ACCOUNTS
(Three hours)
Part - I
Question 1
Answer briefly each of the following questions:
(i) What is the accounting treatment of forfeiture of shares which were originally issued at a premium but subsequently forfeited for non payment of calls when:
(a) The allotment money including premium has been paid by the shareholder
(b) The allotment money including premium has not been paid by the shareholder.
(ii) How will you deal with current year’s ‘Proposed Dividend’ and previous year’s ‘Unclaimed Dividend’ at the time of preparation of final accounts of a joint stock company?
(iii) How will you deal with ‘Purchased Goodwill’ at the time of preparation of cash flow statement from two consecutive years’ balance sheet without any adjustments?
(iv) Give two differences between debtors turnover ratio and creditors turnover ratio.
(v) How would you adjust the capital accounts of the partners, when the share of profit of a partner is guaranteed by:
(a) the firm
(b) another partner.
(vi) Define an intangible asset as per AS-26, issued by The Institute of Chartered Accountants of India.
(vii) A firm maintains three ledgers:
(a) General Ledger
(b) Debtors Ledger
(c) Creditors Ledger
At the end of the year, a trial balance is extracted from the three ledgers taken together. Explain how you will extract a trial balance if the sectional balancing system is incorporated.
(viii) What is the meaning of underwriting of shares in the context of a joint venture business?
(ix) When a company purchases the business of another company, what are the two possibilities that may arise in the books of the purchasing company, if the value of net assets is not equal to the purchase price?
(x) How would you value the goodwill of a partnership firm on the basis of:
(a) capitalization of average profit method?
(b) capitalization of super profit method?
Question 2
Burton and Sons, a partnership firm is about to admit a partner and so decides to value goodwill in the books. The partners are considering three different methods of valuation as follows:
(a) On the basis of two years’ purchase of the average profits of the last five consecutive years. These were: 2006 – ₹ 56,000; 2007 – ₹ 48,000; 2008 – ₹ 46,000; 2009 – ₹ 58,000 and 2010 – ₹ 66,000.
(b) On the basis of three years’ purchase of total super profits of the last five years. For this purpose, the normal profit is to be taken as ₹ 40,000 per annum.
(c) On the basis of capitalizing the average super profit. For this purpose, the following information is provided:
(i) Adjusted forecast maintainable profits ₹ 60,000.
(ii) Normal rate of return 20%.
(iii) Capital employed ₹ 2,00,000
(iv) Capitalization rate 25%.
You are required to calculate the value of goodwill on the basis of each of the three methods (a) to (c) above.
Please refer to attached file for ISC Question Papers 2013 Accounts