MARKING SCHEME: 1. According to sec. 14 of the Indian Partnership Act, 1932, the term 'Partnership' is "the relation between two or more persons who have agreed to share the profits of a business carried on by all or by any of them acting for all." 2. Partnership Deed: 'Partnership Deed' is a written document which contains the terms and conditions of Partnership agreed upon by all the partners. 3. P & L A/c includes all charges against profits whereas P & L Appropriation A/c includes all appropriations of profits. 4. In the absence of partnership deed, following rules will be applied for governing the partnership:- (1) Profit sharing ratio will be equal among all partners. (2) No interest will be given on partners’ capitals (3) No interest will be charged on partners’ drawings (4) No partner will be entitled to any salary, fees, commission or remuneration. (5) Interest @ 6% p.a. is to be allowed on Advances/Loans from partners.. 5. Following are the differences between Fixed capital method and Fluctuating capital method. Basis Fixed capital method Fluctuating capital method. 1.No.of Accounts Each partner has two accounts, capital and current account. Each partner has only one account, capital account. 2.Change in balance The capital account remains unchanged unless there is an addition to or withdrawal of capital. The balance of capital account keeps on changing from time to time. 3.Negative balance The fixed capital account of a partner can never show a negative balance. The fluctuating capital account of a partner can show a negative balance.
Interest on Drawings: =Total Drawings X Rate/100 X Months for interest/12 *When date of withdrawal is not given in the question –6 months interest is charged. * When unequal /irregular amount is withdrawn on different dates then interest on drawings is charged by using product method in following ways:- Interest on Drawings = Total of product X Rate/100 X1/12 Some Formats:- Profit and Loss Appropriation Account For the year ended…………….. Dr. Cr. Particulars Rs. Particulars Rs. To Interest on Capital To partners salaries To Partners commission To Reserve (Transfer from Net profit if required ) To Managers commission ( To net divisible profit transferred to partners capital a/c(bal. fig) By net profit (after interest on partners loan By interest on Drawings By net divisible loss transferred to partners capital a/c (bal. fig) Partners capital account :- When capital accounts are fixed Dr Partners capital account Cr Particulars A B Particulars A B To cash/Bank (withdrawal of capital) To bal c/d By bal b/d (opening bal) By Cash/bank(additional capital introduced) Dr Partners’ Current Account Cr. Particulars A B Particulars A B To bal b/d (in case of debit opening bal) To Drawings To interest on Drawings To profit & Loss appropriation a/c To bal c/d By bal b/d (in case of credit opening bal ) By salaries By interest on capital By profit & loss appropriation a/c By commission (b)when Capital account is fluctuating Dr. Partners capital account cr Particulars A B Particulars A B To bal b/d By bal b/d (in case of credit
Stock Debtors Prabhat’s capital Deep’s capital cash 30000 45000 25000 5000 7000 252500 Deep’s capital account Prabhat’s capital account Cash Realisation Loss T/F to Deep’s Capital 27300 Prabhat’s capital 18200 27000 40000 110000 45500 252500 PARTNER’S CAPITAL ACCOUNT Particulars Deep Prabhat Particulars Deep Prabhat To realisation a/c To realisation A/c To cash 27000 27300 40700 40000 18200 86800 By balance b/d By Realisation A/c 90000 5000 120000 25000 95000 145000 95000 145000 CASH ACCOUNT Particulars Amount Particulars Amount To Balance b/d 25000 110000 By realisation A/c Deep’s capital a/c Prabhat’s capital a/c 7500 40700 86800 135000 135000 ANS(13): REALIZATION ACCOUNT Particulars Rs Particulars Rs To Land To Stock To Debtors To Shilpa capital (bank loan) ToCash (expenses) To Cash(creditors) To Profit on realisation Shilpa 10470 Meena 6980 Nanda 3490 81000 56760 18600 20000 1200 31000 20940 By Bank Loan By Creditors By Provision for doubtful debts By Shilpa capital( stock) By Bank(stock) By Bank (debtors) By Bank(land) By Bank(debtors) 20000 37000 1200 35000 14000 8000 110000 4300 229500 229500 CAPITAL ACCOUNT Particulars Shilpa Meena Nanda Particular Shilpa meena Nanda Balance b/d Realisation a/c Cash 35000 81470 50980 23000 Balance b/d General reserve Realisation(Bank) Profit on Realisation Cash (Nanda) 80000 6000 20000 10470 40000 4000 6980 2000 3490 17510 116470 50980 23000 116470 50980 23000 CASH ACCOUNT Particulars Rs Particulars Rs Balance b/d Realisation (stock) Realisation (Debtors) Realisation (Land) Realisation (Debtors) Nanda Capital 10840 14000 8000 110000 4300 17510 164650 Realisation expenses Realisation (Cr.) Shilpa Capital Meena Capital 1200 31000 81470 50980 164650 ANS(14): REALISATION ACCOUNT
Particulars Rs Particulars Rs Debtors Plant Stock Leasehold Land Furniture Cash Creditors Cash (Expenses) Cash (Loan) Profit on realisation Sourav 3250 Utkarsh 3250 12000 47000 42000 60000 25000 25500 2500 40000 6500 Sundry creditors Loan Bank Leasehold Land 72000 Furniture 22500 Stock 40500 Plant 48000 Debtors 10500 27000 40000 193500 260500 260500 PARTNER’S CAPITAL ACCOUNTS Particulars Sourav Utkarsh Particulars Sourav Utkarsh Bank 68250 68250 Balance b/d Reserve Fund Profit on realisation 60000 5000 3250 60000 5000 3250 68250 68250 68250 68250 BANK ACCOUNT Particulars Rs Particulars Rs Balance b/d Realisation (assets) 11000 193500 204500 Realisation (Cr) Realisation ( Exp.) Realisation (loan) Sourav capital 68250 Utkarsh capital 68250 25500 2500 40000 136500 204500 ANS (15): Realisation Account Particulars Rs Particulars Rs Building Machinery Furniture Stock Investment Debtors Ashu Capital (Crs.) Harish Capital (B.O.) Cash (Expenses) Profit on Realisation Ashu 3600 Harish 2400 80000 70000 14000 20000 60000 48000 88000 50000 3000 6000 439000 Creditors Bank overdraft Ashu Capital (building) Harish Capital (mach. & furniture) Bank (Debtors) Ashu Capital 48000 Harish Capital 32000 88000 50000 95000 80000 46000 80000 439000 Cash Account Particulars Rs Particulars Rs Balance b/d Realisation (debtors) Harish Capital 8000 46000 5600 59600 Realisation (Exp.) Ashu Capital 3000 56600 59600 Partner’s Capital Account Particulars Ashu Harish Particulars Ashu Harish Realisation (Building) Realisation 95000 80000 Balance b/d Realisation (Crs) 108000 88000 54000
(machinery) Realisation (stock & investment) Bank 48000 56000 32000 Realisation (B.O.) Profit on realisation Bank 3600 50000 2500 5600 199600 112000 199600 112000 ANS(16): Realisation Account Particulars Rs Particulars Rs Plant Debtors Furniture Stock Investment Bills receivable Sanjay capital Cash creditors Cash (B/P) 90000 60000 32000 60000 70000 36000 18300 80000 30000 Creditors Bills payable Bank : Plant 72000 Debtors 54000 Furniture 18000 Stock 54000 Investment 76000 B/R 31000 Loss of Realisation Sanjay Tarun Vineet 80000 30000 305000 61300 476300 476300 Capital account Particulars Sanjay Tarun Vineet Particulars Sanjay Tarun Vineet Loss on realisation Bank 30650 87650 20434 79566 10216 59784 Balance b/d Realisation (expenses) 100000 18300 100000 70000 118300 100000 70000 118300 100000 70000 Cash account Particulars Rs Particulars Rs Balance b/d Realisation (S. Assets) 32000 305000 Realisation (Creditors) Sanjay Capital 87650 Tarun Capital 79566 Vineet Capital 59784 80000 227000 337000 337000 ANS(17): Realisation account Particulars Rs Particulars Rs Sundry Debtors Stock Motor Cars Machinery Investment Ixtures Tanu Capital Manu capital Bank (Expenses) 55000 75000 90000 45000 70000 9000 50000 30400 2200 Sundry Creditors Bills Payable Bills Loan Tanu Capital (Debtors) Bank Manu Capital (machinery) Tanu Capital (Motor Cars) Bank : Investment 76000 Fixtures 4000 Loss on Realisation : Tanu 23500 Manu 14000 62000 32000 50000 55000 10000 40000 60000 80000 37600 426600 426600 Partner’s Capital Account
1. The authorized capital of V. Ltd. is Rs. 20,00,000 divided into 2,00,000 equity shares of Rs. 10 each. Out of these 1,00,000 equity shares issued. The amount is payable as under: On Application – Rs. 2; On Allotment – Rs. 5; Balance on final call The public applied for 90,000 shares. All the money was duly received. How will you show ‘Share Capital Account’ in the balance sheet of the company. Also prepare “Notes to Accounts” for the same. Solution: Balance Sheet of V. Ltd. Particulars Note No. Amount Current Year Rs. Amount Previous Year Rs. I(1) Equity and Liability Share holder's Fund (a) Share Capital 1 900000 \ Note No. 1 Share Capital Authorized Capital 2,00,000 equity shares of Rs. 10 each 2000000 Issued Capital 1,00,000 equity shares of Rs. 10 each 1000000 Subscribed Capital 90,000 equity shares of Rs. 10 each 900000 Called Up & Paid Up Capital 90,000 equity shares of Rs. 10 each 900000 Example 2. The authorized capital of T. Ltd. is Rs. 50,00,000 divided into 3,00,000 equity shares of Rs. 10 each and 20,000 6%Preference shares of Rs. 100 each. Out of these 2,00,000 equity shares issued at a premium of 15%. The amount is payable as under: On Application – Rs. 2.5; On Allotment – Rs. 6.5 (including Premium); Balance on final callThe public applied for 2, 50,000 shares. Allotment was made on pro-rata basis. All the money was received except 1000 eq. shares on which call money was not paid by Mr. Manohar. These shares were reissued to Shyam @ Rs. 8 fully paid up. How will you show ‘Share Capital Account’ in the balance sheet of the company? Also prepare “Notes to Accounts” for the same. Solution: Balance Sheet of T. Ltd. Particulars Note No. Amount Current Year Rs. Amount Previous Year Rs. Equity and Liability Share holder's Fund (a) Share Capital (b) Reserve and Surplus 1 2 2002000 150000 Note No. 1 Share Capital
Solution: Solution: JOURNAL Particulars L.F. Amt.(Dr.) Amt.(Dr.) Bank A/c Dr. To Share Application A/c (Being share application money received on 46,000) 2,400 1,38,000 1,500 9,00 75,000 45,000 18,000 Share Application A/c Dr. To Share Capital A/c To Share Allotment A/c To Bank A/c (Being share application money transferred) Share Allotment A/c Dr. To Share Capital A/c To Securities Premium Res. A/c (Being allotment money due) 1,25,000 75,000 50,000 Bank A/c(12,5000-4,5000=8,0000-3,000= 77,000 +16,00)Dr. To Equity Share Allotment A/c To Calls-in-advance a/c (Being allotment money received and on 800 shares @ Rs. 4 per share). 78,600 50,000 77,000 1,600 50,000 Share First call A/c Dr. To Share capital A/c (Being first call money due) Bank A/c Dr. Calls-in-advance A/c To Share First Call A/c (Being first call money received ) 47,700 800 48,500 Share Final Call A/c Dr. To Share Capital A/c (Being final call money due) 50,0000 50,000 Bank A/c Dr. Calls-in-advance A/c Dr. To Share Final Call A/c (Being final call money received) 47,700 800 48,500 Shares issued 25,000 Nominal value – Rs. 10 + 2 – Rs. 3 on application Rs. 3 + 2 on allotment Rs. 2 on first call Rs. 2 on final call Applied Allotted 20,000 20,000 6,000 15,000 10,000 Nil 46,000 25,000
Particulars Amt.(Dr.) Amt.(Dr.) Share Capital a/c (300 X 6) Dr. Securities Premium Res. A/c (300 X 4) Dr. To Share Forfeiture A/c (300 x2) To Share Allotment Call A/c(300x8) (Being 300 shares forfeited for the non-payment of allotment of Rs. 8 each including premium of Rs. 4 1,800 1,200 600 2400 BankA/c (300X15)Dr To Share capital A/c (Being reissue of 300 shares at Rs. 15 as fully paid up) 4,500 4,500 Share Forfeiture A/c Dr. To Capital Reserve A/c (Being balance of forfeited share account transferred to capital reserve) 600 600 Case (iii) JOURNAL Particulars L.F. Amt.(Dr.) Amt.(Dr.) Share Capital A/c (200X50)Dr. To Share Final Call A/c To Share Forfeiture A/c (Being 200 shares forfeited for the non-payment of final call) 10,000 2,000 8,000 Bank A/c (200X45) Dr. Share forfeiture a/c (200X5) To Share capital A/c (200X50) (Being reissue of 400 shares at Rs. 45 as fully paid up) 9,000 1,000 10,000 Share Forfeiture A/c Dr. To Capital Reserve A/c (Being balance of forfeited share account transferred to capital reserve) 7000 7000 Example 4. A limited company invites applications for 50,000 equity shares of Rs. 10 each, at a maximum discount by the Companies Act, payable as follows: On application Rs. 3; on allotment Rs. 3; on first call Rs. 2; on final call the balance. Applications were received for 55,000 shares. Allotments were made on the following basis: To applicants for 35,000 shares- in full
3. Ravindram Ltd. A/c Dr. To Equity Share Capital A/c To Security Premium A/c = 2,00,000 =16,000 shares 10+2.5=12.5 2,00,000 1,60,000 40,000 2. 1 mark for 1st entry and 2marks for 2nd entry 1 2 Bank A/c Dr. To 12%Debenture App.& Allot. A/c 12% Debentures App.& Allot. A/c Dr. To 12% Debentures A/c To Security Premium Reserve A/c To Bank A/c 6,00,000 6,00,000 6,00,000 3,00,000 1,50,000 1,50,000 3. two marks for each type of redemption 1 2. 3. 4. Own Debenture A/c Dr. To Bank A/c 12% Debentures A/c Dr. To Own Debentures A/c To Profit on Redemption A/c 12% Debenture A/c Dr. To Debenture holder A/c Debenture holder A/c Dr. To Bank A/c 81600 85000 40,000 40,000 81,600 81600 3400 40,000 40,000
5. Profit on Redemption A/c Dr. To Capital Reserve A/c 3400 3400 4. . ½ mark for 1st entry, ½ mark for 2nd entry and 2 marks for 3rd entry 1. 2. 3. Furniture A/c Dr. To M/s Furniture Mart. A/c M/s Furniture Mart. A/c Dr. To Bills Payable A/c M/s Furniture Mart. A/c Dr. To 9% Debentures A/c To Security Premium Reserve A/c No.of Deb.=1,10,000 = 1000 Deb. 100+10=110 2,20,000 1,10,000 1,10,000 2,20,000 1,10,000 1,00,000 10,000 5. (i) OUT OF SYLLABUS. (ii)1 mark for each entry 1. 2. Bank A/c Dr. To 8% Deb. App.& Allot. A/c 8% Deb. App.& Allot. A/c Dr. To 8% Debentures A/c To Security Premium Reserve A/c 2,06,250 2,06,250 2,06,250 1,87,500 18,750 (iii) 1 mark for each entry 1. 2. Own Debentures A/c Dr. To Bank A/c 9% Debentures A/c Dr. To Own Debentures A/c To Profit on Redemption of Deb. A/c 76,000 80,000 76,000 76,000 4,000
DRR A/C Dr. To. General Reserve A/C 10,00,000 10,00,000 8. 3 marks for 1st 2 entries and 3 marks for last 4 entries 1. 2. 3. 4. 5 6 7 8 Sundry Assets A/c Dr. Goodwill A/c Dr. To Sundry Liabilities A/c To P & Co. A/c P & Co. A/c Dr. Loss on Issue of Debenture A/c Dr. To 12% Debenture A/c To Security Premium A/c To Premium on Redemption A/c Statement of P & L App. A/c Dr. To Deb. Red. Res. A/c (being DRR created equal to 25% of Deb.) Debenture Redemption Investment A/C Dr. T0 Bank A/c (being 15% Investment made as per provision) Bank A/c Dr. To Debenture Redemption Investment A/C (being 15% Investment sold) 12% Debenture A/c Dr. Premium on Redemption A/c Dr. To Debenture holder A/c Debenture holder A/c Dr. To Bank A/c Deb. Red. Res. A/c Dr. To General Reserve A/c 6,00,000 30,000 5,50,000 25,000 1,25,000 75,000 75,000 5,00,000 25,000 5,25,000 1,25,000 70,000 5,50,000 5,00,000 50,000 25,000 1,25,000 75,000 75,000 5,25,000 5,25,000 1,25,000
9. 1 mark It means Issue of debenture as additional security against bank loan, so that bank can be a debenture holder when company is not able to pay the dues. 10..(i) ½ mark for each entry 1. 2. 3. 4. Bank A/c Dr. To 9% Deb. App.& Allot. A/c 9% Deb. App.& Allot. A/c Dr. Loss on Issue of Debenture A/c Dr. To 9% Debentures A/c To Security Premium Reserve A/c To Premium on Redemption A/c 9% Debentures A/c Dr. Premium on Redemption A/c Dr. To Debenture holder A/c Debenture holder A/c Dr. To Bank A/c 39,37,500 39,37,500 5,62,500 37,50,000 5,62,500 43,12,500 39,37,500 37,50,000 1,87,500 5,62,500 43,12,500 43,12,500 (ii) ½ mark for each entry 1. 2. 3 4 5 Bank A/c Dr. To 12% Deb. App.& Allot. A/c 9% Deb. App.& Allot. A/c Dr. To 9% Debentures A/c To Security Premium Reserve A/c 21,60,000 21,60,000 5,00,000 20,00,000 21,60,000 20,00,000 1,60,000 5,00,000 20,00,000 Deb. Red. Res. A/c Dr. To General Reserve A/c 9% Debentures A/c Dr. To Debenture holder A/c Debenture holder A/c Dr. To Bank A/c 11. 3 marks for issue and 3 marks for redemption
Particular Rs. Particular Rs. To Bal. b/d To Bank A/C(bal. fig.) 9,00,000 4,20,000 By Depreciation A/C By Bal. c/d 1,20,000 12,00,000 13,20,000 13,20,000 From the following summarized balance sheets of a company, calculate cash flow from operating activities: Particulars Note No. 31st March 2014 (Rs) 31st March 2015 (Rs) I. Equity and Liabilities Share holder’s funds: Equity Share Capital Reserves & Surplus Non Current Liabilities: 6% Debentures Current Liabilities: Creditors Bills Payable Other Current Liabilities 1,00,000 30,000 60,000 30,000 30,000 40,000 1,00,000 60,000 80,000 35,000 10,000 45,000 TOTAL 2,90,000 3,30,000 II. Assets Non Current Assets: Fixed assets Non Current Investments Current Assets Stock Debtors Cash 1,50,000 40,000 40,000 40,000 20,000 1,90,000 30,000 30,000 45,000 10,000 TOTAL 2,90,000 3,30,000 Additional Information A piece of machinery costing Rs 5,000, on which depreciation of Rs 2,000 had been charged was sold for Rs 1,000. Depreciation charged during the year was rs 17,000. New debentures have been issued on 1st August, 2014. Cash Flow Statement for the year ended March 31st, 2015 Particulars Details(Rs.) Rs. Cash flow from operating activities Closing bal. of Reserve & surplus Less: Opening bal. of Reserve & surplus Net profit before tax and extra ordinary item Add: Non cash and non operating exps. Depreciation Interest on Debentures 60,000 (30,000) 30,000 17,000
Loss on sale of machinery Operating profit before change in working capital Add: Decrease in current assets and increase in C.L Increase in creditors Increase in other current liabilities. Less: Increase in current assets and decrease in C.L Increase in inventories/stock Increase in trade receivable(debtors) Decrease in B/P Net Cash flow from operating activities 23,400 4,400 2,000 53,400 5,000 5,000 63,400 (15,000) (5,000) (20,000) Working note: Interest on Debenture 1. = 60,000 X 4/12 X 6/ 100 = 1200 2. = 80,000 X 8/12 X 6/ 100 = 3200 4400 From the following information, calculate the cash flow from Investing Activities.’ Particulars Opening Balance (Rs) Closing Balance (Rs) Furniture (At cost) 20,000 28,000 Accumulated Depreciation on Furniture 6,000 9,000 During the year, furniture costing Rs. 4,000 was sold at a profit of Rs. 3,000. Depreciation on furniture charged during the year amounted to Rs. 5,000. OR During the year, furniture costing Rs. 4,000 (accumulated depreciation there on Rs. 2,000) was sold at Rs. 5,000. HINTS: * There is need to prepare ‘Furniture a/c’ & ‘Prov. for Dep. a/c’. *‘Furniture A/c is required to ascertain the amount of furniture Purchased during the year. *‘Provision for Depreciation A/c is required to ascertain the depreciation provided during the year. Solution: Furniture Account Particulars (Rs.) Particulars (Rs.) To Balance b/d To Profit & Loss A/c (Gain on Sale) To Bank A/c (Balan. fig. being furniture purchased) 20,000 3,000 12,000 By Bank A/c (Sale of Furniture) By Accumulated Dep. A/c By Balance c/d 5,000 2,000 28,000 35,000 35,000
Add: Depreciation on Fixed Assets Witting off Preliminary Expenses Loss on Sale of Furniture Less: Profit on Sale of Machinery Operating Profit before Working Capital Changes Add: Increase in Creditors Decrease in Bills Receivable Less: Increase in Debtors Decrease in Bills Payable Increase in Prepaid Expenses Net Cash Flow from Operating Activities 20,000 10,000 1,000 (6,000) 2,99,000 10,000 3,000 (6,000) (4,000) (200) 3,01,800 Net Flow of Cash = Inflow of Cash – Outflow of Cash