Accounting I Mock Test I April 2024 I Answers I CA Foundation

Mock Test Paper - Series I: April, 2024 Date of Paper: 29th April, 2024 Time of Paper: 2 P.M. to 5 P.M. FOUNDATION COURSE PAPER – 1: ACCOUNTING ANSWERS 1. (a) (i) False - Accounting Standards for non-corporate entities in India are issued by the Institute of Chartered Accountants of India (ICAI).. (ii) True - Subsidy received from the government for working capital by a manufacturing concern is a revenue receipt because it has no effect on improvement of future capability of business in revenue generation. (iii) True - In the early periods of useful life of a fixed assets, repairs and maintenance expenses are relatively low because the asset is new. Whereas in later periods, as the asset become old, repairs and maintenance expenses increase continuously. Under written down value method, depreciation charged is high in the initial period and reduces continuously in the later periods. Thus, depreciation and repair and maintenance expenses become more or less uniform throughout the useful life of the asset. (iv) True - Discount at the time of retirement of a bill is a gain for the drawee and loss for the drawer. (v) False - Surviving partners may continue to carry on the business in case of partnership. (vi) False - Receipts and payments account is a classified summary of cash receipts and payments over a certain period together with cash and bank balances at the beginning and close of the period. (b) Limitations which must be kept in mind while evaluating the Financial Statements are as follows: • The factors which may be relevant in assessing the worth of the enterprise don’t find place in the accounts as they cannot be measured in terms of money. • Balance Sheet shows the position of the business on the day of its preparation and not on the future date while the users of the accounts are interested in knowing the position of the business in the near future and also in long run and not for the past date. • Accounting ignores changes in some money factors like inflation etc. • There are occasions when accounting principles conflict with each other. • Certain accounting estimates depend on the sheer personal judgement of the accountant. • Different accounting policies for the treatment of same item adds to the probability of manipulations. (c) Calculation of depreciation for the year ended 31.3.24 Machine Machine Machine Depreciation on sold machine I (28,54,000 - 2,16,000) II Purchased on 1st July III Purchased on 1st Nov IV ` ` ` ` Book value as on 1st April, 2023 26,38,000 4,80,000 5,60,000 2,16,000 Depreciation @15% 3,95,700 (for full year) 54,000 (for 9 months) 35,000 (for 5 months) 8,100 (for 3 months) Total depreciation (I + II + III + IV) ` 4,92,800 2. (a) Particulars L.F. Dr. ` Cr. ` (i) Suspense Account Dr. 936 To Profit and Loss Adjustment A/c 936 (Correction of error by which Purchase Account was over debited last year) (ii) Profit & Loss Adjustment A/c Dr. 180 Customer’s Account Dr. 1,104 To Suspense Account 1,284 (Correction of the entry by which (a) Sales A/c was over credited by ` 180 (b) customer was credited by `642 instead of being debited by ` 462) (iii) Suspense Account Dr. 600 To Profit & Loss Adjustment A/c 600 (Correction of error by which Returns Inward Account was debited by ` 300 instead of Returns Outwards Account being credited by ` 300) (iv) Suspense Account Dr. 1,790 To Geet Account 895 To Meet Account 895 (Removal or wrong debit to Meet and giving credit to Geet from whom cash was received) (v) Customer’s Account Dr. 1,400 To Profit & Loss Adjustment A/c 1,400 (Rectification of the error arising from non-preparation of invoice for goods delivered) (vi) Profit & Loss Adjustment A/c Dr. 1600 To Customer’s Account 1,600 (The Customer’s A/c credited with goods not yet purchased by him) (vii) Inventory A/c To Profit & Loss Adjustment A/c (Cost of goods debited to inventory and credited to Profit & Loss Adjustment A/c) Dr. 1280 1280 (viii) Trade receivable/ Manas’s Account To Suspense Account Dr. 500 500 (`500 due by Manas not taken into trial balance, now rectified) (ix) Deep’s account/Trade receivable Dr. 6,000 To Profit & Loss Adjustment A/c 6,000 (Sales to Deep omitted, now rectified) (x) Profit & Loss Adjustment A/c Dr. 8,436 To Bhatt’s Capital Account 8,436 (Transfer of the Profit & Loss Adjustment A/c balance to the Capital Account) (b) Bank Reconciliation Statement as on 31st March, 2024 Particulars ` Bank balance (Debit i.e. overdraft) as per Bank Pass book 1,34,300 (i) No adjustment required as there would be no difference on 31.3.24 (ii) Add: No entry in Cash book for interest collection by Bank 11,200 (iii) Less: Amount debited in cash book for pending cheques in collection but not credited in Pass Book (30,000) (iv) Add: Cheque credited in cash book but not debited in pass book 10,000 (v) Add: Reversal of wrong Credit Less: Reversal of wrong debit 2,000 (1,200) (vi) Less: Cheque of ` 1,000 entered in cash book but omitted to be banked (4,000) (vii) Less: Discounted dishonored but no entry in Cash book (20,800) (viii) Add: Rebate on bill retired not entered in cash book 700 (viii) Add: Cheques deposited in bank not yet recorded in cash book 9,600 Balance (Cr. i.e. overdraft) as per Cash book 1,11,800 Note: A cheque of ` 4,320 credited in Pass Book on 28th March, 2024 and later debited in Pass Book on 1st April, 2024 has no effect on Bank Reconciliation statement as at 31st March, 2024. 3. (a) Trading and Profit and Loss Account for the year ended 31st December, 2023 Amount Amount ` ` To Opening stock 50,000 By Sales (` 2,60,000  125/ 100) 3,25,000 To Purchases (balancing figure) 2,72,500 By Closing stock 62,500 To Gross profit c/d (` 2,60,000  25/ 100) 65,000 3,87,500 3,87,500 To Expenses 49,250 By Gross profit b/d 65,000 To Loss on sale of fixed assets 750 To Depreciation on fixed assets (W.N.1) 1,000 To Net profit 14,000 65,000 65,000 Balance Sheet as on 31st December, 2023 Amount Amount Liabilities ` Assets ` Capital (W.N. 5) 1,69,000 Fixed assets 9,000 Add: Additional capital 5,000 Debtors (W.N. 3) 87,500 Net profit 14,000 Stock 62,500 1,88,000 Bank balance 50,000 Less: Drawings (25,000) 1,63,000 Creditors 46,000 2,09,000 2,09,000 Working Notes: 1. Fixed assets account ` ` To Balance b/d 7,500 By Bank (sale) 1,750 To Bank 5,000 By Loss on sale of fixed asset (2,500-1,750) 750 By Depreciation (balancing figure) 1,000 By Balance c/d 9,000 12,500 12,500 2. Bank account ` ` To Balance b/d (balancing figure) 62,500 By Creditors 2,80,000 To Debtors 3,40,000 By Expenses 49,250 To Capital 5,000 By Drawings 25,000 To Sale of fixed assets 1,750 By Fixed assets 5,000 By Balance c/d 50,000 4,09,250 4,09,250 3. Debtors account ` ` To Balance b/d 1,02,500 By Bank 3,40,000 To Sales  125 (` 2,60,000 100 ) 3,25,000 By Balance c/d (balancing figure) 87,500 4,27,500 4,27,500 4. Creditors account ` ` To Bank 2,80,000 By Balance b/d (balancing figure) 53,500 To Balance c/d 46,000 By Purchases (from trading account) 2,72,500 3,26,000 3,26,000 5. Balance Sheet as on 1st January, 2023 Liabilities ` Assets ` Creditors (W.N. 4) 53,500 Fixed assets 7,500 Capital (balancing figure) 1,69,000 Debtors 1,02,500 Stock 50,000 Bank balance (W.N. 2) 62,500 2,22,500 2,22,500 (b) Revaluation Account Particulars ` Particulars ` To Stock 1,500 By Land & Building 25,000 To revaluation profit By Provision for doubtful debt 2,000 Arun 8,500 Varun 8,500 Tarun 8,500 27,000 27,000 Partners’ Capital Accounts Particulars Arun Varun Tarun Particulars Arun Varun Tarun To Tarun 4,375 4,375 - By Bal b/d 1,00,000 75,000 75,000 To Tarun’s - - 98,125 By General reserve 4,000 4,000 4,000 Executor By Arun & Varun - - 8,750 To Bal. c/d 1,08,125 83,125 By Profit and Loss Adjustment* (suspense) A/c - - 1,875 By Revaluation 8,500 8,500 8,500 1,12,500 87,500 98,125 1,12,500 87,500 98,125 *Profit and Loss Adjustment = [(25,000 + 20,000 + 22,500)/3] x 3/12 x 1/3 = 1,875 Balance Sheet of Firm as on 1st July,2024 Particulars ` Particulars ` Arun 1,08,125 Land & Building 1,75,000 Varun 83,125 Investment 65,000 Tarun Executor 98,125 Stock 13,500 Creditors 20,000 Trade receivable 35,000 Profit & Loss Adjustment 1,875 Cash in hand 7,000 Cash at bank 12,000 3,09,375 3,09,375 Calculation of goodwill and Tarun’s share Average of last five year’s profits and losses for the year ended on 31st March 31.3.2019 28,750 31.3.2020 35,000 31.3.2021 22,500 31.3.2022 20,000 31.3.2023 25,000 Total 1,31,250 Average profit 26,250 Goodwill at 1 year purchase = ` 26,250 x 1 = ` 26,250 Tarun’s Share of Goodwill = ` 26,250X1/3 = ` 8,750 Which is contributed by Arun and Varun in their gaining Ratio Arun = ` 8,750X1/2 =` 4375 Varun =` 8,750X1/2 = ` 4375 4. (a) Statement of Distribution of Cash by ‘Maximum Loss Method’ Creditors ` Amar’s Loan ` Amar ` Akbar ` Antony ` Balance due 80,000 20,000 1,00,000 30,000 90,000 15th April 2024 realised ` 60,000 Paid to creditors (60,000) - - - - Balance due 20,000 20,000 1,00,000 30,000 90,000 1st May, 2024 realised ` 1,46,000 Paid to creditors (` 20,000) 20,000 - - - - Paid to Amar’s loan (` 20,000) - 20,000 - - - Balance due (1) Nil Nil 1,00,000 30,000 90,000 Balance ` 1,06,000 Maximum Loss (1,00,000 + 30,000 + 90,000 - 1,06,000) = ` 1,14,000 shared in Profit & Loss ratio 5:3:2 (57,000) (34,200) (22,800) Akbar’s deficiency shared by Amar & Antony in capital ratio 100:90 43,000 (4,200) 67,200 (2,210) 4,200 (1,990) Cash paid [2] 40,790 - 65,210 Balance due (3) [1-2] 59,210 30,000 24,790 31st May 2024 realised ` 94,000 Maximum Loss [59,210 + 30,000 + 24,790 - 94,000] = ` 20,000 shared in 5:3:2 (10,000) (6,000) (4,000) Cash paid (4) 49,210 24,000 20,790 Balance/Loss* on realisation (3-4) 10,000 6,000 4,000 (b) Subscription for the year ended 31.3.2024 ` Subscription received during the year 33,75,000 Less: Subscription receivable on 1.4.2023 1,01,250 Less: Subscription received in advance on 31.3.2024 47,250 (1,48,500) Add: Subscription receivable on 31.3.2024 1,48,500 32,26,500 Add: Subscription received in advance on 1.4.2023 81,000 2,29,500 Amount of Subscription appearing in Income & Expenditure Account 34,56,000 Sports material consumed during the year end 31.3.2024 ` Payment for Sports material 20,25,000 Less: Amounts due for sports material on 1.4.2023 (6,07,500) 14,17,500 Add: Amounts due for sports material on 31.3.2024 8,77,500 Purchase of sports material 22,95,000 Sports material consumed: Stock of sports material on 1.4.2023 6,75,000 Add: Purchase of sports material during the year 22,95,000 29,70,000 Less: Stock of sports material on 31.3.2024 (10,12,500) Amount of Sports Material appearing in Income & Expenditure Account 19,57,500 Balance Sheet of M/s Zara Club For the year ended 31st March, 2024(An extract) Liabilities ` Assets ` Unearned Subscription 47,250 Subscription receivable 1,48,500 Amount due for sports material 8,77,500 Stock of sports material 10,12,500 5. (a) Trial Balance of Shri. Hari Om as on 31st March, 2024 Particulars Dr. Amount ` Cr. Amount ` Capital 4,20,000 Purchases 1,08,000 Discount Allowed 3,600 Carriage Inward 26,100 Carriage Outwards 6,900 Sales 1,80,000 Return Inward 900 Return Outwards 2,100 Rent and taxes 3,600 Plant and Machinery 2,42,100 Stock on 1st April,2023 46,500 Sundry Debtors 60,600 Sundry Creditors 36,000 Investments 10,800 Commission Received 5,400 Cash in Hand 300 Cash at Bank 30,300 Motor Cycle 1,03,800 6,43,500 6,43,500 Note: Stock as on 31st March,2024 will not appear in trail balance. (b) (i) (1) Journal Proper in the Books of M/s. VS Wires Date Particulars Amount Amount 2024 ` ` Mar. 31 Returns outward A/c Dr. 4,32,000 To Purchases A/c 4,32,000 (Being the transfer of returns to purchases account) Sales A/c Dr. 6,00,000 To Returns Inward A/c 6,00,000 (Being the transfer of returns to sales account) . Sales A/c Dr. 60,00,000 To Trading A/c 60,00,000 (Being the transfer of balance of sales account to trading account) Trading A/c Dr. 46,80,000 To Opening Inventory A/c 6,00,000 To Purchases A/c 36,00,000 To Wages A/c 3,00,000 To Carriage Inwards A/c 1,80,000 (Being the transfer of balances of opening inventory, purchases and wages accounts) Closing Inventory A/c Dr. 12,00,000 To Trading A/c 12,00,000 (Being the incorporation of value of closing Inventory) Trading A/c Dr. 25,20,000 To Gross Profit 25,20,000 (Being the amount of gross profit calculated) Gross profit Dr. 25,20,000 To Profit and Loss A/c 25,20,000 (Being the transfer of gross profit to Profit and Loss Account) OR (ii) In the Books of Mr. Mandeep Manufacturing Account for the Year ended 31.03.2024 Particulars Units Amount Particulars Units Amount ` ` To Opening Work- in-Process 27,000 78,000 By Closing Work- in-Process 42,000 1,44,000 To Raw Materials Consumed: By Trading A/c – Cost of finished goods transferred 15,00,000 58,00,800 Opening Inventory 7,80,000 Add: Purchases 24,60,000 32,40,000 Closing Inventory (9,60,000) 22,80,000 To Direct Wages – W.N. (1) 12,16,800 To Direct expenses: Hire charges on Machinery – W.N. (2) 10,50,000 To Indirect expenses: Hire charges of Factory 7,80,000 Repairs & Maintenance 5,40,000 ________ 59,44,800 59,44,800 Working Notes: (1) Direct Wages – 1,500,000 units @ `0.80 = ` 12,00,000 42,000 units @ `0.40 = ` 16,800 ` 12,16,800 (2) Hire charges on Machinery – 15,00,000 units @ ` 0.70 = ` 10,50,000 (c) Sr. No. Particulars Dr (`) Cr (`) (i) Bank A/c Dr. 2,25,000 To Equity Share Capital A/c 1,50,000 To Securities Premium A/c 75,000 (Being 15,000 Equity Shares Issued at a premium of ` 5) (ii) Securities Premium A/c Dr 75,000 Profit & Loss A/c Dr 75,000 To Bonus to Equity Shareholders A/c 1,50,000 (Being amount transferred for issue of Bonus Shares to ESH in the ratio of 1:5) (iii) Bonus to Equity Shareholders A/c Dr. 1,50,000 To Equity Share Capital A/c 1,50,000 (Being bonus shares issued) (iv) 12% Debentures A/c Dr 3,60,000 Premium on Redemption A/c Dr 10,800 To Debenture Holders A/c 3,70,800 (Being amount payable to debenture holders) (v) Profit & Loss A/c Dr 10,800 To Premium on Redemption A/c 10,800 (Being premium on redemption transferred to P&L) (vi) Debenture Redemption Reserve A/c Dr 36,000 To General Reserve 36,000 (Being DRR transferred to General Reserve) (vii) Bank A/c Dr 54,000 To DRR Investment A/c 54,000 (Being DRR Investment sold) (viii) Debenture Holders A/c 3,70,800 To Bank A/c 3,70,800 (Being Debenture Holders paid) 6. (a) Journal of Avent Limited Date Particulars Dr. Cr. 2023 ` ` May 31 Bank A/c (Note 1 – Column 3) Dr. 11,20,000 To Equity Share Application A/c 11,20,000 (Being application money received on 5,60,000 shares @ ` 2 per share) June 10 Equity Share Application A/c Dr. 11,20,000 To Equity Share Capital A/c 2,70,000 To Equity Share Allotment A/c (Note 1 - Column 5) 5,50,000 To Bank A/c (Note 1– Column 6) 3,00,000 (Being application money on 1,35,000 shares transferred to Equity Share Capital Account; on 2,75,000 shares Dec. 31 adjusted with allotment and on 1,50,000 shares refunded as per Board’s Resolution No…..dated…) Equity Share Allotment A/c Dr. 6,75,000 To Equity Share Capital A/c 1,35,000 To Securities Premium A/c 5,40,000 (Being allotment money due on 1,35,000 shares @ ` 5 each including premium at `4 each as per Board’s Resolution No….dated….) Bank A/c (Note 1 – Column 8) Dr. 1,25,000 To Equity Share Allotment A/c 1,25,000 (Being balance allotment money received) Equity Share Final Call A/c Dr. 9,45,000 To Equity Share Capital A/c 9,45,000 (Being final call money due on 1,35,000 shares @` 7 per share as per Board’s Resolution No…..dated….) Bank A/c Dr. 9,45,000 To Equity Share Final Call A/c 9,45,000 (Being final call money on 1,35,000 shares @ ` 7 each received) Working Note: Calculation for Adjustment and Refund Cate- gory No. of Shares Applied for No. of Shares Allotted Amount Received on Application Amount Required on Application Amount adjusted on Allotment Refund [3 – (4 + 5)] Amount due on Allotment Amount received on Allotment (1) (2) (3) (4) (5) (6) (7) (8) (i) 10,000 10,000 20,000 20,000 Nil Nil 50,000 50,000 (ii) 50,000 25,000 1,00,000 50,000 50,000 Nil 1,25,000 75,000 (iii) 5,00,000 1,00,000 10,00,000 2,00,000 5,00,000 3,00,000 5,00,000 Nil TOTAL 5,60,000 1,35,000 11,20,000 2,70,000 5,50,000 3,00,000 6,75,000 1,25,000 Also, (i) Amount Received on Application (3) = No. of shares applied for (1) X `2 (ii) Amount Required on Application (4) = No. of shares allotted (2) X ` 2 (b) Following factors are taken into consideration for calculation of depreciation. 1. Cost of asset including expenses for installation, commissioning, trial run etc.- Cost of a depreciable asset represents its money outlay or its equivalent in connection with its acquisition, installation and commissioning as well as for additions to or improvement thereof for the purpose of increase in efficiency. 2. Estimated useful life of the asset - Useful Life’ is either (i) the period over which a depreciable asset is expected to be used by the enterprise or (ii) the number of production or similar units expected to be obtained from the use of the asset by the enterprise. Determination of the useful life is a matter of estimation and is normally based on various factors including experience with similar type of assets. Several other factors like estimated working hours, production capacity, repairs and renewals, etc. are also taken into consideration on demanding situation. 3. Estimated scrap value (if any) is calculated at the end of useful life of the asset. If such value is considered as insignificant, it is normally regarded as nil. On the other hand, if the residual value is likely to be significant, it is estimated at the time of acquisition/installation, or at the time of subsequent revaluation of asset. Or (b) Bills of Exchange are usually drawn to facilitate trade transmission, that is, bills are meant to finance actual purchase and sale of goods. But the mechanism of bill can be utilised to raise finance also. When bills are used for such a purpose, they are known as accommodation bills. When the acceptor of a bill finds himself in financial straits to honour the bill on the due date, then he may request the drawer to cancel the original bill and draw on him a fresh bill for another period. And if the drawer agrees, a new bill in place of the original bill may be accepted by the drawee for another period. This is called the renewal of bill.