Kerala Plus Two Accountancy AFS Board Model Paper 2022 with Answers

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Kerala Plus Two Accountancy AFS Board Model Paper 2022 with Answers

Time: 2 Hours
Maximum Score: 60

Section – II
Analysis of Financial Statements (40 Scores)

Part – VI

A. Answer any four questions from 25 to 30. Each carries 1 score. (4 × 1 = 4)

Question 25.
Equity shareholders are ____________________
(a) Creditors
(b) Customers
(c) Owners
(d) Debtors
Answer:
(c) Owners

Question 26.
Interest on calls in advance payable according to table F is
(a) 6%
(b) 12%
(c) 5%
(d) 10%
Answer:
(b) 12%

Question 27.
Debentures constitute ____________________ capital of the company.
(a) Owned
(b) Borrowed
(c) Authorised
(d) Reserve
Answer:
(b) Borrowed

Question 28.
The financial statements of a business enterprise include:
(a) Balance Sheet
(b) Cash Flow Statement
(c) Statement of Profit and Loss
(d) All of the above
Answer:
(d) All of the above

Question 29.
A company issued a share of face value of Rs. 10 to Rs. 15. The excess value is called
(a) Reserve
(b) Premium
(c) Nominal Value
(d) Discount
Answer:
(b) Premium

Question 30.
One of the tools used for financial analysis is also known as 100% statements. Identify it.
(a) Common size statement
(b) Comparative statement
(c) Trend analysis
(d) Cash flow analysis
Answer:
(a) Common size statement

B. Answer all questions from 31 to 35. Each carries 1 score. (3 × 1 = 3)

Question 31.
Find the odd one.
(a) Current Ratio
(b) Debt Equity Ratio
(c) Liquid Ratio
(d) Operating Ratio
Answer:
(d) Operating Ratio

Question 32.
A company proposes a 20% dividend on equity shares. If the paid up amount of equity shares is Rs. 10 per share, Dividend per share will be ____________________
(a) Rs. 4
(b) Rs. 2
(c) Rs. 6
(d) Rs. 10
Answer:
(b) Rs. 2

Question 33.
When shares are issued for cash, there is
(a) Inflow of cash
(b) Outflow of cash
(c) Both inflow and outflow of cash
(d) None of the above
Answer:
(a) Inflow of cash

Part – VII

A. Answer the following question carries 2 scores. (1 × 2 = 2)

Question 34.
What do you mean by One Person Company?
Answer:
Section 2(62) of the Companies Act, 2013-OPC means a company with only one person as a member.

B. Answer any one question from 35 to 36. Carries 2 scores. (1 × 2 = 2)

Question 35.
MK Ltd. purchased a machine from Santhi Ltd. for Rs. 5,50,000 and paid Rs. 50,000 in cash and balance by issue of shares of Rs. 10 each. Write the Journal entry for purchase consideration.
Answer:

Question 36.
Explain the nature of the Financial Statements. (Any two points only)
Answer:

1. Recorded Facts
2. Accounting Conventions
3. Personal Judgment

Part – VII

A. Answer any three questions from 37 to 40. Each carries 3 scores. (3 × 3 = 9)

Question 37.
Arjun Ltd. invited applications for 20,000 equity shares of Rs. 10 each. Applications were received for 30,000 shares, and the directors decided to make a pro rata allotment by adjusting the excess application money toward S’the amount due on allotment. Pass Journal entries when the application money is Rs. 3 per share.
Answer:
Journal

Question 38.
Give Journal entries for issue of Rs. 1,50,000, 10% debentures of Rs. 100 each issued at par and redeemed at par.
Answer:
Journal

Question 39.
Classify the following transactions into operating activities and investing activities of a manufacturing concern.
(a) Rent of factory paid
(b) Purchase of Land
(c) Sale of Goods
(d) Paid cash to Suppliers
(e) Purchase of Furniture
(f) Investment in Fixed Deposit
Answer:

Operating Activities	Investing Activities
Rent of the factory paid	Purchase of Land
Sale of goods	Purchase of Furniture
Paid cash to suppliers	Investment in Fixed Deposit

Question 40.
Amrita, a shareholder holding 300 shares of Rs. 10 each, did not pay the allotment money of Rs. 5 per share (including a premium of Rs. 2) and the first and final call of Rs. 4. Her shares were forfeited. Give a journal entry for forfeiture.
Answer:

B. Answer the following question, carries 3 scores. (1 × 3 = 3)

Question 41.
Sun Ltd. purchased assets of the book value of Rs. 2,50,000 from Moon Ltd. and agreed to make the payment of purchase consideration by issuing 2500, 9% debentures of Rs. 100 each. Record necessary Journal Entries.
Answer:

Part – IX
A. Answer any two questions from 42 to 44. Each carries 4 scores.

Question 42.
Distinguish between Shares and Debentures.
Answer:

Shares	Debentures
1. Share is a part of owned capital.	1. Debenture is a part of loan or borrowed capital.
2. Dividend is paid on a share.	2. Interest is paid on debentures.
3. Shareholder is a proprietor.	3. Debenture holder is a creditor.
4. A share is unsecured.	4. Debentures are generally secured.
5. Shareholder enjoys voting right.	5. Debenture holders do not enjoy voting rights.
6. Shareholder gets dividend only if there is a profit.	6. The debenture holder gets interest whether the company makes profit or not.

Question 43.
Explain the limitations of the Financial Statement. (Any Four).
Answer:

1. They are only interim reports: The financial statements are prepared at the end of each accounting year. But the actual position of a business can be determined only when the business is sold or liquidated. So financial statements are only interim reports.
2. Do not give exact position: Financial statements do not give the correct position of a business. Fixed assets are shown at cost less depreciation, not at saleable value. Assets which do not have any realisable (saleable) value are also shown in the Balance Sheet.
3. Historical Cost: The financial Statements are prepared based on original {historical} cost. The value of assets and liabilities may be changed {increased or decreased}; but financial statements do not consider such changes or present market values.
4. Non-monetary factors: Only factors which can be expressed in terms of money value are given in financial statements. Non-monetary factors like efficiency of management, quality of employees, credit worthiness of the business are ignored.
5. Non-precision: Financial Statements deal with matters which should be given in detail. So the precision {briefing} of financial statements is not possible.

Question 44.
Prepare a comparative statement of Profit and Loss of Star Company Ltd. from the following.

Answer:

B. Answer any one question from 45 to 46. Carries 4 scores. (1 × 4 = 4)

Question 45.
The Directors of a Ltd. Co., decided to forfeit 500 equity shares of Rs. 10 each for non-payment of second and final call of Rs. 3 per share. These shares were re-issued at Rs. 8 per share. Show the necessary Journal Entries.
Answer:
Journal

Question 46.
“The nature of financial analysis will differ depending on the purpose of the analyst.” In the light of this, explain the significance of Analysis of Financial Statements.
Answer:
Financial analysis is useful and significant to different users in the following ways:

1. Finance manager: Financial analysis focuses on the facts and relationships related to managerial performance, corporate efficiency, financial strengths and weaknesses, and creditworthiness of the company. A finance manager must be well-equipped with the different tools of analysis to make rational decisions for the firm. The tools for analysis help in studying accounting data to determine the continuity of the operating policies, investment value of the business, credit ratings, and testing the efficiency of operations.
2. Top management: Financial analysis helps the top management in measuring the success of the company’s operations, appraising the individual’s performance and evaluating the system of internal control.
3. Trade payables: Trade payables, through an analysis of financial statements, appraises not only the ability of the company to meet its short-term obligations, but also judges the probability of its continued ability to meet all its financial obligations in the future. Trade payables are particularly interested in the firm’s ability to meet their claims over a very short period. Their analysis will, therefore, evaluate the firm’s liquidity position.
4. Lenders: Suppliers of long-term debt are concerned with the firm’s long-term solvency and survival. They analyse the firm’s profitability over some time, its ability to generate cash, to be able to pay interest and repay the principal, and the relationship between various sources of funds (capital structure relationships). Long-term lenders analyse the historical financial statements to assess the future solvency and profitability.
5. Investors: Investors, who have invested their money in the firm’s shares, are interested in the firm’s earnings. Financial analysis helps the investors to know the present position and future profitability of the company.
6. Labour unions: Labour unions analyse the financial statements to assess whether they can presently afford a wage increase and whether it can absorb a wage increase through increased productivity or by raising the prices.
7. Others: The economists, researchers, etc., analyse the financial statements to study the present business and economic conditions. The government agencies need it for price regulations, taxation, and other similar purposes.

Part – X

Answer any one question from 47 to 48. Carries 5 scores. (1 × 5 = 5)

Question 47.
Sathya Ltd. issued 30,000 Equity Shares of Rs. 10 each at a premium of Rs. 2 per share payable as follows:
On Application Rs. 3
On Allotment Rs. 5 (including premium)
On First and Final call Rs. 4
Applications were received for 35,000 shares and prorata allotment was made to all applicants. The excess application money was adjusted towards the allotment. Record necessary journal entries in the books of the company.
Answer:
Journal

Question 48.
Balance Sheet of Megha Ltd. as on March 31st, 2021 is given below:

Compute the following ratios:
(a) Current Ratio
(b) Debt Equity Ratio
Answer:
(a) Current Ratio = \(\frac{CurrentAssets}{Current Liabilities}\)
Current assets = 1,75,000 + 3,25,000 + 30,000 = 5,30,000
Current liabilities = 2,90,000
Current ratio = \(\frac{530000}{290000}\) = 1.83 : 1

(b) Shareholders fund = Share capital + Reserves and surplus
= 3,00,000 + 2,00,000
= Rs.5,00,000
Debt-Equity Ratio = \(\frac{Long Term Debt}{Share Holders Fund}\)
= \(\frac{1,00,000}{5,00,000}\)
= 0.2 : 1