Page 143 - MA12

Model Test Papers M.49

Answers

1. (i) Difference between Sacrificing Ratio and Gaining Ratio
Basis Sacrificing Ratio Gaining Ratio
1. Meaning It is the ratio in which the old partners have agreed It is the ratio in which the continuing
to sacrifice their shares in profit in favour of new partners acquire the outgoing (retired or
partner. deceased) partner’s share.
2. How to Calculate It is calculated by taking out the difference It is calculated by taking out the difference
between Old Share and New Share. between New Share and Old Share.
(ii) Pro rata Allotment means allotment of shares to the applicants in the ratio of number of
shares offered to the number of shares applied.
For example:
Total No. of Shares offered = 4,000
Total No. of Shares applied = 4,800
No. of Shares applied by James = 96
No. of Shares to be allotted to James = 4,000/4,800 × 96 = 80 shares.
The need for a pro rata allotment arises in case of oversubscription of Shares, i.e., when
the number of shares applied for is more than the number of shares offered for subscription
by the company.
(iii) Difference between Realisation Account and Revaluation Account
Basis Realisation Account Revaluation Account
1. Meaning It records the realisation of assets and settlement It records the effect of revaluation of
of liabilities. assets and reassessment of liabilities.
2. When Prepared It is prepared at the time of dissolution of the It is prepared at the time of reconstitution
firm. of the firm.
(iv) Redemption of Debentures means discharging the liability towards debentures by making
repayment to the Debentureholders.
Methods of Redemption of Debentures:
1. By payment in lump sum at the time of their maturity.
2. By payment in instalments by draw of lots.
3. By purchase in the Open Market.
(v) When Fixed Capital Accounts Method is followed, the amount of loss is debited to
Partners’ Current Accounts. Therefore, Partner’s Capital Account is not affected by the
amount of losses and always shows credit balance.
(vi) Calculation of Amount realised from Re-issue of Forfeited Shares:
`
Amount of Forfeited Shares Account on Forfeiture of Shares (100 × ` 80) 8,000
Less: Amount transferred to Capital Reserve 5,000
Loss on Reissue of Forfeited Shares 3,000
Loss on Reissue per share is ` 30 (` 3,000 ÷ 100 shares). It means shares have been reissued
at a discount of ` 30 per share i.e., shares have been reissued at ` 70 per share.
Amount realised from reissue of shares = 100 × ` 70 = ` 7,000.