Mr. Sharma holding 1,000 equity shares of Rs.10 each, issued at par, could pay Rs.3.50 on application, but could not pay the allotment money of Rs. 2.5 per share and his shares
were forfeited. In the books of the company, shares forfeited account will be credited by ________
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Solution
When shares issued at par are forfeited the accounting treatment will be as follows:
(i) Debit Share Capital Account with amount called up (whether received or not) per share up to the time of forfeiture.
(ii) Credit Share Forfeited A/c. with the amount received up to the time of forfeiture.
(iii) Credit ‘Unpaid Calls A/c’ with the amount due on forfeited shares. This cancels the effect of debit to such calls which take place when the amount is made due. Forfeited shares account will be credited by the amount which has been received in respect of forfeited shares.
Thus the amount received on such shares = 1,000 × 3.5 = Rs. 3,500
The shares forfeited account will be credited by Rs. 3,500
Mr. Yatharth consigned to Mr. Ramesh 100 cases of tea costing Rs. 100 per case. He paid Rs. 1,000 as freight and cartage. Mr. Ramesh could take delivery of only 90 cases since 10 cases were loss in transit. The amount of abnormal loss will be _____
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Solution
Cost of goods consigned to Mr. Ramesh = 100 × 100 = Rs. 10,000
Plus freight and carriage = Rs. 1,000
Total cost of 100 cases consigned = Rs. 11,000
Abnormal loss i.e. goods lost in transit = 11,000 × 10/100 = Rs. 1,100
The balance of furniture and fixtures as on 1st April, 2009 was Rs. 10,000. Furniture of Rs.5,000 was purchased on 1st October, 2009. Depreciation is charged @ 10% p.a. on W.D.V. method. The depreciation for the year ended 31st March, 2010 will be _____
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Solution
Under WDV method, depreciation is charged at a fixed rate every year, on the reducing balance. a
certain percentage is applied to the previous year’s book value, to arrive at the current year’s depreciation/
book value, which shows a declining balance, weighted for earlier years, and lower and lower for later
years, as the asset grows older.
Lets find the WDV as on 30-3-2010 of the furniture and fixture in question
Balance of furniture and fixture as on 1-4-2009 = Rs. 10,000
Original cost of furniture purchased on 1-10-2009 = Rs. 5,000
31-3-20 10 depreciation @10%pa on the opening balance = 10,000 × 10% = Rs. 1,000
31-3-2010 depreciation @10%pa on the furniture purchased on 1-10-2009 for half year
= 5,000 × 10% × ½ = Rs. 250
31-3-2010 total depreciation = 1,000 + 250 = Rs. 1,250
Following figures have been taken from the trial balance of a trader;
Purchases Rs. 30,000
Purchase Returns Rs. 5,000
Sales Rs. 40,000
Sales Returns Rs. 5,000
The amount of profit will be
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Solution
Profit = sales less return – purchase less return
Sales less return = sales – sales return = 40,000 – 5,000 = Rs. 35,000
Purchase less return = purchase – purchase return = 30,000 - 5,000 = Rs. 25,000
Thus amount of profit = 35,000 – 25,000 = Rs. 10,000
A and B are partners in a firm sharing profits in the ratio of 3:2. They admit C as the new partner for 1/6th share in the profits. The firm’s goodwill was valued at Rs.1,50,000. For adjustment of goodwill, C’s account will be debited by
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Solution
When a new partner is admitted in the firm, the existing/old partners have to sacrifice, what is given to the new partner, from their future profits, the reputation they have gained in their past efforts and the side of capital they have taken before. The new partner when admitted has to compensate for all these sacrifices made by the old ones. The compensation for such sacrifice can be termed as ‘goodwill’.
Hence, at the time of admission of the new partner, it is necessary to account the valuation of goodwill in
the firm.
For adjustment of goodwill C’s account will be debited by his share in the firm’s goodwill.
The value of the firms goodwill = Rs. 1,50,000
Share of C in profit = 1/6
Thus C’s account will be debited by 1,50,000 × 1/6 = Rs. 25,000
G Ltd. acquired assets worth Rs. 75,000 from H Ltd. by issue of shares of Rs.10 each at a premium of Rs. 5. The number of shares to be issued by G Ltd. to settle the purchase
consideration will be
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Solution
The shares are being issued at a premium thus the value of each share issued will be 10 + 5 = Rs. 15
Total value of assets acquired = Rs. 75,000
Number of shares issued = total value of shares acquired/value per share = 75,000/15 = 5,000 shares
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Solution
Under this method goodwill is calculated on the basis of the average of some agreed number of past
years. The average is then multiplied by the agreed number of years.
Goodwill = Average Profits × Number of years of Purchase
Here average profit of last 4 years will be (40,000 + 50,000 + 60,000 + 50,000)/4 = Rs. 50,000
Agreed number of years = 3 years
Thus goodwill = 50,000 × 3 = Rs. 1,50,000
A and B are partners sharing profits in the ratio of 3:2. They admit C as a new partner for 3/10th share, which he acquires 2/10 from A and 1/10 from B. The new profit sharing ratio of A, B and C is
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Solution
The substance of the transactions gets preference over legal position. The transactions and events recorded in the books of account and presented in the financial statements,
should be governed by the substance of such transactions and not merely by their legal form as per the concept of
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Solution
Concept of substance over form is applied in the given case.
Mr. A, the owner of M/s Apex Ltd. withdrew some goods from the business for his personal use. The accountant of the firm recorded this transaction on the basis of selling price of goods. He justifies his contention on the basis that business and the proprietor are two different entities as per business entity concept and therefore drawings should be charged at the same price on which the goods are sold to the outside customers. However, Mr. A emphasizes that he should be charged with only the cost price of the goods withdrawn by him.
At which price, the drawings should be recorded?
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Solution
Drawings should be recorded at cost price.
The amount due to the retiring partner on account of goodwill is debited to the continuing partners in their _______.
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Solution
Amount due to retiring partner on account of goodwill is debited to the continuing partners in their gaining ratio.
Carriage charges paid for a new plant purchased if debited to carriage account would affect
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Solution
Carriage charges paid for new plant should be debited to Plant A/c. If debited to Carriage A/c, now rectification would affect both A/cs.
Proforma invoice is a statement of information in the form of invoice prepared by the _______ to appraise the _______ about certain essential particulars of the goods.
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Solution
Proforma invoice is prepared by consignor and sent to consignee to inform him about essential particulars of goods.
The petty cashier generally work on_______ system.
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Solution
Petty cashier works on Imprest system.
Scrap value of an asset means the amount that it can fetch on sale at the _______ of its useful life.
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Solution
Scrap value means amount realised at end of useful life of asset.
All expenses and _______ accounts appearing in the trial balance are transferred either to the trading account or profit and loss account.
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Solution
All expenses and income accounts appearing in trial balance are Ist of either to Trading or Profit & Loss A/c.
In double entry book keeping system, every transaction affects at least ______account(s).
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Solution
Every transaction affects at least 2 accounts.
The left side of an account is known as _______ and the right side as _______.
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Solution
Left side of an account is Dr. whereas right side is Cr.
_______ principle requires that the same accounting method should be used from one accounting period to the next.
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Solution
Consistency requires that same method should be used from one accounting year to next.
A promissory note is drawn by _______ in favour of _______ .
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Solution
A promissory note is drawn by maker in favour of payee.