CA FOUNDATION JANUARY 2025

MOCK EXAM 1

PAPER 1: ACCOUNTING
Question no. 1 is compulsory.
Candidates are required to answer any four questions from the remaining five questions.
Working Notes should form part of the answer

TIME : 3 HOURS MAX MARKS : 100

Question 1:
(a) State with reasons weather the following statements are true or false:
(1) The concept helps in keeping business affairs free from the influence of the
personal affairs of the owner is known as the matching concept.
(2) The nature of business is not an important criteria in separating an
expenditure between capital and revenue.
(3) When it is probable that the firm will need to pay off the obligation, this gives
rise to Contingent liability.
(4) The allowance made for promoting sales is called Cash discount.
(5) Cash column of a Cash-book may show a Debit or Credit Balance.
(6) When a new partner is admitted, old partners have to forego certain share in
profits of the firm, this is called as sacrifice ratio.
(6 X 2 Marks Each)

(b) From the following information, ascertain the value of stock as on 31.3.2017:
value of stock on 1.4.2016 3,50,000
purchases during the period from 1.4.2016 to 31.3.2017 17,30,000
Manufacturing expenses during the above period 3,50,000
sales during the same period 26,10,000
At the time of valuing stock on 31.3.2016 a sum of Rs. 30,000 was written off a
particular item which was originally purchased for Rs. 1,00,000 and was sold for Rs.
80,000. But for the above transaction the gross profit earned during the year was
25% on cost.
(4 Marks)

(c) Following notes pertain to the Balance Sheet of Preet Ltd. as at 31st March, 2022:
Rs.
Share capital:
Authorised capital:
15,000 12% Preference shares of Rs. 10 each 1,50,000
1,50,000 Equity shares of Rs. 10 each 15,00,000
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 16,50,000
Issued and Subscribed capital:
12,000 12% Preference shares of Rs. 10 each fully paid 1,20,000
1,35,000 Equity shares of Rs. 10 each, Rs. 8 paid up 10,80,000
Reserves and surplus:
General Reserve 1,80,000
Capital Redemption Reserve 60,000
Securities premium (collected in cash) 37,500
Profit and Loss Account 3,00,000
On 1st April, 2022, the Company has made final call @ Rs. 2 each on 1,35,000
equity shares. The call money was received by 20th April, 2022. Thereafter, the
company decided to capitalise its reserves by way of bonus at the rate of one share
for every four shares held.
Show necessary journal entries in the books of the company.
(4 Marks)
Question 2:
(a) The following are the balances extracted from the books of Shri Raghuram as on
31.03.2018, who carries on business under the name and style of M/s Raghuram and
Associates at Chennai:
Particulars Debit (Rs.) Credit (Rs.)
Capital A/c 14,11,400
Purchases 12,00,000
Purchase Returns 18,000
Sales 15,00,000
Sales Returns 24,000
Freight Inwards 62,000
Carriage Outwards 8,500
Rent of Godown 55,000
Rates and Taxes 24,000
Salaries 72,000
Discount allowed 7,500
Discount received 12,000
Drawings 20,000
Printing and Stationery 6,000
Insurance premium 48,000
Electricity charges 14,000
General expenses 11,000
Bank charges 3,800
Bad debts 12,200
Repairs the Motor vehicle 13,000
Interest on loan 4,400
Provision for Bad-debts 10,000
Loan from Mr. Rajan 60,000
Sundry creditors 62,000
Motor vehicles 1,00,000
Land and Buildings 5,00,000
Office equipment 2,00,000
Furniture and Fixtures 50,000
Stock as on 31.03.2017 3,20,000
Sundry debtors 2,80,000
Cash at Bank 22,000
Cash in Hand 16,000
Total 30,73,400 30,73,400
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 Prepare Trading and Profit and Loss Account for the year ended 31.03.2018 and the
Balance Sheet as at that date after making provision for the following:
(a) Depreciate Building by 5%, Furniture and Fixtures by 10%, Office Equipment
by 15% and Motor Car by 20%.
(b) Value of stock at the close of the year was Rs. 4,10,000.
(c) One month rent for godown is outstanding.
(d) Interest on loan from Rajan is payable @ 10% per annum. This loan was
taken on 01.07.2017.
(e) Reserve for bad debts is to be maintained at 5% of Sundry debtors.
(f) Insurance premium includes Rs. 42,000 paid towards proprietor's life
insurance policy and the balance of the insurance charges cover the period
from 01 04.2017 to 30.06.2018.
(10 Marks)

(b) Mr. Tilak keeps his books on single entry system. The following information of Mr.
Tilak is given:
(i) Balances as on 1st April, 2022:
Cash in Hand Rs. 4,000 Stock Rs. 35,000
Cash in Bank Rs. 28000 Fixed Assets Rs. 20000
Sundry Creditors Rs. 15,000 Sundry Debtors Rs. 23,000
Capital Account Rs. 95,000

(ii) During the year 2022-2023 Sundry Creditors were paid Rs. 26,000 in cash
and Rs. 1,55,000 by cheque, and received Rs. 55,000 in cash and Rs.
1,90,000 by cheque from Sundry Debtors.
(iii) All Sales and Purchases were on credit.
(iv) Balances as on 31st March, 2023 were, Sundry Debtors Rs. 27,000 and
Sundry Creditors Rs. 35,000.
(v) All expenses which are debited to profit and loss accounts were disbursed by
cheques except petty expenses amounting to Rs. 7,500 paid in cash.
(vi) Outstanding expenses as on 31st March 2023 were Rs. 2,000,
(vii) Net Profit for the year was Rs. 41,000 after allowing 10% depreciation on
fixed assets.
(viii) Closing Stock was valued at Rs. 75,000.
(ix) His Drawings during the year were Rs. 10,000 in cash and Rs. 14,000 by
cheques.
You are required to prepare Profit and Loss Account for the year ended 31st March
2023 and Balance Sheet as at that date.
(10 Marks)

Question 3:
(a) From the following particulars, prepare Bank Reconciliation Statement as on 31st
March, with amended Cash Book.
1 Balance as per cash Book 400
2 Cheques receive and recorded in Bank Column but not yet sent to 1,000
Bank for collection
3 Cheques deposited into the bank but not recorded in the Cash Book 2,000
4 Cheques deposited but not yet collected by the Bank 1,500
5 Cheques issued but not yet presented for payment 2,500
6 Bank Charges debited in Pas Book only 200
7 Interest allowed in Pass Book only 100
8 Insurance Premium paid directly by Bank understanding advice 500
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 9 Bills receivables directly collected by the Bank 2,000
10 Cheques deposited for collection, returned dishonored and recorded 1,000
in Pass Book only
11 'Cheques Issued' returned on technical grounds 300
12 A wrong debit given by bank in pass book 800
13 A wrong credit given by bank in pass book 400
14 Bills discounted dishonored but not recorded in Cash Book 4,000
15 Direct payment by a customer into the bank but not recorded in 700
Cash Book
16 A Cash receipt recorded in Bank Column 1,000
17 A Cash payment recorded in Bank Column 600
(10 Marks)

(b) A proprietor of a concern while balancing his book finds some differences in the trial
balance. To avoid delay in the preparation of Financial Statements, he places the
difference to "Suspense Account" which he carries forward to the next year. In the
next year the following mistakes were discovered:
(i) Sales book was under cast by Rs. 100.
(ii) Purchase book was carried forward as Rs. 250 instead of Rs. 450.
(iii) Credit sales to X Rs. 400 posted as Rs. 4,000.
(iv) Sales to X Rs. 400 recorded in the Sales Book as Rs. 4,000.
(v) Purchase of a Furniture of Rs. 10,000 passed through the Purchase Book.
(vi) Sales of a Furniture of Rs. 1,000 to Y not entered any where.
You are required to :
(i) rectify the errors.
(ii) prepare Suspense Account.
(iii) show the effect of rectification of errors on last year's profits.
(10 Marks)

Question 4:
(a) P and Q were partners sharing profits equally in LLP. Their Balance Sheet as on
March 31, 2022 was as follows:

Balance Sheet as on 31st March, 2022

Equity and Liabilities Rs. Assets Rs.
Capitals: Bank 30,000
P 1,00,000 Debtors 25,000
Q 50,000 1,50,000 Stock 35,000
Creditors 20,000 Furniture 40,000
Q’s current account 10,000 Machinery 60,000
Reserves 15,000 P’s current account 10,000
Bank Loan 5,000
2,00,000 2,00,000

The firm was dissolved on the above date:

P took over 50% of the stock at 10% less on its book value, and the remaining stock
was sold at a gain of 15%. Furniture and Machinery realized for Rs. 30,000 and Rs.
50,000 respectively; There was an unrecorded investment which was sold for Rs.
25,000; Debtors realized 90% only and Rs. 1,245 were recovered for bad debts
written off last year. There was an outstanding bill for repairs which had to be paid
for Rs. 2,000.
You are required to prepare Realization Account, Partners’ capital accounts (including

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 transfer of current account balances) and Bank Account in the books of the firm.
(10 Marks)

(b) The Balance Sheet of A, B and C who were sharing profits in proportion to their
capitals stood as follows as at 31st March, 2018:
Liabilities Rs. Assets Rs.
Sundry Creditors 6,900 Cash at Bank 5,500
Investment Fluctuation Reserve 7,500 Sundry Debtors 5,000
Capital Accounts Less: Provision 100 4,900
A 18,000 Stock 8,000
B 13,500 Investments 11,500
C 9,000 40,500 Land and Building 25,000
54,900 54,900

B retired on 1st April, 2018, and the following was agreed upon:
(i) That stock be depreciated by 6%.
(ii) That the Provision for Doubtful Debts be brought up to 5% on Debtors.
(iii) That Land and Buildings be appreciated by 20%.
(iv) That a provision of Rs. 770 be made in respect of outstanding legal charges.
(v) Investments are brought down to Rs. 8,500.
(vi) That the Goodwill of the entire firm be fixed at Rs. 10,800 and B's share of
goodwill be adjusted into the accounts of A and C who are going to share
future profits in the ratio of 5:3.
(vii) That the entire capital of the firm as newly constituted be fixed at Rs. 28,000
between A and C in the proportion of 5:3 (actual cash to be brought in paid
off, as the case may be).
Pass Journal entries, Partners capital account and show the Balance Sheet after
transferring B's share to a separate Account in his name.
(10 Marks)

Question 5:
(a) X Ltd. gives you the following information as at 31st March, 2023:
Particulars Rs.
EQUITY AND LIABILITIES
1. Shareholders’ funds
a Share capital 5,80,000
b Reserves and Surplus 96,000
2. Current liabilities
Trade Payables 1,13,000
ASSETS
1. Property, Plant and Equipment 6,90,000
2. Non-current investments 37,000
3. Current Assets
Cash and cash equivalents (bank) 62,000
The share capital of the company consists of Rs. 50 each equity shares of Rs.
4,50,000 and Rs. 100 each Preference shares of Rs. 1,30,000 (issued on 1.4.2021).
Reserves and Surplus comprises Profit and Loss Account only.
In order to facilitate the redemption of preference shares at a premium of 10%, the
Company decided:
(a) to sell all the investments for Rs. 30,000.
(b) to finance part of redemption from company funds, subject to, leaving a bank
balance of Rs. 24,000.
(c) to issue minimum equity share of Rs. 50 each share to raise the balance of
funds required.

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 You are required to pass the necessary Journal Entries to record the above
transactions.
(10 Marks)

(b) You are given following balances as on 1 st April, 2005 :

Machinery A/c Rs. 5,00,000
Provision for Depreciation A/c Rs. 1,16,000
Depreciation is charged on machinery at 20% p.a. by the Diminishing Balance
Method. A piece of machinery purchased on 1st April, 2003 for Rs. 1,00,000 was sold
on 1st October, 2005 for Rs. 60,000. Prepare the Machinery Account and Provision for
Depreciation Account for the year ended 31st March, 2006. Also, prepare the
Machinery Disposal Account.
(10 Marks)

Question 6:
(a) The Following is the Receipts and Payments Accounts of 'Vikas Club' for the year
ended on 31st march, 2017:
Receipts Rs. Payments Rs.
To Balance b/d 4,400 By Salaries 44,000
To Subscription: By Furniture
2015-2016 1,500 (Purchased on 1st Jan. 2017) 10,000
2016-2017 96,000 By Sports Expenses 11,000
2017-2018 500 By Drama Expenses 18,400
To Entrance Fees 8,000 By Newspapers 2,500
To Sports Fund 15,000 By Municipal Taxes 3,600
To Sale drama tickets 24,000 By Refreshments 32,200
To Sale of waste paper 150 By Lighting and Heating 6,000
To Interest on Investments 1,350 By Medicines Purchased 4,000
By Balance c/d 19,200
1,50,900 1,50,900

Prepare Income and Expenditure A/c for the year ended 31st March, 2017, and the
Balance Sheet as at that date, after taking the following information into account:
(i) The club has 200 members each paying an annual subscription of Rs. 500 and
the subscription of two members is still in arrear for 2015-2016.
(ii) Stock of medicines on 31 st March, 2017 was Rs. 1,000.
(iii) Salaries are paid @ Rs. 4,000 per month.
(iv) The other assets on 1st April, 2016 were : Furniture Rs. 40,000 and 9%.
Investment Rs. 18,000 (Face value Rs. 20,000).
(v) Depreciate furniture at 10% P.a. and provide up to date interest on
investment.
(vi) Entrance fees is treated as income.
(15 Marks)

(b) BPL Limited proposed to make a issue of 2,00,000 of these Rs. 10 shares at a price
of Rs. 14 each, the arrangements for payment being:
(a) Rs. 2 per share payable on application, to be received by 1st July, 2021;
(b) Allotment to be made on 10th July, 2021 and a further Rs. 5 per share
(including the premium) to be payable;
(c) The final call for the balance to be made, and the money received by 30th
April, 2022.
Applications were received for 7,10,000 shares and were dealt with as follows:
(i) Applicants for 10,000 shares received allotment in full;
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 (ii) Applicants for 60,000 shares received an allotment of one share for every two
applied for; no money was returned to these applicants, the surplus on
application being used to reduce the amount due on allotment;
(iii) Applicants for 6,40,000 shares received an allotment of one share for every
four applied for; the money due on allotment was retained by the company,
the excess being returned to the applicants; and
(iv) the money due on final call was received on the due date.
You are required to record these transactions (including cash items) in the Journal of
BPL Limited.
(5 Marks)

OR

(b) A company had issued 40,000, 13% debentures of Rs. 100 each on 1st April, 2021.
The debentures are due for redemption on 1st July, 2022. The terms of issue of
debentures provided that they were redeemable at a premium of 5% and also
conferred option to the debenture holders to convert 20% of their holding into equity
shares (Nominal value Rs. 10) at a price of Rs. 15 per share. Debenture holders
holding 5,000 debentures did not exercise the option. Calculate the number of equity
shares to be allotted to the debenture holders exercising the option to the maximum.
(5 Marks)

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