Bihar Board 12th Accountancy Model Question Paper 2 in English Medium

Bihar Board 12th Accountancy Model Papers

Bihar Board 12th Accountancy Model Question Paper 2 in English Medium

Time : 3 Hours 15 Min
Full Marks: 100

Instructions for the candidates

1. Candidates are required to give their answers in their own words as far as practicable.
2. Figures in the right-hand margin indicate full marks.
3. While answering the questions, the candidate should adhere to the word limit as for as practicable.
4. 15 minutes of extra time has been allotted for the candidate to read the questions carefully.
5. This question paper has two sections: Section – A and Section – B.
6. In Section – A, there are 50 objective type questions which are compulsory, each carrying 1 mark. Darken the circle with black/blue ball pen against the correct option on OMR Sheet provided to you. Do not use Whitener/Liquid/Blade/Nail on OMR Sheet, otherwise, the result will be treated as invalid.
7. In Section – B there are Non-objective type questions. There are 25 Short answer type questions, out of which any 15 questions are to be answered. Each question carries 2 marks. Apart from this, there are 8 Long answer type questions, out of which any 4 of them are to answer. Each question carries 5 marks.
8. Use of any electronic device is prohibited.

Objective Type Questions

Question No. 1 to 50 have four options, out of which only one is correct, you have to mark correct option on the OMR Sheet. (50 × 1 = 50)

Question 1.
Receipts and Payments Account usually indicates:
(a) Surplus
(b) Capital fund
(c) Debit Balance
(d) Credit Balance
Answer:
(c) Debit Balance

Question 2.
Receipts and Payments Account is a:
(a) Personal Account
(b) Real Account
(c) Nominal Account
(d) None of these
Answer:
(b) Real Account

Question 3.
Outstanding subscription is a:
(a) Income
(b) Asset
(c) Both ‘A’ and ‘B’
(d) None of these
Answer:
(b) Asset

Question 4.
Income and Expenses related to the prize fund is shown in:
(a) Income and Expenditure Account
(b) The asset side of the Balance sheet
(c) Liabilities side of the Balance sheet
(d) Cash Account
Answer:
(a) Income and Expenditure Account

Question 5.
Income and Expenditure Account records:
(a) All cash receipts and payments
(b) All credit receipts and payments
(c) All cash and credit receipts and payments
(d) None of these
Answer:
(a) All cash receipts and payments

Question 6.
Which sequence is correct and appropriate?
(a) Cashbook, Receipts & Payment Account, Income & Expenditure Account and Balance sheet.
(b) Receipts and Payments Account, Cash Book, Income and Expenditure Account and Balance sheet
(c) Income and Expenditure Account, Receipts and Payments account, cash book and Balance sheet.
(d) None of these
Answer:
(c) Income and Expenditure Account, Receipts and Payments account, cash book and Balance sheet.

Question 7.
The main aim of the Not-for-Profit organisation is:
(a) To earn profit
(b) To serve society
(c) To earn profit and serve society
(d) All the above
Answer:
(b) To serve society

Question 8.
Payment of Honorarium to Secretary is a:
(a) Revenue Expenditure
(b) Capital Expenditure
(c) Both
(d) None of these
Answer:
(a) Revenue Expenditure

Question 9.
Which of the following statements is correct?
(a) There is no difference between Cash Book and Receipts and Payments Account
(b) Receipts and Payments Account is prepared after Cash Book
(c) Receipts and Payments Account is maintained by Non-trading concern whereas Cash Book is maintained by the Trading concern
(d) Receipts and Payment Account is prepared before Cash Book
Answer:
(c) Receipts and Payments Account is maintained by Non-trading concern whereas Cash Book is maintained by the Trading concern

Question 10.
When the time of withdrawals is not mentioned, interest on drawings is charged:
(a) For 6 1/2 months
(b) For 6 months
(c) For 5 1/2 months
(d) For 12 months
Answer:
(b) For 6 months

Question 11.
Recording of the unrecorded asset on the reconstitution of a partnership firm will be.
(a) Again to the existing partner
(b) A loss to the existing partner
(c) Neither a gain nor a loss to the existing partner
(d) None of these
Answer:
(b) A loss to the existing partner

Question 12.
Current Account is:
(a) Personal Account
(b) Real Account
(c) Nominal Account
(d) None of these
Answer:
(a) Personal Account

Question 13.
In which ratio, the cash brought in for goodwill by the new partner is shard by the existing partners.
(a) Profit-Sharing Ratio
(b) Capital Ratio
(c) Sacrificing Ratio
(d) None of these
Answer:
(c) Sacrificing Ratio

Question 14.
A, B and C are three partners sharing profits and losses in the ratio of 4 : 3 : 2. D is admitted for 1/10th share, the new ratio will be:
(a) 10 : 7 : 7 : 4
(b) 5 : 3 : 2 : 1
(c) 4 : 3 : 2 : 1
(d) None of these
Answer:
(c) 4 : 3 : 2 : 1

Question 15.
The executors will be paid interest on the amount due from the date of death of the partner @
(a) 4%
(b) 5%
(c) 6%
(d) 7%
Answer:
(c) 6%

Question 16.
Realisation Account is a:
(a) Personal Account
(b) Nominal Account
(c) Real Account
(d) None of these
Answer:
(b) Nominal Account

Question 17.
A firm can be voluntarily dissolved by the partners:
(a) On Majority basis
(b) On 3/4 Member’s decision
(c) On 1/2 Member’s decision
(d) None of these
Answer:
(a) On Majority basis

Question 18.
Unrecorded liabilities when paid will be shown in:
(a) The debit side of Realisation Account
(b) Debit side of Bank Account
(c) Credit side of Realisation Account
(d) Credit side of Bank Account
Answer:
(a) The debit side of Realisation Account

Question 19.
Who are the owners of the company?
(a) Equity shareholders
(b) Preference shareholders
(c) Debenture holders
(d) Both A & B
Answer:
(a) Equity shareholders

Question 20.
Forfeiture of shares results in the reduction of:
(a) Paid-up capital
(b) Authorised capital
(c) Fixed Assets
(d) Reserve capital
Answer:
(a) Paid-up capital

Question 21.
Profit on cancellation of own debentures is transferred to:
(a) Profit and Loss Account
(b) Profit and Loss Appropriation Account
(c) General Reserve Account
(d) Capital Reserve Account
Answer:
(d) Capital Reserve Account

Question 22.
Interest on Sinking fund Investment is credited to:
(a) Profit and Loss Account
(b) Sinking fund Account
(c) General Reserve Account
(d) Sinking fund Investment Account
Answer:
(b) Sinking fund Account

Question 23.
Discount on issue of debentures is:
(a) Fixed Asset
(b) Current Asset
(c) Real Asset
(d) Factitious Asset
Answer:
(d) Factitious Asset

Question 24.
In case of issue of debentures as collateral security for a loan from the bank which account will be debited:
(a) Bank Account
(b) Bank Loan Account
(c) Debenture Account
(d) Debentures Suspense Account
Answer:
(c) Debenture Account

Question 25.
According to SEBI guidelines, a company will have to create debenture redemption reserve equivalent to the amount of the following percentage of debenture issued:
(a) 40%
(b) 50%
(c) 70%
(d) 100%
Answer:
(b) 50%

Question 26.
As per the provisions of Companies Act, 2013 under which section, the final Accounts of a company is prepared:
(a) 128
(b) 210
(c) 129
(d) 212
Answer:
(b) 210

Question 27.
Out of the following which parties are interested in financial statement?
(a) Managers
(b) Financial Institutions
(c) Creditors
(d) All of these
Answer:
(d) All of these

Question 28.
Debt-Equity Ratio is:
(a) Liquidity ratio
(b) Activity Ratio
(c) Solvency Ratio
(d) Operating ratio
Answer:
(c) Solvency Ratio

Question 29.
When the opening stock is 50,000 Rs closing stock 60,000 Rs and cost of goods sold is 2,20,000 Rs then stock Turnover Ratio is:
(a) 2 times
(b) 3 times
(c) 4 times
(d) 5 times
Answer:
(c) 4 times

Question 30.
Cash flow statement is related to:
(a) AS – 3
(b) AS – 6
(c) AS – 09
(d) AS – 12
Answer:
(a) AS – 3

Question 31.
Which of the following activity comes under Financial Activities?
(a) Receipts from the issuance of Equity shares
(b) Cash sales
(c) Bank overdraft
(d) Purchase of Debentures
Answer:
(a) Receipts from the issuance of Equity shares

Question 32.
Which of the following item is not considered as cash equivalents?
(a) Bank overdraft
(b) Commercial paper
(c) Treasury Bills
(d) Investment
Answer:
(d) Investment

Question 33.
Cash from operating activities will decrease due to:
(a) Increase in current Assets
(b) The decrease in current liabilities
(c) Neither of the two
(c) Both (a) and (b)
Answer:
(b) The decrease in current liabilities

Question 34.
The term Quick assets do not include:
(a) Stock
(b) Debtors
(c) B/R
(d) Cash and Bank Balance
Answer:
(a) Stock

Question 35.
Dividends are usually paid on:
(a) Authorised capital
(b) Issued capital
(c) Called up capital
(d) Paid-up capital
Answer:
(d) Paid-up capital

Question 36.
The nominal capital is known as:
(a) Authorised Capital
(b) Registered Capital
(c) Both (a) and (b)
(d) None of these
Answer:
(c) Both (a) and (b)

Question 37.
When a partner takes responsibility to make the payment of any outside liability of a firm, the account credited will be:
(a) Realisation account
(b) Cash Account
(c) partner’s capital Account
(d) None of these
Answer:
(c) partner’s capital Account

Question 38.
Cash balance shown in the Balance sheet is shown on the dissolution of the firm in:
(a) Realisation Account
(b) Cash Account
(c) Capital Account
(d) Profit and Loss Account
Answer:
(b) Cash Account

Question 39.
‘x’ and ‘y’ share profit in the ratio of 3 : 2. ‘z’ was admitted as a partner who gets 1/5 share, z acquires 3/20 share from ‘x’ and 1/20 from y. The new profit sharing ratio will be:
(a) 9 : 7 : 4
(b) 8 : 8 : 4
(c) 6 : 10 : 4
(d) 10 : 6 : 4
Answer:
(a) 9 : 7 : 4

Question 40.
partner’s current Account is prepared when the capital of partners is maintained under:
(a) Fluctuating basis
(b) Fixed basis
(c) In both of the situations
(d) None of these
Answer:
(a) Fluctuating basis

Question 41.
The amount received from the issue of debentures is:
(a) Capital receipts
(b) Revenue Receipts
(c) Capital and Revenue Receipt
(d) Neither capital nor revenue
Answer:
(a) Capital receipts

Question 42.
The Ideal Quick Ratio is:
(a) 2 : 1
(b) 1 : 1
(c) 0.5 : 1
(d) None of these
Answer:
(b) 1 : 1

Question 43.
Goodwill is:
(a) Fixed Assets
(b) Intangible Assets
(c) Fictitious Asset
(d) Both (a) & (b)
Answer:
(b) Intangible Assets

Question 44.
Provision for Taxation is:
(a) Current liability
(b) Interval Reserve
(c) Both (a) & (b)
(d) None of these
Answer:
(a) Current liability

Question 45.
Interest payable on debentures is:
(a) A charge against profit
(b) Appropriation of profit
(c) Both (a) & (b)
(d) None of these
Answer:
(a) A charge against profit

Question 46.
The formula of sacrificing ratio is:
(a) New Ratio-old Ratio
(b) Old Ratio-New Ratio
(c) Old Ratio-gaining Ratio
(d) None of these
Answer:
(b) Old Ratio-New Ratio

Question 47.
Subscription received in Advance is:
(a) Asset
(b) Liability
(c) Income
(d) None of these
Answer:
(b) Liability

Question 48.
Right shares are the shares which:
(a) Are issued to directors of the company
(b) Are issued to existing shareholders of the company
(c) Are issued to promoters in consideration of their services
(d) Are issued to vendors for purchasing assets
Answer:
(c) Are issued to promoters in consideration of their services

Question 49.
When the current ratio is 2 : 5 and the amount of current liabilities is 25000 Rs, what is the amount of current assets?
(a) ₹ 62,500
(b) ₹ 12,500
(c) ₹ 10,000
(d) None of these
Answer:
(b) ₹ 12,500

Question 50.
Which one of the following is a non-cash item?
(a) Depreciation
(b) Goodwill wrote off
(c) Both (a) & (b)
(d) None of these
Answer:
(a) Depreciation

Non-Objective Type Questions

Short Answer Type Questions

Question No. 1 to 25 are Short answer type questions. Answer any 15 out of them. Each question carries 2 marks. (15 × 3 = 30)

Question 1.
What is Income and Expenditure Account?
Answer:
Income and expenditure Account is a Nominal Account. It is a summary of incomes and expenses for a
particular accounting period.lt is like a profit and loss account of a business concern. Thus, an income and expenditure Account is a revenue account of a non-profit organisation. It serves the same purpose as the profit and loss Account in trading concerns.

Question 2.
What are the Current Assets?
Answer:
Current assets is a balance sheet account that represents the value of all assets that can reasonably expect to be converted into cash within one year. Current assets include cash and cash equivalents, accounts receivable, inventory, prepaid, marketable securities etc.

Question 3.
Define the Sinking fund.
Answer:
A sinking fund is a means of repaying funds borrowed through a bond issue through periodic payments to a trustee who retires part of the issue by purchasing the bonds in the open market. Rather than the issuer repaying the entire principal of a bond issue on the maturity date, another company buy back a portion of the issue annually and usually at fixed par value or at the current market value of the bonds whichever is less.

Question 4.
Distinguish between the Current Ratio and Quick Ratio.
Answer:
The main difference between the current ratio and the quick ratio is that the letter offers a more conservative view of the company’s ability to meets its short-term liabilities with its short-term assets because it does not include inventory and other current assets that are more difficult to liquidate. By excluding inventory the quick ratio focuses on the company’s more liquid assets.

Question 5.
Explain four characteristics of a Partnership firm.
Answer:
Following are the feature of a partnership firm:

• Two or more persons
• Agreement
• Profit-sharing
• Mutual agency.

Question 6.
What is Super Profit?
Answer:
Super profit is the excess of average profits over normal profits. Under this method, goodwill is calculated on the basis of super-profits.

Question 7.
What is a Financial Statement?
Answer:
The end product of financial accounting is financial statements. Financial statements are organised summaries of detailed information about the financial position and performance of enterprises for a particular period. Financial statements are also called financial report. The term ‘Financial statement’ normally refers to two basic statements, namely.

• Balance sheet
• Statement of profit loss.

Question 8.
What is Cash Flow Statement?
Answer:
Meaning of Cash Flow Statement: A statement of changes in financial position on a cash basis is commonly known as the cash flow statement. It shows the changes in cash position from one accounting period to another. In other words, the cash flow statement summarises the causes of changes in cash and cash equivalents position between dates of two Balance Sheets. It indicates the sources and uses of cash. This statement attempts to analyse the transactions of the firm in terms of cash. Thus, a Cash Flow Statement can be defined as a statement which summarises sources of cash inflows and uses of cash outflows of the firm during a particular period of time, says, a month or a year.

Question 9.
Distinguish between Realisation Account and Revaluation Account.
Answer:
Revaluation Account is prepared only when there is any change in the value of asset and liabilities of the partnership firm at the time of admission, retirement, and death of a partner. On the other hand, Realisation Account is opened when the firm goes into liquidation, so as to close the books of account and also to compute the effect (profit or loss) arising due to the realisation of assets and settlement of liabilities.

Question 10.
What is over-subscription of shares?
Answer:
When the number of shares applied for is more than the number of shares offered to the public the issue as said to be over-subscribed. However, a company cannot allot shares more than those offered for subscription.

Question 11.
Distinguish between Gaining Ratio and Sacrificing Ratio.
Answer:
Difference between sacrificing Ratio and Gaining ratio
Sacrificing Ratio:

• It is the ratio in which the old partners surrender their share of profit in favour of the new partner.
• It is calculated at the time of admission of a new partner.
• The purpose of calculating sacrificing ratio is to calculate the share of goodwill payable to old partners at the time of admission of a partner.
• Old Partner’s Capita! Account increase with the amount received as goodwill. New partner losses.
• It is calculated by deducting the new ratio from the old ratio.
• New Partner’s Capital A/c Dr. To Old Partner’s Capital A/c (In sacrificing ratio)

Gaining Ratio:

• It is the ratio in which the remaining partners share the retiring partner’s share of profit.
• It is calculated at the time of retirement or death of a partner.
• The purpose of calculating gaining ratio is to calculate the share of goodwill payable to the retiring partner by each of the remaining partners.
• Retiring partner gains and the remaining partners capital reduces, so they lose.
• It is calculated by deducting the old ratio from the new ratio.
• Remaining Partner’s Capital A/cs Dr. To Retiring Partner’s Capital A/c.

Question 12.
What is the forfeiture of shares?
Answer:
The term ‘forfeit’ means taking away of a thing or property on breach of a condition or default. A shareholder is liable to pay all the calls made by the company within the stipulated time. If a shareholder fails to pay allotment money and/or call money due on the shares held by him the company has right to forfeit such shares. But the company will have to follow the procedures specified in its Articles of Association. To forfeit a share means to cancel the allotment of defaulting shareholders.

Question 13.
Define Prospectus.
Answer:
The prospectus is the basis of the agreement between the company and the shareholders who take the shares on the strength of the prospectus. If they have been misleading by any statement in or omission of a material fact from the prospectus, they may

• hold the directors responsible for the loss that he may have suffered and.
• rescind the contract for taking the shares.

Question 14.
Distinguish between Revenue profit and Capital profit.
Answer:
Following are the main difference between capital profit and revenue profit.
Mode of Earning: Capital profit is earned by selling of assets, shares and debentures at a price more than their book value and face value. Revenue profit is earned in the ordinary course of business.

Distribution: Capital profit is not available for the distribution to shareholders as a dividend. Revenue profit is available for the distribution to shareholders a dividend.

Use: Capital profit is transferred to capital reserve and used for meeting capital losses. Revenue profit is used to distribute dividend and create reserve and fund for various purpose.

Treatment: Capital profit is shown on the liabilities side of the balance sheet. Revenue profit is shown as a debit balance on the debit side of the trading and profit & loss accounts and asset side of the balance sheet as an accumulated loss.

Question 15.
What is Financial Analysis?
Answer:
The financial analysis consists in separating facts according to some definite plan arranging them in groups according to certain circumstances and then presenting them in a convenient and easily readable and understandable form.

Question 16.
Distinguish between Cash Book and Receipts and Payments Account.
Answer:
Difference between Receipts and Payment Account and Cash Book.

Basis	Receipts and payment A/c	Cash Book
1. Date	Entries are not made datewise.	All entries are made datewise.
2. Entries	Entries are made classified form.	Entries are made chronological form.
3. Period	This account is prepared at the end of the accounting year.	Cashbook is prepared on a daily basis.
4. Institue	This is prepared by the non-for-profit organisations.	This is prepared by all the organisations trading and non-trading.
5. Ledger folio	There is no column of ledger folio.	This has a separate column for ledger folio.
6. Side	The left side is receipts and right sides are payment side.	the left side is the debit side and the right side is the credit side.

Question 17.
What is an unlimited liability?
Answer:
The indefinite extent of liability to pay a firms debts or obligations, extending beyond the investments of the firm’s owner partners of shareholders to their personal assets. This extent of liability is assumed in an unlimited liability.

Question 18.
Distinguish between charge against profit and Appropriation of profit.
Answer:
Difference between Appropriation of profit and charge against profit.

Appropriation of profit	Charge against profit.
It is the distribution of net profit to various needs.	It is the deduction from revenue to ascertain net profit or a net loss.
It is made only if there is a profit.	It is made even if there is a loss.
It is done after the creation of all the charges.	It is done before the appropriation of profit.

Question 19.
Distinguish between Fixed capital and Fluctuating capital.
Answer:
Distinguish between Fixed Capital and Fluctuating Capital.

Basis	Fixed Capital	Fluctuating Capital
1. Number of a/c	There are two a/c for each partner: current a/c and capital a/c	There is only one a/c for each partner namely capital a/c
2. Balance in a/c	The balance in capital a/c in capital a/c remains the same year after year except for special circumstance.	The balance in capital a/c keeps on changing very frequently from year to year.
3. Adjustments	Adjustment relating to drawing interest on drawing, interest on capital etc. are made in current a/c	Adjustments relating to drawing intt. on drawing intt. on capital etc. are made in capital a/c
4. Nature of balance in a/c	Capital A/c always shows a credit balance. Balance of current A/c may be either debit or credit.	Capital A/c may have a debit balance or credit balance. Balance of current A/c does not arise in this case.

Question 20.
Write four items relating to Not-for-Proft organisation.
Answer:
Following are four items relating to Non-for-Profit organisations.

• Not-for-profit organisations are established for the welfare and service of society and their members.
• They promote art, culture, religion, education sports etc.
• They do not operate with the objective of earning profit.
• These organisations are set-up as charitable societies, trust or club etc.

Question 21.
Distinguish between ‘Charge against profit’ & ‘Appropriation out of profit.’
Answer:
Distinguish between “charge against profit” and Appropriation out of profit as discussed below.

Charge against Profit	Appropriation out of Profit
(i) It is the deduction from revenue to ascertain net profit or a net loss.	(i) It is a distribution of net profit to various heads.
(ii) It is made even if there is a loss.	(ii) It is made only if there is profit.
(iii) It is done before the appropriation of profit.	(iii) It is done after the creation of all charges.
(iv) This will be debited to P/L Appropriation A/c.	(iv) It will be debited to P/L A/c or debited to the respective provision A/c.

Question 22.
Why the valuation of goodwill is required? Give a minimum of three reasons.
Answer:
The need for valuation of goodwill as discussed below:

• If any partner is admitted
• If any partner retires from the firm
• If any partner dies
• If any firm is sold
• If a firm is converted into a Company.

Question 23.
A, B and C are partners sharing profits in the ratio of \(\frac{1}{2}: \frac{1}{3}: \frac{1}{6}\). Find out new profit sharing ratio if B retires.
Answer:
Old ratio of A, B and C = \(\frac{1}{2}: \frac{1}{3}: \frac{1}{6}\) or, \(\frac{3}{6}: \frac{2}{6}: \frac{1}{6}\) = 3 : 2 : 1
B. Retires, New Radio = 3 : 1

Question 24.
Under which circumstances, a partnership firm is deemed to be dissolved?
Answer:
Under the following circumstances, a partnership firm is deemed to be dissolved

• Retirement of any of the partner
• Death of my partner
• Any of partner declared as insolvent
• In capability of any partner
• completion of the ventures
• At the expiry of the term of the partnership.

Question 25.
A, B and C were partners sharing profits in the ratio of \(\frac{2}{6}, \frac{1}{2}\) and \(\frac{1}{6}\). A retires and surrenders \(\frac{2}{3}\)rd of his share in favour of B and remaining in favour of C. Calculate new ratio and gaining ratio.
Answer:
A’s share (2/6) will be divided between B and C in the ratio of \(\frac{2}{3}: \frac{1}{3}\)
B’s gain = \(\frac{2}{3}\) of \(\frac{2}{6}: \frac{4}{18}\);
C’s gain = \(\frac{1}{3}\) of \(\frac{2}{6}=\frac{2}{18}\)
New share = old share + gaining share
B’s new share = \(\frac{1}{2}+\frac{4}{18}=\frac{9+4}{18}=\frac{13}{18}\)
C’s new share = \(\frac{1}{6}+\frac{2}{18}=\frac{3+2}{18}=\frac{5}{18}\)
New ratio of B and C = \(\frac{13}{18}: \frac{5}{18}\) or 13 : 5

Long Answer Type Questions

Question no. 26 to 33 are Long answer type questions. Answer any 4 of them. Each question carries 5 marks. (4 × 5 = 20)

Question 26.
From the following information, calculate goodwill by (i) Capitalization method and (ii) at 3 years purchase of super-profits:
(i) Total Assets ₹ 10,00,000
(ii) External liabilities ₹ 1,80,000
(iii) Normal Rate of Return 10%
(iv) Average Net Profit of the last five years ₹ 1,00,000
Answer:
Calculation of Goodwill by using capitalization method.

10,00,000 – 820,000
Goodwill = 120,000
Net Assets = Total Assets – Liabilities = 10,00,000 – 180,000 = 820,000
Calculation of Goodwill by using super profit methods.

Super profit = 100,000 – 82,000 = 18,000
Goodwill = 180,000

Question 27.
An Ltd. company issued 5000 shares of ₹ 100 each at a premium of ₹ 5 per share payable as ₹ 20 on Application, ₹ 35 on the allotment (including premium), ₹ 30 on the first call and the balance on the second call. All the amounts were duly received except the first call money on 500 shares and the final call money on 700 shares. These shares have been forfeited and re-issued at ₹ 80 per share. Give Journal entries to record the above transactions.
Answer:

Question 28.
What is Cash Flow statement? How is it prepared?
Answer:
Meaning of cash flow statement: cash flow statement can be defined on a statement which summarises sources of cash inflows and outflows of cash and cash equivalent of the firm from various business activities during a given period. Thus, this statement exhibits the flow of incoming and outgoing cash.

Calculation of Cash Flows from Operating Activities: Almost all the companies prepare its Income Statement on the accrual basis of accounting under which revenues are recorded when earned and expenses are recorded when incurred. Because of this, net profit, as shown by Income Statement will not be equal to cash generated by operating activities. Hence, there is a need to calculate cash flows from operating activities. AS-3 (Revised) suggests two methods of reporting cash flows from operating activities:
(1) Direct Method, and (2) Indirect Method.

1. Direct Method: Under the direct method, major classes of gross cash receipts and gross cash payments are considered. Under this method, cash receipts from operating activities, i.e., cash received from the sale of goods and rendering services, cash collected from customers and cash received from trading commission and royalties and cash payments for operating activities such as payment to creditors for goods and services, employees for their services etc. are disclosed. The difference between cash receipts and cash payments is the net cash flow from operating activities. A cash flow statement based on the direct method is a Profit & Loss Account on a cash basis.

2. Indirect Method: Under this method, net profit or loss is adjusted for the effects of transactions of noncash nature and non-operating nature and changes in current assets and liabilities.

Question 29.
Calculate current Assets of a company from the following information:
Stock Turnover Ratio = 4 times
Stock at the end is ₹ 20,000 more than stock in the beginning.
Sales ₹ 300,000 and Gross Profit Ratio is 20% of sales.
Current liabilities = ₹ 40,000
Quick Ratio = 0.75
Answer:
Sales 300,000, G.P Ratio = 20%;
Cost of Goods sold = Sales – G.P.;
GP = \(=300,000 \frac{\times 20}{100}=60,000\)
300000 – 60000 = 240000
Stock Turnover Ratio = \($\frac{\text { cost of Goodwill }}{\text { Aug.Stock }}$\)
4 = 240000/Aug.stock
Aug. Stock = 240,000/4 = 60,000
Let op. stock = x
So, cl. stock = x + 20,000
Avg. Stock = \(=\frac{x+x+20,000}{2}\) = 60,000
x + 10,000 = 60,000
x = 60,000 – 10,000 = 50,000
op. Stock = 50,000
Quick Ratio = Liquid Assets/CL. Liabilities
0. 75 = L. A/400,000
L. A. = 30,000
Current Assets = L.A + C.L. Stock = 30,000 + 70,000
C.A = 10,000

Question 30.
From the following particulars, Calculate Cash Flow from Investing Activities.
Investment at the beginning of the Period: 5,80,000
Investment at the end of the Period: 3,40,000
During the year the company had sold 50% of its investment held in the beginning of the period at a profit of ₹ 90,000
Answer:

Question 31.
Pass Journal entries when shares are issued at a premium.
Answer:
Journal entries where shares are issued at a premium.
I. When share premium is payable with application money.
(i) At the time of receipt of application money.
Bank A/c — Dr.
To share Application A/c
(ii) At the time of transfer of Application Money:
Share Application A/c
To share Capital A/c
To securities premium A/c

II. When the premium is payable on Allotment.
(i) Share Allotment A/c — Dr.
To share Capital A/c
To securities Premium A/c
(ii) On receipt of Allotment Money.
Bank A/c — Dr.
To share Allotment A/c

III. When the premium is payable with share call money.
(i) Share Call A/c — Dr.
To share Capital A/c
To securities Premium A/c
(ii) When call money is received.
Bank A/c — Dr.
To share call A/c

Question 32.
From the following comparative balance sheet prepare cash flow statement as on 31st December 2016.

Depreciation charged on machinery Rs. 5,000
Answer:
Calculation of cash flow statement from operating Activities.

Question 33.
Prepare an imaginary proforma of the cash flow statement.
Answer:
Imaginary proforma of cash flow statement