THEORY QUESTIONS
JOINT VENTURE
1. Differentiate between Joint venture and Partnership.
2. Differentiate between Joint venture a/c and Joint venture with co-venturer a/c.
3. What do you mean by Memorandum Joint venture account?
4. What is the meaning of underwriting of shares in the context of a joint venture business?
5. Define joint venture.
6. Distinguish between abnormal loss of stock and normal loss of stock.
7. Differentiate between Joint Venture account and JV with …… account.
8. Why are abnormal losses ignored when calculating the profit of the joint venture?
9. Under what circumstances are no separate set of books kept for joint venture?
10. Differentiate between Memorandum Joint venture a/c and Joint Bank a/c.
11. How do you give accounting treatment to Abnormal Loss of Goods in Joint Venture
accounts?
12. Why are abnormal losses ignored when calculating the profit of the Joint Venture?
13. Why is the word Memorandum affixed to the Memorandum Joint Venture Account?
14. vi) What journal entry will you pass when unsold stock is taken over by a co venturer
15. assuming that a separate set of books is maintained?
16. In what ways is a Joint venture different from a Partnership?
17. Why is abnormal loss not included in the books of a joint venture?
18. How do you give accounting treatment to Abnormal Loss of Goods in Joint Venture
accounts?
19. Give the accounting treatment in the books of a co venture under the Memorandum Joint
Venture Method, when he takes over the unsold stock.
20. Dustinguish between abnormal loss of stock and normal loss of stock.
21. What is memorandum joint venture account? Why is it prepared?
22. What journal entry will you pass when unsold stock is taken over by a co- venturer assuming
that a separate set of books is maintained?
23. In what ways is a Joint venture different from a Partnership?
24. Define Memorandum Joint Venture account.
25. Explain any two differences between Joint venture account and memorandum Joint venture
account.
26. What is the purpose of preparing Joint Bank account?
27. Define Joint Venture.
FUNDAMENTALS OF PARTNERSHIP
28. Give the adjusting and closing entry for recording interest on drawings charged from the
partners when the firm follows the fixed capital method.
29. How would you value the goodwill of a partnership firm on the basis of :
Capitalization of average profit method?
Capitalization of super profit method?
30. State the provisions of the Partnership Act, 1932, in the absence of a Partnershipdeed regard
ing:
Interest on Partner’s Drawing
Interest on advances made
31. What is the complete accounting treatment of interest on loan to the partner during the
preparation of a profit and loss appropriation account of a partnership firm assuming that
such interest has been paid in cash to the partner by the firm?
32. What is meant by ‘Capitalized value of Average Profits’? Give the formula for determining
it.
33. How would you adjust the capital accounts of the partners, when the share of profit of a
partner is guaranteed by:
the firm
another partner.
34. What is the rate of interest on Loan allowed to a partner in the absence of a partnership
deed ?
35. Mention four rules to be applied in absence of a partnership deed in partnership accounts.
36. Mention the accounting entries for Interest on capital and interest on drawings in partnership
accounts.
37. Mention the accounting entries for Salaries paid to partners and Distribution of profit to
partners.
38. What do you mean by guaranteeing profit to a partner?
39. Differentiate between capital provided by a partner and loan advance by a partner.
40. What is hidden goodwill and how it is calculated? [ISC 2004]
41. Give the accounting entry for payment of Partners Loan and Partner’s spouse loan at the time
of dissolution of a firm.
42. Under what circumstances no goodwill premium is shared by one of the old partners at the
time of admission of a new partner?
43. Give journal entry for recording interest on drawings charged from the partners and interest
on capital allowed to partners when the firm follows the fixed capital method.
44. State the provisions of Partnership Act,1932 ,in the absence of a Partnership Deed regarding
(a) Interest on Partner’s drawings
(b) Interest on Loans made by a partner to the firm other than capital.
(c) salaries and commission to partners
(d) Interest on capital allowed to a partner by the firm.
45. Mita and Mohan are partners sharing profits and losses in the ratio of 1:2 with capitals of
15,000 and 25,000 respectively. The partnership deed provides for interest on capital @ 6%
per annum. The trading loss for the year ending 31st March, 2016 was 1,500. State, giving
reason, the amount of interest of capital which will be allowed to the partners.
46. Give the adjusting entry and closing entry for recording commission allowed to a partner,
when the firm follows the fixed capital method.
47. State one difference between partner’s loan account and partner’s capital account.
48. Explain with example any two methods of valuation of goodwill in a partnership firm.
49. Explain the treatment of interest on loan advanced by a partner.
50. Mention the items that may appear on the debit side of the Capital account of a partner when
the capitals are fluctuating.
51. Give two reasons for distinguishing loan account and capital account of partners.
52. Mention the items that may appear on the debit side of the Capital account of a partner when
the capitals are fluctuating.
53. Mittal & Sons earned a profit of 2,75,000 during the year ended 31st March, 2016. 10% of
this profit was to be transferred to Investment Fluctuation Reserve. Pass the necessary journal
entry for the same.
54. Explain any two differences between Profit and Loss appropriation account and Profit and
Loss account in Company accounts.
55. Why is goodwill sometimes recorded in the books and immediately written off?[ISC 1995,
08]
56. Mention the accounting treatment required when the incoming partner brings personal
goodwill into the business.[ISC 2000]
57. State any four factors upon which the value of goodwill depends.[ISC 2001]
58. Give two reasons for distinguishing loan account and capital account of partners.
59. State the Application of Assets as per Section 48 of the Indian Partnership Act, 1932.
CHANGE IN PROFIT SHARING RATIO
60. Distinguish between gaining ratio and sacrificing ratio.
61. Under what circumstances is the Workmen Compensation Fund is distributed to partners
capital accounts?
62. Why are assets revalued and liabilities reassessed when there is a change in the profit
sharing ratio of partners.
ADMISSION OF A PARTNER
63. State the complete accounting treatment of hidden goodwill at the time of
admission of a partner.
64. 4.Why are assets and liabilities revalued at the time of admission of partner?[ISC 2001]
65. Under what circumstances premium for goodwill paid by the incoming partner would never
be recording the books of account? [ISC 2003, 06 ]
66. What accounting steps are taken by a partnership firm when a new partner is unable to bring
the business guaranteed by him?
67. Under what circumstances is the workmen compensation fund is distributed to partners
capital accounts.
68. Explain with example, how Hidden Goodwil is valued at the time of admission of a partner.
69. Why is general reserve distributed amongst old partners before a new partner is admitted?
[ISC 1997]
RETIREMENT AND DEATH OF A PARTNER
70. List out any 4 items for which a deceased partner is eligible for.
71. Distinguish between Gaining ratio and Sacrificing ratio.
72. How will the firm show the amount payable to the retiring partner, if it is not in a position to
immediately pay the amount due to him on his retirement?
73. Give the formula for calculating the outgoing partners share in the interim profits of the firm
on the basis of sales made by the firm.
DISSOLUTION OF PARTNERSHIP FIRM
74. What is the accounting treatment when realization expenses are paid by the partner on behalf
of the firm?
75. What is the purpose of preparing realisation account?
76. State two differences between dissolution of partnership and dissolution of firm.
77. Why is a memorandum balance sheet prepared at the time of dissolution of a
partnership firm?
78. How would you treat Workmen Compensation Fund and Employees Provident
79. Fund shown on the liability side of Balance Sheet, at the time of dissolution of
80. partnership firm and why?
81. How is workmen compensation fund shown in the balance sheet of a partnership firm, treated
at the time of its dissolution?
82. What is the accounting treatment of Employees Provident Fund appearing in the Balance
Sheet of a partnership firm at the time of its dissolution?
83. How will the firm record the payment of realization expense which were to be borne by a
partner, but paid by the firm on his behalf.
84. Explain any two differences between revaluation account and realisation account.
85. How would you treat Workmen Compensation Fund and Employees Provident Fund shown
on the liability side of Balance Sheet, at the time of dissolution of partnership firm and why
86. Why is general reserve not transferred to realisation account at the time of dissolution?
87. What is the purpose of preparing realisation account?
ISSUE OF SHARES
88. Explain similarities between Equity shares and Preference Shares.
89. What do you mean by calls in arrears ?
90. Differentiate between authorized capital and issued capital.
91. Mention the purposes of using securities premium.
92. What do you mean by called up and paid up capital?.
93. What is the accounting treatment of securities premium?
94. Apart from issuing shares to the general public for cash, list two other groups to whom a
company could issue shares for consideration other than cash.
95. 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.
96. 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?
97. State two similarities between calls in arrear account and calls in advance account.
98. What is the accounting treatment when shares are issued to promoters for
consideration ther than cash.
99. Explain similarities between Equity shares and Preference Shares.
100. What do you mean by pro rata allotment? Give a suitable example.
101. Why are the Preference Shares so called ?
102. How is Share premium treated in accounts?
103. What do you mean by calls in arrear and calls in advance?
104. Explain the accounting treatment of share forfeiture amount at the time of reissue of
forfeited shares.
105. Explain any two differences between called up capital and paid up capital.
106. What are the accounting treatments for shares issued to promotors and to underwriters.
107. What is the minimum price at which a company can reissue its forfeited shares which
were issued at par?
108. Give two differences between Authorized Capital and Issued Capital.
109. What is prorata allotment of shares?
110. Explain any two points of similarities between preference shares and debentures.
111. State the reasons, why balancing figure of share forfeiture account added to share capital
in a company balance sheet?
ISSUE OF DEBENTURES
112. Explain issuing debentures as collateral security with an example.
113. Distinguish between Profit on issue of Debentures and Premium on redemption of
Debentures.
114. What do you understand by issuing debentures as collateral security? With example.
115. When does Loss on Issue of Debentures arise?
116. Give any two differences between Securities Premium Reserve and Premium on
Redemption of Debentures.
117. ‘A company has to pay interest on debentures prior to paying dividend on shares’. Justify.
118. Give the adjusting entry and closing entry for interest on debentures due to the debenture
holders of the company.
FINAL ACCOUNTS OF COMPANIES
119. How do you show unclaimed dividend and proposed dividend in schedule III balance
sheet?
120. Mention any 4 items appearing under Reserves and Surplus.
121. Mention any 4 items appearing under Intangible assets.
122. Give any two points of difference (without examples) between tangible and intangible
fixed assets.
123. Under what heading will ‘Premium on Redemption of Debentures’ be recorded in a
Horizontal balance sheet?
124. Define an intangible asset as per AS-26, issued by The Institute of Chartered Accountants
of India.
125. Mention the name and explain the part of capital of a company which is called
up only on its winding up.
126. 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?
127. Distinguish between authorized, issued, subscribed, called up and paid up capital by the
means of a hypothetical example in the form of a problem.
128. What do you mean by General reserve?
129. Mention any 2 items to be deducted under Reserves and Surplus.
130. Differentiate between Secured Long term debts and Un-Secured Long term debts.
131. Mention any 2 items each appearing under current liabilities and current assets.
132. Differentiate between Short term provisions and long term provisions.
133. Explain any two differences between Profit and Loss appropriation account and Profit
and Loss account in Company accounts.
134. Mention any four items appear under the heading ‘Reserves and Surplus’ in a Company
Balance sheet.
135. Distinguish between Authorized, issued, subscribed, called up and paid up capital by
means of a hypothetical example in the form of a problem.
136. Define an intangible asset as per AS-26, issued by The Institute of Chartered
Accountants of India.
137. What are trade investments?
138. How are Calls-in advance and Calls-in-arrear shown in a Balance sheet?
139. Explain any two points of differences (without examples) between Tangible and
Intangible assets.
140. Differentiate between long term liabilities and short term liabilities with examples.
141. What is meant by miscellanious expenditure with respect to a companies balance sheet.
142. What are contingent liabilities? How is it shown in the companies balance sheet?
143. How do you show Unclaimed dividend and proposed dividend in Schedule III balance
sheet?
144. What is a contingent liability? How are contingent liabilities shown in the balance sheet
of a company prepared as per schedule III of the companies Act 2013?
145. How is Share premium treated in accounts?
146. What is meant by ‘Current Maturities of Long Term Debt? How is it disclosed in the
Balance Sheet of a company?
147. Give two differences between Reserve Capital and Capital Reserve.
FINANCIAL STATEMENT ANALYSIS
148. What do you mean by Comparative statements?
149. What is the significance of Common size statements?
150. What is a Comparative Balance Sheet?
151. What is the main object of preparing a Comparative Balance Sheet?
152. Name any two commonly used tools for comparison of Financial Statements.
CASH FLOW STATEMENT
153. What do you mean by Cash flow statement?
154. Mention any 4 items appearing under Cash and cash equivalent.
155. State the accounting standard which is followed for preparation of cash flow statement.
156. What is the basis of accounting that is followed when preparing a cash flow statement?
157. 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?
158. Classify the following into cash flow from Operating, Investing and Financing activites
while preparing Cash Flow Statement.
Interim dividend
Purchase of goodwill
Interest paid on public deposits
Payment of income tax
159. Distinguish between Cash flow from investing Activities and Cash flow from financing
activities.
160.
What is meant by Cash equivalents?
161. What do you mean by operating activities in cash flow statement?
162. What is meant by an operating cycle?
163. Give two differences between Net Profit and Cash from Operations.
164. State whether declaration of final dividend would result in inflow, outflowor no flow of
cash.
165. Give one difference between an Operating Activity and an Investing Activity.
166. What is meant by Cash equivalents?
RATIO ANALYSIS
167. What are the significance of Accounting Ratios?
168. State two differences between Debtors’ turnover ratio and Creditors’ turnover ratio.
169. In what way is a Current Ratio different from Liquidity Ratio.
170. Give two differences between debtors’ turnover ratio and creditors’ turnover ratio.
171. Mention two ratios for measuring Solvency, two ratios for measuring Stability.
172. What are the uses of accounting ratios?
173. Why are Prepaid expenses not considered as Quick Assets?
174. What are the uses of accounting ratios?
175. Differentiate between solvency ratios and turnover ratios
176. Give the formula for computing EPS
177. Distinguish between profitability ratios and solvency ratios.
178. Give the formulae for calculating the following ratios:
Interest Coverage Ratio
Proprietary Ratio