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Reconstitution of Partnership (Admission of Partner) 12th BK Commerce Chapter 3 Solutions Maharashtra Board

Balbharti Maharashtra State Board 12th Commerce Book Keeping & Accountancy Solutions Chapter 3 Reconstitution of Partnership (Admission of Partner) Textbook Exercise Questions and Answers.

Class 12 Commerce BK Chapter 3 Exercise Solutions

1. Objetive type questions.

A. Select the most appropriate alternatives from the following and rewrite the sentences.

Question 1.
Anuj and Eeshan are two partners sharing profits and losses in the ratio of 3 : 2. They decided to admit Aaroh for 1/5th share, the new profit sharing ratio will be __________
(a) 12 : 8 : 5
(b) 4 : 3 : 1
(c) 12 : 8 : 1
(d) 12 : 3 : 1
Answer:
(a) 12 : 8 : 5

Question 2.
Excess of proportionate capital over actual capital represents __________
(a) equal capital
(b) surplus capital
(c) deficit capital
(d) gain
Answer:
(c) deficit capital

Question 3.
__________ is credited when unrecorded asset is brought into business.
(a) Revaluation Account
(b) Balance Sheet
(c) Trading Account
(d) Partners Capital Account
Answer:
(a) Revaluation Account

Question 4.
When goodwill is withdrawn by the partner __________ account is credited.
(a) Revaluation
(b) Cash/Bank
(c) Current
(d) Profit and Loss Adjustment
Answer:
(b) Cash/Bank

Question 5.
If asset is taken over by the partner __________ Account is debited.
(a) Revaluation
(b) Capital
(c) Asset
(d) Balance Sheet
Answer:
(b) Capital

B. Write the word/phrase/term, which can substitute each of the following statements.

Question 1.
The method under which calculation of goodwill is done on the basis of extra profit earned above the normal profit.
Answer:
Super Profit Method

Question 2.
An account is opened to adjust the value of assets and liabilities at the time of admission of a partner.
Answer:
Revaluation A/c or Profit and Loss A/c

Question 3.
The reputation of a business is measured in terms of money.
Answer:
Goodwill

Question 4.
The ratio in which general reserve is distributed to the old partners.
Answer:
Old Ratio

Question 5.
Name the method of the treatment of goodwill where a new partner will bring his share of goodwill in cash.
Answer:
Premium Method

Question 6.
The proportion in which old partners make a sacrifice.
Answer:
Sacrifice Ratio

Question 7.
Capital employed × NRR/100 = __________
Answer:
Normal Profit

Question 8.
An Account is debited when the partner takes over the asset.
Answer:
Partner’s Capital A/c or Partner’s Current A/c

Question 9.
Profit and Loss Account balance appearing on the liability side of the Balance Sheet.
Answer:
Undistributed Profit or Accumulated Profit

Question 10.
Old ratio – New ratio = __________
Answer:
Sacrifice Ratio

C. State True or False with reasons:

Question 1.
A new partner can bring capital in cash or kind.
Answer:
This statement is True.
As per the provision of partnership deed, when any person is admitted in the firm, he has to bring some amount as capital which can be in cash or in-kind of assets to get rights in the assets and definite share in the future profit of the firm.

Question 2.
When goodwill is paid privately to the partners, it is not recorded in the books.
Answer:
This statement is True.
When goodwill is paid privately to the partners, by a newly admitted person, then in such case no transaction takes place in the business, and the firm as such is not all benefited. Hence it is not recorded in the books of accounts.

Question 3.
The gain ratio is calculated at the time of admission of a partner.
Answer:
This statement is False.
At the time of admission of a person, in the business, sacrifices are made by the old partners in favour of the new partner. It means there is no question of any gain to the partners, so we can say that the Gain ratio is not calculated at the time of admission of a partner.

Question 4.
Revaluation profit is distributed among all partners including new partners.
Answer:
This statement is False.
Revaluation profit arises due to efforts and hardworking of the old partners in the past and hence profit earned on revaluation of assets and liabilities at the time of admission of a person as a partner in the business belongs to old partners. So, such profit is not distributed among all partners including the new partners. It is distributed only among old partners.

Question 5.
Change in the relationship between the partners is called as Reconstitution of Partnership.
Answer:
This statement is True.
When any person joins the business as a partner, a change in the relationship takes place. The old agreement is terminated and a new agreement is prepared. There is the change in profit or loss sharing ratio and relationship of the partners which is known as Reconstitution of Partnership.

Question 6.
New partners always bring their share of goodwill in cash.
Answer:
This statement is False.
When a new person is admitted to the partnership firm, the old partners surrender a certain share in profit and give it to a new partner. In exchange for that new partner is required to bring goodwill in cash or in kind. If he is unable to bring cash for goodwill, then Goodwill is raised and adjusted to the new partner’s capital A/c.

Question 7.
When the goodwill is written off, the goodwill account is debited.
Answer:
This statement is False.
To write off goodwill means to decrease or wipe out the value of goodwill. When goodwill as an asset of the business is raised, Goodwill A/c is debited in the books of Account. Conversely, when Goodwill is written off from the business, the Goodwill A/c is credited in the books of business.

Question 8.
The new ratio minus the old ratio is equal to the sacrifice ratio.
Answer:
This statement is False.
When a new partner is admitted, old partners have to sacrifice their profit share in favour of the new partner and their old ratio gets reduced and whatever ratio is left becomes a new ratio. Hence, as per equation:
New Ratio = Old Ratio – Sacrifice Ratio.
By interchanging the terms,
Sacrifice Ratio = Old Ratio – New Ratio.

Question 9.
Usually, when a new partner is admitted to the firm, there will be an increase in the capital of the firm.
Answer:
This statement is True.
When a new partner is admitted to the firm, he brings his share of capital and goodwill, in cash or in-kind, to enjoy the right of sharing the future profit, and hence there will be an increase in the capital of the firm.

Question 10.
Cash/Bank Account is credited when goodwill is withdrawn by the old partners.
Answer:
This statement is True.
When a new partner brings his share of goodwill, old partners have the right to withdraw it in cash. Therefore, when old partners withdraw the amount of goodwill, cash goes out from the firm and not goodwill. Hence Cash/Bank A/c is credited.

D. Find the odd one.

Question 1.
General reserve, Creditors, Machinery, Capital
Answer:
Machinery

Question 2.
Decrease in Furniture, Patents wrote off, Increase in Bills payable, R.D.D. written off
Answer:
R.D.D. written off

Question 3.
Super profit method, Valuation method, Average profit method, Fluctuating capital method
Answer:
Fluctuating capital method

E. Calculate the following:

Question 1.
A and B are partners in a firm sharing profit and losses in the ratio of 1 : 1. C is admitted. A surrenders 1/4th share and B surrenders 1/5th of his share in favour of C. Calculate new profit sharing ratio.
Solution:
Old ratio of A and B = 1 : 1 or \(\frac{1}{2}\) : \(\frac{1}{2}\)
A’s sacrifice = \(\frac{1}{4} \times \frac{1}{2}=\frac{1}{8}\)
B’s sacrifice = \(\frac{1}{5} \times \frac{1}{2}=\frac{1}{10}\)
Sacrificing ratio of A and B = \(\frac{1}{8}\) : \(\frac{1}{10}\) = 5 : 4
C’s share = A’s share + B’s share = \(\frac{1}{8}+\frac{1}{10}=\frac{5+4}{40}=\frac{9}{40}\)
A’s new share = Old ratio – Sacrifice ratio = \(\frac{1}{2}-\frac{1}{8}=\frac{4-1}{8}=\frac{3}{8}\)
B’s new share = Old ratio – Sacrifice ratio = \(\frac{1}{2}-\frac{1}{10}=\frac{5-1}{10}=\frac{4}{10}\)
Therefore, New ratio of A, B and C = \(\frac{3}{8}: \frac{4}{10}: \frac{9}{40}\) = 15 : 16 : 9
(Making denominator equal)

Question 2.
Anika and Radhika are partners sharing profit in the ratio of 5 : 1. They decide to admit Sanika to the firm for 1/5th share. Calculate the Sacrifice ratio of Anika and Radhika.
Solution:
Balance = 1 – share of new partner
= 1 – \(\frac{1}{5}\)
= \(\frac{4}{5}\) (Remaining share)
New ratio = Old ratio x Balance of 1
Anika’s New ratio = \(\frac{5}{6} \times \frac{4}{5}=\frac{20}{30}\)
Radhika’s New ratio = \(\frac{1}{6} \times \frac{4}{5}=\frac{4}{30}\)
Sanika’s New ratio = \(\frac{1}{5} \times \frac{6}{6}=\frac{6}{30}\) (Making denominator equal)
∴ New Profit and Loss ratio = \(\frac{20}{30}: \frac{4}{30}: \frac{6}{30}\) = 20 : 4 : 6 i.e. 10 : 2 : 3
Sacrifice ratio = old ratio – New ratio
Anika’s Sacrifice ratio = \(\frac{5}{6}-\frac{20}{30}=\frac{25-20}{30}=\frac{5}{30}\)
Radhika’s Sacrifice ratio = \(\frac{1}{6}-\frac{4}{30}=\frac{5-4}{30}=\frac{1}{30}\)
∴ Sacrifice ratio = \(\frac{5}{30}: \frac{1}{30}\) = 5 : 1

Question 3.
Pramod and Vinod are partners sharing profits and losses in the ratio of 3 : 2. After the admission of Ramesh the New ratio of Pramod, Vinod and Ramesh are 4 : 3 : 2. Find out the Sacrifice ratio.
Solution:
Sacrifice Ratio = Old ratio – New ratio
Pramod’s Sacrifice ratio = \(\frac{3}{5}-\frac{4}{9}=\frac{27-20}{45}=\frac{7}{45}\)
Vinod’s Sacrifice ratio = \(\frac{2}{5}-\frac{3}{9}=\frac{18-15}{45}=\frac{3}{45}\)
∴ Sacrifice ratio = \(\frac{7}{45}: \frac{3}{45}\) = 7 : 3.

F. Answer in one sentence.

Question 1.
What is Revaluation Account?
Answer:
An account opened and operated by any partnership firm for recording changes in the value of assets and liabilities and to ascertain profit or loss made on revaluation of assets and liabilities is called Revaluation Account.

Question 2.
What is meant by Reconstitution of Partnership?
Answer:
Reconstitution of partnership means a change in the relationship between/among partners and in the form of partnership.

Question 3.
Why is the new partner admitted?
Answer:
A new partner is admitted to the existing partnership firm to increase the capital resources of the firm and to secure advantages of a new entrant’s skill and business connections, i.e. goodwill.

Question 4.
What is the sacrifice ratio?
Answer:
A ratio that is surrendered or given up by the old partners in favour of a newly admitted partner is called the sacrifice ratio.

Question 5.
What do you mean by raising the goodwill at the time of admission of a new partner?
Answer:
Raising the Goodwill at the time of admission of a new partner means debiting Goodwill Account up to the value it is raised and crediting. Old partners’ Capital Accounts in their old ratio in the books of the firm.

Question 6.
What is the super profit method of calculation of goodwill?
Answer:
Super profit method of calculation of Goodwill is a method in which Goodwill is valued at a certain number of years purchases of the super profit of the partnership firm.

Question 7.
When is the ratio of sacrifice calculated for the distribution of goodwill?
Answer:
The ratio of sacrifice is calculated when the benefits of goodwill contributed by a new partner in cash is to be transferred to existing partners’ Capital/Current Account.

Question 8.
What is the treatment of accumulated profits at the time of admission of a partner?
Answer:
Accumulated profits at the time of admission of a partner are transferred to old partners’ Capital/Current Accounts in their old profit sharing ratio.

Question 9.
State the ratio in which the old partner’s Capital A/c will be credited for goodwill when the new partner does not bring his share of goodwill in cash.
Answer:
When the new partner does not bring his share of goodwill in cash, Goodwill is raised up to a certain value and credited to old partners’ Capital/Current A/cs in their old profit sharing ratio.

Question 10.
What does the excess of debit over credits in the Profit and Loss Adjustment Account indicate?
Answer:
The excess of debit over credits in the Profit and Loss Adjustment Account indicates loss on revaluation of assets and liabilities.

G. Complete the table.

Question 1.

Answer:
Average Profit = \(\frac{Total Profit}{Number of years}\)

Question 2.

Answer:
Normal Profit = Capital Employed × \(\frac{NPR}{100}\)

Question 3.

Answer:
The stock shown in Balance Sheet → Stock undervalued by 20% → Cost of Stock
₹ 1,60,000 → ₹ 40,000 → ₹ 2,00,000

Practical Problems

Question 1.
Vikram and Pradnya share profits and losses in the ratio 2 : 3 respectively. Their Balance Sheet as of 31st March 2018 was as under.
Balance Sheet as of 31st March 2018

They agreed to admit Avani as a partner on 1st April 2018 on the following terms:
1. Avani shall have 1/4th share in future profits.
2. He shall bring ₹ 37,500 as his capital and ₹ 30,000 as his share of goodwill.
3. Land and building to be valued at ₹ 45,000 and furniture to be depreciated by 10%.
4. Provision for bad and doubtful debts is to be maintained at 5% on the Sundry Debtors.
5. Stock to be valued ₹ 82,500.
The Capital A/c of all partners to be adjusted in their new profit and loss ratio and excess amount be transferred to their loan accounts.
Prepare Profit and Loss Adjustment Account, Capital Accounts, and New Balance Sheet.
Solution:
In the books of Partnership Firm

Balance Sheet as of 1st April 2018

Working Notes:
1. Calculation of new profit ratio = 1 – share of new partner
= 1 – \(\frac{1}{4}\)
= \(\frac{3}{4}\) (Remaining share)
New ratio = old ratio × balance 1 (Remaining share)
Vikram’s new ratio = \(\frac{2}{5} \times \frac{3}{4}=\frac{6}{20}\)
Pradnya’s new ratio = \(\frac{3}{5} \times \frac{3}{4}=\frac{9}{20}\)
Avani’s ratio = \(\frac{1}{4}=\frac{1}{4} \times \frac{5}{5}=\frac{5}{20}\)
∴ New profit sharing ratio = 6 : 9 : 5.
Capital amount adjusted in their new profit and loss ratio:
Total Capital of the Partnership Firm = (Reciprocal of New Partner’s Share) × (Capital of New Partner)
= (Reciprocal of \(\frac{1}{4}\)) × 37,500
= 4 × 37,500
= ₹ 1,50,000
Vikram’s Capital balance = (Vikram’s New Ratio) × (Total Capital of the firm)
= \(\frac{6}{20}\) × 1,50,000 = ₹ 45,000
Pradnya’s Capital balance = \(\frac{9}{20}\) × 1,50,000 = ₹ 67,500

Question 2.
Amalendu and Sameer share profits and losses in the ratio 3 : 2 respectively. Their Balance Sheet as of 31st March 2017 was as under:
Balance Sheet as of 31st March 2017

On 1st April 2017 they admit Paresh into partnership. The term being that:
1. He shall pay ₹ 16,000 as his share of Goodwill 50% amount of Goodwill shall be withdrawn by the old partners.
2. He shall have to bring in ₹ 20,000 as his Capital for 1/4 share in future profits.
3. For the purpose of Paresh’s admission it was agreed that the assets would be revalued as follows:
A. Land and Building is to be valued at ₹ 60,000.
B. Plant and Machinery to be valued at ₹ 16,000.
C. Stock valued at ₹ 20,000 and Furniture and Fixtures at ₹ 4,000.
D. A Provision of 5% on Debtors would be made for Doubtful Debts.
Pass the necessary Journal Entries in the books of a new firm.
Solution:
Journal entries in the books of Partnership Firm


Working Notes:

Question 3.
Vasu and Viraj share profits and losses in the ratio of 3 : 2 respectively. Their Balance Sheet as on 31st March, 2019 was as under:
Balance Sheet as on 31st March, 2019

They admit Hari into partnership on 1-4-2019. The terms being that:
1. He shall have to bring in ₹ 60,000 as his Capital for 1/4 share in future profits.
2. Value of Goodwill of the firm is to be fixed at the average profits for the last three years.
The Profit were:
2015-16 – ₹ 48,000
2016-17 – ₹ 81,000
2017-18 – ₹ 73,500
Hari is unable to bring the value of Goodwill in cash. It is decided to raise Goodwill in the books of accounts.
3. Reserve for Doubtful debts is to be created at ₹ 1,500.
4. Closing stock is valued at ₹ 22,500.
5. Plant and Building are to be depreciated by 5%.
Prepare Profit and Loss-Adjustment A/c, Capital Accounts of Partners and Balance Sheet of the new firm.
Solution:
In the books of the firm __________

Balance Sheet as on 1st April 2019

Working Notes:
1. Average Profit = \(\frac{Total Profit}{No. of years}\)
= \(\frac{48,000+81,000+73,500}{3}\)
= ₹ 67,500
∴ Goodwill value = ₹ 67,500
Vasu’s share in Goodwill = ₹ 40,500 (67,500 × \(\frac{3}{5}\))
Viraj’s share in Goodwill = ₹ 27,000 (67,500 × \(\frac{2}{5}\))

2. Hari is not able to bring a share in goodwill and it is decided to raise the goodwill in the book.
Therefore, Goodwill is recorded in the Asset side ₹ 67,500.

Question 4.
Mr. Deep & Mr. Karan were in partnership sharing profits & losses in the proportion of 3 : 1 respectively. Their Balance Sheet on 31st March 2018 stood as follows:
Balance Sheet as of 31st March 2018

They admit Shubham into Partnership on 1 April 2018. The terms being that:
1. He shall have to bring in ₹ 20,000 as his capital for 1/5 share in future profits & ₹ 10,000 as his share of Goodwill.
2. A provision for 5% doubtful debts to be created on sundry debtors.
3. Furniture to be depreciated by 20%.
4. Stock should be appreciated by 5% and Building be appreciated by 20%.
5. Capital A/c of all partners be adjusted in their new profit sharing ratio through cash account.
Prepare Profit and Loss-Adjustment A/c, Partners’ Capital A/c, Balance Sheet of the new firm.
Solution:
In the books of the firm __________


Balance Sheet as of 1st April 2018

Working Note:
Calculation of new ratio : Balance of 1 = 1 – share of new partner
= 1 – \(\frac{1}{5}\)
= \(\frac{4}{5}\) (Remaining share)
New ratio = Old ratio × balance 1 (Remaining share)
Deep’s new ratio = \(\frac{3}{4} \times \frac{4}{5}=\frac{3}{5}\)
Karan’s new ratio = \(\frac{1}{4} \times \frac{4}{5}=\frac{1}{5}\)
Shubham’s new ratio = \(\frac{1}{5}=\frac{1}{5}\)
∴ New profit and loss sharing ratio = 3 : 1 : 1
Capital amount to be adjusted in Partner’s new profit and loss ratio:
Total Capital of the firm = (Reciprocal of New partner’s share) × (New partner’s capital)
= 5 × 20,000
= ₹ 1,00,000
Deep’s capital balance = \(\frac {3}{5}\) × 1,00,000 = ₹ 60,000
Karan’s capital balance = \(\frac {1}{5}\) × 1,00,000 = ₹ 20,000

Question 5.
Mr. Kishor & Mr. Lai were in partnership sharing profits & losses in the proportion of 3/4 and 1/4 respectively.

They decided to admit Ram on 1 April 2018 on the following terms:
1. He should be given 1/5th share in profit and for that, he brought in ₹ 60,000 as capital through RTGS.
2. Goodwill should be raised at ₹ 60,000.
3. Appreciate Land and Building by 20%.
4. Furniture and Stock are to be depreciated by 10%.
5. The capitals of all partners should be adjusted in their new profit sharing ratio through Bank A/c.
Pass necessary Journal Entries in the books of the partnership firm and a Balance Sheet of the new firm.
Solution:
Journal entries in the books of the firm


Balance Sheet as of 1st April 2018

Working Notes:
1.

2. Calculation of new profit sharing ratio:
New Ratio = (Balance of 1) × (old ratio)
Kishor’s New ratio = \(\left(1-\frac{1}{5}\right) \times \frac{3}{4}=\frac{4}{5} \times \frac{3}{4}=\frac{3}{5}\)
Lal’s New ratio = \(\left(1-\frac{1}{5}\right) \times \frac{1}{4}=\frac{4}{5} \times \frac{1}{4}=\frac{1}{5}\)
Ram’s ratio = \(\frac{1}{5}\)

3. Total capital of the firm = (Reciprocal of Ram’s ratio) × (His capital contribution)
= \(\frac{5}{1}\) × 60,000 = ₹ 3,00,000
Kishor’s new closing capital balance = 3,00,000 × \(\frac{3}{5}\) = ₹ 1,80,000
Lai’s new closing capital balance = 3,00,000 × \(\frac{1}{5}\) = ₹ 60,000
Ram’s new closing capital balance = ₹ 60,000

Question 6.
Vrushali and Leena are equal partners in the business. Their Balance Sheet as of 31st March 2013 stood as under.
Balance Sheet as of 31st March 2018

They decided to admit Aparna on 1st April 2018 on the following terms:
1. The Machinery and Building be depreciated by 10%. Reserve for Doubtful Debts to be increased by ₹ 5,000.
2. Bills receivable are taken over by Vrushali at a discount of 10%.
3. Aparna should bring ₹ 60,000 as capital for her 1/4th share in future profits.
4. The Capital accounts of all the partners be adjusted in proportion to the new profit sharing ratio by opening the Current accounts of the partners.
Prepare Profit and Loss-Adjustment A/c, Partners’ Capital A/c, Balance Sheet of the new firm.
Solution:

Balance Sheet as on 1st April 2018

Working Notes:
1. R.D.D. to be increased by ₹ 5,000 means subtract ₹ 5,000 from Debtors.

2. Bills receivable taken by Vrushali at 10 % discount i.e. 12,000 – 1,200 = ₹ 10,800.
Write this amount on the debit side of the partners’ Capital Account in Vrushali’s column.

3. Calculation of new ratio = 1 – share of new partner
= 1 – \(\frac{1}{4}\)
= \(\frac{3}{4}\) (Remaining share)
New ratio = Old ratio × Balance 1 (Remaining Share)
Vrushali’s new ratio = \(\frac{1}{2} \times \frac{3}{4}=\frac{3}{8}\)
Leena’s new ratio = \(\frac{1}{2} \times \frac{3}{4}=\frac{3}{8}\)
Aparna’s ratio = \(\frac{1}{4}\)
∴ Partner’s new profit and loss ratio = \(\frac{3}{8}: \frac{3}{8}: \frac{1}{4}\) = 3 : 3 : 2
Now, capital amount to be adjusted in partners new profit and loss ratio.
Total capital of the firm = (Reciprocal of New Partner’s Share) × (New Partner’s Capital)
= (Reciprocal of \(\frac{1}{4}\)) × 60,000
= 4 × 60,000
= ₹ 2,40,000
Vrushali’s capital balance = \(\frac {3}{8}\) × 2,40,000 = ₹ 90,000
Leela’s capital balance = \(\frac {3}{8}\) × 2,40,000 = ₹ 90,000
The deficit of these capital balances is to be adjusted through the Current account.
To keep the balance of Vrushali’s and Leena’s capital ₹ 90,000 each, deficit of ₹ 53,850 and ₹ 58,050 are incurred which is transferred to the respective Partner’s Current A/cs and recorded on the Asset side of Balance Sheet [As it is to be recovered from Partners].

Question 7.
The balance sheet of Medha and Radha who share profit and loss in the ratio 3 : 1 is as follows:
Balance Sheet as of 31st March 2018

They decided to admit Krutika on 1st April 2018 on the following terms:
1. Krutika is taken as a partner on 1st April 2017. She will pay 40,000 as her capital for 1/5th share in future profits and ₹ 2,500 as goodwill.
2. 5% provision for bad and doubtful debt be created on debtors.
3. Furniture be depreciated by 20%.
4. Stocks be appreciated by 5% and plant & machinery by 20 %.
5. The Capital accounts of all partners be adjusted in their new profit sharing ratio by adjusting the amount through a loan.
6. The new profit sharing ratio will be 3/5 : 1/5 : 1/5 respectively.
You are required to prepare Profit and Loss-Adjustment A/c, Partners’ Capital A/c, Balance Sheet of the new firm.
Solution:


Balance Sheet as of 1st April 2018

Working Notes:
1. Total capital of the firm = (Reciprocal of New Partner’s Profit Sharing ratio) × (Capital contributed by new partner)
= (Reciprocal of \(\frac{1}{5}\)) × 40,000
= 5 × 40,000
= ₹ 2,00,000
Medha’s closing capital, balance = \(\frac{3}{5}\) × 2,00,000 = ₹ 1,20,000
Radha’s closing capital balance = \(\frac{1}{5}\) × 2,00,000 = ₹ 40,000

2. General reserve is distributed among old partners in their old profit and loss ratio.

3. Cash Balance = 78,000 + 40,000 + 2,500 = ₹ 1,20,500 [Amount brought in by new partner.]

Question 8.
The Balance Sheet of Sahil and Nikhil who share profits in the ratio of 3 : 2 as of 31st March 2017 is as follows:
Balance Sheet as of 31st March 2017

Varad admitted on 1st April 2017 on the following terms:
1. Varad was to pay ₹ 1,00,000 for his share of capital.
2. He was also to pay ₹ 40,000 as his share of goodwill.
3. The new profit sharing ratio was 3 : 2 : 3.
4. Old partners decided to revalue the assets as follows:
Building ₹ 1,00,000. Furniture ₹ 48,000, Debtors ₹ 38,000 (in view of likely bad debts)
5. It was found that there was a liability for ₹ 3,000 for goods in March 2017 but recorded on 2nd April 2017.
You are required to prepare:
(a) Profit and Loss-Adjustment account
(b) Capital accounts of the partners
(c) Balance Sheet after the admission of Varad.
Solution:


Balance Sheet as of 1st April 2017

Working Notes:
1. Cash in hand = Opening balance + Varad’s capital + Varad’s goodwill (amount brought in)
= 20,000 + 1,00,000 + 40,000
= ₹ 1,60,000

2. Sacrifice ratio = Old ratio – New ratio
Sahil’s sacrifice = \(\frac{3}{5}-\frac{3}{8}=\frac{24-15}{40}=\frac{9}{40}\)
Nikhil’s sacrifice = \(\frac{2}{5}-\frac{2}{8}=\frac{16-10}{40}=\frac{6}{40}\)
i.e. sacrifice ratio = \(\frac{9}{40}: \frac{6}{40}\) = 9 : 6 = 3 : 2.
Goodwill is distributed among old partners in the sacrifice ratio.

Question 9.
Mr. Amit and Baban share profits and losses in the ratio 2 : 3 respectively. Their Balance Sheet as of 31st March 2018 was as under:
Balance Sheet as of 31st March 2018

They agreed decided to admit Kamal on 1st April 2018 on the following terms:
1. Kamal shall have 1/4th share in future profits.
2. She shall bring 50,000 as her capital and 40,000 as her share of goodwill.
3. Land and building to be valued at 60,000 and furniture to be depreciated by 10%.
4. Provision for bad and doubtful debts is to be maintained at 5% on the sundry debtors.
5. Stocks to be valued at 1,10,000.
The Capital A/c of all partners to be adjusted in their new profit and loss ratio and excess amount be transferred to their loan accounts.
Prepare Profit and Loss-Adjustment A/c, Capital A/cs, and New Balance Sheet.
Solution:

Balance Sheet as of 1st April 2018

Working Notes:
1. Cash balance = Opening balance + Amount brought in by Kamal
= 1,10,000 + 50,000 + 40,000
= ₹ 2,00,000

2. For calculation of new profit and loss ratio:
Calculation of new profit ratio = 1 – share of new partner
= 1 – \(\frac{1}{4}\)
= \(\frac{3}{4}\) (Remaining share)
New ratio = old ratio × balance 1 (Remaining share)
Amit’s new ratio = \(\frac{2}{5} \times \frac{3}{4}=\frac{6}{20}\)
Baban’s new ratio = \(\frac{3}{5} \times \frac{3}{4}=\frac{9}{20}\)
Kamal’s ratio = \(\frac{1}{4}=\frac{1}{4} \times \frac{5}{5}=\frac{5}{20}\)

3. New profit and loss ratio = 6 : 9 : 5
Capital amount adjusted in their new profit and loss ratio by taking new partner Kamal’s capital (₹ 50,000) as a base.
For part 5 capital = ₹ 50,000 (Kamal’s capital)
For part 6 capital = ₹ 60,000 (Amit’s capital)
For part 9 capital = ₹ 90,000 (Baban’s capital)

4. After keeping these capital balances difference of the amount of Amit’s capital ₹ 63,520 and of Baban’s capital ₹ 45,280 are taken as partner’s loan to the firm and as a liability of the firm it is recorded in the Liabilities side of the Balance Sheet.

Question 10.
The following is the Balance Sheet of Om and Jay on 31st March 2018, they share profits and losses in the ratio 3 : 2.
Balance Sheet as of 31st March 2018

They take Jagdish into partnership on 1st April 2018. The terms being:
1. Jagdish should pay ₹ 3,000 as his share of Goodwill. 50% of goodwill withdrawn by partners in cash.
2. He should bring ₹ 9,000 as capital for 1/4th share in future profits.
3. Building to be valued at 18,000, Machinery and Furniture to be reduced by 10 %.
4. A provision of 5% on debtors to be made for doubtful debts.
5. Stock to be taken at the value of ₹ 15,000.
Prepare Profit and Loss A/c, Partners’ Current A/c, Balance Sheet of the new firm.
Solution:

Balance Sheet as of 1st April 2018

Working Notes:
1.

2. Write partner’s capital accounts balance as fixed capital balance in the Balance Sheet and transferred current account balance in the Balance Sheet as Partners Current A/c.

3. As shown in the cash account partners’ withdrew half amount of goodwill amount share.

Class 12 Commerce BK Textbook Solutions Digest

• 12th Bk Chapter 1 Practical Problems
• 12th Bk Chapter 2 Practical Problems
• 12th Bk Chapter 3 Practical Problems
• 12th Bk Chapter 4 Practical Problems
• 12th Bk Chapter 5 Practical Problems
• 12th Bk Chapter 6 Practical Problems
• 12th Bk Chapter 7 Practical Problems
• 12th Bk Chapter 8 Practical Problems
• 12th Bk Chapter 9 Practical Problems
• 12th Bk Chapter 10 Practical Problems

Rectification of Errors 11th BK Commerce Chapter 8 Solutions Maharashtra Board

Balbharti Maharashtra State Board Bookkeeping and Accountancy 11th Solutions Chapter 8 Rectification of Errors Textbook Exercise Questions and Answers.

Class 11 Commerce BK Chapter 8 Exercise Solutions

1. Answer in One Sentence:

Question 1.
What is meant by rectification of errors?
Answer:
The correction of accounting errors in a systematic manner is called the rectification of errors.

Question 2.
What is meant by the error of principle?
Answer:
An error committed by the accountant by not following accounting principles properly is called an error of principle.

Question 3.
What is meant by the error of partial omission?
Answer:
An error in which transaction is correctly recorded in the books of account but one of the postings is wrong is known as partial omission. If will affect the trial balance.

Question 4.
What is meant by the error of complete omission?
Answer:
Failure on the part of an accountant to record the business transactions in the books of account is called an error of complete omission. It does not affect the agreement of the trial balance.

Question 5.
What are compensating errors?
Answer:
The error which is committed on one side of the ledger account compensates for an error committed on the other side of some other leader account is called compensating error.

2. Give one word/term or phrase for each of the following statements.

Question 1.
Errors that affect the agreement of Trial Balance.
Answer:
One-sided errors

Question 2.
Taking the total more while closing books of accounts.
Answer:
Overcasting

Question 3.
The error arises when a transaction is partially or completely omitted to be recorded in the books of accounts.
Answer:
Error of omission

Question 4.
Transactions recorded due to violating of the accounting principles.
Answer:
Error of principle

Question 5.
Accounts to which difference in Trial Balance is transferred.
Answer:
Suspense account

Question 6.
Error in which the effect of one mistake is nullified by another mistake.
Answer:
Compensating error

Question 7.
Errors that are not disclosed by the Trial Balance.
Answer:
Two-sided errors

Question 8.
Errors of incorrect entries or wrong posting.
Answer:
Errors of commission

3. Select the most appropriate alternative from those given below and rewrite the sentence.

Question 1.
Rectification entries are passed in ______________
(a) Journal Proper
(b) Ledger
(c) Balance Sheet
(d) Cash Book
Answer:
(a) Journal Proper

Question 2.
The type of error for which journal entry is always required for rectification ______________
(a) over casting
(b) one sided error
(c) under casting
(d) two sided error
Answer:
(d) two-sided error

Question 3.
Error occurred due to wrong posting are called error of ______________
(a) principal
(b) commission
(c) compensating
(d) omission
Answer:
(b) commission

Question 4.
If transaction is totally omitted from the books, it is called ______________
(a) Error of recording
(b) Error of omission
(c) Error of principle
(d) Error of commission
Answer:
(b) Error of omission

Question 5.
Suspense Account is opened when ______________ does not tally.
(a) Balance sheet
(b) Trading Account
(c) Profit and loss
(d) Trial Balance
Answer:
(d) Trial Balance

4. State whether the following statements are True or False with reasons.

Question 1.
Trial Balance is prepared from the balance of ledger accounts.
Answer:
This statement is True.
A Trial balance is a statement of debit and credit balances extracted from the various accounts in the ledger. All business transactions are recorded first in Journal or in subsidiary books and subsequently, they are posted to respective ledger accounts. At the end of the year, they are balanced and transferred to the Trial balance.

Question 2.
A Trial Balance can agree in spite of certain errors.
Answer:
This statement is True.
The error of principle or error of complete omission or compensatory error is not disclosed by the Trial Balance. It will be agreed with debit and credit balances but there may be a certain error.

Question 3.
Rectification entries are passed in Cash Book.
Answer:
This statement is False.
Rectification entries are passed in the Journal Proper book. Cashbook is mainly used for cash transactions and not for rectification of errors.

Question 4.
There is no need to open a Suspense Account if the Trial Balance agrees.
Answer:
This statement is True.
When the Trial Balance does not tally a temporary account called ‘Suspense Account’ is opened to balance the trial balance. So when the trial balance is agreed there is no need to open ‘Suspense Account’.

Question 5.
All the errors can be rectified only through Suspense Account.
Answer:
This statement is False.
The errors of principle and errors of complete omission can be rectified by passing entries. So all the errors can not be rectified by the Trial Balance.

5. Do you agree or disagree with the following statements.

Question 1.
The unintentional omission or commission of amounts and accounts while recording the transactions is known as an error.
Answer:
Agree

Question 2.
The errors committed due to wrong recording, wrong posting, wrong totaling, wrong balancing, wrong calculations are known as Arithmetical errors.
Answer:
Disagree

Question 3.
When one or more debit errors happen to equal one or more credit errors it is said to be a Compensating error.
Answer:
Agree

Question 4.
The agreement of Trial balance is not affected when a transaction is not recorded at all in the original Books.
Answer:
Agree

Question 5.
When a transaction is not recorded according to the principles of accounting it is known as Compensating error.
Answer:
Disagree

6. Complete the following sentence.

Question 1.
______________ is assured only when there are no errors in the books of accounts.
Answer:
Accuracy

Question 2.
Transactions recorded in contravention of the accounting principles are known as ______________
Answer:
errors of principle

Question 3.
______________ entry depends generally on when the error is detected.
Answer:
Rectifying

Question 4.
Temporary account opened to rectify the entry is known as ______________
Answer:
suspense account

Question 5.
Errors are caused due to ______________ recording of transactions.
Answer:
wrong

Practical Problems

Question 1.
Rectify the following errors:
1. Salary paid to Pravin was wrongly debited to his personal account ₹ 6,500/-
2. Cash Purchases ₹ 12,000/- from Siddhant Traders was debited to Siddhant Trader Account.
3. Paid Rent ₹ 5,000 to landlord Shantilal was debited to his personal account.
4. Received interest ₹ 700 from Bank was wrongly credited to Bank Account.
5. Advertisement expenses ₹ 5,000/- paid to Times of India was debited to Times of India.
Solution:
Journal Proper

Working Note:

Question 2.
Rectify the following errors:
1. Machinery purchased for ₹ 9,000/- has been debited to Purchase Account.
2. ₹ 15,000/- paid to Indus Company for Machinery purchased stand debited to Indus Company Account.
3. Printer Purchased for ₹ 10,000/- was wrongly passed through Purchase Book.
4. ₹ 800/- paid to Mohan as Legal Charges were debited to his personal account.
5. Cash paid to Ramesh ₹ 500/- was debited to Suresh.
Solution:
Journal Proper

Working Note:

Question 3.
Rectify the following errors:
1. A credit sale of goods to Sanjay ₹ 3,000/- has been wrongly passed through the ‘Purchase Book’.
2. A credit purchase of goods from Sheetal amounting to ₹ 2,000/- has been wrongly passed through the ‘Sales Book’.
3. A return of goods worth ₹ 500/- to Umesh was passed through the ‘Sales Return Book’.
4. A return of goods worth ₹ 900/- by Ganesh was entered in ‘Purchase Return Book’.
5. Credit Purchases from Neha ₹ 10,000/- were recorded as ₹ 11,000/-
Solution:
Journal Proper

Working Note:

Question 4.
Rectify the following errors:
1. Paid Rent ₹ 2,000/- to Nikhil has been debited to his personal account.
2. Total of the Sales Return Book is wrongly taken more by ₹ 200/-
3. Goods sold to Dhanraj ₹ 6,500/- on credit were not posted to his personal account.
4. Old Computer purchased was debited to Repairs account ₹ 8,000/-
5. Repairs to Furniture of ₹ 500/- have been debited to Furniture account.
Solution:
Journal Proper

Working Note:

Question 5.
Rectify the following errors:
1. Wages paid for the construction of Building ₹ 10,000/- was wrongly debited to Wages Account.
2. Cash received from Patel ₹ 5,000/- though recorded in Cash Book was not posted to his personal account in the Ledger.
3. Sold goods worth ₹ 9,000/- to Rohini has been wrongly debited to Mohini’s Account.
4. Material purchased for construction of Building was debited to Purchase Account ₹ 5,000/-
Solution:
Journal Proper

Working Note:

Question 6.
There was a difference of ₹ 1230/- in a Trial Balance. It was placed on the Debit side of Suspense A/c. Later on, the following errors were discovered. Pass rectifying entries and prepare Suspense A/c.
1. Sales Book was overcast by ₹ 1,000/-
2. Goods sold to Aarti for ₹ 4,400/- has been posted to her account as ₹ 4,000/-
3. Purchases Book was overcast by ₹ 100/-
4. An amount of ₹ 500/- received from Ranjeet, has not been posted to his account.
5. Goods sold to Sameer for ₹ 750/- were recorded in Purchase Book.
6. An amount of ₹ 500/- has been posted to the credit side of the Commission Account instead of ₹ 570/-
Solution:
Journal Proper

Question 7.
A bookkeeper finds that the debit side of the Trial Balance is short of ₹ 308/- and so for the time being, the balances of the side by putting the difference to Suspense Account. The following errors were disclosed.
1. The debit side of the purchases account was undercast by ₹ 100/-
2. ₹ 100/- is the monthly total of discount allowed to customers were credited to the discount account in the ledger.
3. An entry for goods sold of ₹ 102/- to Mihir was posted to his account as ₹ 120/-
4. ₹ 26/- appearing in the Cash Book as paid for the purchase of Stationery for office use have not been posted to Ledger.
5. ₹ 275/- paid by Mihir were credited to Mithali’s Account.
You are required to make the necessary Journal Entries and the Suspense Account.
Solution:
Journal Proper

Question 8.
The trial Balance of Anurag did not agree. It showed an excess credit of ₹ 6,000/-. He put the difference to Suspense Account. He discovered the following errors.
1. Cash received from Ramakant ₹ 8,000/- posted to his account as ₹ 6,000/-
2. Credit purchases from Naman ₹ 7,000/- were recorded in Sales Book. However, Naman’s Account was correctly credited.
3. Return Inwards Book overcast by ₹ 1,000/-
4. Total of Sales Book ₹ 10,000/- was not posted to Sales Account.
5. Machinery purchased for ₹ 10,000/- was posted to Purchases Account as ₹ 5,000/-.
Rectify the errors and prepare Suspense Account.
Solution:

Question 9.
There was an error in the Trial Balance of Mr. Yashwant on 31st March 2019, and the difference in Books was carried to a Suspense Account. Ongoing through the Books you found that.
1. ₹ 1,000/- being purchases return were posted to the debit of Purchase Account.
2. ₹ 4,000/- paid to Badrinath was debited to Kedarnath’s Account.
3. ₹ 5,400/- received from Kishor was posted to the debit of his account.
4. Discount received ₹ 2,000/- was posted to the debit of Discount Allowed Account.
5. ₹ 2,740/- paid to Repairs to Motor Cycle was debited to Motor Cycle Account ₹ 1,740/-
Give Journal Entries to rectify the above errors and ascertain the amount transferred to Suspense Account on 31st March 2019 by showing the Suspense Account, assuming that the Suspense Account is balanced after the above corrections.
Solution:
Journal Proper

Question 10.
Rectify the following errors.
1. Goods purchased from Kishor ₹ 700/- were passed through Sales Book.
2. An item of ₹ 120/- in respect of purchase returns, has been wrongly entered in the Purchase Book.
3. Amount payable to Subhash for repairs done to Printer ₹ 180/- and new Printer supplied for ₹ 1,920/-, were entered in the Purchase Book as ₹ 2,000/-
4. Returned goods to Nitin ₹ 1,500/- was passed through Returns Inward Book.
5. An item of ₹ 450/- relating to the Prepaid Rent account was omitted to be brought forward.
Solution:
Journal Proper

Note: In entry No. 5 Suspense A/c is not used as the problem is silent about the opening of Suspense A/c.

Class 11 Commerce BK Textbook Solutions Digest

• 11th Bk Chapter 1 Practical Problems
• 11th Bk Chapter 2 Practical Problems
• 11th Bk Chapter 3 Practical Problems
• 11th Bk Chapter 4 Practical Problems
• 11th Bk Chapter 5 Practical Problems
• 11th Bk Chapter 6 Practical Problems
• 11th Bk Chapter 7 Practical Problems
• 11th Bk Chapter 8 Practical Problems
• 11th Bk Chapter 9 Practical Problems
• 11th Bk Chapter 10 Practical Problems

Computer in Accounting 12th BK Commerce Chapter 10 Solutions Maharashtra Board

Balbharti Maharashtra State Board 12th Commerce Book Keeping & Accountancy Solutions Chapter 10 Computer in Accounting Textbook Exercise Questions and Answers.

Class 12 Commerce BK Chapter 10 Exercise Solutions

1. Objective questions:

A. Select the most appropriate alternatives from those given below and rewrite the statements.

Question 1.
The primary document for recording all financial transactions in Tally is the ______________
(a) Journal
(b) Trial sheet
(c) Voucher
(d) File
Answer:
(c) Voucher

Question 2.
______________ displays the balance day-wise for a selected voucher type.
(a) Record book
(b) Ledger book
(c) Journal book
(d) Daybook
Answer:
(d) Daybook

Question 3.
Fixed Deposit A/c comes under ______________ group.
(a) Investments
(b) Current liability
(c) Bank A/c
(d) Current asset
Answer:
(a) Investments

B. Give the word term or phrase which can substitute each of the following statements:

Question 1.
The details of Bills receivable are maintained in this record.
Answer:
Sundry Debtors

Question 2.
Tally software is classified into this category.
Answer:
Mercantile

Question 3.
The short key is used to save or accept the information.
Answer:
Ctrl + A

Question 4.
It is a damaged software, cracked, nearly fully functional.
Answer:
Pirated Software

Question 5.
The process by which all the calculations are automatically done by the accounting software.
Answer:
Automation

C. State whether the following statements are true or false with reason:

Question 1.
Alt + D is the short key for delete voucher entries.
Answer:
This statement is True.
To delete voucher entries, people use the Alt + D key.

Question 2.
In Tally, the F6 Function key is for the payment vouchers.
Answer:
This statement is False.
In Tally, the F6 Function key is useful for receipt vouchers.

Question 3.
Legal software is fully functional software without any restriction.
Answer:
This statement is True.
The base of the legal software is fully functional, safe, and legal, so one can use this kind of software without any hesitation and restriction.

Question 4.
Salary Account comes under Indirect expenses.
Answer:
This statement is True.
When the expenses are made for the purchase of goods, and for the manufacturing process, they are known as a direct expense. Salary does not fall in that category and so it comes under the indirect expense category.

Question 5.
Accounting software may not be customized to meet the special requirement of the user.
Answer:
This statement is False.
Customized Accounting software is prepared to meet the special requirement of the user which is not readily available in the market.

D. Answer in One Sentences:

Question 1.
What is CAS?
Answer:
CAS means Computerized Accounting System which helps business firms to implement accounting processes and makes it user friendly with automation.

Question 2.
Write the steps to create a ledger account in tally.
Answer:
Steps to create a ledger account in the tally are as follows:

• From Gateway of Tally Screen, click on accounts info.
• Path gateway to Tally – Accounts Info – Ledgers – Single ledger – Choses create.

Question 3.
How to view reports in Tally?
Answer:
For viewing accounting reports in accounting software to click on the report option and select the Display option.

Question 4.
State the various types of vouchers.
Answer:
Following are the various voucher types:

1. F4 Contra voucher – For cash deposited in the bank and cash withdrawn from the bank, Transfer from one cash A/c to another Cash A/c and Bank to Bank transfer.
2. F5 Payment voucher – For all types of payments are recorded through this voucher type (Cash and Bank) Cash or Bank.
3. F6 Receipt voucher – For Cash and Bank receipts
4. F7 Journal voucher – For non-cash transactions
5. F8 Sales voucher – For cash as well as credit sales
6. F9 Purchase voucher – For cash as well as a credit purchase

Question 5.
Write the steps to create a company.
Answer:
Following are the steps to create a company:

1. After entering into Accounting software Tally, double click on the option, create a company, under company information. Then follow the navigation path.
   Gateway of Tally > Company Info > Create Company
2. Fill in the detailed information in the company creation form, displayed on the screen – Company creation window.

Class 12 Commerce BK Textbook Solutions Digest

• 12th Bk Chapter 1 Practical Problems
• 12th Bk Chapter 2 Practical Problems
• 12th Bk Chapter 3 Practical Problems
• 12th Bk Chapter 4 Practical Problems
• 12th Bk Chapter 5 Practical Problems
• 12th Bk Chapter 6 Practical Problems
• 12th Bk Chapter 7 Practical Problems
• 12th Bk Chapter 8 Practical Problems
• 12th Bk Chapter 9 Practical Problems
• 12th Bk Chapter 10 Practical Problems

Depreciation 11th BK Commerce Chapter 7 Solutions Maharashtra Board

Balbharti Maharashtra State Board Bookkeeping and Accountancy 11th Solutions Chapter 7 Depreciation Textbook Exercise Questions and Answers.

Class 11 Commerce BK Chapter 7 Exercise Solutions

1. Answer in One Sentence only.

Question 1.
What is depreciation?
Answer:
Depreciation is a gradual, continuous, and permanent decline or decrease in the value of a fixed asset due to its use, wear and tear or any other similar reason.

Question 2.
Why depreciation is charged?
Answer:
Depreciation on fixed assets is charged to ascertain the correct profit or loss on its sale, to show assets at the correct value in the Balance sheet, and to provide for its replacement.

Question 3.
What is a ‘Scrap Value’ of an asset?
Answer:
The total amount whatsoever received by selling used or obsolete assets or their spare parts is called residual.

Question 4.
Why depreciation is charged even in the year of loss?
Answer:
Fixed assets are used even in the year of loss and the use of fixed assets reduces its value and hence depreciation is charged even in the year of loss.

Question 5.
Which account is credited when depreciation is charged?
Answer:
The concerned fixed asset account is credited when depreciation is charged.

Question 6.
Where is the profit or loss on sale of the asset is transferred?
Answer:
The profit or loss on the sale of assets is transferred to the profit and loss account.

Question 7.
To which account balance of Depreciation A/c is transferred?
Answer:
The balance of Depreciation A/c is transferred to profit and loss A/c at the end of the year.

Question 8.
What is the formula to calculate depreciation by the Straight Line Method?
Answer:
Depreciation per annum = \(\frac{Cost of Fixed Asset (-) Scrap value}{Estimated life of Fixed Asset}\)

Question 9.
What is Fixed Instalment Method?
Answer:
A method of charging depreciation in which depreciation is charged on fixed assets at a fixed percentage of its original cost is called the fixed installment method.

Question 10.
Which account is debited when expenses are paid on the installation of the Machinery?
Answer:
The machinery account is debited when expenses are paid for the installation of machinery.

2. Write the word/term/phrase which can substitute each of the following statements:

Question 1.
A continuous, gradual, and permanent reduction in the value of the fixed assets.
Answer:
Depreciation

Question 2.
The expenditure incurred for purchase, installation charges, etc. of an asset.
Answer:
Cost of Asset

Question 3.
The amount that a fixed asset is expected to realize at its disposal.
Answer:
Scrap Value

Question 4.
The period for which the asset remains in working condition.
Answer:
The life period of asset

Question 5.
The method of depreciation in which the total depreciation is equally spread over the life of the asset.
Answer:
Fixed Instalment Method

Question 6.
The method of depreciation in which the rate of depreciation is fixed but the amount of depreciation reduces every year.
Answer:
Reducing Balance Method

Question 7.
The type of asset on which depreciation is charged.
Answer:
Fixed Asset

Question 8.
Expenses incurred for fixation of the new asset to bring it in working condition.
Answer:
Installation Charges

Question 9.
Excess of the Selling price of a fixed asset over its Written Down Value.
Answer:
Profit on Sale of Asset

Question 10.
Method of depreciation that cannot reach zero value.
Answer:
Diminishing Balance Method

3. Select the most appropriate answers from the alternatives given below and rewrite the sentence.

Question 1.
Decrease in the value of fixed assets is known as _____________
(a) Depreciation
(b) Appreciation
(c) Combination
(d) None of these
Answer:
(a) Depreciation

Question 2.
Depreciation is charged only on _____________ assets.
(a) Fixed
(b) Current
(c) Non-performing
(d) Fictitious
Answer:
(a) Fixed

Question 3.
The amount spent on installation of new machinery is a _____________ expenditure.
(a) Revenue
(b) Capital
(c) Deferred Revenue
(d) Income
Answer:
(b) Capital

Question 4.
The amount that a fixed asset is expected to realise on its disposal is known as _____________
(a) Book value
(b) Scrap value
(c) Market value
(d) Original value
Answer:
(b) Scrap value

Question 5.
The amount of depreciation reduces year after year under _____________
(a) Fixed Instalment Method
(b) Written Down Value Method
(c) Depreciation Fund Method
(d) Revaluation Method
Answer:
(b) Written Down Value Method

Question 6.
The amount of depreciation remains constant every year under _____________
(a) Straight Line Method
(b) Diminishing Balance Method
(c) Revaluation Method
(d) Insurance Policy Method
Answer:
(a) Straight Line Method

Question 7.
The balance of depreciation account is transferred to _____________
(a) Manufacturing A/c
(b) Trading A/c
(c) Profit & Loss A/c
(d) Balance sheet
Answer:
(c) Profit and Loss A/c

4. State whether the following statements are True or False with reasons.

Question 1.
Depreciation is charged on fixed assets.
Answer:
This statement is True.
Fixed assets working life is longer. The working life of all fixed assets decreases with the passage of time. The value of assets decreases every year so a reduction in the value of fixed assets due to its wear and tear depreciation is charged on fixed assets.

Question 2.
Depreciation increases the value of the asset.
Answer:
This statement is False.
Depreciation reduced the value of the fixed assets. The working life of all fixed assets decreases with the passage of time and its wear and tear.

Question 3.
Balance of the depreciation account is transferred to Profit and Loss A/c.
Answer:
This statement is True.
Depreciation is charged to profit and Loss A/c as it is an element of Cost. It is also essential to arrive at true value of the asset and also net profit or Loss during a particular accounting period. Even if an asset is not in use, its value is reduced due to the passage of time. Depreciation is Cost/Loss to the business. It is a noncash expenditure.

Question 4.
The Profit or Loss on the sale of the asset is ascertained only after charging depreciation.
Answer:
This statement is True.
Cost on date of sale can be ascertained only after deducting depreciation from date of purchase till the date of sale after that it is possible to compare between cost on the date of sale and selling price to ascertain profit or loss on sale of the machine.

Question 5.
Wages paid for the installation of Machinery are debited to Wages A/c.
Answer:
This statement is False.
Wages paid on the installation of machinery are debited to the machinery account as they are the capital nature of expenditures.

Question 6.
It is not necessary to depreciate an asset if it is not in use.
Answer:
This statement is False.
The working life of fixed assets decreases with passes of time. The value of these assets decreases every year as new technology introduced in the market old becomes outdated so it is necessary to depreciate an asset even it is not in use.

Question 7.
Depreciation is charged on Current Assets only.
Answer:
This statement is False.
Depreciation is charged only on fixed assets and not on current assets working life of fixed assets is longer and it decreases with passes of time. The value of fixed assets decreases every year so depreciation is charged on fixed assets.

Question 8.
Depreciation need not be charged when a business is making a loss.
Answer:
This statement is False.
Depreciation is charged whether a business is making losses or profits. Depreciation is the non-cash expenditure of the business like all other expenses are charged in the same way depreciation is charge even business is making losses.

5. Complete the following sentences.

Question 1.
Depreciation is charged on _____________ asset.
Answer:
Fixed

Question 2.
Wages paid for Installation/fixation of Machinery is debited to _____________ account.
Answer:
Machinery

Question 3.
Under _____________ system, the amount of depreciation changes every year.
Answer:
Diminishing Balance

Question 4.
Depreciation = \(\frac{Cost of Asset Less …………}{Estimated Working Life of Asset}\)
Answer:
Scrap value

Question 5.
Gradual and permanent decrease in the value of asset is known as _____________
Answer:
Depreciation

Question 6.
In Fixed Instalment System the amount of depreciation is _____________ every year.
Answer:
Constant

Question 7.
The amount spent on installation of Machinery is a _____________ expenditure.
Answer:
Capital

Question 8.
_____________ is the value which an asset realises at the end of its useful life.
Answer:
Scrap value

Question 9.
Depreciation Account is a _____________ account.
Answer:
Nominal

Question 10.
Depreciation is derived from a Latin word _____________
Answer:
Depretium

6. Do you agree or disagree with the following statements.

Question 1.
Depreciation is a non-cash expense.
Answer:
Agree

Question 2.
Underwritten the down value method the Depreciation curve slopes parallel to the ‘X’ axis.
Answer:
Disagree

Question 3.
The rate of depreciation depends upon the life of the fixed asset.
Answer:
Agree

Question 4.
The terminal value of the asset never affects the annual amount of depreciation.
Answer:
Disagree

Question 5.
By charging depreciation on fixed assets ascertainment of true and fair financial position is possible.
Answer:
Agree

7. Correct the following statement and rewrite the statement.

Question 1.
The residual value of an asset increases the amount of annual depreciation.
Answer:
The residual value of an asset decreases the amount of annual depreciation.

Question 2.
Depreciation is calculated on all assets.
Answer:
Depreciation is calculated on fixed assets only.

Question 3.
Underwritten down value method depreciation is calculated on the original cost of an asset.
Answer:
Underwritten down value method depreciation is calculated on its opening balance every year.

Question 4.
Depreciation provided on assets is debited to an asset accounts.
Answer:
Depreciation provided on assets is credited to an asset account.

Question 5.
Profit on sale of the asset is credited to an asset account.
Answer:
Profit on sale of the asset is debited to an asset account.

8. Calculate the following.

Question 1.
A machine costing ₹ 23,000 is estimated to have a life of 7 years and the scrap value is estimated at ₹ 2,000 at the end of its useful life. Find out the amount of depreciation p.a.
Solution:
Depreciation p.a. = \(\frac{Cost of Asset (-) Scrap value}{Estimated life of asset}\)
= \(\frac{23,000-2,000}{7}\)
= \(\frac{21,000}{7}\)
= ₹ 3,000 p.a.

Question 2.
If the cost of the Computer is ₹ 40,000 and depreciation is to be charged at 8% p.a. Calculate the amount of depreciation.
Solution:
Depreciation p.a. = Cost of computer (×) percentage
= 40,000 × \(\frac{8}{100}\)
= ₹ 3,200 p.a.

Question 3.
Mr. ‘X’ purchased Furniture on 1st October 2015 at ₹ 2,80,000 and spent ₹ 20,000 on its installation. He provides depreciation at 6% under the straight-line method on 31st March 2016. Calculate the amount of depreciation.
Solution:
Depreciation as per straight line method = Cost of Furniture × Percentage × Period
= 3,00,000 × \(\frac{6}{100}\) × \(\frac{6}{12}\)
= ₹ 9,000

Question 4.
M/s Sitaram and Co Purchased a Machinery on 1st January 2016 for ₹ 2,00,000. The company provides depreciation @ 10% p.a. on Reducing Balance Method on 31st March every year. Calculate Written Down Value of Machinery as of 31st March 2017.
Solution:
Original cost on 01.01.2016 = ₹ 2,00,000
Less: Dep for 2015-16 for 3 months = ₹ 5,000
W.D.V. on 01.04.2016 = ₹ 1,95,000
Less: Dep for 2016-17 for 12 months = ₹ 19,500
W.D.V. on318t March, 2017 = ₹ 1,75,500

Question 5.
On 1st July 2016 M/s. Ramai & Co. .sold Machinery for ₹ 7,000 the original cost of ₹ 10,000 which was purchased on 18th April 2015. Find out the profit or loss on sale of Machinery by charging depreciation at 10% p.a. on original cost on 31st March every year.
Solution:
Original cost of machinery on 01.04.2015 = ₹ 10,000
Less: Dep for 2015-16 for 12 months = ₹ 1,000
W.D.V. on 01.04.2016 = ₹ 9,000
Less: Dep for 2016-17 for 3 months = ₹ 250
W.D.V. on 01.07.2016 = ₹ 8,750
Less: Selling price = ₹ 7,000
∴ Loss on sale of machinery = ₹ 1,750

Practical Problems on Straight Line Method

Question 1.
On 1st April 2015, Farid of Nasik purchased a Motor Car for ₹ 55,000. The scrap value of the Motor Car was estimated at ₹ 10,000 and its estimated life is 10 years. The Registration charge for the Motor Car was ₹ 5,000.
Show Motor Car Account for first four years, assuming that the books of accounts are closed on 31st March every year.
Solution:
In the books of Farid, Nasik Motor Car Account

Working Note:
Calculation of Depreciation per annum
Depreciation = \(\frac{Original cost of an asset (-) Scrap value}{Estimated life of asset in years}\)
= \(\frac{60,000-10,000}{10}\)
= \(\frac{50,000}{10}\)
= ₹ 5,000 p.a.

Question 2.
On 1st January 2017 ‘Sai Industries, Nagpur’ purchased a Machine costing ₹ 1,65,000 and spent ₹ 15,000 for its installation charges. The estimated life of the Machine is to be 10 years and the scrap value at the end of its life would be ₹ 30,000. On 1st October 2018, the entire Machine was sold for ₹ 1,50,000.
Show Machinery Account, Depreciation Account, for the years 2016-17, 2017-18, and 2018-19 assuming that the accounts are closed on 31st March every year.
Solution:
In the books of Sai Industries, Nagpur

Working Notes:
1. Calculation of Depreciation per annum:
Depreciation = \(\frac{Original cost of an asset (-) Scrap value}{Estimated life of asset in years}\)
= \(\frac{1,80,000-30,000}{10}\)
= \(\frac{1,50,000}{10}\)
= ₹ 15,000 p.a.

2. Calculation of Profit or loss on sale of machine:
Original cost 01.01.2017 = ₹ 1,80,000
Less: Depreciation for 2016-17 (3 months) = ₹ 3,750
W.D.V. on 01-04-2017 = ₹ 1,76,250
Less: Depreciation for 2019-18 (12 months) = ₹ 15,000
W.D.V. on 01.04.2018 = ₹ 1,61,250
Less: Depreciation for 2018-19 (6 months) = ₹ 7,500
W.D.V. on date of sale = ₹ 1,53,750
Less: Selling price = ₹ 1,50,000
∴ Loss on sale of machine = ₹ 3,750

Question 3.
Shubhangi Trading Company of Dombivli purchased Machinery for ₹ 86,000 on 1st January 2016 and immediately spent ₹ 4,000 on its fixation and erection. On 1st October 2016 additional Machinery costing ₹ 40,000 was purchased.
On 1st October 2017, the Machinery purchased on 1st January 2016 became obsolete and was sold for ₹ 70,000. On 1st July 2017, a new Machine was also purchased for ₹ 45,000.
Depreciation was provided annually on 31st March at the rate of 12% per annum on the fixed installment method.
Prepare Machinery Account for three years and pass Journal Entries for the Third year i.e. 2017-2018.
Solution:
In the books of Shubhangi Trading company, Dombivli

Journal of Shubhangi Trading Company

Working Note:
Calculation of Profit or loss on sale of machine:
Original cost on 01.01.2016 = ₹ 90,000
Less: Depreciation for 2015-16 (3 months) = ₹ 2,700
W.D.V. on 01-04-2016 = ₹ 87,300
Less: Depreciation for 2016-17 (12 months) = ₹ 10,800
W.D.V. on 01.04.2017 = ₹ 76,500
Less: Depreciation for 2017-18 (6 months) = ₹ 5,400
W.D.V. on date of sale = 71,100
Less: Selling price = 70,000
∴ Loss on sale of machine = ₹ 1,100

Question 4.
On 1st Jan 2015, Triveni Traders Raigad purchased a Plaint for ₹ 12,000, and installation charges being ₹ 3,000. On 1st July 2016 another Plant was purchased for ₹ 25,000, on 1st April 2017 another Plant was purchased for ₹ 27,000, wages paid for installation amounted to ₹ 2,000. Carriage paid for the Plant amounted to ₹ 1,000.
Show Plant Account up to 31st March 2018 assuming that the rate of depreciation is @ 10% p.a. on Straight Line Method.
Solution:
In the books of Triveni Traders, Raigad

Question 5.
Sameer & Company, Mumbai purchased a Machine worth ₹ 2,00,000 on 1st April 2016. On 1st July 2017, the company purchased an additional Machine for ₹ 40,000.
On 31st March 2019, the company sold the Machine purchased on 1st July 2017 for ₹ 35,000. The company writes off depreciation at the rate of 10% on the original cost and the books of accounts are closed every year on 31st March.
Show the Machinery Account and Depreciation Account for the first three years ending 31st March 2016-17, 2017-18 and 2018-19
Solution:
In the books of Sameer & Company, Mumbai

Working note:
Calculation of Profit or Loss on sale of machine:
Original cost on 01.07.2017 = ₹ 40,000
Less: Depreciation for 2017-18 (9 months) = ₹ 3,000
W.D.V. on 01-04-2018 = ₹ 37,000
Less: Depreciation for 2018-19 (12. months) = ₹ 4,000
W.D.V. on date of sale = ₹ 33,000
Less: Selling price = ₹ 35,000
∴ Profit on sale of machine = ₹ 2,000

Question 6.
Samarth Manufacturing Co. Ltd, Aurangabad, purchased a New Machinery for ₹ 45,000 on 1st Jan 2015 and immediately spent ₹ 5,000 on its fixation and erection. In the same year, 1st July additional Machinery costing ₹ 25,000 was purchased. On 1st July 2016, the Machinery purchased on 1st Jan 2015 became obsolete and was sold for ₹ 40,000.
Depreciation was provided annually on 31st March at the rate of 10% per annum on the Fixed Instalment Method.
You are required to prepare Machinery Account for the year 2014-15, 2015-16, 2016-17.
Solution:
In the books of Samarth Manufacturing Co. Ltd, Aurangabad

Working Note:
Calculation of Profit or Loss on sale of machine:
Original cost on 01.01.2015 = ₹ 50,000
Less: Depreciation for 2014-15 (3 months) = ₹ 1,250
W.D.V. on 01-04-2015 = ₹ 48,750
Less: Depreciation for 2015-16 (12 months) = ₹ 5,000
W.D.V. on 01-04-2016 = ₹ 43,750
Less: Depreciation for 2016-17 (3 months) = ₹ 1,250
W.D.V. on date of sale = ₹ 42,500
Less: Selling price = ₹ 40,000
∴ Loss on sale of machine = ₹ 2,500

Practical Problems on Written Down Value Method

Question 1.
M/s Omkar Enterprise Jalgaon acquired a Printing Machine for ₹ 75,000 on 1st Oct 2015 and spent ₹ 5,000 on its transport and installation. Another Machine for ₹ 45,000 was purchased on 1st Jan 2017. Depreciation is charged at the rate of 20% on Written Down Value Method, on 31st March every year.
Prepare Printing Machine Account for the first four years.
Solution:
In the books of M/s Omkar Enterprise Jalgaon.

Question 2.
Vishal Company, Dhule, purchased Machinery costing ₹ 60,000 on 1st April 2016. They purchased further Machinery on 1st October 2017, costing ₹ 30,000, and on 1st July 2018, costing ₹ 20,000. On 1st Jan 2019, one-third of the Machinery, which was purchased on 1st April 2016, became obsolete and it was sold for ₹ 18,000.
Assume that, company account closes on 31st March every year.
Show Machinery Account for the first three(3) years and pass journal entries for the Third year, after charging depreciation at 10% p.a. on Written Down Value Method.
Solution:
In the books of Vishal Company, Dhule.

Journal of Vishal Company

Working Notes:
1. Calculation of Profit or Loss on sale as Machine:
Original cost on 01.04.2016 = ₹ 20,000
Less: Dep. for 2016-17 (12 months) = ₹ 2,000
W.D.V. on 01.04.2017 = ₹ 18,000
Less : Dep. for 2016-17 (12 months) = ₹ 1,800
W.D.V. on 01.04.2018 = ₹ 16,200
Less : Dep. for 2018-19 (9 months) = ₹ 1,215
W.D.V. on date of sale = ₹ 14,985
Less : Selling Price = ₹ 18,000
∴ Profit on sale & machine = ₹ 3,015

2. Depreciation for 2018-19
(a) Opening balance on 01.04.2018 = ₹ 77,100
Less : W.D.V. of Machine sold on 01.04.2018 = ₹ 16,200
10% depreciation on 60,900 = ₹ 6,090
(b) Purchase of Machine on 01.07.2018 20,000 – 10% – 9 months = ₹ 6,090 + ₹ 1,500 = ₹ 7,590

Question 3.
Mahesh Traders Solapur purchased Furniture on 1st April 2014 for ₹ 20,000. In the same year on 1st, Oct. additional Furniture was purchased for ₹ 10,000.
On 1st Oct. 2015, the Furniture purchased on 1st April 2014 was sold for ₹ 15,000 and on the same day, a new Furniture was purchased for ₹ 20,000.
The firm charged depreciation at 10% p.a. on the Reducing Balance Method.
Prepare Furniture Account and Depreciation Account for the year ending 31st March 2015, 2016, and 2017.
Solution:
In the books of Mahesh Traders, Solapur

Working Notes:
1. Calculation of Profit or loss on sale of furniture:
Original cost on 01.04.2014 = ₹ 20,000
Less: Depreciation for 2014-15 (12 months) = ₹ 2,000
W.D.V. on 01.04.2015 = ₹ 18,000
Less: Depreciation for 2015-16 = ₹ 900
W.D.V. on date of sale = ₹ 17,100
Less: Selling price = ₹ 15,000
∴ Loss on sale of furniture = ₹ 2,100

2. Calculation of Depreciation for 2016 -17:
(a) Opening balance on 01.04.2015 = ₹ 27,500
Less: W.D.V. of furniture sold on 01.04.2015 = ₹ 18,000
9,500 – 10% = ₹ 950
(b) Purchase of furniture on 01.10.2015 – 10% – 6months = 950 + 1,000 = ₹ 1,950

Question 4.
Radhika-Masale’ Amravati purchased a Plant on 1st Jan. 2015 for ₹ 80,000. A new Plant was also purchased
for ₹ 60,000, installation expenses being ₹ 10,000 on 1st April 2016. On 1st Jan 2017, a new Plant was purchased for ₹ 20,000, by disposing of the 1st Plant at ₹ 60,000.
Prepare Plant Account and Depreciation Account for 31st March 2015, 31st March 2016, and 31st March 2017, assuming that the rate of depreciation was @ 10% on Diminishing Balance Method.
Solution:
In the books of Radhika-Masale, Amravati

Working Notes:
1. Calculation of Profit or loss on sale of plant:
Original cost on 01.01.2015 = ₹ 80,000
Less: Depreciation for 2014.15. (3 months) = ₹ 2,000
W.D.V. on 01.04.2015 = ₹ 78,000
Less: Depreciation for 2015 -16 (12 months) = ₹ 7,800
W.D.V. on 01.04.2016 = ₹ 70,200
Less: Depreciation for 2016 -17 (9 months) = ₹ 5,265
W.D.V. on date of sale = ₹ 64,935
Less: Selling price = ₹ 60,000
∴ Loss on sale of plant = ₹ 4,935

2. Calculation of Depreciation for 2016-17:
(a) Opening balance on 01.04.2016 = ₹ 70,200
Less: W.D.V. of plant sold on 01.04.2016 = ₹ 70,200
Nil – 10% = Nil
(b) Purchase of plant on 01.04.2016 – 10% – 12months = ₹ 7,000
(c) Purchase of plant on 01.01.2017 – 10% – 3m months = ₹ 500
Total = ₹ 7,500

Question 5.
On 1st April 2015, Suman Traders purchased Machinery for ₹ 30,000. On 1st Oct. 2015, they purchased further Machinery costing ₹ 20,000.
On 1st Oct. 2016, they sold the Machine purchased on 1st April 2015 for ₹ 18,000 and brought another Machine for ₹ 15,000 on the same date.
Depreciation is provided on Machinery @ 20% p.a. on the Diminishing Balance Method and the financial year closes on 31st March every year.
Prepare the Machinery Account and Depreciation Account for the year 2015-16, 2016-17, and 2017-18.
Solution:
In the books of Suman Traders

Working Notes:
1. Calculation of Profit or loss on sale of machine:
Original cost on 01.04.2015 = ₹ 30,000
Less: Depreciation for 2015-16 (12 months) = ₹ 6,000
W.D.V. on 01.04.2016 = ₹ 24,000
Less: Depreciation for 2016-17 (6 months) = ₹ 2,400
W.D.V. on date of sale = ₹ 21,600
Less: Selling price = ₹ 18,000
∴ Loss on sale of machine = ₹ 3,600

2. Calculation of Depreciation for 2016-17:
(a) Opening balance on 01.04.2016 = ₹ 42,000
Less: W.D.V. of machine sold on 01.04.2016 = ₹ 24,000
18,000 – 20% = ₹ 3,600
(b) Purchase of machine on 01.10.2016 – 15,000 – 20% – 6months = 3,600 + 1,500 = ₹ 5,100

Class 11 Commerce BK Textbook Solutions Digest

• 11th Bk Chapter 1 Practical Problems
• 11th Bk Chapter 2 Practical Problems
• 11th Bk Chapter 3 Practical Problems
• 11th Bk Chapter 4 Practical Problems
• 11th Bk Chapter 5 Practical Problems
• 11th Bk Chapter 6 Practical Problems
• 11th Bk Chapter 7 Practical Problems
• 11th Bk Chapter 8 Practical Problems
• 11th Bk Chapter 9 Practical Problems
• 11th Bk Chapter 10 Practical Problems

Bills of Exchange 12th BK Commerce Chapter 7 Solutions Maharashtra Board

Balbharti Maharashtra State Board 12th Commerce Book Keeping & Accountancy Solutions Chapter 7 Bills of Exchange Textbook Exercise Questions and Answers.

Class 12 Commerce BK Chapter 7 Exercise Solutions

Objective Questions

A. Select the correct option and rewrite the sentence:

Question 1.
The person on whom a bill is drawn is called a ______________
(a) Drawee
(b) Payee
(c) Drawer
(d) Acceptor
Answer:
(a) Drawee

Question 2.
Before acceptance the bill is called a ______________
(a) Order
(b) Request
(c) Draft
(d) Instrument
Answer:
(c) Draft

Question 3.
When the due date of the bill drawn falls due on a public holiday, the payment must be made on the ______________ day.
(a) same
(b) preceding
(c) next
(d) any
Answer:
(b) preceding

Question 4.
The due date of the bill drawn for 2 months on 23rd Nov. 2019 will be ______________
(a) 23rd Jan. 2020
(b) 25th Jan. 2019
(c) 26th Jan. 2019
(d) 25th Jan. 2020
Answer:
(d) 25th Jan. 2020

Question 5.
Noting charges are borne by ______________
(a) Notary Public
(b) Drawee
(c) Drawer
(d) Endorsee
Answer:
(b) Drawee

Question 6.
There are ______________ parties to bill of exchange.
(a) five
(b) four
(c) three
(d) two
Answer:
(c) three

Question 7.
When a bill is drawn for 2 months after date on 3rd Jan. 2020, its due date will be ______________
(a) 3rd Jan. 2020
(b) 3rd Mar. 2020
(c) 5th Mar. 2020
(d) 6th Mar. 2020
Answer:
(d) 6th Mar. 2020

Question 8.
Notary Public is ______________
(a) Govt. Officer
(b) Drawer
(c) Payee
(d) Endorsee
Answer:
(a) Govt. Officer

Question 9.
When Acceptor or Drawee does not pay the amount of bill to the holder on the due date it is known as ______________ the bill.
(a) returning
(b) discounting
(c) honouring
(d) dishonouring
Answer:
(d) dishonouring

Question 10.
The person who accepts the bill treats the bill as ______________
(a) Bills Payable
(b) Promissory Note
(c) Draft
(d) Bills Receivable
Answer:
(a) Bills Payable

B. Write the word/phrase/term, which can substitute each of the following statements:

Question 1.
Three extra days are allowed over and above the term of the bill.
Answer:
Grace days

Question 2.
Fees charged by Notary Public for getting the fact of dishonour noted.
Answer:
Noting Charges

Question 3.
A person who is entitled to receive the amount of bill of exchange.
Answer:
Payee

Question 4.
A person in whose favour a bill endorsed.
Answer:
Endorsee

Question 5.
Officer appointed by the government for noting of dishonour of bill.
Answer:
Notary Public

Question 6.
Cancellation of the bill on maturity in return for a new bill for an extended period of credit.
Answer:
Renewal of Bill

Question 7.
Bill of exchange drawn and accepted without any valuable consideration.
Answer:
Accommodation bill

Question 8.
A person who is in possession of the Bill of Exchange.
Answer:
Holder

Question 9.
Conversion of Bill of Exchange into its present value.
Answer:
Discounting of the bill

Question 10.
The amount is not recoverable from Drawee on account of insolvency.
Answer:
Bad debts

C. State whether the following statements are True or False with reasons:

Question 1.
An Inland bill is one that is drawn in one country and payable in another country.
Answer:
This statement is False.
Inland bill means, a bill drawn, accepted, and made payable within the territory of one and same, country. So, a bill is drawn in one country and payable in another country can’t be an inland bill.

Question 2.
Retirement of the bill means payment of the bill before the due date.
Answer:
This statement is True.
Payment of the bill, by the acceptor of the bill to the holder of the bill before the due date, is known as Retirement of the bill. So retirement of the bill means payment of the bill before the due date.

Question 3.
Drawee can transfer the ownership of the bill.
Answer:
This statement is False.
Drawee is a debtor. He has to pay the amount of the bill to its holder on the due date. Hence he cannot transfer its ownership to other people. The drawer can transfer the ownership of the bill as he is the owner of the bill.

Question 4.
Acceptance of the bill without making any changes in the terms of the bill is called qualified acceptance.
Answer:
This statement is False.
Acceptance of the bill with some changes as regards the terms, amount, place, etc. of a bill is known as qualified acceptance. Acceptance of the bill without making changes as regards the term is called general acceptance.

Question 5.
Discounting is a device to convert the bill into its present value.
Answer:
This statement is True.
When the drawer or holder of the bill approaches the bank to discount the bill, the bank pays the bill amount after deducting a certain amount (which is known as discounting charges). It means conversion of the bill into its present value in cash. So, we can say that discounting is a device to convert the bill into its present value.

Question 6.
A bill of exchange must be presented to the acceptor on the due date.
Answer:
This statement is True.
To get the payment of the bill from the acceptor, the holder of the bill is required to present it to the acceptor on its due date. Acceptor either honours the bill or dishonours the bill.

Question 7.
If a bill is discounted by the holder, no entry is passed in his book when the bill is honoured on the due date.
Answer:
This statement is True.
On discounting the bill the holder gives the possession of the bill to the bank. On the maturity date, the bank has to present the bill to the drawee to collect the payment. When the discounted bill is honoured, the transaction takes place between drawee and bank.

Question 8.
Noting charges are to be borne by the drawer.
Answer:
This statement is False.
Noting charges are to be borne by the drawee only as due to his act of non-payment, the bill is dishonoured and the drawer is not able to get money on its due date.

Question 9.
If a bill is drawn payable ‘on demand’ no grace days are allowed.
Answer:
This statement is True.
‘On demand’ means the amount of the bill is to be paid by drawee immediately on presentation of the bill as no time period is mentioned on it. In demand bill, 3 days grace is not allowed by law.

Question 10.
There are three parties to a promissory note.
Answer:
This statement is False.
There are only two parties to a promissory note, i.e. Drawer or maker of the note and drawee or payee of the note.

D. Find the odd one:

Question 1.
(a) Retaining
(b) Noting
(c) Discounting
(d) Endorsing
Answer:
(b) Noting

Question 2.
(a) Trade bill
(b) Accommodation bill
(c) After date bill
(d) Demand bill
Answer:
(d) Demand bill

Question 3.
(a) Notary public
(b) Drawer
(c) Drawee
(d) Payee
Answer:
(a) Notary public

Question 4.
(a) Discounting charges
(b) Rebate
(c) Bank charges
(d) Noting charges
Answer:
(d) Noting charges

Question 5.
(a) Stamp
(b) Acceptance
(c) Draft
(d) Amount
Answer:
(c) Draft

E. Complete the sentences:

Question 1.
Making payment of bill before the due date of maturity is known as ______________
Answer:
Retirement of Bill

Question 2.
A person whose liabilities are more than his assets and is not in a position to pay off his liabilities is ______________
Answer:
Insolvent person

Question 3.
Amount that cannot be paid by acceptor on account of insolvency is known as ______________
Answer:
Deficiency

Question 4.
A bill of exchange payable after certain period is known as ______________
Answer:
After date bill

Question 5.
A bill which is drawn and accepted with valuable consideration is known as ______________
Answer:
Trade Bill

Question 6.
A person who draws the bill of exchange is known as ______________
Answer:
Drawer

Question 7.
A bill whose due date is calculated from the date of acceptance is known as ______________
Answer:
After sight bill

Question 8.
Recording the fact of dishonour of bill is known as ______________
Answer:
Noting

Question 9.
When drawee accepts the bill payable at a particular place only, it is known as ______________
Answer:
qualified acceptance as to place

Question 10.
Fees charged by the bank for collection of bill on behalf of holder is ______________
Answer:
bank charges

F. Answer in a sentence:

Question 1.
What do you mean by Bill of Exchange?
Answer:
A Bill of Exchange is a written order signed by the drawer, directing a certain person to pay a certain sum of money on-demand or on a certain future date to a certain person or as per his order.

Question 2.
What are Days of Grace?
Answer:
The three extra days allowed to the drawee or the acceptor of a bill for making payment on it are called Days of Grace.

Question 3.
What do you mean by Discounting a Bill of Exchange?
Answer:
Encashment of a bill of exchange with the bank for certain cash which is less than the face value of the bill, before its due date by its drawer or holder is called Discounting of a Bill of Exchange.

Question 4.
What is Noting of the Bill?
Answer:
Noting of a Bill of Exchange is the recording of the facts of its dishonour by a Notary public.

Question 5.
What are Noting Charges?
Answer:
Noting Charges are the fees charged by the Notary public for noting the facts of dishonour on the face of the bill and in his official register.

Question 6.
What is the relationship between drawer and drawee?
Answer:
The relationship between the drawer and the drawee is that of the creditor and debtor.

Question 7.
Who is the Payee of the Bill?
Answer:
The Payee of a Bill is the person to whom the bill is made payable or in whose favour the bill is drawn.

Question 8.
What do you mean by Rebate?
Answer:
Any concession or discount in monetary terms given by the holder of the bill of exchange to the drawee or acceptor, when a bill is retired is called a Rebate.

Question 9.
What is the Legal Due Date?
Answer:
The date which is arrived at after adding three days of grace to the nominal due date is known as Legal Due Date.

Question 10.
What are Bills Payable on Demand?
Answer:
When the amount of bill is payable by a drawee on the presentation of a bill, in which time period is not mentioned and grace days are not allowed is known as Bills Payable on Demand.

G. Do you agree or disagree with the following statements:

Question 1.
A bill of exchange is a conditional order.
Answer:
Disagree

Question 2.
The party which is ordered to pay the amount is known as the payee.
Answer:
Disagree

Question 3.
The person in whose favour the bill is endorsed is known as the endorsee.
Answer:
Agree

Question 4.
Rebate or discount given on retiring a bill is an income to the Drawee.
Answer:
Agree

Question 5.
A bill from the point of view of the debtor is called Bills payable.
Answer:
Agree

Question 6.
In case of bill drawn payable ‘on demand,’ no grace days are allowed.
Answer:
Agree

Question 7.
A bill is required to be accepted by Drawer.
Answer:
Disagree

Question 8.
A bill of exchange need not be dated.
Answer:
Disagree

Question 9.
A bill before acceptance is called Promissory Note.
Answer:
Disagree

Question 10.
Renewal is requested by the drawee to extend the credit period of the bill.
Answer:
Agree

H. Calculations:

Question 1.
Ganesh draws a bill for ₹ 40,260 on 15th Jan. 2020 for 50 days. He discounted the bill with the Bank of India @ 15 % p.a. on the same day. Calculate the amount of discount.
Solution:
Discount = Amount of Bill × \(\frac{\text { Rate }}{100} \times \frac{\text { Unexpired days }}{366}\)
= 40,260 × \(\frac{15}{100} \times \frac{50}{366}\)
= ₹ 825
(Note: 2020 is a Leap year, so the total number of days = 366)

Question 2.
Shefali Traders drew a bill on Maya for ₹ 30,000 on 1st Oct. 2019 payable after 3 months.
Calculate the amount of discount in the following cases:
(i) Shefali Traders discounted the bill on the same day @ 12 % p.a.
(ii) Shefali Traders discounted the bill on 1st Nov. 2019 @ 12 % p.a.
(iii) Shefali Traders discounted the bill on 1st Dec. 2019 @ 12 % p.a.
Solution:
Discount = Amount of Bill × \(\frac{\text { Rate }}{100} \times \frac{\text { Unexpired days }}{365}\)
(i) Discount = 30,000 × \(\frac{12}{100} \times \frac{3}{12}\) = ₹ 900
(ii) Discount = 30,000 × \(\frac{12}{100} \times \frac{2}{12}\) = ₹ 600
(iii) Discount = 30,000 × \(\frac{12}{100} \times \frac{1}{12}\) = ₹ 300

Question 3.
Veena who had accepted Sudha’s bill for ₹ 28,000 was declared bankrupt and only 35 paise in a rupee could be recovered from her estate. Calculate the amount of bad debts.
Solution:
From Veena, only 35 paise in a rupee could be recovered i.e. 65 paise in a rupee is bad debt for Sudha. So 65% of ₹ 28,000 = ₹ 18,200 is the amount of bad debts.

Question 4.
Nitin renewed his acceptance for ₹ 72,000 by paying ₹ 22,000 in cash and accepting a new bill for the balance plus interest @ 18%. p.a. for 4 months. Calculate the amount of the new bill.
Selution:
For Nitin,
Total outstanding = ₹ 72,000
Nitin paid in cash= ₹ 22,000
Remaining dues = ₹ 50,000
Now, on this ₹ 50,000 we have to calculate interest @ 18% for 4 months
I = \(\frac{\mathrm{PRN}}{100}\)
= 50,000 × \(\frac{18}{100} \times \frac{4}{12}\)
= ₹ 3,000
So, amount of new bill = Remaining dues + Interest
= 50,000 + 3,000
= ₹ 53,000

Question 5.
Nisha’s acceptance for ₹ 16,850 sent to the bank for the collection was honoured and bank charges debited were ₹ 125. Find out the amount actually received by Drawer.
Solution:
Bill of ₹ 16,850 sent to the bank for collection and it is honoured and bank charges = ₹ 125
So, actual amount received by drawer = 16,850 – 125 = ₹ 16,725.

Question 6.
A bill of ₹ 16,000 was drawn by Keshav on Gopal on 12th June 2019 for 2 months, what will be the due date, if all of sudden, the legal due date is declared as an emergency holiday?
Solution:
Consider immediate or next working day as the due date in case the legal due date is declared as an emergency holiday.

∴ The legal due date is 16th August 2019 (The next day).

I. Prepare the following specimens:

Question 1.
Prepare a bill of exchange from the following information:
Drawer: Shankar, Vadodara, Gujarat
Drawee: Vinayak, Somwar Peth, Pune
Amount: ₹ 16,000
Period: 3 months
Date of Bill: 6th Sept. 2019
Date of acceptance: 11th Sept. 2019
Solution:

Question 2.
Prepare a bill of exchange from the following information:
Drawer: Dinesh, P. R. Road, Andheri (West)
Drawee: Mahesh, L. B. S. Road, Mulund
Payee: Amit, Thane (West)
Amount: ₹ 9,500
Period of Bill: 4 months after sight
Date of Bill: 26th Nov. 2019
Date of acceptance: 29th Nov. 2019
Solution:

Question 3.
Kantilal, 343/D, Palm Heights, Jogeshwari, drew a bill on 10th Oct. 2019 for ₹ 63,490 for 45 days after the date on Shantilal, B2, Himalaya Towers, Baramati, payable to Priyanka, Satara. The bill was accepted on 13th Oct. 2019 for 60 days.
Prepare a format of bill of exchange from the above details.
Solution:

Question 4.
Prepare a format of bill exchange from the following:
Rahul Sane, 86-D, Raviwar Peth, Nagpur accepted the bill drawn on him by Prithviraj, Icon Heights, Wardha for ₹ 87,000 on 30th July 2019.
The bill was drawn on 26th July 2019 for ₹ 1,00,000 for 90 days after the date.
Solution:

Question 5.
Prepare a format of bill of exchange from the following.
Drawer: Kashmira Shah, Partner M/S Shah, and Shah, 2 – C, Matruchhaya Building, Akola
Drawee: Dhanashree Traders, Bangalore Road, Belgaum (Signed by Jayshree, Partner)
Payee: M/S Janki Traders, Akola
Amount: ₹ 64,500
Period of Bill: 3 months
Date of drawing: 12th Sept. 2019
Date of acceptance: 15th Sept. 2019
Solution:

Question 6.
Prepare a format Bill of Exchange with imaginary Drawer, Drawee, Address, Amount, Dates.
Drawer: Dhanesh Shah, 24/c, Amir Mahal, Borivali, Mumbai
Drawee: Kalpana Shah, 33, Sharadashram, Dadar (West), Mumbai
Amount: ₹ 80,500
Period: 60 days
Date of the bill: 2nd December 2020
Accepted on: 5th December 2020
Solution:

J. Complete the following Table.

Question 1.

Answer:

Question 2.

Answer:

S.No.	Date of Drawing	Date of Acceptance	Tenure	Type	Nominal due Date	Legal due Date
(i)	3rd January, 2020	5th January, 2020	45 days	after date	17th Feb. 2020	20th Feb. 2020
(ii)	9th April, 2019	12th April, 2019	4 months	after sight	12th Aug. 2019	14th Aug. 2019
(iii)	23rd November, 2019	23rd November, 2019	2 months	after date	23rd Jan. 2020	25th Jan. 2020
(iv)	16th August, 2019	20th August, 2019	4 months	after sight	20th Dec. 2019	23rd Dec. 2019
(v)	23rd December, 2018	24th December, 2018	60 days	after date	21st Feb. 2019	24th Feb. 2019

Practical Problems

Question 1.
On 1st Jan., 2020 Hemant sold goods of ₹ 18,500 to Nitin. On the same date Hemant drew a bill of exchange for ₹ 18,500 at 2 months. On the due date the bill was duly honoured.
Give Journal Entries in the books of Hemant and Nitin. Prepare Hamant’s Account in the books of Nitin.
Solution:
In the books of Hemant
Journal Entries

In the books of Nitin
Journal Entries

Question 2.
Neha sold goods to Rohan ₹ 42,000 on 6th Sept. 2019. Neha drew a bill of exchange at 3 months for the amount which was accepted by Rohan. Neha discounted the bill with her bankers at ₹ 41,000. On the due date of the bill Rohan dishonoured the bill and bank paid ₹ 300 as Noting Charges.
Show Journal Entries in the books of Neha and Rohan.
Solution:
In the books of Neha
Journal Entries

In the books of Rohan
Journal Entries

Question 3.
Jyoti owes ₹ 31,000 to Swati for which she draws a bill on Jyoti for 2 months. The bill was duly accepted by Jyoti. Swati sends the bill to bank for collection. Jyoti honoured the bill on the due date and bank charges ₹ 475 as bank charges.
Give Journal Entries in the books of Swati.
Solution:
In the books of Swati
Journal Entries

Question 4.
Pankaj purchased goods of ₹ 20,000 from Omprakash on credit on 15th April, 2019. Omprakash draws After Sight bill for the amount due on Pankaj for 3 months which was accepted by Pankaj on 18th April, 2019. On 20th April, 2019 Omprakash endorsed the bill to his creditor Jagdish in full settlement of his amount ₹ 21,000. On the due date the bill was dishonoured by Pankaj.
Give Journal Entries in the books of Omprakash, Pankaj and Jagdish.
Solution:
In the books of Omprakash
Journal Entries

In the books of Pankaj
Journal Entries

In the books of Jagdish
Journal Entries

Question 5.
Siddhant sold goods to Sudhir of ₹ 43,800 on 18th March, 2019. Siddhant draws a bill on Sudhir on the same day for ₹ 43,800 for 3 months which was duly accepted by Sudhir. Siddhant discounted the bill on the same day at 8% p.a. The bill was dishonoured on the due date and Sudhir requested Siddhant to accept ₹ 13,800 and interest in cash on remaining amount at 12% p. a. Siddhant agreed and for the balance amount accepted a new bill at 2 months. Before the due date of new bill Sudhir retired the bill by paying ₹ 29,700.
Pass necessary Journal Entries in the books of Siddhant.
Solution:
In the books of Siddhant
Journal Entries

Working Notes:
1. March 18, Discount = 43,800 × \(\frac{3}{12} \times \frac{8}{100}\) = ₹ 876

2. March 21, calculation of interest balance amount:
I = \(\frac{\mathrm{PRN}}{100}\)
= 30,000 × \(\frac{12}{100} \times \frac{2}{12}\) (for 2 months on remaining amount ₹ 30,000)
= ₹ 600

3. Before due date bill was retired by Sudhir by paying ₹ 300 less which is considered as discount and as date is not given, here it is not recorded.

Question 6.
Sangeeta accepted a bill for ₹ 18,000 drawn by Geeta at 3 months. Geeta discounted the bill for ₹ 17,400. Before the due date Sangeeta approached Geeta for renewal of the bill. Geeta agreed on the condition that Sangeeta should pay ₹ 6,000 immediately and for the balance she should accept a new bill for 4 months along with interest ₹ 550. The arrangements were carried through. But on the due date of new bill Sangeeta became insolvent and 35 paise in a rupee could be recovered from her estate.
Give Journal Entries in the books of Sangeeta and prepare Sangeeta’s Account in the books of Geeta.
Solution:
In the books of Sangeeta
Journal Entries

Working Notes:
1. It is advisable to write journal entries in the books of Geeta also to get entries in ‘Sangeeta’s Account’ property.
In the books of Geeta
Journal Entries

Question 7.
Priyanka owed Meena ₹ 18,000, Priyanka accepted a bill drawn by Meena for the amount at 4 months. Meena endorsed the same bill to Sagar. Before due date Priyanka approached Meena for renewal of bill. Meena agreed on condition that ₹ 6,000 be paid immediately together with interest on the remaining amount of 8% p.a. for 3 months and Priyanka should accept a new bill for the balance amount. These arrangements were carried through. However, before the due date Priyanka became insolvent and only 50% of the amount could be recovered from her estate.
Give Journal Entries in the books of Meena.
Solution:
In the books of Meena
Journal Entries

Working Note:
Calculation of interest on remaining amount ₹ 12,000 @ 8 % p.a. and for 3 months
I = \(\frac{\mathrm{PRN}}{100}\)
= 12,000 × \(\frac{8}{100} \times \frac{3}{12}\)
= ₹ 240

Question 8.
Seema purchased goods from Roma on credit on 1st August, 2019 for ₹ 37,000. Seema accepts bill for 2 months drawn by Roma for the same amount. On the same day, Roma discounts the bill with the bank for ₹ 36,200 on 3rd August, 2019. On the due date the bill is dishonoured and Noting Charges of ₹ 160 is paid by the bank. Seema pays ₹ 19,000 and Noting Charges in cash immediately. A new bill is drawn by Roma for the balance including interest ₹ 650 for 2 months, which is accepted by Seema. The new bill is retired one month before the due date at a rebate of ₹ 300.
Give Journal Entries in the books of Seema and prepare Seema’s Account in the books of Roma.
Solution:
In the books of Seema
Journal Entries

Question 9.
Uday purchased goods from Shankar on credit for ₹ 35,000 at 10 % trade discount. Uday paid ₹ 1,500 immediately and for the balance accepted a bill for 3 months. Before due date Uday approached Shankar with a request to renew the bill. Shankar agreed but with condition that Uday should accept a new bill for 3 months including interest at 12% p.a.
Give Journal Entries in the books of Shankar.
Solution:
In the books of Shankar
Journal Entries

Working Note:
I = \(\frac{\text { PRN }}{100}\)
= 30,000 × \(\frac{3}{12} \times \frac{12}{100}\)
= ₹ 900

Question 10.
Sagar drawn an after sight bill on 21st Nov., 2019 for ₹ 21,000 at 3 months on Prasad. The bill is discounted by Sagar at 8% p.a. with his bank. On maturity. Prasad finds himself unable to make payment of the bill and requests Sagar to renew it. Sagar accepts the request and draws a new bill at one month for ₹ 21,750 including interest which was duly accepted by Prasad. Sagar deposits the bill into bank for the collection. Prasad honours the bill on the due date and bank charges ₹ 250 as bank charges.
Pass necessary Journal Entries in the books of Sagar and prepare Sagar’s Account in the books of Prasad.
Solution:
In the books of Sagar
Journal Entries

Question 11.
Journalise the following transaction in the books of Abhishek:
(a) Siddhant informs Abhishek that Vineet’s acceptance for ₹ 23,000 endorsed to Siddhant has been dishonoured. Noting Charges amounted to ₹ 430.
(b) Kajal renews her acceptance to Abhishek for ₹ 39,000 by paying ₹ 3,000 in cash and accepting a fresh bill for the balance along with interest at 11.5% p.a. for 3 months.
(c) Radhika retired her acceptance to Abhishek for ₹ 23,000 by paying ₹ 22,250 by cheque.
(d) Abhishek sent a bill of Subodh for ₹ 9,000 to bank for collection. Bank informed that the bill has been dishonoured by Subodh.
Solution:
In the books of Abhishek
Journal Entries

Working Note:
Amount of interest = 36,000 × \(\frac{3}{12} \times \frac{11.5}{100}\) = ₹ 1,035.

Question 12.
Journalise the following transaction in the books of Narendra:
(a) Narendra retires his acceptance to Upendra by paying ₹ 4,000 in cash and endorsing a bill accepted by Ramlal for ₹ 5,000.
(b) Vikram’s acceptance to Narendra ₹ 6,000 retired one month before the due date at rebate of 12% p.a.
(c) Dilip renews his acceptance to Narendra for ₹ 12,000 by paying ₹ 4,000 in cash and accepting a fresh bill for the balance plus interest at 12% p.a. for 3 months.
(d) Bank informed Narendra that, Kartik’s acceptance for ₹ 13,000 to Narendra, discounted with the bank was dishonoured and Noting Charges paid by bank ₹ 140.
Solution:
In the books of Narendra
Journal Entries

Question 13.
Journalise the following transaction in the books of Bharti:
(a) Bank informed that Amit’s acceptance for ₹ 15,750 sent to bank for collection was honoured and bank charges debited were ₹ 150.
(b) Nitin renewed his acceptance for ₹ 22,200 by paying ₹ 2,200 in cash along with interest on balance amount at 10% and accepted a fresh bill for the balance for 3 months.
(c) Dhanshri who had accepted Bharti’s bill for ₹ 17,500 was declared insolvent and only 40% of the amount due could be recovered from her estate.
(d) Discharged our acceptance to Savita for ₹ 9,450 by endorsing Pravin’s acceptance to us ₹ 9,000.
Solution:
In the books of Bharti
Journal Entries

Question 14.
Journalise the following transaction in the books of Sudha:
(a) Endorsed Sonali’s acceptance at 2 months for ₹ 6,000 in favour of Urmila and paid cash ₹ 3,500 in full settlement of her account ₹ 10,000.
(b) Discounted 2 months acceptance of Surya for ₹ 7,800 with bank at 10% p.a.
(c) Bank informed that Anuradha’s acceptance of ₹ 4,800 which was discounted was dishonoured and bank paid Noting Charges ₹ 125.
(d) Pooja honoured her acceptance of ₹ 16,400 which was deposited into bank for collection.
Solution:
In the books of Sudha
Journal Entries

Question 15.
Journalise the following transaction in the books of Mrunal:
(a) Bank informed that Aishwarya’s acceptance of ₹ 24,000 which was discounted had been dishonoured and bank paid Noting Charges ₹ 220. Bill was renewed at the request of Aishwarya for 2 months with interest of ₹ 480.
(b) Received ₹ 4,630 from private estate of Ankur who was declared insolvent against bill accepted by him for ₹ 6,000.
(c) Accepted a bill of ₹ 15,000 at 3 months drawn by Anushka for the amount due to her ₹ 20,000 and balance paid by cheque.
(d) Dishonoured our acceptance to Vivek ₹ 27,000 and Noting Charges paid by Vivek ₹ 700.
Solution:
In the books of Mrunal
Journal Entries

Class 12 Commerce BK Textbook Solutions Digest

• 12th Bk Chapter 1 Practical Problems
• 12th Bk Chapter 2 Practical Problems
• 12th Bk Chapter 3 Practical Problems
• 12th Bk Chapter 4 Practical Problems
• 12th Bk Chapter 5 Practical Problems
• 12th Bk Chapter 6 Practical Problems
• 12th Bk Chapter 7 Practical Problems
• 12th Bk Chapter 8 Practical Problems
• 12th Bk Chapter 9 Practical Problems
• 12th Bk Chapter 10 Practical Problems

Subsidiary Books 11th BK Commerce Chapter 5 Solutions Maharashtra Board

Balbharti Maharashtra State Board Bookkeeping and Accountancy 11th Solutions Chapter 5 Subsidiary Books Textbook Exercise Questions and Answers.

Class 11 Commerce BK Chapter 5 Exercise Solutions

Objective Type Questions & Answers

1. Answer the following questions in one sentence.

Question 1.
What are Subsidiary Books?
Answer:
Subdivision of journals on the basis of nature of transactions is known as Subsidiary Books.

Question 2.
What is a Cash Book?
Answer:
The subsidiary book in which details of cash are received in the form of cash, cheques, drafts, etc., and details of payment made in the form of cash, cheques, drafts, etc. is called a cash book.

Question 3.
State the meaning of ‘Contra entry’.
Answer:
The accounting entries which appear on both the sides of cash book are called contra entries.

Question 4.
State the meaning of the imprest system of Petty Cash Book.
Answer:
Imprest System of Petty cash book is a system in which head cashier gives fixed (imprest) amount to the petty cashier at the beginning of month/fortnight to meet the expenses of that period. Later on the shortfall after meeting the expenses is reimbursed by the head cashier.

Question 5.
Which transactions are recorded in Purchase Book?
Answer:
Goods purchased on credit for resale are only recorded in the Purchase Book.

Question 6.
Which sales are recorded in Sales Book?
Answer:
Credit sales of goods are recorded in Sales Book.

Question 7.
Which transactions are recorded in the Journal Proper?
Answer:
Journal Proper is meant for recording opening entries, closing entries, adjustment entries, transfer entries, and rectification entries.

Question 8.
Who is a Petty Cashier?
Answer:
A cashier in charge of recording transactions in a petty cash book is known as Petty Cashier.

2. Give a word/term or phrase for each of the following statements:

Question 1.
A person who maintains Petty Cash Book.
Answer:
Petty Cashier

Question 2.
A bank account which the businessman prefers to open.
Answer:
Current Account

Question 3.
Petty Cash Book in which the payment side is ruled in suitable columns.
Answer:
Analytical Petty Cash Book

Question 4.
Subsidiary book in which only credit purchases of goods are recorded.
Answer:
Purchase Book

Question 5.
Subsidiary book in which return of goods sold on credit is recorded.
Answer:
Sales Return Book

Question 6.
The entry is recorded on both sides of the cash book.
Answer:
Contra Entry

Question 7.
Name the account which encourages personal savings.
Answer:
Saving Account

Question 8.
A note was issued by the buyer to the seller giving full details of goods returned.
Answer:
Debit Note

Question 9.
A note was issued by the seller on receipt of defective goods from the customer.
Answer:
Credit Note

Question 10.
Name the bank account on which overdraft facility is given to the Account holder.
Answer:
Current Account

3. Select the most appropriate answers from the alternatives given below and rewrite the sentences.

Question 1.
Cash column of Cash Book can never have ____________ balance.
(a) credit
(b) debit
(c) zero
(d) none of the above
Answer:
(a) credit

Question 2.
Any entry recorded on both sides of Cash Book is known as ____________ entry.
(a) opening
(b) rectifying
(c) transfer
(d) contra
Answer:
(d) contra

Question 3.
The source document for recording in Sales book is ____________
(a) Inward Invoice
(b) Outward Invoice
(c) Voucher
(d) Cash Memo
Answer:
(b) Outward Invoice

Question 4.
Credit purchase of Machinery is recorded in the ____________
(a) Purchase Book
(b) Cash Book
(c) Journal Proper
(d) Returns Outward Book
Answer:
(c) Journal Proper

Question 5.
Sub-division of journal is known as ____________ book.
(a) Subsidiary
(b) Purchase Return
(c) Purchase
(d) Journal Proper
Answer:
(a) Subsidiary

Question 6.
Additional cash introduced in business is recorded in ____________
(a) Purchase Book
(b) Cash Book
(c) Journal Proper
(d) Returns Inwards Book
Answer:
(b) Cash Book

Question 7.
Entry for bad debts is recorded in the ____________
(a) Sales Book
(b) Purchase Book
(c) Cash Book
(d) Journal Proper
Answer:
(d) Journal Proper

Question 8.
Direct deposit made by the customer into our bank is recorded in the ____________ side of the Cash Book.
(a) payments
(b) credit
(c) receipts
(d) both
Answer:
(c) receipts

Question 9.
The person who draws the cheque and signs on it is the ____________
(a) drawer
(b) drawee
(c) payee
(d) all of the above
Answer:
(a) drawer

Question 10.
A fixed amount is deposited for a fixed period in ____________ deposit account.
(a) Current
(b) Savings
(c) Fixed
(d) Recurring
Answer:
(c) Fixed

4. State whether the following statements are True or False with reasons:

Question 1.
Journal is a book of secondary entry.
Answer:
This statement is False.
Journal is a book of prime entry.

Question 2.
Assets sold on credit are entered in Sales Journal.
Answer:
This statement is False.
Assets sold on credit are entered in Journal Proper.

Question 3.
Cash and credit purchases are entered in Purchase Book.
Answer:
This statement is False.
Only credit purchases are entered in Purchase Book.

Question 4.
Cash sales are entered in Sales Journal.
Answer:
This statement is False.
Cash sales are entered in the cash book.

Question 5.
Cash Book records transactions relating to receipts and payments of cash.
Answer:
This statement is True.
Cashbook is prepared for cash transactions only. All incomes are receipts and they are recorded on the debit side of Cashbook. All expenses are payments recorded to the credit side.

5. Do you agree with the following statements.

Question 1.
Trade discount is recorded in Cash Book.
Answer:
Disagree

Question 2.
Petty Cash Book is a book with having a record of big payments.
Answer:
Disagree

Question 3.
Cash received is entered on the debit side of the Cash Book.
Answer:
Agree

Question 4.
Transactions recorded on both debit and credit side of Cash Book is known as Contra Entry.
Answer:
Agree

Question 5.
Credit purchase of machinery is entered in Purchase Journal.
Answer:
Disagree

6. Complete the following sentences:

Question 1.
Cash Book is a ____________ Journal.
Answer:
Subsidiary

Question 2.
In Journal Proper, only ____________ discount is recorded.
Answer:
Cash

Question 3.
Return of goods purchased on credit to the suppliers will be entered in ____________ Journal.
Answer:
Purchase return

Question 4.
Assets sold on credit are entered in ____________
Answer:
Journal proper

Question 5.
Double column Cash Book records transactions relating to cash and ____________
Answer:
Bank

Question 6.
Credit purchases of goods are recorded in ____________
Answer:
Purchase Book

Question 7.
Cash Book does not record the ____________ Transactions.
Answer:
Credit

Question 8.
Credit balance shown by a bank column in Cash Book is ____________
Answer:
Overdraft

Question 9.
Petty Cash Book is used for recording ____________ expenses.
Answer:
Petty

Question 10.
In Purchase Book goods purchased on ____________ are recorded.
Answer:
Credit

7. Correct the following sentences and rewrite them the same.

Question 1.
Cash purchases of goods are recorded in the Purchase book.
Answer:
Cash purchases of goods are recorded in Cashbook.

Question 2.
Cash Book records cash transactions as well as credit transactions.
Answer:
Cash Book records only cash transactions.

Question 3.
Small and large business records all transactions in subsidiary books.
Answer:
Large business records all transactions in subsidiary books.

Question 4.
The person who maintains the Petty Cash Book is called Chief Cashier.
Answer:
The person who maintains the Petty Cash Book is called Petty Cashier.

8. Calculate the following.

Question 1.
Cash purchases for ₹ 1,60,000 at 10% T.D. and 5% C.D. What is the amount of Net purchases?
Answer:
Gross Price = ₹ 1,60,000
Less: 10% T.D. = ₹ 16,000
Net Price = ₹ 1,44,000
Less: 5% C.D. = ₹ 7,200
Net Purchases = ₹ 1,36,800

Question 2.
Purchased goods from Harish for ₹ 12,000 @ 7% T.D. What is the amount of Trade discount?
Answer:
Trade Discount = Purchases Price × Percentage of T.D.
= 12,000 × \(\frac{7}{100}\)
= ₹ 840

Question 3.
Sold 50 Shirts at ₹ 300 per shirt and 40 Trousers at ₹ 600 each. What is the amount of sales?
Answer:
(1) 50 Shirts × ₹ 300 = ₹ 15,000
(2) 40 Trousers × ₹ 600 = ₹ 24,000
Total Sales = ₹ 39,000

Question 4.
Sold 30 Jackets at ₹ 500 per Jacket at 8% Trade discount, What is the amount of Trade discount?
Answer:
Sales Value = 30 Jackets × ₹ 500 = ₹ 15,000
Trade Discount = 15,000 × \(\frac{8}{100}\) = ₹ 1,200

9. Complete the following Table.

Question 1.

Answer:
2,000

Question 2.

Answer:
45,000

Question 3.

Answer:
1,84,000

Question 4.

Answer:
1,10,000

Question 5.

Answer:
8,000

Question 6.

Answer:
1,40,000

Question 7.

Answer:
1,10,000

Question 8.

Answer:
1,580

Question 9.

Answer:
1,650

Question 10.

Answer:
600

Practical Problems

Question 1.
Prepare a two-column Cash Book with the help of the following information for January 2018.

January 2018		Amt (₹)
01	Started business with cash	1,20,000
03	Cash paid into Bank of Baroda	50,000
05	Purchased goods from Sakshi on credit	20,000
06	Sold goods to Divakar and received a bearer cheque	20,000
10	Paid to Sakshi cash	20,000
14	Cheque received on December 06, 2018, deposited into Bank
18	Sold goods to Shivaji on credit	12,000
20	Cartage paid in cash	500
22	Received cash from Shivaji	12,000
27	Commission received	5,000
30	Drew cash for personal use	2,000

Solution:
In the books of ____________


Note: Transactions dated 5th and 18th are credit transactions, hence not to be recorded in the cash book.

Question 2.
Prepare a two-column Cash Book from the following transaction for the year July 2018.

July 2018		Amt (₹)
01	Cash in hand	17,500
01	Cash at Bank	5,000
03	Purchased goods for cash	3,000
05	Received cheque from Arun	10,000
08	Sold goods for cash	8,000
10	Arun’s cheque deposited into the bank	–
12	Purchased goods and paid by cheque	20,000
15	Paid establishment expenses through bank	1,000
18	Cash Sales	7,000
20	Deposited into bank	10,000
24	Paid General Expenses	500
27	Received commission by Cross cheque	6,000
29	Paid Rent	2,000
30	Withdrew cash for personal use	1,200
31	Wages paid	6,000

Solution:
In the books of ____________

Question 3.
Record the following transactions in the Cash Book of M/s Kamal Traders. Balance for the month of July 2018: Cash in hand ₹ 2,000 and balance in Bank Current account ₹ 8,000.

July 2018		Amt (₹)
03	Cash Sales	2,300
05	Purchased goods and amount paid by cheque	6,000
08	Cash Sales	10,000
12	Paid General Expenses	700
15	Sold goods and amount received by Cheque and deposited into Bank	20,000
18	Purchased Motor Car paid by Cheque	15,000
20	Cheque received from Mrunal deposited into Bank	10,000
22	Cash Sales	7,000
25	Mrunal’s cheque returned dishonoured
28	Paid Rent	2,000
29	Paid Telephone expenses by cheque	500
31	Cash is withdrawn from Bank for personal use	2,000

Prepare a two-column Cash Book.
Solution:
In the books of M/s Kamal Traders

Question 4.
Prepare Analytical Petty Cash Book from the following transactions in the books of Swarali General Stores, Kolhapur. The imprest amount is ₹ 1,500 received from the main cashier.

2018 January		Amt (₹)
01	Paid Cartage	50
02	Telephone Charges	40
02	Bus Fare	20
03	Postage	30
04	Refreshment to Employees	80
06	Courier Charges	30
08	Refreshment to Customers	50
10	Cartage	35
15	Taxi Fare to Manager	70
18	Purchased Stationery	65
20	Bus Fare	10
22	Xerox Charges	30
25	Internet Charges	35
27	Postage Stamps	200
29	Repair on Furniture	105
30	Cleaning Expenses	115
31	Miscellaneous Expenses	100

Solution:
Analytical Petty Cash Book of Swarali General Stores

Question 5.
From the following information prepare Columnar Petty Cash Book kept on imprest system in the books of Manisha Books Stall, Beed.

2018 April		Amt (₹)
01	Opening petty cash balance	200
02	Received a bearer cheque to make up the imprest amount	1,200
03	Gave a tip to peon	40
04	Purchased stationery	150
05	Paid Taxi Fare	35
06	Purchased Stamp pad	140
07	Paid Cartage	40
08	Paid Bus Fare	30
11	Paid to sweeper	50
13	Purchased a box of pencils	40
14	Paid Mobile charges	35
15	Gave it to Sohan on account	250
19	Paid for Refreshment to staff	150
20	Paid Railway Fare	30
21	Paid Carriage	65

Solution:
Analytical Petty Cash Book of Manish a Books Stall, Beed

Question 6.
Prepare proper Subsidiary Books and post them to the ledger from the following transactions for the month of February 2018.

2018 February		Amt (₹)
01	Goods sold to Virat	5,000
04	Purchased goods from Khushboo Traders	2,480
06	Sold goods to Shankar Traders	2,100
07	Virat returned goods	600
08	Returns goods to Khusboo Traders	280
10	Sold goods to Mahesh	3,300
14	Purchased from Kunti Traders	5,200
15	Furniture purchased from Arun	3,200
17	Bought goods from Kunti Traders	4,060
20	Return goods to Kunti Traders	200
22	Return goods from Mahesh	250
24	Purchased goods from Kirti less 10% T.D.	5,700
25	Sold goods to Shri Surya goods less 5% T.D.	6,600
26	Sold goods to Prakash Brothers	4,000
28	Return goods to Kirti less 10% T.D.	1,000
28	Prakash Brothers returned goods	500

Solution:
In the books of ____________
Purchase Book

Sales Book

Purchase Return Book

Sales Return Book

In the books of ____________

Question 7.
Enter the following transactions in the books of Vijay in Purchase Book, Sales Book, Purchase Returns Book and Sales Returns Book and Journal Proper for the month of August 2018.
2018 August
01 Purchased goods from Vikas Stores ₹ 18,000 at 5% Trade Discount
02 Sold goods of ₹ 9,000 to Prabhakar Traders
05 Veena sold goods of ₹ 16,000 to us at 5% Trade Discount as per our order dated 28th July, 2018.
08 Sent a Debit Note to Vikas Stores ₹ 1,600 (Gross) for goods returned.
10 Sold goods of ₹ 12,000 on credit to Shamal & Sons at 6% Trade Discount.
18 Received Credit Note from Veena ₹ 900 (Gross) for goods returned.
22 Sent Credit Note to Prabhakar Traders for ₹ 1,500 for goods returned. Received Dedit note from Shamal & Sons for ₹ 1,200 (Net) for goods returned.
23 Purchased goods of ₹ 16,600 from Priya Stores and paid for Carriage ₹ 150.
25 Purchased goods from Sadhana Stores ₹ 12,000 and sold the same to Aradhana Stores at a profit of 20% on cost.
28 Aradhana Stores returned goods of ₹ 2,400 as they were defective and the same were returned to Sadhana Stores.
31 Purchased Furniture for office use ₹ 30,000 from Art Furniture Works on credit.
Solution:
In the books of Vijay
Purchase Book

Sales Book

Purchase Return Book

Sales Return Book

Journal Proper

Question 8.
Mr. Akash gives you the following information and asks you to prepare Purchase Book, Sales Book, Purchase Returns Book and Sales Return Book for the month of January 2018.
2018 January
01 Purchased goods on credit from Dhanal Traders for ₹ 15,000 and sold the same to Kunal Traders at a profit of 25% on cost.
05 Placed an order with Sunetra for goods of ₹ 10,000 less 5% Trade discount.
08 Purchased goods of ₹ 20,000 at 10% Trade Discount from Saurabha Traders.
13 Sold goods to Vinayak Stores ₹ 8,000 at 5% Trade Discount.
15 Vinayak Stores returned goods to us ₹ 200.
18 Sunetra executed our order placed on 5th Jan. 2018.
20 Sold goods to Vishnu Traders ₹ 21,000 less 5% Trade Discount.
22 Returned goods to Sunetra ₹ 1,000 (Gross).
28 Kunal Traders returned goods to us ₹ 500
30 Returned goods to Sourabh Traders ₹ 1,500.
Solution:
In the books of Mr. Akash
Purchase Book

Sales Book

Purchase Return Book

Sales Return Book

Question 9.
Enter the following transactions in the Subsidiary Book of Kamal Traders.
2018 April
01 Bought from Suhas goods of ₹ 12,000 as per his Invoice No. 41.
04 Purchased from Virat goods of ₹ 11,870 less 10% Trade Discount vide Bill No. 12.
07 Bought from Kuldip goods of ₹ 11,000 less 25% Trade Discount vide Bill No. 12.
08 Bought from M/s. Art Furniture Works, Furniture for ₹ 13,000 vide Invoice No. 84.
12 Sold to Dhiraj goods of ₹ 11,500 vide Sales Invoice No. 27
13 Sold to Raja goods of ₹ 12,780 less 5% Trade Discount, vide invoice No. 88
21 Sold to Suresh goods of ₹ 8,000 less 20% Trade Discount
23 Dhiraj returned goods of ₹ 500 vide our Credit note No. 14
26 Suresh returned goods of ₹ 150 (gross) vide our Credit Note No. 115
28 Returned to Suhas goods ₹ 1,200 vide our Debit Note No. 09
30 Returned to Virat goods of ₹ 1,300 (Gross) vide our Debit Note No. 10.
30 Returned to Kuldip goods of ₹ 1,100 (Gross) vide our Debit Note No. 11.
Solution:
In the books of Kamal Traders
Purchase Book

Sales Book

Purchase Return Book

Sales Return Book

Journal Proper

Question 10.
Enter the following transactions in the Subsidiary Books of Navyug Traders:
2018 March
01 Sold to Bharat Patil goods ₹ 10,000 at 10% Trade discount.
04 Purchased from Naresh goods of ₹ 11,000 less 10% Trade discount.
06 Purchased Furniture from M/s. Sham Furniture Works, of ₹ 15,000 for office use.
07 Bharat Patil returned 20% of the goods bought by him on 1st March above and we gave him fresh goods in exchange.
08 Sold to Sundar goods of ₹ 13,000 less 15% Trade Discount.
10 Sold to Sumit Computer for ₹ 23,800 with a book value of ₹ 24,000.
12 Placed an order with Sajan for goods of ₹ 12,000.
17 Purchased from Naresh goods of ₹ 14,000 and sold them to Kamesh for ₹ 16,000.
19 Kamesh returned us goods of ₹ 1,600 and immediately returned the same to Naresh.
23 Sold to Rakesh for ₹ 4,500 old Furniture with a book value of ₹ 4,800.
26 Returned to M/s. Sham Furniture Works, office Furniture of ₹ 4,500.
28 Sajan executed our order dated 12th March, 2018.
Solution:
In the books of Navyug Traders
Purchase Book

Sales Book

Purchase Return Book

Sales Return Book

Journal Proper

Class 11 Commerce BK Textbook Solutions Digest

• 11th Bk Chapter 1 Practical Problems
• 11th Bk Chapter 2 Practical Problems
• 11th Bk Chapter 3 Practical Problems
• 11th Bk Chapter 4 Practical Problems
• 11th Bk Chapter 5 Practical Problems
• 11th Bk Chapter 6 Practical Problems
• 11th Bk Chapter 7 Practical Problems
• 11th Bk Chapter 8 Practical Problems
• 11th Bk Chapter 9 Practical Problems
• 11th Bk Chapter 10 Practical Problems

Reconstitution of Partnership (Death of Partner) 12th BK Commerce Chapter 5 Solutions Maharashtra Board

Balbharti Maharashtra State Board 12th Commerce Book Keeping & Accountancy Solutions Chapter 5 Reconstitution of Partnership (Death of Partner) Textbook Exercise Questions and Answers.

Class 12 Commerce BK Chapter 5 Exercise Solutions

1. Objective questions:

A. Select the most appropriate answer from the alternative given below and rewrite the sentences.

Question 1.
Benefit Ratio is the ratio in which _______________
(a) The old partner gain on the admission of a new partner
(b) The Goodwill of a new partner on admission is credited to old partners
(c) The continuing partners’ benefits on retirement or death of a partner
(d) All partners are benefitted.
Answer:
(c) The continuing partner’s benefits on retirement or death of a partner

Question 2.
The ratio by which existing partners are benefitted _______________
(a) gain ratio
(b) sacrifice ratio
(c) profit ratio
(d) capital ratio
Answer:
(a) gain ratio

Question 3.
Profit and Loss Suspense Account is shown in the new Balance Sheet on _______________ side.
(a) debit
(b) credit
(c) asset
(d) liabilities
Answer:
(c) asset

Question 4.
Death is a compulsory _______________
(a) Dissolution
(b) Admission
(c) Retirement
(d) Winding up
Answer:
(c) Retirement

Question 5.
The balance on the Capital Account of a partners, on his death is transferred to _______________ Account.
(a) Relatives
(b) Legal Heir’s Loan/Executors Loan
(c) Partners’ Capital
(d) Partners’ Loan
Answer:
(b) Legal Heir’s Loan/Executors Loan.

B. Write a word, term, phrase, which can substitute each of the following statements.

Question 1.
Excess of credit side over the debit side of Profit and Loss Adjustment Account.
Answer:
Profit

Question 2.
A person who represents the deceased partner on the death of the partner.
Answer:
Legal Heir’s or Executor

Question 3.
Accumulated past profit kept in the form of reserve.
Answer:
Reserve fund or General reserve

Question 4.
The partner who died.
Answer:
Deceased partner

Question 5.
The proportion in which the continuing partners benefit due to the death of a partner.
Answer:
Gain/Benefit ratio

C. State whether the following statements are True or False with reasons.

Question 1.
A deceased partner is not entitled to the Goodwill of the firm.
Answer:
This statement is False.
A deceased partner’s contribution was there in the development of business and goodwill is the value of the business in terms of money. Hence, a deceased partner is entitled to receive goodwill from the firm.

Question 2.
A deceased partner is entitled to his share of General Reserve.
Answer:
This statement is True.
General reserve is created out of past undistributed profit. Past profit is earned due to the efforts and hard work of all the partners including the partner who is now dead. Hence a deceased partner has right on it and therefore a deceased partner is entitled to receive his share of General reserve.

Question 3.
If goodwill is written off, a Deceased Partner’s Capital Account is debited.
Answer:
This statement is False.
When the benefits of goodwill are given to the deceased partner, his capital account is credited and when such goodwill is written off, capital accounts of remaining partners are debited.

Question 4.
After the death of a partner, the entire amount due to the deceased partner is paid to the legal representative of the deceased partner.
Answer:
This statement is True.
After the death of a partner, the entire amount due to the deceased partner is paid to the legal representative of the deceased partner as he is the only person who has the legal right to that amount.

Question 5.
For recording the profit or loss up to the death, the Profit and Loss Appropriation Account is operated.
Answer:
This statement is False.
For recording the profit or loss up to the death, the Profit and Loss suspense Account is created and operated. This is because final accounts cannot be prepared on the date of death of a partner. Till that period a separate account called Profit and Loss Suspense A/c is prepared.

D. Fill in the blanks and rewrite the following sentence.

Question 1.
Deceased Partners’ Executors Account is shown on the _______________ side of the Balance Sheet.
Answer:
Liabilities

Question 2.
On the death of a partner, a ratio in which the continuing partners get more share of profits in future is called as _______________ Ratio.
Answer:
Gain

Question 3.
Deceased partners share of profit up to the death is shown on _______________ side of Balance Sheet.
Answer:
Assets

Question 4.
Benefit Ratio = New Ratio – _______________
Answer:
Old Ratio

Question 5.
When Goodwill is raised at its full value and it is written off _______________ Account is to be credited.
Answer:
Goodwill

E. Answer in one sentence only.

Question 1.
What is Gain Ratio?
Answer:
The profit-sharing ratio which is acquired by the surviving or continuing partners on account of the death of any partner is called gain ratio or benefit ratio.

Question 2.
In which ratio general reserve is distributed on the death of a partner?
Answer:
General reserve is distributed on the death of a partner in their old profit sharing ratio.

Question 3.
To whom do you distribute general reserve on the death of a partner?
Answer:
On the death of a partner general reserve is distributed among all partners in their old profit and loss ratio.

Question 4.
How the death of a partner is a compulsory retirement?
Answer:
After the death of a partner, the business is not able to get any kind of services from the deceased partner and so we can say that the death of a partner is like a compulsory retirement.

Question 5.
To which account profit is to be transferred up to the date of his death?
Answer:
Profit of the deceased partner, up to the date of his death, is transferred to his Legal Heir’s/Executor’s Account.

Practical Problems

Question 1.
Rajesh, Rakesh, and Mahesh were equal Partners on 31st March 2019. Their Balance Sheet was as follows 31st March 2019.
Balance Sheet as of 31st March 2019

Mr. Rajesh died on 30th June 2019 and the following adjustment was agreed as:
1. Furniture was to be adjusted to its market price of ₹ 3,40,000.
2. Land and Building were to be depreciated by 10%.
3. Provide R.D.D. @ 5% on debtors.
4. The profit up to the date of death of Mr. Rajesh is to be calculated on the basis of last year’s profit which was ₹ 1,80,000.
Prepare:
1. Profit and Loss Adjustment A/c
2. Partners’ Capital Account
3. Balance Sheet of the continuing firm.
Solution:
In the books of the Partnership Firm


Balance Sheet as of 1st July 2019

Working Note:
The profit of the firm of last year was ₹ 1,80,000.
Proportionate profit up to the date of death for Rajesh is as follows
= 1,80,000 × \(\frac{3}{12} \times \frac{1}{3}\) (Period) (P & L ratio)
= ₹ 15,000 (Profit and Loss Suspense A/c)

Question 2.
Rahul, Rohit, and Ramesh are in a business sharing profits and losses in the ratio of 3 : 2 : 1 respectively. Their Balance Sheet as of 31st March, 2017 was as follows:
Balance Sheet as of 31st March 2017

On 1st October 2017, Ramesh died and the Partnership deed provided that
1. R.D.D. was maintained at 5% on Debtors.
2. Plant and Machinery and Investment were valued at ₹ 80,000 and ₹ 4,10,000 respectively.
3. Of the creditors an item of ₹ 6,000 was no longer a liability and hence was properly adjusted.
4. Profit for 2017-18 was estimated at ₹ 1,20,000 and Ramesh’s share in it up to the date of his death was given to him.
5. Goodwill of the firm was valued at two times the average profit of the last five years, which were
2012-13 – ₹ 1,80,000
2013-14 – ₹ 2,00,000
2014-15 – ₹ 2,50,000
2015-16 – ₹ 1,50,000
2016-17 – ₹ 1,20,000
Ramesh’s share in it was to be given to him.
6. Salary ₹ 5,000 p.m. was payable to him.
7. Interest on capital at 5% i.e. was payable and on Drawings ₹ 2,000 were charged.
8. Drawings made by Ramesh up to September 2017 were ₹ 5,000 p.m.
Prepare Ramesh’s Capital A/c showing the amount payable to his executors.
Give working of Profit and Goodwill.
Ramesh Capital Balance ₹ 3,41,000
Solution:
In the books of the Partnership Firm

Working Notes:
1. Calculation of share of Goodwill:
(a) Average profit = \(\frac{Total Profit}{No. of years}\)
= \(\frac{1,80,000+2,00,000+2,50,000+1,50,000+1,20,000}{5}\)
= \(\frac{9,00,000}{5}\)
= ₹ 1,80,000

(b) Goodwill = Average profit × No. of years
= 1,80.000 × 2
= ₹ 3,60,000

(c) Share of Goodwill to Ramesh = Goodwill of the firm × Ramesh’s share
= 3,60,000 × \(\frac{1}{6}\)
= ₹ 60,000

2. Calculation of share of profit due to Ramesh:
Share of profit = Last year profit × Share of profit × Period
= 1,20,000 × \(\frac{1}{6} \times \frac{6}{12}\)
= ₹ 10,000 (Profit and Loss Suspense A/c)

3. Interest on Capital is calculated for six months.
∴ Interest = 2,40,000 × \(\frac{6}{12} \times \frac{5}{100}\) = ₹ 6,000

4.

Question 3.
Ram, Madhav, and Keshav are partners sharing profit and losses in the ratio 5 : 3 : 2 respectively. Their Balance Sheet as of 31st March, 2018 was as follows:
Balance Sheet as of 31st March 2018

Keshav died on 31st July 2018 and the following adjustments were agreed by as per the partnership deed.
1. Creditors have increased by ₹ 10,000.
2. Goodwill is to be calculated at 2 years purchase of average profits of 5 years.
3. The profits of the preceding 5 years was
2013-14 – ₹ 90,000
2014-15 – ₹ 1,00,000
2015-16 – ₹ 60,000
2016-17 – ₹ 50,000
2017-18 – ₹ 50,000 (Loss)
Keshav’s share in it was to be given to him.
4. Loose Tools and livestock were valued at ₹ 80,000 and ₹ 1,20,000 respectively.
5. R.D.D. was maintained at ₹ 10,000.
6. Commission ₹ 2,000 p.m. was payable to Keshav. Profit for 2018-19 was estimated at ₹ 45,000 and Keshav’s share in it up to the date of his death was given to him.
Prepare Revaluation A/c, Keshav’s Capital A/c showing the amount payable to his executors.
Solution:
In the books of the Partnership Firm

Working Notes:
1. Calculation of share of Goodwill:
(a) Average profit = \(\frac{\text { Total profit }}{\text { No. of years }}\)
= \(\frac{90,000+1,00,000+60,000+50,000-50,000}{5}\)
= \(\frac{2,50,000}{5}\)
= ₹ 50,000

(b) Goodwill = Average profit × No. of years
= 50,000 × 2
= ₹ 1,00,000

(c) Share of Goodwill to Keshav = Goodwill of the firm × Keshav’s share
= 1,00,000 × \(\frac{2}{10}\)
= ₹ 20,000

2. Calculation of share of profit due to Keshav
Share of profit = Last year profit × Share of Keshav × Period
= 45,000 × \(\frac{2}{10} \times \frac{4}{12}\)
= ₹ 3,000 (Profit and Loss Suspense Account)

Question 4.
Virendra, Devendra, and Narendra were partners sharing profit and losses in the ratio of 3 : 2 : 1. Their Balance Sheet as of 31st March 2019 was as follows.
Balance Sheet as of 31st March 2019

Mr. Virendra died on 31st August 2019 and the partnership deed provided that the event of the death of Mr. Virendra his executors be entitled to be paid out.
1. The capital to his credit at the date of death.
2. His proportion of Reserve at the date of last Balance Sheet.
3. His proportion of Profits to date of death is based on the average profits of the last four years.
4. His share of Goodwill should be calculated at two years purchase of the profits of the last four years for the year ended 31st March were as follows:
2016 – ₹ 40,000
2017 – ₹ 60,000
2018 – ₹ 70,000
2019 – ₹ 30,000
5. Mr. Virendra has drawn ₹ 3,000 p.m. to date of death, There is no increase and decrease in the value of assets and liabilities.
Prepare Mr. Virendra Executors A/c.
Solution:
In the books of the Partnership Firm

Working Notes:
1. Calculation of share of profit:
(a) Average Profit = \(\frac{\text { Total profit }}{\text { No. of years }}\)
= \(\frac{40,000+60,000+70,000+30,000}{4}\)
= \(\frac{2,00,000}{4}\)
= ₹ 50,000

(b) Goodwill = Average profit × No. of years
= 50,000 × 2
= ₹ 1,00,000

(c) Share of Goodwill to Virendra = Goodwill of the firm × Virendra’s share
= 1,00,000 × \(\frac{3}{6}\)
= ₹ 50,000

2. Share of profit due to Virendra
Share of profit = Last year profit × Share of Virendra × Period
= 50,000 × \(\frac{3}{6} \times \frac{5}{12}\)
= ₹ 10,417 (Profit and Loss Suspense A/c)

Question 5.
The Balance Sheet of Sohan, Rohan, and Mohan who were sharing profits and losses in the ratio of 3 : 2 : 1 is as follows:
Balance Sheet as of 31st March 2019

Mr. Rohan died on 1st October 2019 and the following adjustments were made:
1. Goodwill of the firm is valued at ₹ 30,000.
2. Land and Building and Machinery were found to be undervalued by 20%.
3. Investments are valued at ₹ 60,000.
4. Stock to be undervalued by ₹ 5,000 and a provision of 10% as debtors were required.
5. Patents were valueless.
6. Mr. Rohan was entitled to share in profits up to the date of death and it was decided that he may be allowed to retain his drawings as his share of profit. Rohan’s drawings till the date of death were ₹ 25,000.
Prepare Partners’ Capital Accounts.
Solution:
In the books of the Partnership firm

Working Notes:
1.

2. Firm’s goodwill = ₹ 30,000.
DistrIbute among partners in their profit and loss ratio 3 : 2 : 1.

3. Revised value of Land & Building = \(\frac{\text { Book value }}{(100-20)} \times 100\)
= \(\frac{40,000}{80} \times 100\)
= ₹ 50,000.
∴ Increase In the value of Land & Building = Revised value – Book value
= 50,000 – 40,000
= ₹ 10,000.

4. Revised value of Machinery = \(\frac{\text { Book value }}{(100-20)} \times 100\)
= \(\frac{80,000}{80} \times 100\)
= ₹ 1 ,00,000.
∴ Increase in the value of Machinery = 1,00,000 – 80,000 = ₹ 20,000.

5. Patents were valueless means it is a loss for the business.

6. Rohan’s share In profit is ₹ 25,000 and his drawings are ₹ 25,000. Rohan is allowed to retain his drawings as his share of profit. Means write ₹ 25,000 as drawings on the debit side and write ₹ 25,000 as Profit and Loss Suspense A/c on the Credit side of Partners’ Capital A/c.

Class 12 Commerce BK Textbook Solutions Digest

• 12th Bk Chapter 1 Practical Problems
• 12th Bk Chapter 2 Practical Problems
• 12th Bk Chapter 3 Practical Problems
• 12th Bk Chapter 4 Practical Problems
• 12th Bk Chapter 5 Practical Problems
• 12th Bk Chapter 6 Practical Problems
• 12th Bk Chapter 7 Practical Problems
• 12th Bk Chapter 8 Practical Problems
• 12th Bk Chapter 9 Practical Problems
• 12th Bk Chapter 10 Practical Problems

Analysis of Financial Statements 12th BK Commerce Chapter 9 Solutions Maharashtra Board

Balbharti Maharashtra State Board 12th Commerce Book Keeping & Accountancy Solutions Chapter 9 Analysis of Financial Statements Textbook Exercise Questions and Answers.

Class 12 Commerce BK Chapter 9 Exercise Solutions

Objective Questions

A. Select the most appropriate alternative from those given below and rewrite the sentences:

Question 1.
Gross Profit Ratio indicates the relationship of gross profit to the ____________
(a) Net cash
(b) Net sales
(c) Net purchases
(d) Gross sales
Answer:
(b) Net sales

Question 2.
Current ratio = \(\frac{……………….}{Current liabilities}\)
(a) Quick assets
(b) Quick liabilities
(c) Current assets
(d) None of these
Answer:
(c) Current assets

Question 3.
Liquid assets = ____________
(a) Current assets + Stock
(b) Current assets – Stock
(c) Current assets – Stock + Prepaid Expenses
(d) None of these
Answer:
(b) Current assets – Stock

Question 4.
Cost of goods sold = ____________
(a) Sales – Gross profit
(b) Sales – Net profit
(c) Sales proceeds
(d) None of these
Answer:
(a) Sales – Gross profit

Question 5.
Net profit ratio is equal to ____________
(a) Operating ratio
(b) Operating net profit ratio
(c) Gross profit ratio
(d) Current ratio
Answer:
(a) Operating ratio

Question 6.
The common size statement requires ____________
(a) common base
(b) journal entries
(c) cashflow
(d) current ratio
Answer:
(a) common base

Question 7.
Bill payable is ____________
(a) long-term loan
(b) current liabilities
(c) liquid assets
(d) net loss
Answer:
(b) current liabilities

Question 8.
Generally current ratio should be ____________
(a) 2 : 1
(b) 1 : 1
(c) 1 : 2
(d) 3 : 1
Answer:
(a) 2 : 1

Question 9.
From financial statement analysis the creditors are specially interested to know ____________
(a) Liquidity
(b) Profits
(c) Sale
(d) Share capital
Answer:
(a) Liquidity

B. Give one word/term/phrase for each of the following statements.

Question 1.
The statement showing the profitability of two different periods.
Answer:
Comparative Income Statement

Question 2.
The ratio measures the relationship between gross profit and net sales.
Answer:
Gross Profit Ratio

Question 3.
Critical evaluation of financial statement to measure profitability.
Answer:
Analysis of Financial Statement

Question 4.
A particular mathematical number showing the relationship between two accounting figures.
Answer:
Ratio

Question 5.
An asset that can be converted into cash immediately.
Answer:
Liquid Asset

Question 6.
The ratio measuring the relationship between net profit and ownership capital employed.
Answer:
ROCE

Question 7.
The statement showing financial position for different periods of the previous year and the current year.
Answer:
Comparative Balance Sheet

Question 8.
Statement showing changes in cash and cash equivalent during a particular period.
Answer:
Cash Flow Statement

Question 9.
Activity related to the acquisition of long-term assets and investment.
Answer:
Financing Activities

Question 10.
The ratio that establishes a relationship between Quick Assets and Current Liabilities.
Answer:
Liquid Ratio

C. State true or false with reasons.

Question 1.
Financial statements include only the Balance Sheet.
Answer:
This statement is False.
Financial statements include Balance Sheet and Profit and Loss A/c. This is because financial statements are prepared by business organisations to find out the efficiency, solvency, profitability, growth, strength, and status of the business. For this, they need information from the balance sheet as well as from Profit and Loss A/c.

Question 2.
Analysis of financial statements is a tool but not a remedy.
Answer:
This statement is True.
Based on analysis of the financial statement one can get an idea of the financial strength and weakness of the business. However, based on this one cannot take decisions about the business on various issues. Hence analysis of financial statements is a tool but not a remedy.

Question 3.
Purchase of fixed assets is operating cash flow.
Answer:
This statement is False.
Purchase of fixed assets is cash flow from investing activities. It is not a day-to-day operations activity like office/selling/distribution finance expenses/activities.

Question 4.
Dividend paid is not a source of funds.
Answer:
This statement is True.
The dividend is always paid on shares issued by a company as an expense. Shares itself is a source of funds. In payment of dividends, cash goes out from the company. It is an outflow of cash and not a source of funds.

Question 5.
Gross profit depends upon net sales.
Answer:
This statement is True.
The gross profit ratio discloses the relation between gross profit and total net sales. The gross profit ratio is an income-based ratio, where gross profit is an income. There is a direct relation between net sales and gross profit. Higher the net sales higher the gross profit.

Question 6.
Payment of cash against the purchase of stock is the use of funds.
Answer:
This statement is True.
Cash payment for the purchase of stock is made from cash balance or/and from bank balance which is a part of the business fund. When stock or materials we purchase we use cash for payment.

Question 7.
Ratio Analysis is useful for inter-firm comparison.
Answer:
This statement is True.
The comparison of the operating performance of a business entity with the other business entities is known as an inter-firm comparison. This ratio analysis assists to know-how and to what extent a business entity is strong or weak as compared to other business entities.

Question 8.
The short-term deposits are considered as cash equivalent.
Answer:
This statement is True.
The short-term deposits are liquid assets. It means deposits are kept for some period (usually less than one year) and they are kept with an intention to get money quickly as and when required.
They are as good as cash and considered as cash equivalent.

Question 9.
Activity ratios and Turnover ratios are the same.
Answer:
This statement is True.
Turnover ratio is an efficiency ratio to check how efficiently a company is using different assets to extract earnings from them.
Activity ratios are financial analysis tools used to measure a business’s ability to convert its assets into cash. From both these definitions, we can say that Activity ratios and Turnover ratios are the same.

Question 10.
The current ratio measures the liquidity of the business.
Answer:
This statement is True.
The current ratio shows the relationship between current assets and current liabilities. If the proportion of current assets is higher than current liabilities, the liquidity position of the business entity is considered good. More liquidity means more short-term solvency. From the above, it is proved that the current ratio measures the liquidity of the business.

Question 11.
Ratio analysis measures profitability efficiency and financial soundness of the business.
Answer:
This statement is True.
With the help of profitability ratios (Gross profit, Net profit, and Operating profit) one can get the idea of profitability efficiency of the firm, and with the help of liquidity ratios (Current ratio and liquid ratio) one can get the idea of solvency or financial soundness of the business.

Question 12.
Usually, the current ratio should be 3 : 1.
Answer:
This statement is False.
Usually, the current ratio should be 2 : 1. It means current assets are double of current liabilities. It shows the short-term solvency of business enterprises.

D. Answer in one sentence only.

Question 1.
Mention two objectives of the comparative statement.
Answer:
Objectives of comparative statements are:

• Compare financial data at two points of time and
• Helps in deriving the meaning and conclusions regarding the changes in financial positions and operating results.

Question 2.
State three examples of cash inflows.
Answer:
Examples of cash inflows are:

• Interest received
• Dividend received
• Sale of asset/investment
• Rent received.

Question 3.
State three examples of cash-out flows.
Answer:
Examples of cash outflows are:

• Interest paid
• Loss on sale of an asset
• Dividend paid
• Repayment of short-term borrowings.

Question 4.
Give the formula of Gross Profit Ratio.
Answer:
Gross profit ratio = \(\frac{\text { Gross profit }}{\text { Net sales }} \times 100\)
Where Gross profit = Net sales – Cost of goods sold.
Cost of goods sold = Opening stock + Purchase – Purchase return + Direct expense – Closing stock
Net sales = Sales – Sales return.

Question 5.
Give the formula of Gross profit.
Answer:
Gross profit = Net sales – Cost of goods sold.
Cost of goods sold = Opening stock + Purchase – Purchase return + Direct expense – Closing stock
Net sales = Sales – Sales return.

Question 6.
Give any three examples of current assets.
Answer:
Cash or cash equivalent short-term lending and advances, expenses paid in advance, taxes paid in advance, etc. are examples of current assets.

Question 7.
Give the formula of the current ratio.
Answer:
Current ratio = \(\frac{\text { Current assets }}{\text { Current liabilities }}\)

Question 8.
Give the formula of quick assets.
Answer:
Quick assets = Current assets – (Stock + Prepaid expense)

Question 9.
State the formula of Cost of goods sold.
Answer:
Cost of goods sold = Opening stock + Purchase – Purchase return + Direct expense – Closing stock

Question 10.
State the formula of Average stock.
Answer:
Average stock = \(\frac{\text { Opentng stock of goods }+\text { Closing stock of goods }}{2}\)

Practical Problems

Question 1.
From the Balance Sheet of Amar Traders as of 31st March 2018 and 31st March 2019 prepare a Comparative Balance Sheet.

Solution:
Comparative Balance Sheet of Amar Traders as of 31st March 2018 and 31st March 2019


Percentage change = \(\frac{\text { Amount of absolute change }}{\text { Amount of previous year }} \times 100\)

Question 2.
From the Balance Sheet of Alpha Limited prepare a Comparative Balance Sheet as of 31st March 2018 and 31st March 2019:
Balance Sheet as of 31st March 2018 and 31st March 2019

Solution:
Comparative Balance Sheet of Alpha Limited as of 31st March 2018 and 31st March 2019

Question 3.
Prepare Comparative Balance Sheet for the year ended 31-3-18 and 31-3-19. Assets & Liabilities as follows:

Solution:
Comparative Balance Sheet as of 31st March 2018 and 31st March 2019

Question 4.
Prepare Comparative Balance Sheet for the year ended 31-3-17 and 31-3-18.

Solution:
Comparative Balance Sheet as of 31st March 2017 and 31st March 2018

Question 5.
Prepare Comparative Income statement of Noha Limited for the year ended 31-3-17 and 31-3-18.

Solution:
Comparative Income Statement of Noha Limited
For the year ended 31st March 2017 and 31st March 2018

Question 6.
Prepare Comparative Income Statement of Sourabh Limited for years ended 31-3-17 and 31-3-18.

Solution:
Comparative Income Statement of Sourabh Limited
For the year ended on 31st March 2017 and 31st March 2018

Question 7.
Following is the Balance Sheet of Sakshi Traders for the year ended 31-3-17 and 31-3-18

Prepare Common Size Balance Sheet for the years 31-03-17 and 31-03-18.
Solution:
Common Size Statement of Balance Sheet of Sakshi Traders as of 31st March 2017 and 31st March 2018

Note: Taking Total borrowed funds and Tota Funds applied as a base (100), Calculation is done.

Question 8.
Prepare Common Size Income Statement for the year ended 31-3-17 and 31-3-18.

Solution:
Common Size Statement for the year ended on 31st March 2017 and 31st March 2018

Note: Taking the amount of sales as base (100) other percentage figures are calculated.

Question 9.
Following is the Balance Sheet of Sakshi Limited. Prepare Cash Flow Statement:

Solution:
Cash Flow Statement
For the year ended 31st March 2017 and 31st March 2018

Question 10.
From the following Balance Sheet of Konal Traders prepare a Cash Flow Statement.

Solution:
Cash Flow Statement
For the year ended on 31st March 2017 and 31st March 2018

Question 11.
A company had following Current Assets and Current Liabilities:
Debtors = ₹ 1,20,000
Creditors = ₹ 60,000
Bills Payable = ₹ 40,000
Stock = ₹ 60,000
Loose Tools = ₹ 20,000
Bank Overdraft = ₹ 20,000
Calculate Current ratio.
Solution:
1. Current Assets = Debtors + Stock + Loose Tools
= 1,20,000 + 60,000 + 20,000
= ₹ 2,00,000

2. Current liabilities = Creditors + Bills payable + Bank overdraft
= 60,000 + 40,000 + 20,000
= ₹ 1,20,000

3. Current ratio = \(\frac{\text { Current assets }}{\text { Current liabilities }}\)
= \(\frac{2,00,000}{1,20,000}\)
= \(\frac{5}{3}\)
= 5 : 3

Question 12.
Current assets of company ₹ 6,00,000 and its Current ratio is 2 : 1. Find Current liabilities.
Solution:
Current ratio = \(\frac{\text { Current assets }}{\text { Current liabilities }}\)
\(\frac{2}{1}=\frac{6,00,000}{\text { Current liabilities }}\)
2 × Current liabilities = 6,00,000 × 1
Current liabilities = \(\frac{6,00,000}{2}\) = ₹ 3,00,000

Question 13.
Current liabilities = ₹ 3,00,000
Working capital = ₹ 8,00,000
Inventory = ₹ 2,00,000
Calculate Quick ratio.
Solution:
Current assets = Current liabilities + Working capital
= 3,00,000 + 8,00,000
= ₹ 11,00,000
Quick assets = Current assets – Inventory
= 11,00,000 – 2,00,000
= ₹ 9,00,000
Quick liability = Current liabilities – Bank O/D = ₹ 3,00,000
Quick ratio = \(\frac{\text { Quick assets }}{\text { Quick liabilities }}\)
= \(\frac{9,00,000}{3,00,000}\)
= \(\frac{3}{1}\)
= 3 : 1

Question 14.
Calculate Gross Profit ratio
Sales = ₹ 2,70,000
Net purchases = ₹ 1,50,000
Sales Ratio = ₹ 20,000
Closing Stock = ₹ 25,000
Operating Stock = ₹ 45,000
Solution:
Net sales = Sales – Sales return
= 2,70,000 – 20,000
= ₹ 2,50,000
Cost of goods sold = Opening stock + Net purchase – Closing stock
= 45,000 + 1,50,000 – 25,000
= ₹ 1,70,000
Gross profit = Net sales – Cost of goods sold
= 2,50,000 – 1,70,000
= ₹ 80,000
Gross Profit ratio = \(\frac{\text { Gross profit }}{\text { Net sales }} \times 100\)
= \(\frac{80,000}{2,50,000} \times 100\)
Gross profit ratio = 32%

Question 15.
Calculate Net Profit ratio from the following:
Sales = ₹ 3,80,000
Cost of goods sold = ₹ 2,60,000
Indirect expense = ₹ 60,000
Solution:
Sales = ₹ 3,80,000
Less: Cost of goods sold = ₹ 2,60,000
Gross profit = ₹ 1,20,000
Less: Indirect expense = ₹ 60,000
Net profit = ₹ 60,000
Net profit ratio = \(\frac{\text { Net profit }}{\text { Sales }} \times 100\)
= \(\frac{60,000}{3,80,000} \times 100\)
= 15.79%

Question 16.
Calculate Operating ratio:
Cost of goods sold = ₹ 3,50,000
Operating expense = ₹ 30,000
Sales = ₹ 5,00,000
Sales return = ₹ 30,000
Solution:
Net sales = Sales – Sales return
= 5,00,000 – 30,000
= ₹ 4,70,000
Operating ratio = \(\frac{\text { Cost of goods sold }+\text { Operating expense }}{\text { Net sales }} \times 100\)
= \(\frac{3,50,000+30,000}{4,70,000} \times 100\)
= \(\frac{3,80,000}{4,70,000} \times 100\)
= 80.85%

Question 17.
Calculate Current ratio.
1. Current assets = ₹ 3,00,000
2. Current liabilities = ₹ 1,00,000
Solution:
Current ratio = \(\frac{\text { Current assets }}{\text { Current liabilities }}\)
= \(\frac{3,00,000}{1,00,000}\)
= \(\frac{3}{1}\)
= 3 : 1

Class 12 Commerce BK Textbook Solutions Digest

• 12th Bk Chapter 1 Practical Problems
• 12th Bk Chapter 2 Practical Problems
• 12th Bk Chapter 3 Practical Problems
• 12th Bk Chapter 4 Practical Problems
• 12th Bk Chapter 5 Practical Problems
• 12th Bk Chapter 6 Practical Problems
• 12th Bk Chapter 7 Practical Problems
• 12th Bk Chapter 8 Practical Problems
• 12th Bk Chapter 9 Practical Problems
• 12th Bk Chapter 10 Practical Problems

Accounts of ‘Not for Profit’ Concerns 12th BK Commerce Chapter 2 Solutions Maharashtra Board

Balbharti Maharashtra State Board 12th Commerce Book Keeping & Accountancy Solutions Chapter 2 Accounts of ‘Not for Profit’ Concerns Textbook Exercise Questions and Answers.

Class 12 Commerce BK Chapter 2 Exercise Solutions

1. Objective Type Questions:

A. Select the most appropriate alternatives from the following and rewrite the sentences:

Question 1.
Not for Profit concern renders ___________ services to public at large.
(a) commercial
(b) social
(c) individual
(d) group
Answer:
(b) social

Question 2.
Donation for Scholarship Fund is ___________
(a) Capital Receipt
(b) Revenue Receipt
(c) Capital Expenditure
(d) Revenue Expenditure
Answer:
(a) Capital Receipt

Question 3.
Income and Expenditure Account is a ___________ Account.
(a) Capital
(b) Real
(c) Personal
(d) Nominal
Answer:
(d) Nominal

Question 4.
Outstanding subscription at the end of the Accounting Year represents ___________
(a) Liability
(b) an Expenditure
(c) an Asset
(d) Capital Fund
Answer:
(c) an Asset

Question 5.
Subscription received in advance during the accounting year is ___________
(a) an Income
(b) an Expense
(c) an Asset
(d) a Liability
Answer:
(d) a Liability

Question 6.
Excess of Income over Expenditure is termed as ___________
(a) Deficit
(b) Profit
(c) Surplus
(d) Loss
Answer:
(c) Surplus

Question 7.
Not for Profit concern prepares ___________ Account instead of Profit and Loss Account to know the result.
(a) Trading
(b) Income and Expenditure
(c) Cash
(d) Receipt and Payments
Answer:
(b) Income and Expenditure

Question 8.
The closing balance of Receipts and Payments Account usually represent ___________
(a) Closing stock
(b) Cash and Bank Balance
(c) Surplus
(d) Deficit
Answer:
(b) Cash and Bank Balance

Question 9.
Not for Profit organization is also called ___________ organization.
(a) service
(b) trading
(c) profit-making
(d) commercial
Answer:
(a) service

Question 10.
Expenditure on Purchase of Building is a ___________ Expenditure.
(a) Capital
(b) Revenue
(c) General
(d) Recurring
Answer:
(a) Capital

B. Write the Word/Phrase/Term, which can substitute each of the following Statements.

Question 1.
The Form of Organization providing services to the society only.
Answer:
Not for Profit concern

Question 2.
An account which is prepared by Not for Profit concern instead of Profit and Loss Account.
Answer:
Income and Expenditure Account

Question 3.
Donations are received for a specific purpose.
Answer:
Specific donation/Capital Receipt

Question 4.
The Receipts are not recurring in nature.
Answer:
Capital Receipt

Question 5.
An Account that records only revenue items in case of Not a for-profit concern.
Answer:
Income and Expenditure Account

Question 6.
Accounts which records only cash transactions in case of Not for Profit concerns.
Answer:
Receipts and Payments Account

Question 7.
The income is earned during the year but not received during the year.
Answer:
Outstanding income

Question 8.
The credit balance of Income and Expenditure Account.
Answer:
Surplus

Question 9.
To excess of total assets over total liabilities of a Not for Profit concern.
Answer:
Capital Fund

Question 10.
All such receipts are non-recurring in nature and not forming a part of a regular flow of income.
Answer:
Capital Receipts

C. State whether the following statements are True or False with reasons.

Question 1.
Not for Profit concerns do not have a profit motive.
Answer:
This statement is True.
Not for profit concerns, the main aim is to give services to its members or to the society at large. They do not carry any Trading activity or Manufacturing activity so there is no question of having a profit motive for ‘Not for Profit’ concerns.

Question 2.
Charitable Institutions prepare Profit and Loss Accounts at the end of every financial year.
Answer:
This statement is False.
Charitable Institutions, Not for Profit concerns, do not undertake any trading activities and hence instead of Profit and Loss Account prepare Income-Expenditure Account to record all revenue expenses/losses and revenue incomes/gains of the current year.

Question 3.
There is no difference between Receipts and Payments Account and Income and Expenditure Account.
Answer:
This statement is False.
In the Receipts and Payments Account, all receipts and payments transactions in cash or through the bank are recorded irrespective of the current year, previous year, or next year while in Income-Expenditure Account, only the current year’s incomes and expenses (Revenue) are recorded.

Question 4.
Income and Expenditure Account represents either surplus or deficit.
Answer:
This statement is True.
In the Income and Expenditure Account, all revenue incomes and expenses are recorded and at the end of the specified period, the difference is found out which is known as ‘Surplus’ (Revenue incomes are more than Revenue expenses) or ‘Deficit’ (Revenue expenses are more than Revenue incomes).

Question 5.
Receipts and Payments Accounts do not have any opening balance.
Answer:
This statement is False.
Receipts and Payments Account is just like a cash book of trading concern and opening balance (Cash or Bank or Cash and Bank) must be there to start recording of transactions.

Question 6.
Not for Profit concerns do not prepare a Balance Sheet.
Answer:
This statement is False.
To know the financial position of the organization, at the end of the particular period, Not for Profit concerns prepare Balance Sheet.

Question 7.
Purchases of Sports Equipments is a Capital Expenditure.
Answer:
This statement is True.
Generally, the life span of sports equipment is more than one year, so the purchase of sports equipment is considered a capital expenditure.

Question 8.
Income and Expenditure Account is a Real Account.
Answer:
This statement is False.
In the Income and Expenditure Account, all the revenue incomes and revenue expenses are recorded and therefore it is a Nominal Account and not a Real Account.

Question 9.
The Receipts and Payments Account contains only the transactions relating to the current year.
Answer:
This statement is False.
In the Receipts and Payments Account, transactions of not only the current year but of the previous year or of the next year are also recorded.

Question 10.
Excess of Assets over liabilities is called Capital Fund.
Answer:
This statement is True.
For ‘Not for Profit’ concerns in the Balance Sheet, when a total of Assets is more than the total of Liabilities, the difference of amount is considered as ‘Capital Fund’.

D. Fill in the blanks.

Question 1.
Not for Profit organization is never engaged in ___________ activities.
Answer:
trading

Question 2.
Not for Profit organization is called ___________ organization.
Answer:
service

Question 3.
Receipts and Payments Account falls under the category of ___________ Account.
Answer:
Real

Question 4.
In Receipts and Payment Account the summary of ___________ transactions are recorded.
Answer:
cash

Question 5.
Income and Expenditure Account is similar to the ___________ Account of Trading concern.
Answer:
Profit and Loss

Question 6.
Credit side of Receipts and Payments Account shows cash ___________
Answer:
payments

Question 7.
Income and Expenditure Account is a ___________ Account.
Answer:
Nominal

Question 8.
Mumbai University prepares ___________ Account instead of a Profit and Loss account.
Answer:
Income and Expenditure

Question 9.
Subscription received from the members is considered as ___________ receipts.
Answer:
revenue

Question 10.
The transactions recorded in the Income and Expenditure Account related only to the ___________ year.
Answer:
current

E. Answer in one sentence only.

Question 1.
What do you mean by ‘Not for Profit’ Concern?
Answer:
A concern or organization which is formed and established to serve its members and society or the general public by undertaking various activities without any profit motive is called a ‘Not for Profit’ concern.

Question 2.
Which organizations prepare Income and Expenditure Account?
Answer:
‘Not for profit’ concern prepares Income and Expenditure Account.

Question 3.
What is Receipts and Payments Account?
Answer:
An account that is prepared by a ‘Not for Profit Concern’ to record a summary of all types of cash receipts and cash payments inclusive of bank transactions is called Receipts and Payments Account.

Question 4.
Why Income and Expenditure Account is prepared?
Answer:
Income and Expenditure Account is prepared to ascertain, whether the concern has sufficient income to meet its expenses, or not.

Question 5.
What is Capital Fund?
Answer:
Excess of Assets over Liabilities is known as Capital Fund which also consists of contributions, subscription, entrance fees, surplus income, etc.

Question 6.
What is a Subscription?
Answer:
Subscription is the periodical payment made by the members to the ‘Not for Profit’ concern for maintaining their membership.

Question 7.
What is ’Legacy’?
Answer:
Any asset, property, or amount of cash which ‘Not for Profit’ concern receives as per the provisions made in the will of the donor after his death is called Legacy.

Question 8.
What is Surplus?
Answer:
Excess of income over expenditure shown by Income and Expenditure Account represents Surplus for the financial year.

Question 9.
What do you mean by Non-recurring Expenses?
Answer:
Non-recurring expenses are the expenses that are made for the acquisition of fixed assets that gives benefits for a long period.

Question 10.
To which account ‘Surplus’ or ‘Deficit’ is transferred?
Answer:
‘Surplus’ or ‘Deficit’ is transferred to the Balance Sheet by adding it or subtracting it from Capital Fund.

F. I. Complete the Table:

Question 1.

Sr. No.	Income (₹)	Expenditure (₹)	Surplus/Deficit (₹)
1	10,000	?	5,000 (Deficit)
2	8,000	?	4,000 (Surplus)
3	?	15,000	8,000 (Surplus)
4	7,500	9,000	?
5	15,000	11,300	?

Solution:

Sr.No.	Income (₹)	Expenditure (₹)	Surplus/Deficit (₹)
1	10,000	15,000	5,000 (Deficit)
2	8,000	4,000	4,000 (Surplus)
3	23,000	15,000	8,000 (Surplus)
4	7,500	9,000	1,500 (Deficit)
5	15,000	11,300	3,700 (Surplus)

II. Salaries paid during the year:

Question 1.

Sr.No.	Total (₹)	Prepaid/Outstanding	₹	Expenditure for the year
1	1,100	Prepaid	100	?
2	2,700	Prepaid	?	2,000
3	8,250	Prepaid	?	6,650
4	1,200	Outstanding	200	?
5	?	Outstanding	600	5,100
6	1,800	Outstanding	?	2,200

Solution:

Sr. No.	Total (₹)	Prepaid/Outstanding	₹	Expenditure for the year
1	1,100	Prepaid	100	1,000
2	2,700	Prepaid	700	2,000
3	8,250	Prepaid	1,600	6,650
4	1,200	Outstanding	200	1,400
5	4,500	Outstanding	600	5,100
6	1,800	Outstanding	400	2,200

III. Rent received during the year:

Question 1.

Sr.No.	Total Received (₹)	Rent Received in Advance/Accrued	₹	Income for the year (₹)
1	1,300	Received in Advance	200	?
2	?	Received in Advance	400	1,400
3	2,650	Received in Advance	?	2,000
4	?	Accrued	290	3,190
5	1,700	Accrued	?	2,150
6	2,600	Accrued	500	?

Solution:

Sr.No.	Total Received (₹)	Rent received in Advance/Accrued	₹	Income for the year (₹)
1	1,300	Received in Advance	200	1,100
2	1,800	Received in Advance	400	1,400
3	2,650	Received in Advance	650	2,000
4	2,900	Accrued	290	3,190
5	1,700	Accrued	450	2,150
6	2,600	Accrued	500	3,100

G. Calculate the following:

Question 1.
10 % p.a. Depreciation on Furniture ₹ 50,000 (for three months)
Solutions:
Depreciation = Cost of Asset × Rate × Period
= 50,000 × \(\frac{10}{100}\) × \(\frac{3}{12}\)
= ₹ 1250 Depr. for 3 months
Thus, Depreciation on furniture @ 10 % on ₹ 50,000 for 3 months = ₹ 1250.

Question 2.
12 % p.a. Interest on Bank loan ₹ 80,000 for 1 year.
Answer:
I = \(\frac{\mathrm{PRN}}{100}\)
= 80,000 × \(\frac{12}{100}\) × 1
= ₹ 9600.
Thus, interest on a Bank loan ₹ 80,000 for 1 year = ₹ 9600.

Question 3.
Opening stock of stationery ₹ 5,000, purchases of stationery ₹ 7000, outstanding stationery bill ₹ 12,000, closing stock ₹ 1000. What is the amount of stationery consumed?
Answer:

Question 4.
Salary ₹ 10,000, outstanding salary ₹ 5,000. Calculate the salary to be debited to the Income and Expenditure Account.
Answer:

Question 5.
Library Books ₹ ……………? Less 10% Depreciation ₹ 5,000 = ₹ 45,000.
Answer:
Library books ₹ 50,000. Less 10% Depreciation ₹ 5,000 = ? 45,000

H. Find odd one:

Question 1.
Trading Account, Profit and Loss Account, Receipts and Payments Account, Balance Sheet.
Answer:
Receipts and Payments Account

Question 2.
Machinery, Furniture, Computers, Salaries.
Answer:
Salaries

Question 3.
Subscription, Stationery, Interest Received, Locker Rent received.
Answer:
Stationery

Question 4.
Reliance Industries, Venna Vidya Mandir, Laxmi Hospital, Manoj Sports club.
Answer:
Reliance Industries

Question 5.
Surplus, Deficit, Net Profit, Capital fund.
Answer:
Net Profit

Practical Problems

Question 1.
Calculation of stationery consumed during the year

Adjustments:
1. ₹ 1,000 outstanding for the stationery bill.
2. Stock of Stationery as of 31 – 03 – 2019 was valued at ₹ 1,800.
With the above information, calculate the amount of Stationery consumed during the year and show its presence in final Accounts of a concern.
Solution:
In the books of ___________________

Balance Sheet as of 31 – 03 – 2019

Question 2.
Presentation of Subscription only

Adjustments:
The outstanding subscription for 2018-19 is ₹ 32,000.
With the above information, present the item Subscription in Income and Expenditure Account for the year ended 31 -03-2019 and Balance Sheet as on the date.
Solution:
In the books of ___________________

Balance Sheet as of 31st March 2019

Working Note:
Outstanding subs, given in the balance sheet as on 01-04-2018 are ₹ 26,000 (for 2016-17) and ₹ 35,000 (for 2017-18). Against that, as shown in Receipt – Payment A/c ₹ 23,000 and ₹ 30,000 are received respectively. Means ₹ 3,000 and ₹ 5,000 are still outstanding which are known in the current year balance sheet.

Question 3.

Adjustments:
Subscription outstanding for the year 2017-18 is ₹ 6,000.
During the previous year subscription received in advance for 2017-18 is ₹ 2,000.
The outstanding subscription of 2016-17 is ₹ 2,500.
With the help of the above information present the item Subscription in Income and Expenditure Account for the year ending 31-03-2018 and Balance Sheet as on that date.
Solution:
In the books of ___________________

Balance Sheet as of 31st March 2018

Question 4.
Preparation of Income and Expenditure Account only
Following is the Receipts and Payments Account of “Satara Sports Club” Satara.
Prepare Income and Expenditure Account for the year ending 31-03-2019.

Adjustments:
1. Outstanding subscription for the current year is ₹ 4,500.
2. Outstanding rent for the current year amounted to ₹ 1,000.
3. Entrance fees are to be treated as Revenue Income.
4. Stock of sports material as of 01-04-2018 ₹ 6,000 and on 31 – 03 – 2019 ₹ 14,000.
Solution:
In the books of ‘Satara Sports Club’ Satara

Working Notes:
1. Entrance fees are to be treated as Revenue income. Therefore entire amount is recorded on the income side.
2. Since the selling price of Furniture ₹ 4,500 is lower than its cost price of ₹ 8,000, there is a Loss in the sale of furniture.
It is calculated as follows:
Loss on sale of furniture = Book value (cost) – Selling price
= 8,000 – 4,500
= ₹ 3,500
It is debited to Income and Expenditure A/c.

Question 5.
“Bhartiya Kala Kendra”, Solapur gives you the following information for the year ended on 31-03-2018. Prepare Income and Expenditure Account for the year ending 31-03-2018.

Additional Information:
1. Legacies are to be capitalized.
2. Outstanding salary ₹ 200.
3. 50% of Entrance fees are to be capitalized.
Solution:
In the books of Bhartiya Kala Kendra, Solapur

Question 6.
Accounts of a Charitable Hospital
From the following particulars relating to “Radha-Krishna Charitable Hospital”, Pune.
Prepare Income and Expenditure Account for the year ending 31-03-2020 and Balance Sheet as of that date.

Additional Information:

Provide Depreciation on Equipments ₹ 1,900 and on Building ₹ 1,500.
Solution:
In the Books of Radha-Krishna Charitable Hospital, Pune

Balance Sheet as of 31st March 2020

Working Notes:
1. To find medicines consumed, here in the opening stock, purchases are added and the closing stock of medicine is subtracted.
2. For equipment, in opening balance, add equipment purchased during the year and subtract depreciation to get the closing balance of equipment.
3. Interest ₹ 10,000 is received on 10% investments means there is no outstanding interest.

Question 7.
From the following transactions of Receipts and Payments Account of “Pavan-putra Hanuman Vyayamshala”, Parbhani and the adjustments are given, you are required to prepare Income and Expenditure Account and Balance Sheet as of 31st March 2019.

Adjustments:
1. There are 500 members paying an annual subscription of ₹ 50 each.
2. Outstanding salary was ₹ 1,200.
3. The Assets on 01-04-2018 were as follows:
Building ₹ 50,000, Furniture ₹ 15,000
4. Provide depreciation on Building and Furniture at 5% and 10% respectively.
5. 50% Entrance fees are to be capitalized.
6. Interest on investment at 5% p.a. has accrued for 6 months.
7. Capital fund ₹ 70,000 on 01-04-2018.
Solution:
In the Books of Pavan-putra Hanuman Vyayamshala, Parbhani

Balance Sheet as of 31st March 2019

Working Notes:
1. Interest on investment is receivable for 6 months:
I = \(\frac{\text { PRN }}{100}\)
= 15,000 × \(\frac{5}{100} \times \frac{6}{12}\)
= ₹ 375 (outstanding interest on investment)
2. 50 % of entrance fees (i.e. \(\frac{6200}{2}\) = ₹ 310o) is to be capitalised means add it to capital fund.
3. Total subscription of current year = 500 members × ₹ 50 = ₹ 25,000
But actual subscription received = ₹ 18,000
means difference (25,000 – 18,000) of ₹ 7,000 is outstanding subscription.

Question 8.
Newly Started Art Circle
“Jeevan Jyoti Art Circle” a newly established concern has presented the following information:

Adjustments:
1. Subscription outstanding for the year was ₹ 5,000.
2. Depreciate Furniture @ 10% p.a.
3. Full amount of admission fees and 50% donations are to be capitalized.
You are required to prepare an Income and Expenditure Account for the year ending 31-03-2018 and a Balance Sheet as of that date.
Solution:

Balance Sheet as of 31st March 2018

Working Notes:
The full amount of admission fees and 50% of donations are added to the surplus amount to get capital funds. (Opening balance of the capital fund is not given.)

Question 9.
Given below is the Receipts and Payments Account of “Vithai Mahila Mandat”, Pandharpur for the year ending 31-03-2018. Prepare an Income and Expenditure Account for the year ended 31-03-2018 and Balance Sheet as of that date.

Adjustments:
1. Capital fund on 01-04-2017 was ₹ 90,000.
2. Outstanding subscription ₹ 4,000.
3. Entrance fees are to be capitalized.
4. Rent paid includes ₹ 800 paid for April 2018.
5. They have the following Assets and Liabilities as of 01-04-2017:
Furniture ₹ 9,000, Building ₹ 70,000, and Outstanding Expenses ₹ 12,000.
Solution:
In the books of Vithai Mahila Mandal, Pandharpur

Balance Sheet as of 31st March 2018

Working Notes:
1. Outstanding subscription of ₹ 4,000 is first added to subscription received on the credit side of Income and Expenditure A/c and then it is shown on the Assets side of Balance Sheet.
2. Entire amount of entrance fees ₹ 3,500 is added to the capital fund.
3. Prepaid ₹ 800 is first deducted from rent paid on the debit side of Income & Expenditure A/c and then shown on the Assets side of the Balance Sheet.
4. Outstanding expenses ₹ 12,000 is directly shown on the Liabilities side of the Balance Sheet.

Question 10.
From the following Receipts and Payments Account “K.B.P. Engineering College”, Nashik for the year ending on 31 – 03 – 2019 and additional information, prepare Income and Expenditure Account for the year ending 31-03-2019 and Balance Sheet as on that date.

Additional Information:

1. 50% of donations are for the Building funds and the balance is to be treated as Revenue income.
2. Outstanding subscription ₹ 5,300.
3. Life membership fees are to capitalize.
Solution:
In the books of K.B.P. Engineering College, Nashik

Balance Sheet as of 31st March 2019

Working Notes:
1. Life membership fees are to be capitalized, which means add the entire amount to the capital fund.

2. 50% of Donations of ₹ 7,00,000 i.e., ₹ 3,50,000 is to be added to the Building Fund, and the remaining amount of donation i.e., ₹ 3,50,000 is credited to Income and Expenditure A/c.

3. The depreciation on Fixed assets is calculated by using the following formula:
Depreciation = Opening balance + Purchases – Closing value
∴ Depreciation on Books = 6,00,000 + 61,000 – 6,00,000
= 6,61,000 – 6,00,000
= ₹ 61,000
∴ Depreciation on Furniture = 3,19,000 + 51,000 – 3,00,000
= 3,70,000 – 3,00,000
= ₹ 70,000

4. Fixed deposit: Opening balance given = ₹ 9,10,000
Fixed deposit (31-03-2019) = ₹ 8,50,000
(Newly purchased)
∴ Total fixed deposits = ₹ 17,50,000

5. Admission Fees ₹ 60,000 are recorded on the credit side of Income and Expenditure A/c because it is taken as Revenue income.

Question 11.
Account of a School
From the following Balance Sheet and Receipts and Payments Account of “New English School”, Barshi, prepare Income and Expenditure Account for the year ending 31 – 03 – 2020 and a Balance Sheet as on that date.


Additional Information:
1. Outstanding salary of ₹ 9,000.
2. Outstanding tuition fees ₹ 15,000.
3. Depreciate library books by ₹ 9,000 and Furniture by ₹ 10,000.
Solution:
In the books of New English School, Barshi

Balance Sheet as of 31st March 2020

Working Notes:
1. Donation (Capital) is added to the Capital fund.
2. Government Grant ₹ 1,20,000 is recorded on the credit side of Income & Expenditure A/c because it is the revenue income of the organization.
3. Outstanding tuition fees ₹ 15,000 and outstanding salary ₹ 9,000 are added to the respective head of Account and then they are shown separately on the Assets side and Liabilities side of the Balance Sheet respectively.

Question 12.
Account of a Library
Following is the Receipts Payments Account of “Dhananjay Library”, Mumbai for the year ending 31-03-2020.

You are required to prepare an Income and Expenditure Account for the year ended 31-03-2020 and a Balance Sheet as of that day.
The following information is also made available to you.
1. On 31 -03-2019, the library had the following Assets also; Books ₹ 50,000, Furniture ₹ 6,500, and Machinery of ₹ 30,000.
2. Subscription received in advance amounted to ₹ 500.
3. Outstanding salaries ₹ 1300 and Rent ₹ 950.
4. 50% of the admission fees should be capitalized.
5. Furniture to be depreciated at 10% p.a.
6. Library books were purchased on 1st April 2019 charge depreciation at 10% p.a.
7. The Investments were purchased on 01-04-2019 and they carry interest at 20% p.a.
Solution:
In the books of Dhananjay Library, Mumbai

Balance Sheet as of 31st March 2020

Working Notes:
1. Opening Balance Sheet is prepared to find out opening capital fund:
Balance Sheet as of 31st March 2019

2. Outstanding expenses of the previous year, paid in the current year so no entry for outstanding expenses (2018-19)

3. Interest on Investment @ 20% on ₹ 6,000 = ₹ 1,200
Interest on Investment received = ₹ 900
Outstanding interest on investment = ₹ 300

4. Depreciation on library books at 10% p.a.
On opening balance of ₹ 50,000 (for whole year) = ₹ 5,000
On purchases on 01-04-2019 (for whole year) = ₹ 500
Total Depreciation = ₹ 5,500

5. Subscriptions received in advance ₹ 500 is deducted from subscription received on the credit side of Income and Expenditure A/c and then subscription received in advance is shown separately on the Liabilities side of Balance Sheet.

6. Outstanding salaries and outstanding rent are added to the respective head of Account on the debit side of the Income & Expenditure Account and both the outstanding items are recorded on the Liabilities side of the Balance Sheet.

Question 13.
Outstanding Expenses and Prepaid Expenses
From the following information supplied to you, prepare Income and Expenditure Account for the year ending 31-03-2020 and Balance Sheet as on that date for “Morya Sports Club”, Thane.
Balance Sheet as on 01-04-2019


Adjustments:
1. Subscription received includes ₹ 3,000 for 2018-19 and outstanding subscription for 2019-20 was ₹ 14,000.
2. On 31-03-2020, the Prepaid insurance premium was ₹ 2,500.
3. Depreciate Furniture by ₹ 3,000.
4. Locker rent outstanding for 2019-20 is ₹ 400.
Answer:
In the books of ‘Morya Sports Club’ Thane

Balance Sheet as of 31st March 2020

Working Notes:
1. Outstanding subscription (2018-19) ₹ 8,000 given in b/s against that ₹ 3,000 received in 2019-20.
Means still receivable subscription = ₹ 5,000 (8,000 – 3,000).

2. Prepaid insurance premium (2018-19) ₹ 2,000 is for the current year. Therefore, in the current year’s insurance premium, ₹ 2,000 is to be added and then subtract the current year’s prepaid insurance premium.

3. Outstanding salary of (2018-19), ₹ 4,000 of the previous year is to be subtracted from current year’s salary.

4. Total amount of donations and entrance fees are to be capitalized so add the entire amount of both the items to Capital fund.

5. Outstanding locker’s rent (2018-19) ₹ 500 is given in the Balance Sheet. It is to be subtracted from the current year’s locker’s rent and then adds the current year’s outstanding locker rent.

Question 14.
Charitable Hospital
Following information has been provided by “Vivekanand Charitable Hospital”, Latur. You are required to prepare an Income and Expenditure Account for the year ending 31-03-2019 and the Balance Sheet as of that date.


Adjustments:
1. On 31-03-2019 stock of drugs was valued at ₹ 22,000.
2. Depreciation on Building at 5% p.a. and on Ambulance ₹ 30,000.
3. Life membership fees are to be capitalized.
Answer:
In the books of Vivekanand Charitable Hospital, Latur

Balance Sheet as of 31st March 2019

Working Notes:
1. Purchase of drugs ₹ 2,00,000 includes ₹ 40,000 of 2017-18 and in the Balance Sheet of 2017-18, the outstanding bill of drugs is ₹ 50,000 given. So, ₹ 10,000 is still outstanding.

2. Consumption of drugs:
Opening stock (2017-18) = ₹ 42,000
Add: Purchase of drugs = ₹ 1,60,000
Total = 1,60,000 + 42,000 = ₹ 2,02,000
Less: Closing stock of drugs = ₹ 22,000
Consumption of drugs = 1,80,000

Class 12 Commerce BK Textbook Solutions Digest

• 12th Bk Chapter 1 Practical Problems
• 12th Bk Chapter 2 Practical Problems
• 12th Bk Chapter 3 Practical Problems
• 12th Bk Chapter 4 Practical Problems
• 12th Bk Chapter 5 Practical Problems
• 12th Bk Chapter 6 Practical Problems
• 12th Bk Chapter 7 Practical Problems
• 12th Bk Chapter 8 Practical Problems
• 12th Bk Chapter 9 Practical Problems
• 12th Bk Chapter 10 Practical Problems

Final Accounts of a Proprietary Concern 11th BK Commerce Chapter 9 Solutions Maharashtra Board

Balbharti Maharashtra State Board Bookkeeping and Accountancy 11th Solutions Chapter 9 Final Accounts of a Proprietary Concern Textbook Exercise Questions and Answers.

Class 11 Commerce BK Chapter 9 Exercise Solutions

1. Answer in One Sentence.

Question 1.
What is Trading Account?
Answer:
An account in which direct expenses are compared with direct incomes to find out gross profit or gross loss for a given period is known as Trading Account.

Question 2.
What do you mean by Profit and Loss Account?
Answer:
An account in which indirect expenses are compared with indirect incomes to find out net profit or net loss for a given period is known as the Profit and Loss Account.

Question 3.
Why Balance Sheet is prepared?
Answer:
The balance sheet is prepared to ascertain the financial position of the business on a specific date usually at the end of the accounting year.

Question 4.
State the meaning of Final Accounts.
Answer:
Final Accounts are the group of Trading Account, Profit and loss account and Balance sheet prepared to know the results of business for a given period.

Question 5.
What is Net Profit?
Answer:
When the total credit side of Profit and Loss A/c is greater than the total of debit side, it indicates credit balance which is known as net profit.

Question 6.
What do you mean by Gross Profit?
Answer:
When the total credit side of Trading A/c is greater than the total of debit side, it indicates credit balance, which is called gross profit.

Question 7.
State the meaning of Accrued Income?
Answer:
Income that is due and accumulated but not yet actually received during the current accounting year is called accrued income.

Question 8.
State the meaning of Outstanding Expenses?
Answer:
The expenses which are incurred in the current year, but not paid partly or fully during the current accounting year are termed as outstanding expenses.

Question 9.
What is Depreciation?
Answer:
Depreciation means a continuous reduction in the value of property or asset due to wear and tear, accident, fall in the market price, the passage of time, etc.

Question 10.
What do you mean by Prepaid Expenses?
Answer:
The expense which is paid in advance before they are due for payment is called prepaid expenses.

2. Give a word, term, or phrase which can substitute each of the following statements:

Question 1.
Expenses are paid before it is due.
Answer:
Prepaid Expenses

Question 2.
Income due but not yet received.
Answer:
Accrued Income

Question 3.
Carriage paid on the sale of goods.
Answer:
Carriage Outwards

Question 4.
Statement of Assets and liabilities.
Answer:
Balance Sheet

Question 5.
Account prepared to know Net Profit or Net loss.
Answer:
Profit and Loss A/c

Question 6.
Value of goods remaining unsold at the end of the year.
Answer:
Closing Stock

Question 7.
The provision was made to compensate the loss on account of likely debts.
Answer:
Provision for Bad and Doubtful Debts

Question 8.
The accounts are prepared at the end of the accounting year to know the profit or loss and financial position of the business.
Answer:
Final Accounts

Question 9.
An amount spent on promoting the sale of goods.
Answer:
Selling Expenses

Question 10.
Additional information is provided below the Trial Balance.
Answer:
Adjustments

3. Select the most appropriate alternatives given below and rewrite the sentence:

Question 1.
_____________ is excess of assets over liabilities.
(a) Goodwill
(b) Capital
(c) Investments
(d) Drawings
Answer:
(b) Capital

Question 2.
Discount earned is transferred to credit side of _____________ account.
(a) Current
(b) Profit and Loss
(c) Trading
(d) Capital
Answer:
(b) Profit and Loss

Question 3.
_____________ is a statement which shows the financial position of business on a specific date.
(a) Trading Account
(b) Trial Balance
(c) Profit and Loss A/c
(d) Balance Sheet
Answer:
(d) Balance Sheet

Question 4.
Outstanding expenses are shown on the _____________ side of Balance sheet.
(a) Assets
(b) Liability
(c) Both
(d) None of these
Answer:
(b) Liability

Question 5.
Interest on Drawing is credited to _____________ Account.
(a) Trading
(b) Profit and Loss
(c) Capital
(d) All
Answer:
(b) Profit and Loss

Question 6.
Debit balance of Trading Account means _____________
(a) Gross Loss
(b) Net Loss
(c) Net Profit
(d) Gross Profit
Answer:
(a) Gross Loss

Question 7.
Carriage Inward is debited to _____________ Account.
(a) Trading
(b) Profit and Loss
(c) Capital
(d) Bank
Answer:
(a) Trading

Question 8.
Excess of credit over to debit in Profit and Loss A/c indicates _____________
(a) Net Profit
(b) Gross Profit
(c) Gross Loss
(d) Net Loss
Answer:
(a) Net Profit

Question 9.
Closing stock is always valued at cost or market price which is _____________
(a) more
(b) less
(c) zero
(d) equal
Answer:
(b) less

Question 10.
When specific date is not given, in that case interest on drawings is charged for _____________ month.
(a) Four
(b) Six
(c) Eight
(d) Nine
Answer:
(b) Six

4. State True or False with reasons:

Question 1.
In every adjustment at least there are three effects.
Answer:
This statement is False.
There are at least two effects in every adjustment of final accounts.

Question 2.
Every item of Trial Balance has only one effect.
Answer:
This statement is True.
Every transaction is recorded through journal or subsidiary books with the principle of the double-entry book-keeping system. Journal and subsidiary books are posted to the ledger account and trial balance is prepared from the balances of the ledger so there are already two effects passed. So every item of Trial Balance has only one effect.

Question 3.
Income due but not received is a liability.
Answer:
This statement is False.
Income due but not received is an Asset and not a liability.

Question 4.
Goodwill is not a fictitious asset.
Answer:
This statement is True.
Goodwill is the reputation or name and fame of a business organization in the market. It is the money value of a business reputation earned by a business. It is an intangible asset.
Fictitious assets are created by accounting entry in the books of accounts it doesn’t have any realizable value.
E.g.: Share issue expenses.

Question 5.
The credit balance of the Profit & Loss account shows a net profit.
Answer:
This statement is True.
The credit side of profit and loss A/c represents incomes when the credit side is greater than the debit side (expenses) it shows the Net Profit of the year.

5. Fill in the blanks:

Question 1.
Gross Profit is transferred to _____________ account.
Answer:
Profit and Loss A/c

Question 2.
Debit Balance of Trading Account indicates _____________
Answer:
Gross Loss

Question 3.
Income Receivable appears on _____________ side of Balance Sheet.
Answer:
Asset

Question 4.
Interest on Bank Loan is debited to _____________ A/c.
Answer:
Profit and Loss A/c

Question 5.
Profit and Loss account is prepared to find out _____________ results of the business.
Answer:
Net Working

Question 6.
All indirect/operating expenses are transferred to _____________ account.
Answer:
Profit and Loss A/c

Question 7.
Interest of proprietor’s drawing is credited to _____________ account.
Answer:
Profit and Loss A/c

Question 8.
An excess of debit over credit in the Profit & Loss A/c represents the _____________
Answer:
Net Loss

Question 9.
All direct expenses are transferred to _____________ account.
Answer:
Trading A/c

Question 10.
Balance Sheet is _____________ of assets & liabilities.
Answer:
Statement

6. Find the odd one:

Question 1.
Rent, Salary, Insurance, Plant, and Machinery.
Answer:
Plant and Machinery

Question 2.
Purchases, Closing stock, Debtors, Factory Rent.
Answer:

Question 3.
Capital, Bills Payable, Debtors, Outstanding wages.
Answer:
Debtors

Question 4.
Advertisement, Travelling Expenses, Factory Rent, Insurance.
Answer:
Factory Rent

Question 5.
Cash in Hand, Debtors, Outstanding Income, Reserve for Doubtful Debts.
Answer:
Reserve for Doubtful Debts

7. Do you agree or disagree with the following statements:

Question 1.
Reserve for bad debts is created by debiting Profit and Loss Account.
Answer:
Agree

Question 2.
A balance Sheet is a statement as well as an account.
Answer:
Disagree

Question 3.
Indirect Expenses are debited to Trading Account.
Answer:
Disagree

Question 4.
Bank Overdraft is treated as an Internal Liability.
Answer:
Disagree

Question 5.
Capital is excess of Liabilities over Assets.
Answer:
Disagree

8. Correct and Rewrite the following statements:

Question 1.
The balancing figure of the Trading Account is Net Profit or Net Loss.
Answer:
The balancing figure of the Trading Account is Gross Profit or Gross Loss.

Question 2.
All direct expenses are debited to the Profit and Loss Account.
Answer:
All direct expenses are debited to Trading Account.

Question 3.
When the credit side of the Profit and Loss Account is greater than the debit side, it is called Net Loss.
Answer:
When the credit side of the Profit and Loss account is greater than the debit side, it is called Net Profit.

Question 4.
Capital A/c……………..Dr.
To Profit and Loss Account
(Being Net Profit transferred to Capital A/c)
Answer:
Profit and Loss Account…………….Dr.
To Capital A/c
(Being Net Profit transferred to Capital A/c)

Question 5.
Trading A/c……………Dr.
To Sales A/c
(Being Sales transferred to Trading A/c)
Answer:
Sales A/c…………Dr
To Trading A/c
(Being sales transferred to Trading A/c)

9. Calculate the following.

Question 1.
Calculate the Capital

Solution:
Capital = Assets – Liabilities
= ₹ 1,00,000 – ₹ 39,950
= ₹ 60,050

Question 2.
The machinery of ₹ 35,500 is purchased on 1st July 2018 and on the same day ₹ 4,500 are spent on the installation of the Machinery. The proprietor has decided to Depreciate Machinery at the rate of 7% p.a. Calculate the amount of depreciation, assuming that accounting year is ending on 31st March every year.
Solution:
Cost of Machinery = Purchase Price + Installation Charges
= 35,500 + 4,500
= ₹ 40,000
Depreciation for 9 months = 40,000 × \(\frac{7}{100} \times \frac{9}{12}\) = ₹ 2,100

Question 3.
Mr. Pramod borrowed a Loan from the State Bank of India ₹ 3,50,000 on 1st Oct. 2018 at the rate of interest of 12% p.a. Calculate the Interest on a bank loan for the year 2018-19, assuming that the financial year-end on 31st March every year.
Solution:
Interest on Bank loan for 6 months = 3,50,000 × \(\frac{12}{100} \times \frac{6}{12}\) = ₹ 21,000

Question 4.
Annual Insurance Premium ₹ 8,000 is paid on 1st Dec 2018. Calculate the amount of Insurance Premium for the accounting year ending on 31st March 2019.
Solution:
Annual Insurance Premium for 12 months = ₹ 8,000
Less: Prepaid for 8 months = ₹ 5,333
Insurance for 4 months (01.12.18 to 31.03.19) = ₹ 2,667

Question 5.
Calculate the Gross Profit/Gross Loss
Purchases A/c ₹ 15,500, Sales A/c ₹ 30,000, Carriage Inward ₹ 1,200, Opening Stock ₹ 5,000, Purchases Returns ₹ 500, Closing Stock ₹ 18,000
Solution:
Cost of Goods Sold = Opening Stock + Purchases – Purchases Returns + Carriage Inward – Closing Stock
= 5,000 + 15,500 – 500 + 1,200 – 18,000
= ₹ 3,200
Gross Profit = Sales – Cost of goods sold
= 30,000 – 3,200
= ₹ 26,800

Practical Problems

Question 1.
From the following Balances of Jayashri Traders, you are required to prepare Trading Account for the year ended 31/03/2019.

Solution:
In the books of Jayashri Traders

Question 2.
Prepare Profit and Loss Account of Sanjay Brothers for the year ended 31st March 2018 from the following balances.
1. Bank charges ₹ 22,000
2. Interest (Cr.) ₹ 16,000
3. Sundry expenses ₹ 42,000
4. Insurance ₹ 35,000
5. Salaries ₹ 40,000
6. Rates and Taxes ₹ 13,000
7. Postage ₹ 8,000
8. Advertisement ₹ 40,000
9. Rent paid ₹ 32,000
10. Bad debts ₹ 10,000
11. Commission (Cr) ₹ 17,500
12. Printing & Stationery ₹ 21,000
13. Loss by fire ₹ 18,000
14. Discount (Dr) ₹ 23,000
15. Discount (Cr) ₹ 37,000
16. Misc. Income ₹ 14,000
17. Depreciation ₹ 34,000
18. Carriage Outwards ₹ 60,000
19. Godown Expenses ₹ 40,000
Note: Gross Profit ₹ 4,07,500
Solution:
In the books of the Sanjay Brothers.

Question 3.
From the following Trial Balance of Sanjiv & Sons. Prepare Trading Account and Profit & Loss Account for the year ending on 31st March 2019 and a Balance Sheet as on that date.

Additional information:
1. Closing stock on 31st March 2019, was at cost ₹ 60,000 and Market Price ₹ 70,000.
2. Outstanding expenses: Wages ₹ 4,000, Salary ₹ 2,400
3. Provide depreciation at 10% on Motor Van and 5% on Furniture.
4. Write off ₹ 2,000 for bad debts and create R.D.D. at 5% on debtors.
5. Provide 10% p.a. interest on capital.
Solution:
In the books of Sanjiv & Sons

Balance Sheet as of 31st March, 2019

Question 4.
From the following Trial Balance of Nandini & Co. as of 31st March 2019. Prepare Final Accounts after considering the adjustments given below.

Adjustments:
1. Closing stock valued at ₹ 1,00,000.
2. Write off ₹ 2,000 as bad debts and create a provision for doubtful debts @ 5% on Sundry Debtor.
3. Depreciate Machinery by 10% p.a. and Loose Tools is valued at ₹ 1,00,000.
4. Charge Interest on Capital @ 2% p.a.
Solution:
In the books of Nandini & Co.

Balance Sheet as of 31st March 2019

Question 5.
Prepare Final accounts of Abdul Traders for the year ending 31st March 2019 with the help of the following Trial Balance and Adjustments.
Trial Balance as of 31st March 2019.

Adjustments:
1. Closing stock valued at ₹ 89,600
2. Outstanding expenses Salaries ₹ 2,000, Wages ₹ 4,000
3. Charge depreciation on Machinery @ 10%
4. Bad debts are written off ₹ 2,000 and create a provision for bad and doubtful debts 5% on Sundry Debtors.
Solution:
In the books of Abdul Traders.


Balance Sheet as of 31st March 2019

Question 6.
Following is the Trial Balance of Geeta Enterprises. You are required to prepare a Trading and Profit & Loss Account for the year ended 31st March 2019 and the Balance Sheet as of that date after taking into account the additional information provided to you.
Trial Balance as of 31st March, 2019

Additional information:
1. Closing stock of goods on 31st March 2019 valued at ₹ 7,100 at cost price and ₹ 7,500/- as market price.
2. Travelling expenses include ₹ 125 spent on personal traveling.
3. ₹ 175 is to be written off as bad debts which were due from Mr. Ashok, a debtor, and 5% R.D.D. is to be maintained on debtors.
4. Reserve for discount on debtors as well as on creditors is to be maintained at 2% and 3% respectively.
5. Provide 10% depreciation on Plant & Machinery and Furniture.
Solution:
In the books of Geeta Enterprises.

Balance Sheet as of 31st March 2019

Question 7.
Following are the closing ledger balances of Deepak & Co. Prepare Trading Account and Profit & Loss Account for the year ended 31st March 2019 and Balance sheet as of that date.
Ledger Balances of Mr. Deepak and Co. as of 31st March, 2019

Adjustments:
1. Closing stock was valued at ₹ 60,000
2. An amount of ₹ 3,000 is still to be received on account of commission.
3. Provision for discount on debtors and Provision for discount on Creditors are to be created 2% and 3% respectively.
4. Amount of Furniture is to reduce by ₹ 4,500 and Building by 10%.
5. Outstanding expenses Salaries ₹ 4,500 and Wages ₹ 1,500.
Solution:
In the books of Deepak & Co.

Balance Sheet as of 31st March 2019

Question 8.
Following is the Trial Balance extracted from the books of Raju Traders. You are required to prepare Trading A/c, Profit & Loss A/c for the year ending on 31st March 2019 and Balance Sheet as of that date after Considering the additional information given below.
Trial Balance as of 31st March 2019

Adjustments:
1. Closing stock is valued at ₹ 40,000 at Cost Price and ₹ 44,000 as Market Price.
2. Provide Depreciation on Plant & Machinery, Furniture, Computers @ 5%, 10%, 15% respectively.
3. Salaries are paid for 10 months only.
4. Further Bad debts amounted to ₹ 400 and provide 10% R.D.D. on Sundry Debtors.
5. Advertisement is paid for 2 years.
Solution:
In the books of Raju Traders.


Balance Sheet as of 31st March 2019

Question 9.
From the following Trial Balance of Shradha Enterprises, you are required to prepare Final Accounts for the year ending on 31st March 2019.
Trial Balance as of 31st March 2019

Adjustments:
1. Insurance is prepaid to the extent of ₹ 2,250
2. Closing stock is valued at ₹ 3,80,000 Cost price and ₹ 4,00,000 as Market price.
3. Outstanding Expenses are Wages ₹ 6,000 and Rent ₹ 5,000
4. Write off further had debts ₹ 1,500 and provide 5% Reserve for doubtful debts.
5. Depreciation on Furniture and Plant & Machinery at 10% p.a. and on Freehold Premises at 15% p.a.
Solution:
In the books of Shradha Enterprises

Balance Sheet as of 31st March 2019

Question 10.
From the following Trial Balance of Ayub & Co. as of 31st March 2019, you are required to prepare Trading Account, Profit and Loss Account for the year ending 31st March 2019, and Balance Sheet as of that date after making necessary adjustments.
Trial Balance as of 31st March 2019

Adjustments:
1. Stock on hand on 31st March 2019 valued at ₹ 60,000
2. Rent amounting to ₹ 600 Prepaid.
3. Bad Debts ₹ 600 and create a Provision for Doubtful Debts 5%
4. Depreciation on Plant & Machinery by 10% and Furniture is valued at ₹ 4,500
5. Outstanding Salaries ₹ 900
Solution:
In the books of Ayub and Co.

Balance Sheet as of 31st March 2019

Question 11.
From the following Trial Balance of Rajnish & Sons and the additional information given below prepare Trading & Profit and Loss Account for the year ending on 31st March 2018 and Balance Sheet as on that date.
Trial Balance as of 31st March 2018

Adjustments:
1. Closing Stock valued at ₹ 3,00,000 cost price and ₹ 3,20,000 at Market price.
2. Salaries were paid for 10 months only.
3. Insurance is paid for one year ending on 30.06.2018
4. One of the debtors Mr. Amit became insolvent, from whom ₹ 10,000 was not received.
5. 5% R.D.D. is to be maintained on Debtors.
6. Depreciate Machinery & Furniture @ 10% and 5% respectively.
Solution:
In the books of Rajnish & Sons


Balance Sheet as of 31st March 2018

Question 12.
From the following Trial Balance of John & Sons, you are required to prepare Trading Account, Profit and Loss Account for the year ending 31st March 2019 and Balance Sheet as of that date.
Trial Balance as of 31st March 2019

Adjustments:
1. Closing Stock ₹ 27,000
2. Charge Depreciation on Machinery and Motor car @ 10% and 5% respectively.
3. Create R.D.D. 5% on Sundry Debtors
4. Interest on Drawings @ 5% p.a.
5. Create Discount on Sundry Creditors 3%
6. Advertisement ₹ 1,000 is prepaid.
7. Outstanding Rent ₹ 1,500
Solution:
In the books of John and Sons

Balance Sheet as of 31st March 2019

Question 13.
From the following Trial Balance of Pushkraj, you are required to prepare Trading Account and Profit and Loss Account for the year ended 31st March 2019 and Balance Sheet as of that date.
Trial Balance as of 31st March 2019

Adjustments:
1. Stock on 31st March 2019 was valued at ₹ 28,000
2. Create a Provision for doubtful debts on Sundry Debtors @ 5%
3. Depreciate Motor car by 5% p.a. and Machinery by 7% p.a.
4. Outstanding expenses Rent ₹ 800 & Wages ₹ 1,000
5. Charge interest on Capital @ 3% p.a.
6. Goods of ₹ 4,000 withdrawn by the proprietor for personal use.
Solution:
In the books of Pushkraj


Balance Sheet as of 31st March 2019

Question 14.
From the following Trial Balance of Jyoti, Trading Co. Prepare the Trading Account and Profit and Loss Account for the year ended 31st March 2019 and Balance Sheet as of that date.
Trial Balance as of 31st March 2019

Adjustments:
1. Closing stock valued at ₹ 58,000 Cost Price while the Market price is ₹ 60,000
2. Write off ₹ 1,200 as Bad debts and create provision for doubtful debts 2% on Sundry Debtors and also create provision for discount on Creditors 5%.
3. Loose Tools is valued at ₹ 52,000 and depreciate Furniture by 10% p.a.
4. Outstanding expenses Salary ₹ 1,000 and Wages ₹ 225
5. Charge interest on Capital 2% and on Drawings 10%.
Solution:
In the books of Jyoti Trading Co.

Balance Sheet as of 31st March 2019

Question 15.
From the following Trial Balance of Manish Enterprise, Prepare the Trading Account and Profit and Loss Account for the year ended 31st March 2019 and Balance sheet as of that date.
Trial Balance as of 31st March 2019

Adjustments:
1. Closing Stock was ₹ 32,000.
2. Write off 50% of patents, depreciate Plant & Machinery by 10% p.a and Office Equipment by 20%.
3. Reserve for bad debts is to be created 5% and discount on Debtors 2%.
4. Outstanding expenses Mobile charges ₹ 300 and Freight ₹ 500
5. Charge Interest on Capital @ 5%.
6. Goods of ₹ 2,000 distributed on free samples.
Solution:
In the books of Manish Enterprise

Balance Sheet as of 31st March 2019

Class 11 Commerce BK Textbook Solutions Digest

• 11th Bk Chapter 1 Practical Problems
• 11th Bk Chapter 2 Practical Problems
• 11th Bk Chapter 3 Practical Problems
• 11th Bk Chapter 4 Practical Problems
• 11th Bk Chapter 5 Practical Problems
• 11th Bk Chapter 6 Practical Problems
• 11th Bk Chapter 7 Practical Problems
• 11th Bk Chapter 8 Practical Problems
• 11th Bk Chapter 9 Practical Problems
• 11th Bk Chapter 10 Practical Problems