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2301.

Define Goodwill.

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Solution :Goodwill is the value of the reputation of a FIRM in RESPECT of the profits expected in future over and above the normal profits earned by other SIMILAR firms belonging to the same type of industry.
Discussion
2302.

Define Double Entry System of Book Keeping.

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Solution :Double Entry BOOK Keepingrefersto a SYSTEM of ACCOUNTING in which EVERY transaction is recorded under two aspects
Discussion
2303.

Define cash as per Accounting Standard-3.Or What is meant by 'Cash'?Or Cash Flow Statement shows inflows and outflows of 'Cash' and 'Cash Equivalents' from various activities of an enterprise during a particular period. Give the meaning of 'Cash' for the purpose of preparing Cash Flow Statement.

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Solution :Cash comprises of cash on HAND and demand DEPOSITS with BANKS.
Discussion
2304.

Define Capital Expenditure.

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SOLUTION :Capital EXPENDITURE is the expenditure that is incurred for the purpose of long-term advantages of business. It is incurred EITHER for the ACQUISITION of an asset or for increasing the revenue-earning capacity of the business
Discussion
2305.

Define Balance Sheet.

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Solution :Balance Sheet or Position Statement is a historical statement which SHOWS the financial position of an enterprise at a point of TIME. It lists the balances of various ASSETS (non-current and current), equity and liabilities (non-current and current) at a point of time.
Discussion
2306.

Deepak Ltd. Offered 5,50,000 equity shares.the call (Rs.8 per share) was received except from Gopal , who holds 4,000 shares has not paid after application money of Rs.2 per shareand from shyam who holds 1,000 shares has paid only Rs.6 per share . Gopal's shares were forfeited . the amount of subscribed capital to be disclosed in the Balance Sheet is

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Rs.39,96,000.
Rs.39,74,000.
Rs. 49,46,000.
Rs.49,74,000.

Answer :B
Discussion
2307.

Deepak Ltd. Offered 5,50,000 equity shares of Rs 10 each. The public applied for 5,00,000 shares. The call (Rs 8 per share) was received except form Gopal, who holds 4,000 shares has not paid after application money of Rs 2 per share and from Shyam who holds 1,000 shares has paid only Rs 6 per share. Gopal's shares were forfeited. The amount of subscribed capital to be disclosed in the Balance Sheet is

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RS 39,96,000
Rs 39,74,000
Rs 49,46,000
Rs 49,74,000

Answer :B
Discussion
2308.

Deepa, Neeru and Shilpa were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Neeruretired and the new profit sharing ratio between Deepa and Shilpa was 2 : 3. On Neeru's tetirement, the goodwill of the firm was valued at Rs. 1,20,000. Record necessary journal entry for the treatment of goodwill on Neeru's retirement.

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SOLUTION :
Working NOTES
1. Calculation of Gaining Ratio
Gaining Share = New Share - Old Share
Deepa's Gaining Share = `(2)/(5)-(5)/(10)=(4-5)/(10)=-(1)/(10)=(1)/(10)` i.e., SACRIFICE.
Shilpa's Gaining Share = `(3)/(5)-(2)/(10)=(6-2)/(10)=(4)/(10)`i.e., Gain
Hence, Shilpa will compensate both Neeru (retiring PARTNER) and Deepa (continuing partner who has sacrificed) to the extent of their sacrifice worked out as FOLLOWS:
Deepa's Sacrifice = Goodwill of the firm `xx` Sacrificing Share
`"=Rs. 1,20,000"xx(1)/(10)=Rs. 12,000`
Neeru's (Retiring Partner's Sacrifice) = Rs. `1,20,000 xx (3)/(10)` = Rs. 36,000.
Discussion
2309.

Deepu Ltd.A non financing company received dividend on shares. How will it be presented while preparing 'Cash Flow Statement'?

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SOLUTION :INVESTING ACTIVITIES.
Discussion
2310.

Decrease in the value of assets at time ofretirement of a partner is

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CREDITED to REVALUATION ACCOUNT.
Debited to Revaluation Account.
Debited to Profit and LOSS Account.
None of these.

Solution :Debited to Revaluation Account.
Discussion
2311.

Decrease in the value of assets at the time of retirement of a parnter is

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CREDITED to Revaluation ACCOUNT
Debited to Revaluation Account
Debited to PROFIT and Loss Account
None of these

Solution :Debited to Revaluation Account
Discussion
2312.

Decrease in liability at the time of retirement of a partner is

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CREDITED to REVALUATION Account
Debited to Revaluation Account
Debited to Profit and Loss Account
None of these

Solution :Credited to Revaluation Account
Discussion
2313.

Decount/ Loss on Issue of Debentures debited to Statement of Profit and Loss (Finance Cost ) is

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ADDED under Operating Activities and Debentures areshown as Financial Activities at NET AMOUNT RECEIVED.
added under Operating Activities and Debentures areshown asInvestingActivities at net amount received.
deducted under Operating Activities and shown as inflow under Financing Activities.
None of the above.

Solution :added under Operating Activities and Debentures areshown as Financial Activities at net amount received.
Discussion
2314.

Debtors Rs 2,64,000. Provision for Doubtful Debts Rs 24,000. Rs 48,000 of the book debts proved bad. Realisation Account is to be credited with

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`RS 2,16,000`
`Rs 2,40,000
Rs 1,92,000
None of these

Answer :A
Discussion
2315.

Debt to equity ratio of a company is 0.8:1 state whether the long term loan obtained by the company will improve decrease or not change the ratio.

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Discussion
2316.

Debt to Equity Ratio : X Ltd-0.25:1,Y ltd -0.50:1 .It means Y ltd is depending more on borrowings or external debts as compared to shareholders'funds.

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Discussion
2317.

Debt to equity ratio of x ltd is 1:2 what is the effect of conversion of debentrure in to preferecne shares on this ratio?

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Discussion
2318.

Debt to Equity ratio = 2:1

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Discussion
2319.

Debt Equity Ratio is :

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LIQUIDITY Ratio
Solvency Ratio
Activity Ratio
Operating Ratio

Answer :B
Discussion
2320.

Debt equity ratio of a company is 1:2. Which of the following transactions will increse it:

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ISSUE of NEW shares for cash
REDEMPTION of Debentures
Issue of Debentures for cash
Goods purchased on credit

Answer :C
Discussion
2321.

Debentures redeemable after 10 years of issue are shown as:

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Long-term BORROWINGS,
Other Long-term LIABILITIES,
Short-term Borrowings,
Other Short-term Liabilities.

Solution :Long-term Borrowings
Discussion
2322.

Debentures redeemable after 10 years from the date of issue are shown as

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LONG TERM BORROWINGS
Other Long-tern Liabilities
Short-term Borrowings
Other Short-term Liabilities

Solution :Long term Borrowings
Discussion
2323.

Debentures of a Company can be issued :

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For Cash
For CONSIDERATION other than Cash
As a COLLATERAL Security
Any of the above

Answer :D
Discussion
2324.

Debentures issued as collateral security will be debited to :

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BANK ACCOUNT
Debentures Suspense Account
Debentures Account
Bank LOAN Account

Answer :B
Discussion
2325.

Debentures issued as Collateral Security

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are RECORDED in the BOOKS.
are not recorded in the books.
MAY or may not be recorded in the books.
None of these.

Solution :may or may not be recorded in the books.
Discussion
2326.

Debentures are shown in the Balance Sheet under the head of:

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Other LONG-TERM LIABILITIES,
CURRENT Liabilities,
Long - term BORROWINGS,
Long-term Provisions.

Solution :Long - term Borrowings,
Discussion
2327.

Debentures can be redeemed :

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By issue of NEW shares
By EXISTING resources
By ACCUMULATED PROFITS
By all of the above

Answer :D
Discussion
2328.

Debentures are part of

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SHAREHOLDER's FUNDS
BORROWED Funds
Borrowings from Bank
None of these

Solution :Borrowed Funds
Discussion
2329.

Debentures are shown in the Balance Sheet of a company under the head of

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NON - CURRENT LIABILITES.
Current Liabilities.
Share Capital.
None of these.

Solution :Non - current Liabilites.
Discussion
2330.

Debentureholders are

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OWNERS of the COMPANY
LENDERS of the company
vendors of the company
customers of the company

Solution :lenders of the company
Discussion
2331.

D,E and F are sharingprofitsand losses in the ratio of 5:3:2. They decide to share profits and losses in the ration of 2:3:5 with effects from 1st April, 2019. Theyalso decide to record the effect of the followingwithoutaffecting their book values, bypassingan adjustmententry: {:(,,"BookValues(₹)"),(,"General Reserve","25,000"),(,"Contingecy Reserve","25,000"),(,"Profit and Loss A/c (Cr.)","75,000"),(,"Adverstisement Supense A/c (Dr.)","1,00,000"):}

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Solution : Calculationof NetEeffect of Accumulated PROFITS,Losses and Reserves,
`{:(,,"₹"),(,"General Reserve","25,000"),(,"Contingecy Reserve","25,000"),(,"Profit and Loss A/c (CR.)","75,000"),(,,overline"2,50,00"),(,,underline"1,00,000"),(,"Less: ADVERTISEMENT Supense A/c (Dr.)",underlineunderline"1,50,000"):}`
`{:(,"Calculationof Sacrifice/(Gain):","D","E","F"),((i), "Their Old Share",5//10,3//10,2//10),((ii),"Their NEW Share",underline(2//10),underline(3//10),underline(5//10)),((iii),"Sacrifice/(Gain)(i) -(ii)",underlineunderline(3//10)"(Sacrifice)",underlineunderline(...),underlineunderline(-3//10)"(Gain)"):}`
CALCULATION of shareof scarifingand gainingpartner in thenet accumulated profits, losses and reserve:
For `D = ₹1,50,000xx 3//10 = ₹ 45,000`, ForF `= ₹ 1,50,000 XX 3//10 = ₹ 45,000`.
Discussion
2332.

Debenture interest is paid

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at a predetermined rate
at VARIABLE rate.
at a rate BASED on net profit of the COMPANY.
at a rate as determined by the company from time to time.

Solution :at a predetermined rate
Discussion
2333.

Debenture holders are :

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Ownersof the COMPANY
DEBTORS of the Company
Creditors of the Company
PROMOTERS of the Company

Answer :C
Discussion
2334.

Debenture Application Account is in the nature of

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RealAccount
Personal Account
Nominal Account
None of the Above

Answer :B
Discussion
2335.

Current Ratio of X Ltd. Is 2:1. State with reason, which of the following transaction swould (i) increase, (ii) decrease, or (iii) not changethe ratio: (i)Included in the Trade Payables was a bills payable of 9000 which was met on maturity. (ii) Complany issued 10000 Equity shares of 10 each to the vendors of Machinery purchased.

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SOLUTION :
Discussion
2336.

Currrent liabilities of a company were Rs. 2,00,000 and its current ratio was 2.5:1. After this the company paid Rs. 1,00,000 to a trade payable. The current ratio after the payment will be:

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`2:1`
`4:1`
`5:1`
NONE of the above

ANSWER :B
Discussion
2337.

D Ltd. invited applications for issuing 10,00,000 equity shares shares of Rs. 10 each. The public applied for 8,55,000 shares. Can the company proceed for the allotment of shares ? Given reason in support of your answer.

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Solution :The company cannot PROCEED for allotment of shares as the minimum SUBSCRIPTION is not RECEIVED which should be 90 % of the shares OFFERED for subscription (i.e. 9,00,000).
Discussion
2338.

Current ratio of a firm is 9:4. Its current liabilities are Rs. 1,20,000. Inventory is Rs. 30,000. Its liquid ratio will be:

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`1:1`
`1.5:1`
`2:1`
`1.6:1`

ANSWER :C
Discussion
2339.

D Ltd. Invited applications for 10,00,000 equity shares of Rs. 10 each. The public applied for 8,55,000 shares. Can the company proceed for the allotment of shares? Give reason in support of your answer.

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Solution :Allotment of shares cannot TAKE place as minimum subscription is not RECEIVED which should be 90% of shares OFFERED for subscription or RS. 90,00,000.
Discussion
2340.

Current Ratio of a company is 3 : 1. State with reason whether the payment of Rs. 20,000 to the creditors will increase, decrease or not change the ratio.

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Solution :After payment of Rs. 20,000 to the CREDITORS, both total of current ASSETS and total of current liabilities will be reduced by the same amount. Therefore, Current RATIO will INCREASE.
Discussion
2341.

Current Ratio of a companyis 3:1st with with reson whether the payment of Rs 20000 to the creditors will increase decrease or not change the ratio.

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Discussion
2342.

Current ratio of a company is 3:1 state with reason whether the payment of deivdent wuld improve reduce or not change the ratio.

Answer»
Discussion
2343.

Current Ratio of a Company is 2.5:1. If its working capital is Rs. 60,000, its current liabilities will be:

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RS. 40,000
Rs. 60,000
Rs. 1,00,000
Rs. 24,000

Answer :A
Discussion
2344.

Current ratio of a company is 2:1 state with reason whether office equipment sold for Rs 4000(book value Rs 5000) would improve rduce or not change the ratio.

Answer»
Discussion
2345.

Current Ratio is 2 : 1. On the sale of fixed asset (Book value Rs 20,000) for Rs 18,000, state whether the Current Ratio will

Answer»

IMPROVE
Decline
Will not change
Can't say

Solution :Improve
Discussion
2346.

Current Ratio of a company is 2:1 State giving reasons ,Which of the following will improve reduce or not change the ratio: (i) Redemption of Debentures (ii) Purchase of goods aginst cheque. (iii) Purchase of Loose Tools against cash. (iv) Sale of fixed asset against cheque. (v) Receipt of cheque from a debtor.

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Solution :(i) Redemption of Debentures will improve the current Ratio as both current assets (CASH or bank) and current liabilites (other current liabilites) have decreased by the same amount.
(ii) Purchase of goods against cheque will not change the current ratio asone current asset (goods) pre[laces another current asset (bank)
(iii) purchase of LOOSE tools against cash willl REDUCE the current ratio as current asset (cash) declines while loose tools are not included in curent asset for calculatiing current ratio.
(iv) Sale of fixed asset against cheque will improve the current ratio since current asset (bank) increases while in current liabilities there is no change
(V) Cheque RECEIVED form a debtor will not change the current ratio since one curent asset (Debtor) is replaced by another current asset (Bank).
Discussion
2347.

Current liabilities of a company are Rs. 5,60,000, current ratio is 2.5:1 and quick ratio is 2:1. Find the value of the Inventories.

Answer»
Discussion
2348.

Current Ratio of a company is 2:1 . State giving reasons which of the following would improve, reduce or not change the ratio: (i) Repayment of a current liability (ii) Purchase of goods for cash. (iii) Sale of ofice equipment for 4000 (Book value 5000) (iv) Purchase of stock in trade on credit (v) Sale of godds 11000(Cost 10000). (vi) Payment of dividend

Answer»

Solution :In such questions it is better to assume amounts of currents assets (CA) and current liabilities (CL).It then becomes easy to determine effect of the transaction on the ratio. Current Ratio (Given) is 2:1 let us assume CA=Rs 20000 and CL=Rs 10000.
(i) Repayment of current liability will improve current ratio because fall in current asset will be less than twice the fall in current liability
(ii) Purchase of goods on cash will not change the current ratio , neither the total current assets nor the total current liabilites are affected since there is only a CONVERSION of one current asset (cash) in ot ANOTHER current asset (Goods).
(iii) SALE of office equipment will improve the current ratio beacuse current asset (cash) will increase without any change in current liability.
(iv) Both the Total current Assets and total current liabilitiesare INCREASED by the same amount .Therefore the current ratio will REDUCE
(v) Sale of goods for Rs 110000, cost being Rs 10000 will improve the current ratio because current asset (cash or trade receivables) will increase by Rs 1000
(vi) Payment of dividend will reduce the total of current assets and total of current liabilities by the same amount . Therefore the current ratio will improve
Discussion
2349.

Current ratio = 4.5:1, quick ratio = 3:1.Inventory is Rs. 36,000. Calculate the current assets and current liabilities.

Answer»
Discussion
2350.

Current Ratio is 2:1 . On the sale of fixed asset (Book value Rs. 20,000) for Rs. 18,000, state whether the Current Ratio will

Answer»

IMPROVE.
Decline.
Will not change.
Can't say.

Solution :Improve.
Discussion