Accountancy : Company Accounts and Analysis of Financial Statements 2007 CBSE [ All India ] Set III
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Q1
Give the meaning of Cash Flow Statements . Marks:2View AnswerAnswer:
A Cash flow statement is a statement which describes the inflow(source) and outflow(uses) of cash and cash equivalents in an enterprise during a specified period of time. Such a statement describes net effects of the various business transactions on cash and its equivalents and takes into account receipts and disbursements of cash. A cash flow statements summarise the causes of changes in cash position of business enterprise between dates of two balance sheets. -
Q2
A ltd. engaged in the business of retailing of two wheelers, invested Rs.50,00,000 in the shares of a manufacturing company. State with reason whether the dividend received on this investment will be cash flow from operating activities or investing activities. Marks:2View AnswerAnswer:
Dividends received on investments represents an inflow of cash. Such inflow does not arises out of operating activity of own business but from investment made in other business. Hence, such flow falls under Investing activity but not under operating activity. -
Q3
Define Sacrificing Ratio. Marks:2View AnswerAnswer:
When a new partner is admitted, the old partner forgoes of his profit in favour of new partner and thus reducing the share of profit or loss of the old partner. Sacrifice made by old partners can be found put by deducting their new share from the old share. Sacrificing Ratio = Old Ratio – New Ratio -
Q4
Give the meaning of issued share capital. Marks:2View AnswerAnswer:
It refers to that part of the authorised capital of the company which has actually been offered to the public for subscription in cash including shares allotted to vendors/promoters for consideration other than cash. It sets the limit of the capital available for subscription. -
Q5
What is meant by Sweat Equity Shares? Marks:2View AnswerAnswer:
The Companies Act,1999 introduce through Section 79-A a new type of equity share called Sweat Equity share. The expression “Sweat Equity Shares” means equity shares issued at a discount or for consideration other then cash for providing know-how or making available rights in the nature of intellectual property rights or value additions by whatever name called. -
Q6
Give the meaning of issue of debentures as a ‘Collateral Security’. Marks:2View AnswerAnswer:
The term “Collateral Security” implies additional security given for a loan. Where a company obtains a loan from bank or insurance company, it may use its own debentures to the lenders as collateral security against the loan in addition to any other security that may be offered. In such a case, the leader has the absolute right over the debentures until and unless the loan is repaid. The holder of such debentures is entitled to interest. -
Q7
K, L and M were partners in a firm sharing profits in 2:1:1 ratio. M was guaranteed a profit of Rs.25,000. K agreed to meet the liability arising out of guaranteed amount to M. The firm earned a profit of Rs.80,000 for the year ended 31.3.2006. Prepare P&L Appropriation A/c. Marks:3View AnswerAnswer:
Profits for the year = K’s share of Profits = 2/4 X 80,000 = 40,000 L’s share of profit = ¼ X 80,000 = 20,000 M’s share of profit = ¼ X 80,000 = 20,000 However, N was guaranteed a profit of Rs.25,000, the ability of which has to be borne by ‘K’. therefore, the deficiency is ‘N’ guaranteed profits to be meet by ‘k’ = 25,000 – 20,000 = 5,000 Profits payable to ‘K’ = 40,000 – 5,000 = 35,000 Profits payable to L = 20,000 Profits payable to M = 25,000 Particulars Amt. Particulars Amt. To K’s Capital To L’s Capital To M’s capital 35,000 20,000 25,000 By net profit b/d 80,000 80,000 80,000 -
Q8
Das ltd. issued 9,000 7% debentures of Rs.5,000each. Pass necessary journal entries for the issue of debentures when the debentures were issued. 1. At 10% premium and redeemable at 5% premium. 2. At par and redeemable at 6% premium, 3. At 6% premium and redeemable at par Marks:3View AnswerAnswer:
Date Particulars L.F Dr. Amt. Cr. Amt 1. Bank A/c Dr. To 7% Debentures A/c To Premium on Redemption of Debentures A/c To Debenture Premium A/c (Being debentures issued at 10% premium redeemable at 5% premium) 4,95,00,000 4,50,00,000 22,50,000 22,50,000 2. Bank A/c Dr. Loss on issue of Debentures A/c Dr . To 7% Debentures A/c To premium on Redemption of debentures A/c (Being 7% debentures issued at par redeemable at a premium of 6%) 4,50,00,000 27,00,000 4,50,00,000 27,00,000 3. Bank A/c Dr. To 7% Debentures A/c To Debentures Premium A/c (Being 7% debentures issued at a premium of 6% redeemable at par) 4,77,00,000 4,50,00,000 27,00,000 -
Q9
Explain briefly any three objectives of analysis of financial statement. Marks:3View AnswerAnswer:
The objectives of analysis of financial statement are given here: To judge the debt servicing capacity of the firm To understand the long term and short term solvency position of the firm To judge the financial health of the firm.
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Q10
Vimal Ltd. Purchased machinery of Rs.9,90,000 from Kamal ltd. The payment to Kamal ltd. was made by issuing equity shares of Rs.100 each. Pass necessary journal entries in the books of Vimal ltd. for purchase of machinery and the issue of shares when- (i)S hares were issued at par (ii) Shares were issued at 10% discount, (iii)Shares were issued at 25% premium Marks:4View AnswerAnswer:
Particulars L.F Dr.Amt. Cr.Amt (i) (a) Machinery A/c Dr. To Kamal ltd A/c (being a net purchase) 9,90,000 9,90,000 (b) Kamal Ltd. A/c Dr. To Share Capital (Being purchase discharged by issue of 9900 share@Rs.100 each issued at par) 9,90,000 9,90,000 (ii) (a) Machinery A/c Dr. To Kamal Ltd. A/c (being a net purchased) 9,90,000 9,90,000 (b) Kamal Ltd A/c Dr. Discount on issue of shares A/c Dr. To Share capital (9,90,000 / 100 X 100) (Being 11,000 shares @Rs.100 each were issued at a discount or 10% as purchase consideration) 9,90,000 1,10,000 11,00,000 (iii) (a) Machinery A/c Dr. To Kamal ltd. A/c (Being a machinery purchased) 9,90,000 9,90,000 (b) Kamal Ltd. A/c Dr. To Share Capital A/c (9,90,000 / 125 X 100) To Share Premium A/c (Being 7920 shares @ Rs.100 each issued at a premium of 25% as purchase consideration) 9,90,000 7,92,000 1,98,000
