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Model Test Papers M.409

5. State with reason whether Income and Expenditure Account records all revenue
receipts and revenue payments relating to current year.

Or
Income and Expenditure Account is prepared on cash basis of accounting. Do
you agree? (1)
6. Simran and Reema are partners sharing profits and losses in the ratio of 2 : 1. They
acquire a running business with assets and liabilities valued at ` 5,00,000 and
` 3,00,000 respectively paying a consideration of ` 4,00,000. The accountant debited
the difference of ` 2,00,000 to Goodwill Account. Is he correct in doing so? Why? (1)

7. From the following information, compute the Outstanding Subscription as on
31st March, 2018 as well as Subscription Outstanding for the year: `
(i) A club has 150 members, each paying an annual subscription of 1,000
(ii) Subscription received during the year 1,60,000
(iii) Subscription received in advance as at 31st March, 2017 30,000
(iv) Subscription received in advance as at 31st March, 2018 20,000
(v) Subscription outstanding as at 31st March, 2017 52,000
(vi) Subscription of ` 24,000 are still in arrears for the year 2016–17. (3)

8. Mona, Nisha and Priyanka are partners in a firm. They contributed ` 50,000 each as
capital three years ago. At that time Priyanka agreed to look after the business as
Mona and Nisha were busy. The profits for the past three years were ` 15,000, ` 25,000
and ` 50,000 respectively. While going through the books of account, Mona noticed
that the profit had been distributed in the ratio of 1 : 1 : 2. When she enquired from
Priyanka about this, Priyanka replied that since she looked after the business she
should get more profit. Mona disagreed and it was decided to distribute profit equally,
retrospectively for the last three years.
You are required to make necessary corrections in the books of account of Mona, Nisha
and Priyanka by passing an adjustment entry.
9. Bharat Ltd. issued 40,000; 9% Debentures of ` 100 each, at a discount of 5% and
redeemable at 10% premium after 4 years. These debentures are due for redemption
on 31st July, 2018. The company invested the funds as required by law in the specified
securities on 30th April, 2018 earning interest @ 10% p.a. The Board of Directors also
decided to transfer the minimum required amount to Debentures Redemption Reserve
Account on 31st March, 2018. The company had in its Debentures Redemption Reserve
Account a balance of ` 8,80,000 as at 1st April, 2017.
Pass necessary Journal entries in the books of Bharat Ltd. at the time of redemption
of Debentures. (3)