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2201.

Explain dissolution of a firm by (i) Agreement, and (ii) Notice.

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Solution :(i) Dissolutin by Agreement: A firm is DISSOLVED when all the partners agree that it should be dissolved. A partnership firm is the cretion by an agreement, similarly a firm can be dissoved by an agreemtnt.
(ii) Dissolution by Notice: When the PARTNESHIP is at will, the firm may be dissolved at any TIME by any partner GIVING notice in writing to all the other partners of his intention to dissolve the firm.
Discussion
2202.

Explain dissolution of a firm by (i) Agreement and (ii) Notice .

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Discussion
2203.

Explain Convention of Consistency

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SOLUTION :ACCORDING to this convention, FINANCIAL Statements should be prepared on the same basis as that of the preceding period. Though, consistency is important to make the accounting data COMPARABLE this does not mean that change cannot be made in a business unit's accounts. In the event of any change (when there are good reasons for it), a note must be attached ALONG with the accounting statements indicating the alteration(s)
Discussion
2204.

Explain briefly the meaning and significance of the following ratios: (i) current ratio ,(ii) quick ratio, (iii) Debt to equity ratio, (iv) Trade receivables or debtors trunover ratio.

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Discussion
2205.

Explain Conservatism or Prudence Principle

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Solution :Under this principle, the working RULE is: "Anticipate no gain but provide for all possible LOSSES. Thus, the ACCOUNTANT should record not only ACTUAL losses but ALSO those losses that are likely to occur.
Discussion
2206.

Explain briefly the meaning and significance of any two of the following ratios: (i) Trade receivables or debtors' turnoverratio,(ii) gross profit ratio ,(iii)operating ratio.

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Discussion
2207.

Explain any two limitations of ratio analysis

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Discussion
2208.

Explain adjusting entries

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Solution :The Adjusting ENTRY is recorded to relate the figures to the trading period. Suppose, premises have been sublet on March 31, and three months’ rent, has been received in ADVANCE amounting to Rs. 12000. While preparing accounts up to 31st March, one should take into account only one month’s rent for preparing the profit and loss account (accounting period concept), the rest two month’s rent, already received is for the NEXT year and will be credited to profit and loss account next year. The adjusting entry will be:
Rent Account DR
To Advance Rent Account
Rent Received in advance Account is a ‘Liability’ and is shown in the balance sheet.
Discussion
2209.

Expenses allowed on issue of Shares appears in a Company's Balance Sheet under :

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SHARE CAPITAL
CURRENT Liability
Unamortized Expenditure
Contingent Liability

Answer :B
Discussion
2210.

Exe Ltd. Has balance in Provisionfor Tax Account of Rs. 50,000 as on 31st March , 2018 and 2019 respectively . It made a provision for tax during the year of Rs. 65,000. theamount of tax paid during the year was

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Rs.50,000.
Rs.60,000.
Rs.40,000.
None of these.

Answer :C
Discussion
2211.

Exe Ltd. has Rs. 10,000 debit balance in Calls-in-Arrears Account and also Rs. 10,000 credit balance in Calls-in-Advance Account. The Accountant did not show both the accounts in Balance Sheet adjusting the two accounts against each other. Is the approach correct?Give your reasons.

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Solution :No, the APPROACH is not correct because the two items are SEPARATE. Call-in-Arrears is shown by way of deduction from the Called-up SHARE Capital whereas Calls-in-Advance is shown as CURRENT LIABILITY.
Discussion
2212.

Exe Ltd. Has balance in Provision for Tax Account of Rs 50,000 and Rs 75,000 as on 31st March, 2018 and 2019 respectively. It made a provision for tax during the year of Rs 65,000. The amount of tax paid during the year was

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RS 50,000
Rs 60,000
Rs 40,000
None of these

Answer :C
Discussion
2213.

Equity shares cannot be issued for the purpose of :

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CASH RECEIPTS
Purchase of assets
Redemption of DEBENTURES
DISTRIBUTION of dividend

ANSWER :D
Discussion
2214.

Enumerate any three items of 'Current Assets' and three items of 'Current Liabilities'included in each of these major headings as per Revised Schedule VI (Now Schedule III) of the Companies Act, 1956 (Now 2013).

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SOLUTION :CURRENT InvestmentsCurrent LIABILITIES
• Current Investments•Short-term Borrowings
• Inventories•Trade Payables
•Trade Receivables•Other Current Liabilities.
Discussion
2215.

Equity Share Capital Rs. 20,00,000, Reserve 5,00,000, Debentures Rs. 10,00,000, Current Liabilities Rs. 8,00,000. Debt-equity ratio will be :

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0`.4:1`
`.32:1`
`.72:1`
`.5:1`

ANSWER :A
Discussion
2216.

Enumerate two main steps involved in valuing the goodwill according to super profit method.

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Solution :(i) Ascertain super profits by SUBTRACTING normal profits from average profits.
(ii) CALCULATE goodwill by multiplying super profits with NUMBER of years' purchase.
Discussion
2217.

Electronics Ltd. Issued 10,000, 6% Debentures of Rs.100 each at a premium of Rs.10 lt will credit 6% Debentures by

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RS. 11,00,000.
Rs.10,00,000.
Rs.9,00,000.
None of these.

Answer :B
Discussion
2218.

Electronics Ltd. Issued 10,000, 6% Debentures of Rs 100 each at a premium of Rs 10. It wil credit 6% Debentures by

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RS 11,00,000
Rs 10,00,000
Rs 9,00,000
None of these

Answer :B
Discussion
2219.

Durga Ltd. invited applications for issuing 1,00,000 equity shares of Rs. 10 each at par. The amount was payable as follows : {:("On Application","Rs. 2 per share"),("On Allotment","Rs. 3 per share."),("On First and Final Call","Rs. 5 per share."):} Applications were received for 2,80,000 shares. Applications for30,000 shares were rejected and the money refunded. Allotment was made to the remaining applicants as follows. {:("Category","No. of Shares Applied","No. of Shares Allotted"),("I","1,50,000","85,000"),("II","1,00,000","15,000"):} Excess money received with applications was adjusted towards sums due on allotment and first final call. All calls were made and were duly received except the final call by a shareholder belonging to Category I who applied for 300 shares. His shares were forfeited. The forfeited shares were re-issued at a premium of 30% fully paid up. Pass necessary Journal entries for the above transactions in the book of Durga Ltd. Open calls in-arrears and calls in advance account wherever required.

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Solution :NET amount received on ALLOTMENT Rs. 1,25,000, Net amount received on final call Rs. 4,24,150, Captial Reserve Rs. 850.
Hint : Excess APPLICATION money transferred to Share Allotment A/c : Rs. 1,75,000
Excess application money transferred to CALLS in Advance A/c : Rs. 75,000
Excess application money RETURNED Rs. 1,10,000
Calls in Arrears Rs. 850.
Discussion
2220.

Electricity expenses are shown in the Statement of Profit and Loss under:

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COST of MATERIALS Consumed,
Other EXPENSES,
Employees BENEFIT Expenses,
Any of the above.

Solution :Other Expenses
Discussion
2221.

Donation received for a special purpose :

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Should be credited to INCOME and Expenditure Account
Should be credited to separate account and shown in the BALANCE Sheet
Should be shown on the ASSETS side
Should not be RECORDED at all.

Answer :B
Discussion
2222.

Donation received for special purpose is

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LIABILITY
REVENUE RECEIPT
CAPITAL Receipt
None of these

Solution :Capital Receipt
Discussion
2223.

Dolphin Ltd. Reaned profit of 5,00,000. on sale of fixed asset which was credited to Statement of Profit and Loss . In preparing Cash Flow Statement . Rs.5,00,000 will be

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added to net profit before taxand EXTRAORDINARY items.
DEDUCTED from net profit before TAX and extraordinary
deducted from net profit before tax and extraordinary shown as extraordinary item under Operating Activity.
None OFTHE above.

Solution :deducted from net profit before tax and extraordinary
Discussion
2224.

Dolphin Ltd. earned profit of Rs 5,00,000 on sale of fixed asset which was credited to Statement of Profit and Loss. In preparing Cash Flow Statement, Rs 5,00,000 will be

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added to net profit before TAX and extraordinary ITEMS
deducted from net profit before tax and extraordinary items
deducted from net profit before tax and extraordinart shown as extraordinary ITEM under Operating Activity
None OFTHE above

Solution :deducted from net profit before tax and extraordinary items
Discussion
2225.

Does the loan from an outsider have priority over the loan from a partner as to repayment ?

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Discussion
2226.

Does movement between items that constitute Cash or Cash Equivalents result into Cash Flow? Give reasons in support of your answer.

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Solution :TRANSACTIONS which REPRESENT MOVEMENT between items of Cash or Cash Equivalents do not result in Cash Flow as they are PART of the cash management of an enterprise rather than part of its Operating, Investing and FINANCING Activities.
Discussion
2227.

Does partnership firm has a separte legal entity? Give reason in suport of your answer.

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SOLUTION :No, a partnership firm does not have a SEPARATE legal entity from its partners.
Reason: PRIVATE ASSETS of the partners can be used to meet the LIABILITIES of the firm in case firm's assets are not adequate to meet its liabilities.
Discussion
2228.

Do you think that Financial Statement Analysis is a post-mortem of business transactions?

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SOLUTION :YES, Financial Statement , Analysis is a post-morterm of the BUSINESS transactions as it assesses the operational ability , profitability and financial SOUNDNESS of the business.
Discussion
2229.

Do you think that Calls in Advance is a part of Share Capital ?

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Solution :No. It is not a COMPANY's Share CAPITAL and no DIVIDEND is payable on the amount of CALLS in ADVANCE.
Discussion
2230.

Do you think lower Inventory Turnover Ratio is good for the firm?

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Solution :No.Lower INVENTORY TURNOVER Ratio is not good as it indicates POOR inventory MANAGEMENT.
Discussion
2231.

DN Ltd. issued 50,000 shares of Rs. 10 each payable as Rs. 2 per share on application, Rs. 3 on allotment and Rs. 5 on first and final call. Applications were received for 70,000 shares. It was decided that: (a) to refuse allotment to the applicants for 10,000 shares, (b) to allot 20,000 shares to Mohan who had applied for similar number, and (c) to allot the remaining shares on pro rata basis. Mohan failed to pay the allotment money and Sohan who belonged to Category 'c' and was allotted 3,000 shares paid thecall money with allotment. Calculate the amount received on allotment.

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Solution :Applications were RECEIVED for 70,000 shares and allotment was made as follows:

`{:("Calculation of Amount Received on Allotment:",Rs.),("Allotment money due (50,000 shares"xx"Rs.3)","1,50,000"),("Less:Excess APPLICATION money ADJUSTED on allotment",),("(Pro rata allotment)""(10,000"xx"Rs.2)", "-20,000"),(,BAR(1,30,000)),("Less: Calls-in-Arrears (Mohan)(""20,000"xx"Rs.3)","60,000"),("Allotment money received", " " bar(70,000)),("ADD: Calls-in-Advance (3,000"xx"Rs.5)","15,000"),("Amount Received on Allotment including Calls-in-Advance",""barul(ul(85,000))):}`
Discussion
2232.

Do you agree with the statement that Cash Book is a subsidiary book only?

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Solution :No. CASH BOOK is a SUBSIDIARY book as well as a PRINCIPAL book
Discussion
2233.

Dividend received by other than financial enterprise is shown in Cash Flow Statement under

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OPERATING ACTIVITIES
INVESTING Activities
Financing Activities
None of these

Solution :Investing Activities
Discussion
2234.

Dividend received by other than financial enterprise is shown in Cash Flow Statement under:

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OPERATING ACTIVITIES
INVESTING activities.
FINANCING activities

Solution :Investing activities.
Discussion
2235.

Dividend received by financial enterprise is shown in Cash Flow Statement under:

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OPERATING ACTIVITIES
Investing activities.
FINANCING activities

Solution : Operating activities
Discussion
2236.

Dividend received by financial enterprise is shown in Cash Flow Statement under

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OPERATING ACTIVITIES
Investing Activities
Financing Activities
None of these

Solution :Operating Activities
Discussion
2237.

Dividend paid by a Trading company is classified under which kind of activity while preparing cash flow statement?

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Cash Flow from Operating ACTIVITIES
Cash Flow from INVESTING Activities
Cash flow from FINANCING Actvities
No Cash Flow

Answer :C
Discussion
2238.

Dividend paid by a manufacturing company is shown under which kind of activity while preparing Cash Flow Statement.

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SOLUTION :Dividend paid by a MANUFACTURING company is SHOWN under FINANCING ACTIVITY.
Discussion
2239.

Dividend paid by a non - financial company is shown as

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OPERATING ACTIVITIES.
Investing Activities
FINANCING Activities.
CASH and Cash Equivalent.

Solution :Financing Activities.
Discussion
2240.

Dividend receibedby other than financial enterprise is shown incashFlow Statement uner

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OPERATING ACTIVITIES.
INVESTING Activities
Financing Activites.
None of these.

Solution :Investing Activities
Discussion
2241.

Dividend paid by a non-financial company is shown as

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OPERATING ACTIVITIES
Investing Activities
FINANCING Activities
CASH and Cash Equivalent

Solution :Financing Activities
Discussion
2242.

Dividendpaid by a manufacturing company is classfied under which kind of activity while perparing cash flow statement ?

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CASH FLOW from Operating ACTIVITIES
Cash Flow from INVESTING Activities
Cash flow from FINANCING Actvities
No Cash Flow

Answer :C
Discussion
2243.

Dividend paid by a finance company is classified under which kind of activity while preparing Cash Flow Statement.

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SOLUTION :It is CLASSIFIED under FINANCING ACTIVITY.
Discussion
2244.

Dividend paid by a financial company is shown as cash outflow under

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OPERATING ACTIVITIES
Investing Activities
FINANCING Activities
CASH and Cash Equivalent

Solution :Financing Activities
Discussion
2245.

Dividend paid by a finance company is classified under which kind of activity while preparing cash flow statement ?

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Cash FLOW from Operating Activities
Cash Flow from INVESTING Activities
Cash flow from FINANCING Actvities
No Cash Flow

Answer :C
Discussion
2246.

Dividend is paid on:

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AUTHORISED CAPITAL,
ISSUED Capital,
SUBSCRIBED Capital that is Paid-up,
NONE of the above.

Solution :Subscribed Capital that is Paid-up,
Discussion
2247.

Dividend earned by a financial company is shown in the Statement of Profit and Loss as:

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REVENUE from OPERATIONS,
Other Income.
Any of the above,
NONE of the above.

Solution :Revenue from Operations,
Discussion
2248.

(distribution of profit)X.and Y entered intopartershipon 1st April2018theydo nothavepartnership Deed. Theycontributed Capitals Of Rs. 10,00,000 andRs. 6,00,000respecively on 31stOctober , 2018 X advanceda loanof Rs, 4,00,000 to thefirmwithoutanyagreementas to interestBooksare closed on 31st MarchEvery year,Fill themissinginformation/ values(?) in thefollowingAccounts:

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SOLUTION :
Discussion
2249.

Distinguish between Reserve Capital and Capital Reserve.

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SOLUTION :
Discussion
2250.

Distinguish between Oversubscription and Undersubscription of Shares.

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SOLUTION :
Discussion