Institute of Chartered Financial Analysts of India (ICFAI) University 2010 MS Finance Cfa - exam paper
Model Question Paper Financial Accounting - I (MSF1A1)
Answer all 74 questions.
Marks are indicated against each question.
Total Marks
1 Which of the following is a statement that shows what an organization owes and what it owns at any given point of time?
(a) Balance sheet
(b) Cash flow statement
(c) Trading account
(d) Profit and Loss account
(e) Funds flow statement.
(1 mark)
2 Which of the following concepts states that in order to determine the profits or losses accrued in an accounting period, the expenses must relate to the goods or services sold during the period?
(a) Matching concept
(b) Going concern concept
(c) Accounting period concept
(d) Time period concept
(e) Revenue recognition concept.
(1 mark)
(1 mark)
(1 mark)
(1 mark)
(1 mark)
3 Which of the following is not a revenue reserve?
(a) General reserve
(b) Investment allowance reserve
(c) Dividend equalization reserve
(d) Capital redemption reserve
(e) Revaluation reserve.
4. Which of the following errors affects the agreement of a trial balance?
(a) Mistake in balancing an account
(b) Omitting to record a transaction entirely in the subsidiary books
(c) Recording of a wrong entry in the subsidiary book
(d) Recording a correct entry in wrong subsidiary book
(e) Posting an entry on the correct side but in the wrong account.
5 Who among the following external users of financial statements does not belong to public group?
(a) Investors
(b) Academicians
(c) Researchers
(d) Analysts
(e) Customers.
6 Accounting equivalence concept is also known as
(a) Matching concept
(b) Accounting period concept
(c) Duality concept
(d) Consistency concept
(e) Realization concept.
7 The impact on assets, profit and total liabilities of a firm, on account of salary paid will be
Assets |
Profit |
Total Lia | |
(a) |
No effect |
Decreases |
Decreases |
(b) |
Decreases |
No effect |
Decreases |
(c) |
Decreases |
Decreases |
Decreases |
(d) |
Increases |
No effect |
Increases |
(e) |
Decreases |
Increases |
Decreases. |
8 The theme of the difference or the inherent superiority of the US GAAP over the Indian Accounting
I. Reporting versus disclosure.
II. Form versus substance.
III. Accounting versus analysis.
IV. Globalization versus localization.
(a) Both (I) and (II) above
(b) Both (I) and (III) above
(c) (I), (II) and (III) above
(d) (I), (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.
9 Accounting Standard 12 issued by the Accounting Standard Board is applicable to
(a) Valuation of Inventory
(b) Amalgamation
(c) Government Grants
(d) Construction Contracts
(e) Cash Flow Statements.
(1 mark)
10-A cheque deposited, but not collected should be deducted when preparing a bank reconciliation statement starting with a/an
I. Favorable balance of cash book.
II. Overdraft of pass book.
III. Favorable balance of pass book.
(a) Only (I) above
(b) Only (II) above
(c) Only (III) above
(d) Both (I) and (II) above
(e) Both (II) and (III) above.
(1 mark)
H-Which of the following items is to be added while preparing a bank reconciliation statement starting with the favorable balance of pass book?
(a) An amount directly deposited in the bank is not entered in cash book
(b) Cheques issued are not presented for payment up to the date of bank reconciliation statement
(c) Interest credited in the pass book is not entered in the cash book
(d) Cheques deposited are dishonored but the dishonor not entered in cash book
(e) Interest on fixed deposit entered in pass book as per instructions is not entered in cash book.
(1 mark)
12-Which of the following is true if goods purchased are Rs.10,000, trade discount received is Rs.280 and cash discount received is Rs.20?
(a) Cash account is credited with Rs.9,700 and discount received account is credited with Rs.20
(b) Cash account is credited with Rs.9,700 and discount received account is debited with Rs.20
(c) Cash account is credited with Rs.9,720 and discount received account is debited with Rs.20
(d) Cash account is credited with Rs.9,720 and discount received account is credited with Rs.20
(e) Cash account is credited with Rs.9,700 and discount received account is credited with Rs.300.
(1 mark)
13-Harika Ltd., introduced the imprest system of petty cash book, the amount of imprest being Rs.2,500. The petty cash transactions during the month of December, 2008 were as under:
Particulars |
Rs. |
Postage |
425 |
Wages |
682 |
Office cleaning |
248 |
Stationery |
435 |
Conveyance |
391 |
The amount of cash balance in the petty cash book as on December 31, 2008 was
(a) Rs.2,181
(b) Rs. 319
(c) Rs.2,500
(d) Rs. 638
(e) Rs.2,000.
14.Which of the following does not come under retirement benefit, as stated by the Accounting Standard-
(1 mark)
| ||||||||||||
15-Which of the following is false with reference to royalties? |
(a) The balance in the shortworkings account appears on the assets side of lessees balance-sheet
(b) In the books of the lessee, the shortworking account shows debit balance
(c) In a sub-lease, the lessee transfers a part of the right acquired by him to the sub-lessee
(d) In a sub-lease, royalties suspense account does not record the shortworking that exists between the lessee and the sub-lessee
(e) In a sub-lease, royalties will be paid on the basis of the combined output of both the primary lessee and the sub-lessee.
(1 mark)
(1 mark)
(1 mark)
(1 mark)
16-Which of the following is true with reference to bills of exchange?
(a) When a bill sent for collection by bank is dishonored, the drawer will credit bank a/c
(b) At the time of renewal of bill interest a/c is credited in the books of the drawee
(c) Accommodation bills are drawn, accepted and endorsed for some consideration
(d) Refusal by the acceptor to make payment of the bill on due date is called dishonor
(e) When a bill is endorsed, the drawer credits the drawees a/c.
17-Who among the following opens deficiency account if his estate is not sufficient to repay the debt?
(a) Insolvent drawer
(b) Insolvent drawee
(c) Insolvent endorsee
(d) Insolvent seller
(e) Insolvent maker.
18-Which of the following is not a characteristic of promissory note?
(a) It must be in writing
(b) It contains an unconditional promise to pay
(c) The maker must be a certain person
(d) It can be made payable to bearer
(e) The amount payable must be certain.
19-Under trading method of maintaining branch accounts, the excess of invoice price over the cost price of the goods sent to branch is credited to
(a) Goods sent to branch account
(b) Branch account
(c) Branch adjustment account
(d) Branch stock reserve account
(e) Branch stock account.
(1 mark)
20-The most suitable method of inventory valuation for items like perishable food products is
(a) First-In First-Out
(b) Specific Identification
(c) Weighted average
(d) Perpetual
(e) Periodic.
21-Owners equity at the end of the year was Rs.98,000. During the year, the owner contributed Rs.15,000 towards additional capital and withdrew Rs.8,500 for his personal use. If the firm had a net profit of Rs.16,500 for the year, the owners equity at the beginning of the year was
(a) Rs.1,08,500
(b) Rs.1,06,500
(c) Rs. 92,000
(d) Rs. 75,000
(e) Rs.1,21,000.
22-The process whereby the company uses existing accounts receivable as collateral for a loan is known as
(a) Factoring
(b) Pledging
(c) Discounting
(d) Hedging
(e) Arbitrating.
(1 mark)
(1 mark)
(1 mark)
(1 mark)
23-Which of the following asset is to be valued at the lower of cost and net realizable value?
(a) Patent rights
(b) Inventories
(c) Investments
(d) Sundry debtors
(e) Bills receivables.
24-Cost of conversion is equal to
(a) Direct material plus direct wages plus production overhead
(b) Direct wages plus all types of overhead
(c) Direct wages plus direct expenses plus production overhead
(d) Direct material plus direct wages plus direct expenses plus production overhead
(e) Direct material plus direct wages plus all types of overhead.
25-The portion of the acquisition cost of the fixed asset yet to be allocated is known as
(a) Written down value
(b) Accumulated value
(c) Realizable value
(d) Salvage value
(e) Residual value.
26-Ramya Ltd., took on lease a mine for a term of four years. The royalty is payable at a rate of 10% on sales subject to a minimum rent of Rs.16,000 payable equally over the term of lease. The sales during the year 2007-08 amounted to Rs.30,000. The amount paid to landlord for the year 2007-08 was
(a) Rs. 3,000
(b) Rs.16,000
(c) Rs. 4,000
(d) Rs.13,000
(e) Rs.30,000.
(1 mark)
27.Which of the following depreciation methods is generally used for petroleum and other mining companies?
(a) Units-of-Production method
(b) Sum-of-the-Years Digits method
(c) Diminishing balance method
(d) Straight-line method
(e) Weighted average method.
(1 mark)
28.Aayush Ltd., having its head office at Kolkata has a branch at Hyderabad. Goods are sent to branch at cost plus 50%. The following details are furnished:
Particulars |
Rs. |
Opening stock at branch at invoice price |
12,00,000 |
Opening debtors |
4,00,000 |
Goods sent to branch at invoice price |
36,00,000 |
Cash sales |
12,60,000 |
Credit sales |
24,00,000 |
Cash received from debtors |
22,00,000 |
Goods returns by branch |
1,80,000 |
Stock shortage at branch |
1,20,000 |
Bad debts |
30,000 |
If company maintains branch accounts under stock and debtors system, the gross profit shown in Branch Adjustment account is
(a) Rs. 8,40,000
(b) Rs.11,40,000
(c) Rs.12,20,000
(d) Rs.12,60,000
(e) Rs.15,00,000.
29-The following is the data pertaining to Jagan Enterprises as on March 31, 2008:
Particulars |
Rs. |
Gross profit Closing stock Salaries Other expenses Fixed assets Sundry debtors Sundry creditors Cash and bank Capital Short term loan |
1,32,000 37.500 43.000 36.500 3.00.000 22.500 16.000 26.500 3.00.000 18,000 |
The firm has the practice of charging depreciation on the fixed assets at the rate of 10% on book value. The total of the assets side of the Balance Sheet as on March 31, 2008 was
(a) Rs.3,69,000
(b) Rs.3,34,000
(c) Rs.3,56,500
(d) Rs.3,71,500
(e) Rs.2,96,500.
(2marks)
If royalties is less than minimum rent, the balance of royalty account at the end of the year has to be transferred to
(a) Capital Reserve account
(b) Profit & Loss account
(c) Royalty suspense account
(d) Profit & Loss appropriation account
(e) Landlords account.
(1 mark)
31-Consider the following data pertaining to credit purchases made by Zodiac Ltd., a dealer in electronic goods, for the month of December 2008:
Date |
Particulars |
No. of units |
Rate per unit (Rs.) |
Trade Discount |
December 01 |
Black & White TVs |
50 |
3,000 |
10% |
December 01 |
Colour TVs |
10 |
6,000 |
10% |
December 09 |
Tape Recorders |
10 |
1,000 |
10% |
December 09 |
Two-in-one |
10 |
1,500 |
10% |
December 19 |
Audio Cassettes |
100 |
30 |
5% |
On December 22, 2008, the company purchased from Indian Stationers on credit for office use 10 dozens of carbon papers at the rate of Rs.35 per dozen and 10 dozens of ball pens at the rate of Rs.25 per dozen.
At the time of making payment on December 31, 2008, the suppliers have allowed a cash discount of 10% on the above purchases.
The total of purchase book for the month of December 2008, was
(a) Rs.2,14,350
(b) Rs.2,38,000
(c) Rs.1,92,915
(d) Rs.2,38,600
(2marks)
(e) Rs.2,14,740.
32-If the debit balance in the furniture account has been taken as Rs.5,650 instead of Rs.5,850, then this
type of error is called
(a) Error of complete omission
(b) Error of principle
(c) Error of partial omission
(d) Compensating error
(e) Error of commission.
33.The feature of straight line method of depreciation is that
(a) The amount of depreciation increases every year while the rate of depreciation decreases
(b) The amount of depreciation and the rate of depreciation remain same every year
(c) The amount of depreciation decreases while the rate of depreciation remains the same
(d) The amount of depreciation and the rate of depreciation increase every year
(e) The amount of depreciation increases while rate of depreciation remains the same.
(1 mark)
(1 mark)
(1 mark)
34.Outstanding expenses appearing in the trial balance should be
(a) Debited to Profit and Loss account as an expense
(b) Debited to Profit and Loss Appropriation account as an appropriation
(c) Shown as current liability in the balance sheet
(d) Shown as current asset in the balance sheet
(e) Reduced from related expense in the Profit and Loss account.
35.Which of the following is not an example of revenue expenditure?
(a) Insurance premium
(b) Taxes and legal expenses
(c) Depreciation on machinery
(d) Discount allowed
(e) Installation charges of machinery.
36.In the event of fire, if the claim admitted is less than the amount of stock destroyed then the difference should be shown in the
(a) Debit side of the Profit and Loss account
(b) Credit side of the Profit and Loss account
(c) Asset side of the balance sheet
(d) Liabilities side of the balance sheet
(e) Asset side under the head miscellaneous expenditure.
(1 mark)
37-Seesam Manufacturers Ltd., purchased a machinery of Rs.9,00,000 on April 1, 2004. The company was charging depreciation @ 20% p.a. on diminishing balance method. The company purchased another machinery on April 1, 2005 at a cost of Rs.70,000. On April 1, 2007, the company decided to change the method of depreciation from diminishing balance method to straight line method @ 10% p.a. on original cost, with effect from April 1, 2007. It purchased another machinery for Rs.80,000 on October 01, 2007 and spent Rs.6,700 for installation. The company sold its machinery which was purchased on April 1, 2005 for Rs.40,000 on March 31, 2008. The balance of machinery account as on April 1, 2008
(2marks)
was | |
(a) |
Rs.1,01,335 |
(b) |
Rs.5,94,500 |
(c) |
Rs.4,53,165 |
(d) |
Rs.5,05,600 |
(e) |
Rs.5,40,000 |
38.Income tax provision relating to previous year is charged/transferred to
(a) Debit side of the current year Profit and Loss account
(b) Credit side of the current year Profit and Loss account
(c) Debit side of the current year Profit and Loss Appropriation account
(d) Credit side of the current year Profit and Loss Appropriation account
(e) Liabilities side of the balance sheet.
39-Depreciation on fixed assets of foreign branches should be translated using the
(a) Closing rate
(b) Average rate
(c) Rate at which the concerned fixed asset has been converted
(d) Weighted average rate
(e) Forward rate.
40-The total of debit column of trial balance of a company is Rs.90,600 and that of the credit column is Rs.69,800. Subsequently the following errors are discovered:
Particulars |
Correct Amount (Rs.) |
Amount which appears in trial balance (Rs.) |
Carriage outwards |
2,000 |
1,000 (credit column ) |
Interest from investments |
4,500 |
4,300 (debit column) |
Returns outwards |
7,500 |
7,500 (debit column) |
The total of the correct trial balance is
(a) Rs.92,600
(b) Rs.81,800
(c) Rs.80,800
(d) Rs.79,800
(1 mark)
(e) Rs.72,000.
41-Anishta Ltd., furnished the following information as on March 31, 2008:
Particulars |
Rs. |
Paid-up equity share capital of 15,000 shares of Rs.100 each Fixed assets Current assets Reserves and surplus |
15,00,000 9.20.000 8.61.000 50,000 |
The sundry creditors were one-fourth of total liabilities owed to outsiders. The sundry creditors of Anishta Ltd., as on March 31, 2008 were
(2marks)
(a) |
57,750 | |
(b) |
2,81,000 | |
(c) |
9,20,000 | |
(d) |
13,19,000 | |
(e) |
2,31,000. | |
As |
on December 31, |
42.
book balance did not agree with the balance as per cash book. On scrutiny, the following omissions and commissions were noticed:
Mr. Srinivas, a tenant, directly deposited an amount of Rs.2,300 into the bank account towards rent and the same is not accounted in the cash book.
A cheque for Rs.1,500 received from Mr. Raghu entered in cash book, but not sent to bank for collection up to December 31, 2008.
The bank balance as per cash book is
(a) Rs.29,550 (debit)
(b) Rs.29,550 (credit)
(c) Rs.31,050 (credit)
(d) Rs.25,000 (debit)
(e) Rs.30,000 (debit).
43-XYZ Ltd., furnishes the following details:
Value of machinery as on April 01, 2005 |
Rs.30,000 |
Rate of depreciation |
25% |
Method of depreciation |
Written down value |
The total amount of accumulated depreciation charged in respect of the Machinery up to March 31, 2008 was
(a) Rs.17,344
(b) Rs.16,875
(c) Rs. 4,219
(d) Rs.12,656
(e) Rs.13,125.
44-Consider the following data pertaining to a Godrej Ltd., for the month of December 2008:
Date |
Receipts (Qty) |
Rate per unit (Rs.) |
Issues (Qty) |
December 2 |
12 |
6,600 |
- |
December 6 |
18 |
7,400 |
- |
December 12 |
- |
- |
9 |
December 31 |
- |
- |
16 |
If the company maintains both the First-In First-Out and Weighted average inventory valuation method, the difference in the value of closing inventory between First-In-First-Out and Weighted average method as on December 31, 2008 was
(2marks)
(1 mark)
(a) |
Rs.1,600 |
(b) |
Rs.1,500 |
(c) |
Rs.3,200 |
(d) |
Rs.3,000 |
(e) |
Rs.2,500 |
45-If goods are returned by a customer to branch, the entry to be passed in the books of Head Office is
(a) Debit Returns Inward a/c, Credit Branch Stock a/c
(b) Debit Branch stock a/c, Credit Branch Debtors a/c
(c) Debit Branch Debtors a/c, Credit Branch Stock a/c
(d) Debit Branch Stock a/c, Credit Returns Inwards a/c
(e) Debit Branch Debtors a/c, Credit Returns Inwards a/c.
46-Murali, a sole proprietor, maintains a three columnar cash book to record his business transactions. Consider the following data pertaining to his business for the month of December 2008:
Date |
Particulars |
Rs. |
December 1 |
Opening cash on hand |
50,000 |
1 |
Balance at bank |
7,00,000 |
5 |
Cheque received from a customer and deposited on the same day (after allowing a discount of Rs.2,500) |
1,00,000 |
5 |
Paid to supplier by cheque (after receiving a discount of: Rs.10,000) |
2,00,000 |
12 |
Salaries paid to staff in cash |
40,000 |
13 |
Received a cheque from Daulat Ram, a customer (who owed Rs.30,000 and was allowed a discount @ 1%) |
29,700 |
14 |
Paid M/s. Bharani and Co. in full settlement of their dues of Rs.53,000 |
52,500 |
30 |
Paid to Rama & Bros. (as against Rs.75,000) in full and final settlement |
72,500 |
The amount of bank balance as on January 1, 2009 was
(a) Rs.5,02,000
(b) Rs.5,04,700
(c) Rs.7,00,000
(d) Rs.8,27,000
(e) Rs. 50,000.
47-Moon Ltd., has the practice of creating provision for doubtful debts @ 8% on debtors. The balance of provision for doubtful debts on April 01, 2007 and March 31, 2008 was Rs.24,000 and Rs.36,000, respectively. During the year 2007-08, the amount collected from debtors was Rs.60,50,000. Credit sales during the year were
(a) Rs.60,50,000
(b) Rs.66,00,000
(c) Rs.62,00,000
(d) Rs.64,50,000
48-Raghav Enterprises depreciates its machinery on straight line method @ 10% p.a. The firm decided to change the method of depreciation from straight line method to diminishing balance method @ 20% p.a. on book value, with effect from July 1, 2008. On October 1, 2008 a machine whose book value was Rs.15,000 on July 1, 2006 was sold for Rs.8,000. (The accounting year of Raghav Enterprises starts from July 1, every year and ends on June 30 the following year). The amount of profit/loss on sale of machinery was
(a) Rs.3,400 (loss)
(b) Rs.3,400 (profit)
(c) Rs.4,300 (loss)
(d) Rs.4,300 (profit)
(e) Rs.3,000 (loss).
(2marks)
49-On April 01, 2007 Sunny Ltd., showed a balance of Rs.5,600 to the credit of Provision for bad and doubtful debts. On March 31, 2008, the Sundry Debtors showed a balance of Rs.2,50,400. Out of the total debtors, the status of the following debtors is as follows:
Sinha Rs.3,800 - identified as bad debt and is to be written off.
Gupta Rs.9,000 - expected to realize only 80%.
Patel Rs.8,000 - expected to realize only 60%.
Iyer Rs.5,500 - filed insolvency petition and the recovery chances are remote.
All other debts as on the date of finalization of accounts are estimated to be good. The amount transferred to Profit & Loss account from provision for bad debts account was
(a) Rs.14,300
(b) Rs.10,500
(c) Rs. 8,700
(d) Rs.13,800
(1 mark)
(e) Rs. 5,500.
50-For mutual accommodation, Anil has drawn a bill for Rs.9,000 and Bhowmic has drawn another bill for Rs.6,000. Both the bills have been drawn for 3 months and mutually accepted by Anil and Bhowmic and discounted with a bank at a discount of 10% p.a. If the proceeds have been shared in the ratio of 2:1 between Anil and Bhowmic respectively, Anils share of discount is
(a) Rs. 125
(b) Rs. 200
(c) Rs. 250
(d) Rs.1,000
(e) Rs. 500.
(2marks)
51-Melton Ltd., a mining company took a lease of mine from Rose Ltd., for extracting minerals from its property for a period of 12 years from April 01, 2005. The terms of agreement are:
i. Royalty at the rate of Rs.20 per ton of output.
ii. Minimum rent Rs.5,00,000 per annum.
iii. It was further agreed that the shortfall in any year may be recouped from any excess of royalty
over the minimum rent in the next 2 years, subject to a maximum of Rs.75,000 per annum.
The following is the data pertaining to output of the Melton Ltd., for the past three years:
Year |
Output (tonnes) |
2005-06 |
20,000 |
2006-07 |
25,000 |
2007-08 |
32,000 |
The amount of shortworkings lapsed during the year 2007-08 was
(a) Rs. 25,000
(b) Rs. 75,000
(c) Rs.1,00,000
(d) Rs. 50,000
(2marks)
(e) Rs.1,50,000.
Under stock and debtors method of accounting for dependant branch, which of the following is the correct entry passed by Head Office for goods sent to branch at invoice price?
(a) Debit branch stock and credit goods sent to branch
(b) Debit goods sent to branch and credit branch stock
(c) Debit branch stock and credit Head Office stock
(d) Debit Head Office stock and credit branch stock
(e) Debit goods sent to branch and credit Head Office stock.
53-Nrupur Computers of Jaipur has a branch at Delhi. Computers are supplied to the branch at cost. The expenses of the branch are paid from Jaipur and the branch
keeps a sales journal and the debtors ledger only. The following information pertaining to the branch is available for the year ended March 31, 2008:
Particulars |
Rs. |
Particulars |
Rs. |
Opening stock (01-04-2007) Closing stock (31-03-2008) Credit sales Cash sales |
24.000 18.000 41,000 17,500 |
Sundry debtors (01-04-2007) Sundry debtors (31-03-2008) Goods received from Head Office Expenses paid by H.O for the Branch |
6,600 9,160 33,600 10,400 |
For the year ended March 31, 2008, the profit of the branch transferred to General Profit and Loss account was
(a) Rs.55,400
(b) Rs.14,560
(c) Rs.12,840
(d) Rs.11,600
(2marks)
(e) Rs. 8,500.
54.A company sublets its office accommodation and receives Rs.95,000 during the year 2007-08. Details of rent in arrears and in advance at the beginning and end of the year were:
Date |
In arrears (Rs.) |
In advance (Rs.) |
April 01, 2007 |
8,300 |
4,200 |
March 31, 2008 |
7,400 |
3,000 |
The rental income for the year ended March 31, 2008 was
(a) Rs. 95,300
(b) Rs. 95,000
(c) Rs. 83,700
(d) Rs.1,06,600
(2marks)
(e) Rs. 82,000.
55.The following errors were made by the accountant of a company in the Profit and Loss account for the year 2007-08:
Selling expenses overstated by Rs.14,800
Discount received overstated by Rs. 7,790
Interest on investment understated by Rs. 2,320
As a result of these errors, the net profit was
(a) Overstated by Rs.9,330
(b) Understated by Rs.9,330
(c) Understated by Rs.7,790
(d) Understated by Rs.17,170
(e) Overstated by Rs.7,790.
56-Denim Ltd., has furnished the following information for the year ended March 31, 2008:
Particulars |
Rs. |
Sales Opening stock Carriage inward Purchases |
3.00.000 30.000 10.000 2.00.000 |
If the gross profit of the company for the year ended March 31, 2008 was 50% on cost, the amount of closing stock as on March 31, 2008 was
(a) Rs.36,657
(b) Rs.40,000
(c) Rs.96,657
(d) Rs.95,000
(e) Rs.94,000.
57-Which of the following statements is correct in respect of a trial balance?
(a) The trial balance shows the profit earned by the concern during a period
(b) The trial balance is prepared after preparing the profit and loss account
(c) The trial balance shows only balances of assets and liabilities
(d) The trial balance shows only nominal account balances
(e) The trial balance shows balances of all real, personal and nominal accounts.
(1 mark)
58-While preparing the final accounts of the company, the accountant of Citizen Ltd., located the following errors:
The Returns Inward book was undercast by Rs.2,754.
A credit purchase of Rs.2,504 was posted to the debit of the suppliers account as Rs.250.
Wages of Rs.1,000 paid for installation of a new machine was debited to wages account.
Sales returns of Rs.1,754 were taken into stock but no entry in respect of the transaction was passed in the books.
The difference in Trial Balance of the company on account of the above errors is
(a) Nil
(b) Rs. 877
(c) Rs.1,377
(d) Rs.3,631
(e) Rs.4,131.
(2marks)
(1 mark)
59-In relation to price, the phrase markon means
(a) The first selling price at which goods are offered
(b) The selling price raised above the original selling price
(c) Difference between the cost and the original selling price plus any net markups
(d) Difference between the cost and the first selling price
(e) The selling price raised above the cost.
60-If the difference in trial balance is controlled in Suspense a/c, what will be the Suspense a/c balance due to the following errors?
Debited Purchases a/c Rs.6,500 for furniture purchased.
Debited Bansals a/c and Salary a/c Rs.3,000 each for salary paid to him.
Debited D. Gupta & Co.s a/c Rs.7,350 for goods purchased from them on credit.
Credited M/s Roy & Co. Rs.100 for cash discount allowed by them.
(a) Rs.16,750
(b) Rs.10,250
(c) Rs.17,500
(d) Rs.24,200
(e) Rs.24,100.
61-Sayonara Ltd., follows perpetual inventory system. On March 31 of every year, the company undertakes physical stock verification. On March 31, 2008, the value of stock as per the records differed from the value as per physical stock. On scrutiny, the following differences were noticed:
Stock register was undercast by Rs.5,000.
Goods purchased for Rs. 12,000 were received and included in the physical stock but no entry was made in the books.
Goods costing Rs.24,000 were sold and entered in the books but the stock is yet to be delivered.
Goods worth Rs.5,000 were returned back by the customers and omitted to be recorded.
(a) Rs.1,90,000
(b) Rs.2,06,000
(c) Rs.2,16,000
(d) Rs.1,98,000
(e) Rs.1,76,000.
62-On April 01, 2004, Surya Ltd., obtained a 99 years lease for a coal field from Chandra Ltd., on the following terms:
Royalties will be 6% of sales revenue from coal sold during the period.
Minimum rent will be Rs.20,000 for the first year with an annual increase of Rs.4,000 till it reaches Rs.40,000.
Shortworkings, if any, are recoverable within first 3 years of the lease.
The coal raised by Surya Ltd., is as under:
Year |
Production in tonnes |
Closing Stock in tonnes |
2004-05 |
2,500 |
500 |
2005-06 |
4,250 |
750 |
2006-07 |
16,250 |
2,000 |
2007-08 |
32,000 |
4,000 |
If sale price of coal is Rs.50 per ton, the amount of shortworkings recovered were
(a) Rs.17,000
(b) Rs.26,000
(c) Rs. 9,000
(d) Rs.14,000
(2marks)
(e) Rs.16,000.
63-Consider the following data pertaining to Amruth & Co. for the year ended March 31, 2008:
Particulars |
Rs. |
Sales |
55,000 |
Purchases |
45,000 |
Opening stock |
4,000 |
Salaries and wages |
2,200 |
Printing and stationery |
300 |
Rent paid |
1,200 |
Prepaid insurance |
400 |
Carriage inward |
370 |
Carriage outward |
250 |
Returns inward |
2,000 |
Returns outward |
1,500 |
Closing stock |
2,000 |
The Manager of the business is entitled to a commission of 6% on profit after charging his commission. The commission payable to the manager for the year 2007-08 was
(a) Rs.180
(b) Rs.167
(c) Rs.237
(d) Rs.191
(e) Rs.157.
64-Consider the following extract of Trial Balance of Vaibhav Ltd., as on March 31, 2008:
Particulars |
Rs. |
Share Capital |
57,690 |
12% Bank loan |
15,000 |
Sundry creditors |
5,000 |
Bills payable |
1,000 |
Land & building |
43,600 |
Cash at bank |
2,350 |
Office equipment |
19,970 |
Furniture |
20,000 |
Closing stock |
3,800 |
Bills receivable |
900 |
Sundry debtors |
5,500 |
Petty cash balance |
21 |
Cash on hand |
940 |
For the year ended March 31, 2008, the following adjustments were effected:
Depreciation on - Office equipment: Rs.1,997; Furniture: Rs.3,000.
Reserve for discount on Sundry creditors is Rs.72. Provision for discount on Sundry debtors is Rs.78.
Sundry creditors include a debt of Rs.800 due to Mr. Madhukar who is also in the list of Sundry debtors for the same amount.
Accrued commission receivable amounted to Rs.1,300 and Prepaid printing charges aggregated to Rs.185; Accrued interest on bank loan is of Rs.1,500.
After effecting the adjustments, the net profit was Rs.13,373.
The total of liabilities side of the balance sheet of the Vaibhav Ltd., as at March 31, 2008 was
Rs. 92,691 Rs. 90,000 Rs.1,02,691 Rs.1,26,691 Rs.1,30,000.
(a)
(b)
(c)
(d) (e)
65.The
(2marks)
following balances were extracted from the books of Run Ltd., as on March 31, 2008:
Particulars |
Rs. |
Share capital Secured loans Current assets Fixed assets Reserves and surplus Sundry creditors |
5.00.000 4.00.000 3,01,200 8.00.000 1,40,000 61,200 |
The total of Application of Funds in the vertical form of balance sheet of Run Ltd., as on March 31, 2008 was
(a) Rs.11,01,200
(b) Rs.11,00,000
(c) Rs.10,40,000
(d) Rs.11,41,200
(e) Rs.11,01,900.
(2marks)
66-Infy Ltd., with its Head Office at Mumbai has a Branch at Hyderabad. The branch receives all goods from Head Office, which also remits cash for all expenses. Total sales made by the branch during the year 2007-08 amounted to Rs.5,60,000 out of which 20% was cash sales. The following further information pertaining to the branch for the year 2007-08 is available:
Particulars |
As on April 01, 2007 (Rs.) |
As on March 31, 2008 (Rs.) |
Sundry debtors |
60,000 |
48,000 |
The amount collected from debtors during the year 2007-08 was
(a) Rs.4,60,000
(b) Rs.5,72,000
(c) Rs.5,36,000
(d) Rs.5,24,000
(e) Rs.5,08,000.
(2marks)
67-Consider the following data pertaining to M/s Nag Enterprises:
Original cost of furniture Rs.10,000.
Rate of depreciation under written down value method 20%.
Residual value of furniture at the end of useful life Rs.3,276.80.
The estimated useful life of the furniture is
(a) 3 years
(b) 4 years
(c) 5 years
(d) 6 years
(e) 7 years.
68. 331
Avinash Ltd., of Delhi sends goods to its Kanpur Branch at cost plus 3 %. Out of the goods sent to
the branch during the month of December 2008, part of the goods were lost in transit. The transactions pertaining to the branch during the month of December 2008 were as under:
Particulars |
Rs. |
Opening stock (invoice price) Goods sent to Branch (invoice price) Credit sales Closing stock (invoice price) Opening cash balance Closing cash balance Cash received from Branch Cash collected from debtors |
3.000 13,000 8,800 2.400 4.000 1.400 9.000 5.400 |
The cost price of the goods lost in transit were
(a) Rs.1,850
(b) Rs.2,850
(c) Rs.2,000
(d) Rs.1,330
(e) Rs. 500.
(2marks)
69-Ms. Khajuraho owns a coal mine which is leased to Mr. Harappa at a royalty of 25% of sales subject to a minimum rent of Rs.1,20,000 per annum. The royalty is payable on April 30 for the coal sold during September 01 to February 28/29 every year and on October 31 for the coal sold during March 01 to August 31 every year.
Details of sales as under:
Period |
Sales (Rs.) |
September 01, 2006 to February 28, 2007 March 01, 2007 to March 31, 2007 March 01, 2007 to August 31, 2007 September 01, 2007 to February 29, 2008 March 01, 2008 to March 31, 2008 |
2,20,000 45.000 2.30.000 2.90.000 90.000 |
The amount which Ms. Khajuraho should record as revenue from royalty for the year 2007-08 is
(a) Rs.1,41,250
(b) Rs.2,75,000
(c) Rs. 96,250
(d) Rs.1,63,750
(e) Rs.5,60,000.
70.The accountant of ABC Ltd., prepared the provisional Profit and Loss account for the year ended March 31, 2008 and submitted to the manager for verification. The accountant reported a profit of Rs.6,50,000. On scrutiny, the following omissions and commissions were noticed:
Building rent of Rs.1,500 per month was paid upto January 2008. Rent debited to Profit and Loss account was Rs.15,000.
Sales book was overcast by Rs.20,000.
Rs.20,000 paid for the repair of second hand machinery purchased, to bring it to the working condition, was debited to Repairs and Maintenance as Rs.2,000.
The above mistakes were duly rectified. The profit made by the company after the rectifications was
Rs.6,29,000
Rs.6,49,000
(a)
(b)
(c)
(d) (e)
71-The
Rs.6,32,000
Rs.6,25,000
Rs.6,47,000.
following is the Trial Balance of Agarwal & Sons as on March 31, 2008:
Particulars |
Debit (Rs.) |
Credit (Rs.) |
Capital Account |
7,50,000 | |
Fixed Assets |
19,20,000 | |
Sundry debtors |
2,70,000 | |
Sundry creditors |
2,25,000 | |
Purchases |
10,08,000 | |
Sales |
24,22,500 | |
Purchases returns |
73,500 | |
Sales returns |
33,000 | |
Opening stock (as on April 01, 2007) |
72,000 | |
Bad debts |
28,500 | |
General and Administration expenses |
10,26,000 | |
Term Loan (Interest rate of 13% per annum) |
4,50,000 | |
Interest on bank overdraft |
45,000 | |
Prepaid Rent |
18,000 | |
Investments in fixed deposit (8% p.a.) |
3,00,000 | |
Discount allowed |
18,000 | |
Discount received |
31,500 | |
Reserve and surplus |
8,88,000 | |
Cash on hand |
75,000 | |
Total |
46,87,500 |
49,66,500 |
The trial balance did not agree. On scrutiny, it is observed that certain balances were wrongly placed in the trial balance. If the difference in the total of corrected trial balance was on account of omission of bank balance, the amount of bank balance was
(a) Rs. 27,000 (favorable balance)
(b) Rs. 18,000 (favorable balance)
(c) Rs. 27,000 (over draft)
(d) Rs.1,08,000 (favorable balance)
(e) Rs. 18,000 (over draft).
(2marks)
72-Consider the following data relating to Nirvesh Ltd., for the month of December 2008:
Particulars |
As on December 01, 2008 (Rs.) |
As on December 31, 2008 (Rs.) |
Stock |
1,40,000 |
70,000 |
Accounts payable |
40,000 |
50,000 |
The company makes all purchases on credit. During the month of December 2008, the company paid a sum of Rs.3,50,000 to the suppliers. The goods are sold at 25% above cost.
The sales for the month of December, 2008 were
(a) Rs.4,30,000
(b) Rs.5,50,000
(c) Rs. 70,000
(d) Rs.1,05,000
(e) Rs.5,37,500.
(2marks)
73-On December 31, 2008, the bank column of the cash book of Aion Ltd., showed a credit balance of Rs.81,000 which did not agree with the balance as per the bank statement. On scrutiny the following omissions and commissions were noticed:
As per bank statement, a cheque of Rs.3,500 was deposited on December 25, 2008, but no entry was made in the cash book.
Receipt side of the cash column of the cash book was undercast by Rs.500.
An amount of Rs.24,980 was credited by the bank on account of the proceeds of a cheque for Rs.25,000 deposited for collection. No entry was passed in the cash book for bank charges.
A cheque issued by a customer for Rs.2,650 was deposited in the bank on December 25, 2008. But the same was dishonoured on December 29, 2008. No entry was passed in the cash book for dishonour.
The amount of bills receivable collected directly by the bank aggregated to Rs. 17,500
The amount of bank charges of Rs.125 was recorded twice in the cash book.
A bill of Rs.40,000 discounted for Rs.35,480 was dishonoured and noting charges of Rs.75 were paid by the bank. No entry was made in the cash book.
The bank balance as per the bank statement on December 31, 2008 was
(a) Rs.1,04,770 (debit)
(b) Rs. 67,470 (debit)
(c) Rs.1,02,620 (debit)
(d) Rs.1,02,120 (debit)
(e) Rs. 67,470 (credit).
(2marks)
Which of the following is a not a non-operating surplus?
74.
(a) Excess surplus from sale of fixed asset over acquisition cost
(b) Income earned as royalties
(c) Interest on securities
(d) Income from revaluation of fixed assets
(e) Dividends from shares.
(1 mark)
END OF QUESTION PAPER
Suggested Answers Financial Accounting - I (MSF1A1)
Answer Reason
1. A Balance sheet is a statement of what an organization owes and what it owns at any given point of
time.
2. A Matching concept states that in order to determine the profits or losses accrued in an accounting
period, the expenses must relate to the goods or services sold during the period.
3. E Revaluation reserve is not a revenue reserve because it is not created out of accumulated retained
earnings from the profits of normal business operations.
4. A The mistake in balancing an account affects the agreement of a trial balance (a) is the correct answer.
The other mistakes do not affect the agreement of trial balance. The omission to record a transaction entirely in the subsidiary books (b) will not affect the agreement of a trial balance because both the aspects of a transaction are omitted to be recorded. Recording of a wrong entry in the subsidiary books (c) will not cause disagreement of a trial balance because, the wrong entry so recorded has the effect of posting the transaction in the manner it is recorded. Recording a correct entry in wrong subsidiary book (d) has the effect of posting the transaction in the manner it is recorded and has no impact on the agreement of a trial balance. Posting an entry on the correct side in the wrong account
(e) does not affect the tallying of a trial balance because the aspect of the transaction is posted to the correct side of an account. Thus, (a) is the correct answer.
5. A Investors belong to financial group of external users of financial statements. The following are the
public group of external users of financial statements:
I. Academicians
II. Researchers
III. Analysts
IV. Customers
V. Government Agencies.
6. C Accounting equivalence concept is also known as duality concept.
7. C When salary is paid by cash there is reduction in cash and in asset. Salary being an expense reduces
the profitability affecting capital as also total liabilities of the firm.
8. E The theme of the difference or the inherent superiority of the US GAAP over the Indian accounting
standards needs to be evaluated on the following parameter(s).
Reporting versus disclosure.
Form versus substance.
Accounting versus analysis.
Globalization versus localization
9. C Accounting Standard 12 issued by the Accounting Standard Board is applicable to Government
grants.
10. D A cheque deposited, but not collected should be deducted when preparing a bank reconciliation
statement starting with a favorable balance of cash book or an overdraft of pass book. Hence, option
(d) is correct answer.
11. D Option (d) is the correct answer. The cheques deposited are dishonored but the dishonor not entered in
the cash book are to be added to the pass book bank balance to bring pass book bank balance equal to the cash book bank balance.
12. A Trade discount received is not recorded in the books of account but deducted in the Purchase book.
Therefore the journal entry is
Purchases a/c To Cash a/c
To Discount received a/c Hence (a) is the correct answer.
Rs.9,720
Dr.
Rs.9,700 Rs. 20
Particulars |
Rs. |
Rs. |
Petty cash book |
2,500 |
Postage |
425 | |
Wages |
682 | |
Office cleaning |
248 | |
Stationery |
435 | |
Conveyance |
391 | |
Balance as per cash book |
319 | |
Amount reimbursed |
2,181 2,500 |
Leave travel concession does not come under retirement benefit as stated by the Accounting Standard-
14.
15.
E
D
15.
Royalties suspense account in the book of the lessee represents the difference between the minimum rent and the actual royalties receivables from the sub-lessee. The shortworking account with the subtenant is like a mirror reflecting the minimum rent payable and the actual royalty. Therefore, option
(d) is false.
The balance in the shortworking account appears on the assets side of lessees balance-sheet.
In the books of the lessee the shortworking account shows debit balance. When the lessee transfers a part of the right acquired by him to a sub-lessee, the lessee vis-a-vis the sub-lessee assumes the position of lessor. In a sub-lease, royalties to the lessor will be paid on the basis of the combined output of both the primary lessee and the sub-lessee.
Refusal by the acceptor to make payment of the bill on due date is called dishonor. A bill sent for collection by bank when dishonored, the drawer will debit the drawees a/c and credit bills sent for collection a/c. At the time of renewal of bill interest a/c is debited in the book of the drawee as interest is paid by him. Accommodation bills are drawn, accepted and endorsed without any consideration for the sake of mutual accommodation. When a bill is endorsed, the drawer debits the endorsees a/c and credits the bills receivable a/c.
16.
D
Insolvent drawee opens deficiency account if his estate not sufficient to repay the debt.
17.
18.
B
D
The following are the characteristics of promissory notes:
1. It must be in writing.
2. It contains an unconditional promise to pay.
3. The maker must be a certain person.
4. It is not payable to the bearer.
5. The amount payable must be certain.
Therefore, option (d) is the correct answer.
Under trading method of maintenance of branch accounts, the excess of invoice price over the cost price of the goods sent to branch is credited to branch account and debited to goods sent to branch account. Under Stock and debtors method, the excess of invoice price over the cost price of the goods sent to branch is credited to branch adjustment account and debited to goods sent to branch account. In neither of the methods, it is taken to branch stock reserve account or branch stock account.
19.
B
First-In First-Out is the most suitable method of inventory valuation for perishable food products. This is because the first lot of products can go out first without spoilage.
20.
21.
A
D
Owners equity at the at the end of the year = Rs. 98,000 Add: Drawings during the year = Rs. 8,500
Rs.1,06,500 Rs. 15,000 Rs. 16,500
Less: Additional capital Net Profit
Rs. 75,000
Therefore Owners equity at the beginning of the year = Rs.75,000
The process whereby the company uses existing accounts receivable as collateral for a loan is known as pledging.
22.
23.
24.
25. 26.
B
B
C
A
C
Inventories are to be valued at lower of cost or net realizable value.
Cost of conversion is made of direct wages plus direct expenses plus production overhead The portion of the acquisition cost of the asset yet to be allocated is known as written down value. Minimum rent per annum = Rs.16,000/4 = Rs .4,000
Royalty based on sales = Rs.30,000 x 10% = Rs.3,000
Amount payable to landlord was Rs.4,000 (since minimum rent is more than royalty on the basis of sales).
Units-of-Production Method is used for oil and petroleum product manufacturing company.
27. A
28. C
In the books of Aayush Ltd.
Dr. Branch Stock a/c Cr.
Particulars |
Rs. |
Particulars |
Rs. |
To Balance b/d To Goods sent to Branch a/c |
12,00,000 36,00,000 |
By Bank a/c By Branch Debtors a/c By Goods sent to Branch a/c (returns) By Branch Adjustment a/c (Loading in shortage) By Branch Profit & Loss a/c(cost of shortage of stock) By Balance c/d |
12,60,000 24,00,000 1,80,000 40.000 80.000 8,40,000 |
48,00,000 |
48,00,000 |
Dr. Branch Adjustment account Cr. | ||||||||||
|
29. C In the books of Jagan Enterprises
Dr. Profit and loss account for the year ended March 31, 2008 Cr. | ||||||||||
|
Balance sheet of Jagan Enterprises as on March 31, 2008 | ||||||||||
|
30. B If royalties is less than minimum rent, the balance of royalty account at the end of the year has to be
transferred to Profit and Loss account.
31. A Purchases Day Book
Date |
Particulars |
Details (Rs.) |
Total (Rs.) |
December, 01 |
50 Black & White TV @ Rs.3,000 each 10 Colour TV @ Rs.6,000 each Less: Trade discount @ 10% |
1,50,000 60,000 |
1,89,000 |
2,10,000 21,000 | |||
December, 09 |
10 pieces of Taperecorder @ Rs.1,000 |
10,000 |
each 10 pieces of Two-in-one @ Rs.1,500 each |
15,000 | ||
Less: Trade discount @ 10% |
25,000 2,500 |
22,500 | |
December, 19 |
100 pieces of Audio Casettes @ Rs.30 each Less: Trade discount @ 5% |
3,000 150 |
2,850 |
2,14,350 |
The purchase of stationery is not a part of purchase of goods and it is to be debited to stationery account.
The amount of cash discount allowed by the creditors / suppliers is an income. Discount received on account of prompt payment and the purchases will be recorded at the cost of purchases.
Option (a) cannot be the answer because if the whole transaction is omitted to be entered in the books of accounts then it is error of omission. Option (b) cannot be the answer because error of principle means wrong classification of revenue items as capital items and vice-versa, the total effect will be the same and hence the trial balance will tally. Option (c) cannot be the answer as the dual aspects of the transaction is recorded without any omission but with wrong amounts. Option (d) cannot be the answer because it is not a compensating error. Option (e) is the correct answer because wrong amount is debited in the correct account (furniture account). Therefore it is wrong calculation of balances in ledger account and it is called error of commission.
32. E
Under the straight line method of depreciation, the rate of depreciation is fixed and the amount of depreciation is also same. Hence, (b) is correct answer.
33. B
34. C
35. E
36. A
37. C
Any item appearing in the trial balance will have one effect i.e., outstanding expenses appearing in the trial balance will be shown as current liability in the balance sheet. It cannot be debited to the Profit and Loss account. It cannot be debited to Profit and Loss Appropriation account. Hence, option (c) is correct answer.
Installation charges of machinery is an example of capital expenditure as it is the cost incurred for increasing the earning capacity of a business. Other expenditures stated in (a), (b), (c) and (d) are examples of revenue expenditure.
In the event of fire, if the claim admitted is less than the amount of stock destroyed then the difference should be shown in the debit side of the Profit and Loss account.
In the books of Seesam Manufactures Ltd.
Dr._Machinery account_Q\ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Calculation of profit or loss on sale of machinery | ||||||||
|
Note:2 Calculation of depreciation for the year 2007-08 under straight line method:
Working notes: Note: 1
Dep. on the machinery purchased on April 01, 2004 = Rs.9,00,000 x 10% = Rs. 90,000 Dep. on the machinery purchased on April 01, 2005 = Rs. 70,000 x 10% = Rs. 7,000 Dep. on the machinery purchased on Oct. 01, 2007 = Rs.86,700 x 10% x 6/12 = Rs. 4,335
Rs.1,01,335
38. C Income tax provision relating to previous year is charged to debit side of the current year Profit and
Loss Appropriation account.
39. C Depreciation of foreign branches of the parent enterprise should be translated using the rate at which
the fixed asset has been converted. The closing rate is used for conversion of current assets and liabilities. Average rate will be used to convert revenue items. Weighted average rate is used for revenue items in some special situations like when the income is not evenly accrued through out the accounting period. If current assets are acquired and held abroad and are covered by forward exchange contract, the assets should be converted at the forward rate mentioned in the contract. Hence the answer is (c).
Particulars |
Rs. |
Total of debit column of trial balance Add: Carriage outwards Less: Returns outward (wrongly taken) Less: Interest on investment (wrongly taken) Total of trial balance (debit column) |
90.600 2,000 92.600 7,500 4,300 80,800 |
Particulars |
Rs. |
Total of credit columnof trial balance Add: Interest on investments Add: Returns outward Less: Carriage outwards (wrongly taken) Total of trial balance (credit column) |
69,800 4.500 7.500 |
81,800 1,000 | |
80,800 |
41. A Total assets = Owners equity + Outside liabilities
Fixed assets + current assets = Capital + Reserves + Outside liabilities Rs.9,20,000 + Rs.8,61,000 = Rs.15,00,000 + Rs.50,000 + Outside liabilities Rs.17,81,000 = Rs.15,00,000 + Rs.50,000 + Outside liabilities Outside liabilities = Rs.17,81,000 - Rs.15,50,000 = Rs.2,31,000 Sundry creditors = Rs.2,31,000 f 4 = Rs.57,750.
42. B Bank Reconciliation Statement as on December 31, 2008
Particulars |
Rs. |
Rs. |
Overdraft as per Pass book |
28,750 | |
Add: | ||
Rent deposited by Mr. Srinivas directly into the |
2,300 |
bank |
2,300 | |
31,050 | ||
Less: | ||
Cheque received from Mr. Raghu entered in cash | ||
book, but not sent for collection up to the date of |
1,500 |
1,500 |
BRS | ||
Overdraft as per cash book |
29,550 |
43. A Original cost = Rs.30,000
Rate of depreciation as per written down method = 25%
Year |
Dep as per WDV method (Rs.) |
1 |
7,500 (30,000 x 25/100) |
2 |
5,625 (22,500 x 25/100) |
3 |
4,219 (16,875 x 25/100) |
Total |
17,344 |
44. A Under FIFO method, the closing inventory consists of the latest stock thus,
Stores ledger in the books of Godrej Ltd. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Date |
Purchases |
Issues |
Balance | ||||||
Quantity Units |
Rate Rs. |
Rs. |
Quantity Units |
Rate Rs. |
Rs. |
Quantity Units |
Rate Rs. |
Rs. | |
02 12 08 |
12 |
6,600 |
79,200 |
12 |
6,600 |
79,200 | |||
06 12 08 |
18 |
7,400 |
1,33,200 |
30 |
7,080 |
2,12,400 | |||
12 12 08 |
9 |
7,080 |
63,720 |
21 |
7,080 |
1,48,680 | |||
31 12 08 |
16 |
7,080 |
1,13,280 |
5 |
7,080 |
35,400 | |||
Therefore, the difference in First-in First-out method and Weighted average method is Rs.37,000 - Rs.35,400 = Rs.1,600.
45. B If goods are returned by a customer to branch, the entry to be passed in the books of Head Office is
Branch stock a/c Dr.
To Branch Debtors a/c
Date |
Particulars |
Dis. |
Cash |
Bank |
Date |
Particulars |
Dis. |
Cash |
Bank |
2008 |
Rs. |
Rs. |
Rs. |
2008 |
Rs. |
Rs. |
Rs. | ||
Dec. 1 |
To Balance b/d |
50,000 |
7,00,000 |
Dec 5 |
By Creditor a/c |
10,000 |
2,00,000 | ||
5 |
To Debtor a/c |
2,500 |
1,00,000 |
12 |
By Salaries A/c |
40,000 | |||
13 |
To Daulat Ram A/c |
300 |
29,700 |
14 |
By Bharani a/c |
500 |
52,500 | ||
30 |
By Rama &Bros |
2,500 |
72,500 | ||||||
31 |
By Balance c/d |
10,000 |
5,04,700 | ||||||
2,800 |
50,000 |
8,29,700 |
13,000 |
50,000 |
8,29,700 | ||||
Jan 1, 2009 |
To balance b/d |
10,000 |
5,04,700 |
47. C Dr. Sundry Debtors Account Cr. | ||||||||||||||
|
48. A Raghav Enterprises
Calculation of loss on sale of Machinery sold
Rs. | ||||||||||||||||||
|
49. C Dr. Provision for bad and doubtful debts Cr.
Particulars |
Rs. |
Particulars |
Rs. |
To Bad debts (Sinha) |
3,800 |
By balance b/d |
5,600 |
To Provision c/d |
10,500 |
By Profit and Loss account |
8,700 |
14,300 |
14,300 |
Computation of suitable provision for the year ending March 31,2008 | ||||||||||
|
Rs.9,000 x 10 x 3 Discount on bill drawn by Anil 100 x 12 = Rs.225
Rs.6,000 x 10 x 3 Discount on bill drawn by Bhowmic 100 x 12 = Rs.150
Total discount paid = Rs.225 + Rs.150 = Rs.375 Anils share is Rs.375 x 2/3 = Rs.250.
51. A The amount of shortworkings lapsed during the year 2007-08 amounts to Rs.25,000. Analysis of royalty payable (Royalty @ Rs.20 per ton)
Year |
Output (tons) |
Actual royalty (Rs.) |
Min rent (Rs.) |
Short workings (Rs.) |
up .) o =2 ScR e( r |
Payment (Rs.) |
S w lapsed (Rs.) |
s. S( /f c/ |
2005 06 2006 07 2007 08 |
20,000 25.000 32.000 |
4.00.000 5.00.000 6,40,000 |
5.00.000 5.00.000 5.00.000 |
1,00,000 |
75,000 |
5.00.000 5.00.000 5,65,000 |
25,000 |
1,00,000 1,00,000 Nil |
52. A Head office will debit branch stock account and credit goods sent to branch account.
53. E In the books of the Head Office (Jaipur)
Delhi Branch Account
Date |
Particulars |
Rs. |
Date |
Particulars |
Rs. |
01.4.07 |
To Balance b/d |
31.3.08 |
By Bank A/c | ||
Stock |
24,000 |
31.3.08 |
Cash sales |
17,500 | |
Debtors |
6,600 |
31.3.08 |
Cash from Debtors |
*38,440 | |
31.3.08 |
To Bank A/c |
10,400 |
31.3.08 |
By Balance c/d | |
31.3.08 |
(expenses) To Goods Sent to Branch A/c |
33,600 |
31.3.08 |
Stock |
18,000 |
31.3.08 |
To General Profit & Loss A/c |
8,500 |
31.3.08 |
Debtors |
9,160 |
83,100 |
83,100 |
Delhi Branch Debtors Account | ||||||||||||||||||||||||
|
Particulars |
Rs. |
Rs. |
Rent received during the year Add: Outstanding rent on March 31, 2008 Rent received in advance on April 01, 2007 Less: Outstanding rent on April 01, 2007 Rent received in advance on March 31, 2008 Rental income for the year ended March 31, 2008 |
7,400 4,200 |
95,000 11,600 |
8,300 3,000 |
1,06,600 11,300 | |
95,300 |
Particulars |
Profit increased |
Profit decreased |
Rs. |
Rs. | |
Selling expenses overstated (Profit understated) Discount received overstated (Profit overstated) |
7,790 |
14,800 |
Interest on investment understated(Profit |
2,320 |
understated) | ||
7,790 |
17,120 | |
Net profit understated/decreased |
9,330 |
56. B Dr. Trading account Cr. | ||||||||||||||||||||||||
|
57. E A Trial balance is a summary of all real, personal and nominal accounts as on a particular date. All the
debit balances from the ledger are shown on one side and all the credit balances are shown on the other side. A trial balance is prepared before final accounts are prepared.
58. A The undercasting of returns inward book is rectified by debiting returns inward account with Rs.2,754
and the wrong debit to the suppliers account is to be rectified by crediting the account with Rs.2,504 + Rs.250 = Rs.2,754. Thus, the wrong casting in one transaction is compensated by wrong posting of wrong amount to the wrong side. It has no effect on the agreement of trial balance. Payment of wages to the debit of wrong account is an error of principle and it does not affect the trial balance. The complete omission of sales returns will not affect the trial balance totals. Thus, the difference in trial balance is nil despite the errors
59. C The phrase markon means the difference between the cost and the original selling price plus any net
markups.
60. C Purchase A/c debited for furniture purchased is an error of principle and does not affect trial balance.
For salary paid Bansals A/c is also debited. This is an excess debit of Rs.3,000. For goods purchased D.Guptas A/c should have been credited by Rs.7,350 instead of debiting their A/c. The difference in trial balance due to the above error is double the amount i.e, 7,350 x 2 = 14,700. For cash discount allowed by Roy & Co., their A/c should have been debited instead of crediting giving rise to a difference of Rs.200 in the trial balance. So the Suspense A/c balance will be Excess debit - 3,000+ 14,700 = 17,700 Excess credit Rs.200. The net difference is Rs.17,700 less 200 = Rs.17,500.
62. A
Computation of Inventory | |||||||||||||||||||||
|
Analysis of Sales Revenue and Royalties | ||||||||||||||
|
Analysis of Royalties Payable | ||||||||||||||||||
|
63. A Trading account and Profit and loss account for the year ended March 31, 2008.
Particulars |
Rs. |
Particulars |
Rs. |
To Opening stock To Purchases 45,000 Less: Returns outward 1,500 |
4,000 43,500 370 7,130 |
By Sales 55,000 Less: Returns 2,000 inward |
53,000 2000 |
By Closing stock By Gross profit | |||
To Carriage inward To Gross profit To Salaries and wages To Printing and stationery To Rent To Carriage outward To Managers commission To Net Profit | |||
55,000 |
55,000 | ||
2,200 300 1,200 250 180 3,000 |
7,130 | ||
55,000 |
55,000 |
Profit before charging Managers commission = Rs.3,180 Managers Commission = (Rs.3,180/106) x 6 = Rs.180.
64. A Balance Sheet of Vaibhav Ltd as on March 31, 2008
Liabilities |
Rs. |
Assets |
Rs. | |
Share Capital |
57,690 |
Land & building |
43,600 | |
Profit and loss account |
13,373 |
Office equipment |
19,970 | |
12% Bank Loan 15,000 |
Less: Depreciation |
1,997 |
17,973 | |
Add: Outstanding interest 1,500 |
16,500 |
Furniture |
20,000 | |
Sundry creditors 5,000 |
Less: Depreciation |
3,000 |
17,000 | |
Less: |
Closing stock |
3,800 | ||
Debtors set off 800 |
Sundry debtors |
5,500 | ||
Provision for discount on |
Less: Provision for discount |
78 | ||
creditors |
on debtors | |||
72 |
4,128 | |||
Creditors setoff |
800 |
4,622 | ||
Bills payable |
1,000 |
Bills receivable |
900 | |
Cash at bank |
2,350 | |||
Petty cash |
21 | |||
Accrued commission |
1,300 | |||
Prepaid printing |
185 | |||
Cash on hand |
940 | |||
92,691 |
92,691 |
65. C Balance Sheet of Run Ltd., as on March 31, 2008 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
66. A Working Notes:
i. Cash sales & Credit sales
\ Particulars \ Rs.
Total sales |
5,60,000 |
Less : Cash sales (20% of Rs.5,60,000) |
1,12,000 |
Credit sales (80%) |
4,48,000 |
Dr. Memorandum Branch Debtors Account Cr. | ||||||||||
| ||||||||||
The amount collected from debtors to be shown in branch account is Rs.4,60,000 |
67. C Original cost of furniture 10,000 Less depreciation @20%
Year |
Cost |
Depreciation |
WDV |
1 |
10,000 |
2,000 |
8,000 |
2 |
8,000 |
1,600 |
6,400 |
3 |
6,400 |
1,280 |
5,120 |
4 |
5,120 |
1,024 |
4,096 |
5 |
4,096 |
819.20 |
3276.80 |
Dr. |
Branch Cash A/c |
Cr. | |
Particulars |
Rs. |
Particulars |
Rs. |
To Opening balance |
4,000 |
By Remitted to HO |
9,000 |
To Cash collected |
5,400 | ||
from debtors | |||
To Cash sales (Balancing figure) |
1,000 |
By Closing balance |
1,400 |
10,400 |
10,400 |
Dr. Branch Stock A/c Cr. | ||||||||||||
|
Invoice Price = Rs.3,800
33-%
Margin on cost price = 3 i.e., 25% on sales.
3
Cost price of the goods lost in transit= Rs.3,800 x 4 = Rs.2,850.
69. A _
Period |
Sales (Rs.) |
April 01, 2007 to August 31, 2007 (Rs.2,30,000 -Rs.45,000) September 01, 2007 to February 28, 2008 March 01, 2008 to March 31, 2008 Total sales for 2007-08 Royalty (Rs.5,65,000 x 25%) for the year 2007-08 |
1.85.000 2.90.000 90,000 5.65.000 1,41,250 |
Particulars |
Rs. |
Profit as per P & L a/c |
6,50,000 |
(-) Outstanding building rent |
3,000 |
6,47,000 |
(-) Overcast of sales book |
20,000 |
6,27,000 | |
(+) Repairs for machinery (wrongly debited) |
2,000 |
Profit after rectification entries |
6,29,000 |
71. A Trial Balance of M/s Agarwal & Sons as on March 31, 2008
Dr.
Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
72. E Books of Nirvesh Ltd.
Dr. Stock Account Cr.
Date |
Particulars |
Rs. |
Date |
Particulars |
Rs. |
Dec 01, 08 |
To Opening balance To Purchases |
1.40.000 3.60.000 |
December 01, 08 |
By Cost of goods sold (bal. Fig) By Closing balance |
4,30,000 70,000 |
5,00,000 |
5,00,000 |
Sales = Rs.4,30,000 + 25% (Rs.4,30,000) = Rs.5,37,500
Purchases = Accounts payable closing balance 50,000 + Payment to creditors 3,50,000 - opening balance of accounts payable 40,000 = Rs.3,60,000
73. D Bank Reconciliation Statement as on December 31,2008
Particulars |
Rs. |
Rs. |
Bank overdraft per the cash book Add : Cheque for Rs.25,000 deposited but collection as per bank statement Rs.24,980 i.e. bank charges Cheque dishonored as per the bank statement Bill for Rs.40,000 discounted for Rs.35,480 dishonored by the bank, noting charges being Rs.75 Less: Cheque deposited but not recorded in the cash book Bills collected directly by the bank Bank charges recorded twice in the cash book Receipt side was undercast in cash book Bank overdraft as per the pass book (Dr.) |
20 2,650 40,075 |
81,000 42,745 |
3,500 17,500 125 500 |
1,23,745 21,625 | |
1,02,120 |
74. B Income earned as royalties is not a non-operating surplus. It is a operating revenue. Remaining all other are non-operating surplus. Hence option (b) is correct answer.
Attachment: |
Earning: Approval pending. |