Institute of Chartered Financial Analysts of India (ICFAI) University 2007 Certification Finance Financial Accounting – I (111) : - Question Paper

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54.
ans : (d)
cause : A trial balance is a summary of all the ledger balances of real accounts, personal accounts and nominal accounts outstanding on a particular date.
The other options are not accurate because
(a) Preparation of trial balance has no importance from the view point of legal regulations. There is no provision as to its preparation in the Companies Act.
(b) The statement of assets and liabilities of a company is its balance sheet and not the trial balance.
(c) Profit and loss account reveals the profit or loss of a company and not the trial balance
(e) Trial balance is not a real account. Real account indicates the worth of assets. Thus, the options a, b, c and e are false.
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55.
ans : (c)
cause : The interest accrued on debentures as on 31, March is
= Rs.80,000 × 12% ×512= Rs.4,000.
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56.
ans : (a)
cause : Debtors as on March 31, 2006 Rs. 3,00,000
Rs.
Rs.
Less debtors on sold asset
5,000
Discount allowed omitted
300
5,300
2,94,700
Add wrong entry(3,100–1,300)
1,800
2,96,500
Provision for bad &doubtful debt needed 296500 × 2/100 =
5,930
Less opening balance
1,000
4,930
Less bad debt recovered
500
4,430
Add bad debts written off
2,000
Debit P&L A/c on account of provision for BDD
6,430
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57.
ans : (b)
cause : Trading and profit & loss account of Mythili Ltd. for the year ended March 31, 2006
Dr. Cr.
Particulars
Rs.
Rs.
Particulars
Rs.
Rs.
To Opening stock
48,000
By Sales
16,15,000
To Purchases 6,72,000
Less : Returns
22,00015,93,000
Less : Returns
49,000
6,23,000
By Loss of stock due to fire
6,000
By Advertisement (free samples)
5,000
To Gross profit c/f
9,83,000
By Closing stock
50,000
16,54,000
16,54,000
To Bad debts
19,000
By Gross Profit
9,83,000
To Salaries and wages
5,10,000
By Interest on investments
16,000
To Interest on bank overdraft
30,000
(Accrued Income @ 8% on Rs.2,00,000)
Add : Outstanding
9,000
39,000
By Discount received
21,000
To Advertisement
1,20,000
Add : Free samples
5,000
1,25,000
To Fire insurance premium
18,000
Less : Prepaid
1,500 16,500
To Discount allowed
12,000
To General expenses
54,000
To Outstanding interest on debentures
33,600
To Depreciation
Plant & machinery (20%)
1,34,400
Furniture & fixtures (12%)
34,200
To Loss of stock (Rs.6,000–Rs.5,000)
1,000
To Provision for discount on debtors
9,000
To Net profit
32,300
10,20,000
10,20,000
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58.
ans : (b)
cause : Cost of goods sold = Opening stock + Purchases – Closing stock
= Rs.16,000 + Rs.12,000 – Rs.2,000 = Rs.26,000. (b) is the accurate ans.
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59.
ans : (c)
cause :
Balance Sheet of Nilgiri Ltd as on March 31, 2006.
Liabilities
Rs.
Assets
Rs.
Share Capital
5,76,900
Land & building
4,36,000
Profit and loss account
1,33,731
Office equipment
1,99,700
12% Bank Loan 1,50,000
Less : Depreciation
19,970
1,79,730
Add : Outstanding interest
15,000
1,65,000
Furniture
2,00,000
Sundry creditors 50,000
Less : Depreciation
30,000
1,70,000
Less :
Closing stock
38,000
Debtors set off 8,000
Sundry debtors
55,000
Provision for discount on creditors 720
41,280
Less : Provision for discount on debtors
779
Creditors setoff
8,000
46,221
Bills payable
10,000
Bills receivable
9,000
Cash at bank
23,500
Petty cash
210
Accrued commission
13,000
Prepaid printing
1,850
Cash on hand
9,400
9,26,911
9,26,911
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60.
ans : (b)
cause : Income received in advance is a liability and shown on the liability side. All other statements viz, prepaid expenses shown on asset side, income earned but not received shown on asset side, income accrued but not due shown on asset side and outstanding liabilities for expenses shown on liability side are actual.
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61.
ans : (b)
cause : The goods are sent to the branch at 120% of cost price. Therefore, the value of goods sent is Rs.8,00,000x120%
= Rs.9,60,000 the loading on goods sent is Rs.1,60,000.
Goods spoiled Rs.4,800
Shortage of stock Rs.10,200 i.e. Goods sent plus goods returned (Rs.9,60,000 + Rs.15,000 = Rs.9,75,000) less
Sales plus spoiled stock plus closing stock Rs.2,50,000 + Rs.6,50,000 + Rs.4,800 + Rs.60,000 = 9,64,800) = Rs.10,200.
Branch Profit and Loss account for the period ended December 31, 2006
Particulars
Rs.
Particulars
Rs.
To Branch expenses –salary, rent and office expenses
90,000
By Stock adjustment account Loading on goods sent to branch
1,60,000
To Spoilage of goods
4,800
To Shortage of stock
10,200
To Stock reserve (loading on closing stock)Rs.60,000x20/120
10,000
To Branch debtors - discount
22,000
To Profit transferred to general profit and loss account
23,000
1,60,000
1,60,000
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62.
ans : (b)
cause : In the Books of head office, journal entry is
Branch stock a/c – Dr.
To Branch Debtors a/c
Other entries said in (a), (c), (d) and (e) are not actual.
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63.
ans : (c)
cause : Since salary bill of Nagpur Br. is paid Nagpur Br.A/c is to be debited and cash is going out, Cash A/c is to be credited.
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64.
ans : (a)
cause : The shortage of stock at invoice price Rs.4,000
At cost is Rs. 4,000 –(4,000 x 25%)=Rs.4,000-Rs.1,000= Rs.3,000.
In the Books of Head office at Chennai
Fair Pal Company
Debtors Account
Particulars
Rs.
Particulars
Rs.
To Balance b/d
60,000
By Cash
5,40,000
To Cheques dishonoured
10,000
By Branch stock
12,000
To Sales
5,60,000
By Bad debtors
3,000
By Discount
2,000
By Balance c/d
73,000
6,30,000
6,30,000
Dr. Branch Stock Account Cr.
Particulars
Rs.
Particulars
Rs.
To Balance b/d
48,000
By Cash- cash sales
3,60,000
To Goods sent to Branch account
9,60,000
By Branch Debtors-
Credit sales
5,60,000
To Branch Debtors a/c
- Returns by customers
12,000
By Branch Profit and Loss a/c
- Cost of shortage
(Balancing figure)
4,000
By Balance c/d
96,000
10,20,000
10,20,000
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65.
ans : (c)
cause : The balance in goods sent to branch account should be transferred to the credit of trading account in case of manufacturing concerns and purchases account in case of trading concerns. Hence (a), (b), (d) and (e) are not accurate.
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66.
ans : (a)
cause : In periods of inflation, if the method of evaluation of inventories is changed from LIFO to FIFO, the goods purchased earlier at lower rates will be included in cost of goods sold and hence the cost of goods sold will be shown at lower value. The goods in stock will represent the goods purchased recently at higher prices, showing higher closing stock and hence the profit will be increased.
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67.
ans : (e)
cause : Decision making requires critical analysis and careful interpretation of the published financial statements. The common tools used by the management to facilitate analysis are Ratio Analysis, Fund Flow Statement, Cash Flow Statement. Comparative Statement and Common Size Statement. Hence choice (e) is the right ans.
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68.
ans : (b)
cause : Cash received from debtors is not a revenue because revenue is recognized at the stage of sale of goods itself irrespective of whether cash sale or credit sale. All others are revenue items. Hence choice (b) is the right one.
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69.
ans : (e)
cause : Accounting policies in respect of method of depreciation, depletion and amortization conversion or translation of foreign currency, evaluation of inventories, treatment of retirement benefits and treatment of contingent liabilities require disclosure and hence choice (e) is the accurate ans
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70.
ans : (d)
cause : Machinery Account
Date
Particulars
Amount
Date
Particulars
Amount
April 1, 2003
April 1, 2003
April 1, 2003
April 1, 2004
October 1, 2004
April 1, 2005
October 1, 2005
April 1,2006
To Bank a/c
To Bank a/c (repairs)
To Bank a/c (installation)
To balance b/f
To bank a/c
To balance b/f
To profit and loss a/c
Profit on sale of machinery (5,00,000 – 4,00,000)
To balance b/f
5,00,000
60,000
40,000
6,00,000
4,80,000
2,00,000
6,80,000
5,40,000
3,50,000
1,00,000
9,90,000
4,55,000
March 31, 2004
March 31, 2004
March 31, 2005
March 31, 2005
October 1, 2005
March 31, 2006
March 31, 2006
March 31, 2006
By depreciation
By balance c/d
By depreciation
By balance c/d
By bank
By depreciation (old asset)
By depreciation (40,000 + 35,000)
By balance c/d
1,20,000
4,80,000
6,00,000
1,40,000
5,40,000
6,80,000
4,00,000
60,000
75,000
4,55,000
9,90,000
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71.
ans : (d)
cause : Shortworkings recouped =actual royalty – minimum rent = (Rs.40000×Rs.5) – Rs.1,70,000 = Rs.30,000
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72.
ans : (b)
cause : 1st fault involves the sales was overcast i.e. excess credit provided hence we need to debit the sales account, since final accounts have been prepared, we need to debit the P& L adjustment account. Secondly, instead of debiting Bedi with Rs.456, he was wrongly debited with Rs.615 resulting in excess debit which should be reversed with the difference i.e, with Rs.159. As sales account instead of crediting it with Rs.456 was wrongly credited with Rs.645, i.e, excess credit of Rs.189 was given, hence rectification requires sales account to be debited totally with Rs.4,100 + Rs.189 = Rs.4,289. Since the final accounts have been prepared, the debit should be provided to P& L adjustment account.
Rs.
Rs.
Profit and Loss Adjustment account Dr.
To Bedi’s account
To Suspense account
4,289
159
4,130
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73.
ans : (d)
cause : Net Profit of Periyar Chemicals Ltd. for the year ending March 31, 2006
Dr.
Rs.
Cr.
Particulars Rs.
Particulars
To Purchases 1,42,500
By Sales 3,00,000
Add: Omitted to be recorded
16,000
1,58,500
To reduce in inventory
81,000
To Gross Profit
60,500
3,00,000
3,00,000
To Sales Commission 6,000
By Gross Profit
60,500
Add: Accrued 3,0009,000
By Rent received 30,000
To Depreciation
22,500
Less: received in advance
5,000
25,000
To Net Profit
54,000
85,500
85,500
The net profit is rs.54,000.
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74.
ans : (d)
cause : According to the basic accounting equation, assets = liabilities + owners equity.
Hence owners equity = assets – liabilities.
Capital = Rs.2,55,000 + Rs.1,75,000 + Rs.90,000 + Rs.85,000 – (Rs.1,25,000 + Rs.35,000)
= Rs.6,05,000 – Rs.1,60,000 = Rs.4,45,000
Profit for the year 2002-2003 = Capital as on March 31, 2003 – Capital as on April 01, 2002
= Rs.4,45,000 – Rs.3,50,000 = Rs.95,000.

Earning:   Approval pending.