Mock Test Paper - Series I: December, 2024

Date of Paper: 20 th December, 2024

Time of Paper: 10.30 A.M. to 1.30 P.M.

FOUNDATION COURSE
PAPER – 1: ACCOUNTING
ANSWERS
1. (a) (i) False: A claim that an enterprise is pursuing through legal process,
where the outcome is uncertain, is a contingent asset.
(ii) False: If the effect of errors committed cancel out, the errors will
be called compensating errors and the trial balance will agree.
(iii) True: If closing stock appears in trail balance, it depicts that one
aspect of the double entry has been completed, hence it is taken
only to Balance Sheet.
(iv) False: A forfeited share is merely a share available to the company
for sale and remains vested in the company for that purpose only.
Reissue of forfeited shares is not allotment of shares but only a sale
as they have already been allotted earlier.
(v) True: All the receipts and payments whether of revenue or capital
nature are included in Receipt and Payment account.
(vi) True: As per perpetual existence the company has existence
independent of its members, it continues to be in existence despite
the death, insolvency or change of members.
(b) Distinction between Money Measurement concept and Matching
concept
As per Money Measurement concept, only those transactions, which can
be measured in terms of money are recorded. Since money is the medium
of exchange and the standard of economic value, this concept requires that
those transactions alone that are capable of being measured in terms of
money should be recorded in the books of accounts. Transactions and
events that cannot be expressed in terms of money are not recorded in the
business books.
In Matching concept, all expenses matched with the revenue of that period
should only be taken into consideration. In the financial statements of the
organization if any revenue is recognized then expenses related to earn
that revenue should also be recognized.

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 (c) Chemical Mill
Calculation of the value of Inventory as on 31-3-2024
Receipts Issues Balance
Date Units Rate Amount Units Rate Amount Units Rate Amount
` ` ` ` ` `
1-1-2024 Balance Nil
1-1-2024 100 300 30,000 100 300 30,000
15-1-2024 50 300 15,000 50 300 15,000
1-2-2024 200 400 80,000 250 380 95,000
15-2-2024 100 380 38,000 150 380 57,000
20-2-2024 100 380 38,000 50 380 19,000

Therefore, the value of Inventory as on 31-3-2024 = 50 units @ ` 380

= `19,000
2. (a) In the books of Saraswat & Sons
Journal
Particulars L.F. Dr. Cr.
` `
(i) Furniture A/c Dr. 20,000
To Purchases A/c 20,000
(Correction of wrong debit to Purchases A/c
for furniture purchased)
(ii) Satyam A/c Dr. 3,000
To Bad Debts Recovered A/c 3,000
(Correction of wrong credit to Personal A/c in
respect of recovery of previously written off
bad debts)
(iii) Repairs A/c Dr. 18,500
To Building A/c 18,500
(Correction of wrong debit to building A/c for
repairs made)
(iv) Purchases A/c Dr. 18,000
To Ram Singh A/c 18,000
(Purchases of goods from Ram Singh
remained unrecorded)
(v) Drawings A/c Dr. 15,000
To Audit Fees A/c 15,000
(Correction of wrong debit to Audit Fees A/c
for college fees of proprietor’s son)

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(vi) Anita Dr. 4,500
To Kanika 4,500
(Correction of wrong credit to Anita instead of
Kanika)
(vii) Returns Inwards / Sales Return A/c Dr. 8,900
To Customer/Debtors A/c 8,900
(Entry of goods returned by customer and
taken in inventory omitted from records)
(viii) Furniture A/c Dr. 7,500
To Wages A/c 7,500
(Wages paid to workmen for office furniture
wrongly charged to wages a/c now rectified)
(ix) Salaries A/c Dr. 18,000
To Clerk’s (Personal) A/c 18,000
(Correction of wrong debit to Clerk’s personal
A/c for salaries paid)
(x) Purchases A/c Dr. 20,000
Sales A/c Dr. 20,000
To Raghav A/c 40,000
(Correction of wrong entry in the sales Book
for purchases of goods from Raghav)
(b) S Chand & Associates
Dr. Machinery Account Cr.
Date Particulars Amount Date Particulars Amount
(`) (`)
1.1.2021 To Bank A/c 3,00,000 31.12.2021 By Balance c/d 3,00,000
3,00,000 3,00,000
1.1.2022 To Balance 3,00,000
b/d
1.7.2022 To Bank A/c 4,50,000 31.12.2022 By Balance c/d 7,50,000
7,50,000 7,50,000
1.1.2023 To Balance 7,50,000 31.12.2023 By Machinery 3,00,000
b/d Disposal A/c
31.12.2023 By Balance c/d 4,50,000
7,50,000 7,50,000
1.1.2024 To Balance 4,50,000
b/d

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Dr. Provision for Depreciation Account Cr.
Date Particulars Amount Date Particulars Amount
(`) (`)
31.12.2021 To Balance c/d 45,000 31.12.2021 By Depreciation 45,000
A/c
45,000 45,000
31.12.2022 To Balance c/d 1,17,000 1.1.2022 By Balance b/d 45,000
31.12.2022 By Depreciation 72,000
A/c
(` 38,250 +
` 33,750)
1,17,000 1,17,000
31.12.2023 To Machinery 1,15,762 1.1.2023 By Balance b/d 1,17,000
Disposal A/c

31.12.2023 To Balance c/d 96,188 31.12.2023 By Depreciation 62,438

31.12.2023 A/c (WN 1)
By Depreciation on 32,512
machinery sold
(WN 2)
2,11,950 2,11,950
1.1.2024 By Balance b/d 96,188

Dr. Machinery Disposal Account Cr.

Date Particulars Amount Date Particulars Amount
(`) (`)
31.12.2023 To Machinery 3,00,000 31.12.2023 By Provision for 1,15,762
A/c Depreciation A/c
31.12.2023 By Bank A/c 1,50,000
31.12.2023 By Profit & Loss 34,238
A/c (Loss on
Sale)
3,00,000 3,00,000
Working Notes:
1. Depreciation for the machine purchased on 1.7.2022.
For the year 2022 (Used for 6 months) = ` 4,50,000 x 15% x 6
12
= ` 33,750
For the year 2023 (Used for full year) = ` 4,16,250 x15 % = ` 62,438
2. Depreciation for the machine purchased on 1.1.2021.
Depreciation for the year 2021 = ` 3,00,000 x 15% = ` 45,000
Depreciation for the year 2022 = `2,55,000 x15% = ` 38,250
Depreciation for the year 2023 = ` 2,16,750 x15% =` 32,512

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3. (a) (i) Realisation Account
Particulars Amount Particulars Amount
(` ) (` )
To Land and building 2,46,000 By Sundry creditors 36,000
To Furniture and fixtures 65,000 By Mortgage loan 1,10,000
To Stock 1,00,000 By Cash account -
To Debtors 72,500 Land and building 2,30,000
To Cash A/c (expenses on 7,800 Furniture & fixtures 42,000
dissolution) Stock 72,000
To Cash A/c (creditors 54,000 Debtors 65,000
` 36,000 + ` 18,000) By Partners’ capital
To Cash A/c (Mortgage 1,10,000 accounts (Loss
loan) 4:3:2:1)
P = 40,120
Q= 30,090
R= 20,060 1,00,300
S= 10,030
6,55,300 6,55,300
Partners’ Capital Accounts
Particulars P Q R S Particulars P Q R S
` ` ` ` ` ` ` `
To Balance b/d - - 1,000 6,000 By Balance b/d 2,16,000 1,44,000
To Realization By Cash A/c
A/c (Loss) 40,120 30,090 20,060 10,030 (realization
loss) 40,120 30,090 - 10,030
To R’s Capital By P’s Capital
A/c 12,636 8,424 - - A/c 12,636
(Deficiency) By Q’s Capital 8,424
A/c
To Cash A/c 2,03,364 1,35,576 - - By Cash A/c 6,000
2,56,120 1,74,090 21,060 16,030 2,56,120 1,74,090 21,060 16,030

Note: P, Q and S brought cash to make good, their share of the loss on
realization. However, in actual practice they will not be bringing any cash,
only a notional entry will be made.
Cash Account
Particulars Amount Particulars Amount
(`) (`)
To Balance b/d 15,500 By Realization A/c:
To Realization A/c: Expenses on 7,800
Land and building 2,30,000 dissolution
Furniture & fixtures 42,000 Creditors (36,000 + 54,000
18,000) 1,10,000
Mortgage loan
Stock 72,000 By P’s capital A/c 2,03,364
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 Debtors 65,000 By Q’s capital A/c 1,35,576
To P, Q, S’s capital 80,240
A/c’s (Realisation
Loss-)
(40,120 + 30,090 +
10,030)
To S’s capital A/c 6,000
5,10,740 5,10,740
Working Note:
As per Garner Vs. Murray rule, solvent partners have to bear the loss due
to insolvency of a partner in their capital ratio.
Calculation of Capital Ratio of Solvent Partners
Though S is a solvent partner yet he cannot be called upon to bear loss on
account of insolvency of R because his capital account has a debit balance.
Therefore, capital ratio of P & Q = 216 : 144 = 3 : 2
Deficiency of R will be shared by P & Q in the capital ratio of 3 : 2 i.e.
P = ` 21,060 X 3/5 = ` 12,636
Q = ` 21,060 X 2/5 = ` 8,424
(b) In the books of Mr. Dilip
Trading Account for the year ended 31 st March, 2024
Particulars Amount Particulars Amount
(`) (`)
To Opening By Sales
3,30,000 29,10,000
Inventory
To Purchases 12,90,000 Less: Returns (60,000) 28,50,000
Less: Returns (36,000) By Closing
12,54,000 5,40,000
Inventory
To Freight
1,20,000
Inwards
To Gross profit 16,86,000
33,90,000 33,90,000

Profit and Loss Account for the year ended 31st March, 2024
Particulars ` Particulars `
To Depreciation 1,57,500 By Gross profit 16,86,000
To Salaries 6,30,000 By Discount received 27,000
To Administration
4,50,000
expenses
To Discount allowed 57,000

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To Bad debts 15,000
To Net profit 4,03,500
17,13,000 17,13,000
Balance Sheet as at 31st March, 2024
Liabilities Amount Assets Amount
(`) (`)
Capital 19,50,000 Furniture 10,50,000
Add: Net profit 4,03,500 23,53,500 Less: Depreciation (1,57,500) 8,92,500
Trade payables 5,70,000 Closing Inventory 5,40,000
Output IGST 6,000 Trade receivables 6,30,000
Investment in Govt
Securities 3,00,000
Cash in Hand and
Cash at Bank 5,67,000
29,29,500 29,29,500

Working Note:
Summary of Output and Input GST liability (as per trial balance)
OUTPUT GST (`) INPUT GST (`)
CGST 24,000 30,000
SGST 24,000 30,000
IGST 18,000

Output Tax Paid through ITC Tax

liability (Tax Payable Liability
head)
IGST CGST SGST
CGST 24,000 24,000
SGST 24,000 24,000
IGST 18,000 6,000 6,000 6,000
In the above solution, it is assumed that balance IGST liability of ` 6,000
(after utilising CGST and SGST) is not paid off in cash.
Alternatively, it can also be assumed that the balance liability of ` 6,000
is paid off in cash. Accordingly, Output IGST liability of ` 6,000 shall not
appear under liability side of the balance sheet and amount of cash at
bank is reported as ` 5,61,000.

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4. (a) New State Society
Income and Expenditure Account
for the year ended 31 st March, 2024
Dr. Cr.
Expenditure ` ` Income `
To Electric charges 14,400 By Entrance fee (40% of 24,000
To Postage and 10,000 ` 60,000)
stationary
To Telephone 10,000 By Membership 4,00,000
charges subscription
1,76,000
To Rent Less: Received in 20,000 3,80,000
8,000 advance
Add: Outstanding 1,84,000
To Salaries By Sale proceeds of old 3,000
1,32,000
Add: Outstanding 1,38,000 papers
6,000
To Depreciation By Hire of lecture hall 40,000
(W.N.1)
Electrical fittings 30,000 By Interest on securities 16,000
Furniture 10,000 (W.N.2)
Books 92,000 1,32,000 Add: Receivable 35,000 51,000
To Excess of Income
over Expenditure 9,600
4,98,000 4,98,000

Working Notes:
1. Depreciation `
Electrical fittings 10% of ` 3,00,000 30,000
Furniture 10% of ` 1,00,000 10,000
Books 10% of ` 9,20,000 92,000
2. Interest on Securities
Interest @ 15% p.a. on ` 3,00,000 for full year 45,000
Interest @ 15% p.a. on ` 80,000 for half year 6,000
51,000
Less: Received (16,000)
Receivable 35,000
(b) (i) Journal Entry in the books of the M/s Krishna
Dr. Cr.
Date Particulars ` `
April, 1 Amit’s Capital A/c Dr. 3,000
2024 Lalit’s Capital A/c Dr. 3,000
To Sumit’s Capital A/c 6,000
(Being the required adjustment
for goodwill through partner’s
capital accounts)

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(ii) Revaluation Account
Particulars ` Particulars `
To Furniture A/c 3,000 By Machinery A/c 5,100
To Inventory A/c 1,200
To Partners’ Capital A/cs 900
(Amit - ` 300, Lalit - ` 300,
Sumit - ` 300)
5,100 5,100
Partners’ Capital Account
Particulars Amit Lalit Sumit Particulars Amit Lalit Sumit
To Sumit 3,000 3,000 – By Balance b/d 24,600 24,600 27,000
(Goodwill)
To Cash A/c – –
6,000 By General Reserve 3,000 3,000 3,000
A/c
To Executors – – 30,300 By Revaluation A/c 300 300 300
A/c (Profit)
To Balance c/d 24,900 24,900 – By Amit (Goodwill) – – 3,000
By Lalit (Goodwill) – – 3,000
27,900 27,900 36,300 27,900 27,900 36,300

Balance Sheet M/s Krishna Bros after death of Sumit

Liabilities ` Assets `
Capital Amit 24,900 Machinery 35,100
Lalit 24,900 Furniture 13,800
Fixture 12,600
Sumit’s 30,300 Cash (9,000-6,000) 3,000
Executors A/c
Trade payables 14,100 Inventories 4,500
Trade receivables 27,000
Less: Provision for 1,800 25,200
Doubtful debts

94,200 94,200
Working Note:
Statement showing the Required Adjustment for Goodwill
Particulars Amit Lalit Sumit
Right of goodwill before death 1/3 1/3 1/3
Right of goodwill after death 1/2 1/2 –
Gain / (Sacrifice) (+) 1/6 (+) 1/6 (-) 1/3

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5. (a) In the books of Ali
Journal Entries
Date Particulars Debit Credit
Amount Amount
2024 ` `
April 15 Bills receivable A/c Dr. 45,000
To Akbar’s A/c 45,000
(Being acceptance received from
Akbar for mutual accommodation)
April 18 Bank A/c Dr. 44,100
Discount A/c Dr. 900
To Bills receivable A/c 45,000
(Being bill discounted with bank)
April 18 Akbar’s A/c Dr. 15,000
To Bank A/c 14,700
To Discount A/c 300
(Being one-third proceeds of the bill
sent to Akbar)
July 18 Akbar’s A/c Dr. 52,500
To Bills payable A/c 52,500
(Being Acceptance given)
July 18 Bank A/c Dr. 8,475
Discount A/c Dr. 900
  30,000 + 8,475  
1,200×  
  51,300 
To Akbar’s A/c 9,375
(Being proceeds of second bill
received from Akbar)
(b) Trading and Profit and Loss Account
for the year ended 31st December, 2024
Amount Amount
` `
To Opening stock 50,000 By Sales (` 2,60,000  3,25,000
125/100)
To Purchases (balancing By Closing stock 62,500
figure) 2,72,500
To Gross profit c/d
(` 2,60,000  25/100) 65,000
3,87,500 3,87,500

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 To Expenses 49,250 By Gross profit b/d 65,000
To Loss on sale of fixed
assets (W.N.1) 750
To Depreciation on fixed
assets (W.N.1) 1,000
To Net profit 14,000
65,000 65,000
Working Note:
1. Fixed Assets A/c
` `
To Balance b/d 7,500 By Bank (sale) 1,750
To Bank 5,000 By Loss on sale of fixed 750
(Purchases) asset (2,500-1,750)
By Depreciation (bal fig) 1,000
_____ By Balance c/d 9,000
12,500 12,500
(c) Journal Entries in the books of Substance Ltd.
` `
1-4-2024 Equity share final call A/c Dr. 8,10,000
To Equity share 8,10,000
capital A/c
(For final calls of ` 2 per
share on 4,05,000 equity
shares due as per Board’s
Resolution dated….)
20-4-2024 Bank A/c Dr. 8,10,000
To Equity share final 8,10,000
call A/c
(For final call money on
4,05,000 equity shares
received)
Securities Premium A/c Dr. 1,12,500
Capital Reserve A/c Dr. 1,80,000
General Reserve A/c Dr. 5,40,000
Profit and Loss A/c Dr. 1,80,000
To Bonus to 10,12,500
shareholders A/c
(For making provision for
bonus issue of one share
for every four shares held)

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 Bonus to shareholders A/c Dr. 10,12,500
To Equity share 10,12,500
capital A/c
(For issue of bonus shares)
Extract of Balance Sheet as at 30th April, 2024 (after bonus issue)
`
Authorised Capital
45,000 12% Preference shares of `10 each 4,50,000
5,06,250 Equity shares of `10 each (W.N.) 50,62,500
Issued and subscribed capital
36,000 12% Preference shares of `10 each, fully paid 3,60,000
5,06,250 Equity shares of `10 each, fully paid 50,62,500
(Out of above, 1,01,250 equity shares @ `10 each were
issued by way of bonus)
Reserves and surplus
Profit and Loss Account 7,20,000
W.N.: The authorised capital has been increased by sufficient number of
shares. (5,06,250 – 4,50,000) = 56,250 shares
6. (a)
Entry Particulars L.F. Debit Credit
No. Amount Amount
(`) (`)
1 Bank A/c Dr. 4,00,000
To Equity Share Application A/c 4,00,000
(Money received on applications for
2,00,000 shares @ ` 2 per share)
2 Equity Share Application A/c Dr. 4,00,000
To Equity Share Capital A/c 4,00,000
(Transfer of application money on
2,00,000 shares to share capital)
3 Equity Share Allotment A/c Dr. 8,00,000
To Equity Share Capital A/c 6,00,000
To Securities Premium A/c 2,00,000
(Amount due on the allotment of
2,00,000 shares @ ` 3 per share and
Securities Premium @ `1 per share)
4 Bank A/c Dr. 800,000
To Equity Share Allotment A/c 800,000
(Allotment money received)
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5 Equity Share First Call A/c Dr. 4,00,000
To Equity Share Capital A/c 4,00,000
(Being first call made due on 2,00,000
shares at ` 2 per share)
6 Bank A/c Dr. 460,000
To Equity Share First Call A/c 4,00,000
To Calls in Advance A/c 60,000
(Being first call money received along
with calls in advance on 20,000 shares at
` 3 per share)
7 Equity Share Final Call A/c Dr. 6,00,000
To Equity Share Capital A/c 6,00,000
(Being final call made due on 2,00,000
shares at ` 3 each)
8 Bank A/c Dr. 53,1000
Calls in Advance A/c Dr. 60,000
Calls in Arrears A/c Dr. 9,000
To Equity Share Final Call A/c 6,00,000
(Being final call received for 1,77,000
shares, calls in advance for 20,000
shares and calls in arrears on 3,000
shares adjusted)
9 Interest on Calls in Advance A/c Dr. 2,400
To Shareholders A/c 2,400
(Being interest made due on calls in
advance of `60,000 at the rate of 12%
p.a.)
10 Shareholders A/c Dr. 2,400
To Bank A/c 2,400
(Being payment of interest made to
shareholder)
11 Shareholders A/c Dr. 150
To Interest on Calls in Arrears A/c 150
(Being interest on calls in arrears made
for 2000 shares due at the rate of 10%)
12 Bank A/c Dr. 6,150
To Calls in Arrears A/c 6,000
To Shareholders A/c 150
(Being money received from shareholder
having 2,000 shares for calls in arrears
and interest thereupon)
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 13 Shareholders A/c Dr. 100
To Interest on Calls in Arrears A/c 100
(Being interest on calls in arrears made
on 1,000 shares due at the rate of 10%)
14 Bank A/c Dr. 3,100
To Calls in Arrears A/c 3,000
To Shareholders A/c 100
(Being money received from shareholder
having 1,000 share for calls in arrears
and interest thereupon)
Calculation of Interest on Calls in Advance & Calls in Arrears:
Interest on Calls in Advance = ` 60,000 x 12% x 4 / 12 = ` 2,400
Interest on Calls in Arrears ` 6,000 x 10% x 3 / 12 = ` 150
Interest on Calls in Arrears ` 3,000 x 10% x 4 / 12 = ` 100
Table F of The Companies Act,2013 prescribes 10% and 12% p.a. as
the maximum rates respectively for calls in arrears and calls in advance.
Accordingly, these rates have been considered while passing the above
entries,
(c) Bank Reconciliation Statement as on 31 st March,2024
` `
Bank balance as per Pass book 75,00,000
Add: Bills dishonoured not recorded in the
37,50,000
cash book
Cheque received entered twice in the
75,000
cash book
Insurance premium paid directly not
4,50,000
recorded in the cash book
Cheque received but not sent to the bank 84,00,000
Credit side of the bank column cast short 15,000 1,26,90,000
2,01,90,000
Less: Cheque deposited into the bank but no
37,50,000
entry was passed in the cash book
Bank charges recorded twice in the cash
15,000
book
Cheque issued but not presented to the
37,50,000 (75,15,000)
bank
Bank balance as per Cash book 1,26,75,000

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 Or
(c) Objective and Advantages of Accounting Standards: An Accounting
Standard is a selected set of accounting policies or broad guidelines
regarding the principles and methods to be chosen out of several
alternatives. The Accounting Standards Board formulates Accounting
Standards to be established by the Council of the Institute of Chartered
Accountants of India.
The main objective of Accounting Standards is to establish standards
which have to be complied with to ensure that financial statements are
prepared in accordance with generally accepted accounting standards.
Accounting Standards seek to suggest rules and criteria of accounting
measurements. These standards harmonize the diverse accounting
policies and practices at present in use in India.
The main advantage of setting accounting standards is that the adoption
and application of Accounting Standards ensure uniformity,
comparability and qualitative improvement in the preparation and
presentation of financial statements.
The other advantages are as follows:
(i) Reduction in variations.
(ii) Disclosure beyond that required by law.
(iii) Facilities comparison.

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