Goods and Services Tax (GST) is one of India's most significant tax reforms. Introduced on July 1, 2017, GST replaced multiple indirect taxes, unifying them under a single umbrella to create a transparent, simplified taxation system.

Meaning of GST

GST is a destination-based, value-added tax levied on the supply of goods and services across India. Unlike the previous tax system, which involved multiple indirect taxes imposed at various stages of production and distribution, GST ensures seamless taxation, eliminating complexities.

Structure of GST

GST operates through a dual model, meaning both central and state governments levy taxes under different categories:

1. Central Goods and Services Tax (CGST) – Collected by the central government on intra-state supplies.
2. State Goods and Services Tax (SGST) – Collected by the state government on intra-state supplies.
3. Integrated Goods and Services Tax (IGST) – Collected by the central government on inter-state supplies.

Types of GST Tax Slabs

GST follows a multi-tier tax structure with different rates applicable to various categories of goods and services:

• 0% GST – Essential goods such as food grains, fresh milk, and health services.
• 5% GST – Basic necessities such as restaurant food and essential medicines.
• 12% GST – Processed food items, textiles, and insurance policies.
• 18% GST – Consumer electronics, apparel, and services such as hospitality and telecom.
• 28% GST – Luxury goods like automobiles, tobacco products, and high-end consumer items.

GST: Meaning and Features

Features of GST

GST has several key characteristics that make it different from the earlier tax regime:

1. Elimination of Multiple Taxes

GST replaces indirect taxes like VAT, service tax, excise duty, entertainment tax, and others, creating a single unified tax structure.

2. Input Tax Credit Mechanism

Businesses can claim a tax credit for GST paid on their purchases, reducing overall tax burdens and preventing tax-on-tax effects.

3. Destination-Based Taxation

Under GST, tax is collected where goods and services are consumed, rather than where they are produced, ensuring fair distribution of tax revenue.

4. Dual GST System

Since India follows a federal system, GST is divided into CGST, SGST, and IGST, enabling both state and central governments to collect tax revenue.

5. Composition Scheme for Small Businesses

Businesses with annual turnover below ₹1.5 crore can opt for a simplified tax scheme, paying GST at a nominal rate instead of adhering to complex filing processes.

6. Digitized Compliance through GST Network (GSTN)

The entire GST process—registration, filing returns, tax payments—is conducted via the GST Network (GSTN) portal, streamlining administration.

7. Anti-Profiteering Provisions

GST ensures that businesses pass on tax benefits to consumers instead of inflating prices, promoting fairness and affordability.

8. Special Provisions for E-Commerce

Under GST, e-commerce operators are required to collect tax at source (TCS) and remit it, simplifying tax compliance for online businesses.

9. Harmonization of Tax Rates

GST eliminates arbitrary tax rates across states, preventing discrepancies and enhancing uniformity in taxation.

10. Encourages a Formal Economy

GST promotes tax transparency, discouraging black-market transactions and increasing tax revenue for government development initiatives.

GST: Meaning and Features

Advantages of GST

GST offers a wide range of benefits to businesses, consumers, and the overall economy

Benefits for Businesses

1. Ease of Tax Compliance – Simplifies tax filing, reducing paperwork and administrative costs.
2. Elimination of Cascading Effect – Input tax credit system ensures businesses don’t pay redundant taxes, reducing overall cost burdens.
3. Encourages Entrepreneurship – Lower compliance costs encourage more startups and small businesses to operate legally.
4. Boosts Inter-State Trade – Businesses can operate across states without worrying about multiple tax regulations.

Benefits for Consumers

1. Reduced Prices for Goods and Services – Elimination of multiple taxes ensures lower retail prices.
2. Transparent Pricing Structure – Consumers can clearly see the tax component in invoices.
3. Availability of Quality Goods – Businesses save costs on taxes, leading to better quality products at competitive rates.

Benefits for the Economy

1. Higher Government Revenue – GST brings more businesses into the tax system, expanding the tax base and increasing tax collections.
2. Enhances GDP Growth – A simplified tax system fosters investment, trade, and overall economic growth.
3. Reduces Tax Evasion – Since GST is fully digital, tax leakage and corruption are minimized.
4. Improves Global Competitiveness – Indian businesses can compete internationally due to lower operational costs.

Double Entry System of Book-Keeping

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Among the various accounting methods, Cash Basis Accounting and Accrual Basis Accounting are the two most commonly used approaches, each with distinct advantages and limitations.

Cash Basis of Accounting

Meaning:

Cash Basis Accounting records transactions only when cash changes hands. Revenue is recognized when payment is received, and expenses are recorded when payments are made. This method is normally used by small businesses and individuals who prefer simplicity in financial management.

For example, if Rent ₹10,000 of February 2025 has been paid in March 2025 it would be recorded in the books of accounts only in March 2025.

Features:

1. Transactions are recorded only when actual cash is exchanged.
2. No accounts receivable or accounts payable are maintained.
3. Provides an immediate view of available cash flow.
4. Commonly used by sole proprietors, small businesses, and freelancers.

Advantages:

1. Simple and easy to manage: Requires minimal accounting knowledge, making it accessible for small businesses.
2. Avoids taxation on uncollected revenue: Since revenue is only recognized when received, businesses do not pay tax on unpaid invoices.
3. Clear cash flow visibility: Offers an accurate reflection of available funds, assisting in liquidity management.

Disadvantages:

1. Does not represent financial obligations: Ignores unpaid bills and pending receivables, leading to an incomplete financial picture.
2. Unsuitable for larger businesses: Not accepted under Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).
3. Can lead to misleading profitability insights: A business may appear profitable due to incoming cash while ignoring outstanding liabilities.

Cash Basis and Accrual Basis of Accounting

Accrual Basis of Accounting

Meaning:

Accrual Basis Accounting records transactions when they occur, regardless of when cash is received or paid. Revenue is recognized when earned, and expenses are recorded when incurred, ensuring a more accurate representation of a company's financial health.

For example, if Rent ₹10,000 of February 2025 has been paid in March 2025 it would be recorded in the books of accounts in February 2025.

Features:

1. Transactions are recorded based on actual business activities rather than cash flow.
2. Uses accounts receivable (for revenue yet to be received) and accounts payable (for expenses owed).
3. Required for companies following GAAP and IFRS standards.
4. Provides a detailed view of financial performance, supporting better decision-making.

Advantages:

1. Reflects actual financial performance: Captures revenues and expenses as they occur, offering a complete financial picture.
2. Better financial planning and forecasting: Enables businesses to prepare for future expenditures and manage cash flow strategically.
3. Essential for compliance with financial reporting standards: Mandatory for corporations and businesses subject to audit or external review.

Disadvantages:

1. Complex and requires expertise: Involves bookkeeping skills and accounting software to maintain accurate records.
2. Might misrepresent cash availability: Since revenue is recorded before cash is received, businesses may appear profitable despite cash shortages.
3. Increased administrative burden: Businesses must track invoices, accounts payable, and receivables, adding complexity to financial operations.

Cash Basis and Accrual Basis of Accounting

Key Differences Between Cash Basis and Accrual Basis Accounting

Which Accounting Basis/ Method is better?

Accrual Basis is a more appropriate basis for the calculation of profits as expenses are matched against revenue earned in the same accounting period.

The choice between cash and accrual accounting depends on the nature of the business, financial reporting requirements, and growth ambitions:

1. Small businesses and freelancers prefer cash accounting due to its simplicity and ease of implementation.
2. Corporations and large enterprises adopt accrual accounting for accurate financial reporting and regulatory compliance.
3. Tax considerations play a crucial role—businesses may prefer cash accounting to defer tax obligations on unpaid revenue.

Accounting Principles and Concepts

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Meaning of Accounting:
Accounting is a systematic process that involves identifying, measuring, recording, and communicating crucial information about an organization’s economic events to its interested stakeholders. It plays a pivotal role in providing quantitative data—primarily financial in nature—about economic entities, aimed at aiding informed economic decisions.

Definitions of Accounting:

According to the American Accounting Association (AAA):
"Accounting is the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information."

The American Institute of Certified Public Accountants (AICPA) defines accounting as:
"The art of recording, classifying, and summarizing in a significant manner and in terms of money transactions and events which are, in part at least, of financial character, and interpreting the results thereof."

Functions of Accounting

The functions of Accounting can be explained on the basis of the activities undertaken during the Accounting Process followed:

1. Financial Transactions:
   Accounting begins with managing various financial transactions such as sales, purchases, and expenses, often symbolized by relevant icons or figures.
2. Identification:
   The first step is identifying which financial events should be recorded in the books of accounts. This involves observing all business activities and selecting transactions that are classified as financial.
3. Measurement:
   Only transactions that can be quantified in monetary terms are recorded. Events without measurable financial value are excluded from accounting.
4. Recording:
   Transactions considered as economic events are documented in monetary terms, following a chronological order. This step, known as the preparation of a Journal, ensures organized bookkeeping.
5. Classifying:
   Recorded financial transactions are grouped based on their nature and compiled into separate accounts, a process called the preparation of the Ledger.
6. Summarizing:
   The next function involves summarizing data, beginning with ledger balances and preparing a Trial Balance. The Trial Balance serves as a foundation for creating financial statements, commonly known as Final Accounts i.e. the Trading Account, Profit & Loss Account, and Balance Sheet.
7. Analyzing:
   Financial analysis involves examining and interpreting financial data to assess performance, trends, and overall health. This includes reviewing:

• Income Statement: Evaluating revenue, expenses, and profit for a specific period.
• Balance Sheet: Analyzing assets, liabilities, and equity at a particular point in time.
• Cash Flow Statement: Tracking cash inflows and outflows across operational, investing, and financing activities

    8. Communication or Reporting:
The ultimate aim of accounting is to deliver financial information to users like stakeholders, regulators, and tax authorities. This regular communication helps them analyze the data for their specific needs and make informed financial decisions.

Objectives and Limitations of Accounting

Accounting as a Source of Information

(Need of Accounting Information by different users)

Accounting serves as a vital source of qualitative information—primarily financial in nature—about economic entities. This information is crucial for making sound economic decisions and caters to a diverse group of users, as detailed below:

1. Management:
   Managers require timely information on aspects like cost of sales and profitability to plan, control, and make strategic decisions.
2. Investors and Potential Investors:
   Financial data provides insights into the risks and returns associated with investments, helping investors assess the viability of their decisions.
3. Unions and Employee Groups:
   Information on financial stability, profitability, and wealth distribution assists unions and employees in negotiations and understanding the organization’s well-being.
4. Lenders and Financial Institutions:
   Lenders evaluate the creditworthiness of the business and its ability to repay loans or meet interest obligations through financial statements.
5. Suppliers and Creditors:
   Suppliers use financial information to gauge the company’s ability to settle outstanding payments and ensure long-term business viability.
6. Customers:
   Financial statements assure customers of the organization’s continuity, securing the future supply of products, parts, or after-sales services.
7. Government and Regulatory Bodies:
   Authorities rely on financial data to monitor resource allocation and ensure compliance with legal and regulatory standards.
8. Social Responsibility Groups:
   Groups such as environmental organizations review financial information to assess the company’s impact on the environment and its commitment to sustainable practices.
9. Competitors:
   Competitors utilize accounting data to benchmark against industry standards and identify the relative strengths and weaknesses of their rivals.

Users of Financial Statements

1. Internal Users:
   Internal users include owners, shareholders or investors, employees, and management. They rely on financial statements to make informed decisions regarding the organization’s operations and strategies.
2. External Users:
   External users consist of entities such as regulatory agencies, labor unions, stock exchanges, the public, and others. These users depend on financial information to understand the organization's financial standing and compliance.

Objectives and Limitations of Accounting

Objectives of Accounting

1. Maintaining Systematic Records:
   The primary goal of accounting is to systematically document business transactions. This involves first recording all financial transactions in the Journal and subsequently transferring them to the Ledger.
2. Error and Fraud Prevention:
   Accounting serves as a tool to prevent and detect potential errors or fraudulent activities within an organization.
3. Profit and Loss Determination:
   One of the key roles of accounting is to determine the profit or loss incurred during a specific period through the preparation of financial statements like the Trading Account and Profit and Loss Account.
4. Assessing Financial Position:
   Accounting aims to evaluate the financial position of a business by analyzing its assets and liabilities at the end of each accounting period.
5. Providing Financial Information:
   Accounting facilitates the regular provision of financial information to its users, such as stakeholders, regulators, and other interested parties, aiding them in making informed decisions.

Advantages of Accounting

1. Provides Information on Financial Performance:
   Accounting delivers factual insights into a business's financial performance over a specific period, such as the profit earned or loss incurred, as well as the financial position at a given point in time.
2. Assists Management:
   By offering detailed financial reports, accounting helps management in planning, decision-making, and exercising control over the business operations.
3. Facilitates Comparative Analysis:
   Systematic record-keeping and regular preparation of reports enable businesses to make meaningful comparisons across different periods or with other entities.
4. Aids in Tax Settlement:
   Well-maintained accounting records simplify the settlement of various tax liabilities, including income tax, GST, and more.
5. Supports Loan Procurement:
   Financial statements, derived from accurate accounting, play a crucial role in securing loans from banks and financial institutions, as they assess the financial health of the business.
6. Enhances Decision-Making:
   Accounting provides valuable financial data that supports informed decision-making by the management team.
7. Replaces the Need for Memory-Based Accounting:
   Systematic records eliminate the dependency on memory for tracking transactions, allowing for quick and easy reference as needed.
8. Provides Evidence in Legal Cases:
   Properly maintained accounting records serve as documentary evidence in court during disputes or legal proceedings.
9. Facilitates Business Sale:
   When selling a business, accounting records help determine an accurate and fair purchase price for the entity.

Limitations of Accounting

1. Lack of Precision:
   Accounting is not entirely free from personal bias or judgment, which can impact the accuracy of financial statements.
2. Historic Valuation of Assets:
   Accounting records assets based on their historical cost minus depreciation, which may not reflect their current market value.
3. Excludes the Impact of Price Level Changes:
   Since financial statements are prepared using historical costs, changes in the value of money or inflation are not accounted for.
4. Ignores Qualitative Aspects:
   Accounting focuses solely on monetary transactions and does not account for qualitative factors such as employee satisfaction or customer relationships.
5. Window Dressing:
   Financial statements can be manipulated to present a more favorable picture of the business's financial position than what actually exists.

Objectives and Limitations of Accounting

 Qualitative Characteristics of Accounting Information

1. Reliability:
   Reliable accounting information ensures users can depend on its accuracy and truthfulness. The reliability is determined by how well the information aligns with the actual transactions or events it represents, as well as how accurately these are measured and displayed.
2. Relevance:
   Relevant information must be timely, provide value in making predictions, and offer feedback. It helps users by:

• Assisting in predicting the outcomes of past, present, or future events.
• Confirming or revising their prior evaluations of such events.

    3. Understandability:
Accounting information should be presented in a manner that is easy for decision-makers to interpret and understand. Effective communication plays a crucial role, as the clarity of the message determines whether users can accurately grasp its meaning.

   4. Comparability:
Beyond being relevant and reliable, financial information should allow users to compare different aspects of a business over various time periods or with other entities. This characteristic is essential for making informed evaluations and decisions.

The Role of Accounting

Role of Accounting can be explained in brief as under:

1. As a Language:
   Accounting is often regarded as the language of business. It serves as a medium to communicate crucial financial information about enterprises effectively.
2. As a Historical Record:
   It acts as a chronological record of an organization’s financial transactions, capturing the actual amounts involved and preserving the financial history of the business.
3. As a Reflection of Current Economic Reality:
   Accounting helps in assessing an entity’s income, reflecting changes in wealth over time and providing insights into its economic standing.
4. As an Information System:
   It functions as a system that connects the information provider (accountant) with information users (external stakeholders), enabling effective communication through organized financial data.
5. As a Commodity:
   Specialized financial information is viewed as a valuable service in today’s society. Accountants, equipped with the expertise to provide such information, play a critical role in meeting the demand for reliable data.

Branches of Accounting

1. Management Accounting:
   This branch focuses on aiding management in making informed policy decisions and evaluating the outcomes of these decisions. It provides critical data and insights to support strategic planning and operational efficiency.
2. Cost Accounting:
   Cost accounting specializes in analyzing and tracking expenditure to determine the costs of products or services. This helps businesses establish accurate pricing strategies, control expenses, and provide valuable costing data for managerial decision-making.
3. Financial Accounting:
   The primary objective of financial accounting is to maintain a comprehensive record of financial transactions. It serves three critical purposes:

• Calculating the profit or loss incurred by the business over a specific accounting period.
• Evaluating the financial position of the business by assessing its assets and liabilities at the end of the accounting period.
• Supplying essential financial information to management and other stakeholders for effective decision-making.

Objectives and Limitations of Accounting

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India has a rich legal framework to protect the rights of stray animals and pet owners. These laws aim to ensure the humane treatment of animals and promote coexistence between humans and animals.

Legal Rights of Stray Animals

1. Protection Against Cruelty:

Law: Sections 428 and 429 of the Indian Penal Code (IPC) make it illegal to harm, poison, or kill stray animals. Violators can face imprisonment of up to five years and fines.

Example: In Kerala, local authorities were accused of poisoning stray dogs to control their population. Animal welfare organizations filed complaints, leading to legal action and increased awareness about humane methods like sterilization.

2. Right to Be Fed:

Law: Feeding stray animals is lawful, as upheld by the Delhi High Court. Citizens have the right to feed stray animals, and this act cannot be obstructed.

Example: In Delhi, a woman feeding stray dogs was harassed by her neighbors. The court ruled in her favor, emphasizing her right to feed the animals.

3. Protection from Relocation:

Law: Stray dogs cannot be relocated or removed from their territories unless under specific circumstances, as per the Animal Birth Control (Dogs) Rules, 2001.

Example: In Mumbai, a housing society illegally relocated stray dogs. Animal activists intervened, and the dogs were returned to their original location.

4. Legal Recourse:

Law: Citizens can report violations of these laws to local animal protection groups or the police. Cases can be filed under the relevant sections of the IPC and the Prevention of Cruelty to Animals Act.

Example: In Chennai, a man who brutally beat a stray dog was reported by animal welfare activists. He was fined and sentenced to community service.

Legal Rights of Pet Owners

1. Right to Own Pets:

Law: Housing societies or landlords cannot impose blanket bans on keeping pets. The Animal Welfare Board of India (AWBI) guidelines protect pet owners from such restrictions.

Example: In Bengaluru, a housing society tried to ban residents from keeping dogs. The AWBI intervened, and the society was forced to revoke the ban.

2. Right to Walk Pets:

Law: Pet owners have the right to walk their pets in public spaces, provided they follow local regulations and ensure public safety.

Example: In Pune, a pet owner was fined for not cleaning up after their dog in a public park. This highlights the importance of adhering to hygiene norms while exercising this right.

3. Protection from Harassment:

Law: Pet owners cannot be harassed or penalized for keeping pets, as long as they adhere to hygiene and safety norms.

Example: In Hyderabad, a landlord tried to evict a tenant for keeping a cat. The tenant filed a complaint, and the landlord was warned against such discriminatory practices.

4. Guidelines for Housing Societies:

Law: AWBI guidelines ensure that housing societies cannot impose discriminatory rules against pet owners, such as banning pets in elevators or common areas.

Example: In Gurgaon, a housing society banned pets from using elevators. The AWBI issued a notice, and the ban was lifted.

Challenges and Advocacy

Despite these laws, challenges such as illegal trading, smuggling, and cruelty persist. Advocacy by animal welfare organizations and active enforcement of laws are crucial to addressing these issues. Public awareness campaigns and community engagement can also play a significant role in promoting compassion and coexistence.

By understanding and respecting these laws, citizens can contribute to a more humane and harmonious society.

Do You Want to Keep a Pet Dog?

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Accounting Equation is also known as Balance Sheet Equation as already discussed in the previous article on Balance Sheet Equation. Here is the break-up analysis of 50 transactions given below, showing the effect of these transactions on Capital, Liability and Asset.

Students can use C + L = A or A - L = C but C + L = A is preferred as it aligns the normal Balance Sheet columns.

The presentation of the effect of transactions can be given in horizontal or vertical form. Here, only horizontal way has been given. Either way the effect is same.

Here’s a breakdown of 50 sample transactions along with their balance sheet equation effects (Assets = Liabilities + Equity):

Effect of 50 Transactions on Accounting Equation

1. Started business with cash.

Cash - Asset - Increase

Capital - Increase

2. Started business with cash, bank balance.

Cash - Asset - Increase,

Bank – Asset- Increase

Capital - Increase

3. Borrowed loan from State Bank of India.

Bank - Asset – Increase,

SBI’s loan – Liability - Increase

4. Borrowed loan from a friend.

Bank - Asset - Increase,

Friend’s loan - Liability - Increase

5. Purchased machinery for cash.

Machinery - Asset - Increase,

Cash - Asset - Decrease

6. Purchased machinery for cash, payment made by cheque.

Machinery - Asset - Increase,

Bank - Asset - Decrease

7. Purchased furniture, payment made by accepting a bill of exchange

Furniture – Asset – Increase,

Bills Payable - Liability - Increase

8. Purchased goods, 50% payment made by cheque.

Stock – Asset - Increase,

Bank - Asset - Decrease,

Creditors - Liability - Increase

9. Goods purchased on credit, now returned.

Creditors - Liability - Decrease,

Stock – Asset - Decrease

10. Sold goods for cash.

Cash - Asset - Increase

Stock – Asset - Decrease

11. Sold goods on credit.

Debtors - Asset - Increase

Stock – Asset - Decrease

12. Sold goods, 50% payment received in cash.

Cash - Asset - Increase

Debtors - Asset - Increase

Stock – Asset - Decrease

13. Payment of an instalment of State bank of India’s loan.

SBI’s loan – Liability – Decrease,

Bank – Asset - Decrease

14. Bills Receivable received from a debtor.

Bills Receivable – Asset – Increase,

Debtors – Asset - Decrease

15. Deposited into Canara bank.

Canara Bank – Asset – Increase,

Cash – Asset - Decrease

16. Withdrew from bank for office use.

Cash - Asset – Increase,

Bank - Asset – Decrease

17. Withdrew from bank for domestic use.

Drawings – Capital – Decrease,

Bank – Asset - Decrease

18. Payment of wages, rent by cheque.

Wages and Rent – Capital (Expenses) – Decrease,

Bank – Asset - Decrease

19. Returned to friend, loan borrowed from him, by cheque.

Friend’s loan – Liability – Decrease,

Bank – Asset - Decrease

20. Bad Debts (Debtors didn’t pay their dues, declared insolvent by court).

Bad Debts – Capital (Expense) – Decrease,

Debtors – Asset - Decrease

21. Cash received from Munim for commission.

Cash – Asset – Increase,

Commission – Capital (Income) - Increase

22. Received rent by cheque

Bank – Asset – Increase,

Rent – Capital (Income) - Increase

23. Goods returned by our customers.

Stock – Asset – Increase,

Debtors – Asset - Decrease

24. Collection of cash from debtors after discount.

Cash - Asset - Increase

Discount Allowed – Capital (Expense) - Decrease

Debtors - Asset - Decrease

25. Payment to creditors after discount.

Creditors - Liability - Decrease

Cash – Asset – Decrease

Discount received – Capital - Increase

26. Depreciation on asset.

Depreciation – Capital (Expense) - Decrease

Asset - Decrease

27. Appreciation to asset.

Asset - Increase

Appreciation – Capital - Increase

28. Interest on Loan.

Interest on Loan – Capital - Decrease

Loan – Liability - Increase

29. Interest on bank deposit.

Bank - Asset - Increase

Interest on Bank Deposit – Capital - Increase

30. Outstanding expenses.

Expenses – Capital - Decrease

Outstanding expenses – Liability - Increase

31. Expenses paid in advance (when these are paid).

Prepaid expenses - Asset - Increase

Cash – Asset - Decrease

32. Accrued Income.

Accrued Income - Asset - Increase

Income – Capital - Increase

33. Income received in advance. (when it is received).

Cash - Asset - Increase

Income received in advance – Liability - Increase

34. Withdrew goods for personal use.

Drawings - Capital - Decrease

Stock – Asset - Decrease

35. Goods given as charity.

Charity – Capital - Decrease

Stock – Asset - Decrease

36. Prepaid Expenses (Adjustment)

Prepaid Expenses - Asset - Increase

Expenses – Capital - Decrease

37. Interest On Capital.

Interest on Capital - Capital – Increase and - Decrease

38. Interest on Drawings.

Interest on Drawings - Capital – Decrease and - Increase

39. Loss By Fire (Theft)

Loss by Fire (Theft) – Capital - Decrease

Stock – Asset - Decrease

40. Received a Cheque from Angad, directly deposited into bank.

Bank - Asset - Increase

Angad – Asset - Decrease

41. Collected accounts Receivable

Cash – Asset – Increase

Accounts Receivable – Asset - Decrease

42. Purchased vehicle with loan

Vehicle – Asset – Increase

Loan – Liability - Increase

43. Owner withdrew cash

Cash – Asset – Decrease

Capital - Decrease

44. Paid off accounts payable

Accounts Payable – Liability – Decrease

Cash/Bank – Asset - Decrease

45. Provided services on credit

Debtors – Asset – Increase

Service Income - Capital - Increase

46. Owner invested additional cash

Cash – Asset – Increase

Capital - Increase

47. Received interest income

Cash – Asset – Increase

Interest - Capital - Increase

48. Paid insurance premium

Insurance – Capital – Decrease

Cash/Bank – Asset - Decrease

49. Paid for software subscription

Software Expenses – Capital – Decrease

Cash – Asset - Decrease

50. Paid for employee medical insurance

Employee Benefit Expenses – Capital – Decrease

Cash – Asset - Decrease

Note:

Name of the expense, asset, liability, debtor, creditor etc. is to be used if given.

For payment Cash/ Bank is to be used depending on the case.

Learning Games and Activities in Accountancy – Class 11

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The Accountancy exam is a culmination of your year-long efforts and hard work. It requires not only a sound understanding of the subject but also meticulous attention to detail during the exam. Here are some essential precautions and tips to keep in mind:

Relax and Concentrate
Firstly, it’s crucial to remain calm and composed. The exam is an opportunity to showcase your knowledge and efforts. Take a deep breath, focus on the task at hand, and believe in yourself.

Read the Instructions
Before you dive into the questions, make sure to read the instructions on the backside of the title page of your answer sheet carefully. Understanding these guidelines will help you avoid any unnecessary mistakes.

Utilize the Fifteen Minutes Reading Time
Make the best use of the fifteen minutes of reading time provided. Plan your approach and grasp what is required for each question. Identify the questions you are most confident about and those that might need more time.

Follow the Sequence
When attempting the questions, follow a sequence that works best for you. Start with the questions you know well and leave space for the more challenging ones to be addressed later. Start from Part A or Part B. This strategy ensures that you secure marks for the answers you are confident about.

Double-Check the Questions
Before writing your answers, read each question once more to ensure you fully understand what is being asked. This precaution will help you avoid any misinterpretation and ensure that you provide relevant answers.

Avoid Common Mistakes
Common mistakes in the Accountancy exam often occur due to rushing rather than a lack of knowledge. Stay calm and take your time to avoid simple errors. Double-check your calculations and ensure accuracy.

Proper Format for Accounts and Statements
Ensure that the format of accounts and statements is drawn correctly. Neatness and proper formatting play a significant role in scoring well. If applicable, underline the main figures or enclose them in boxes for clarity.

Include Working Notes
Working notes are an integral part of the solution. Always show your working notes clearly, and keep rough work separate. This practice demonstrates your methodical approach to solving problems.

Symmetry in Digits
When writing digits in statements and accounts, maintain symmetry. This practice saves time and effort during totaling and reduces the chances of errors.

Fill in the Blanks and MCQs
For fill-in-the-blank questions (In case there is any), write the entire question along with the answer, and underline or highlight the answer figures and entries. For multiple-choice questions (MCQs), write the part number followed by the answer statement clearly. Skip one or two lines between MCQ answers for better readability.

Start Long Questions on a Fresh Page
Always start long questions on a fresh page. This practice helps in organizing your answers and makes it easier for the examiner to follow your work.

Correcting Mistakes
If you need to correct something, use a single horizontal stroke to cut through the word, amount, or sentence. If you need to cancel an entire statement or account, draw a big cross over it. Avoid making your answer sheet messy with too many corrections.

So, these were 12 Tips to Attempt Accountancy Exam. Following these will definitely help you attempting the exam perfectly.

MCQs on Partnership Accounting Class 12

MCQs on Company Accounts Class 12

MCQs on Analysis of Financial Statements

The post 12 Tips to Attempt Accountancy Exam. appeared first on Commerceatease - Website for 11th & 12th Commerce.

Case Based Questions in Accountancy Class 12 are designed to test your understanding of accounting concepts in real-world scenarios. They typically present a situation or a business case, and you're asked to analyze it, apply accounting principles, and make decisions based on the data provided. These questions often require a deeper level of thinking and problem-solving skills.

Common Topics for case-Based Questions:

Here are some common topics you might prepare for case study questions:

1. Partnership accounts: Dealing with the accounting aspects of partnerships, such as admission, retirement, or dissolution of partners.
2. Issue of shares and debentures: Recording and accounting for the issue of shares or debentures in a company.
3. Ratio analysis: Analyzing financial ratios to assess the performance and financial health of a business.
4. Comparative Statements: Filling the missing information.
5. Cash Flow Statement: Analysis of different activities resulting in cash flows - inflows or outflows.

Case-Based Questions from CBSE Resources

Following are a few questions taken from CBSE resources for Case Based Questions:

Question 1: (Fundamentals of Partnership Accounting)

Read the following hypothetical text and answer the given questions:
Amit and Mahesh were partners in a fast-food corner sharing profits and losses in ratio 3:2. They sold fast food items across the counter and did home delivery too. Their initial fixed capital contribution was ₹1,20,000 and ₹80,000 respectively. At the end of first year their profit was ₹ 1,20,000 before allowing the remuneration of ₹3,000 per quarter to Amit and ₹.2,000 per half year to Mahesh. Such a promising performance for first year was encouraging, therefore, they decided to expand the area of operations. For this purpose, they needed a delivery van, a few Scotties and an additional person to support. Six months into the accounting year they decided to admit Sundaram as a new partner and offered him 20% as a share of profits along with monthly remuneration of ₹ 2,500. Sundaram was asked to introduce ₹1,30,000 for capital and ₹70,000 for premium for goodwill. Besides this Sundaram was required to provide Rs.1,00,000 as loan for two years. Sundaram readily accepted the offer. The terms of the offer were duly executed, and he was admitted as a partner.

Questions:
Q1 Remuneration will be transferred to .............. of Amit and Mahesh at the end of the accounting period.
(a) Capital account.
(b) Loan account.
(c) *Current account.
(d) None of the above.

Q2 Upon the admission of Sundaram the sacrifice for providing his share of profits would be done:
(a) by Amit only.
(b) by Mahesh only.
(c) by Amit and Mahesh equally.
(d) *by Amit and Mahesh in the ratio of 3:2.

Q3 Sundaram will be entitled to a remuneration of ...............at the end of the year. *(₹15,000)

Q4 While taking up the accounting procedure for this reconstitution the accountant of the firm Mr. Suraj Marwaha faced a difficulty. Solve it be answering the following:
For the amount of loan that Sundaram has agreed to provide, he is entitled to interest thereon at the rate of .............. *(6% p.a.)

Case Based Questions in Accountancy

Question 2: (Admission of Partner)

Sterling enterprises is a partnership business with Ryan, Williams and Sania as partners engaged in production and sales of electrical items and equipment. Their capital contributions were ₹50,00,000, ₹50,00,000 and ₹80,00,000 respectively with the profit the sharing ratio of 5:5:8. As they are now looking forward to expanding their business, it was decided that they would bring in sufficient cash to
double their respective capitals. This was duly followed by Ryan and Williams but due to unavoidable reasons Sania could not do so and ultimately it was agreed that to bridge the shortfall in the required capital a new partner should be admitted who would bring in the amount that Sania could not bring and that the new partner would get share of profits equal to half of Sania’s share which would be sacrificed by Sania only. Consequent to this agreement Ejaz was admitted and he brought in the required capital and ₹30,00,000 as premium for goodwill.
Based on the above information you are required to answer the following questions.

Q1 What will be the new profit-sharing ratio of Ryan, Williams, Sania and Ejaz?
(a) 1:1:1:1
(b) 5:5:8:8
*(c) 5:5:4:4
(d) None of the above

Q2 What is the amount of capital brought in by the new partner Ejaz?
(a) ₹50,00,000
*(b) ₹80,00,000
(c) ₹40,00,000
(d) ₹30,00,000

Q3 What is the value of the goodwill of the firm?
*(a) ₹1,35,00,000
(b) ₹30,00,000
(c) ₹1,50,00,000
(d) Cannot be determined from the given data.

Q4 What will be correct journal entry for distribution of Premium for Goodwill brought in by Ejaz?
(a) Ejaz Capital A/c ……………...Dr. ₹30,00,000
To Sania’s Capital A/c ₹30,00,000
*(b) Premium for Goodwill A/c….......…Dr. ₹30,00,000
To Sania’s Capital A/c ₹30,00,000
(c) Premium for Goodwill A/c…........…Dr. ₹30,00,000
To Reyan’s Capital A/c ₹8,33,333
To William’s Capital A/c ₹8,33,333
To Ejaz’s Capital A/c ₹13,33,333
(d) Premium for Goodwill A/c…......…Dr. ₹30,00,000
To Reyan’s Capital A/c ₹10,00,000
To William’s Capital A/c ₹10,00,000
To Ejaz’s Capital A/c ₹10,00,000

Case Based Questions in Accountancy

Question 3: (Accounting for Share Capital)

Nidiya limited was incorporated on 1stApril 2017 with registered office in Mumbai. The capital clause of memorandum of Association reflected a registered capital of 8,00,000 equity shares of ₹10 each and 1,00,000 preference shares of ₹50 each. Since some large investments were required for building and machinery the company in consultation with vendors, Ms. VPS Enterprises, issued 1,00,000 equity shares and 20,000 preference shares at par to them in full consideration of assets acquired. Besides this the company issued 2,00,000 equity shares for cash at par payable as ₹3 on application, ₹2 on allotment, ₹3 on first call and ₹2 on second call. Till date second call has not yet been made and all the shareholders have paid except Mr. Ajay who did not pay allotment and calls on his 300 shares and Mr. Vipul who did not pay first call on his 200 shares. Shares of Mr. Ajay were then forfeited and out of them 100 shares were reissued at ₹12 per share.

Based on above information you are required to answer the following questions:

Q1 Shares issue to vendors of building and machinery, Ms. VPS Enterprises, would be classified as:
(a) Preferential Allotment
(b) Employee Stock Option Plan
(c) *Issue for Consideration other than cash
(d) Right Issue of Shares

Q2 How many equity shares of the company have been subscribed?
(a) 3,00,000
(b) 2,99,500
(c) *2,99,800
(d) None of these

Q3 What is the amount of security premium reflected in the balance sheet at the end of the year?
(a) ₹200
(b) ₹600
(c) *₹400
(d) ₹ 1,000

Q4 What amount of share forfeiture would be reflected in the balance sheet?
(a) *₹600
(b) ₹900
(c) ₹200
(d) ₹ 300

Case Based Questions in Accountancy

Question 4: (Cash Flow Statement)

Read the following hypothetical text and answer the given questions on the basis of the same:
Krishika an alumni of IIM Ahemdabad initiated her startup Krishika Ltd. in 2018. The profits of Krishika Ltd. in the year 2019-20 after all appropriations was ₹31,25,000. This profit was arrived after taking into consideration the following items: -
1. Gain on sale of fixed tangible assets - ₹12,50,000
2. Goodwill written off - ₹7,80,000
3. Transfer to General Reserve - ₹8,75,000
4. Provision for taxation - ₹4,37,500

Additional Information: -
Particulars                             31.03.2020 (in ₹)                      31.03.2019 (in ₹)
Prepaid Expenses                      7,50,000                                        5,00,000
Inventory                                  10,50,000                                        8,20,000
Trade Payables                          4,50,000                                        3,50,000
Trade Receivables                    6,20,000                                         5,90,000

Questions:
Q1 Net Profit before tax will be ₹………….
(a)22,50,000 (b) 35,62,500 (c) 39,67,500 *(d) 44,37,500

Q2 Operating profit before working capital changes will be ₹…………                                                                                                                                  (a) 52,17,500 (b) 64,67,500 *(c) 39,67,500 (d) 39,69,500

Q3 Cash from operating activities before tax will be ₹………..
*(a) 35,57,500 (b) 40,67,500 (c) 37,87,500 (d) 35,67,300

Q4 Cash flow from Operating Activities will be ₹…………
(a) 39,95,000 *(b) 31,20,000 (c) 40,67,500 (d) 31,00,000

MCQs on Partnership Accounting Class 12

MCQs on Company Accounts Class 12

MCQs on Analysis of Financial Statements

The post Case Based Questions in Accountancy Class 12 appeared first on Commerceatease - Website for 11th & 12th Commerce.

All these questions have been taken from previous year CBSE examination question papers.

Question 1:

The Quick Ratio of a company is 1 : 2. Which of the following transactions will result in an increase in this ratio?

1. Cash received from debtors
2. *Sold goods on credit
3. Purchased goods on credit
4. Purchased goods on cash

Question 2:

Identify which of the following would result in inflow of cash from operating activities:

1. Payment to creditors
2. Interest received by a non-finance company
3. Dividend received by a non-finance company
4. *Amount received from debtors

Question 3:

Analysis of Financial Statements is useful and significant to different users. Which of the following users is particularly interested in firm's ability to meet their claims over a very short period of time?

1. Labour Unions
2. *Trade Payables
3. Top Management
4. Finance Manager

Question 4:

_____ ratios are calculated to determine the ability of the business to service its debt in the long run.

1. Liquidity
2. Turnover
3. *Solvency
4. Profitability

Question 5:

Acquisition of machinery by issue of equity shares will result in:

1. Cash inflow from financing activities
2. Cash outflow from financing activities
3. Cash outflow from investing activities
4. *No flow of cash

MCQs on Analysis of Financial Statements

Question 6:

The transaction "Capital gains tax paid on sale of fixed assets" is classified under which of the following:

1. Operating Activities
2. *Investing Activities
3. Financing Activities
4. Cash and Cash Equivalents

Question 7:

Which of the following is not an objective of Analysis of Financial Statements?

1. To assess the current profitability and operational efficiency of the firm.
2. To ascertain the relative importance of different components of the financial position of the firm.
3. *To consider the impact of price level changes.
4. To identify the reasons for change in the profitability/financial position of the firm.

Question 8:

_______ is also known as Acid-Test Ratio.

1. Current Ratio
2. *Quick Ratio
3. Gross profit Ratio
4. Operating Ratio

Question 9:

Current Ratio of Super Ltd. is 2 : 1. Which of the following transactions will result in decrease in this ratio?

1. Payment of ₹40,000 to creditors
2. Sale of furniture (book value ₹38,000) for ₹16,000 only
3. *Repayment of long-term loan of ₹7,00,000
4. Cash collected from debtors ₹1,18,000

Question 10:

Statement I: Issue of Debentures will result in inflow of cash.

Statement II: Issue of Debentures to the vendors for purchase of machinery will result in outflow of cash.

Choose the correct option from the following:

1. Both statements are correct.
2. Both statements are incorrect.
3. *Statement I is correct, and Statement II is incorrect.
4. Statement I is incorrect, and Statement II is correct.

MCQs on Analysis of Financial Statements

Question 11:

What will be the effect of “Purchase of Marketable Securities for cash” on Cash Flow Statement?

1. *No effect
2. Inflow from financing activities
3. Outflow from investing activities
4. Outflow from financing activities

Question 12:

₹5,00,000 to acquire shares in Neligare Industries and received a dividend of ₹30,000 after acquisition.

1. Cash outflow from financing activities ₹4,70,000
2. Cash inflow from investing activities ₹4,70,000
3. Cash inflow from financing activities ₹4,70,000
4. *Cash outflow from investing activities ₹4,70,000

Question 13:

The Debt-Equity Ratio of a company is 3 : 2. Which of the following transactions will result in increase in this ratio?

1. Purchase of goods on credit
2. *Issue of Debentures
3. Issue of Equity Shares
4. Cash received from Debtors

Question 14:

Statement I: Issue of fully paid bonus shares out of Securities Premium Account will result in inflow of cash.

Statement II: Cash withdrawn from bank will result in inflow of cash.

In the context of the above two statements, choose the correct option:

1. Both statement I and statement II are correct
2. *Both statement I and statement II are incorrect
3. Statement I is correct, and statement II is incorrect
4. Statement I is incorrect, and statement II is correct

Question 15:

Which of the following tools of Analysis of Financial Statements indicate the trend and direction of financial position and operating results?

1. *Comparative statements
2. Common size statements
3. Cash flow analysis
4. Ratio analysis

MCQs on Analysis of Financial Statements

Question 16:

________ indicate the speed at which activities of the business are being performed.

1. Liquidity ratios
2. *Turnover ratios
3. Solvency ratios
4. Profitability ratios

Question 17:

Which of the following transactions will result in cash flows from operating activities?

1. Cash receipts from sale of investments ₹60,000
2. *Cash receipts from sale of goods ₹94,000
3. Dividend received ₹31,000
4. Payment of cash for purchase of fixed assets ₹3,00,000

Question 18:

Dividend paid by a Finance Company is classified under which of the following:

1. Operating Activities
2. Investing Activities
3. *Financing Activities
4. Cash and Cash Equivalents

Question 19:

The Quick Ratio of a company is 1 : 1. Which of the following transactions will result in increase of this ratio?

1. Purchase of inventory ₹1,50,000 through cheque
2. *Sold inventory on credit ₹ 50,000
3. Outstanding expenses of ₹ 40,000 paid
4. Machinery purchased for cash ₹50,000

Question 20:

Which of the following transactions will result in cash outflow from operating activities?

1. *Payment to creditors
2. Proceeds from sale of investments
3. Dividend received by a non-finance company
4. Depreciation charged on furniture

MCQs on Analysis of Financial Statements

Question 21:

Which of the following is not a limitation of ‘Analysis of Financial Statements’?

1. It is just a study of the reports of the company.
2. It does not consider price level changes.
3. *It ascertains the relative importance of different components of the financial position of the firm.
4. It may be misleading without the knowledge of the changes in accounting procedures followed by a firm.

Question 22:

Ratios that are calculated for measuring the efficiency of operations of business based on effective utilization of resources are known as:

1. Liquidity ratios
2. *Turnover ratios
3. Solvency ratios
4. Profitability ratios

Question 23:

Sale of patents of ₹50,00,000 will result in:

1. Cash inflow of ₹50,00,000 from financing activities
2. Cash outflow of ₹50,00,000 from financing activities
3. Cash outflow of ₹50,00,000 from investing activities
4. *Cash inflow of ₹50,00,000 from investing activities

Question 24:

Income tax paid is classified under:

1. *Operating activities
2. Investing activities
3. Financing activities
4. Cash and cash equivalents

Class 12 Accountancy MCQs Financial Statements Analysis

Class 12 Accountancy MCQs Comparative Statements

Class 12 Accountancy MCQs Ratio Analysis

Class 12 Accountancy MCQs Cash Flow Statement

MCQs on Company Accounts Class 12

MCQs on Partnership Accounting Class 12

Case Based Questions in Accountancy Class 12

The post MCQs on Analysis of Financial Statements appeared first on Commerceatease - Website for 11th & 12th Commerce.

The following questions are all from the previous year CBSE question papers. Students can have idea of the level and type of questions asked in examination, to prepare well for the coming final exam.

Question 1:

Alfa Ltd. invited applications for 50,000 equity shares of ₹10 each at a premium of 30%. The whole amount was payable on application. Applications were received for 2,50,000 shares. The company decided to allot the shares on a pro-rata basis to all the applicants. The amount refunded by the company was:

1. ₹32,50,000
2. ₹15,60,000
3. ₹39,00,000
4. *₹26,00,000

Question 2:

Reserve capital is that part of _________ capital which cannot be called except at the time of winding up of the company.

1. Issued
2. Called up
3. *Uncalled
4. Nominal

Question 3:

Xeno Ltd. issued 25,000 equity shares of ₹0 each. The amount was payable as follows: On Application ₹4 per share, On Allotment ₹5 per share, On First and Final call Balance All the shares offered were applied for and allotted. All the money due on allotment was received except on 1,500 shares. These shares were forfeited immediately after allotment. First and final call was not yet made. At the time of forfeiture, Share Capital Account will be debited by:

1. ₹15,000
2. ₹24,000
3. *₹13,500
4. ₹18,000

Question 4:

Assertion (A) : Irredeemable debentures are also known as perpetual debentures.

Reason (R) : The company does not give any undertaking for the repayment of money borrowed by issuing such debentures. They are repayable on the winding up of the company or on the expiry of a long period.

1. *Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).
2. Both Assertion (A) and Reason (R) are correct, but Reason (R) is not the correct explanation of Assertion (A).
3. Assertion (A) is incorrect, but Reason (R) is correct.
4. Assertion (A) is correct, but Reason (R) is incorrect.

Question 5:

Money received in advance from shareholders before it is actually called up by the directors is:

1. *debited to calls in advance account
2. credited to calls in advance account
3. debited to share capital account
4. credited to share capital account

MCQs on Company Accounts

Question 6:

An offer of securities or invitation to subscribe securities to a select group of persons is termed as:

1. Buy back of shares
2. Employee stock option plan
3. *Private placement of shares
4. Sweat Equity

Question 7:

A share of ₹100 on which ₹80 is received is forfeited for non-payment of final call of ₹20. The minimum price at which this share can be reissued is:

1. ₹120
2. ₹100
3. ₹80
4. *₹20

Question 8:

Shiv Ltd. forfeited 500 shares of ₹10 each on which ₹7 per share was paid. These shares were reissued for ₹9 per share fully paid. Amount transferred to Capital Reserve Account will be:

1. *₹3000
2. ₹5000
3. ₹4500
4. ₹3500

Question 9:

If a share of ₹100 on which ₹70 has been paid is forfeited, then at which minimum price can it be re-issued ?

1. ₹100
2. *₹30
3. ₹70
4. ₹130

Question 10:

If a share of ₹10 issued at a premium of ₹2 per share, on which ₹8 (including premium) has been called and ₹6 (including premium) has been paid by the shareholder, is forfeited, then Share Capital Account will be debited with :

1. ₹10
2. ₹4
3. ₹8
4. *₹6

MCQs on Company Accounts

Question 11:

On 1st April 2022, Mega Ltd. issued 30,000, 10% Debentures of ₹100 each at a discount of 10%. The total amount of interest due on debentures for the year ending 31st March 2023 will be:

1. ₹2,70,000
2. *₹3,00,000
3. ₹27,000
4. ₹30,000

Question 12:

Maharaja Ltd. took over assets of ₹15,00,000 and liabilities of ₹2,00,000 of Dolphin Ltd. for an agreed purchase consideration of ₹12,60,000. It was agreed that the purchase consideration will be paid by issuing 11% Debentures of ₹100 each at 10% discount. The number of debentures issued will be:

1. 13,000
2. 12,600
3. 10,000
4. *14,000

Question 13:

Misha Ltd. issued 6,000, 8% Debentures of ₹100 each at ₹96 per debenture. 8% Debentures Account will be credited by:

1. ₹5,76,000
2. ₹24,000
3. *₹6,00,000
4. ₹60,000

Question 14:

Nominal/Authorized share capital is:

1. that part of the share capital which is issued by the company.
2. the amount of share capital which is actually applied for by the prospective shareholders.
3. *The maximum amount of share capital which a company is authorized to issue.
4. the amount actually paid by the shareholders.

Question 15:

The debentures which do not have a specific charge on the assets of the company are called:

1. Redeemable Debentures
2. *Unsecured Debentures
3. Zero Coupon Rate Debentures
4. Non-Convertible Debentures

MCQs on Company Accounts

Question 16:

Alfa Ltd. offered for public subscription 50,000 equity shares of ₹10 each at ₹110 per share. The entire amount was payable on application. Applications were received for 48,000 shares and allotment was made to all the applicants. The amount received on application will be:

1. *₹52,80,000
2. ₹55,00,000
3. ₹50,00,000
4. ₹48,00,000

Question 17:

Assertion (A): When the shares are forfeited, share capital account is debited with the amount called up and credited to (i) respective unpaid calls account i.e., calls in arrears and (ii) share forfeiture account with the amount already received on shares.

Reason (R): When the shares are forfeited, all entries relating to the shares forfeited, except those relating to securities premium, already recorded in accounting records must be reversed.

Choose the correct option from the following:

1. *Both Assertion (A) and Reason (R) are correct, and Reason (R) is the correct explanation of Assertion (A).
2. Both Assertion (A) and Reason (R) are correct, but Reason (R) is not the correct explanation of Assertion (A).
3. Assertion (A) is incorrect, but Reason (R) is correct.
4. Assertion (A) is correct, but Reason (R) incorrect.

Question 18:

Lexa Ltd. issued 50,000 equity shares of ₹10 each at a premium of ₹2 per share. The amount was payable as follows:

On application and allotment ₹7 per share (including premium)

On first and final call Balance

The issue was fully subscribed. All the money was duly received except the first and final call on 1,000 equity shares. These shares were forfeited. On forfeiture of these shares Calls in Arrears Account will be:

1. credited by ₹7,000
2. debited by ₹5,000
3. *Credited by ₹5,000
4. debited by ₹7,000

Question 19:

Minimum subscription for allotment of shares as per Securities and Exchange Board of India (SEBI) guidelines cannot be less than 90% of which of the following capital?

1. Reserve Capital
2. Nominal Capital
3. Subscribed Capital
4. *Issued Capital

Question 20:

KLB Ltd. forfeited 3,000 shares of 10 each, ₹8 per share called up for non-payment of first call of ₹2 per share. All these shares were reissued at ₹7 per share, ₹8 paid up. The amount transferred to Capital Reserve Account will be:

1. ₹18,000
2. ₹24,000
3. *₹15,000
4. ₹3,000

MCQs on Company Accounts

Question 21:

NUK Ltd. forfeited 1,000 shares of ₹10 each, fully called up for non-payment of final call of ₹2 per share. 800 of these shares were reissued at ₹11 per share fully paid. The amount credited to Capital Reserve Account will be:

1. *₹6,400
2. ₹8,000
3. ₹7,200
4. ₹10,000

Question 22:

The debentures which do not carry a specific rate of interest are called:

1. *Zero Coupon Rate Debentures
2. Specific Coupon Rate Debentures
3. Unsecured Debentures
4. Secured Debentures

Question 23:

Beeta Ltd. offered for subscription 1,00,000 equity shares of ₹ 10 each at a premium of 100% payable entirely on application. Applications were received for 5,00,000 equity shares. The company decided to allot the shares on pro-rata basis to all the applicants. The amount received by the company on application was:

1. *₹ 1,00,00,000
2. ₹ 20,00,000
3. ₹ 1,20,00,000
4. ₹ 80,00,000

Question 24:

The amount of share capital which a company is authorized to issue by its Memorandum of Association is called:

1. Issued capital
2. Subscribed capital
3. Reserve capital
4. *Nominal capital

Question 25:

Sinoy Ltd. issued 20,000 shares of ₹ 10 each at a premium of ₹ 6. The amount was payable as follows:

On Application – ₹ 7 per share (Including Premium ₹ 1 per share)

On Allotment – ₹ 5 per share (Including Premium ₹ 2 per share)

On First and Final call – Balance

The issue was fully subscribed. All the money was duly received except the allotment and first and final call on 1,000 shares. These shares were forfeited. On forfeiture of these shares, the ‘Securities Premium Account’ will be debited by:

1. ₹ 2,000
2. ₹ 3,000
3. *₹ 5,000
4. ₹ 20,000

MCQs on Company Accounts

Question 26:

Money not received from shareholders on allotment or calls is:

1. debited to calls in advance account.
2. credited to calls in advance account.
3. *Debited to calls in arrears account.
4. credited to calls in arrears account.

Question 27:

Those debentures where a charge is created on the assets of the company for the purpose of payment in case of default are known as:

1. *Secured Debentures
2. Registered Debentures
3. Specific Coupon Rate Debentures
4. Redeemable Debentures

Question 28:

Nagar Ltd. issued 6,000, 11% Debentures of ₹ 100 each at a discount of 10% redeemable at a premium. ‘Discount on issue of debentures’ and ‘Premium on redemption of debentures’ were accounted for through ‘Loss on issue of debentures account’. If the amount of ‘Loss on issue of debentures’ was ₹90,000, then the amount of premium on redemption of debentures was:

1. ₹ 60,000
2. ₹ 90,000
3. ₹ 1,20,000
4. *₹ 30,000

Question 29:

On 1st April 2022 Surya Ltd. issued 10,000, 12% Debentures of ₹ 100 each at a premium of 5%. The total amount of interest on debentures for the year ended 31st March 2023 will be:

1. *₹ 1,20,000
2. ₹ 50,000
3. ₹ 1,00,000
4. ₹ 1,26,000

Class 12 Accountancy MCQs Share Capital

Class 12 Accountancy MCQs Debentures

Case Based Questions in Accountancy Class 12

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