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

Mock Test Paper - Series III: June, 2024 Date of Paper: 5th June, 2024 Time of Paper: 2 P.M. to 5 P.M. FOUNDATION COURSE PAPER – 1: ACCOUNTING ANSWERS 1. (a) (i) 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. (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: The financial statements must disclose all the relevant and reliable information in accordance with the Full Disclosure Principle. (iv) False: The provisions of the Indian Partnership Act, 1932 shall not apply to a limited liability partnership. Limited Liability (LLPs) Act, 2008 is applicable for Limited Liability Partnerships (v) False: Under the single entry system of bookkeeping, generally cash book and personal accounts of creditors and debtors are maintained, and no other ledger is maintained. (vi) False: Preference share holder can hold both Equity shares and Preference shares of the company. Any person can hold both kinds of shares. (b) Difference between Provision and Contingent liability Provision Contingent liability (1) Provision is a present liability of uncertain amount, which can be measured reliably by using a substantial degree of estimation. A Contingent liability is a possible obligation that may or may not crystallise depending on the occurrence or non- occurrence of one or more uncertain future events. (2) A provision meets the recognition criteria. A contingent liability fails to meet the same. (3) Provision is recognized when (a) an enterprise has a present obligation arising from past events; an outflow of resources embodying economic benefits is probable, and (b) a reliable estimate can Contingent liability includes present obligations that do not meet the recognition criteria because either it is not probable that settlement of those obligations will require outflow of economic benefits, or the be made of the amount of the obligation. amount cannot be reliably estimated. (4) If the management estimates If the management estimates, that it is probable that the that it is less likely that any settlement of an obligation will economic benefit will outflow result in outflow of economic from the firm to settle the benefits, it recognises a obligation, it discloses the provision in the balance sheet. obligation as a contingent liability. (c) S. No. Debit (`) Credit (`) 1 Commission A/c Dr. 13,500 To Interest Received 13,500 (Correcting wrong entry of interest received into commission account) 2 M/s Kamal Traders A/c Dr. To Suspense A/c 630 630 (Being credit sale of ` 5,920 posted as ` 5,290 i.e. debiting M/s Kamal Traders A/c less by 630, now rectified) 3 Drawing A/c Dr. 44,000 To Machinery A/c 44,000 (Correction of wrong debit to machinery account for purchase of air-conditioner for personal use) 4 Return Inward A/c Dr. 20,000 To Debtors (Personal) A/c 20,000 (Correction of omission to record return of goods by customers) 2. (a) In the books of Firm Machinery Account ` ` 1.1.2020 To Bank A/c 37,000 31.12.2020 By Depreciation A/c 4,000 To Bank A/c (overhauling charges) 3,000 31.12.2020 By Balance c/d 36,000 40,000 40,000 1.1.2021 To Balance b/d 36,000 31.12.2021 By Depreciation A/c 6,150 1.7.2021 To Bank A/c 10,000 31.12.2021 By (` 5,400 + ` 750) Balance c/d 39,850 (` 30,600 + ` 9,250) 46,000 46,000 1.1.2022 To Balance b/d 39,850 1.7.2022 By Bank A/c(sale) 28,000 1.7.2022 To Bank A/c 25,000 1.7.2022 By Profit and Loss A/c (Loss on Sale – W.N. 1) 305 31.12.2022 By Depreciation A/c (` 2,295 + ` 1,388 + ` 1,875) 5,558 By Balance c/d 30,987 (` 7,862 + ` 23,125) 64,850 64,850 1.1.2023 To Balance b/d 30,987 1.7.2023 By Bank A/c (sale) 2,000 1.7.2023 By Profit and Loss A/c (Loss on Sale – W.N. 1) 5,272 31.12.2023 By Depreciation A/c (` 590 + ` 3,469) 4,059 31.12.2023 By Balance c/d 19,656 30,987 30,987 Working Note: Book Value of machines Machine Machine Machine I II III ` ` ` Cost of all machinery 40,000 10,000 25,000 (Machinery cost for 2020) Depreciation for 2020 4,000 Written down value as on 31.12.2020 36,000 Purchase 1.7.2021 (6 months) 5,400 10,000 Depreciation for 2021 750 Written down value as on 31.12.2021 30,600 9,250 Depreciation for 6 months (2022) 2,295 Written down value as on 1.7.2022 28,305 Sale proceeds 28,000 Loss on sale 305 Purchase 1.7.2022 25,000 Depreciation for 2022 1,388 1,875 Written down value as on 31.12.2022 7,862 23,125 Depreciation for 6 months in 2023 590 Written down value as on 1.7.2023 7,272 Sale proceeds 2,000 Loss on sale 5,272 Depreciation for 2023 3,469 Written down value as on 31.12.2023 19,656 (b) Valuation of Physical Stock as at March 31, 2024 ` Stock at cost on 31st March,2023 7,20,000 Add: (1) Under casting of a page total 1,800 (2) Goods purchased and delivered during January – March, 2024 ` (6,30,000 – 27,000 + 36,000) 6,39,000 (3) Cost of sales return ` (9,000 – 1,800) 7,200 6,48,000 Less: (1) Overcasting of a page total ` (54,000 – 45,000) 9,000 13,68,000 (2) Goods sold and dispatched during January – March, 2024 ` (8,10,000 – 45,000 + 36,000)8,01,000 Less: Profit margin 8,01,000 × 25 1,60,200 125 6,40,800 (6,49,800) Value of stock as on 31st March, 2024 7,18,200 Note: In the above solution, transfer of ownership is assumed to take place at the time of delivery of goods. If it is assumed that transfer of ownership takes place on the date of invoice, then ` 36,000 goods delivered in March 2024 for which invoice was received in April, 2024, would be treated as purchases of the accounting year 2023-2024 and thus excluded. Similarly, goods dispatched in March, 2024 but invoiced in April, 2024 would be excluded and treated as sale of the year 2023- 2024 3. (a) Income and Expenditure Account for the year ended 31st March, 2024 ` ` To Medicines consumed By Prescription fees 6,60,000 Purchases 2,45,000 Less: Stock on 31.3.24 (95,000) 1,50,000 By Visiting fees 2,50,000 To Motor car expense 80,000 By Fees from lectures 24,000 To Wages and salaries (1,05,000 – 30,000) 75,000 To Rent for clinic 60,000 To General charges 49,000 To Interest on loan 36,000 To Net Income 4,84,000 9,34,000 9,34,000 Capital Account for the year ended 31st March, 2024 ` ` To Drawings: By Cash/bank 2,00,000 Motor car expenses 40,000 By Cash/ bank (pension) 3,00,000 (one-third of ` 1,20,000) Household expenses Daughter’s Surgery exp. 1,80,000 2,15,000 By Net income from practice (derived from income and expenditure A/c) 4,84,000 Wages of domestic servants 30,000 Household furniture 25,000 To Balance c/d 4,94,000 9,84,000 9,84,000 (b) Revaluation Account ` ` To Furniture A/c 40,000 By Office equipment A/c 47,000 To Stock A/c 30,000 By Building A/c 5,00,000 By Provision for To Partners’ capital A/cs: doubtful debts 15,000 P 2,46,000 Q 1,64,000 R 82,000 4,92,000 5,62,000 5,62,000 Partners’ Capital Accounts P Q R P Q R ` ` ` ` ` ` To Q’s capital A/c 90,000 – 30,000 By Balance b/d 8,00,000 4,20,000 4,00,000 To Q’s loan A/c 8,24,000 By General Reserve 1,80,000 1,20,000 60,000 To Balance c/d 11,36,000 5,12,000 By revaluation reserve 2,46,000 1,64,000 82,000 By P’s capital A/c 90,000 By R’s capital A/c 30,000 12,26,000 8,24,000 5,42,000 12,26,000 8,24,000 5,42,000 Balance Sheet as on 1.4.2024 (After Q’s retirement) Liabilities ` ` Assets ` ` Capital accounts: Building 15,00,000 P 11,36,000 Furniture 2,00,000 R 5,12,000 16,48,000 Office equipment 3,27,000 Q’s loan account 8,24,000 Stock 2,20,000 Sundry creditors 3,70,000 Sundry debtors 3,00,000 Less: Provision for doubtful debts (15,000) 2,85,000 Cash at bank 3,10,000 28,42,000 28,42,000 Working Notes: Calculation of goodwill: 1. Average of last 4 year’s profit = (90,000+1,40,000+1,20,000+1,30,000)/4 = ` 1,20,000 2. Goodwill at three years’ purchase ` 1,20,000 x 3 = ` 3,60,000 Goodwill adjustment Share of goodwill (Old ratio) Share of goodwill (New ratio) Adjustment P 1,80,000 2,70,000 90,000 (Dr.) Q 1,20,000 - 1,20,000 (Cr.) R 60,000 90,000 30,000 (Dr.) 4. (i) Statement showing Realization of Cash Sr. No. Particulars Realization Creditors Partner’s Loan Partner’s Capital 1 After taking into account cash balance and amount set aside for expenses 1,500 1,500 - - 2 4,500 1,500 3,000 3 5,850 - 4,500 1,350 4 9,000 - - 9,000 Including Savings in Exp 30,150 - - 30,150 51,000 3,000 7,500 40,500 To ascertain the amount distributable out of each installment realized among the partners, the following table will be constructed: Statement of Distribution on Capital Accounts (1) Calculation to determine the mode of distribution of `1,350 Particulars Total A B C Balance 63,000 22,500 27,000 13,500 Less: Maximum Loss in 2:2:1 (61,650) (24,660) (24,660) (12,330) +1,350 -2,160 +2,340 +1,170 Deficiency of A's capital written off against those of B and C in the ratio of their capital 27,000: 13,500, (Garner vs. Murray) (1,440) (720) Manner in which the first ` 1,350 should be distributed + 900 + 450 (2) Distribution of `9,000 Balance after (1) 61,650 22,500 26,100 13,050 Less : Maximum Loss in 2:2:1 (52,650) (21,060) (21,060) (10,530) Balance available and distributed 9,000 1,440 5,040 2,520 (3) Distribution of `30,150 Balance after (2) 52,650 21,060 21,060 10,530 Less: Maximum Loss in 2:2:1 (22,500) (9,000) (9,000) (4,500) Distribution of ` 30,150 30,150 12,060 12,060 6,030 Summary: - Balance 63,000 22,500 27,000 13,500 - Total Amounts Paid 40,500 13,500 18,000 9,000 - Loss 22,500 9,000 9,000 4,500 (b) Trading and Profit and Loss Account of Mr. Chauhan for the year ended 31st March, 2024 Dr. Cr. Particulars ` Amount (`) Particulars ` Amount (`) To Opening stock 64,500 By Sales 4,27,150 To Purchases 3,13,200 Less: Sales return 5,150 4,22,000 Less: Purchases return 3,450 3,09,750 By Closing stock 2,50,000 To To To Carriage inward Wages Gross profit c/d 2,250 23,430 2,72,070 6,72,000 6,72,000 To Salaries 45,100 By Gross profit b/d 2,72,070 To Rent 8,600 By Bad debts recovered 900 To Advertisement expenses 8,350 To Printing and stationery 2,500 To Bad debts 2,200 To Carriage outward 2,700 To Provision for doubtful debts 5% of ` 2,40,000 12,000 Less: Existing provision 6,400 5,600 To Provision for discount on debtors 2.5% of ` 2,28,000 5,700 Less: Existing provision 2,750 2,950 To Depreciation: Plant and machinery 6,000 Furniture and fittings 2,050 8,050 To Office expenses 20,320 To Interest on loan 6,000 To Net profit (Transferred to capital account) 1,60,600 2,72,970 2,72,970 Balance Sheet of Mr. Chauhan as on 31st March, 2024 Liabilities ` Amount ` Assets ` Amount ` Capital account 1,30,000 Plant and machinery 40,000 Add: Net profit 1,60,600 Less: Depreciation 6,000 34,000 2,90,600 Furniture and fittings 20,500 Less: Drawings 16,000 2,74,600 Less: Depreciation 2,050 18,450 Bank overdraft 1,60,000 Closing stock 2,50,000 Sundry creditors 95,000 Sundry debtors 2,40,000 Payable salaries 4,900 Less: Provision for doubtful debts 12,000 Less: Provision for bad debts Prepaid rent 5,700 2,22,300 600 Cash in hand 2,900 Cash at bank 6,250 5,34,500 5,34,500 5. (a) In the books of Katen Journal Entries Particulars ` ` Bills Receivable A/c Dr. 50,000 To Bharat A/c 50,000 (Being a 3 month’s bill drawn on Bharat for the amount due) Bank A/c Dr. 49,500 Discount A/c Dr. 500 To Bills Receivable A/c 50,000 (Being the bill discounted) Bharat A/c Dr. 50,000 To Bank A/c 50,000 (Being the bill cancelled up due to Bharat’s inability to pay it) Bharat A/c Dr. 750 To Interest A/c 750 (Being the interest due on ` 25,000 @ 12% for 3 months) Bank A/c Dr. 25,750 To Bharat A/c 25,750 (Being the receipt of a portion of the amount due on the bill together with interest) Bills Receivable A/c Dr. 25,000 To Bharat A/c 25,000 (Being the new bill drawn for the balance) Bharat A/c Dr. 25,000 To Bills Receivable A/c 25,000 (Being the dishonour of the bill due to Bharat’s insolvency) Bank A/c Dr. 10,000 Bad Debts A/c Dr. 15,000 To Bharat A/c 25,000 (Being the receipt of 40% of the amount due on the bill from Bharat’s estate) (b)(i) Computation of Income for the year 2023-24: ` Money received during the year related to 2023-24 15,00,000 Add: Money received in advance during previous years 4,50,000 Total income of the year 2023-24 19,50,000 (ii) Advance from Customers A/c Date Particulars ` Date Particulars ` 31.3.24 To Sales A/c (Advance related to current year transferred to sales) 4,50,000 1.4.2023 By Balance b/d 6,00,000 By Bank A/c 3,60,000 To Balance c/d 5,10,000 (Balancing Figure) 9,60,000 9,60,000 So, total money received during the year is: ` Cash Sales during the year 15,00,000 Add: Advance received during the year 3,60,000 Total money received during the year 18,60,000 OR (ii) (i) Amount of salaries to be charged to P & L A/c for the year ended 31stDecember, 2023 Employees = 9 x ` 1,32,000 x 12 = ` 1,42,56,000 Trainees = 2 x ` 63,000 x 6 = ` 7,56,000 Salaries charged to P & L A/c ` 1,50,12,000 (ii) Amount actually paid as salaries during 2023 Employees = 9 x ` 1,32,000 x 11 + 9 x ` 1,20,000 = ` 1,41,48,000 Trainees = 2 x ` 63,000 x 5 = ` 6,30,000 Amount paid as salaries `1,47,78,000 (iii) Outstanding salaries as on 31.12.2023 Employees = 9 x ` 1,32,000 = ` 11,88,000 Trainees = 2 x ` 63,000 = ` 1,26,000 Outstanding salaries ` 13,14,000 (c) Journal Entries in the books of Puri Ltd. ` ` 1-4-2024 Equity share final call A/c Dr. 2,70,000 To Equity share capital A/c 2,70,000 (For final calls of ` 2 per share on 1,35,000 equity shares due as per Board’s Resolution dated….) 20-4-2024 Bank A/c Dr. 2,70,000 To Equity share final call A/c 2,70,000 (For final call money on 1,35,000 equity shares received) Securities Premium A/c Dr. 37,500 Capital Reserve A/c Dr. 60,000 General Reserve A/c Dr. 1,80,000 Profit and Loss A/c Dr. 60,000 To Bonus to shareholders A/c 3,37,500 (For making provision for bonus issue of one share for every four shares held) Bonus to shareholders A/c Dr. 3,37,500 To Equity share capital A/c 3,37,500 (For issue of bonus shares) Extract of Balance Sheet as at 30th April, 2024 (after bonus issue) ` Authorised Capital 15,000 12% Preference shares of `10 each 1,50,000 1,83,750 Equity shares of `10 each (W.N.2) 18,37,500 Issued and subscribed capital 12,000 12% Preference shares of `10 each, fully paid 1,20,000 1,68,750 Equity shares of `10 each, fully paid 16,87,500 (Out of above, 33,750 equity shares @ `10 each were issued by way of bonus) Reserves and surplus Profit and Loss Account 2,40,000 Working Notes: The authorized capital should be increased as per details given below: ` Existing authorized Equity share capital 15,00,000 Add: Issue of bonus shares to equity shareholders (25% of ` 13,50,000) 3,37,500 18,37,500 6. (a) In the books of Devis Ltd. Journal Entries To Equity Share Allotment A/c 21,00,000 (Being balance allotment money received for 3,00,000 shares) Equity Share first and final call A/c Dr. 12,00,000 To Equity Share Capital A/c 12,00,000 (Being first and final call amount due on 3,00,000 equity shares at ` 4 per share as per Directors’ resolution no... dated...) Bank A/c Dr. 11,64,000 Calls in arrears A/c 36,000 To Equity Share first and final call A/c 12,00,000 (Being final call received on 2,91,000 shares) Share capital A/c (9,000 x ` 20) Dr. 1,80,000 To Forfeited shares A/c (9,000 x ` 16) 1,44,000 To Calls in arrears A/c (9,000 x ` 4) 36,000 (Being forfeiture of 9,000 shares of ` 20 each fully called-up for non payment of first and final call @ ` 4 as per Directors’ resolution no... dated..) Bank A/c (7,500 x `16) Dr. 1,20,000 Forfeited shares A/c (7,500 x `4) 30,000 To Equity Share Capital A/c (7,500 x ` 20) (Being re-issue of 7,500 shares @ ` 16) 1,50,000 Forfeited share A/c (7,500 x ` 12) 90,000 To capital reserve A/c (7,500 x ` 12) 90,000 (Being profit on re-issue transferred to capital reserve) Working Note: Calculation of amount to be transferred to Capital reserve A/c ` Forfeited amount per share = 1,44,000/9,000 = 16 Loss on re issue (20-16) 4 Surplus per share 12 Transfer to capital reserve ` 12 x 7,500 ` 90,000 (b) In the Books of Universe Limited Journal Entries Dr. (`) Cr. (`) 1-4-2023 Bank A/c Dr. 36,00,000 Discount/Loss on Issue of Debentures A/c Dr. 6,00,000 To 12% Debentures A/c 40,00,000 To Premium on Redemption of Debentures A/c 2,00,000 (For issue of debentures at discount redeemable at premium) 30-9-2023 Debenture Interest A/c Dr. 2,40,000 To Debenture holders A/c 2,16,000 To Tax Deducted at Source A/c 24,000 (For interest payable) 30-9-2023 Debenture holders A/c Dr. 2,16,000 Tax Deducted at Source A/c Dr. 24,000 To Bank A/c 2,40,000 (For payment of interest and TDS) 31-3-2024 Debenture Interest A/c Dr. 2,40,000 To Debenture holders A/c 2,16,000 To Tax Deducted at Source A/c 24,000 (For interest payable) 31-3-2024 Debenture holders A/c Dr. 2,16,000 Tax Deducted at Source A/c Dr. 24,000 To Bank A/c 2,40,000 (For payment of interest and tax) 31-3-2024 Profit and Loss A/c Dr. 4,80,000 To Debenture Interest A/c 4,80,000 (For transfer of debenture interest to profit and loss account at the end of the year) 31-3-2024 Profit and Loss A/c Dr. 1,20,000 To Discount/Loss on issue of debenture A/c 1,20,000 (For proportionate debenture discount and premium on redemption written off, i.e., 6,00,000 x 1/5) (c) Adjusted Cash Book as on 31st December, 2023 Particulars ` Particulars ` To Balance b/d To Debtors 1,98,000 1,00,000 By Bank charges By Debtor (cheque dishonour) 34,000 5,000 By Balance c/d 2,59,000 2,98,000 2,98,000 Bank Reconciliation Statement as on 31st December, 2023 Particulars ` ` Balance as per adjusted cash book ADD: Cheque issued but not presented Payment not effected by bank LESS: Cheque deposited but not cleared Balance as per Bank Pass Book 45,000 4,000 25,000 2,59,000 49,000 3,08,000 25,000 2,83,000