Accountancy and Financial Management Past Paper PDF

Question Bank Accountancy and Financial Management - III PART – 1 Select the most appropriate answer from the following. 1) What is the primary legal document needed to convert a partnership firm into a limited company? A) Partnership Agreement B) Memo...

Question Bank Accountancy and Financial Management - III PART – 1 Select the most appropriate answer from the following. 1) What is the primary legal document needed to convert a partnership firm into a limited company? A) Partnership Agreement B) Memorandum of Association (Correct Answer) C) Shareholders Agreement D) Articles of Association 2) In the process of converting a partnership firm into a limited company, what is usually issued to the partners? A) Bonds B) Shares (Correct Answer) C) Debentures D) Loans 3) Which of the following is NOT a benefit of converting a partnership firm into a limited company? A) Limited liability B) Greater access to capital C) Increased privacy (Correct Answer) D) Perpetual succession 4) When a partnership firm is converted into a limited company, the assets and liabilities of the firm are typically: A) Written off B) Transferred to the new company (Correct Answer) C) Sold at market value D) Left with the original partners 5) What tax implication might arise when a partnership firm is sold to a limited company? A) No tax implications B) Capital gains tax on transferred assets (Correct Answer) C) Sales tax on shares issued D) Income tax on dividends 6) Which document must be filed with the Registrar of Companies during the conversion process? A) Application for Conversion (Correct Answer) B) Tax Returns C) Partnership Deed D) Shareholder Agreement 7) In the context of a partnership converting to a limited company, "capital contribution" typically refers to: A) Personal savings of the partners B) The value of assets brought into the company by partners (Correct Answer) C) Loans taken by the partnership D) Dividends distributed to shareholders 8) The term "limited liability" means that: A) Partners are personally liable for company debts B) Shareholders' liability is limited to their share capital (Correct Answer) C) There is no liability for any financial loss D) Only directors can be held liable 9) In the absence of any agreement, partners are liable to receive interest on their loans @ A) 12 % p.a. B) 10% p.a C) 8% p.a. D) 6% p.a. (Correct Answer) 10) Interest on Partner’s capital is _____________ A) An expenditure B) An appropriation (Correct Answer) C) A gain D) None of the above 12) A partner act as ____________ for a firm A) Third Party B) Agent (Correct Answer) C) Employee D) None of the above 13) Piecemeal distribution can help organizations manage: A) Inflation B) Cash flow challenges (Correct Answer) C) Excess inventory D) Workforce redundancy 14) In a piecemeal distribution, cash is typically allocated based on A) Individual or project priorities (Correct Answer) B) Random selection C) The largest outstanding debts D) Equal shares to all stakeholders 15) Which of the following is a benefit of piecemeal distribution? A) Increases cash flow variability B) Reduces the risk of misallocation (Correct Answer) C) Diminishes stakeholder trust D) Creates unnecessary administrative complexity 16) Which factor is NOT typically considered in a piecemeal distribution strategy? A) Timing of cash needs B) Risk tolerance of stakeholders C) Historical performance of the distribution process D) Market trends in asset prices (Correct Answer) 17) Salaries and wages payable by a firm as on the date of dissolution is treated A) As unsecured debtors B) As non-recoverable C) As secured creditors D) As preferential creditors (Correct Answer) 18) When there are four partners, excess capital is to be computed A) Thrice (Correct Answer) B) Once C) Twice D) Four times 19) After all excess capital are paid, the balance cash is paid to the partners A) In the profit sharing ratio (Correct Answer) B) In the ratio of their unit capitals C) Equally D) None of the above 20) What is the primary purpose of amalgamation of firms? A) To increase competition B) To expand market share and reduce operational costs (Correct Answer) C) To create redundancies D) To dissolve all existing partnerships 21) On amalgamation of a firm, __________ Account is opened. A) Realization (Correct Answer) B) Deficiency C) P & L Adjustment D) P & L Suspense 22) On amalgamation, fictitious assets of the vendor firm are transferred to A) Realization Account B) Partners Capital Accounts (Correct Answer) C) Purchasing Firms Account D) P & L Adjustment 23) On sale of firm to a company, the purchase consideration is calculated by A) Payment method B) Lump sum method C) Net assets method D) Any of the above (Correct Answer) 24) On amalgamation, loans from partners of vendor firm are transferred to A) In the ratio of their unit capitals B) Equally C) In the profit sharing ratio D) None of the above (Correct Answer) 25) Shares or debenture received from company on sale of firm are distributed among the partners A) In a specific ratio agreed by all partners B) Equitably C) In the ratio of capital D) Any of the above (Correct Answer) 26) Conversion of partnership into a limited company is referred to as _____________ of partnership Business to a joint stock company A) Exchange B) Sale C) Transfer (Correct Answer) D) Acquisition 27) In partnership accounts, the drawings of a partner are: A) Considered as an expense B) Subtracted from the partner’s capital account (Correct Answer) C) Added to the partner’s capital account D) Not recorded in the final accounts 28) If a partnership agreement specifies a fixed salary for a partner, this amount is treated as A) A liability B) An expense before calculating profit C) An appropriation of profit after calculating profit (Correct Answer) D) A non-operating expense 29) What does the Balance Sheet of a partnership reflect? A) Assets, liabilities, and equity of the partnership (Correct Answer) B) Revenue generated during the period C) The net cash flow for the year D) The profit-sharing ratio among partners 30) which of the following is included in the final accounts of a partnership? A) Balance Sheet B) Income Statement C) Statement of Partners’ Capital D) All of the above (Correct Answer) State whether the following statements are true or false 1. Excess capital method is also known as Quotient Method. - True 2. Partners capital accounts are closed on settlement of purchase consideration among the partners - False 3. Profit or loss on realization is transferred to partners’ capital account in capital ratio - False 4. Provision for discount on debtors shows debit balance - False 5. Closing stock is valued at market price only. - False 6. Outstanding wages is a nominal account - False 7. Partners are not allowed to withdraw funds from the partnership at any time. False 8. In a partnership, the final accounts are prepared only at the end of the financial year. False 9. Goodwill can be recorded in the final accounts of a partnership. - True 10. The partnership agreement dictates how profits are to be shared among partners. - True 11. Current account of a partner always shows credit balance - False 12. Bill under discount is a current liability - False 13. Expenses on dissolution are credited to realization account - False 14. Return outward is deducted from purchase - True 15. Partners loan are internal liability - True 16. On amalgamation old firm are dissolved - True 17. Drawing appears on debit side of capital account. - True 18. The partners must conduct lawful business - True 19. Goodwill require special treatment on amalgamation - True 20. On amalgamation fictitious assets are transferred to capital account - True 21. Unpaid salaries of employees are preferential liabilities. - True 22. Partners capital accounts are closed on settlement of purchase consideration among the partners - True 23. Debit balance of trading account represent a gross loss - False 24. General Reserve is credited to partner’s capital account. - True 26. In Amalgamation of firms, the old firms are called as Amalgamating Firms - True 25. As per the Partnership Act, interest 6% p.a. is allowed on partner’s loans - True 26. In Amalgamation of firms, the old firms are called as Amalgamating Firms - True 27. In case of current accounts of partners, no interest is payable on the balances of current accounts. - True 28. Payable to employees is a preferential liability of the firm. - True 29. Interest on drawings is an income of the firm - True 30. In conversion of partnership into Limited Company, the partnership business is purchased by a Limited Company. – True  PART – 2 1) Mukesh, Rupesh and Dipesh carrying on business in partnership decided to dissolve it on and from 30th September, 2021. The following was their Balance Sheet on the date: Liabilities Rs Assets Rs Partners Capital : Fixed Assets 40,000 Mukesh 20,000 Current Assets 22,000 Rupesh 5,000 Bank 13,000 Dipesh 10,000 General Reserve 30,000 Creditors 10,000 75,000 75,000 As per the arrangements with the bank, the partners were entitled to withdraw Rs 4,000 immediately and Rs 9,000 after 1st December, 2020. It was decided that after keeping aside an amount of Rs 1,000 for estimated realization expenses, the available funds should be distributed amongst the partners as and when realized. The following were the realization: Fixed Assets Current Assets (Rs) (Rs) 31st Nov 2021 (First) 10,000 5,000 15th Nov 2021 (Second) 26,000 12,000 30th December, 2022 (Final) 10,000 12,000 Actual realization expenses amounted to Rs 700. You are requested to submit a statement showing distribution of cash amongst the partners by Proportionate Method. 2) M, N, and S are carrying on business in partnership has decided to dissolve it on and from 31st December 2020. The following was the balance sheet on that date: Liabilities Rs Assets Rs General Reserve 10,000 Fixed Assets 80,000 Mrs A's Loan 20,000 Current Assets 44,000 Mrs B's Loan 20,000 Bank 26,000 Capital M 30,000 N 15,000 S 25,000 1,03,820 1,50,000 1,50,000 It was decided that after keeping aside an amount of ` 4,000 for estimated realization Expenses, the available funds should be distributed amongst the partners as and when Realized. The following were the realization: Actual realization expenses amounted to Rs 4,400 You are requested to submit a statement showing distribution of cash among the partners Under excess capital method 3) M N AND S Carry on business in partnership sharing profit and losses in the proportions of 1/2, 3/8 and 1/8 respectively. On 31st March, 2020, they agreed to sell their business to a limited company. Their position on that date was as follows: Liabilities Rs Assets Rs Partners’ Capital : Machinery 48,000 M’s Capital 40,000 Furniture 42,000 N’s Capital 30,000 Stock 23,000 S’s Capital 26,000 Book Debts 15,000 Loan on Mortgage 16,000 Cash 3,000 Sundry Creditors 19,000 1,31,000 1,31,000 The company took the following assets at the valuation shown below: Machinery Rs 61,000 Furniture Rs 31,800 Stock Rs 22,000 Book Debts Rs 14,000 Goodwill Rs 12,000 The company also agreed to pay the creditors which were agreed at Rs 17,700. The company paid Rs 67,000 in fully paid shares of Rs 10 each and the balance in cash. The expenses amounted to Rs 1,500. Prepare ledger accounts in the books of the firm. 4) M/s A & B as partners decided to amalgamate with M/s. C & co. having C and D as a partners on the following terms and conditions: (i) The new firm M/s AC and Co. to consider Goodwill of both the firm at Rs 12,000 each. (ii) The new firm to take over investment at 10% depreciation; Debtors and Furniture at book Value Premises at Rs 53,000; Land at Rs 66,800; Machinery at Rs 9,000 and such cash Which remained after discharged of partner’s loan by respective old firms before Amalgamations. (iii) The new firms also assumed other liabilities of old firms. The following were Balance Sheet of both the firms on the date of amalgamation Liabilities A & Co C & Co Assets A & co C & Co Creditors 20,000 10,000 cash 15,000 12,000 Bills Payable 5,000 Investment 10,000 8,000 Loans : A 8,000 Debtors 9,000 4,000 C 10,000 Furniture 12,000 6,000 Reserves 10,000 4,000 Premises 30,000 Capital : A 35,000 Land 50,000 B 22,000 Machinery 15,000 C 36,000 Goodwill 9,000 D 20,000 1,00,000 80,000 1,00,000 80,000 Solve the above problem and prepare the necessary ledger Account in each case: (1) Realization Account (2) Partners Capital Accounts (3) New Firms Account 5) Amit Bros. and Modi Traders decided to amalgamate and form a new firm called Shah & Co on the following terms and conditions on 1st January 2021 when their Balance Sheet were as follows: - Particulars Desai Bros. Shah Particulars Desai Bros Shah Traders Traders Capital: Building 20,000 41,000 P 60,000 - Furniture 6,000 - Q 30,000 - Investments 30,000 12,000 R - 40,000 Stocks 34,000 46,600 S - 65,000 Debtors 20,000 75,000 Creditors 20,000 46,000 Cash at Bank 11,000 10,400 Bank loan 11,000 34,000 1,21,000 1,85,000 1,21,000 1,85,000 Terms of Amalgamation: -Case of Modi Traders: a) Goodwill was valued at 20,000 b) Modi Traders partners to take over its Bank Loan equally. c) Building was taken to be worth Rs.60, 000. d) Stock to be valued at 30,000. e) Provision for doubtful debts to be created at 5% on debtors. Case II Amit Bros: - a) Goodwill was valued at 10,000. b) Building was taken to be worth Rs.80,000 c) Investment was not taken over by the new firm which was taken over by Varun at 10,000. d) Stock was valued at 42,600 e) Provision for doubtful debts to be created at 5% on debtors Use Net Asset Method to determine the Purchase Consideration and prepare necessary ledger in the books of Modi Traders.  6) The following is the Trial Balance of a firm as on 31 st December, 2020. Debit Rs. Credit Rs. Current Account : Capital: Amar 10,000 - Kamal 30,000 Kusum 8,000 - Kusum 20,000 Kajal 4,000 Cash paid by kajal on 1 st July, 40,000 Cash in hand 8,880 2016 23,900 Opening Stock 79,450 Bills Payable 10,400 Purchases 3,43,250 Reserve for Doubtful Debts 51,050 Return Inward 10,500 Creditors 4,200 Wages 34,350 Outstanding Salaries 5,25,300 Salaries 19,590 Sales 8250 Furniture and Fixtures 10,000 Return Outward Trademarks 31,000 Postage and Insurance 6,480 Trade Expenses 5,380 Rent 8,400 Debtors 80,400 Bad debts 800 Investment at 5% made on 1st August, 2016 12,000 Prepaid Rent 480 Bills Receivable 40,140 7,13,100 7,13,100 Kamal and Kusum were running a business in partnership sharing profits equally. On 1st July, 2016, Kajal admitted into partnership firm for 1/3 rd of profit. She brought in Rs 40,000 in cash of which Rs 12,000 were considered as being payment for her share of goodwill and remainder as her capital. Adjustments: a) Closing stock Rs. 40,000. b) Depreciation on Furniture is @ 10% p.a c) Good to the value of Rs 2,000 have been distributed as a free sample. d) 1/5th of the Trademarks are to be written off. You are required to prepare firms Final Account for the year ending as on 31st December, 2017 The gross profit for the year is to be allocated in the ratio of time between the pre and post admission period. 7) Pandit, Sharma and Karma are partners sharing profit and losses in the ratio 4:2:1. They decided to dissolve the partnership as on 31st March, 2017 when their Balance Sheet was as under: Balance Sheet as on 31st March, 2017 (20 MARKS) Liabilities Rs Assets Rs Partners’ Capital : Land & Building 1,00,000 Pandit 2,00,000 Machinery 3,00,000 Sharma 1,20,000 Debtors 90,000 Karma 40,000 Stock 69,000 10% loan (Unsecured) 80,000 Cash and Bank 1,000 Bills Payable 60,000 Creditors 60,000 5,60,000 5,60,000 Rs 1,600 has to be provided for Realization expenses Thereafter all cash received should be distributed among the partners. The amount was realized as follows: 1st Realization Rs 1, 20,600 nd 2 Realization Rs 1, 00,000 3rd Realization Rs 1, 58,000 4th Realization Rs 55,400 The actual realization expenses were Rs 1,000. Prepare a statement showing piecemeal distribution of cash as per excess capital method. 8) D, E and F carry on business in partnership sharing profits and losses in the proportion of 1/2, 3/8 and 1/8 respectively. On 31st March, 2017, they agreed to sell their business to a limited company. Their position on that date as follows: particular ₹ Particulars ₹ D capital 40,000 Machinery 48,000 E capital 30,000 Furniture Stock 42,000 F capital 26,000 Book Debts 23,000 Loan on Mortgage 16,000 Cash 15,000 Sundry Creditors 18,000 2,000 1,30,000 1,30,000 The company took the following assets at the valuation shown below: Machinery 61,000 Furniture 31,800 Stock 22,000 Book Debts 10,000 The company also agreed to pay the creditor which was agreed at ₹ 17,700. The company paid ₹ 67,000 in fully paid shares of ₹ 10 each and the balance in cash. The expenses amounted to ₹ 1500. Prepare ledger accounts in the books of the firm 9) PQR CO. Ltd was formed with an authorized capital of Rs 1, 50,000 consisting of 10,000 Equity shares @ Rs 10 each and 5,000, 7 ½ Preference Shares of Rs 10 each to acquire on 1-7-14 the business of Amar and Kiran who were sharing profit in the ratio of 3:2. Their balance sheet as on 30-06-2020 was as follows: Balance Sheet Liabilities Rs Assets Rs Trade Creditors 16,580 Land and Building 40,000 Overdraft 8,950 Plant and Machinery 24,000 Capital Stock 15,960 Amar 40,947 Debtors 23,860 Kiran 37,316 1,03,820 1,03,820 The company took over all the assets and assumed all the liabilities and the consideration was fixed at Rs 1, 10,000. In computing this figure, Land and Building were valued at Rs 60,000. Plant and Machinery at Rs 20,000; Stock at Rs 15,000 and Debtors at book value subject t allowances of 5% to cover the doubtful debts. The purchase price was settled by the issue of 3,300 Equity shares at Rs 10 each, to the firm, 2500 preference shares of Rs 10 each, and the balance paid in cash. Prepare: 1. Realization A/c 2. Partners Capital Account 3. PQR CO. Ltd A/c and 4. Cash A/c