Institute of Chartered Financial Analysts of India (ICFAI) University 2007 Certification Finance Financial Accounting (CFA510):2009 - Question Paper

not matching with the related sale; (II) Accounts receivables are overstated in the year of sales as
the accounts receivables are not reported at net realizable value; (III) Revenue is overstated in the
year of sales as a outcome of not making any provision for possible loss on account of non-recoverable
accounts (IV) It violates the matching principle of accounting as the expenses of bad debts is not
matched for the identical period of income..
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40. C Under delivery method the revenue is recognized when the goods are delivered or services are
truly given.
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ans cause
41. A Dividend cannot be paid out of capital.
Dividend is payable only on paid-up capital. It is not payable on calls-in-advance amount. Dividend
declared should be regarded as current liability. Interim dividend can be declared by the directors
without any approval of shareholders.
Hence, choice (a) is accurate ans.
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42. A
Bad debts Rs.54,000
Add: Closing provision (4% on Rs.7,95,000) Rs.31,800
Rs.85,800
Less: Opening provision Rs.60,000
Amount to be debited to profit & loss account Rs. 25,800
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43. C
Dr. Sundry Debtors Account Cr.
Date Particulars Rs. Date Particulars Rs.
April 01, 2007 To Opening balance
(32,000/8%) 4,00,000
2007-08 By Cash 60,50,000
2007-08 To Credit sales
(Balance figure) 62,00,000
March 31, 2008 By Closing balance
(44,000/8%) 5,50,000
66,00,000 66,00,000
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44. D In case of sale on installment basis, revenue is recognized to the extent of true amount of
installment received.
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45. D
Particulars Rs.
Opening balance of sundry debtors 70,500
Add: Credit sales 10,12,500
10,83,000
Less: Closing balance of Sundry debtors 1,05,000
Cash collected from debtors 9,78,000
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46. A Straight line depreciation per annum = Rs. 5,25,000 × 5% = Rs.26,250
The number of years for which depreciation has been charged on this basis
=
Rs.5,25,000 Rs.4,46,250
= three years
Rs.26,250
?
If depreciation at the rate of 8% was charged by the reducing balance method, the values (WDVs)
would be
Particulars Rs
WDV at the end of the first year (Rs.5,25,000 × 92%) 4,83,000
WDV at the end of the second year (Rs.4,83,000 × 92%) 4,44,360
WDV at the end of the third year (Rs.4,44,360 × 92%) 4,08,811

Earning:   Approval pending.