Accountancy : Company Accounts and Analysis of Financial Statements 2007 CBSE [ Delhi ] Set II
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Q1
List four items which can be credited to the Capital Account of a partner when the Capital Account is fluctuating. Marks:2View AnswerAnswer:
The four items which can be credited to the Capital Account of a partner when the Capital Account is fluctuating are: s Salary s Commission s Interest on capital s Cash/Bank A/c -
Q2
State the conditions according to Sec. 79 of Company Act, 1956 for the issue of shares at discount. Marks:2View AnswerAnswer:
Issue of shares at discount is governed by Section 79 of the companies Act 1956.It prescribes the following conditions: The shares are of a class already issued: s It is authorised by a resolution passed by the company in its general meeting and sanctioned by the central government. s The resolution specifies the maximum rate of discount at which the shares are to be issued s Not less than one year has, at the date of issue, elapsed since the date on which the company was entitled to commence the business. s The shares are issued within two months of the date on which the issue is sanctioned by the central government or within such extended time as the central government may allow. -
Q3
What is meant by ‘Preferential Allotment of Shares’? Marks:2View AnswerAnswer:
A preferential allotment is one that is made at a predetermined price to the preidentified people who are having a strategic stake in the company such as promoters, venture capitalists, financial institutions, buyers of companies products or its suppliers. -
Q4
Give the meaning of Debenture. Marks:2View AnswerAnswer:
Debenture is a written instrument of principal amount and repaid after a specified period or at intervals or at the option of the company and for payment of interest at a fixed rate payable usually either half-yearly or yearly on fixed dates. OR “A debenture is a document under company’s seal which provides for the repayment” (E. Thomas) OR “Debenture is a document given by a company as evidence of debt to the holder usually arising out of a loan and most commonly secured by a charge”.
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Q5
State any two objectives of preparing a cash flow statement. Marks:2View AnswerAnswer:
The primary objective of cash flow statement is s To provide useful information about cash flows of an enterprise during a particular period under various heads. s To facilitate formulation of financial policies such as dividend policy -
Q6
Fine Garments Ltd. is engaged in the export of readymade garments. The company purchased a machinery of Rs 10, 00,000 for the use in packaging of such garments. State giving reason whether the cash flow due to the purchase of machinery will be cash flow from operating activities, investing activities or financial activities? Marks:2View AnswerAnswer:
Investing Activities -
Q7
Ram and Shyam were partners in a firm sharing profits in the ratio of 3:5. Their Fixed Capitals were: Ram Rs. 5, 00,000 and Shyam Rs. 9, 00,000. After the accounts of the year had been closed, it was found that interest on capital at 10% per annum as provided in the partnership agreement has not been credited to the Capital Accounts of the partners. Pass a necessary entry to rectify the error. Marks:3View AnswerAnswer:
JOURNAL Date Particulars L.F. Dr. (Rs.) Cr. (Rs.) Ram’s Capital A/c To Shyam Capital A/c (Being required adjustment to rectify the errors) 2,500 2,500 Working Note: Partner Adjustment Difference Dr (Rs.) Cr.(Rs.) Dr (Rs.) Cr (Rs.) Ram Shyam 
52,500 87,500 1,40,000 50,000 90,000 1,40,000 2,500 -------- 2,500 -----------
2,500 -
Q8
A& B Ltd. issued 5, 00,000, 7% debentures of Rs. 50 each. Pass necessary journal entries in the books of the company for the issue of debentures when debentures were: Issued at par, redeemable at 8% premium. Issued at 4% premium redeemable at 5% premium. iii. Issued at 5% premium redeemable at par.
Marks:3View AnswerAnswer:
JOURNAL Date Particula L.F. Dr. (Rs) Cr. (Rs) At the time of issue (i)Bank A/c Loss on issue of Debenture A/c To 7% Debenture A/c To premium on redemption of debenture A/c (Being money due on debentures issued at par but redeemable at premium) 5,00,000 40,000 (ii)Bank A/c Loss on issue on Debenture A/c To 7% Debenture A/c To premium on redemption of debenture A/c To Security Premium A/c ( Being the issue of Debenture at 4% premium but redeemable at 5% premium ) 5,20,000 25,000 25,000 20,000 (iii) Bank A/c To 7% Debenture A/c To Security Premium A/c (Being the issue of debenture at 5% premium but redeemable at par) 5,25,000 5,00,000 25,000 -
Q9
The following is the Profit and Loss Account of Kamal Ltd : Profit & Loss accounts for the years ended 31st March 2005 and 2006 : 2005 2006 Sales Revenue Less: Cost of goods sold Gross Profit Less: Indirect Expenses Profit before Tax Less: Tax 50% 50,000 23,700 26,300 2,300 24,000 - 65,000 33,180 31,820 9,820 22,000 - Compute percentage changes from 2005 to 2006. Marks:3View AnswerAnswer:
Comparative Balance Sheet for the year 2005 and 2006 31st March Particulars Amount Change 2005 2006 Absolute % Sales Less: Cost of goods sold Gross Profit Less: Indirect expenses Profit before Tax Less: Income Tax 50,000 23,700 65,000 33,180 15,000 9,480 30 40 26,300 2,300 31,820 9,820 5,520 7,520 20.98 326.9 12,000 12,000 11,000 11,000 (1,000) (1,000) (18.33) (18.33) 12,000 11,000 (1,000) (18.33) -
Q10
Explain briefly the interest of shareholders and creditors in the analysis of financial statements of a company. Marks:3View AnswerAnswer:
Interest of Shareholders : Shareholders are interested to know the earning capacity of the business and its future growth. Since they are not involved in the day to day working of the company, they come to know the results of operations. Only through the analysis of financial statement. Creditors: Creditors and other lender of money are interested in knowing the solvency i.e. capacity of the business to repay their loans. This can be seen by looking into the: Whether current assets are sufficient to meet current liabilities Proportion of current assets to liquid assets Managerial efficiency of the firm.
