Accounts -2000-Set I

Q1) Why is ‘Profit and Loss Appropriation Account’ prepared? (Marks 3)
Ans1) Profit and Loss Appropriation Account is prepared to show how the net profit have been distributed among the partners. The account is credited with net profit or debited with net loss to begin with and further credited with Interest on drawings and debited with interest on capital salary etc. The final profit/loss is distributed in the agreed profit sharing ratio.

Q2) What are the alternatives available to a company for the allotment of debentures when there is over- subscription of debentures? (Marks 3)
Ans2) When there is over-subscription of debentures;
(i) The company may not allot any debenture to some applicant i.e. their application money is refunded.
(ii) If the applicants have been allotted less number of debentures than they applied for, the excess application money is adjusted towards allotment and subsequent calls.

Q3) A and B were partners sharing profits in the ratio of 3 : 2. They admitted X and Y as new partners. A surrendered 1/3rd of his share in favour of X and B surrendered 1/4th of his share in favour of Y. Calculate the new profit sharing ratio of A, B, X and Y. (Marks 3)
Ans3) A’s sacrifice = 1/3 x 3/5 = 3/15
B’s sacrifice = 1/4 x 2/5 = 2/20
A’s new share = 3/5 – 3/15 = 6/15
(Old share – sacrifice)
B’s new share = 2/5 – 2/20 = 6/20
… New Profit sharing ratio :
A : B : X : Y
6/15 : 6/20 : 3/15 : 2/20
= 4 : 3 : 2 : 1
(X’s share is equal to A’s sacrifice)
(Y’s share is equal to B’s sacrifice)

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