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SIDDHARTH EDUCATION SERVICES LTD.

®
For CS, CA, ICWA [Foundation, Inter, Final]
Prestige Chambers, Opp. Thane Railway Stn. P.F.2, Thane (W):2533 4903.
VaibhavSoc., 1st Floor, Opp. Municipal Garden, Dombivli (E) Tel:2443455.
Ist floor, Popatlal Bldg, Ranade Road, Dadar (W) – 65540023.
Also at vashi
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ICWA ACCOUNTS PAPER 1

Question 1 is compulsory answer any 5 from the rest

Attempt all questions

Q1(A) Fill in the blanks (1 mark each)

1. Fundamental accounting assumptions are __________ ________ __________.


2. Branch profit is calculated by preparing branch account is in case of __________ method.
3. In case of hire purchase instalment, once goods are repossessed amount paid by the
purchaser will be accounted as ___________.
4. __________ means setting off excess royalty with shortworking.

Q1(B) Answer the following: (2 marks each)

1. State briefly Garner v/s Murray rule.


2. Distinguish between liability and provision.
3. State briefly EPS
4. State briefly stock turnover ratio
5. State briefly price earning ratio

Q1(C) Match the column: (1 mark each)

Column A Column B
Redemption of Preference shares AS 17
Redemption of Debentures AS 9
Earnings per share AS 20
Revenue recognition AS 19
Segment reporting AS 7
Contract costing Section 80
Section 121
Section 77

Q2(A) From the following information

1. Convert branch trial balance into rupees; (use Opening rate 1$ = Rs.20, closing rate 1$ = Rs.
24, average rate 1$ = Rs. 22 and for fixed assets 1$ = Rs. 18 (4 marks)
2. Prepare final accounts of X ltd as on 31st March 2002. X ltd has head office in india and
branch at usa. (6 marks)

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Particulars Head office Branch
Rs. in thousands $ in thousands
Share capital 4000
Reserves and surplus 2000
Land 1000
Building (cost) 2000
Reserve for depreciation of building 400
Plant and machinery (cost) 5000 400
Reserve for dep of Plant 1200 260
Debtors 560 120
Creditors 400 60
Stock as on 1.4.01 200 40
Branch stock reserve 8
Cash and bank balance 20 20
Purchases 480 40
Sales 1040 246
Goods sent to branch 200 10
MD’s salary 60
Salaries and wages 150 90
Rent 24
Office expenses 50 36
Commission receipts 512 200
Branch/ H O current a/c 240 14

Additional information:

1. Stock as on 31.3.02 HO- Rs. 3,00,000 and Branch- $ 6,250.


2. Head office always sent goods to branch at cost plus 25%.
3. RDD to be made 5%.
4. Depreciation is to be charged on WDV basis 10% on buildings and 20% on plant and
machinery.
5. MD is entitled to 2% commission on net profits.
6. Income tax provision to be made 47.5%

Q2(B) Explain redemption of debentures by sinking fund method. (6 marks)

Q3(A) Explain redemption of preference shares ( 4 marks)

Q3(B) From the following information relating to C bank limited, prepare profit and loss account and
balance sheet for the year ended 31.3.02 (12 marks)

Shares of Rs.100 each 2,00,000 Cash in hand 22,650


Statutory reserve (fully invested in 5% 1,20,000 Investment in shares (mkt value 92,500
govt. Sec at par) Rs.2,00,000)
Bad debts 12,875 Cash with banks in india 2,84,500
Establishment expenses 1,27,725 Interest received 12,86,400
Current deposits 13,65,227 Term loans in india 10,00,000
Interest paid 7,48,490 Cash credit hypothecation india 12,56,000
Savings accounts 17,20,000 Cash credit pledge in india 9,44,000
Acceptances for customers 47,500 Bills purchased 16,00,000

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Discount 4,95,000 Loans to employees 40,770
Profit and loss account (1.4.01) credit 8,20,400 Salaries allowances 4,45,467
Fixed deposits 8,75,000 Dividend paid for 00-01 20,000
Commission and exchange 2,92,900 Dividend received 8,000
Premises 4,80,000
Additional information:

1. The chief executive of the bank drew a remuneration of Rs. 48,000 which is included in
salaries and allowances.
2. Unexpired discount as on 31.3.02 Rs. 40,000.
3. Establishment expenses includes Advertisement 10000, Stationery 63000, Rent 18000,
Lighting 3000, Audit fees 8000, Postage and telegram 4600, Revenue stamps 400, Stamp
paper 1500
4. Provide for taxation at 40% and surcharge at 5% thereon.
5. Current account includes 500000 debit balance being overdraft.
6. Advances made have been classified as under:
Particulars Term loan Cash credit(H) Cash credit (P)
Standard assets 999960 1255950 943900
Sub standard assets 6 4 40
Doubtful upto 1 year 2 3 5
Doubtful 1 to 3 years 20 20 20
Doubtful more than 3 years 10 20 30
Loss assets 2 3 5
Total 1000000 1256000 944000
No provision has been made so far against these assets. Doubtful assets are secured to the
extent of 50% of the dues.

Q4(A) Following is balance sheet of SLTD as on 31.3.07

Liabilities Amount Assets Amount


Authorised capital Fixed assets
20,000 10% preference shares of 10 each 2,00,000 Cost 6,00,000
1,80,000 equity shares of 10 each 18,00,000 Provision for depreciation 2,00,000
20,00,000 4,00,000
Issued capital Investments 2,00,000
20,000 10% preference shares of 10 each 2,00,000 Current assets
20,000 equity shares of 10 each 2,00,000 Stock 50,000
Reserves and surplus Debtors 50,000
General reserve 2,40,000 Cash and bank balance 1,00,000
Securities premium 1,40,000 Miscellaneous expenditure 40,000
Profit n loss account 37,000
Current liabilities and provisions 23,000
Total 8,40,000 Total 8,40,000
For the year ended 31.3.08, the company made net profit of 30,000 after providing for 40,000
depreciation and writing of miscellaneous expenditure of 20,000. The preference dividend for the
year ended 31.3.08 was paid before 31.3.08. Except cash and bank balance other current assets and
current liabilities on 31.3.08 were same as on 31.3.07. The company redeemed preference shares at
a premium of 10%. The company issued bonus shares in ratio 1 share for every 2 equity shares held

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as on 31.3.08. To meet cash requirements of redemption the company sold a portion of the
investments, so as to leave a minimum balance of 60,000 after such redemption. Investments were
sold at 90% of cost as on 31.3.08.

Prepare (i) Necessary journal entries (ii) Cash and bank account and (iii) Balance sheet as on 31.3.08.
(12 marks)

Q4(B) Write short note an AS 7. (4 marks)

Q5(A) From the following information prepare balance sheet: (10 marks)

Current ratio 2.8 Long term loans to current liabilities 1.8


Liquid ratio 1.6 Average collection period 3 months
Total assets turnover 2/3 Reserves to capital 0.6
Fixed assets turnover 1.25 Sales 4000000
Q5(B) Distinguish between hire purchase system and instalment purchase system (6 marks)

Q6(A) A, B and C are equal partners whose balance sheet as on 31.3.01 is as follows:

Liabilities Amount Assets Amount


Creditors 5000 Cash in hand 50
A’s loan 1000 Stock 800
Capitals: Debtors 1000
A 800 Plant and machinery 2000
C 500 Furniture and fittings 800
Land and buildings 2000
B’s capital a/c 650
Total 7300 Total 7300
Due to lack of liquidity and weak financial position of the partners of the partners, the firm is
dissolved. A and C are not able to contribute anything, and sum of 200 is received from B. All of
them declared insolvent. The following assets realized stock – 500 plant and machinery – 50%
furniture – 75% less. Land and building – 40% and debtors 45% less only. Realisation expenses
amounted to 50. Close the firm books. (12 marks)

Q6(B) Explain dead rent. (4 marks)

Q7(A) Prepare income and expenditure account and balance sheet of A trust for the year ended 31st
December 2002. (12 marks)

Receipts and payment account for the year ended 31.12.02

Receipts Amount Payments Amount


To balance b/d: Cash 500 By rent 9750
Bank 4000 By miscellaneous expenses 28800
Stamp 300 By postage expenses 1200
To Subscriptions: By furniture 8000
2001 4650 By creditors for sports materials 12200
2002 67200 By cost of prizes 4150
2003 2600 By cash purchase of sports material 2000
To entrance fees 8000 By match expenses 7030

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To General donations 4050 By balance c/d
To donation for prize fund 2800 Cash 545
To sale of old sports material 5200 Bank 26000
To interest on prize fund investment 300 Stamps 150
To Miscellaneous receipts 225
Total 99825 99825
Additional information:

Particulars As on 31.3.01 As on 31.3.02


Sports materials 4000 5000
Furniture 40000 ?
5% Prize fund investments 11700 ?
Creditors for sports materials 1400 2950
Subscription in arrears 4750 ?
Subscription in advance 1400 ?
Prize fund 12000 ?
Rent paid in advance - 750
Outstanding rent 750 -
Outstanding miscellaneous expenses 2280 4020
Miscellaneous expenses paid in advance 750 850
Book value of sports materials sold was Rs. 4000. Depreciation to be provided on furniture 10%. Half
of the entrance fees to be capitalised. There are 720 members each paying annual subscription of
Rs. 100.

Q7(B) Distinguish between receipts payments account and income expenditure account (4 marks)

Q8. Write short notes on: (4 marks each)

a. Accounting standard 2
b. Contingent liability
c. Accounting standard 4
d. Cum interest price and ex interest price.