CBSE Class 12 Accountancy Board Exam 2020: Chapter-Wise Most Important Questions & Answers
If you are appearing for CBSE Class 12th Board exams 2020 with Commerce stream, check this list of Chapter-wise important questions and answers from Accountancy. The questions are recommended and can be asked in the CBSE Class 12th Accountancy Board Exam.
CBSE Class 12th Accountancy Board Exam is scheduled for 5th March 2020. All the students are in last stage of their preparation. In this article we have complied a list of important questions and answers from both the parts of Accountancy syllabus. Questions given below are important and helpful for quick revision and are expected to be asked in Class 12 Accountancy board exam 2020.
Part A: (Accounting for Not-for-Profit Organizations, Partnership Firms and Companies)
This Part comprises of 5 chapters and 17-18 questions are expected from this part in the board exam.
Chapter 1 : Accounting for Not-for-Profit Organisation
Ques 1 How are Specific donations treated while preparing final accounts of a ‘Not-For-Profit Organisation’?
Solution: Specific donations are taken on the liabilities side of the Balance Sheet of a Not-For-Profit Organisation
Ques 2 Distinguish between ‘Receipts and Payments Account’ and ‘Income and Expenditure Account’ on the basis of ‘Depreciation’.
Solution: Receipts and payment account doesn’t include depreciation as depreciation is a non-cash expense. Whereas income and expenditure account includes depreciation as an expenditure.
Chapter 2 : Partnership Firm- Basic Concept
Ques 1 A new partner acquires two main rights in the partnership firm which he joins. State one of these rights.
Solution: Two main rights acquired by a newly admitted partner
(i) Right to share the assets of the partnership firm;
(ii) Right to share the profits of the partnership firm.
Ques 2 Pass necessary rectifying journal entries for the following omissions committed while preparing Profit and Loss Appropriation Account. You are also required to show your workings clearly.
(i) A, B and C were partners sharing profits and losses equally. Their fixed capitals were A Rs. 4,00,000; B Rs. 5,00,000 and C Rs. 6,00,000. The partnership deed provided that interest on partners’ capital will be allowed @ 10% per annum. The same was omitted.
(ii) P, Q and R were partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1. Their partnership deed provided that interest on partners’ drawings will be charged @ 18% p.a. Interest on the partners’ drawings was Rs. 1,000, Rs. 500 and Rs. 2,000 respectively. The same was omitted.
Chapter 3 : Reconstitution of a Partnership Firm – Admission of a Partner
Ques 1 How does ‘Nature of business’ affect the value of goodwill of a firm ?
Solution: A firm that produces high value added products or products with stable demand is able to earn more profits therefore, firm’s goodwill will be more.
Ques 2 Ramesh, Mahesh and Suresh were partners in a firm sharing profits in the ratio of 3 : 3 : 2. Their respective fixed capitals were : Ramesh Rs. 5,00,000; Mahesh Rs. 4,00,000 and Suresh Rs. 3,00,000. They admitted Govind as a new partner for 1/5th share in the profits. Govind brought Rs. 4,00,000 as his capital and the necessary amount for goodwill premium. Their new profit sharing ratio will be 2 : 1 : 1 : 1.
Calculate the value of goodwill of the firm, showing your workings clearly. Pass necessary journal entries for the above transactions on
Working Note: Calculation of ratio of debentures outstanding
Year Outstanding Debenture Ratio
2014-15 400000 2
2015-16 400000 2
2016-17 400000 2
2017-18 400000 1
Chapter 4 : Retirement/Death of a Partner
Ques 1 What is meant by ‘Gaining Ratio’ on retirement of a partner ?
Solution: Gaining ratio is the ratio in which the remaining partners acquire the retiring partner’s share.
Ques 2 P, Q and R were partners in a firm. On 31st March, 2018 R retired. The amount payable to R Rs. 2,17,000 was transferred to his loan account. R agreed to receive interest on this amount as per the provisions of Partnership Act, 1932. State the rate at which interest will be paid to R.
Solution: 6% p.a.
Chapter 5 : Dissolution of Partnership Firm
Ques 1 Varun and Arun are partners in a firm sharing profits and losses equally. On the date of dissolution of the partnership firm, Varun’s wife’sloan was Rs. 45,000, whereas Arun’s loan was Rs. 65,000. Which loan will be paid first and why ?
Solution Varun’s wife’s loan will be paid first as it’s an outside liability (third party liability)
Ques 2 State any two grounds on the basis of which court may order for the dissolution of partnership firm.
Solution At the suit of a partner, the court may order a partnership firm to be dissolved on any of the following grounds:
(a) when a partner becomes insane;
(b) when a partner becomes permanently incapable of performing his duties as a partner;
(c) when a partner is guilty of misconduct which is likely to adversely affect the business of the firm;
(d) when a partner persistently commits breach of partnership agreement;
(e) when a partner has transferred the whole of his interest in the firm to a third party;
(f) when the business of the firm cannot be carried on except at a loss; or
(g) when, on any ground, the court regards dissolution to be just and equitable
Part B : Analysis of Financial Statements
This Part comprises of 6 chapters and 6 questions are expected from this part in the board exam.
Chapter 1 : Accounting for Share Capital
Ques 1 When can shares be Forfeited?
Solution:When a shareholder fails to pay the allotment money or any subsequent calls, then the company informs the shareholder by giving him/her a proper notice.If even after the notice, the shareholder fails to pay the due money, then the company forfeits the shares allotted to him/her
Ques 2 EF Ltd. invited applications for issuing 80,000 equity shares of Rs. 50 each at a premium of 20%. The amount was payable as follows :
On Application : Rs. 20 per share (including premium Rs. 5) On Allotment: Rs. 15 per share (including premium Rs. 5) On First Call : Rs. 15 per share
On Second and Final call : Balance amount Applications for 1,20,000 shares were received. Applications for 20,000 shares were rejected and pro-rata allotment was made to the remaining applicants. Seema, holding 4,000 shares failed to pay the allotment money. Afterwards the first call was made. Seema paid allotment money along with the first call. Sahaj who had applied for 2,500 shares failed to pay the first call money. Sahaj’s shares were forfeited and subsequently reissued to Geeta for Rs. 60 per share, Rs. 50 per share paid up.
Final call was not made. Pass necessary journal entries for the above transactions in the books of EF Ltd. by opening calls-in-arrears account.
Chapter 2 : Issue and Redemption of Debentures
Ques 1 What is meant by ‘Issue of debenture at discount and redeemable at premium?
Solution: When debentures are issued below its par value (or the face value) but are redeemed at price higher than its par value, then it is termed as issue of debenture at discount and redeemable at premium. The difference between the issue price and the redemption price is treated as loss on issue of debenture.
Ques 2 Under which head is the ‘Debenture Redemption Reserve’ shown in the Balance Sheet?
Solution: As per the Revised Schedule VI, Debenture Redemption Reserve (DRR) is shown in the Notes to Accounts of Reserve and Surplus. The final balance after adding DRR, is shown as the sub-head 'Reserves and Surplus' under the main head of Shareholders' Funds on the Equity and Liabilities side of the Company's Balance Sheet.
Chapter 3 : Financial Statements of a Company
Ques 1 List any three objectives of financial statements?
Solution: The financial statements are basically the accounts that are prepared for providing the true financial information to the internal as well as external users. These statements lay the base for the decision making process and policy designing by different users. The following are the various objectives for preparing financial statements.
- To Provide Information about Economic Resources-Financial statements provide adequate, accurate, reliable and periodical information about the employment of economic resources. It also specifies the obligation of a business to its external users who do not have the powers or authority to access the information directly.
- To Ascertain the Financial Position-These statements help to reveal the true financial position of an enterprise. In other words, it discloses the performance and position of an organisation in terms of their profitability, solvency, liquidity, financial viability, etc.
- To Ascertain the Earning Capacity- These statements are prepared with an objective of providing useful information to compare, predict and evaluate the earning capacity of a business firm. Thus, it helps in ascertaining the earning capacity of firms.
Ques 2 State under which major headings and sub-headings will the following items be presented in the Balance Sheet of a company as per Schedule-III, Part-I of the Companies Act, 2013.
(i) Prepaid Insurance
(ii) Investment in Debentures
(iv) Unpaid dividend
(v) Capital Reserve
(vi) Loose Tools
(vii) Capital work-in-progress
(viii) Patents being developed by the company.
Chapter 4 : Analysis of Financial Statement
Ques 1 Explain briefly any four objectives of ‘Analysis of Financial Statements’
Solution: (i) Assessing the earning capacity or profitability
(ii) Assessing the managerial efficiency
(iii) Assessing the short term and the long-term solvency of the enterprise
(iv) Inter- firm comparison.
(v) Forecasting and preparing budgets.
(vi) Ascertaining the relative importance of different components of the financial
position of the firm.
Ques 2 What is meant by ‘Cash Flows’ ?
Solution: Cash Flows imply movement of cash in and out due to some non cash items.
Chapter 5 : Accounting Ratio
Ques 1 What are important profitability ratios?
Solution: Profitability ratios are calculated on the basis of profit earned by a business. This ratio gives a percentage measure to assess the financial viability, profitability and operational efficiency of the business. The various important Profitability Ratios are as follows:
- Gross Profit Ratio
- Operating Ratio
- Operating Profit Ratio
- Net Profit Ratio
- Return on Investment or Capital Employed
- Earnings per Share Ratio
- Dividend Payout Ratio
- Price Earnings Ratio
Ques 2 Calculate ‘Total Assets to Debt ratio’ from the following information :
Equity Share Capital 4,00,000
Long Term Borrowings 1,80,000
Surplus i.e. Balance in statement of Profit and Loss 1,00,000
General Reserve 70,000
Current Liabilities 30,000
Long Term Provisions 1,20,000
Current ratio =2:1 and Current assets = Rs.8,00,000
Current ratio = Current Assets/ Current Liabilities=2:1
Therefore, Current Liabilities =Rs.4,00,000
Quick ratio = Quick Assets/ Current Liabilities=1.5:1
Therefore, Quick Assets =Rs.6,00,000
Inventory= Current Assets - Quick Assets
=Rs.8,00,000 - Rs.6,00,000
Inventory Turnover Ratio=6 times
Cost of Revenue from operations/ Average Inventory = 6 times
Cost of Revenue from operations/ Rs.2,00,000 = 6
Cost of Revenue from operations =Rs.12,00,000
Gross Profit is 25% on cost =25% of Rs.12,00,000
So, Revenue from operations = Rs.12,00,000 +Rs.3,00,000
Chapter 6: Cash Flow Statement
Ques 1 What is a Cash Flow Statement?
Solution: A Cash Flow Statement is a statement showing inflows and outflows of cash and cash equivalents from operating, investing and financing activities of a company during a particular period. It explains the reasons of receipts and payments in cash and change in cash balances during an accounting year in a company.
Ques 2 Describe the procedure to prepare Cash Flow Statement.
Solution : The procedure to prepare Cash Flow Statement is described in the following steps in their chronological order.
Step 1: Ascertain the cash flows from operating activities
Step 2: Ascertain the cash flows from investing activities
Step 3: Ascertain the cash flows from financing activities
Step 4: Ascertain net increase or decrease by summing up the amounts of Steps 1, 2, and 3.
Step 5: Write the opening balance of cash and cash equivalents and deduct it from the amount ascertained in Step 4. The resulting figure arrived is the Closing Balance of Cash and Cash Equivalents.