PRINCIPLES AND PRACTICE OF ACCOUNTING

(JANUARY 2021)

Question 1:
(a) State with reasons, whether the following statements are True or False :
(i) Re-issue of forfeited shares is allotment of shares but not a sale.
(ii) Subsidy received from the government for working capital by a manufacturing
concern is a revenue receipt.
(iii) The Sale Book is kept to record both the cash and credit sales.
(iv) There are two ways of preparing an account current.
(v) Consignee will not pass any journal entry in his books at time of receiving of
goods from Consignor.
(vi) Accounting Standards for non-corporate entities in India are issued by the
Central Government.

(b) Define the following terms :

(i) Capital Commitment
(ii) Expired Cost
(iii) Floating Charge
(iv) Obsolescence

(c) Prepare a Bank Reconciliation Statement from the following particulars as on 31st
December, 2020 :
Particulars Rs.
Bank Balance as per Cash Book (Debit) 1,98,000
Bank Charges debited by the bank not recorded in Cash Book 34,000
Received from debtors vide RTGS on 31st December, 2020 not 1,00,000
recorded in Cash Book
Cheque issued but not presented for payment 45,000
Cheque deposited but not cleared 25,000
Cheque received and deposited but dishonoured. Entry for dishonour 5,000
not made in the Cash Book
Instruction for payment given to the bank on 31 st December, 2020 4,000
but the same effected by the Bank on 01st January, 2021

Answer 1:
(a) (i) False :
Reissue of forfeited share is not allotment of share but only a sale.

(ii) True :
Subsidy received from govt. by manufacturing concern is a revenue receipt
because it is not for purchase of capital asset.

(iii) False :
Sales book is only record credit transaction of goods.

(iv) False :
There are three methods of preparing account current:
(i) With the help of Int. Table
(ii) By means of product
(iii) By means of product of balances.

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 (v) True :
Consignee is an agent & on receving goods from consignor he doesnot
become owner of goods.
(vi) False :
Accounting standards for non-corporate entities in India are issued by ICAI.

(b) (i) Capital Commitment

Future liability for capital expenditure in respect of which contracts have been
made.
(ii) Expired Cost
That portion of an expenditure from which no further benefit is expected. Also
termed as expense.
(iii) Floating Charge
A general charge on some or all assets of an enterprise which are not
attached to specific assets and are given as security against a debt.
(iv) Obsolescence
Diminution in the value of an asset by reason of its becoming out-of date or
less useful due to technological changes, improvement in production
methods, change in market demand for the product or service output of the
asset, or legal or other restrictions.

(c) Bank Reconciliation Statement as on 31st Dec. 2020

Particulars Plus Minus
Balance as per Cash Book Dr. 1,98,000
1. Bank charges not recorded in cash book 34,000
2. Received from debtores not recorded in cash book 1,00,000
3. Cheque issued but not presented for pyament 45,000
4. Cheque deposited but not cleared 25,000
5. Cheque deposited but dishonoured 5,000
6. Instruction for payment given to bank as 31st Dec, 4,000
20 but paid by bank as 1st Jan, 21
3,47,000 64,000
Balance as per Pass Book Cr. 2,83,000

Question 2:
(a) Mr. Joshi's trial balance as on 31st March, 2020 did not agree. The difference was put
to a Suspense Account. During the next trading period, the following errors were
discovered :
(i) The total of the Purchases Book of one page, Rs. 5,615 was carried forward to
the next page as Rs. 6,551.
(ii) A sale of Rs. 281 was entered in the Sales Book as Rs. 821 and posted to the
credit of the customer.
(iii) A return to creditor, Rs. 295 was entered in the Returns Inward Book:
however, the creditor's account was correctly posted.
(iv) Cash received from Senu, Rs. 895 was posted to debit of Sethu.
(v) Goods worth Rs. 1,400 were dispatched to a customer before the close of the
year but no invoice was made out.
(vi) Goods worth Rs. 1,600 were sent on sale or return basis to a customer and
entered in the Sales Book at the close of the year, the customer still had the
option to return the goods. The gross profit margin was 20% on Sale.
(vii) Rs. 600 due from Mr. Q was omitted to be taken to the trial balance.
(viii) Sale of goods to Mr. R for Rs. 3,000 was omitted to be recorded.

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 You are required to give journal entries to rectify the errors in a way so as to show
the current year's profit or loss correctly.

(b) M/s. Dayal Transport Company purchased 10 trucks @ Rs. 50,00,000 each on 1st
July 2017. On 1st October, 2019, one of the trucks is involved in an accident and is
completely destroyed and Rs. 35,00,000 is received from the insurance in full
settlement. On the same date, another truck is purchased by the company for the
sum of Rs. 60,00,000. The company writes off 20% of the original cost per annum.
The company observes the calendar year as its financial year.
Give the motor truck account for two years ending 31st December, 2020.

Answer 2:
(a) Journal Entries
1. Suspense a/c Dr. 936
To P/L Adjustment 936
2. P/L Adjustment a/c Dr. 540
Customer a/c Dr. 1,102
To Suspense a/c 1,642
3. Suspense a/c Dr. 590
To P/L Adjustment a/c 590
4. Suspense a/c Dr. 1,790
To Senu 895
To Sethu 895
5. Customer a/c Dr. 1,400
To P/L Adjustment 1,400
6. P/L, Adjustment a/c Dr. 320
Inventory with customer a/c 1,280
To Customer a/c 1,600
7. Trade Receivable a/c Dr. 600
To Suspense a/c 600
8. R' a/c Dr. 3,000
To P/L Adjustment a/c 3,000
9. P/L Adjustment a/c Dr. 5,066
To Capital a/c 5,066

P/L Adjustment A/c

To Suspense a/c 540 By Suspense a/c 936
To Customer a/c 320 By Suspense a/c 590
To Capital a/c (B/F) 5,066 By Customer a/c 1,400
By R's a/c 3,000
5,926 5,926

(b) In the Books of M/s. Dayal Transport Co.

Motor Truck A/c
Date Particulars Amount Date Particulars Amount
1.1.19 To Balance b/d 1.10.19 By Depreciation a/c
T1 – 50,00,000 x 20 x 7,50,000
9/12
T1 35,00,000
T2 3,15,00,000 3,50,00,000
1.10.19 To P/L a/c 7,50,000 By Bank 35,00,000
(Insurance Claim)

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 1.10.19 To Bank a/c (T3) 60,00,000 31.12.19 By Depreciation a/c
T2 90,00,000
T3 3,00,000 93,00,000
31.12.19 By Balance c/d
T2 2,25,00,000
T3 57,00,000 2,82,00,000
41,75,00,000 41,75,00,000
1.1.20 To Balance b/d 31.12.20 By Depreciation a/c
T2 2,25,00,000 T2 90,00,000
T3 57,00,000 2,82,00,000 T3 12,00,000 1,02,00,000
31.12.20 By Balance c/d
T2 1,35,00,000
T3 45,00,000 1,80,00,000
2,82,00,000 2,82,00,000
1.1.21 To Bal. b/d
T2 1,35,00,000
T3 45,00,000 1,80,00,000

Working Note:
Calculation of WDV of Motor Truck as 1.1.2019.
T1 T2
(One Truck) (Nine Truck)
Cost as on 1.7.2017 50,00,000 4,50,00,000
(-) Dep. (31.12.2017) @ 20% (5,00,000) (45,00,000)
W.D.V. (1.1.2018) 45,00,000 4,05,00,000
(-) Dep. (31.12.2018) @ 20% (10,00,000) (90,00,000)
WDV (1.1.2019) 35,00,000 3,15,00,000

Question 3:
(a) A Products Limited of Kolkata has given the following particulars regarding tea sent
on consignment to C Stores of Mumbai :
Cost Price Selling price Qty consigned
5 Kg. Tin Rs. 100 each Rs. 150 each 1,000 Tins
10 Kg. Tin Rs. 180 each Rs. 250 each 1,000 Tins
(i) The consignment was booked on freight "To Pay" basis. The freight was
charged 5% of selling value.
(ii) C Stores sold 500. 5 kg Tins and 800, 10 kg Tins. It paid insurance of Rs.
10,000 and storage charges of Rs. 20,000.
(iii) C Stores is entitled to a fixed commission @ 10% on Sales.
(iv) During transit 50 quantity of 5 kg Tin and 20 quantity of 10 kg Tin got
damaged and the transporter paid Rs. 5,000 as damage charge.
Prepare the Consignment Account in the books of A Products Limited.

(b) From the following particulars prepare an account current, as sent by Mr. Amit to Mr.
Piyush as on 31" December, 2020 by means of product method charging interest @
8% p.a.

Date Particulars Rs.

01-09-2020 Balance due from Piyush 900
15-10-2020 Sold goods to Piyush 1,450
20-10-2020 Goods returned by Piyush 250
22-11-2020 Piyush paid by Cheque 1,200
15-12-2020 Received cash from Piyush 600

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(c) Attempt any ONE of the following two sub-parts i.e. either (i) or (ii)
(i) From the following information show the journal entries in the books of ABC
Limited for the year ended 31st March, 2020:
(1) 100 units of goods costillg Rs. 500 each sent to XYZ Limitecl on Sales
or Return Basis @ Rs. 750 per unit. This transaction was however
treated as actual sales in the books of accounts.
(2) Out of the above 100 units, only 60 units were accepted by XYZ
Limited during the year @ Rs. 700 per unit. No information was
received about acceptability of balance units by the year end.
OR
(ii) Mahesh had the following bill receivables and bills payables against Rajesh.
Calculate the average due date, when the payment can be received or made
without any loss of interest.
Bills Tenure
Date Tenure Date Bills Payable
Receivable
12-06-20 5,000 3 months 27-05-20 3,700 3 months
10-07-20 6,200 1 month 07-06-20 4,000 3 months
15-07-20 3,500 3 months 10-07-20 5,000 1 month
12-06-20 1,500 2 months
28-06-20 2,500 2 months
15th August, 2020 was Public holiday. However, 10 th September, 2020 was
also suddenly declared as holiday.

Answer 3:
(a) In the Books of A Product Ltd.
Consignment A/c
Particulars Amount Particulars Amount
To Goods sent on consign By C Store (Sale)
5 kg Tin – 1000 Tin @ 100 each 5 Kg Tin – 500 Tin @ 150 each 75,000
10 Kg Tin – 1000 Tin @ 180 each 2,80,000 10 Kg Tin – 800 Tin @ 250 each 2,00,000
To C Store
Freight (Note-1) 20,000 By Abnormal Loss (Note-2) 4,225
Insurance 10,000 By Bank (Damages) 5,000
Storage 20,000 By Consignment Stock (Note-3) 83,025
Commission 27,500 77,500
(10% of 2,75,000)
To P/L A/c 9,750
3,67,250 3,67,250
Working Note –
(1) Calculation of Freight
Sale Price of Goods Sent
5 Kg. tin 1,000 x 150 = 1,50,000
10 Kg. tin 1,000 x 250 = 2,50,000
4,00,000
Freight
5 Kg tin = 1,50,000 x 5% = 7,500
10 Kg tin = 2,50,000 x 5% = 12,500
20,000
(2) Calculation of Abnormal Loss
Cost of 5 Kg. tin (50 tin @ 100) = 5,000
10 Kg. tin (20 tin @ 180) = 3,600
8,600

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 (+) Freight
7,500
5 Kg. tin x 5% 375
1,000
12,500
10 Kg. tin x 2% 250
1,000
9,225
(-) Claim 5,000
Abnormal Loss 4,225

(3) Calculation of Consignment Stock In Quantity

5 Kg. Tin 10 Kg. Tin
Goods Sent 1,000 1,000
(-) Sale (500) (800)
(-) Loss (50) (20)
Unsold Unit 450 180

In Amount
Cost of 5 Kg. Tin (450 x 100) = 45,000
10 Kg. Tin (180 x 180) = 32,400

(+) Freight
7,500
5 Kg. Tin x 450 3,375
1,000
12,500
10 Kg. Tin x 180 2,250
1,000
Consignment Stock 83,025

(b) In the Books of Mr. Amit

Mr. Piyush in Account Current with Mr. Amit
(Interest to 31 Dec. 2020 @ 8% p.a.)
Date Particulars Due Amt. Days Product Date Particulars Due Amt. Days Product
2020 Date (Rs.) 2020 Date (Rs.) (Rs.)
1- To Bal. b/d 01.09.20 900 122 1,09,800 20- By Sales 20.10.20 250 72 18,000
Sept Oct Return
15- To Sales 15.10.20 1,450 77 1,11,650 22- By Bank 22.11.20 1,200 39 46,800
Oct Nov
31- To Interest 32.23 15- By Cash 15.12.20 600 16 9,600
Dec (1,47,050x Dec
31- By Balance of 1,47,050
8 1 Dec Product
x )
100 365
31- By Balance c/d 332.23
Dec
2,382.23 2,21,450 2,382.23 2,21,450

(c) (i) In the Books of ABC Ltd.

Journal Entry
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
1 Trade Receivable a/c Dr. 75,000
To Sales 75,000
(Being goods sold on approval or return basis)
2 a. Sales a/c 60 x 50 Dr. 3,000
To Trade Receivable 3,000
(Being Sales Approvaled at lower value)

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 b. Sales a/c 40 unit x 750 Dr. 30,000
To Trade Receivable 30,000
(Being Sales pending approval cancelled)
c. Inventory with customer a/c (40 x 500) Dr. 20,000
To Trading a/c 20,000
(Being unapproval goods included in Stock)

(c) (ii) Calculation of Aug. Due Date

Bills Receivable
Date Due Date Amount Days Product
12.06.20 15-Sep-20 5,000 33 1,65,000
10.07.20 13-Aug-20 6,200 0 0
15.07.20 18-Oct-20 3,500 66 2,31,000
12.06.20 14-Aug-20 1,500 1 1,500
28.06.20 31-Aug-20 2,500 18 45,000
18,700 4,42,500

Bills Payable
Date Due Date Amount Days Product
27.05.20 30-Aug-20 3,700 17 62,900
07.06.20 11-Sep-20 4,000 29 1,16,000
10.07.20 13-Aug-20 5,000 0 0
12,700 1,78,900

Diff. in Prdocut
Avg. Due Date = Base Date +
Diff. in Am t.
4,42,500- 1,78,900
= 13-Aug-2020 +
18,700 - 12,700
2,63,600
= 13-Aug-2020 +
6,000
= 13-Aug-2020 + 44 days
Avg. Due Date = 26-Sept-2020

Question 4:
(a) The partnership deed of a firm consisting of 3 partners - P. Q and R (profit sharing
ratio being 2:1:1) and whose fixed capitals are Rs. 30,000, Rs. 12,000 and Rs. 8,000
respectively provides as follows:
(i) The partners be allowed interest @ 8% p.a. on their lixed capitals, but no
interest to be allowed on %Indrawn profits or charged on drawings.
(ii) That upon the death of a partner, the goodwill of the firm be valued at 2
years purchase of the average net profit (after charging interest on capital)
for the 3 years to 31st December preceding the death of a partner.
(iii) That an insurance policy of Rs. 25.000 each was taken in individual names of
each partner. The premium was charged against the profits of the firm. The
surrender value of the policy was 20% of the sum assured.
(iv) Upon the death of a partner, he is to be credited with his share of the profits,
interest on capitals, etc. calculated upto 31st December following his death.
(v) That the share of the partnership policy and goodwill be credited to a
deceased partner as on 31st December following his death.

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 (vi) That the partnership books to be closed annually on 31st December.
P died on 30th September, 2020. The amount standing to the credit of his current
account as on 31st December, 2019 was Rs. 5,000 and from that date to the date of
death he had withdrawn Rs. 30,000 from the business. An unrecorded liability of Rs.
6,000 was discovered on 30th September, 2020 and it was decided to record it and
immediately pay it off.
The trading results of the firm (before charging interest on capital) had been as
follows :
2017 : Profit Rs. 29,340
20 18 : Profit Rs. 26,470
2019 : Loss Rs. 8,320
2020 : Profit Rs. 13,470
You are required to prepare an account showing amount due to P's legal heir as on
31st December, 2020.
Note : Impact for unrecorded liability not to be given in earlier years.

(b) Dr. Deku started private practice on 1 st April, 2019 with Rs. 2,00,000 of his own fund
and Rs. 3,00,000 borrowed at an interest of 12% p.a. on the security of his life
policies. His accounts for the year were kept on a cash basis and the following is his
summarized cash account:
Receipts Rs. Payments Rs.
Own Capital 2,00,000 Medicines Purchased 2,45,000
Loan 3,00,000 Surgical Equipment 2,50,000
Prescription Fees 6,60,000 Motor Car 3,20,000
Visiting Fees 2,50,000 Motor Car Expenses 1,20,000
Lecture Fees 24,000 Wages and Salaries 1,05,000
Pension Received 3,00,000 Rent of Clinic 60,000
General Charges 49,000
Household Expenses 1,80,000
Household Furniture 25,000
Expenses on Daughter's 2,15,000
Marriage
Interest on Loan 36,000
Balance at Bank 1,10,000
Cash in Hand 19,000
17,34,000 17,34,000

1/3rd of the motor car expenses may be treated as applicable to the private use of
car and Rs. 30,000 of salaries.are in respect of domestic servants.
The stock of medicines in hand on 31st March, 2020 was valued at Rs. 95,000. You
are required to prepare his private practice income and expenditure account and
capital account for the year ended 31st March, 2020. Ignore depreciation on fixed
assets.

Answer 4:
(a) Dr. P's Capital Account Cr.
Date Particular Rs. Date Particular Rs.
30.09.20 Towrrent a/c 25,000 1.1.20 By Balance b/d 30,000
(30,000-5,000)
31.12.20 To Profit and Losss 3,000 31.12.20 By Profit and Loss a/c
Adjustment a/c
(Unrecorded liability)
Interest on Capital 2,400

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 To Balance transferred to 38,465 Share of Profit 4,735
P's Executor's A/c
Insurance Policy a/c 17,500
Q & R (Goodwill) 11,830
66,465 66,465

W.No. – 1
Share in Profit for 2020
Profit for the year = 13,470
Less: Interest on Capital = 4,000
9,470
1 1
P's Share in Profit ( ) = 9,470 x = 4,735 Rs.
2 2

W.No. – 2
Profit on Separate Life Policy
P's Policy = 25,000
Q's and R's Policy @ 20%
(25,000 + 25,000 x 20%) = 10,000
35,000
1
Share of P (35,000 x ) = 17,500
2

W.No. – 3
Valuation of Goodwill
Year Profit before Interest on Fixed Capital Interest Profit after Interest
2017 29,340 4,000 25,340
2018 26,470 4,000 22,470
2019 (8,320) 4,000 (12,320)
47,490 12,000 35,490
35,490
Average = = 11,830
3
Goodwill at two year's purchase of average
Net Profits = 11,830 x 2 = 23,660 Rs.

2
Share of P in the Goodwill = 23,660 x = Rs. 11,830
4

(b) Income and Expenditure Account

Dr. for the year ended 31.03.2020 Cr.
Expenditure Rs. Incomes Rs.
To Medicine Consume 1,50,000 By Prescription Fees 6,60,000
To Motor Car Exp. 80,000 By Visitng Fees 2,50,000
To Wages and Salary 75,000 By Lecture Fees 24,000
To Rent of Clinic 60,000
To General Charges 49,000
To Interest on Loan 36,000
To Surplus 4,84,000
9,34,000 9,34,000

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 W.No. – 1
Car Expenses = 1,20,000
(-) Car Expenses for Personal Use
1
(1,20,000 x ) = 40,000
3
80,000

W.No. – 2
Wages and Salary = 1,05,000
(-) Salary for Personal use in respect of
Domestic Servent = 30,000
75,000

Dr. Deku Capital A/c

Dr. for the year ended 31.03.2020 Cr.
Particulars Rs. Particulars Rs.
To Drawings 4,90,000 By Balance b/d 2,00,000
To Balance c/d 4,94,000 By Income and Expenditure A/c 4,84,000
(Surplus)
By Pension 3,00,000
9,84,000 9,84,000

W.No. – 3
Drawings
Household Expenses = 1,80,000
Expenses on Daughter's Marriage = 2,15,000
Personal Motor Car Expenses = 40,000
Salary to Domestic Servant = 30,000
House Hold Furniture 25,000
4,90,000

W.No. – 4
Calculate Medicine Consume
Purchase = 2,45,000
(-) Closing Stock = 95,000
Medicine Consume 1,50,000

Question 5:
(a) From the following particulars ascertain the value of inventories as on 31 st March,
2020 :
Inventory as on 1st April, 2019 - Rs. 3,50,000
Purchase made during the year - Rs. 12,00,000
Sales - Rs. 18,50,000
Manufacturing Expenses - Rs. 1,00,000
Selling and Distribution Expenses - Rs. 50,000
Administration Expenses - Rs. 80,000
At the time of valuing inventory as on 31st March, 2019, a sum of Rs. 20,000 was
written off on a particular item which was originally purchased for Rs. 55,000 and
was sold during the year for Rs. 50,000.
Except the above mentioned transaction, gross profit earned during the year was
20% on sales.

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(b) Mr. K is engaged in business of selling magazines. Several of his customers pay
money in advance for subscribing his magazines. Information related to year ended
31st March, 2020 has been given below :
On 1st April, 2019 he had a balance of Rs. 3,00,000 advance from customers of
which Rs. 2,25,000 is related to year 2019-20 while remaining pertains to year
2020-21. During the year 2019-20 he made cash sales of Rs. 7,50,000.
You are required to compute :
(i) Total income for the year 2019-20.
(ii) Total money received during the year, if the closing balance as on 31 st March,
2020 in Advance from Customers Account is Rs. 2,55,000.

(c) From the following Income and Expenditure Account and additional information of
ATK Club. prepare Receipts and Payments Accounts and Balance Sheet of the club as
on 31st March, 2020.
ATK Club
Income and Expenditure Account for the year ending 31 st March, 2020
Expenditure Rs. Income Rs.
To Salaries 4,80,000 By Subscription 6,80,000
To Printing and Stationery 24,000 By Entrance Fees 16,000
To Postage 2,000 By Misc. Income 1,44,000
To Telephone 6,000
To Office expenses 48,000
To Bank Interest 22,000
To Audit Fees 10,000
To Annual General Meeting Exp. 1,00,000
To Depreciation (Sports Equipment) 28,000
To Surplus 1,20,000
8,40,000 8,40,000

Additional information :
Particulars As on 31" As on 31"
March, 2019 March, 2020
Subsenption Outstanding 64,000 72,000
Subscription Received in advance 52,000 33,600
Salaries Outstanding 24,000 32,000
Audit Fees Payable 8,000 10,000
Bank Loan 1,20,000 1,20,000
Value of Sports Equipment 2,08,000 2,52,000
Value of Club Premises 7,60,000 7,60,000
Cash in Hand ? 1,14,000

Answer 5:
(a) Statement Showing Calculatial of Inventory as on 31st March, 2020
Particulars Amount
Inventory as on 1/4/2019 3,50,000
Less: Value of abnormal inventory (55,000-20,000) 35,000
Value of normal inventory 3,15,000
Add: Purchases during the year 12,00,000
Add: Manufacturing Expenses 1,00,000
Cost of normal inventory available for sale 16,15,000
Less: Cost of goods sold of normal inventory

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 Total Sales 18,50,000
Less: Abnormal item sale 50,000 18,00,000
Less: G.P. @ 20% on sales 3,60,000 14,40,000
Cost of Inventory as on 31/03/2020 1,75,000

(b) Computation of Income for the Year 2019-20

Cash Sales during the year 7,50,000
Add: Money received in advance in previous year related to current 2,25,000
year
Total Income for the year 2019-20 9,75,000

Advance from Customer A/c

To Sales a/c 2,25,000 By Balance b/d 3,00,000
To Balance c/d 2,55,000 By Bank a/c (B/F) 1,80,000
4,80,000 4,80,000

So, total money received during the year

Cash Sales = 7,50,000
Add: Money received in advance = 1,80,000
Total Received = 9,30,000

(c) Receipts and Payment account of ATK Club for the year ended on 31st March, 2020
Receipts Rs. Payments Rs.
To Balance b/d (Bal. Fig) 54,400 By Salaries (W.N. 3) 4,72,000
To Subscription (W.N. 2) 6,53,600 By Audit Fees (W.N. 3) 8,000
To Entrance Fees 16,000 By Sports Equipment 72,000
To Misc Income 1,44,000 By Printing and Stationery 24,000
By Postage 2,000
By Telephone 6,000
By Office Expenses 48,000
By Bank Interest 22,000
By Annual General Meeting Exp 1,00,000
By Balanace c/d 1,14,000
8,68,000 8,68,000

Balance Sheet of ATK Club as at 31.03.2020

Liabilities Rs. Assets Rs.
Capital Fund (W.N. 1) 8,82,400 Sports Equipment 2,08,000
Add: Surplus 1,20,000 10,02,400 Add: Addition 72,000
2,80,000
Bank Loan 1,20,000 Less: Dep. (28,000) 2,52,000
Outstanding Salaries 32,000 Club Premises 7,60,000
Audit Fees Payable 10,000 Subscription Outstanding 72,000
Subscription Received in Advance 33,600 Cash in Hand 1,14,000
11,98,000 11,98,000

Working Notes:
1. Balance Sheet of ATK Club as at 31.03.2019
Liabilities Rs. Assets Rs.
Capital Fund (Bal. Fig) 8,82,400 Sports Equipment 2,08,000
Bank Loan 1,20,000 Club Premises 7,60,000
Outstanding Salaries 24,000 Subscription Outstanding 64,000

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 Audit Fees Payable 8,000 Cash in Hand 54,400
Subscription Received in Advance 52,000
10,86,400 10,86,400

2. Subscription Account
Particulars Rs. Particulars Rs.
To Outstanding Subscription 64,000 By Subscription Received in Adv. 52,000
To Income & Expenditure 6,80,000 By Cash/Bank (R & P) (Bal. Fig) 6,53,600
To Subscription Received in 33,600 To Outstanding Subscription 72,000
Adv.
7,77,600 7,77,600

3.
Particulars Salaries (Rs.) Audit Fees (Rs.)
Expenses Paid (Bal. Fig) 4,72,000 8,000
+ Closing Outstanding 32,000 10,000
(-) Opening Outstanding (24,000) (8,000)

Question 6:
(a) A Limited is a company with an authorised share capital of Rs. 1,00,00,000 in equity
shares of Rs. 10 each, of which 6,00,000 shares had been issued and fully paid up on
31st March, 2020. The company proposes to make a further issue of 1,35.000 of
these Rs. 10 shares at a price of Rs. 14 each, the arrangement of payment being :
(i) 2 per share payable on application, to be received by 31 st May, 2020;
(ii) Allotment to be made on 10th June, 2020 and a further Rs. 5 per share
(including the premium to be payable);
(iii) The final call for the balance to be made, and the money received by 31 st
December, 2020.
Applications were received for 5,60.000 shares and dealt with as follows;
(1) Applicants for 10,000 shares received allotment in full;
(2) Applicants for 50.000 shares received allotment of 1 share for every 2 applied
for; no money was returned to the applicants, the surplus on application
being used to reduce the amount due on allotment.
(3) Applicants for 5,00,000 shares received an allotment of 1 share for every 5
shares applied for; the money due on allotment was retained by the
company, the excess being returned to the applicants; and
(4) The money due on final call was received on the due date.
You are required to record these transactions (including bank transactions) in the
Journal Book of A Limited.

(b) Discuss therules if there is no Partnership Agreement.

Answer 6:
(a) Journal of A Limited
Date Particulars Dr. (Rs.) Cr. (Rs.)
31-May-2020 Bank a/c Dr. 11,20,000
To Equity Share Application a/c 11,20,000
(Being application money received on
560000 shares @ 2 Rs. per share)
10-June-2020 Equity Share Application a/c Dr. 11,20,000
To Equity Share Capital a/c 2,70,000
To Equity Share Allotment a/c 5,50,000

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 To Bank a/c 3,00,000
(Being aplication money on 135000 shares
transferred to equity share capital account,
adjusted with allotment and refunded as per
Board's Resolution No……….Dated)
10-June-2020 Equity Share Allotment a/c Dr. 6,75,000
To Equity Share Capital a/c 1,35,000
To Securities Premium a/c 5,40,000
(Being allotment money due on 135000
shares @ 5 Rs. each including premium @
Rs. 4 each)
10-June-2020 Bank a/c Dr. 1,25,000
To Equity Share Allotment a/c 1,25,000
(Being balance allotment money received)
10-June-2020 Equity Share Final Call a/c Dr. 9,45,000
To Equity Share Capital A/c 9,45,000
(Being final call money due on 135000
shares @ 7 Rs. per share)
31-Dec-2020 Bank a/c Dr. 9,45,000
To Equity Share Final Call a/c 9,45,000
(Being final call money on 135000 shares @
Rs. 7 each received)

Working Notes:
Calculation for Adjustment and Refund
Category No. of No. of Amount Amount Amount Refund Amount Amount
Shares Shares Received on Required on Adjusted Due on Received
Applied Alloted Application Application on Allotment on
for Allotment Allotment
1 2 3 4 5 6 7 8 9
1 10,000 10,000 20,000 20,000 Nil Nil 50,000 50,000
2 50,000 25,000 1,00,000 50,000 50,000 Nil 1,25,000 75,000
3 5,00,000 1,00,000 10,00,000 2,00,000 5,00,000 3,00,000 5,00,000 Nil
Total 5,60,000 1,35,000 11,20,000 2,70,000 5,50,000 3,00,000 6,75,000 1,25,000

(b) Rules in the absence of Partnership Deed

In the absence of any agreement to the contrary;
1. No partner has the right to a salary,
2. No interest is to be allowed on capital,
3. No interest is to be charged on the drawings,
4. Interest at the rate of 6% p.a. is to be allowed on a partner's loan to the firm,
and
5. Profits and losses are to be shared equally.

Note: In the absence of an agreement, the interest and salary payable to a partner
will be paid only if there is profit.

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