Class 12 Accountancy Questions with Answer

 Q3A) SHORT NOTE

I)Securities Premium -Securities Premium refers to the amount raised by a company through the sale of its shares at a price higher than their face value. It represents the excess amount investors are willing to pay for shares, reflecting confidence in the company's potential. This premium is not distributable as dividends but is used for various purposes such as issuing bonus shares, writing off preliminary expenses, or offsetting future losses.

ii) Subscribed capital

Subscribed capital is the portion of a company's authorized share capital that has been agreed to be purchased by investors. It is essentially a commitment from investors to buy a certain number of shares at a certain price. Subscribed capital is recorded in the company's balance sheet as a liability, as it represents an obligation to the investors.

iii) Authorized capital

Authorized capital is the maximum number of shares that a company is allowed to issue, as stated in its memorandum of association or articles of incorporation. It is not the same as issued capital, which is the number of shares that have actually been issued to investors. Authorized capital can be increased or decreased through a shareholder vote.

3B) Distinguish between sacrificing Ratio & Gaining Ratio 

Ans.Here is a comparison of sacrificing ratio and gaining ratio:

Definition

SACRIFICING RATIO 

The ratio in which existing partners give up a portion of their profit-sharing ratio in favor of a new or incoming partner.

GAINING RATIO

The ratio in which existing partners acquire a portion of the profit-sharing ratio from a retiring or deceased partner.

When used

  SACRIFICING RATIO

When a new partner is admitted to the firm.

GAINING RATIO

When a partner retires or dies and leaves the firm.

Effect on existing partners

Reduces their profit-sharing ratio.

Increases their profit-sharing ratio.

Calculation

Sacrificing Ratio = Old Ratio - New Ratio

Gaining Ratio = New Ratio - Old Ratio

3B OR)

Q3B) Treatment of Goodwill at the time of Admission/Retirement of a partner

Treatment of Goodwill at the Time of Admission/Retirement of a Partner

The treatment of goodwill at the time of admission or retirement of a partner depends on whether the goodwill is already recorded in the firm's books or not. Here's a breakdown of both scenarios:

1. Goodwill not recorded in the books:

Admission of a partner:

In this case, the incoming partner brings in an additional amount, known as "goodwill premium," to compensate the existing partners for their share in the future profits arising from the established goodwill.

This premium is credited to the existing partners' capital accounts in their profit-sharing ratio.

Journal entry:

Goodwill A/c Dr. (Amount of premium)

Existing Partners' Capital A/c Cr. (Distributed in their profit-sharing ratio)

Retirement of a partner:

The retiring partner is entitled to their share of the firm's goodwill, which is calculated based on their profit-sharing ratio.

This amount is paid by the remaining partners in their gaining ratio (ratio in which they share future profits after the partner's retirement).

Journal entry:

Retiring Partner's Capital A/c Dr. (Amount of goodwill share)

Remaining Partners' Capital A/c Cr. (Distributed in their gaining ratio)

2. Goodwill already recorded in the books:

Admission of a partner:

The goodwill account is not adjusted.

The incoming partner brings in capital based on their share in the revalued firm (including goodwill).

Journal entry:

Cash A/c Dr. (Amount brought in by new partner)

New Partner's Capital A/c Cr.

Retirement of a partner:

The retiring partner's share of goodwill is debited from the goodwill account and credited to their capital account.

The remaining partners' capital accounts are adjusted to reflect their new profit-sharing ratio.

Journal entry:

Retiring Partner's Capital A/c Dr. (Amount of goodwill share)

Goodwill A/c Cr.

Remaining Partners' Capital A/c Cr. (Distributed in their new profit-sharing ratio