited with the money received on the forfeited shares.
\[ 200 \times 30 = \text{Rs. } 6{,}000 \]
Step 4: Find the discount allowed on reissue
The shares are reissued at Rs. 70 as fully paid up of Rs. 100, so the discount is 100 - 70 = Rs. 30 per share.
\[ \text{Discount} = 200 \times 30 = \text{Rs. } 6{,}000 \]
Step 5: Find the capital reserve
Capital reserve is the balance in Share Forfeiture A/c after the discount is adjusted. Here the discount of Rs. 6,000 uses up the whole forfeited amount.
\[ \text{Capital Reserve} = 6{,}000 - 6{,}000 = 0 \]
Step 6: Check the options
Rs. 4,000, Rs. 6,000 and Rs. 14,000 come from wrong ideas, such as treating the premium as received or ignoring the discount. The balance left is nil, so option 4 is correct.
Final Answer:
No profit is left after the discount is adjusted, so there is no capital reserve. This is option 4. \[ \boxed{\text{Nil}} \]
View Solution
Step 1: Understand the situationEach share has face value Rs. 100 and was issued at Rs. 110. The shareholders did not pay the allotment money of Rs. 60 (which includes the premium of Rs. 10). The first and final call of Rs. 20 was never made.
Capital reserve is the profit on reissue of forfeited shares that is left after the loss on reissue (discount) is adjusted.
Step 2: Find the amount received per share
Total amount payable per share = 100 + 10 = Rs. 110.
Allotment (not received) = Rs. 60. Call (not made) = Rs. 20.
So the application money received = 110 - 60 - 20 = Rs. 30 per share.
The premium was part of the allotment, so no premium was received.
Step 3: Find the forfeited amount
Share Forfeiture A/c is credited with the money received on the forfeited shares.
\[ 200 \times 30 = \text{Rs. } 6{,}000 \]
Step 4: Find the discount allowed on reissue
The shares are reissued at Rs. 70 as fully paid up of Rs. 100, so the discount is 100 - 70 = Rs. 30 per share.
\[ \text{Discount} = 200 \times 30 = \text{Rs. } 6{,}000 \]
Step 5: Find the capital reserve
Capital reserve is the balance in Share Forfeiture A/c after the discount is adjusted. Here the discount of Rs. 6,000 uses up the whole forfeited amount.
\[ \text{Capital Reserve} = 6{,}000 - 6{,}000 = 0 \]
Step 6: Check the options
Rs. 4,000, Rs. 6,000 and Rs. 14,000 come from wrong ideas, such as treating the premium as received or ignoring the discount. The balance left is nil, so option 4 is correct.
Final Answer:
No profit is left after the discount is adjusted, so there is no capital reserve. This is option 4. \[ \boxed{\text{Nil}} \]
Question 41:
A, B and C constituted a partnership to carry out a venture to build offices for Zakash Office Sites Ltd. On the completion of venture under which way the dissolution of a firm will takes place?
Correct Answer: (A) On the happening of certain contingencies
The partnership was formed for one single venture, which is building offices for one client. Such a firm is called a partnership for a particular venture.
Step 2: Recall the rule
Under Section 42 of the Indian Partnership Act, 1932, a firm is dissolved by the happening of certain contingencies, unless there is a contract to the contrary. One of these contingencies is the completion of the venture for which the firm was formed.
Step 3: Check option 1
The completion of the venture is a contingency listed in Section 42, so the firm dissolves on that event. Option 1 is correct.
Step 4: Check option 2
Dissolution by court needs an order of the court on grounds such as unsound mind of a partner or persistent breach of agreement. Nothing like that is stated here, so option 2 is wrong.
Step 5: Check option 3
Dissolution by notice applies to a partnership at will, when a partner gives notice of dissolution. This firm was for a fixed venture, not at will, so option 3 is wrong.
Step 6: Check option 4
Compulsory dissolution takes place when all partners become insolvent or when the business becomes unlawful. Neither is stated, so option 4 is wrong.
Final Answer:
The firm dissolves on the completion of the venture, which is a contingency. This is option 1. \[ \boxed{\text{Option 1}} \]
View Solution
Step 1: Understand the factsThe partnership was formed for one single venture, which is building offices for one client. Such a firm is called a partnership for a particular venture.
Step 2: Recall the rule
Under Section 42 of the Indian Partnership Act, 1932, a firm is dissolved by the happening of certain contingencies, unless there is a contract to the contrary. One of these contingencies is the completion of the venture for which the firm was formed.
Step 3: Check option 1
The completion of the venture is a contingency listed in Section 42, so the firm dissolves on that event. Option 1 is correct.
Step 4: Check option 2
Dissolution by court needs an order of the court on grounds such as unsound mind of a partner or persistent breach of agreement. Nothing like that is stated here, so option 2 is wrong.
Step 5: Check option 3
Dissolution by notice applies to a partnership at will, when a partner gives notice of dissolution. This firm was for a fixed venture, not at will, so option 3 is wrong.
Step 6: Check option 4
Compulsory dissolution takes place when all partners become insolvent or when the business becomes unlawful. Neither is stated, so option 4 is wrong.
Final Answer:
The firm dissolves on the completion of the venture, which is a contingency. This is option 1. \[ \boxed{\text{Option 1}} \]
Question 42:
Under which of the following cases, the Court can order the dissolution of a partnership firm?
(A) When a partner persistently commits breach of partnership agreement.
(B) When a partner has transferred the whole of his interest in the firm to a third party.
(C) By the death of a partner.
(D) When the business of the firm cannot be carried on except at a loss.
Choose the correct answer from the options given below:
Correct Answer: (B) (A), (B) and (D) only
Under Section 44 of the Indian Partnership Act, 1932, a court can dissolve a firm on the suit of a partner. The grounds include unsound mind of a partner, permanent incapacity, misconduct, persistent breach of agreement, transfer of whole interest to a third party, business running only at a loss, and just and equitable grounds.
Step 2: Check statement (A)
Persistent breach of the partnership agreement is a ground under Section 44. So (A) is TRUE.
Step 3: Check statement (B)
If a partner transfers the whole of his interest to a third party, the court can dissolve the firm. So (B) is TRUE.
Step 4: Check statement (C)
Death of a partner is not a ground for court dissolution. The firm is dissolved by the death of a partner automatically under Section 42, unless the partnership deed says otherwise. So (C) is FALSE.
Step 5: Check statement (D)
If the business cannot be carried on except at a loss, the court may order dissolution. So (D) is TRUE.
Step 6: Match with the options
Only (A), (B) and (D) are true, which is option 2.
Final Answer:
The court can dissolve the firm in cases (A), (B) and (D). This is option 2. \[ \boxed{\text{Option 2}} \]
View Solution
Step 1: Recall the ruleUnder Section 44 of the Indian Partnership Act, 1932, a court can dissolve a firm on the suit of a partner. The grounds include unsound mind of a partner, permanent incapacity, misconduct, persistent breach of agreement, transfer of whole interest to a third party, business running only at a loss, and just and equitable grounds.
Step 2: Check statement (A)
Persistent breach of the partnership agreement is a ground under Section 44. So (A) is TRUE.
Step 3: Check statement (B)
If a partner transfers the whole of his interest to a third party, the court can dissolve the firm. So (B) is TRUE.
Step 4: Check statement (C)
Death of a partner is not a ground for court dissolution. The firm is dissolved by the death of a partner automatically under Section 42, unless the partnership deed says otherwise. So (C) is FALSE.
Step 5: Check statement (D)
If the business cannot be carried on except at a loss, the court may order dissolution. So (D) is TRUE.
Step 6: Match with the options
Only (A), (B) and (D) are true, which is option 2.
Final Answer:
The court can dissolve the firm in cases (A), (B) and (D). This is option 2. \[ \boxed{\text{Option 2}} \]
Question 43:
At the time of the dissolution of a partnership firm in which X, Y and Z were partners sharing profit in 2:2:1 ratio, the following information was made available. Arrange them in the sequence in which they will be paid.
(A) A's Loan to the firm Rs 50,000
(B) Creditors Rs 2,00,000
(C) A's Capital Rs 2,50,000 , B's Capital Rs 2,00,000 and C's Capital Rs 1,00,000
(D) Balance available after settlement of all the stakeholders.
Choose the correct answer from the options given below:
Correct Answer: (C) (B), (A), (C), (D)
On dissolution, the money from selling assets is paid in a fixed order. First come the outside liabilities (creditors). Next come the loans given by partners. After that the partners' capitals are returned. Anything left is the surplus, which is shared among partners in the profit ratio.
Step 2: Place each item
(B) Creditors are outsiders, so they are paid first.
(A) A's loan is a liability to a partner, and is paid before capital. This is second.
(C) The capitals of the partners come third.
(D) The balance left after all this is paid last.
Step 3: Write the sequence
\[ \text{(B)} \to \text{(A)} \to \text{(C)} \to \text{(D)} \]
Step 4: Check the options
Options 1 and 2 pay the partner's loan before creditors, which is wrong. Option 4 pays the capital before the loan, which is wrong. Option 3 matches the sequence.
Final Answer:
The order is Creditors, Partner's loan, Capitals, Balance. This is option 3. \[ \boxed{\text{Option 3}} \]
View Solution
Step 1: Recall the order of paymentOn dissolution, the money from selling assets is paid in a fixed order. First come the outside liabilities (creditors). Next come the loans given by partners. After that the partners' capitals are returned. Anything left is the surplus, which is shared among partners in the profit ratio.
Step 2: Place each item
(B) Creditors are outsiders, so they are paid first.
(A) A's loan is a liability to a partner, and is paid before capital. This is second.
(C) The capitals of the partners come third.
(D) The balance left after all this is paid last.
Step 3: Write the sequence
\[ \text{(B)} \to \text{(A)} \to \text{(C)} \to \text{(D)} \]
Step 4: Check the options
Options 1 and 2 pay the partner's loan before creditors, which is wrong. Option 4 pays the capital before the loan, which is wrong. Option 3 matches the sequence.
Final Answer:
The order is Creditors, Partner's loan, Capitals, Balance. This is option 3. \[ \boxed{\text{Option 3}} \]
Question 44:
Choose the correct answer from the options given below:
Match List-I with List-II
| List-I (Cases for payment of realization expenses) | List-II (Journal entry) |
|---|---|
| (A) When realisation expenses are incurred and paid by the firm | (I) Realisation A/c Dr. To Partner's Capital A/c |
| (B) When realisation expenses are paid by a partner on behalf of the firm: | (II) No entry is required |
| (C) When a partner has agreed to bear the realisation expenses and the realisation expenses are paid by the firm | (III) Realisation A/c Dr. To Bank A/c |
| (D) When a partner has agreed to bear the realisation expenses and the partner himself pays the realisation expenses. | (IV) Partner's Capital A/c Dr. To Bank A/c |
Correct Answer: (B) (A) - (III), (B) - (I), (C) - (IV), (D) - (II)
Realisation expenses are the costs of closing the firm, such as legal fees. Who pays them, and who agreed to bear them, decides the journal entry. We match each case with its entry.
Step 2: Case (A), the firm pays:
The firm pays the expense from its own bank account. The expense is a cost of the realisation process, so we debit Realisation A/c and credit Bank A/c. This matches (III).
Step 3: Case (B), a partner pays for the firm:
The partner paid from his own pocket. The firm now owes him this money. So we debit Realisation A/c and credit that Partner's Capital A/c. This matches (I).
Step 4: Case (C), a partner agreed to bear it but the firm paid:
The expense is the partner's own burden, but the firm's bank paid it. So the partner must return the money. We debit Partner's Capital A/c and credit Bank A/c. This matches (IV). Realisation A/c is not debited.
Step 5: Case (D), a partner agreed to bear it and paid it himself:
The partner bore his own expense from his own pocket. Nothing changes in the firm's books. So no entry is required. This matches (II).
Step 6: Check the options:
The matching is A-III, B-I, C-IV, D-II. Option 1 pairs A with I, which is wrong. Option 2 gives the correct pairing. Option 3 pairs A with I, which is wrong. Option 4 pairs B with IV, which is wrong.
Final Answer:
The correct matching is (A) - (III), (B) - (I), (C) - (IV), (D) - (II), which is option 2. \[\boxed{2}\]
View Solution
Step 1: Understanding the Question:Realisation expenses are the costs of closing the firm, such as legal fees. Who pays them, and who agreed to bear them, decides the journal entry. We match each case with its entry.
Step 2: Case (A), the firm pays:
The firm pays the expense from its own bank account. The expense is a cost of the realisation process, so we debit Realisation A/c and credit Bank A/c. This matches (III).
Step 3: Case (B), a partner pays for the firm:
The partner paid from his own pocket. The firm now owes him this money. So we debit Realisation A/c and credit that Partner's Capital A/c. This matches (I).
Step 4: Case (C), a partner agreed to bear it but the firm paid:
The expense is the partner's own burden, but the firm's bank paid it. So the partner must return the money. We debit Partner's Capital A/c and credit Bank A/c. This matches (IV). Realisation A/c is not debited.
Step 5: Case (D), a partner agreed to bear it and paid it himself:
The partner bore his own expense from his own pocket. Nothing changes in the firm's books. So no entry is required. This matches (II).
Step 6: Check the options:
The matching is A-III, B-I, C-IV, D-II. Option 1 pairs A with I, which is wrong. Option 2 gives the correct pairing. Option 3 pairs A with I, which is wrong. Option 4 pairs B with IV, which is wrong.
Final Answer:
The correct matching is (A) - (III), (B) - (I), (C) - (IV), (D) - (II), which is option 2. \[\boxed{2}\]
Question 45:
At the time of dissolution of a partnership firm, the stock appeared in the books was Rs 35,000. One of the partner took over 50% of the stock at 10% less than its book value, and the remaining stock was sold at a gain of 15%. Find the total amount realized from the stock in cash.
Correct Answer: (C) Rs 20,125
The stock is Rs 35,000. Half is taken over by a partner and half is sold outside. We need only the cash received, so we must separate the two parts.
Step 2: Split the stock:
Half of 35,000 is 17,500. So the partner takes stock of book value Rs 17,500. The other stock of book value Rs 17,500 is sold.
Step 3: Stock taken over by the partner:
He takes it at 10% less than book value. So the value is 17,500 x 90/100 = Rs 15,750. This is not paid in cash. It is adjusted in his capital account, so it is not a cash realisation.
Step 4: Stock sold in the market:
It is sold at a gain of 15%. So the cash received is 17,500 x 115/100 = Rs 20,125. This comes in as cash.
Step 5: Check the options:
Rs 15,750 is only the partner's takeover value. Rs 17,500 is the book value of one half. Rs 35,875 adds the takeover value 15,750 and the cash 20,125, but the takeover is not cash. Rs 20,125 is the cash from the sale.
Final Answer:
Cash realised from the stock is Rs 20,125, which is option 3. \[\boxed{20{,}125}\]
View Solution
Step 1: Understanding the Question:The stock is Rs 35,000. Half is taken over by a partner and half is sold outside. We need only the cash received, so we must separate the two parts.
Step 2: Split the stock:
Half of 35,000 is 17,500. So the partner takes stock of book value Rs 17,500. The other stock of book value Rs 17,500 is sold.
Step 3: Stock taken over by the partner:
He takes it at 10% less than book value. So the value is 17,500 x 90/100 = Rs 15,750. This is not paid in cash. It is adjusted in his capital account, so it is not a cash realisation.
Step 4: Stock sold in the market:
It is sold at a gain of 15%. So the cash received is 17,500 x 115/100 = Rs 20,125. This comes in as cash.
Step 5: Check the options:
Rs 15,750 is only the partner's takeover value. Rs 17,500 is the book value of one half. Rs 35,875 adds the takeover value 15,750 and the cash 20,125, but the takeover is not cash. Rs 20,125 is the cash from the sale.
Final Answer:
Cash realised from the stock is Rs 20,125, which is option 3. \[\boxed{20{,}125}\]
Question 46:
Choose the correct answer from the options given below:
Match List-I with List-II
| List-I | List-II |
|---|---|
| (A) Receipt from royalties, fees, commission and other revenue | (I) Investing Activity |
| (B) Receipt from Interest and dividends | (II) Operating Activity |
| (C) Proceeds from issue of preference or equity shares | (III) Cash and Cash equivalent |
| (D) Current Investment | (IV) Financing Activity |
Correct Answer: (C) (A) - (II), (B) - (I), (C) - (IV), (D) - (III)
A cash flow statement groups cash flows into operating, investing and financing activities. Some items are kept outside these as cash and cash equivalents. We place each item in the right group.
Step 2: Item (A):
Royalties, fees and commission are earned from the main business of the firm. So they are Operating Activity. This is (II).
Step 3: Item (B):
Interest and dividends are received on investments made by the firm. So they are Investing Activity (for a non-finance company). This is (I).
Step 4: Item (C):
Issue of preference or equity shares raises long-term capital from owners. So it is Financing Activity. This is (IV).
Step 5: Item (D):
Current investments are short-term, highly liquid investments that are easily turned into cash. So they are treated as Cash and Cash equivalent. This is (III).
Step 6: Check the options:
The correct order is A-II, B-I, C-IV, D-III. Option 1 pairs A with I, wrong. Option 2 pairs A with I, wrong. Option 3 matches all four. Option 4 pairs A with III, wrong.
Final Answer:
The correct matching is A-II, B-I, C-IV, D-III, which is option 3. \[\boxed{3}\]
View Solution
Step 1: Understanding the Question:A cash flow statement groups cash flows into operating, investing and financing activities. Some items are kept outside these as cash and cash equivalents. We place each item in the right group.
Step 2: Item (A):
Royalties, fees and commission are earned from the main business of the firm. So they are Operating Activity. This is (II).
Step 3: Item (B):
Interest and dividends are received on investments made by the firm. So they are Investing Activity (for a non-finance company). This is (I).
Step 4: Item (C):
Issue of preference or equity shares raises long-term capital from owners. So it is Financing Activity. This is (IV).
Step 5: Item (D):
Current investments are short-term, highly liquid investments that are easily turned into cash. So they are treated as Cash and Cash equivalent. This is (III).
Step 6: Check the options:
The correct order is A-II, B-I, C-IV, D-III. Option 1 pairs A with I, wrong. Option 2 pairs A with I, wrong. Option 3 matches all four. Option 4 pairs A with III, wrong.
Final Answer:
The correct matching is A-II, B-I, C-IV, D-III, which is option 3. \[\boxed{3}\]
Question 47:
Arrange the following items related to the Statement of Profit and Loss in a sequence:
(A) Profit before extraordinary items and tax
(B) Profit before tax
(C) Cost of materials consumed
(D) Revenue from operations
Choose the correct answer from the options given below:
Correct Answer: (D) (D), (C), (A), (B)
The Statement of Profit and Loss follows a fixed format. It starts with income, then deducts expenses step by step to reach profit.
Step 2: First line:
The statement starts with Revenue from operations (D). Other income is added to it to get total revenue.
Step 3: Expenses:
Next come the expenses. The first expense is Cost of materials consumed (C). Purchases of stock in trade, employee benefits, finance cost and depreciation follow it.
Step 4: Profit lines:
Total revenue minus total expenses gives Profit before extraordinary items and tax (A). Extraordinary items are then adjusted to get Profit before tax (B).
Step 5: Check the options:
The order is D, C, A, B. Option 1 puts profit first, which is wrong. Option 2 puts profit before tax first, wrong. Option 3 puts the expense before revenue, wrong. Option 4 matches the format.
Final Answer:
The sequence is (D), (C), (A), (B), which is option 4. \[\boxed{4}\]
View Solution
Step 1: Understanding the Question:The Statement of Profit and Loss follows a fixed format. It starts with income, then deducts expenses step by step to reach profit.
Step 2: First line:
The statement starts with Revenue from operations (D). Other income is added to it to get total revenue.
Step 3: Expenses:
Next come the expenses. The first expense is Cost of materials consumed (C). Purchases of stock in trade, employee benefits, finance cost and depreciation follow it.
Step 4: Profit lines:
Total revenue minus total expenses gives Profit before extraordinary items and tax (A). Extraordinary items are then adjusted to get Profit before tax (B).
Step 5: Check the options:
The order is D, C, A, B. Option 1 puts profit first, which is wrong. Option 2 puts profit before tax first, wrong. Option 3 puts the expense before revenue, wrong. Option 4 matches the format.
Final Answer:
The sequence is (D), (C), (A), (B), which is option 4. \[\boxed{4}\]
Question 48:
The current ratio of a firm is 2 : 1. If the firm purchased goods on credit, then how will it affect its current ratio?
Correct Answer: (B) Reduce
Current ratio = Current assets / Current liabilities. It is 2 : 1 now. Buying goods on credit changes both parts.
Step 2: Effect of the transaction:
Goods bought on credit raise stock, which is a current asset. They also raise creditors, which is a current liability. Both go up by the same amount.
Step 3: Try numbers:
Let current assets be Rs 2,00,000 and current liabilities Rs 1,00,000. Buy goods of Rs 50,000 on credit. Now the assets are Rs 2,50,000 and the liabilities are Rs 1,50,000. The ratio is 2,50,000 / 1,50,000 = 1.67 : 1.
Step 4: Why it falls:
Adding the same amount to a larger number and to a smaller number moves the ratio closer to 1. Since the ratio was above 1, it drops.
Step 5: Check the options:
Improve is wrong because 1.67 is less than 2. No change is wrong. Option 4 has no basis. So the ratio reduces.
Final Answer:
The current ratio reduces, which is option 2. \[\boxed{2}\]
View Solution
Step 1: Understanding the Question:Current ratio = Current assets / Current liabilities. It is 2 : 1 now. Buying goods on credit changes both parts.
Step 2: Effect of the transaction:
Goods bought on credit raise stock, which is a current asset. They also raise creditors, which is a current liability. Both go up by the same amount.
Step 3: Try numbers:
Let current assets be Rs 2,00,000 and current liabilities Rs 1,00,000. Buy goods of Rs 50,000 on credit. Now the assets are Rs 2,50,000 and the liabilities are Rs 1,50,000. The ratio is 2,50,000 / 1,50,000 = 1.67 : 1.
Step 4: Why it falls:
Adding the same amount to a larger number and to a smaller number moves the ratio closer to 1. Since the ratio was above 1, it drops.
Step 5: Check the options:
Improve is wrong because 1.67 is less than 2. No change is wrong. Option 4 has no basis. So the ratio reduces.
Final Answer:
The current ratio reduces, which is option 2. \[\boxed{2}\]
Question 49:
From the following details, calculate interest coverage ratio: Net Profit after tax Rs. 1,20,000; 15% Long-term debt 20,00,000; and Tax rate 40%.
Correct Answer: (A) 1.67 times
Interest coverage ratio shows how many times the profit before interest and tax covers the interest.
\[ \text{Interest Coverage Ratio} = \frac{\text{Net Profit before Interest and Tax}}{\text{Interest on Long-term Debt}} \]
So we need profit before tax, then add back the interest to get profit before interest and tax.
Step 2: Find profit before tax.
Net profit after tax is Rs 1,20,000 and the tax rate is 40%. So profit after tax is 60% of profit before tax.
\[ \text{Profit before tax} = \frac{1{,}20{,}000}{60} \times 100 = 2{,}00{,}000 \]
Step 3: Find the interest.
Interest is 15% of the long-term debt.
\[ \text{Interest} = 20{,}00{,}000 \times \frac{15}{100} = 3{,}00{,}000 \]
Step 4: Find profit before interest and tax.
Profit before tax is struck after charging interest. So we add the interest back.
\[ \text{PBIT} = 2{,}00{,}000 + 3{,}00{,}000 = 5{,}00{,}000 \]
Step 5: Find the ratio.
\[ \text{Interest Coverage Ratio} = \frac{5{,}00{,}000}{3{,}00{,}000} = 1.67 \text{ times} \]
Step 6: Check the other options.
Options 2, 3 and 4 (1.75, 1.89 and 1.95 times) do not match 5,00,000 divided by 3,00,000. They come from wrong steps, such as forgetting to add back the interest or using the wrong tax adjustment. So only option 1 is right.
Final Answer:
The interest coverage ratio is 1.67 times, which is option 1.
\[ \boxed{1.67 \text{ times}} \]
View Solution
Step 1: Understand the ratio.Interest coverage ratio shows how many times the profit before interest and tax covers the interest.
\[ \text{Interest Coverage Ratio} = \frac{\text{Net Profit before Interest and Tax}}{\text{Interest on Long-term Debt}} \]
So we need profit before tax, then add back the interest to get profit before interest and tax.
Step 2: Find profit before tax.
Net profit after tax is Rs 1,20,000 and the tax rate is 40%. So profit after tax is 60% of profit before tax.
\[ \text{Profit before tax} = \frac{1{,}20{,}000}{60} \times 100 = 2{,}00{,}000 \]
Step 3: Find the interest.
Interest is 15% of the long-term debt.
\[ \text{Interest} = 20{,}00{,}000 \times \frac{15}{100} = 3{,}00{,}000 \]
Step 4: Find profit before interest and tax.
Profit before tax is struck after charging interest. So we add the interest back.
\[ \text{PBIT} = 2{,}00{,}000 + 3{,}00{,}000 = 5{,}00{,}000 \]
Step 5: Find the ratio.
\[ \text{Interest Coverage Ratio} = \frac{5{,}00{,}000}{3{,}00{,}000} = 1.67 \text{ times} \]
Step 6: Check the other options.
Options 2, 3 and 4 (1.75, 1.89 and 1.95 times) do not match 5,00,000 divided by 3,00,000. They come from wrong steps, such as forgetting to add back the interest or using the wrong tax adjustment. So only option 1 is right.
Final Answer:
The interest coverage ratio is 1.67 times, which is option 1.
\[ \boxed{1.67 \text{ times}} \]
Question 50:
Which financial analysis is also known as 'horizontal analysis'?
Correct Answer: (C) Comparative Statements
Horizontal analysis compares the same item of the financial statements across two or more years, reading the figures along a row. It looks at the change in each item over time. It is also called time-series analysis.
Step 2: Check option 1 (Cash Flow Analysis).
Cash flow analysis studies the inflow and outflow of cash from operating, investing and financing activities. It is not a year-to-year comparison of statement items. So option 1 is WRONG.
Step 3: Check option 2 (Ratio Analysis).
Ratio analysis relates two figures of the same year to find a ratio, such as the current ratio. It is not a horizontal comparison. So option 2 is WRONG.
Step 4: Check option 3 (Comparative Statements).
Comparative statements place the figures of two or more years side by side, with the absolute change and the percentage change. This is exactly horizontal analysis. So option 3 is CORRECT.
Step 5: Check option 4 (Common Size Statements).
Common size statements show every item as a percentage of one base figure, such as total assets or net sales, in the same year. That is vertical analysis. So option 4 is WRONG.
Final Answer:
Horizontal analysis is done through comparative statements, which is option 3.
\[ \boxed{\text{Comparative Statements}} \]
View Solution
Step 1: Understand the term.Horizontal analysis compares the same item of the financial statements across two or more years, reading the figures along a row. It looks at the change in each item over time. It is also called time-series analysis.
Step 2: Check option 1 (Cash Flow Analysis).
Cash flow analysis studies the inflow and outflow of cash from operating, investing and financing activities. It is not a year-to-year comparison of statement items. So option 1 is WRONG.
Step 3: Check option 2 (Ratio Analysis).
Ratio analysis relates two figures of the same year to find a ratio, such as the current ratio. It is not a horizontal comparison. So option 2 is WRONG.
Step 4: Check option 3 (Comparative Statements).
Comparative statements place the figures of two or more years side by side, with the absolute change and the percentage change. This is exactly horizontal analysis. So option 3 is CORRECT.
Step 5: Check option 4 (Common Size Statements).
Common size statements show every item as a percentage of one base figure, such as total assets or net sales, in the same year. That is vertical analysis. So option 4 is WRONG.
Final Answer:
Horizontal analysis is done through comparative statements, which is option 3.
\[ \boxed{\text{Comparative Statements}} \]
Question 51:
Which of the following is not the advantage of Computerised Accounting System (CAS)?
Correct Answer: (D) Economy in the processing of accounting data is minimised.
We must find the statement that is NOT a benefit of a computerised accounting system. So three options are real advantages and one is false or reversed.
Step 2: Check option 1.
A CAS can produce ledgers, trial balance and financial statements quickly and in any format the user needs. Timely reports are a real advantage. So option 1 is an advantage.
Step 3: Check option 2.
Data is stored in files and databases. It is easy to search, update and keep safe, so record keeping is efficient. Option 2 is an advantage.
Step 4: Check option 3.
A CAS gives control through passwords, user rights and audit trails. This ensures effective control over the system. Option 3 is an advantage.
Step 5: Check option 4.
A CAS makes the processing of accounting data cheaper and faster. Economy is increased, not minimised. Saying the economy is minimised turns the benefit into its opposite. So option 4 is NOT an advantage.
Final Answer:
The statement that is not an advantage of CAS is option 4.
\[ \boxed{\text{Option 4}} \]
View Solution
Step 1: Understand the question.We must find the statement that is NOT a benefit of a computerised accounting system. So three options are real advantages and one is false or reversed.
Step 2: Check option 1.
A CAS can produce ledgers, trial balance and financial statements quickly and in any format the user needs. Timely reports are a real advantage. So option 1 is an advantage.
Step 3: Check option 2.
Data is stored in files and databases. It is easy to search, update and keep safe, so record keeping is efficient. Option 2 is an advantage.
Step 4: Check option 3.
A CAS gives control through passwords, user rights and audit trails. This ensures effective control over the system. Option 3 is an advantage.
Step 5: Check option 4.
A CAS makes the processing of accounting data cheaper and faster. Economy is increased, not minimised. Saying the economy is minimised turns the benefit into its opposite. So option 4 is NOT an advantage.
Final Answer:
The statement that is not an advantage of CAS is option 4.
\[ \boxed{\text{Option 4}} \]
Question 52:
Choose the correct answer from the options given below:
Match List-I with List-II
| List-I | List-II |
|---|---|
| (A) Ranges | (I) Holds either row or column constant when the formula or function is copied to another location |
| (B) Mixed reference | (II) Used when we want a cell reference to stay fixed on specific cell |
| (C) Absolute reference | (III) As a formula or function is copied and pasted to other cells, the cell references in the formula or function change to reflect the new location |
| (D) Default reference | (IV) Identified by cell references of the cells from the upper left to lower right |
Correct Answer: (B) (A) - (IV), (B) - (I), (C) - (II), (D) - (III)
In a spreadsheet, a formula can refer to cells in different ways. A range is a block of cells. A reference can be relative (the default), absolute or mixed. We match each with its meaning.
Step 2: Match (A) Ranges.
A range is a group of cells identified by the first cell (upper left) and the last cell (lower right), for example A1:C5. So (A) matches (IV).
Step 3: Match (B) Mixed reference.
A mixed reference fixes only one part, either the row or the column, for example A$1 or $A1. So it holds either the row or the column constant when copied. (B) matches (I).
Step 4: Match (C) Absolute reference.
An absolute reference such as $A$1 always points to one specific cell. It does not change when copied. (C) matches (II).
Step 5: Match (D) Default reference.
The default reference is the relative reference. When the formula is copied to other cells, the reference shifts to show the new location. (D) matches (III).
Step 6: Choose the option.
The pairs are A-IV, B-I, C-II, D-III. This is option 2. Option 1 pairs A with I, which is the mixed reference meaning. Option 3 pairs C with IV, which is the range meaning. Option 4 pairs A with III, the relative meaning. So options 1, 3 and 4 are WRONG.
Final Answer:
The correct matching is (A)-(IV), (B)-(I), (C)-(II), (D)-(III), option 2.
\[ \boxed{\text{Option 2}} \]
View Solution
Step 1: Understand the concept.In a spreadsheet, a formula can refer to cells in different ways. A range is a block of cells. A reference can be relative (the default), absolute or mixed. We match each with its meaning.
Step 2: Match (A) Ranges.
A range is a group of cells identified by the first cell (upper left) and the last cell (lower right), for example A1:C5. So (A) matches (IV).
Step 3: Match (B) Mixed reference.
A mixed reference fixes only one part, either the row or the column, for example A$1 or $A1. So it holds either the row or the column constant when copied. (B) matches (I).
Step 4: Match (C) Absolute reference.
An absolute reference such as $A$1 always points to one specific cell. It does not change when copied. (C) matches (II).
Step 5: Match (D) Default reference.
The default reference is the relative reference. When the formula is copied to other cells, the reference shifts to show the new location. (D) matches (III).
Step 6: Choose the option.
The pairs are A-IV, B-I, C-II, D-III. This is option 2. Option 1 pairs A with I, which is the mixed reference meaning. Option 3 pairs C with IV, which is the range meaning. Option 4 pairs A with III, the relative meaning. So options 1, 3 and 4 are WRONG.
Final Answer:
The correct matching is (A)-(IV), (B)-(I), (C)-(II), (D)-(III), option 2.
\[ \boxed{\text{Option 2}} \]
Question 53:
Arrange the following steps related to freezing the formula using paste special command in logical sequence
(A) Click on Home Tab and select Copy symbol
(B) In the Paste Special box, under paste select the radio button next to Values and click OK
(C) Select the cell (s) that contains the formula
(D) Click on Paste tab and select Paste Special
Choose the correct sequence from the options given below:
Correct Answer: (A) (C), (A), (D), (B)
Freezing a formula means turning the formula into its fixed value. In Excel we copy the cell and then paste only the values using Paste Special.
Step 2: Find the first step.
We cannot copy anything before choosing it. So we first select the cell that contains the formula. That is (C).
Step 3: Find the second step.
After selecting the cell, we click the Home tab and press Copy. That is (A).
Step 4: Find the third step.
Then we click on the Paste option and choose Paste Special. That is (D).
Step 5: Find the last step.
In the Paste Special box, we select Values and click OK. This pastes the value in place of the formula. That is (B).
Step 6: Choose the option.
The order is C, A, D, B. This is option 1. Option 2 starts with the paste dialog before copying. Option 3 copies before selecting the cell. Option 4 starts with paste. So options 2, 3 and 4 are WRONG.
Final Answer:
The correct sequence is (C), (A), (D), (B), option 1.
\[ \boxed{\text{(C), (A), (D), (B)}} \]
View Solution
Step 1: Understand the task.Freezing a formula means turning the formula into its fixed value. In Excel we copy the cell and then paste only the values using Paste Special.
Step 2: Find the first step.
We cannot copy anything before choosing it. So we first select the cell that contains the formula. That is (C).
Step 3: Find the second step.
After selecting the cell, we click the Home tab and press Copy. That is (A).
Step 4: Find the third step.
Then we click on the Paste option and choose Paste Special. That is (D).
Step 5: Find the last step.
In the Paste Special box, we select Values and click OK. This pastes the value in place of the formula. That is (B).
Step 6: Choose the option.
The order is C, A, D, B. This is option 1. Option 2 starts with the paste dialog before copying. Option 3 copies before selecting the cell. Option 4 starts with paste. So options 2, 3 and 4 are WRONG.
Final Answer:
The correct sequence is (C), (A), (D), (B), option 1.
\[ \boxed{\text{(C), (A), (D), (B)}} \]
Question 54:
Which of the following arguments in a financial function represents the total number of payments?
Correct Answer: (C) Nper
Financial functions in a spreadsheet, such as PMT, PV, FV and NPER, use arguments like Rate, Nper, Pmt, PV and FV. Each argument stands for one quantity of a loan or an investment.
Step 2: Check option 1 (FV).
FV means future value. It is the value of the investment at the end of the period. It is not a count. So option 1 is WRONG.
Step 3: Check option 2 (PV).
PV means present value. It is the amount today, such as the loan amount. So option 2 is WRONG.
Step 4: Check option 3 (Nper).
Nper means the number of periods. It is the total number of payments in the loan or the annuity. So option 3 is CORRECT.
Step 5: Check option 4 (Rate).
Rate is the interest rate for each period. It is a percentage, not a count. So option 4 is WRONG.
Final Answer:
Nper is the argument for the total number of payments, option 3.
\[ \boxed{\text{Nper}} \]
View Solution
Step 1: Understand the concept.Financial functions in a spreadsheet, such as PMT, PV, FV and NPER, use arguments like Rate, Nper, Pmt, PV and FV. Each argument stands for one quantity of a loan or an investment.
Step 2: Check option 1 (FV).
FV means future value. It is the value of the investment at the end of the period. It is not a count. So option 1 is WRONG.
Step 3: Check option 2 (PV).
PV means present value. It is the amount today, such as the loan amount. So option 2 is WRONG.
Step 4: Check option 3 (Nper).
Nper means the number of periods. It is the total number of payments in the loan or the annuity. So option 3 is CORRECT.
Step 5: Check option 4 (Rate).
Rate is the interest rate for each period. It is a percentage, not a count. So option 4 is WRONG.
Final Answer:
Nper is the argument for the total number of payments, option 3.
\[ \boxed{\text{Nper}} \]
Question 55:
A graph has at least how many axes
Correct Answer: (A) Two axes
A graph shows the relation between two sets of values. One set goes on the horizontal axis (X axis) and the other on the vertical axis (Y axis).
Step 2: Check option 1 (Two axes).
Every ordinary graph needs an X axis and a Y axis, so it has at least two axes. So option 1 is CORRECT.
Step 3: Check option 2 (Three axes).
Three axes are used only in some 3-D charts, so it is not the minimum. So option 2 is WRONG.
Step 4: Check option 3 (One axes).
One axis cannot show a relation between two values. So option 3 is WRONG.
Step 5: Check option 4 (Four axes).
A graph does not need four axes. Even a chart with a secondary axis has three. So option 4 is WRONG.
Final Answer:
A graph has at least two axes, option 1.
\[ \boxed{\text{Two axes}} \]
View Solution
Step 1: Understand the concept.A graph shows the relation between two sets of values. One set goes on the horizontal axis (X axis) and the other on the vertical axis (Y axis).
Step 2: Check option 1 (Two axes).
Every ordinary graph needs an X axis and a Y axis, so it has at least two axes. So option 1 is CORRECT.
Step 3: Check option 2 (Three axes).
Three axes are used only in some 3-D charts, so it is not the minimum. So option 2 is WRONG.
Step 4: Check option 3 (One axes).
One axis cannot show a relation between two values. So option 3 is WRONG.
Step 5: Check option 4 (Four axes).
A graph does not need four axes. Even a chart with a secondary axis has three. So option 4 is WRONG.
Final Answer:
A graph has at least two axes, option 1.
\[ \boxed{\text{Two axes}} \]
CUET UG 2026 Exam Pattern
| Parameter | Details |
|---|---|
| Exam Name | Common University Entrance Test (CUET UG) 2026 |
| Conducting Body | National Testing Agency (NTA) |
| Exam Mode | Computer-Based Test (CBT) |
| Exam Duration | 60 minutes per test |
| Total Sections | 3 (Languages, Domain Subjects, General Test) |
| Question Type | Multiple Choice Questions (MCQs) |
| Questions per Test | 50 questions (all compulsory) |
| Marking Scheme | +5 for correct, -1 for incorrect |
| Maximum Marks | 250 marks per test |
| Maximum Subject Choices | 5 subjects in total |
| Syllabus Base | Class 12 NCERT (mainly for Domain Subjects) |
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