CA FOUNDATION

SUBJECT- ACCOUNT
Test Code – CNP 2231
(Date :)
(Marks - 100)
TOPIC : FULL COURSE
Question No. 1 is compulsory.

Attempt any four questions from the remaining five questions.

Wherever necessary, suitable assumptions should be made and disclosed by way

of note forming part of the answer.

Working Notes should form part of the answer.

Time Allowed: 3 Hours

QUESTION: 1(A)
State with reasons whether the following statements are True or False:
(i) Amount spent for the construction of temporary huts, which were necessary for
construction of the Cinema House and were demolished when the Cinema House was
ready, is capital expenditure.
(ii) Finished goods are normally valued at cost or market price whichever is higher.
(iii) The additional commission to the consignee who agrees to bear the loss on account of
bad debts is called overriding commission.
(iv) The firm will receive surrender value of the joint life policy on the death of the partner.
(v) Where a non profit organisation separate trading activity, the profit/loss from the
trading account shall be transferred to Income Expenditure Account at the time of
consolidation.
(vi) Capital + Long Term Liabilities = Fixed Assets + Current Assets + Cash - Current
Liabilities

(6*2 MARKS = 12 MARKS)

QUESTION : 1(B)

Differentiate between provision and contingent liability. (4 MARKS)

QUESTION : 1(C)
From the following particulars, prepare a Bank Reconciliation Statement for Ayodhya
Ltd. as on31.3.2021
(1) Balance as per cash book is Rs. 3,60,000.
(2) Cheques issued but not presented in the bank amounts to Rs. 2,04,000.
(3) Bank charges amounts to Rs. 900.
(4) Interest credited by bank amounts to Rs. 4,500.

(4 MARKS)
QUESTION : 2(A)
M/s Krishna took lease of a quarry on 1-1-2019 for Rs. 6,00,00,000. As per technical
estimate the total quantity of mineral deposit is 12,00,000 tonnes. Depreciation was charged
on the basis of depletionmethod. Extraction pattern is given in the following table:
Year Quantity of Mineral extracted
2019 12,000 tonnes
2020 60,000 tonnes
2021 90,000 tonnes
Required
Show the Quarry Lease Account and Depreciation Account for each year from 2019 to
2021.
(10 MARKS)
QUESTION : 2(B)
Sky Ltd. keeps no stock records but a physical inventory of stock is made at the end of each
quarter and the valuation is taken at cost. The company’s year ends on 31 st March, 2018
and their accounts have been prepared to that date. The stock valuation taken on 31 st
March, 2018 was however, misleading and you have been advised to value the closing
stocks as on 31st March, 2018 with the stock figure as on 31st December, 2017 and some
other information is available to you:

(i) The cost of stock on 31st December, 2017 as shown by the inventory sheet
was Rs. 80,000.

(a) On 31st December, stock sheet showed the following discrepancies:

A page total of Rs. 5,000 had been carried to summary sheet as Rs. 6,000.
(b) The total of a page had been undercast by Rs. 200.
(ii) Invoice of purchases entered in the Purchase Book during the quarter from January to
March, 2018 totalled Rs. 70,000. Out of this Rs. 3,000 related to goods received prior
to 31st December, 2017. Invoices entered in April 2018 relating to goods received in
March, 2018 totalled Rs. 4,000.
(iii) Sales invoiced to customers totalled Rs. 90,000 from January to March, 2018. Of this Rs.
5,000 related to goods dispatched before 31 st December, 2017. Goods dispatched to
customers before 31st March, 2018 but invoiced in April, 2018 totalled Rs. 4,000.
(iv) During the final quarter, credit notes at invoiced value of Rs. 1,000 had been issued to
customers in respect of goods returned during that period. The gross margin earned by
the company is 25% of cost.
You are required to prepare a statement showing the amount of stock at cost as
on 31st March, 2018.
(5 MARKS)
QUESTION : 2(C)
Prepare Journal entries for the following transactions in K. Katrak’s books.
(i) Katrak’s acceptance to Basu for Rs. 2,500 discharged by a cash payment of Rs. 1,000
 and a new bill for the balance plus Rs. 50 for interest.
(ii) G. Gupta’s acceptance for Rs. 4,000 which was endorsed by Katrak to M. Mehta was
dishonoured. Mehta paid Rs. 20 noting charges. Bill withdrawn against cheque.
(iii) D. Dalal retires a bill for Rs. 2,000 drawn on him by Katrak for Rs. 10 discount.
(iv) Katrak’s acceptance to Patel for Rs. 5,000 discharged by Mody’s acceptance to
Katrak for a similar amount.
(5 MARKS)

QUESTION : 3(A)
Nishant of Noida consigned 15,000 kgs of Sugar at Rs. 30 per kg to his agent Raja at
Gurgaon. He spent Rs. 5 per kg as freight and insurance for sending the Sugar at
Gurgaon. On the way 100 kgs. of sugar was lost due to the leakage (which is to be treated
as normal loss) and 400 kgs. of sugar was destroyed in transit. Rs. 9,000 was paid to
consignor directly by the Insurance company as Insurance claim.
Raja sold 7,500 kgs. at Rs. 60 per kg. He spent Rs. 33,000 on advertisement and recurring
expenses. You are required to calculate:
(i) The amount of abnormal loss
(ii) Value of stock at the end and
Prepare Consignment account showing profit or loss on consignment, if Raja is entitled to
5% commission on sales.
(10 MARKS)
QUESTION: 3(B)
Mr. Somnath sends goods to his customers on Sale or Return. The following transactions
took place during the month of December, 2021.
December 12th - Sent goods to customers on sale or return basis at cost plus 25% -
Rs. 1,70,000

December 20th - Goods returned by customers Rs. 70,000

December 22nd - Received letters from customers for approval Rs. 70,000
December 27th - Goods with customers awaiting approval Rs. 30,000

Mr. Somnath records sale or return transactions as ordinary sales. You are required to pass
the necessary Journal Entries in the books of Mr. Somnath assuming that the
accounting year closes on 31st Dec., 2021. Considered that the transaction values are at
involve price (including profit margin)
(5 MARKS)
QUESTION : 3(C)(I)
Amar accepted the following bills drawn by Pawan.

On 8th March, 2021 Rs. 16,000 for 4 months.

On 16th March,2021 Rs. 20,000 for 3 months.

On 7th April, 2021 Rs. 24,000 for 5 months.

On 17th May, 2021 Rs. 20,000 for 3 months.

He wants to pay all the bills on a single day. Find out this date. Interest is charged @ 18%
p.a. and Amar wants to save Rs. 628 by way of interest. Calculate the date on which he
has to effect the payment to save interest of Rs. 628.

(5 MARKS)

OR
QUESTION : 3(C)(II)
The following are the transactions that took place between A and B during the period
from 1stOctober, 2020 to 31st March, 2021:

2020 Rs.
Oct.1 Balance due to A by B 3,000
Oct 18 Goods sold by A to B 2,500
Nov. 16 Goods sold by B to A (invoice dated November, 26) 4,000
Dec.7 Goods sold by B to A (invoice dated December, 17) 3,500
2021 Rs.
Jan. 3 Promissory note given by A to B, at three months 5,000
Feb. 4 Cash paid by A to B 1,000
Mar. 21 Goods sold by A to B 4,300
Mar.28 Goods sold by B to A (invoice dated April, 8) 2,700
Draw up an Account Current up to March 31st, 2021 to be rendered by A to B, charging
interest at 10% per annum (By product method). Interest is to be calculated to the nearest
rupee.
(5 MARKS)
QUESTION: 4(A)
The following information of M/s. Missionary Club are related for the year ended 31st
March,2021:
(1)
Balances As on 01-04-2020 As on 31-3-2021
(Rs.) (Rs.)
Stock of Sports Material 2,25,000 3,37,500
Amount due for Sports Material 2,02,500 2,92,500
Subscription due 33,750 49,500
Subscription received in advance 27,000 15,750
(2) Subscription received during the year Rs. 11,25,000
(3) Payments for Sports Material during the year Rs. 6,75000

You are required to:

(A) Ascertain the amount of Subscription and Sports Material that will appear in Income
& Expenditure Account for the year ended 31.03.2021 and
(B) Also show how these items would appear in the Balance Sheet as on 31.03.2021.
(10 MARKS)
QUESTION: 4(B)
The following is the Trial Balance of C. Wanchoo on 31st Dec. 2020.

Trial Balance on 31st December, 2020

Particulars Rs. Rs.
Capital Account 10,00,000
Inventory Account 2,00,000
Cash in hand 1,44,000
Machinery Account 7,36,000
Purchases Account 18,20,000
Wages Account 10,00,000
Salaries Account 10,00,000
Discount Allowed A/c 50,000
Discount Received A/c 30,000
Sundry Office Expenses Account 6,00,000
Sales Account 50,00,000
Sums owing by customer (Trade receivables) 8,50,000
Trade payables (sums owing to suppliers) 3,70,000
Total 64,00,000 64,00,000
Value of Closing Inventory on 31st March, 2020 was Rs. 2,70,000
Required :
Prepare closing entries for the above items and Prepare Trading and Profit and Loss
Account

(10 MARKS)
QUESTION : 5
Amal, Kamal and Tamal are partners in a firm sharing profits and losses as 8:5:3. Their
balance sheet as at 31st December, 2021 was as follows:

Particulars Rs. Particulars Rs.

Sundry creditors 3,00,000 Cash 80,000
General reserve 1,60,000 Bills receivable 1,00,000
Partners’ loan accounts: Sundry debtors 1,20,000
Amal 80,000 Stock 2,40,000
Kamal 60,000 Fixed assets 5,60,000
Partners’ capital accounts:
Amal 2,00,000
Kamal 1,60,000
Tamal 1,40,000
11,00,000 11,00,000

From 1st January, 2022 they agreed to alter their profit-sharing ratio as 5:6:5. It is also
decided that:
(a) The fixed assets should be valued at Rs. 6,62,000;
(b) A provision of 5% on sundry debtors to be made for doubtful debts;
(c) Goodwill of the firm at this date be valued at three years’ purchase of the average net
 profits
of the last five years before charging insurance premium; and
(d) Stock be reduced to Rs. 2,24,000.
There is a joint life insurance policy for Rs. 4,00,000 for which an annual premium of
Rs. 20,000 is paid, the premium being charged to profit and loss account. The surrender
value of the policy on 31st December, 2021 was Rs. 1,56,000.
The net profits of the firm for the last five years were Rs. 28,000, Rs. 34,000, Rs. 40,000,
Rs. 44,000 and Rs. 54,000.
Goodwill and the surrender value of the joint life policy was not to appear in the books.
Draft journal entries necessary to adjust the capital accounts of the partners and prepare
the revised balance sheet.
(20 MARKS)
QUESTION : 6
(A) Give necessary journal entries for the forfeiture and re-issue of shares:
(i) Akhil Pvt. Ltd. forfeited 9,000 shares of Rs. 10 each fully called up, held by
Aditya for non- payment of allotment money of Rs. 3 per share and final call of
Rs. 4 per share. He paid the application money of Rs. 3 per share. These shares
were re-issued to Katen for Rs. 8 per share.
(ii) Mr. C, who was the holder of 10,000 preference shares of Rs. 100 each, on
which Rs. 70 per share has been called up, could not pay his dues on Allotment
and First call each at Rs. 20 per share. The Directors forfeited the above shares
and reissued 8,000 of such shares to Mr. D at Rs. 60 per share paid-up as Rs. 70
per share.
(10 MARKS)
(B) Galaxy Limited issued 10,000 8% Debentures of the nominal value of
Rs.1,00,00,000 as follows:
(a) To sundry persons for cash at 90% of nominal value of Rs. 25,00,000.
(b) To a vendor for purchase of fixed assets worth Rs. 10,00,000 – Rs.
12,50,000 nominal value.
(c) To the banker as collateral security for a loan of Rs. 10,00,000 – Rs.
12,50,000 nominal value
You are required to prepare necessary Journal Entries.
(5 MARKS)
(C) Write short notes on:
(i) Adjusted Selling Price method of determining cost of stock.
(ii) Principal methods of ascertainment of cost of inventory.
(5 MARKS)