INTERNATIONAL INDIAN SCHOOL, RIYADH

TERM – I PREPARATORY EXAMINATION OCT - 2021

ACCOUNTANCY
SUBJECT CODE : 055
Time Allowed: 90 Minutes Maximum Mark: 40
PART I – SECTION A
Instructions: From question number 1 to 18 attempt any 15 questions.

1. Written agreement of partnership which contains terms and conditions of business is:
(a) Articles of Partnership (b) Prospectus
(c) Profit and Loss appropriation A/c. (d) Statement of Partnership

2. Capital employed in a business is ₹2,00,000. Normal Rate of Return on capital employed

is 15%. During the year, the firm earned a profit of ₹48,000. Calculate goodwill on the
basis of 3 year’s purchase of Super Profit.
(a) ₹54,000 (b) ₹60,000
(c) ₹50,000 (d) None of these

3. Hindustan Ltd issued 50,000 equity shares of ₹100 each at a premium of 10%.company
received 46,000 application from the public. All the money duly received .Calculate
amount of premium to be transferred to security premium reserve A/C.
(a) ₹5,00,000 (b) ₹4,60,000 (c) ₹50,00,000 (d) ₹46,00,000

4. A company purchased a running business for a sum of ₹30,00,000 payable 40% by cheque
and the balance by the issue of equity shares of ₹100 each at 20% premium. How many
shares will be issued by the company to the vendor?
(a) 25,000 (b)10,000 (c)15,000 (d) 22,500

5. Forfeited shares can ----------------------

(a) not be re issued at discount
(b) be re issued at a maximum discount of 10%
(c) be re issued at a maximum discount equals to the amount forfeited.
(d) not re issue at par

6. Reserve is ____________(i) to Profit and Loss appropriation a/c. as it is __________(ii)

profit.
(a) (i) credited (ii) charged against (b) (i) debited (ii) appropriation of
(c) (i) credited (ii) appropriation of (d) (i) debited (ii) charged against
7. If the guarantee is given to the partner by some partners, deficiency on such will be borne
by
(a) Partnership firm. (b) All of the other partners.
(c) Partners who had given the guarantee. (d) None of the above.

8. If the Partners are maintaining the capital account on Fixed basis, partner’s capital account
will have:
(a) Credit balance. (b) Debit balance.
(c) Credit or Debit balance. (d) May have Nil balance.

9. A, B and C were partners sharing profit or loss in the ratio of 7:3:2. From Jan. 1, 2019 they
decided to share profit or loss in the ratio of 8:4:3. Due to change in the profit-loss sharing
ratio, B’s gain or sacrifice will be:
(a) Gain 1/60 (b) Sacrifice 19/60
(c) Gain 2/6 (d) none of these

10. When equal amounts are withdrawn in the beginning of each quarter ,the interest on
drawing will be calculated as

(a) Total drawings x rate/100 x 7.5/12. (b) Total drawings x rate/100 x 8/12.
(c) Total drawings x rate/100 x 4.5/12. (d) Total drawings x rate/100 x 6/12

11. In case of admission of a partner, the entry for unrecorded investment will be:
(a) Debit partners’ capital A/C and Credit Investment A/C
(b) Debit Revaluation A/C and Credit Investment A/C
(c) Debit Investment A/C Credit Revaluation A/C
(d) None of the above.

12. K and S are partners. They admitted H into the firm .At the time of admission there was a
creditor ₹50,000. If 5% of creditors are not likely to claim their dues. What amount of
creditor will be shown in the new Balance sheet after the admission of H?
(a) ₹47,500 (b) ₹52,500 (c) no change (d) none of the above

13. Capital which is called only at the time of Winding-Up of the Company is called?
(a) Capital reserve (b) Reserve capital
((c) Secure capital (d) Authorised capital

14. M Ltd issued 20,000 equity shares of ₹10 each on Application ₹3; on allotment ₹4; first
call ₹2 and balance in second and final call. All the money duly received but one
shareholder holding 300 shares paid the entire amount along with allotment and another
share holder holding 500 share did not pay allotment and call money. Calculate amount
 received at the time of allotment.
(a) ₹78,900 (b) ₹80,100 (c) ₹78,000 (d) ₹82,100

15. Money received in advance from shareholders before it is actually called-up by the
directors is:
(a) debited to calls in advance account (b) credited to calls in advance account
((c) debited to calls account (d) None of these

16. Pick the odd one out:

(a) Issue of shares to vendors
(b) Issue of shares to Public
(c) Issue of shares to underwriters
(d) Issue of shares to promoters.

17. X and Y share profits in the ratio of 3 : 2. Z was admitted as a partner who gets 1/5 share.
New profit sharing ratio, if Z acquires 3/20 from X and 1/20 from Y would be:
(a) 10 : 6 : 4 (b) 8 : 8 : 4
(c) 6 : 10 : 4 (d) 9 : 7 : 4

18. Which of the following is not recorded in partners current A/c?

(a) Interest on capital (b) Interest on drawings
(c) Additional capital (d) partners commission

PART I – SECTION B
Instructions: From question number 19 to 36 attempt any 15 questions.

19. Akash and Sonam are partners with a profit-sharing ratio of 2 : 1 and capitals of ₹3,00,000
and ₹2,00,000 respectively. They are allowed 6% p.a. interest on their capitals and are
charged 10% p.a. interest on their drawings. Their drawings during the year were Akash
₹60,000 and Sonam ₹40,000. Sonam’s share of net profit as per profit and loss
appropriation account amounted to ₹40,000. Net Profit of the firm before any
appropriations was:
(a) ₹1,22,000 (b) ₹1,13,000 (c) ₹1,17,000 (d) ₹1,45,000

20. A, B and C sharing profits in the ratio of 2 : 2 : 1, have fixed capitals of ₹3,00,000,
₹2,00,000 and ₹1,00,000 respectively. After closing the accounts for the year ending 31st
March 2019 it was discovered that interest on capitals was provided @ 12% instead of
10% p.a. In the adjusting entry:
(a) Cr. A ₹1,200; Dr. B ₹800 and Dr. C ₹400
(b) Dr. A ₹1,200; Cr. B ₹800 and Cr. C ₹400
 (c) Cr. A ₹800; Cr. B ₹400 and Dr. C ₹1,200
(d) Dr. A ₹800; Dr. B ₹400 and Cr. C ₹1,200

21. Assertion: In case of losses interest on capital will not be provided.

Reason: As interest on capital is treated as the appropriation of the profits and there are
no profits but interest on capital can be provided in case of losses if it is to be treated as
charge.
(a) Both A and R true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A
(c) A is true and R is false
(d) A is false and R is true

22. Reshab & Jas are partners in a firm. Reshab is to get commission of 10% of net profit
before charging any commission. Jas is to get a commission of 10% on net profit after
charging her commission. Net Profit for the year ended 31st March, 2021 was ₹55,000.
What will be amount of Profit to be distributed to each?
(a) ₹5,500 to Reshab & ₹5000 to Jas. (b) ₹44500 each.
(c) ₹22,250 each. (d) None of the above.

23. ‘A’ and ‘B’ are partners in a firm. They share their profits and losses in the ratio of 3 : 2.
They have decided that their new profits (losses) sharing ratio will be 1 : 1. At that time
their goodwill is valued at ₹30,000. Calculate amount of goodwill debited to B’s capital
A/C.
(a) ₹2,500 (b) ₹2,400
(c) ₹2,800 (d) ₹3,000

24. At the time of Admission of a new partner, the following adjustment related to asset was
found: “Stock is overvalued by 10%, ₹66,000 Book value”. Actual value of stock is:
(a) ₹66,000 (b) ₹59,400
(c) ₹60,000 (d) ₹72,600

25. Sreesha and Zara are partners .They admitted Manushi in to the firm. They decided
to share future profit in 2:2:1 ratio. At the time of admission, Balance Sheet shows
a credit balance of 10,000 in Profit & Loss. The following entry will be passed:
(a) Debit Sreesha’s capital A/c 5,000 Debit Zara’s capital A/C 5000 and credit Profit
& Loss A/c 10,000
(b) Debit Profit and Loss A/C 10,000 Credit Sreesha Capital A/c 5,000 and Credit Zara’s
capital A/C 5000
(c) Debit Profit and Loss A/c 10,000 and Credit Revaluation A/C 10,000
(d) Credit Revaluation A/C 10,000 and Debit Profit and Loss A/C 10,000

26. Assertion: At the time of the admission of a partner, Revaluation Account will be
debited by ₹2000 to record the claim on Workmen Compensation for ₹20,000 as the
Reserve for the same was only for ₹18,000.
 Reason : The Claim for Workmen Compensation 2000 will be debited in partners capital
A/c .
(a) Both A and R true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A
(c) A is true and R is false
(d) A and R is false

27. E,F and G are partners sharing Profit and Loss in the ratio 3:3:2 .G is guaranteed to get
₹80,000 profit ,Any deficiency if arises will be borne by E. The net profit for the year
ending 31-3-21 amounted to ₹3,12,000. Which of the following statement is correct as
per the following information.
(a) G will get ₹2000 as his share of profit
(b) E will get ₹1,17,000 as his share of profit
(c) E will get ₹1,15,000as his share of profit
(d) both E and F will get ₹1,16,000 each

28. When shares are forfeited, the share capital account is debited with and the share
forfeiture account is credited with:
(a) Paid-up capital of shares forfeited; Called up capital of shares forfeited.
(b) Called up capital of shares forfeited; Calls in arrear of shares forfeited.
(c) Called up capital of shares forfeited; Amount received on shares forfeited.
(d) Calls in arrears of shares forfeited; Amount received on shares forfeited.

29. P Ltd issued 20,000 equity shares of ₹10 each. Application were received for 30,000
shares and pro-rata allotment was made to all the applicants. How many shares an
applicant of 1500 shares will be allotted.
(a) 1000 (b) 2,250 (c) 150 (d) 2000

30. B Ltd forfeited 300 shares of ₹100 each ₹70 called up, for the nonpayment of first call
₹20 per share. These shares were reissued for ₹60 per share as ₹70 paid up .what is the
amount transferred to Capital reserve?
(a) ₹3000 (b) ₹21,000 (c) ₹12,000 (d) none of these

31. Shares which have preferential rights are called?

(a) Equity share (b) Preference share
(c) Debenture (d) Bond

32. Arrange the following in proper sequence as types of “Share Capital”:

(i) Paid up Capital
(iii) Subscribed Capital
Choose the correct option :
(a) (ii) - (iii) - (iv) - (i)
(c) (i) - (ii) - (iii) - (iv)
(ii) Issued Capital
(iv) Called up Capital
(b) (i) - (ii) - (iii) - (iv)
(d) (iv) - (i) - (ii) - (iii)

33. Hasin Ltd issued 5000 equity shares of ₹10 each at a premium of ₹2 per share payable as
follows; ₹2on application ; ₹4 on allotment(including premium); ₹3 on first call and
 balance in second and final call. All the money were duly received but one shareholder
holding 500 shares failed to pay first call and his shares were forfeited immediately after
first call. After that second & final call was made. Calculate amount to be received in
final call if there is no arrear in the final call.
a) ₹13,500 ( b) ₹5000 (c) ₹15000 (d)None of these

34. Forfeiture of shares results in the reduction of:

(a) Paid up Capital (b) Authorised Capital
(C) Fixed Asset (d) Reserve Capital

35. A and B are partners, sharing profits and losses in the ration 5:3. They decided to admit
C for 1/4th share in profit. On the date of admission it was found that the value machinery
reduced by ₹2,000 and Provision for doubtful debts is to be reduced by ₹400. Calculate
Revaluation profit or loss transferred to Partner’s capital A/c.
(a) Profit ₹1,600 (b) Profit ₹2,400 (c) Loss ₹1,600 (d)Loss ₹2,400

36. Goodwill is an _____________ (i) asset and not a ________________ (ii) asset.
(a) i. Tangible ii. Current (b) i. Intangible ii. Not fixed
(c) i. Intangible ii. Not fictitious (d) i. Tangible ii. Not fictitious

PART I – SECTION C
Instructions: From question number 37 to 41 attempt any 4 questions.
Question No. 37 & 38 are based on the hypothetical situation given below.

Sri Limited issued 60,000 equity shares of ₹ 10 each at a premium of ₹2 per share ,payable
as ₹5on application( including premium) ₹ 4 on allotment and the balance on first &final
call. Application were received for 70,000 shares out of which 8000 shares were rejected
and their money was refunded .Money over paid on application was applied towards sum
due on allotment .All the money were duly received except from one shareholder holding
500 shares who failed to pay the final call money.

37. What is the amount received at the time of allotment of shares?

(a) ₹2,30,000 (b) ₹1,90,000
(c) ₹2,40,000 (d) ₹2,80,000

38. What is the amount of share capital appeared in the Balance Sheet of Sri Limited?
(a) ₹6,00,000 (b)₹5,98,500
(c) ₹7,18,500 (d) None of these

Question No. 39, 40 & 41 are based on the hypothetical situation given below.
 Shenza and Zubi started a partnership business, sharing profit and losses in the ration 3:2.
Their fixed capital was ₹5,00,000 and ₹2,00,000 respectively. They were entitled to get
interest on capital 6% p.a. On the year ending 31st March, 2019 their profit was ₹2,50,000.
Such a promising performance for the first year, they decided to expand their business.
So on 1st October, 2019 Shenza agreed to contribute ₹1,00,000 as additional capital and
Zubi advanced a loan of ₹50,000. They also decided to admit Ziya for 1/5th share in profit
which she acquired equally from Shanza and Zubi. Zia brought ₹3,00,000 as capital and
₹30,000 as premium for goodwill.

39. Interest on capital credited to Shanza’s current A/C. is

a) ₹30,000 (b) ₹33,000 (c) ₹24,000 (d) ₹45,000

40. What will be ratio in which premium for goodwill is credited in Shanza and Zubi’s
current A/C.
(a) 3 : 2 (b) 3 : 1 (c) 1 : 1 (d) 5 : 2

41. What is the value of the goodwill of the firm?

(a) ₹1,50,000 (b) ₹3,30,000 (c) ₹10,00,000 (d) none of these.

PART II – SECTION A
Instructions: From question number 42 to 48 attempt any 5 questions.

42. Which of the following is not the limitation of Financial Statements?

(a) Ignore qualitative aspects
(b) Personal bias
(c) Ignores price level change
(d) Provide information about the profitability of the business

43. _____________ ratios are a measure of the speed with which various accounts are
converted into revenue from operations or cash.
(a) Activity (b) Liquidity
(c) Debt (d) Profitability
44. Assertion: Tanmay Ltd. has a Proprietary Ratio of 25% to maintain this ratio at 30%,
management may increase the current assets
Reason : To increase the proprietary ratio the management may increase equity,
increase of current asset will reduce the ratio.
(a) Both A and R true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A
(c) A is true and R is false
(d) A is false and R is true
45. Quick ratio of a company is 0.8:1. From the following transactions which will increase
the quick ratio.
(a) purchase of loose tools
(b) Insurance premium paid in advance
 (c) Sale of goods on credit
(d) Honoured a bill payable on maturity
46. Higher the ratio, lower is the profitability, is applicable to:
(a) Gross profit ratio (b)Net profit ratio (c) Operating ratio (d) Earning per share
47. A firm carries an average inventory of ₹40,000 .Its inventory turnover ratio is 8 times
.Calculate Gross profit if it is 20% on revenue from operation.
(a) ₹3,20,000 (b) ₹80,000 (c) ₹4,00,000 (d) ₹1,80,000
48. Match the items given in Column I with the headings/subheadings(Balance sheet)
as defined in Schedule III of Companies Act 2013.
Column I Column II
(I) Loose Tools (a) Intangible fixed assets
(Ii) Patents (b)Other current assets
(III) Prepaid insurance (c) Long term Borrowings
(IV) Debentures (d) Inventories
(V) Machinery (e) Tangible Fixed assets
Choose the correct option:
A. (I)-(a), (II)-(b), (III)- (d), (IV)- (c), (V)-(e)
B. (I)-(d), (II)- (a), (III)-(b), (IV)- (c), (V)-(e)
C. (I)-(d), (II)- (a), (III)-(b), (IV)-(e), (V)-(c)
D. (I)- (e), (II)- (d), (III)- (a), (IV)-(b), (V)-(b)

PART II – SECTION B
Instructions: From question number 49 to 55 attempt any 6 questions.

49. Which of the following is not come under current liabilities?

(a) short term provision (b) trade payable
(c) deferred tax liabilities (d) other current liabilities.
50. Opening inventory of a firm is ₹80,000, Cost of revenue from operation ₹6,00,000,
Inventory turnover ratio 5 times. Its closing inventory will be
(a) ₹1,80,000 (b) ₹6,80,000 (c) ₹1,20,000 (d) ₹1,60,000
51. Balance sheet of a company is required to prepare in the format given in
(a) Schedule III Part II (b) Schedule III Part I
(c) Schedule III Part III (d) Table A
52. A company’s quick ratio 1.5 : 1 current liabilities are ₹2,00,000. Inventory is ₹1,80,000.
Current ratio will be
(a) 0.9 : 1 (b) 1.9 : 1 (c) 1.4 : 1 (d) 2.4 : 1
53. Resha Limited has a profit of ₹4,00,000 before interest and tax .Its ROI is 25% ,calculate
capital employed:
(a) 1,00,000 (b) 3,00,000
 (c) 16,00,000 (d)cannot calculate from the above
information
54. Which of the following is an operating’ income?
(a) Sale of Merchandise (b) Interest Income
(c) Dividend Income (d) Profit on the sale of old car
55. Ratio based on figures of profit & loss as well as the Balance sheet are:
(a) Current Ratio (b) Operation Ratio
(c) Liquidity Ratio (d) Composite Ratio