Model Examination - Accountancy February 2024
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Questions and Answers

What is the total amount that Nandu's Capital A/c is debited?

  • 8,000
  • 12,000 (correct)
  • 20,000
  • 40,000

What process is indicated by the transfer of reserve to an old partner's capital?

  • Reserve dissolution (correct)
  • Capital contribution
  • Investment liquidation
  • Profit sharing

How much is Sindu's Capital A/c debited?

  • 30,000
  • 20,000 (correct)
  • 8,000
  • 12,000

What does the abbreviation 'Dr.' signify in accounting?

<p>Debit (A)</p> Signup and view all the answers

What is the significance of the figures 12,000 and 20,000 in the context provided?

<p>Amounts debited from capital accounts (D)</p> Signup and view all the answers

What is the total amount of salary given to Saju?

<p>36,000 (D)</p> Signup and view all the answers

How much interest is charged on Raju's drawings?

<p>2,000 (A)</p> Signup and view all the answers

What is the total interest on capital allocated in the profit and loss appropriation account?

<p>20,800 (A)</p> Signup and view all the answers

What is Saju's share of profit as recorded in the account?

<p>8,320 (B)</p> Signup and view all the answers

What is the total amount recorded in both the profit and loss account for credits?

<p>68,000 (C)</p> Signup and view all the answers

What is the gaining ratio between Maya and Roja?

<p>1:1 (B)</p> Signup and view all the answers

What is the total debit recorded in Maya's capital account?

<p>20,000 (C)</p> Signup and view all the answers

What does the table indicate about the amount credited to Sobha's capital account?

<p>20,000 (B)</p> Signup and view all the answers

Which term describes the account that is credited when goodwill is accounted for?

<p>Goodwill A/c (C)</p> Signup and view all the answers

What is the total credit recorded in Maya's capital account as stated in the table?

<p>50,000 (B)</p> Signup and view all the answers

How much was recorded as a debit for Roja's capital account?

<p>20,000 (A)</p> Signup and view all the answers

What is the total amount represented as a debit to the goodwill account?

<p>20,000 (A)</p> Signup and view all the answers

What does the expression 'Goodwill already appearing in the books' refer to?

<p>Previous goodwill valuations (A)</p> Signup and view all the answers

What accounts for the decrease in the value of machinery recorded at 2,000?

<p>Revaluation of Asset (A)</p> Signup and view all the answers

Which situation does NOT result in the compulsory dissolution of a firm?

<p>One partner becomes insane (C)</p> Signup and view all the answers

What is the total interest on drawings calculated from the provided amounts?

<p>$1,470 (B)</p> Signup and view all the answers

How is the interest on drawings for one month calculated based on total sum of products?

<p>Sum of products x $ rac{1}{12}$ x $ rac{Rate of interest}{100}$ (C)</p> Signup and view all the answers

What amount represents the product for the 15,000 drawing over 6 months at a 7% interest rate?

<p>$90,000 (B)</p> Signup and view all the answers

In the provided adjustments, what does the credit side of Reserve A/c indicate?

<p>Transfer of profits to the reserve (C)</p> Signup and view all the answers

What is the purpose of decreasing the provision for doubtful debts in the revaluation account?

<p>To reflect more accurate financial forecasting (D)</p> Signup and view all the answers

What is the final step in calculating the total interest on drawings using the sum of products?

<p>Calculating a percentage of the total sum (B)</p> Signup and view all the answers

What is the main difference between the Fixed Capital Method and the Fluctuating Capital Method in terms of the number of accounts involved?

<p>Two accounts are used in the Fluctuating Capital Method. (C)</p> Signup and view all the answers

How is the credit balance presented in the Fixed Capital Method?

<p>It should be specifically mentioned in the partnership deed. (A)</p> Signup and view all the answers

What is the formula used to calculate the value of goodwill based on super profit?

<p>Super profit x 100 / Normal profit (A)</p> Signup and view all the answers

In terms of adjustments, how does the Fixed Capital Method differ from the Fluctuating Capital Method?

<p>In the Fixed Capital Method, adjustments are made in the current account. (B)</p> Signup and view all the answers

What is the value of the normal profit if the average profit is ₹30,000 and the normal rate is 10%?

<p>₹20,000 (B)</p> Signup and view all the answers

Which statement best describes the nature of the Capital Account in the Fluctuating Capital Method?

<p>It can show a debit balance. (C)</p> Signup and view all the answers

What ratio applies to the normal profit calculation in the context provided?

<p>1:1 (B)</p> Signup and view all the answers

What happens to the appearance of adjustments in the Balance Sheet when using the Fluctuating Capital Method?

<p>They appear directly in the Capital Account itself. (D)</p> Signup and view all the answers

What is the total amount of the creditors listed in the balance sheet?

<p>41,500 (A)</p> Signup and view all the answers

What is the total value of the assets according to the balance sheet?

<p>118,900 (B)</p> Signup and view all the answers

Which capital account has the highest balance before adjustments?

<p>Suja's Capital (A)</p> Signup and view all the answers

What is the total amount of cash held by all partners in the Partners Capital A/c?

<p>46,000 (D)</p> Signup and view all the answers

What is the value of the provision for doubtful debts in the Revaluation A/c?

<p>800 (B)</p> Signup and view all the answers

How much is the revaluation profit carried forward in the Revaluation A/c?

<p>1,050 (B)</p> Signup and view all the answers

What amount is shown under 'Outstanding Electricity Bill' in the Balance Sheet?

<p>1,000 (D)</p> Signup and view all the answers

Which of the following is NOT an asset according to the Balance Sheet?

<p>Outstanding Electricity Bill (B)</p> Signup and view all the answers

What is the total amount of stock listed in the Revaluation A/c?

<p>2,000 (B)</p> Signup and view all the answers

What is the total value recorded for 'Land and Building' in the Revaluation A/c?

<p>5,200 (A)</p> Signup and view all the answers

What is the balance of Anju's capital after adjustments in the Partners Capital A/c?

<p>41,550 (A)</p> Signup and view all the answers

Which of the following represents the assets in the Balance Sheet?

<p>Land &amp; Building, Bills Receivable, Stock (D)</p> Signup and view all the answers

What amount is debited for cash goodwill in the Partners Capital A/c?

<p>1,050 (D)</p> Signup and view all the answers

How much is the total sum of provisions for doubtful debts and outstanding electricity bill?

<p>2,200 (A)</p> Signup and view all the answers

Flashcards

Transfer of Reserve

The process of transferring a portion of the existing reserve to the old partner's capital account. This is done when a new partner joins the partnership.

Partner's Capital Account

A record of the capital contributions and withdrawals made by a partner in a partnership.

Capital

The amount of money a partner has invested in the partnership. This represents their ownership stake and potential for profit sharing.

Dr. (Debit)

Used to indicate that a partner is receiving a monetary amount. It's a debit entry on their capital account.

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Capital Account Statement

A simple record of the capital account balances for the partners, showcasing their current financial positions.

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Profit and Loss Appropriation Account

This account is used by a partnership to distribute the profits (or losses) earned by the firm amongst its partners.

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Crediting Partners' Capital Accounts

A partner's share of the profits is credited to their respective capital accounts.

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Salary to Partner

A fixed sum of money paid to a partner for their services to the firm.

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Interest on Partner's Capital

A percentage of a partner's capital investment earned as a return on their investment.

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Drawings

The amount withdrawn by partners from the business for their personal expenses.

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Fixed Capital Method

The method in which the capital account of each partner remains fixed throughout the year and any changes in the capital are adjusted through a current account.

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Fluctuating Capital Method

The accounting method where the capital account fluctuates based on profits, drawings, and investments. One capital account is used for all changes.

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Super Profit

The difference between the actual profit earned by a business and the normal profit expected in a similar business.

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Normal Rate of Return

A measure of the profitability of a business. It's calculated as the percentage of a business's profit on its capital.

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Goodwill

An intangible asset representing the excess earning capacity of a business.

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Profit Sharing Ratio

The ratio between partners' profits and losses is 1:1. This means they share profits and losses equally.

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Difference between Fixed and Fluctuating Capital Methods

The difference between how profits and losses are calculated using the fixed capital method and the fluctuating capital method.

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Current Account

An account used to record the temporary changes in the capital of a partner. It acts as a bridge between the capital account and the profit and loss account.

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Revaluation Account Debit

A journal entry that reflects a decrease in the value of an asset like machinery. It's typically made when the asset's market value drops below its book value.

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Provision for Doubtful Debt

This account represents the amount of money a business anticipates not collecting from its customers. It's a provision for potential bad debts.

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Interest on Drawings

Interest calculated on the amount of money withdrawn by partners from the business for personal use. It's a way to account for the cost of using the business's money.

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Compulsory Dissolution (Insolvency or Insanity)

When all or all but one partner becomes insolvent (unable to pay debts) or insane, the firm is compulsorily dissolved.

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Compulsory Dissolution (Illegal Business)

The firm must be dissolved when its operations become illegal due to changes in the law.

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Compulsory Dissolution (Partner Retirement)

If a firm is forced to dissolve because all but one partner decides to leave, it is known as a compulsory dissolution.

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Compulsory Dissolution (Death)

If all or all but one partner dies, the firm is forced to dissolve.

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Reserve Account Debit

A journal entry that reflects the transfer of money from the reserve account to the business's liabilities account.

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Gaining Ratio

The difference between a partner's new profit sharing ratio and their old profit sharing ratio.

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Gaining Ratio Calculation

It is calculated to determine the amount of goodwill to be allocated to each partner when a new partner is admitted into the partnership.

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Journal Entry for Goodwill Adjustment

The journal entry records the adjustment of goodwill when a new partner is admitted. The new partner brings in their capital contribution, which is used to adjust the existing partners' capital accounts and record goodwill.

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Goodwill in Partnership

In the context of a partnership, goodwill represents the premium paid for the firm's intangible assets and future earnings potential.

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Capital Adjustment on New Partner Admission

It occurs when a new partner is admitted to a partnership and existing partners need to adjust their capital accounts to accommodate the new partner's contribution.

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Goodwill Distribution

When a new partner joins an existing partnership, the goodwill is calculated and distributed among the existing partners based on their gaining ratio.

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Revaluation Account

An account that reflects the changes in the value of assets due to revaluation, including increases (profits) and decreases (losses).

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Revaluation Profit

The increase in the value of an asset recognized in the Revaluation Account.

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Revaluation Loss

The decrease in the value of an asset recognized in the Revaluation Account.

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Balance Sheet

A statement that summarizes the financial position of a partnership at a specific point in time.

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Assets

The resources owned by a partnership, such as cash, inventory, and land.

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Liabilities

The obligations a partnership owes to others, such as loans and accounts payable.

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Equity

The partners' ownership claim in the partnership.

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Trading Account

A record of the transactions related to the purchase and sale of goods, the costs of goods sold, and the profit or loss on sales.

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Interest on Capital

A percentage of a partner's capital investment that is paid to them as a return on their investment.

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Partner's Drawings

The portion of the profit allocated to the partner's drawing account. This represents the amount that the partner can withdraw for personal use.

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Capital Investment

The amount a partner invests in the business, which contributes to the overall capital of the partnership.

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Study Notes

Model Examination - February 2024, Part III - Accountancy

  • Time: 2 hours
  • Cool-off time: 15 minutes
  • Maximum marks: 60

Part III - Accountancy with Computerised Accounting

  • Credits to Revaluation Account: 6 months
  • Loan Account Ratio: 1:1
  • Fixed vs. Fluctuating Capital Method
    • Fixed Capital Method:
      • Uses two accounts (Capital and Current)
      • Adjustments mostly to Current Account
      • Appears in the balance sheet
      • Specific mention in partnership deed
      • Shows credit balance
    • Fluctuating Capital Method:
      • Uses one account (Capital)
      • Adjustments directly to Capital account
      • Only Capital Account appears
      • Not necessary/optional mention in partnership deed
      • Shows debit balance
  • Normal Profit Calculation: 20,000 ( = 2,00,000 * 10/100)
  • Super Profit Calculation: Average Profit - Normal Profit.
  • Goodwill Calculation: Super Profit X 100/Normal Rate
  • Revaluation Account (Machinery): 2,000 Dr. to Machinery (Decrease in Machine value)
  • Dissolution of a Firm: Specified situations where a firm dissolves
    • All partners, or those excluding one, become insolvent
    • Business becomes illegal
    • All partners, or those excluding one, retire
    • All partners, or those excluding one, die
  • Interest on Drawings: Calculated for specific dates and given amounts. Examples include 16,000 for 9 months, 15,000 for 6 months, and 9,000 for 2 months.

Bank Account Details (Financial Year 2019-2021)

  • Dec 31, 2019: Bank Account balance of 27,800
  • Balance carried forward (c/d) = 40,000
  • Dec 31, 2020: Bank Account balance of 25,200
  • Balance carried forward (c/d) = 20,000
  • Dec 31, 2021: Bank Account balance of 22,600
  • Instalment/year payment Calculation: 60,000 / 3 = 20,000

Difference between Dissolution of Partnership and Dissolution of Firm

  • Meaning: Partnership relations change, a Firm's complete closure
  • Termination: Partnership not terminated, Firm terminated
  • Court's Intervention: Dissolution is by mutual agreement, Firm through court
  • Settlement: Partner assets/liabilities reassessed, Firm's assets sold, liabilities paid and balance assigned to partners
  • Closure: Book continuation/closure for the business type

Profit and Loss Appropriation Account

  • Particulars Amounts
    • Salary, Interest on Capital, and Share of Profits specified amounts for Raju and Saju

Gaining Ratio (New Ratio - Old Ratio)

  • Detailed ratio calculation given between partners for their shares.

Goodwill A/c

  • Goodwill appearing and written off.

Revaluation Account

  • Stock, Provision for doubtful debt, Outstanding Electricity bill, and Revaluation Profit/Loss with capital balances and amounts.
  • Additional calculations on Land and Building and amounts.

Partners' Capital Account

  • Balances of existing Partners
  • Capital balances for specific partners listed.

Outstanding Electricity Bill, Bills Receivable, and Debtors

  • Balances for each partner and an overall sum

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Description

Prepare for your upcoming accountancy examination with this comprehensive quiz covering key concepts in computerized accounting, including capital methods and profit calculations. Test your knowledge on revaluation accounts, loan ratios, and goodwill calculations. Ideal for students looking to solidify their understanding of the subject before the exam.

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