1.

(i) State any two uses of Securities Premium as stated in Section 78 of the Companies Act, 1956. (ii) In a Cost Sheet, how would you treat : (a) Primary packing material. (b) Secondary packing material. (iii) Give two differences between Sacrificing Ratio and Gaining Ratio. (iv) In case of a Joint Venture business, how is abnormal loss of goods which have been insured, treated in the books of accounts ? (v) List two instances when a partner ‘s Fixed Capital may change. (vi) List any two objectives of stock valuation. (vii) Why is a Journal Ledger Adjustment Account opened ? (viii) Assuming that the Debt-Equity Ratio of a company is 2 : 1, state whether this ratio would increase, decrease or not change in the following cases : (a) Issue of new shares for cash. (b) Repayment of a long-term bank loan. (ix) What are trade investments ? (x) The firm with X. Y and Z as partners earned a profit of ? 3,00,000 during the year ended 31st March. 2011. 20% of this profit w as to be transferred to General Reserve. Pass the necessary- journal entry for the same.

Answer»

(i) Two uses of securities premium as stated in Section 78 of the Companies Act, 1956 are : 

(ii) (a) To issue fully paid bonus shares to the shareholders. 

(b) To write off discount on issue of shares and debentures

(iii) 

BasisSacrificing RatioGaining Ratio
(a) MeaningIt is the ratio in which the old partners surrender a part of their share in favor of new partners.It is the ratio in which remaining partners acquire the outgoing partners share.
(b) Purpose of calculationNew partner’s share of good-will is divided in sacrificing ratio.Outgoing partner’s goodwill divided between remaining partners in gaining ratio.

(iv) The total value of abnormal loss is not to be recorded in the Joint Venture Account. However, any claim received from the Insurance Company is to be credited to the Joint Venture Account.

(v) Following are the two instances when a partner’s fixed capital may change : 

(vi) • When fresh or additional capital has been introduced by a partner.

(vii) • When an amount has been withdrawn by a partner to reduce his capital.

(viii) The following would be the effect: It would result in a decrease in the Debt Equity Ratio.

(ix) Trade investments are long-term investments made by a company in the shares and debentures of another company (not including its subsidiaries).

(x) Profit and Loss Appropriation A/c Dr. 60,000 

To General Reserve A/c 60,000 

(Being 20% of profit transferred to General Reserve)


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