Accountancy (Term II)

Marking scheme value points (1 mark each basis):
(a) Nature of items: a Receipts and Payments Account shows every actual cash receipt and payment, whether capital or revenue; an Income and Expenditure Account shows only items of revenue nature relating to the year.
(b) Opening balance: a Receipts and Payments Account begins with the opening balance of cash in hand / cash at bank (or bank overdraft); an Income and Expenditure Account has no opening balance.

Step 1 – Amount actually paid = ₹40,000 − 10% of ₹40,000 = ₹40,000 − ₹4,000 = ₹36,000.
Step 2 – An unrecorded liability was never in the books, so it is not transferred to Realisation A/c; only its payment is recorded, and the payment is a realisation expense/loss.
Step 3 – The partner paid from his own pocket, so the firm owes him that amount: credit his Capital A/c.
Realisation A/c ... Dr. ₹36,000
To Amar's Capital A/c ₹36,000
(Being unrecorded creditor of ₹40,000 paid by Amar at 10% discount)
Common mistake: crediting Bank A/c (firm's money was not used) or recording ₹40,000 instead of the amount actually paid.

Shubham's share = \( \frac{3}{10} \).
Suman's gain = \( \frac{3}{10} \times \frac{3}{5} = \frac{9}{50} \); Siya's gain = \( \frac{3}{10} \times \frac{2}{5} = \frac{6}{50} \).
New share = Old share + Gain:
Suman = \( \frac{5}{10} + \frac{9}{50} = \frac{25}{50} + \frac{9}{50} = \frac{34}{50} \)
Siya = \( \frac{2}{10} + \frac{6}{50} = \frac{10}{50} + \frac{6}{50} = \frac{16}{50} \)
New ratio = 34 : 16 = 17 : 8.
Check: 34 + 16 = 50, i.e. the whole profit is distributed.

Purchases of sports material = Amount paid − Opening creditors + Closing creditors = 90,000 − 8,000 + 10,000 = ₹92,000.
Sports material consumed = Opening stock + Purchases − Closing stock = 40,000 + 92,000 − 20,000 = ₹1,12,000.
This ₹1,12,000 is shown on the Expenditure side of the Income and Expenditure Account.

All four items relate to the specific (earmarked) Match Fund, so they are adjusted in the fund itself and not taken to the Income and Expenditure Account.
Match Fund ₹70,000
Add: Donation for Match Fund ₹20,000
Add: Sale of match tickets ₹10,000
Less: Match expenses (₹10,000)
Balance shown on the Liabilities side of the Balance Sheet = ₹90,000.

Step 1 – Rate of profit on sales last year = \( \frac{1{,}20{,}000}{12{,}00{,}000} \times 100 = 10\% \).
Step 2 – Estimated profit for 1 April – 30 June 2021 = 10% of ₹4,00,000 = ₹40,000.
Step 3 – Ramesh's share = \( 40{,}000 \times \frac{2}{5} = ₹16{,}000 \).
Journal entry (30 June 2021):
Profit and Loss Suspense A/c ... Dr. ₹16,000
To Ramesh's Capital A/c ₹16,000
(Being Ramesh's share of profit till date of death credited to his capital)
Note: the books are not closed on the date of death, so the share is debited to P&L Suspense A/c, not to P&L Appropriation A/c.

Step 1 – Net assets = 25,00,000 − 7,80,000 = ₹17,20,000. Purchase consideration ₹27,00,000 is more, so Goodwill = 27,00,000 − 17,20,000 = ₹9,80,000.
Step 2 – Issue price = ₹100 − 10% = ₹90. Number of debentures = \( \frac{27{,}00{,}000}{90} = 30{,}000 \); nominal value ₹30,00,000; discount = 30,000 × ₹10 = ₹3,00,000.
\[\begin{array}{|l|r|r|}\hline \text{Particulars} & \text{Dr (₹)} & \text{Cr (₹)}\\\hline \text{Sundry Assets A/c Dr.} & 25{,}00{,}000 & \\ \text{Goodwill A/c Dr.} & 9{,}80{,}000 & \\ \quad\text{To Sundry Liabilities A/c} & & 7{,}80{,}000\\ \quad\text{To Sharma Ltd.} & & 27{,}00{,}000\\\hline \text{Sharma Ltd. Dr.} & 27{,}00{,}000 & \\ \text{Discount on Issue of Debentures A/c Dr.} & 3{,}00{,}000 & \\ \quad\text{To 10\% Debentures A/c} & & 30{,}00{,}000\\\hline\end{array}\]
Common mistake: dividing the consideration by ₹100 instead of the issue price ₹90.

Meaning:
• Collateral security is a subsidiary or additional security given along with the primary security when a company takes a loan from a bank or financial institution.
• A company may issue its own debentures to the lender for this purpose; this is called issue of debentures as collateral security.
• The lender can use (realise) these debentures only if the loan cannot be recovered fully from the primary security. If the loan is repaid, the debentures are returned and cancelled.
• No interest is paid on such debentures (interest is paid only on the loan).
Example: A company takes a loan of ₹50 lakh from a bank and, in addition to mortgaging its machinery, issues 9% debentures of ₹60 lakh (₹100 each) to the bank as collateral security.
(They may be shown in the Balance Sheet below the loan by way of a note, or recorded with Debenture Suspense A/c Dr. To Debentures A/c.)

Points to note: Bank (cash) and the debit balance of P&L A/c are not transferred to Realisation A/c; A's Loan is a partner's loan, settled separately. Creditors paid = 3,00,000 × 80% = ₹2,40,000.
\[\begin{array}{|l|r|l|r|}\hline \text{Dr. Particulars} & \text{₹} & \text{Cr. Particulars} & \text{₹}\\\hline \text{To Stock} & 2{,}40{,}000 & \text{By Creditors} & 3{,}00{,}000\\ \text{To Furniture} & 2{,}00{,}000 & \text{By Mrs. A's Loan} & 70{,}000\\ \text{To Plant and Machinery} & 1{,}00{,}000 & \text{By A's Capital (furniture)} & 1{,}80{,}000\\ \text{To Bank (creditors paid)} & 2{,}40{,}000 & \text{By Bank (plant sold)} & 80{,}000\\ \text{To A's Capital (Mrs. A's loan)} & 70{,}000 & \text{By B's Capital (stock)} & 1{,}80{,}000\\ \text{To B's Capital (expenses)} & 20{,}000 & \text{By Loss: A 30,000; B 30,000} & 60{,}000\\\hline \text{Total} & 8{,}70{,}000 & \text{Total} & 8{,}70{,}000\\\hline\end{array}\]
Check: Dr side 5,40,000 + 2,40,000 + 70,000 + 20,000 = 8,70,000; Cr side before loss 8,10,000, so loss = 60,000, shared equally.

No ratio is given, so profits are shared equally.
Revaluation A/c: losses – Stock ₹10,000, Debtors (34,000 − 30,000) ₹4,000 = ₹14,000. Gains – Plant and Machinery (80,000 − 66,000) ₹14,000, Creditors not to be claimed ₹4,500 = ₹18,500. Gain = ₹4,500 → ₹1,500 to each partner.
\[\begin{array}{|l|r|l|r|}\hline \text{Dr.} & \text{₹} & \text{Cr.} & \text{₹}\\\hline \text{To Stock} & 10{,}000 & \text{By Plant and Machinery} & 14{,}000\\ \text{To Debtors} & 4{,}000 & \text{By Creditors} & 4{,}500\\ \text{To Gain: Vidit, Vinay, Siya (1,500 each)} & 4{,}500 & & \\\hline \text{Total} & 18{,}500 & \text{Total} & 18{,}500\\\hline\end{array}\]
Vinay's Capital A/c: Cr – Balance b/d ₹16,000 + Revaluation gain ₹1,500 + General Reserve (18,000 ÷ 3) ₹6,000 = ₹23,500. Dr – To Vinay's Loan A/c ₹23,500.
\[\begin{array}{|l|r|l|r|}\hline \text{To Vinay's Loan A/c} & 23{,}500 & \text{By Balance b/d} & 16{,}000\\ & & \text{By Revaluation A/c} & 1{,}500\\ & & \text{By General Reserve} & 6{,}000\\\hline & 23{,}500 & & 23{,}500\\\hline\end{array}\]

Each case has two entries: (1) Bank A/c Dr. To Debenture Application and Allotment A/c (cash received); (2) transfer of the application money to Debentures A/c.
(a) Face value 7,50,000; cash = 7,50,000 − 10,000 = 7,40,000; premium on redemption 5% = 37,500.
Bank A/c Dr. 7,40,000 To Deb. Appl. and Allot. A/c 7,40,000
Deb. Appl. and Allot. A/c Dr. 7,40,000; Loss on Issue of Debentures A/c Dr. 47,500 (10,000 + 37,500)
To 10% Debentures A/c 7,50,000; To Premium on Redemption of Debentures A/c 37,500
(b) Cash = 5,000 × 110 = 5,50,000.
Bank A/c Dr. 5,50,000 To Deb. Appl. and Allot. A/c 5,50,000
Deb. Appl. and Allot. A/c Dr. 5,50,000; Loss on Issue of Debentures A/c Dr. 50,000
To 10% Debentures A/c 5,00,000; To Securities Premium A/c 50,000; To Premium on Redemption of Debentures A/c 50,000
(c) Bank A/c Dr. 1,00,000 To Deb. Appl. and Allot. A/c 1,00,000
Deb. Appl. and Allot. A/c Dr. 1,00,000 To 9% Debentures A/c 1,00,000
(d) Number = 2,00,000 ÷ 100 = 2,000; cash = 2,000 × 90 = 1,80,000.
Bank A/c Dr. 1,80,000 To Deb. Appl. and Allot. A/c 1,80,000
Deb. Appl. and Allot. A/c Dr. 1,80,000; Discount on Issue of Debentures A/c Dr. 20,000 To 9% Debentures A/c 2,00,000
(e) Cash = 5,000 × 120 = 6,00,000.
Bank A/c Dr. 6,00,000 To Deb. Appl. and Allot. A/c 6,00,000
Deb. Appl. and Allot. A/c Dr. 6,00,000 To 9% Debentures A/c 5,00,000; To Securities Premium A/c 1,00,000
Remember: premium payable on redemption is a liability recorded at issue and its amount is debited to Loss on Issue of Debentures A/c.

Subscriptions for the year = 34,000 − 900 (last year's outstanding received) + 1,900 (this year's outstanding) = ₹35,000.
Salaries for the year = 13,000 + 2,000 outstanding = ₹15,000.
The computer (₹10,000) is a capital payment, so it does not go to the Income and Expenditure Account.
\[\begin{array}{|l|r|l|r|}\hline \text{Expenditure} & \text{₹} & \text{Income} & \text{₹}\\\hline \text{To Honorarium} & 2{,}000 & \text{By Subscriptions} & 35{,}000\\ \text{To Repairs} & 1{,}000 & \text{By Sale of old newspapers} & 700\\ \text{To Salaries} & 15{,}000 & \text{By Interest on Investments} & 2{,}800\\ \text{To Sundry Expenses} & 1{,}000 & & \\ \text{To Surplus} & 19{,}500 & & \\\hline & 38{,}500 & & 38{,}500\\\hline\end{array}\]

Redemption of debentures means the company pays back the debenture holders. Cash goes out of the business, so it is an outflow of cash.
It is shown under Financing Activities because debentures are a source of long-term borrowed funds.

(i) Simple and integrated – it automates and links all business operations (sales, purchases, inventory, finance), giving accurate up-to-date information quickly.
(ii) Accuracy and speed – ready data-entry screens/templates allow fast, error-free entry, and reports are generated instantly.
Other valid points: transparency and control (greater access to day-to-day information); scalability (handles more data as the business grows); reliability (financial information stays accurate, controlled and secure).

Absolute change = 2020-21 − 2019-20; % change = change ÷ 2019-20 figure × 100.
\[\begin{array}{|l|r|r|r|r|}\hline \text{Particulars} & \text{2019-20} & \text{2020-21} & \text{Change (₹)} & \text{\% Change}\\\hline \text{Revenue from operations} & 10{,}00{,}000 & 15{,}00{,}000 & 5{,}00{,}000 & 50\\ \text{Less: Expenses} & 2{,}00{,}000 & 3{,}00{,}000 & 1{,}00{,}000 & 50\\ \text{Profit before tax} & 8{,}00{,}000 & 12{,}00{,}000 & 4{,}00{,}000 & 50\\ \text{Less: Tax @ 30\%} & 2{,}40{,}000 & 3{,}60{,}000 & 1{,}20{,}000 & 50\\ \text{Profit after tax} & 5{,}60{,}000 & 8{,}40{,}000 & 2{,}80{,}000 & 50\\\hline\end{array}\]
Common mistake: calculating % change on the current-year figure instead of the base year.

\[\begin{array}{|l|r|r|r|r|}\hline \text{Particulars} & \text{31.3.2020} & \text{31.3.2021} & \text{Change (₹)} & \text{\%}\\\hline \text{Shareholders' Funds} & 20{,}00{,}000 & 30{,}00{,}000 & 10{,}00{,}000 & 50\\ \text{Current Liabilities} & 5{,}00{,}000 & 6{,}00{,}000 & 1{,}00{,}000 & 20\\ \text{Total} & 25{,}00{,}000 & 36{,}00{,}000 & 11{,}00{,}000 & 44\\\hline \text{Non-Current Assets} & 15{,}00{,}000 & 24{,}00{,}000 & 9{,}00{,}000 & 60\\ \text{Current Assets} & 10{,}00{,}000 & 12{,}00{,}000 & 2{,}00{,}000 & 20\\ \text{Total} & 25{,}00{,}000 & 36{,}00{,}000 & 11{,}00{,}000 & 44\\\hline\end{array}\]
Working: % change = change ÷ 2020 figure × 100, e.g. 11,00,000 ÷ 25,00,000 × 100 = 44%.

(i) Provides a high level of security – access can be restricted through passwords and user rights.
(ii) Permanent storage of data – data is stored safely and can be retrieved whenever needed.
(iii) Maintains large databases – huge volumes of data can be stored and managed efficiently.
Other valid features: reduces data redundancy, allows data sharing among many users, maintains data integrity, supports backup and recovery.

(i) Attribute: In a DBMS data is kept in tables of rows and columns; each column is an attribute, e.g. transaction number, transaction date, party's name or address.
(ii) Database design: describes the structure of the different parts of the whole database – which tables, fields and relationships it contains.
(iii) Normalisation: the process of breaking information into separate but related tables so that the same data is not repeated (duplication is avoided).

Working 1 – Provision for tax made this year = closing 9,000 + paid 6,500 − opening 5,500 = ₹10,000.
Working 2 – Net profit before tax = (1,25,000 − 55,000) + 10,000 = 70,000 + 10,000 = ₹80,000.
Working 3 – Depreciation = 70,000 − 45,000 = ₹25,000.
\[\begin{array}{|l|r|}\hline \text{Particulars} & \text{₹}\\\hline \text{Net profit before tax} & 80{,}000\\ \text{Add: Depreciation} & 25{,}000\\ \text{Operating profit before working capital changes} & 1{,}05{,}000\\ \text{Add: Decrease in inventories} & 11{,}000\\ \text{Less: Increase in trade receivables} & (1{,}500)\\ \text{Less: Decrease in trade payables} & (34{,}000)\\ \text{Cash generated from operations} & 80{,}500\\ \text{Less: Tax paid} & (6{,}500)\\ \text{Cash flows from operating activities} & 74{,}000\\\hline\end{array}\]
Notes: Bank overdraft is a financing item; patents are investing; current investments are treated as cash equivalents (as in the CBSE marking scheme), so none of these enter operating activities.

1. Insert the software CD into the computer.
2. Start the setup: open My Computer, select the CD drive and double-click install.exe; or use Start → Run and type the path, e.g. E:\install.exe.
3. A window shows the default directories for the application, data and configuration files. The user may accept them or change them by giving another drive/folder name (e.g. D:\software name instead of the default C: folder).
4. Click Install; the installation process starts and copies the files.
5. When the software shows the message of successful installation, close the window and remove the CD. The software is now ready to be configured and used.