Practice Accounts Prime PDF

GATA
No. of Pages: 6 Total Marks: 100

No. of Questions: 7 Time allowed: 3 hrs
Question no 1 is compulsory
Answer any five from the remaining six questions
Wherever necessary, suitable assumptions should be made by the candidates.
Working notes should form part of answer
1.
a) M/s Highway Constructions undertook the construction of a highway on 01.04.2013. The contract
was to be completed in 2 years The contract price was estimated at ` 150 crores. Up to 31.03.2014
the company incurred ` 120 crores on the construction. The engineers involved in the project
estimated that a further ` 45 crores would be incurred for completing the work. What amount
should be charged to revenue for the year 2013-14 as per the provisions of Accounting Standard 7
"Construction Contracts"?
b) An item of machinery was purchased on 1-4-2012 for ` 2,00,000. The WDV depreciation rate
applicable to the machinery was 15%. The written down value of the machinery as on 31-3-2014
was ` 1,44,500. On 1-4-2014, the enterprise decided to change the method from written down
value (WDV) to straight line method (SLM). The enterprise decided to write off the book value of
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` 1,44,500, over the remaining useful life of machinery i.e. 5 years Out of the total useful life 7 years,
2 years have already elapsed. Comment whether the accounting treatment is correct. If not, give the
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correct accounting treatment with reasons.
c) A Ltd. entered into a contract with B Ltd. to despatch goods valuing ` 25,000 every month for 4
months upon receipt of entire payment. B Ltd. accordingly made the payment of ` 1,00,000 and A
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Ltd. started dispatching the goods. In third month, due to a natural calamity, B Ltd. requested A Ltd.
not to dispatch goods until further notice though A Ltd. is holding the remaining goods worth
` 50,000 ready for despatch. A Ltd. accounted ` 50,000 as sales and transferred the balance to
Advance Received against Sales. Comment upon the treatment of balance amount with reference to
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the provisions of Accounting Standard 9.

d) The abstract of the Balance Sheet of the AXE Ltd. as at 31st March 2011, are as follows:
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Liabilities INR
Equity share capital (` 100 each) 15,00,000
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12% Preference share capital (` 100 each) 8,00,000

13% Debentures
3,00,000
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On 31st March, 2011, BXE Ltd. agreed to take over AXE Ltd. on the following terms:
(1) For each preference share in AXE Ltd., ` 10 in cash and one 9% preference share of ` 100 in
BXE Ltd.
(2) For each equity share AXE Ltd. ` 20 in cash and one equity share in BXE Ltd. of ` 100 each. It
was decided that the share in BXE Ltd. will be issued at market price ` 140 per share.
(3) Liquidation expenses of AXE Ltd. are to be reimbursed by BXE Ltd. to the extent of ` 10,000.
Actual expenses amounted to ` 12,500.You are required to compute the amount of purchase
consideration. (4 x 5= 20 Marks)
2. P Ltd. and Q Ltd. were carrying on the business of manufacturing of auto components. Both the
companies decided to amalgamate and a new company PQ Ltd. is to be formed with an Authorized
Capital of ` 10,00,000 divided into 1,00,000 equity shares of ` 10 each. The Balance Sheet of the
companies as on 31.03.2014 were as under:
PRIME/41st ME/IPC 1
P -Limited
Balance Sheet as at 31.03.2014
Particulars Amount (INR)
I. Equity and liabilities
1. Shareholders fund
(a) Share capital 1,40,000
(b) Reserves and Surplus
Profit & loss a/c. 30,000
2. Non current liabilities
8% secured debentures 110,000
3. Current liabilities
Trade payables 54,000
Total 334,000
II. Assets
1. Non – current assets
(a) Fixed Assets
Building at cost less Depreciation 100,000
Plant & Machinery at cost less Depreciation 25,000
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2. Current Assets
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(a) Inventories 135,000
(b) Trade Receivables 44,000
(c) Cash at Bank 30,000
Total 334,000
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Q - Limited
Balance Sheet as at 31.03.2014
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Particulars Amount (INR)

I. Equity and liabilities
1. Shareholders fund
(a) Share capital 250,000
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(b) Reserves and Surplus

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General Reserve 120,000

Profit & loss a/c. 35,000
2. Current liabilities
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Trade payables 140,000

Total 545,000
II. Assets
1. Non – current assets
(a) Fixed Assets
Building at cost less Depreciation 190,000
Plant & Machinery at cost less Depreciation 80,000
Furniture & Fixture at cost less depreciation 25,000
2. Current Assets
(a) Inventories 50,000
(b) Trade Receivables 142,000
(c) Cash at Bank 58,000
Total 545,000
The assets and liabilities of the existing companies are to be transferred at book value with the
exception of some items detailed below:
PRIME/41st ME/IPC 2
(i) Goodwill of P Ltd. was worth ` 50,000 and of Q Ltd. was worth ` 1,50,000.
(ii) Furniture & Fixture of Q Ltd. was valued at ` 35,000.
(iii) The Trade receivables of P Ltd. are realized fully and bank balance of P Ltd. are to be retained
by the liquidator and the trade payables are to be paid out of the proceeds thereof.
(iv) The debentures of P Ltd. are to be discharged by issue of 8% 11,000 debentures of PQ Ltd. at a
premium of 10%.
You are required to:
(i) Compute the basis on which shares in PQ Ltd. will be issued at par to the shareholders of the
existing companies.
(ii) Draw up a Balance Sheet of PQ Ltd. as at 1st April, 2014, the date of completion of
amalgamation. (16 Marks)
3.
a) M/s Ice Limited gives you the following information to find out Total Sales and Total
Purchases:
Particulars INR
Debtors as on 01.04.2011 70,000
Creditors as on 01.04.2011 81,000
Bills receivable received during the year 47,000
Bills payable issued during the year 53,000
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Cash received from customers 156,000
Cash paid to suppliers 172,000
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Bad Debts recovered 16,000
Bills Receivables endorsed to creditors 27,000
Bills Receivables dishonored by customers 5,000
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Discount allowed by suppliers 7,000
Discount allowed to customers 9,000
Endorsed Bills Receivables dishonored 3,000
Sales Return 11,000
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Bills Receivable discounted 8,000

Discounted Bills Receivable dishonored 2,000
Cash Sales 1,68,500
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Cash Purchases 197,800

Debtors as on 31.03.2012 82,000
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Creditors as on 31.03.2012 95,000

(8 Marks)
b) Mr. Brown has made following transactions during the financial year 2011-12:
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Date Particulars
01.05.2011 Purchased 24,000 12% bonds of INR 100 each at INR 84 cum interest. Interest is payable
on 30th Sept and 31st March ever year.
15.06.2011 Purchased INR 150,000 equity shares of INR 10 each in Alpha Limited for INR 25 each
through a broker, who charged @ 2%.
10.07.2011 Purchased 60,000 equity shares of INR 10 each in Beeta Limited for INR 44 each through
a broker, who charged brokerage @ 2%
14.10.2011 Alpha Limited made a bonus issue of 2 shares for every 3 shares held
31.10.2011 Sold 80,000 shares in Alpha Limited for INR 22 each
15.01.2012 Beeta Limited made a right issue of one equity share for every four
shares held at INR 5 per share. Mr. Brown exercised his option for 40% of his
entitlements and sold the balance rights in the market at
INR 2.25 per share.
01.02.2012 Sold 15,000 12% Bonds at INR 90 ex-interest.
15.03.2012 Received 18% interim dividend on equity shares of Beeta Limited.
Interest on 12% Bonds was duly received on due dates.
PRIME/41st ME/IPC 3
Prepare separate investment account for 12% Bonds, Equity Shares of Alpha Limited
and Equity Shares of Beeta Limited in the books of Mr. Brown for the year ended on 31st March, 2012.
(8 Marks)
4. Pathak, Quereshi and Ranjeet were partners sharing profits in the ratio of 7 : 5 : 3 respectively. On 31st
March, 2013 Quereshi retired when the firm's Balance Sheet was as follows :
Liabilities INR Assets INR

Capital Accounts Land and Building 10,00,000
Pathak 850,000 Plant and Machinery Furniture, 4,65,000
Quershi 620,000 Fixture and Fittings 2,30,100
Ranjeet 370,000 Stock 1,82,200
Trade Debtors 200,000
General Reserve 225,000 Less : Provision for Bad Debts
6,000
Trade creditors 113,000 Cash at bank 1,94,000
1,06,700
Total 21,78,000 Total 21,78,000
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It was agreed that :
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(i) Land & Building be appreciated by 20%.
(ii) Plant & Machinery be depreciated by 10%.
(iii) Provision for Bad Debts be made equal to 4% of Trade Debtors
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(iv) Outstanding repairs bill amounting to ` 1500 be recorded in the books of account.
(v) Goodwill of the firm be valued at ` 3,00,000 and Quereshi's capital account be credited with
his share of goodwill without raising goodwill account.
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(vi) Half of the amount due to Quereshi be immediately paid to him by means of a cheque and
the balance be treated as a loan bearing interest @ 12% per annum.
After Quereshi's retirement, Pathak and Ranjeet admitted Swamy as a new partner with effect from
1st April, 2013. Pathak, Ranjeet and Swamy agreed to share profits in the ratio of 2 : 1 : 1 respectively.
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Swamy brought patents valued at ` 20,000 and ` 3,80,000 in cash including payment for his share of
goodwill as valued by the old firm. The entire amount of ` 4,00,000 was credited to Swamy's Capital
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Account. Adjustments were made in the capital account for Swamy's share of goodwill.
You are required to :
(a) Pass journal entries for all the above transactions without any narration, and
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(b) Prepare the capital account of all the partners (16 Marks)
5.
a) The premises of X Ltd. caught fire on 22nd January, 2015 and the stock was damaged. The value of
goods salvaged was negligible. The firm made up accounts to 31st March each year. On 31st March,
2014 the stock at cost was `13,27,200 as against ` 9,62,200 on 31st March 2013.
Purchases from 1st April, 2014 to the date of fire were 34,82,700 as against ` 45,25,000 for the full
year 2013-2014 and the corresponding sales figures were ` 49,17,000 and ` 52,00,000 respectively.
You are given the following further information:
(i) In July, 2014, goods costing ` 1,00,000 were given away for advertising purposes, no entries
being made in the books.
(ii) The rate of gross profit is constant.
X Ltd. had taken an insurance policy of ` 5,50,000 which was subject to the average clause. From the
above information, you are required to make an estimate of the stock in hand on the date of fire and
compute the amount of the claim to be lodged to the insurance company. (8 Marks)
PRIME/41st ME/IPC 4
b) Surya Ltd. has provided you the following particulars Prepare Cash Flow from Operating Activities by
Indirect Method in accordance with AS 3 :
c)
Profit & Loss Account of Surya Ltd. for the year ended 31st March, 2012
Particulars INR Particulars INR
To Depreciation 86,700 By OperatingProfit before depreciation 11,01,600
To Patents written off 35,000 By Profit on Sale on Investments 10,000
To Provision for Tax 1,25,000 By Refund of Tax 3,000
To Proposed dividend 72,000 By Insurance Claim-Major Fire
To Transfer to Reserve 87,000 Settlement 1,00,000
To Net Profit 8,08,900
Total 12,14,600 Total 12,14,600
Profit & Loss Account of Surya Ltd. for the year ended 31st March, 2013
Particulars INR INR
Stock 1,20,000 1,60,000
Trade Debtors 7,500 75,000
Trade Creditors 23,735 87,525
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Provision for Tax 1,18,775 1,25,000
Prepaid Expenses 15,325 12,475
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Marketable Securities 11,775 29,325
Cash Balance 25,325 35,340
(8 Marks)
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6. Following is the Receipts and Payments Account of Nanoo Club for the year ended 31st March, 2009:
Particulars INR Particulars INR
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Opening balance: Salaries 1,20,000

Cash 10,000 Creditors 15,20,000
Bank 3,850 Printing and stationery 70,000
Subscription received 2,02,750 Postage 40,000
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Entrance donation 1,00,000 Telephone and fax 52,000

Interest received 58,000 Repairs and maintenance 48,000
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Sale of fixed assets 8,000 Glass and table linen 12,000

Miscellaneous 9,000 Crockery and cutlery 14,000
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income Receipts at coffee Garden upkeep 8,000

room 10,70,000 Membership fees 4,000
Wines and spirits 5,10,000 Insurance 5,000
Swimming pool 80,000 Electricity 28,000
Tennis court 1,02,000 Closing balance:
Cash 8,000
Bank 2,24,600
Total 21,53,600 Total 21,53,600
PRIME/41st ME/IPC 5
Following additional information is provided to you:
(i) Assets and liabilities as on 31.3.2008 were as follows:
Particulars INR
Fixed assets 5,00,000
Stock 3,80,000
Investment in 12% Government securities 5,00,000
Outstanding subscription 12,000
Gratuity fund 1,50,000
Prepaid insurance 1,000
Sundry creditors 1,12,000
Subscription received in advance 15,000
Entrance donation received pending membership 1,00,000
(ii) Subscription received in advance as on 31.3.09 was ` 18,000.

(iii) Outstanding subscription as on 31.3.09 was ` 7,000.
(iv) Outstanding expenses as on 31.3.09 are:
Salaries : ` 8,000
Electricity : ` 15,000
(v) 50% of the entrance donation was to be capitalized. There was no pending membership as on
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31.3.09.
(vi) The cost of assets sold as on 1.4.08 was ` 10,000.
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(vii) Depreciation was provided @ 10% p.a. on fixed assets on written down value basis.
(viii) A sum of ` 20,000 received in October, 2008 as entrance donation from an applicant was to be
refunded, as he has not fulfilled the requisite membership qualification. The refund was made on
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3.6.09.
(ix) Purchases made during the year 2008-09 amounted to ` 15,00,000.
(x) The value of closing stock as on 31.3.09 was ` 2,10,000.
(xi) The Club as a matter of policy charges off to Income and Expenditure account, all purchases made
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on account of crockery, cutlery, glass and linen in the year of purchase.

You are required to prepare:
(i) Income and Expenditure account for the year ended 31st March, 2009.
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(ii) Balance Sheet as on 31st March, 2009. (16 Marks)

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7.
a) “In business today, the accounts which were earlier maintained in a manual form, are replaced
with computerized accounts”. Explain the significance of computerized accounting system in
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modern time.
b) Distinguish between (i) the pooling of interests method and (ii) the purchase method of recording
transactions relating to amalgamation.
c) A computer costing ` 60,000 is depreciated on straight line basis, assuming 10 years working life
and Nil residual value, for three years The estimate of remaining useful life after third year was
reassessed at 5 years Calculate depreciation as per the provisions of Accounting Standard 6
"Depreciation Accounting".
d) M/s Stairs & Co. draw upon M/s Marble & Co. several bills of exchange due for payment on
different dates as under:
Date of Bill Amount (INR) Tenure of Bill
12th May 44,000 3 months
th
10 June 45,000 4 months
1st July 14,000 1 month
th
19 July 17,000 2 months
Find out the average due date on which payment may be made in one single amount by M/s Marble &
Co. to M/s Stairs & Co. 15th August, Independence Day, is national holiday and 22nd September
declared emergency holiday, due to death of a national leader. (4 x4 = 16 Marks)
PRIME/41st ME/IPC 6
PRIME ACADEMY
41st SESSION MODEL EXAM - IPC – ACCOUNTING
SUGGESTED ANSWERS
1.
a)
Particulars ` (Crores)
Cost of construction incurred up to 31.03.2014 120
Add: Estimated future cost 45
Total estimated cost of construction 165
Degree of completion (120/165 x 100) 72.73%
Revenue recognized (72.73% of 150) 109(approx)
Total Foreseeable loss (165 –150) 15
Less:Loss for current year (120 – 109) 11
Expense loss to be provided for 4
b) As per para 15 of Accounting Standard 6, ‘Depreciation Accounting’, when the method of
depreciation is changed, depreciation is recalculated in accordance with the new method from the
date of the assets coming into use. The deficiency or surplus arising from retrospective re-
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computation of depreciation in accordance with the new method is adjusted in the statement of
profit & loss in the year in which the method of depreciation is changed.
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Calculation of Surplus/Deficiency due to change in method of depreciation
Particulars Amount `
Purchase price of plant as on 01-04-2012 2,00,000
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Less: Depreciation as per SLM, for the year 2012-13 (INR.2,00,000÷7 years) 28,571
Balance as on 31-3-2013 1,71,429
Less: Depreciation for the year 2013-14(INR.2,00,000÷7 years) 28,571
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Balance as on 31-3-2014 1,42,858

Book value as per WDV method 1,44,500
Book value as per SLM 1,42,858
Deficiency 1,642
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Deficiency of INR. 1,642 should be charged to Profit & Loss account.

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Therefore, the accounting treatment done by the enterprises is wrong i.e. book value of
INR.1,44,500 will not be written off over the remaining useful life of machinery i.e. 5 years
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Note: It is assumed that when the company changed method of depreciation from WDV to SLM, it
re-calculated the depreciation amount on the basis of useful life and has not continued with rate of
depreciation as applied in WDV method.
c) As per para 11 of AS 9 “Revenue Recognition”, in a transaction involving the sale of goods,

performance should be regarded as being achieved when the following conditions are fulfilled:
(i) the seller of goods has transferred to the buyer the property in the goods for a price or all
significant risks and rewards of ownership have bee transferred to the buyer and the seller
retains no effective control of the goods transferred to a degree usually associated with
ownership; and
(ii) no significant uncertainty exists regarding the amount of the consideration that will be derived
from the sale of the goods.
In the given case, transfer of property in goods results in or coincides with the transfer of
significant risks and rewards of ownership to the buyer. Also, the sale price has been recovered
by the seller. Hence, the sale is complete but delivery has been postponed at buyer’s request. A
Ltd. should recognize the entire sale of INR.1,00,000 (INR.25,000 x 4) and no part of the same is
to be treated as Advance Receipt against Sales.
PRIME/41st ME/IPC 1
d)
S.No Particulars ` `
I Payment made to shareholders of 8000
preference share of AXE Ltd:
Cash @ 10 per share (8000 pref share of `10) 80,000

9% preference shares in BXE Ltd of `100 each 8,00,000 8,80,000
II Payment made to equity shareholders of 15000
equity shares of AXE Ltd
Cash @ `20 per share (`15000*20) 3,00,000

Equity shares in BXE Ltd issued at market price @ 21,00,000 24,00,000
` 140 each (15000*140)
Total purchase consideration 32,80,000
2. Calculation of Purchase Consideration

Particulars P Ltd. ` Q Ltd. `
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Assets taken over:
Good will 50,000 1,50,000
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Building 1,00,000 1,90,000
Plant & Machinery 25,000 80,000
Furniture & Fixtures _ 35,000
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Inventories 1,35,000 50,000
Trade Receivables _ 1,42,000
Cash at Bank _ 58,000
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3,10,000 7,05,000
Less :Liabilities taken over 8%Debentures (1,21,000) _
Trade Payables _ (1,40,000)
Net Assets taken over 1,89,000 5,65,000
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To be satisfied by issue of shares of PQ Ltd. Of INR.10 each at par 18,900 56,500

PQ Limited
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Balance Sheet as at 1stApril, 2014

Particulars Note No. Amount `
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I. Equity and Liabilities

(1)Shareholder’s Funds
(a) Share Capital 1 7,54,000
(b) Reserve & Surplus 2 11,000
(2)Non-current Liabilities
(a) Long term borrowings 3 1,10,000
(3)Current Liabilities
(a) Trade Payables 1,40,000
Total 10,15,000
II. Assets
(1)Non-current assets Fixed Asset
Tangible 4 4,30,000
Intangible 5 2,00,000
(2)Current Assets
a)Inventories 1,85,000
b)Trade Receivables 1,42,000
c)Cash at Bank 58,000
Total 10,15,000
PRIME/41st ME/IPC 2
Notes to Accounts:
S. No. Particulars Amount `
1 Share Capital
Authorized
1,00,000 shares of INR.10 each 10,00,000
Issued, Subscribed and Paid up
75,400 shares of INR.10 each 7,54,000
(All the above shares are allotted as fully paid up pursuant to
scheme of amalgamation without payments being received in cash)
2 Reserve & Surplus
Securities Premium Account 11,000
3 Long term borrowings
8 % Debentures 1,10,000
4 Tangible Fixed Assets
Building
P Ltd. 1,00,000
Q Ltd 1,90,000 2,90,000
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Plant & Machinery
P Ltd. 25,000
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Q Ltd. 80,000 1,05,000
Furniture & Fixture
Q Ltd. 35,000
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5 Intangible Asset 4,30,000
Goodwill
P Ltd 50,000
Q. Ltd. 1,50,000 2,00,000
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Working Note:
Computation of Securities Premium
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Debentures issued by PQ Ltd. to the existing debenture holders of P Ltd. At 10% premium.
Securities Premium = INR.1,10,000 x 10% = INR.11,000.
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3.
a) 1. Total Sales = Cash sales + Credit sales
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= INR.1,68,500 + INR.2,25,000 (W.N.1)

= INR.3,93,500
2. Purchases = Cash Purchases + Credit Purchases
=INR.1,97,800 + INR.2,70,000 (W.N.2)
= INR.4,67,800
Working Notes:
1. Debtors Account
Particulars Amount ` Particulars Amount `
To Balance b/d 70,000 By Bills receivable 47,000
To Bills receivable dishonoured 5,000 By Cash 1,56,000
To Bills receivable dishonoured (endorsed) 3,000 By Discount allowed 9,000
To Bills receivable dishonoured (discounted) 2,000 By Sales return 11,000
To Credit sales (bal.fig.) 2,25,000 By Balance c/d 82,000
3,05,000 3,05,000
PRIME/41st ME/IPC 3
2. Creditors Account
ToBills payable 53,000 By Balance B/d 81,000
ToCash 1,72,000 By Bills Receivable Dishonoured 3,000
To Discount Received 7,000 (endorsed) 2,70,000
To Bills Receivable endorsed 27,000 By Credit Purchases (bal.fig)
To Balance B/d 95,000
3,54,000 3,54,000
Note: It is assumed that sales return is out of credit sales only.
b) In the books of Mr. Brown

12% Bonds for the year ended 31stMarch, 2012
Date Particulars No. Interest Amount Date Particulars No. Interest Amount
Income` ` Income` `
2011 To Bank A/C 24,000 24,000 19,92,000 2011 By Bank Interest _ 1,44,000
May,1 Sept.30 By Bank A/C
2012 To P&L A/C _ _ 1,05,000 2012 15,000 75,000 13,50,000
Mar,31 (W.N.1) Mar.1 By Bank Interest
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To P& L A/C 2,49,000 2012 By Balance c/d 54,000
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Mar.31 (W.N.2)
9,000 _ 7,47,000
2,50,000 2,55,000 43,61,000 2,50,000 2,55,000 43,61,000
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Investment in Equity shares of Alpha Ltd. for the year ended 31St March, 2012
Date Particulars No. Dividend Amount Date Particulars No. Dividend Amount
Income` ` Income` `
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2011 To Bank A/C 1,50,000 _ 38,25,000 2011 By Bank A/C 80,000 _ 17,60,000
June 15 Oct31
Oct 14 To Bonus issue 1,00,000 _ _ 2012 By Bank A/C – 2,55,000
(1,50,000/3*2) Jan1 divided
2012 To P&L A/C 5,36,000 Mar 31 By Balance 1,70,000 _ 26,01,000
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Mar 31 (W.N.3) c/d

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To P& L A/C 2,55,000 (W.N.4)

2,50,000 2,55,000 43,61,000 2,50,000 2,55,000 43,61,000
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Investment in Equity shares of Beeta Ltd. for the year ended 31stMarch, 2012
Date Particulars No. Dividend Amount Date Particula No. Dividend Amount
income` ` rs Income` `
2011 June To Bank A/C 60,000 _ 26,92,800 2012 By Bank _ _ 20,250
15 Jan15 A/c
2012 Jan To Bank A/C 6,000 _ 30,000 2012 (W.N.6) _ 1,18,800
15 (W.N.5) Mar By Bank-
Mach 31 To P& L A/C _ 1,18,800 _ 15 dividend
Mar 66,000 _ 27,02,550
31 By
Balance
c/d
(bal/fig)
66,000 1,18,800 27,22,800 66,000 1,18,800 27,22,800
Working Notes:
PRIME/41st ME/IPC 4
1. Profit on sale of 12% Bond
Sales price INR.13,50,000
Less: Cost of bond sold = 19,92,000 x15,000
24,000 INR.12,45,000
Profit on sale INR.1,05,000
2. Closing balance as on 31.3.2012 of 12 % Bond
= 19,92,000 x 9,000 = INR.7,47,000
24,000
3. Profit on sale of equity shares of Alpha Ltd.
Sales price(80,000 shares x INR22) INR.17,60,000
Less: Cost of bond sold = 38,25,000 x 80,000 INR.12,24,000
2,50,000
Profit on sale INR.5,36,000
4. Closing balance as on 31.3.2012 of equity shares of Alpha Ltd.
38,25,000 x 1,70,000 INR.26,01,000
2,50,000
5. Calculation of right shares subscribed by Beeta Ltd.
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Right Shares = 60,000 shares x 1= 15,000 shares
4
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Shares subscribed by Mr. Brown = 15,000 x 40%= 6,000 shares
Value of right shares subscribed = 6,000 shares @ INR.5 per share = INR.30,000
6. Calculation of sale of right entitlement by Beeta Ltd.
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No. of right shares sold = 15,000 - 6,000 = 9,000 shares
Sale value of right = 9,000 shares x INR.2.25 per share = INR.20,250
Note: Shares are assumed to be purchased on cum right basis, therefore, amount received from sale
of rights is credited to Investment A/c.
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4. Journal Entries
31stMarch, 2013
` `
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S.No. Particulars
1 Land and building Dr 2,00,000
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To Revaluation A/C . 2,00,000

2 Revaluation A/c Dr 46,500
To Plants And Machinery 46,500
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3 Revaluation A/c Dr 3,500

To Provision for bad debts . 2,000
[(`2,00,000 x 4%) –`6000]
To Provision for Outstanding repair bill 1,500
4 Pathak’s Capital A/c Dr 70,000
Ranjeet’s Capital A/c Dr 30,000
To Quereshi’s Capital A/C 1,00,000
5 Revaluation A/c Dr 1,50,000
To Pathak’s Capital A/c 70,000
To Quereshi’s Capital A/c 50,000
To Ranjeet’s Capital A/c 30,000
6 General reserve A/c Dr 2,25,000
To Pathak’s Capital A/c 1,05,000
To Quereshi’s Capital A/c 75,000
7 Quereshi’s Capital A/c Dr 8,45,000
To Bank A/c . 4,22,500
To Quereshi’s Loan A/c 4,22,500
8 Patents Dr 20,000
PRIME/41st ME/IPC 5
Cash A/c Dr 3,80,000
To Swamy’s Capital A/c . 4,00,000
9 Swamy’s Capital A/c (`3,00,000/4) Dr
To Pathak’s Capital A/c 75,000 60,000
Amount Amount
Particulars Pathak Quereshi Ranjeet Swamy Particulars Pathak Quereshi Ranjeet Swamy
` ` ` ` ` ` ` `
31.3.13 31.3.13
To Quereshi 70,000 30,000 By bal b/d 8,50,000 6,20,000 3,70,000
By bank 4,22,500 By general reserve 1,05,000 75,000 45,000
To loan A/c 4,22,500 By pathak & 1,00,000
To bal c/d 9,55,000 4,15,000 Ranjeet 70,000 50,000 30,000
10,25,000 8,45,000 4,45000 By revaluation A/c 10,25,000 8,45,000 4,45,000
1.4.13
To pathak 60,000 1.4.13 9,55,000 4,15,000
To Ranjeet 15,000 By bal b/d 20,000
To bal c/d 10,15,000 4,,30,000 3,25,000 By Patents 3,80,000
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By cash 60,000 15,000
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By swamy
10,15,000 4,30,000 4,00,000 10,15,000 4,30,000 4,00,000
Working Notes:
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1. Calculation of Gaining ratio after retirement of Quereshi on 31st March,2013
Pathak : Quereshi : Ranjeet: Pathak: Ranjeet
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Old Ratio 7/15 : 5/15 : 3/15 New Ratio 7/10 : 3/10=

Gain of Pathak New Ratio - Old Ratio
7/10 - 7 / 15
(105 – 70) / 150
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35 / 150
Gain of Ranjeet 3/10 – 3/15 = (45 – 30)/150 = 15/150
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Gaining Ratio = 35 : 15 =7:3

2 . Calculation of Sacrificing ratio of Pathak and Ranjeet at time of admission of Swamy
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1stApril, 2013 7:3 (ratio between old partners)

New ratio 2:1:1 2/7-7/10 ¼-3/10
10-14/20 5-6/20
4/20 1/20
Sacrificing ratio 4:1
5.
a) Memorandum Trading Account from 1st April, 2014to 22nd January, 2015
Particulars Amount Amount Particulars Amount `
` `
To opening stock 13,27,200 By Sales 49,17,000
To Purchases 34,82,700 By Stock on 22nd January, 2015 7,76,300
Less: Cost of Goods (1,00,000) 33,82,700 (bal.fig)
Used for
Advertising
To Gross profit 9,83,400
20% of Sales (W.N)
56,93,300 56,93,300
Stock in hand on date of fire = INR.7,76,300.
PRIME/41st ME/IPC 6
Computation of claim for loss of stock
Stock on the date of fire i.e. on 22ndJanuary, 2015 7,76,300
As the value of goods salvaged was negligible, therefore Loss of Stock 7,76,300
Since policy amount is less than claim amount, claim will be restricted to policy amount only.
Therefore, claim of INR.5,50,000 should be lodged by X Ltd. to the insurance company.
Working Note:
Trading Account for the year ended on 31stMarch, 2014
To Opening Stock 9,62,200 By Sales 52,00,000
To Purchases 45,25,000 By Closing 13,27,200
To Gross Profit 10,40,000 Stock
65,27,200 65,27,200
Rate of gross profit to sales = 10,40,000 /52,00,000 x 100 = 20%.
b) Indirect Method Cash flow from Operating activities for the year ended 31stMarch, 2013
Particulars Amount ` Amount `
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Net Profit as per Profit & Loss A/c 8,08,900
Add: Proposed dividend 72,000
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Add: Transfer to reserve 87,000
Add: Provision for Tax made during the Current Year 1,25,000
Less: Refund of tax (3,000)
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Less: Extraordinary items (i.e. Insurance Claim Major Fire Settlement) (1,00,000)
Net Profit before taxation, and extraordinary items 9,89,900
Add: Depreciation 86,700
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Add: Patents written off 35,000

Less: Profit on sale of investments (10,000)
Operating profit before working capital changes 11,01,600
Increase in stock (40,000)
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Increase in trade debtors (67,500)

Increase in trade creditors 63,790
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Decrease in prepaid expenses 2,850 (40,860)

Cash generated from operations 10,60,740
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Income taxes paid (net of refund) 1,15,775

Cash flow before extraordinary item 9,44,965
Insurance claim recovery (major fire settlement) 1,00,000
Net cash from operating activities 10,44,965
6. Income and Expenditure Account of Nanoo club for the year ended 31stMarch, 2009
Expenditure Amount Income Amount
To Salaries (W.N.8) 1,28,000 By Subscriptions (W.N.2) 1,94,750
To Printing and stationery 70,000 By Entrance donation (W.N.3) 90,000
To Postage 40,000 By Interest (W.N.4) 60,000
To Telephone & Fax 52,000 By Miscellaneous income 9,000
To Repairs and maintenance 48,000 BY Profit from operations (W.N.6) 92,000
To Glass and table linen 12,000 By Excess of expenditure over 30,250
Crockery and cutlery 14,000 income transferred to capital
To Garden upkeep 8,000 fund (deficit)
To Membership fees 4,000
To Insurance (W.N.5) 6,000
To Electricity charges (W.N.8) 43,000
PRIME/41st ME/IPC 7
To Loss on sale of assets (10,000 – 8,000) 2,000
To Depreciation (W.N.9) 49,000
4,76,000 4,76,000
Balance Sheet of Nanoo Club as on 31stMarch, 2009

Liabilities Amount ` Assets Amount `
Capital fund(W.N.10) 10,89,600 Fixed assets (W.N.9) 4,41,000
Gratuity fund 1,50,000 Stock 2,10,000
Sundry creditors (W.N.7) 92,000 Investments in 12%
Subscription received in advance 18,000 Government securities 5,00,000
Entrance donation refundable 20,000 Subscription outstanding 7,000
Outstanding salary 8,000 Interest accrued (W.N.4) 2,000
Outstanding electricity charges 15,000 Bank 2,24,000
Cash 8,000
13,92,600 13,92,600
Working Notes:
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(1) Opening Balance Sheet as on 1stApril, 2008
Liabilities Amount ` Assets Amount `
EM
Capital fund (Bal.Fig.) 10,29,850 Fixed assets 5,00,000
Sundry creditors 1,12,000 Stock 3,80,000
Subscription received in advance 15,000 Investment in 12%
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Entrance donation received in Government securities 5,00,000
advance (pending membership) 1,00,000 Subscription outstanding 12,000
Gratuity fund 1,50,000 Prepaid insurance 1,000
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Cash 10,000
Bank 3,850
14,06,850 14,06,850
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(2) Subscription
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Subscription received during the year 2,02,750

Add: Outstanding subscription on 31.3.2009 7,000
PR
Add: Received in advance as on 1.4.2008 15,000

2,24,750
Less: Outstanding subscription as on 1.4.2008 (12,000)
Less: Received in advance as on 31.3.2009 (18,000)
1,94,750
(3) Entrance Donation
Entrance Donation received during the year 1,00,000
Add: Received in advance as on 1.4.2008 1,00,000
2,00,000
Less: Refundable to Ineligible Member 20,000
1,80,000
Less: 50% Capitalized 90,000
90,000
(4) Interest received
PRIME/41st ME/IPC 8
Interest on INR.5,00,000 @ 12% p.a. 60,000
Less: Interest received during the year 58,000
Interest accrued as on 31.3.2009 2,000
Interest credited to Income and Expenditure A/c 60,000
(5) Insurance
Insurance paid During the year 5,000
Add: Prepaid Insurance as on 1.4.2008 1,000
6,000
(6) Profit from Operations
Cost of Goods sold
Opening Stock as on 1.4.2008 3,80,000
Add: Purchases 15,00,000
18,80,000
Less: Closing Stock 2,10,000
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Cost of Goods Sold (A) 16,70,000
Receipts from operations
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Receipts from Coffee Room 10,70,000
Receipts from Wines & Sprits 5,10,000
Receipts from Swimming Pool 80,000
AD
Receipts from Tennis Court 1,02,000
Total of Receipts (B) 17,62,000
Profit from Operations (B-A) 92,000
AC
(7) Sundry Creditor

Opening Balance as on 1.4.2008 1,12,000
Add: Purchases made during the year 15,00,000
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16,12,000
Less: Payment made during the year 15,20,000
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Closing Balance as on 31.3.2009 92,000

(8) (a) Salary
PR
Salary paid as on 31.3.2009 1,20,000
Add: Outstanding Salary as on 31.3.2009 1,28,000
8,000
(b) Electricity charge
Electricity paid during the year 2008-09 28,000
Add: Outstanding Electricity charges as on 31.3.2009 43,000
15,000
(9) Fixed Asset
Fixed Assets as per Trial Balance 5,00,000
Less: W.D.V. of Assets sold 10,000
4,90,000
Less: Depreciation @ 10% on INR.4,90,000
Fixed Assets as on 31.3.2009 49,000
4,41,000
PRIME/41st ME/IPC 9
(10) Capital fund
Capital fund as on 31.3.2008 10,29,850
Add: Entrance donation capitalized 90,000
11,19,850
Less: Deficit 30,250
10,89,600
7.
a) In modern time, computerized accounting systems are used in various areas. The significance of the
computerized accounting system is as follows:
1) Increase speed, accuracy and security - In computerized accounting system, the speed with which
accounts can be maintained is several fold higher. Besides speed, level of accuracy is also high in
computerized accounting system.
2) Reduce errors - In computerized accounting, the possibilities of errors are also very less unless
some mistake is made while recording the data.
3) Immediate information - In this system, with an entry of a transaction, corresponding ledger
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posting is done automatically. Hence, trial balance will also be automatically tallied and the user will
get the information immediately.
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4) Avoid duplication of work - Computerized accounting systems also remove the duplication of the
work.
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b) The following are the points of distinction between (i) the pooling of interests method and (ii) the
purchase method of recording transactions relating to amalgamation:
1) The pooling of interests method is applied in case of an amalgamation in the nature of merger
whereas purchase method is applied in the case of an amalgamation in the nature of purchase.
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2) In the pooling of interests method all the reserves of th transferor company are also recorded by
the transferee company in its books of account while in the purchase method the transferee
company records in its books of account only the assets and liabilities taken over, the reserves,
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except the statutory reserves, of the transferor company are not aggregated with those of the
transferee company.
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3) Under the pooling of interests method, the difference between the consideration paid and the
share capital of the transferor company is adjusted in the general reserve or other reserves of the
transferee company. Under the purchase method, the difference between the consideration and
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net assets taken over is treated by the transferee company as goodwill or capital reserve.
4) Under the pooling of interests method, the statutory reserves are recorded by the transferee
company like all other reserves without opening amalgamation adjustment account. In the
purchase method, while incorporating statutory reserves the transferee company has to open
amalgamation adjustment account debiting it with the amount of the statutory reserves being
incorporated.
c) Depreciation per year = INR.60,000 / 10 = INR.6,000

Depreciation on SLM charged for three years= INR.6,000 x 3 years = INR.18,000
Book value of the Computer at the end of third year = INR.60,000 – INR.18,000= INR.42,000.
Remaining useful life as per previous estimate = 7 years
Remaining useful life as per revised estimate = 5 years
Depreciation from the fourth year onwards = INR.42,000 / 5 = INR.8,400 per annum
d) Calculation of Average Due Date
PRIME/41st ME/IPC 10
(Taking 4thAugustas the base date)
Date of Bill Term Due Date Amount No. of days from the Product
` base date i.e. 4th August `
12thMay 3 months 14th August 44,000 10 4,40,000
10th June 4months 13th October 45,000 70 31,50,000
1st July 1 month 4th August 14,000 0 0
19th July 2 months 23th September 17,000 50 8,50,000
1,20,000 44,40,000
Average due date= Base date + Days equal to = Total of products
Total amount
= 4th August + ` 44,40,000
1,20,000
= 4th August + 37 days = 10thSeptember
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EM
AD
AC
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SATA
No of Questions: 7 Time Allowed: 3 Hrs
Qn. No. 1 is compulsory
Attempt any five questions from the remaining six questions.
1.
a) X transferred his house to his daughter M by way of gift. The gift deed, executed by X, contained a
direction that M shall pay a sum of ` 5,000 per month to N (the sister of the executants).
Consequently M executed an instrument in favour of N agreeing to pay the said sum. Afterwards, M
refused to pay the sum to N saying that she is not liable to N because no consideration had moved
from her. Decide with reasons under the provisions of the Indian Contract Act, 1872 whether M is
liable to pay the said sum to N.
b) State the reasons for accepting the change in the present management set-up of the corporate culture
in a business organization.
c) State with reasons whether the following is true or false:
(i) Employment discrimination is treating one person better than another (3 Marks)
(ii) Under consensus, not everyone agrees to the proposal (2 Marks)
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d) Write a letter to bank requesting to provide statements of salary accounts of three months i.e. from
1st January 2015 to 31st March, 2015. (4 x 5 = 20 Marks)
EM
2.
a) Point out with reasons whether the following agreements are valid or void:
(i) Kamala promises Ramesh to lend ` 50,000 in lieu of consideration that Ramesh gets Kamala's
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marriage dissolved and he himself marries her.
(ii) Sohan agrees with Mohan to sell his black horse. Unknown to both the parties, the horse was
dead at the time of agreement.
(iii) Ram sells the goodwill of his shop to Shyam for ` 4,00,000 and promises not to carry on such
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business forever and anywhere in India.

(iv) In an agreement between Prakash and Girish, there is a condition that they will not institute legal
proceeding against each other without consent. (8 Marks)
b) A retailer was purchasing goods regularly from XYZ Ltd. for the purpose of resale. There were defects
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in the goods in one of the purchase lot and as a result the retailer suffered loss of his share in
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competition. The retailer sued the said company for this reason. The company contended that the
goods were purchased for the purpose of resale and therefore, not bound. Is it a valid contention?
Explain clearly the provisions of the Competition Act, 2002 in this Regard (4 Marks)
PR
c) Groups are basic building block of organization. Can you explain the various characteristics of group
personality? (4 Marks)
3.
a) Peter is working as a salesman in a company on salary basis. The following payments were made to
him by the company during the previous financial year–
(i) overtime allowance,
(ii) dearness allowance
(iii) commission on sales
(iv) employer’s contribution towards pension fund
(v) value of food.
Examine as to which of the above payments form part of “salary” of Peter under the provisions of the
Payment of Bonus Act, 1965. (4 Marks)
b) Section 4 of the Payment of Gratuity Act, 1972 stipulates the manner in which the amount of gratuity
payable to an employee will be calculated. Explain (4 Marks)
c) Communication may be informal too. Rumour mill is also a form of communication. Explain (4 Marks)
PRIME/41st ME/IPC 1
d) State with reasons whether the following is true or false:
(i) Corporate citizenship means extent to which business meets legal, ethical and economic
responsibilities
(ii) A finance and accounting professional need not bother about conflict of interest
(2 x 2 = 4 Marks)
4.
a) An allottee of shares in a Company brought action against a Director in respect of false statements in
prospectus. The director contended that the statements were prepared by the promoters and he has
relied on them. Is the Director liable under the circumstances? Decide referring to the provisions of
the Companies Act, 2013. (8 Marks)
b) State in brief the guidelines for managing ethics and to prevent the need for whistle-blowing in the
work place. (4 Marks)
c) “Importance of communication is increasing day-by-day in the business organizations”. State the
reasons for this increasing importance. (4 Marks)
5.
a) Bal Bharti executed a promissory note in favour of Kulbhushan for ` 1 crore. The said amount was
payable three days after sight. Kulbhushan, on maturity, presented the promissory note on 1st
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January, 2015 to Bal Bharti. Bal Bharti made the payments on 4 th January, 2015. Kulbhushan wants to
recover interest for one day from Bal Bharti. Advise Bal Bharti, in the light of provisions of the
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Negotiable Instruments Act, 1881, whether he is liable to pay the interest for one day? (8 Marks)
b) Two or more Hindu joint families decided to form partnership and carry out a non-banking business.
Total number of members in the partnership is 25 and 4 are minors. Does it contravene provisions of
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the Companies Act, 2013? Comment. (4 Marks)
c) Fairness and honesty are at the heart of business ethics and relate to the general values of decision
makers. Discuss. (4 Marks)
6.
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a) Asswin Ltd. is a public limited company, incorporated under the CompaniesAct, 1956. The Board of
directors of the said company has recently decided to insert an article in its articles of association
relating to expulsion of a member by the Board of directors of the company where the directors were
of the view that the activities or conduct of such a member was detrimental to the interestsof the
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company. Is the Board’s decision valid in the eye of law? (8 Marks)

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b) Is the amount standing to the credit of a member of the Provident Fund attachable in the execution of
decree or order of the Court? Examine the law, on this point, laid down in the Employees’ Provident
Funds and Miscellaneous Provisions Act, 1952. (4 Marks)
PR
c) Critical thinking means questioning every step of your thinking process. How do you develop these
skills? (4 Marks)
7. Answer any four out of the following:

a) The last General Meeting was conducted by the Chairman on 12th August, 2014. Thereafter, on 19th
August, 2014, the Chairman died, before the minutes of the said meeting could be signed. In such an
eventuality, how are the minutes book to be dated and signed? Discuss in terms of the provisions of
the Companies Act, 2013.
b) Which one of the following required ordinary resolution? Explain
1. to change the name of the company
2. to alter the articles of association
3. to reduce the share capital
4. to declare dividends.
c) A company should file its annual return within six months of the closing of the financial year. Comment
d) What are the ethical dilemmas in communication.
e) what are the elements which create discrimination in employment in the business organizations.
(4 x 4 = 16 Marks)
PRIME/41st ME/IPC 2
PRIME ACADEMY
41st SESSION MODEL EXAM - IPC – LAW ETHICS AND COMMUNICATION
SUGGESTED ANSWERS
1.
a) As per Section 2(d) of the Indian Contract Act, 1872, it is not necessary that consideration must be move
from promisor only, thus it may be moved by any other person including a stranger to the transaction.
The problem is based on a case of "Chinnava v Ramawa" is which the Court clearly observed that the
consideration need not necessarily move from the party itself, it may move from any person. Thus M is
liable to pay the said sum to N and cannot deny her liability on the ground that consideration did not
move from N.
b) Generally, people resist change in an organization. Even after there are some people who accept or
welcome change due to the following reasons:
(i) Personal Gain: People will be more likely to accept change when they see the possibility that they will
gain in some of the following areas:-
 Increased security
 Money
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 More authority
 Status/Prestige
EM
 Better Working Conditions
 Self-Satisfaction
 Better Personal Contracts
 Less time and efforts
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(ii) Other factors:
 Provide a new challenge
 Respects/like the source
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 Likes the way change is being communicated

 Reduces boredom
 Provides opportunity for input
 Improve future
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Perception, that the change is necessary.

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c)
(i) True. The root meaning of the term discriminate is “to distinguish one object from another “
PR
Employment discrimination is treating one person better than another because of their age, gender,
race, religion or other protected class of status. Discrimination in employment is wrong because it
violates the basic principle of equality. Discrimination is to treat people differently. It is usually
intended to refer to the wrongful act of making a difference in treatment or favour on a basis other
than individual merit.
(ii) False: Consensus means overwhelming agreement. Most consensus building efforts set out to
achieve unanimity. The key indicator of whether or not a consensus has been reached is that
everyone agrees with the final proposal and it is important that consensus be the product of a good-
faith effort to meet the interests of all stakeholders. Thus, consensus requires that someone frame a
proposal after listening carefully to everyone's interests.
PRIME/41st ME/IPC 1
d) Letter to bank requesting to provide statements of salary accounts for the three months (from 1st of
January, 2015 to 31st of March, 2015)
To,
The Manager,
Axis Bank,
Delhi
Reg: Statement of Salary A/C no ……… from 1st of January, 2015 to 31st of March, 2015 Dear Sir,
As you aware that I, have been maintaining a salary account with your esteemed organization for the
last ten years and also all our family deposits are with this branch. I, am in need of statement of my
salary accounts of the above mentioned period.
I, hereby request you to provide the statement at an earliest.
Thanking you.
Yours faithfully,
(Mr. X)
Y
(Customer)
2.
EM
a)
(i) Void Agreement: As per Section 23 of the Indian Contract Act, 1872 an agreement is void if the
object or consideration is against the public policy.
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(ii) Void Agreement: As per Section 20 of the Indian Contract Act, 1872 the contract caused by mistake
of fact are void. There is mistake of fact as to the existence of subject-matter.
(iii) Void agreement: As per Section 27 of the Indian Contract Act, 1872 an agreement in restraint of
trade is void. However, a buyer can put such a condition on the seller of good will, not to carry on
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same business. However, the conditions must be reasonable regarding the duration and the place of
the business.
(iv) Void agreement: An agreement in restraint of legal proceedings is void as per Section 28 of the
Indian Contract Act, 1872.
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b) The problem as asked in the question is based on the provisions of Section 2(f) of the Competition Act,
2002. The Section provides that “consumer” means any person who buys any goods for a consideration
which has been paid or promised or partly paid or partly promised or under any system of deferred
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payment and includes any user of such goods other than the person who buys such goods for
consideration paid or promised or partly paid or partly promised or under any system of deferred
payment when such use is made with the approval of such person whether such purchase of goods is for
resale or for any commercial purpose or for personal use.
Hence Section 2(f) of the Competition Act, 2002 provides that whether purchase of goods is for resale or
for any commercial purpose or for personal use, the purchaser is a consumer. Thus consumer will also
include a person who purchases goods for re-sale. Therefore the contention of XYZ Ltd. is not valid and
not tenable.
c) Following are the characteristics of group personality:

(i) Spirit of Conformity: Individual members soon come to realize that in order to gain recognition,
admiration and respect from others they have to achieve a spirit of conformity. Our beliefs,
opinions, and actions are influenced more by group opinion than by an individual’s opinion, even if it
is an expert’s opinion.
(ii) Respect for group values: Any working group is likely to maintain certain values and ideals which
make it different from others. In order to deal effectively with a group we must understand its
values which will guide us in foreseeing its programmes and actions.
PRIME/41st ME/IPC 2
(iii) Resistance to change: It has been observed that a group generally does not take kindly to social
changes. On the other hand the group may bring about its own changes, whether by dictation of its
leader or by consensus. The degree to which a group resists change serves as an important index of
its personality. It helps us in dealing with it efficiently.
(iv) Group prejudice: Just as hardly any individual is free from prejudice, groups have their own clearly
evident prejudices. It is a different matter that the individual members may not admit their
prejudiced attitude to other’s race, religion, nationality etc. But the fact is that the individual’s
prejudices get further intensified while coming in contact with other members of the group holding
similar prejudices.
(v) Collective power: It need not be said that groups are always more powerful than individuals, how so
ever influential the individual may be. That is why individuals may find it difficult to speak out their
minds in groups. There is always the risk of the one-against many situation cropping up.
3.
a) Computation of Salary / Wages: According to Section 2(21) of the Payment of Bonus Act, 1965 salary and
wages means all remuneration other than remuneration in respect of overtime work, capable of being
expressed in terms of money, which would if the terms of employment, express or implied, were fulfilled,
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be payable to an employee in respect of his employment, or of work done in such employment and
includes dearness allowance, i.e. all cash payment by whatever name called, paid to an employee on
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account of a rise in the cost of living. But the term excludes:
(i) Any other allowance which the employee is for the time being entitled to;
(ii) The value of any house accommodation or of supply of light, water, medical attendance or other
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amenities of any service or of any concessional supply of food grains or other articles;
(iii) Any traveling concession;
(iv) Any bonus including incentive, production or attendance bonus;
(v) Any contribution paid or payable by the employer to any pension fund or for benefit of the
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employee under any law for the time being in force.

(vi) Any retrenchment compensation or any gratuity or other retirement benefit payable to the
employee or any ex-gratia payment made to him; and
(vii) Any commission payable to the employee.
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It has been clarified in the explanation to the section that where an employee is given, in lieu of the
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whole or part of the salary or wage payable to him, free food allowance or free food by his employer,
such food allowance or the value of such food shall be deemed to form part of the salary or wage for
such employee.
PR
In view of the provisions of Section 2(21) explained above, the payment of dearness allowance and value
of free food by the employer forms part of salary of Prakash Chandra while remaining three payments i.e.
payment for overtime, commission on sales and employer’s contribution towards pension funds shall not
form part of his salary.
(i) In the establishments other than seasonal establishments- the employer shall pay the gratuity to an
employee at the rate of 15 days wages based on the rate of wages last drawn by the employee
concerned for every completed year of service or part thereof in excess of 6 months. In case of
piece- rated employee, daily wages shall be computed on the average of the total wages received by
him for a period of three months immediately preceding the termination of his employment, and,
for this purpose, the wages paid for any overtime work shall not be taken into account.
(ii) In case of an employee who is employed in a seasonal establishment can be classified into two
groups
 Those who work throughout the year &
 Who work only during the season?
PRIME/41st ME/IPC 3
The former who are the monthly rated employee are entitled to get the gratuity at the rate of 15 days
wages for every completed year of service or part thereof in excess of six months. The later are, however,
entitled to receive gratuity at the rate of seven days’ wages for each season.
In case of a monthly rated employee; the fifteen days’ wages shall be calculated by dividing the monthly
rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen.
Computation of Gratuity of disabled employee : [Section 4(4)]

When an employee becomes disable due to any accident or disease and is not in a position to do the
same work and re-employed on reduced wages on some other job, the gratuity will be calculated in two
parts
 For the period preceding the disablement: on the basis of wages last drawn by the employee at
the time of his disablement.
 For the period subsequent to the disablement: On the basis of the reduced wages as drawn by
him at the time of the termination of services.
c) Communication may be oral or written for direct contact. It may be informal also. The “Grapevine” is one
of the recognized channels of informal communication. According to human psychology, a person likes to
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form and move in groups. They interact on serious and non- serious issues and they spread it fast
whether the information is correct or not. This process is known as rumour mill. The larger the
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organization, the more active is the rumour mill. The phenomenon of grapevine is based on generally
three factors, namely: (1) formation of favoured group (2) lack of self confidence and, (3) feeling of
uncertainty due to lack of directions. Four kinds of the grapevine chains have been identified and they
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are:
(i) Single Strand Chain, which is the least accurate in passing on the information or message.
(ii) Gossip Chain, which is often used when information or a message regarding ‘not-on-job’ nature is
being conveyed.
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(iii) Probability Chain is used when information is somewhat interesting but not really significant.
(iv) Cluster Chain, which acts as liaison and spreads information with the greatest speed.
d)
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(i) True. The term corporate citizenship denotes the extent to which businesses meet the legal, ethical,
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economic and voluntary responsibilities placed on them by their stakeholders. Companies can best
benefit their stakeholders by fulfilling their economic, legal, ethical, and discretionary responsibilities.
(ii) False. various accounting scandals witnessed during the past few years have put a serious question
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mark on the role of the finance and accounting professional in providing the right information for
decision making both within and outside their respective organizations. As these finance and
accounting professionals are in public practice, they should take reasonable steps to identify
circumstances that could pose the conflict of interest and thus leading to follow unethical behavior.
4.
a) Yes, the Director shall be held liable for the false statements in the prospectus under sections 34 and 35
of the Companies Act, 2013. Whereas section 34 imposes a criminal punishment on every person who
authorizes the issue of such prospectus section 35 more particularly includes a director of the company in
the imposition of liability for such mis statements. The only situations when a director will not incur any
liability for mis statements in a prospectus are as under:
(i) No criminal liability under section 34 shall apply to a person if he proves that such statement or
omission was immaterial or that he had reasonable grounds to believe, and did up to the time of
issue of the prospectus believe, that the statement was true or the inclusion or omission was
necessary.
(ii) No civil liability for any mis statement under section 35 shall apply to a person if he proves that:
PRIME/41st ME/IPC 4
 Having consented to become a director of the company, he withdrew his consent before the
issue of the prospectus, and that it was issued without his authority or consent; or
 The prospectus was issued without his knowledge or consent, and that on becoming aware of its
issue, he forthwith gave a reasonable public notice that it was issued without his knowledge or
consent.
Therefore, in the present case the director cannot hide behind the excuse that he had relied on the
promoters for making correct statements in the prospectus. He will be liable for mis statements in the
prospectus.
b) Managing ethics and preventing whistle-blowing: The focus on core values and sound ethics, the hall
mark of ethical management, is being recognized as an important way to ensure the long term
effectiveness of governance structures and procedures and to avoid the need for whistle blowing.
Employers, who understand the importance of work place ethics, provide their work force with an
effective framework and guiding principles of identity and address ethical issues as they arise. These
guidelines for managing ethics and to avoid the need for whistle-blowing in the work place may be
summarized as follows:-
(i) Have a Code of Conduct and ethics.
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(ii) Establishment open communication.
(iii) Make ethical decisions in group and make decision public whenever appropriate.
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(iv) Integrate ethics with other management practices.
(v) Use of cross functional teams when developing and implementing the ethics management
programme.
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(vi) Appointing an ombudsman.
(vii) Creating an atmosphere of trust.
c) The importance of communication in the industrial organization has increased immensely in these days.
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The following factors are responsible for the growing importance of communication:
(i) Growth in the size and multiple locations of organizations: Most of the organizations are growing
larger and larger in size. The people are working in the country and abroad, of these organizations.
Keeping in touch, sending directions across and getting feedback is possible only when
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communication lines are kept working effectively.

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(ii) Growth of trade unions: Over the last so many decades, trade unions have been growing strong. No
management can be successful without taking the trade unions into confidence. Effective
communication will create relationship between the management and the workers.
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(iii) Growing importance of human relations: Workers in an organization are not like machines. They
have their own hopes and aspirations. Management has to recognize them and should work with
the spirit of integration so that human relations may be maintained. This may only be achieved
though effective communication.
(iv) Public relations: Every organization has a social responsibility towards customers, government,
suppliers and the public at large. Communication is the only way an organization can project a
positive image of itself.
(v) Advances in behavioral sciences: Modern management is deeply influenced by exciting discoveries
made in behavioral sciences like psychology, sociology, transactional analysis etc. All of them throw
light on suitable aspects of human nature and help in developing a positive attitude towards life and
building up meaningful relationship. This is possible only through communication.
(vi) Technological advancement: The world is changing very fast, owing to scientific and technological
advancements. These advancements deeply affect not only the methods of work but also the
compositions of groups. In such a situation, proper communication between superiors and
subordinates becomes very necessary.
PRIME/41st ME/IPC 5
5.
a) Claim of Interest: Section 24 of the Negotiable Instruments Act, 1881 states that where a bill or note is
payable after date or after sight or after happening of a specified event, the time of payment is
determined by excluding the day from which the time begins to run. Therefore, in the given case, Bal
Bharti will succeed in objecting to Kulbhushan’s claim. As Bal Bharti paid rightly “three days after sight”
which was 4th January. Since the bill was presented on 1st January, Bal Bharti was required to pay only
on the 4th and not on 3rd January, 2015 as contended by Bal Bharti.
b) As provided in section 464 of the Companies Act, 2013, no association or partnership consisting of more
than such number of persons as may be prescribed shall be formed for the purpose of carrying on any
business that has for its object the acquisition of gain by the association or partnership or by the
individual members thereof, unless it is registered as a company under this Act or is formed under any
other law for the time being in force. The number of persons shall not exceed 50, as per Rule 10 of
Companies (Miscellaneous) Rules, 2014. This shall not apply to (a) a Hindu undivided family carrying on
any business; or (b) an association or partnership, if it is formed by professionals who are governed by
special Acts. Since the number of adults are below 50, hence it does not contravene the provisions of
Companies Act, 2013.
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c) Mainly ethical issues can be categorized in the framework of their relation with business associates,
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conflicts of interest, fairness and honesty, and communications. Fairness and honesty are at the heart of
business ethics and relate to the general values of decision makers. At a minimum, businesspersons are
expected to follow all applicable laws and regulations. But beyond obeying the law, they are expected
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not to harm customers, employees, clients, or competitors knowingly through deception,
misrepresentation, coercion, or discrimination.
One aspect of fairness and honesty is related to disclosure of potential harm caused by product use. For
example, Mitsubishi Motors, a Japanese automaker, faced criminal charges and negative publicity after
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executives admitted that the company had systematically covered up customer complaints about tens of
thousands of defective automobiles over a 20-year period in order to avoid expensive and embarrassing
product recalls.
Another aspect of fairness relates to competition. Although numerous laws have been passed to foster
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competition and make monopolistic practices illegal, companies sometimes gain control over markets by
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using questionable practices that harm competition. Rivals of Microsoft, for example, accused the
software giant of using unfair and monopolistic practices to maintain market dominance with its internet
Explorer browser.
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6.
a) The Ministry of Corporate Affairs while clarifying as to whether a public limited company had powers to
insert an article in its Articles of Association relating to expulsion of a member by the Board of Directors
of the company had stated that an article for expulsion of a member is opposed to the fundamental
principles of the Company Jurisprudence and is ultra vires the company. Such a provision is against the
provisions of the Companies Act relating to the rights of a member in a company, the powers of the
Central Government as an appellate authority under Section 111 of the Act and the powers of the Court
under Sections 107, 395 and 397 of the Companies Act. According to Section 9 of the Companies Act, the
Act overrides the Memorandum and Articles of Association and any provision contained in these
documents repugnant to the provisions of the Companies Act, is void.
The Ministry of Corporate Affairs has, therefore, clarified that any assumption of the powers by the Board
of Directors to expel a member by alteration of Articles of Association shall be illegal and void.
Considering the above-mentioned clarification, the Board’s decision of Asswin Ltd. is invalid in the eyes of
law.
PRIME/41st ME/IPC 6
b) As per Section 10 of the Employees’ Provident Funds and Miscellaneous Provisions Act,1952, the amount
standing to the credit of any member in the fund or of any exempted employee in a provident fund shall
not in any way be capable of being assigned or charged and shall not be liable to attachment under any
decree or order of any court in respect of any debt or liability incurred by the member or exempted
employee, and neither the official assignee appointed under the Presidency Town Insolvency Act,1909,
nor any receiver appointed under the Provincial Insolvency Act,1920, shall be entitled to or have any
claim on, any such amount.
This protection also applies to provident fund, pension and insurance amount receivable by employee
under the scheme. The amount standing to the credit of the person at the time of his death is payable to
his nominees under the scheme or the rules under this Act. Further, the amount shall be free from any
debt or other liability incurred by the deceased or the nominee before the death of the member or of the
exempted employee and shall also not be liable to attachment under any decree or order of any Court.
(Section 10, EPF & MP Act, 1952).
c) Critical thinking is the discipline of rigorously and skillfully using information, experience, observation and
reasoning to guide your decisions, actions and beliefs. Critical thinking means questioning every step of
your thinking process: Have you considered all the facts? Have you tested your assumptions? Is your
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reasoning sound? Can you be sure your judgment is unbiased? Is your thinking process logical, rational
and complete? This kind of rigorous, logical questioning is often known as Socratic questioning, after the
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Greek Socrates who is considered to be the founder of critical thinking. By developing the skills of critical
thinking, and bringing rigour and discipline to your thinking processes, you stand a better chance of being
“right” , likely to make good judgments, choices and decisions in all areas of your life. This is an important
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part of "success" and "wisdom".
To do this effectively, you need to develop skills to:
Analyze Cause and Effect: You must be able to separate the motive or reason for an action or event (the
cause) from the result or outcome (the effect).
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Classify and Sequence: You must be able to group items or sort them according to similar characteristics.
Compare and Contrast: You must be able to determine how things are similar and how they are different.
Infer: You must be skilled in reasoning and extending logic to come up with plausible options or
outcomes.
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Evaluate: You must be able to determine sound criteria for making choices and decisions.
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Observe: You must be skilled in attending to the details of what actually happened.
Predict: You must be able to finding and analyze trends, and extend these to make sensible predictions
about the future.
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Rationalize: You must be able to apply the laws of reason (induction, deduction, analogy) in to judge an
argument and determine its merits.
Prioritize: You must be able to determine the importance of an event or situation and put it in the correct
perspective.
Summarize: You must be able to distill a brief report of what happened or what you have learned.
Synthesize: You must be able to identify new possible outcome by using pieces of information that you
already know.
7.
a) Section 118 of the Companies Act, 2013 provides that every company shall prepare, sign and keep
minutes of proceedings of every general meeting, including the meeting called by the requisitionists and
all proceedings of meeting of any class of share holders or creditors or Board of Directors or committee
of the Board and also resolution passed by postal ballot within thirty days of the conclusion of every such
meeting concerned. Minutes kept shall be evidence of the proceedings recorded in a meeting.
By virtue of Rule 25 of the Companies (Management and Administration ) Rules 2014 read with section
118 of the Companies Act, 2013 each page of every such book shall be initialed or signed and the last
page of the record of proceedings of each meeting or each report in such books shall be dated and signed
PRIME/41st ME/IPC 7
by, in the case of minutes of proceedings of a general meeting, by the chairman of the same meeting
within the aforesaid period of thirty days or in the event of the death or inability of that chairman within
that period, by a director duly authorized by the Board for the purpose.
Therefore, the minutes of the meeting referred to in the case given above can be signed in the absence of
Mr V/ on death of the chairman, by any director who is authorized by the Board.
b) To declare dividends; Declaration of dividend is one of the ordinary businesses transacted at every
Annual General Meeting of the company Members may at an AGM declare dividend by ordinary
resolution.
c) Every company shall file a copy of the annual return with the Registrar.
If AGM is held-
File AR within 60 days from the date on which the AGM is held or
If no AGM is held in any year-
File AR within 60 days from the date on which the AGM should have been held together with the
statement specifying the reasons for not holding the AGM with such fees or additional fees as may be
prescribed, within the time as specified, under section 403.
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d)
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(i) Maintain candour: Candour refers to truthfulness, honesty, frankness and one should stick to these
elements while communicating with others.
(ii) Keep message accurate: At the time of relaying information from one source to another,
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communicate the original message as accurately as possible.
(iii) Secrecy: One has to maintain secrecy and confidence in communication. So one should not divulge
such information to others
(iv) Ensure timeliness of communication: The timing of messages can be critical. Delay in sending
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messages can be assumed unethical.

(v) Avoid deception: Ethical communicators are always vigilant in their quest to avoid deception,
fabrication, intentional distortion or withholding of information in their communication.
(vi) Confront unethical behaviour: One must confront an unethical behaviour in order to ensure a
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consistent ethical view point.

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e) Elements of Discrimination: Generally, the discrimination means to distinguish one object from another
or treating people differently. It is usually intended to refer to the wrongful act of making a difference in
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treatment or favour on a basis other than individual merit. Such discrimination may also be related in
employment in business organization. The elements which create discrimination may be summarized as
follows:
(i) If the decision against one or more employees is taken which is not based on individual merit, such
as the ability to perform a given job, seniority or other morally legitimate qualification.
(ii) If the decision has been derived solely from racial or sexual prejudice, false stereotypes other kind of
morally unjustified attitude against members of which the employee belongs.
(iii) If the decision has a harmful or negative impact on the interests of the employees, perhaps costing
them jobs, promotions or better pay.
Discrimination in employment is wrong because it violates the basic principle of justice by
differentiating between people on the basis of characteristics (race or sex) that are not relevant to
the tasks they must perform. Looking to these aspects law has also been changed to conform to
these moral requirements and to minimize the discrimination in employment in this respect.
PRIME/41st ME/IPC 8
MATA
No of Questions: 7 Times Allowed: 3 Hrs
Question No. 1 is compulsory

Answer any five questions from the remaining six questions
Wherever necessary suitable assumptions should be made by the candidates
1.
a) In a certain week, the time allowed to a worker for Job X was 48 hours He took 30 hours for the
job. If the hourly effective rate of earnings under the Rowan plan was ` 55, Find the normal
hourly rate of wages.
Using the same normal hourly wage rate, compute wages of the worker under Halsey plan.
b) From the following particulars furnished by M/s. Starlight Co. Ltd. find out:
(i) Material cost variance; (ii) Material usage variance and (iii) Material price variance.
Value of Material purchased : ` 9,000
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Quantity of Material purchased : 3,000 units
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Standard quantity of materials required
per tonne of finished product : 25 units
Standard rate of material : ` 2 per unit
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Opening Stock : Nil
Closing Stock of material : 500 units
Finished production during the period : 80 tonnes
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c) Mahalaxmi Limited is required to choose between two machines M1 and M2. The two machines
are designed differently, but have identical capacity and do exactly the same job. Machine M1
costs `1,50,000 and will last for 3 years It costs `40,000 per year to run. Machine M2 costs
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` 1,00,000, but will last only for 2 years, and costs `60,000 per year to run. Ignore tax.
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Opportunity cost of capital is 10 per cent. Which machine should Mahalaxmi Limited buy?
Present value Of Re1 at 10% compounded annually :
Years 1 2 3
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Factor 0.909 0.826 0.751
d) A Beta Limited is into manufacturing. It has an expected usage of 50,000 units of certain product
during the next year. The cost of processing an order is ` 20 and the carrying cost per unit is
`0.50 for one year. Lead time on an order is five days and the company will keep a reserve
supply of two days’ usage. You are required to calculate:
(i) The economic order quantity and
(ii) The re-order point. (Assume 360 days in a year). (4 x 5= 20 Marks)
2.
a) Thara travels to work by train to her 5–day week job. Instead of buying daily tickets she finds it
cheaper to buy a quarterly season ticket which costs ` 188 for 13 weeks.
Deepa, an acquaintance, who also makes the same journey, suggests that they both travel in
Thara’s car and offers to give her ` 120 each quarter towards her car expenses. Except for
weekend travelling and using it for local college attendance near her home on three evening
each week to study for her CA IPC , the car remains in Thara’s garage.
PRIME/41st ME/IPC 1
Thara estimates that using her car for work would involve her, each quarter, in the following
expenses:
`
Depreciation (proportion of annual figure) 200
Petrol and oil 128
Tyres and miscellaneous 52
You are required to state whether Thara would accept Deepa’s offer and to draft a statement to
show clearly the monetary effect of your conclusion.
b) Upper India Ltd. is to decide between debt funding and equity funding for its expansion
programme. Its current position is as under :
`
5% Debt 4,00,000
Equity capital (`10 per share) 10,00,000
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Surplus 6,00,000
Total capitalisation 20,00,000
Sales
Less : Cost EM
60,00,000
(53,80,000)
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Profit before interest and tax (PBIT) 6,20,000
Less : Interest (20,000)
Profit before tax (PBT) 6,00,000
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Less : Income-tax @ 33.99% (2,03,940)

Profit after tax (PAT) 3,96,060
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The expansion programme is estimated to cost ` 10,00,000. If it is financed through debt, the
rate of interest on new debt will be 7% and the price earnings (P/E) ratio will be 6 times. If the
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expansion programme is financed through fresh equity shares, the new shares can be sold
netting ` 25 per share and the P/E ratio will be 7 times. The expansion will generate additional
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sales of ` 20,00,000 with after tax return of 5%. If the company is to follow a policy of
maximizing the market value of its shares, which form of financing should it choose and why?
(2 x 8= 16 Marks)
3.
a) Richa Industries engaged in manufacturing Lunch Boxes is working to 50% capacity and produces
15,000 Lunch Boxes per annum. The present cost break up for one Lunch Box is as under:
Material ` 25; Labour ` 20 and Overhead ` 15 (60% variable).
The selling price is ` 75 per Lunch Box.
If it is decided to work at 60% capacity, the selling price falls by 2%. At 80% capacity, the selling
price falls by 10% accompanied by a similar fall in the price of material but labour rate increases
by 10%. You are required to find out the most profitable capacity level amongst 50%, 60% and
80% capacity levels and also calculate the Break-even Point (in units) at above said levels.
PRIME/41st ME/IPC 2
b) From the following information, prepare Trading and Profit and Loss Account:
Debt-Equity Ratio (Long-term Debt/Shareholders’ Funds) 2:1
Capital Gearing Ratio (Funds bearing fixed payments to Equity 3:1
Shareholder’s Funds)
15% Long-term Debts ` 8,00,000
Return on Equity Shareholder’s Funds 25%
Tax Rate 50%
15%Preference Share Capital ?
Break-up of Cost & Profit:

Materials 40%
Labour 25% 25%
Manufacturing Expenses 10%
Depreciation on Plant 10%
Office & Selling Expenses 2.50%
Operating Profit 12.50%
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Sales 100%
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(2 x 8 = 16 Marks)
4.
a) From the following information relating to Process I of a factory for the month of April 2015,
prepare the statement of equivalent production, statement of cost, statement of evaluation and
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Process Account, using average Cost method;
(i) Opening work in progress : 500 units Materials ` 27,000
Labour ` 8,000
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Overheads ` 12,500
47,500
(ii) Cost incurred during April 2003:
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Input of materials: 14,000 units ` 5,74,750

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Labour ` 1,19,300
Overheads ` 1,78,450
(iii) Process loss:
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Normal loss: 10%

Value of scrapped unit: ` 10 each.
Actual loss during April 2003: 1,500 units
Degree of completion: Materials 100%, Labour and Overheads 60%.
(iv) Closing work in progress: 1,000 units
Degree of completion: Materials 100%, Labour and Overheads 70%.
(v) Processed units transferred to Process II: 12,000 units during April 2015.
b) As on 1st April, 2014 and 31st March, 2015, the balance sheets of Vishnu were as follows :
Liabilities 1.04.2014 (`) 31.03.2015 (`)
Creditors 40,000 44,000
Mrs Vishnu’s loan 25,000 —
Loan from Union Bank 40,000 50,000
Capital 1,25,000 1,53,000
TOTAL 2,30,000 2,47,000
PRIME/41st ME/IPC 3
Assets
Cash 10,000 7,000
Debtors 30,000 50,000
Stock 35,000 25,000
Machinery 80,000 55,000
Land 40,000 50,000
Building 35,000 60,000
TOTAL 2,30,000 2,47,000
During the year, a machine costing ` 10,000 (accumulated depreciation ` 3,000) was sold
for ` 5,000. The balance of provision for depreciation against machinery as on 1st April,
2007 was ` 25,000, and on 31st March, 2008 it was ` 40,000. Net profit for the year 2007-08
amounted to ` 45,000.
You are required to prepare the Funds flow Statement. (2 x 8= 16 Marks)
5.
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a) A Limited is engaged in the production of Sugar. While producing sugar, molasses is also
produced. Molasses is identified as a by-product of sugar. Suggest 2 treatments of molasses in
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the cost accounts of A limited.
b) Distinguish between cost allocation and absorption
c) High Vision Ltd. has current sales of `20,00,000. The company is planning to introduce a cash
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discount policy of 2/10, net 30. As a result, the company expects the average collection period to
go down by 10 days and 80% of the sales opt for the cash discount facility. If the company’s
required return on investment in receivables is 20%, should it introduce the new discount policy.
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d) Write a short note on inter relationship between the investing, financing and dividend decisions.
(4 x 4 =16 Marks)
6.
a) An amount of ` 19,80,000 was incurred on a contract work up to 31.3.2015. Certificates have
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been received to date to the value of ` 24,00,000 against which ` 21,60,000 has been received in
cash. The cost of work done but not certified amounted to ` 45,000. It is estimated that by
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spending an additional amount of ` 1,20,000 (including provision for contingencies) the work
can be completed in all respects in another two months. The agreed contract price of the work is
` 25 lakhs. Compute a conservative estimate of the profit to be taken to the profit and Loss
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Account and prepare the contract account. (6 Marks)
b) Silver Coin Ltd. is a manufacturing company. It has received an export order of 1,80,000 units.
The finance manager of the company is estimating working capital requirements for the
production to meet export order. Following information is given for the year 2015-16 :
 Production in 2014-15 was 1,80,000 units and it is estimated that in 2015-16 the level will
be maintained.
 Each unit will remain in process for one month. Raw material being channelized into the
pipelines immediately and the labour and overhead costs accruing evenly during the
month.
 Final production will be stored in warehouse awaiting despatch for 3 months.
 Credit allowed by creditors is 1.5 months from the date of delivery of raw materials.
 Credit permitted to debtors is 2.5 months from the date of despatch.
 Selling price per unit is ` 15.
 The expected ratios of cost to the selling price are raw material 50%, direct wages 15% and
overheads 20%.
PRIME/41st ME/IPC 4
 Raw materials are expected to remain in store for an average of 1.5 months before issue
to production.
 There is regular production and sales cycle.
 The company maintains ` 60,000 as cash in hand.
 Wages and overheads are paid on the first of each month for the previous month.
(i) You are required to submit the working capital requirement to the finance manager of
Silver Coin Ltd.
(ii) From the above information calculate maximum permissible bank finance as per
Tandon committee norms under all three methods assuming core current assets are
25% of current assets. (10 Marks)
7. Write short notes on any four:

a) Economic batch quantity
b) Zero based budgeting
c) Liquidity vs. Profitability in working capital management
d) “Money in the future is worth less than similar money today.” Give the reasons and explain.
e) Do the NPV and Profitability index criterion lead to the same acceptance rejection and ranking
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decisions? (4 x 4= 16 Marks)
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PRIME/41st ME/IPC 5
PRIME ACADEMY
41st SESSION MODEL EXAM - IPC - COST ACCOUNTING AND FINANCIAL MANAGEMENT
SUGGESTED ANSWERS
1.
a) S = 48hours T = 30 Hours Earnings per hour = ` s55 so Total earnings = 55 x 30=1,650Rs
𝑆−𝑇
Total earnings under Rowan = (𝑇 ∗ 𝑅) + ∗ (𝑇 ∗ 𝑅)
𝑠
48−30
= 30 𝑅 + (30𝑅). Solving for R, we get R = `40.(rate per hour)
48
Wages under Halsey = (𝑇 ∗ 𝑅) + 50%(𝑆 − 𝑇) ∗ 𝑅
= (30 ∗ 40) + 50%(48 − 30) ∗ 40
= ` 1560.
b) AP = 9000/3000 = 3
AQ = Actual quantity consumed = Purchase +op. stock - closing stock
= 3,000+0-500 = 2500Kg
SP = Given ` 2
SQ = Standard quantity or actual production
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= 25 x 800 = 2000kg
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SP X SQ SP x AQ AP X AQ
2 x 2000 2 x 2500 3 x 2500
=4000 =5000 =7500
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(i) Material Usage Variance SPSQ- SPAQ 4,000 – 5000 = 1000(A)
(ii) Material Price Variance SPAQ-APAQ 5000 – 7500 = 2500(A)
(iii) Material Cost Variance SPSQ - APAQ 4000 -7500 = 3500(A)
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c)
Year Cash flow PVIF/AF Discounted cash flow
M1 ` M2 ` M1 ` M2 `
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0 Initial outflow 1,50,000 1,00,000 1 1,50,000 1,00,000

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1-3 Operating costs 40,000 2.486 99,440

1-2 Operating costs 60,000 1.735 1,04,100
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Present value of outflows 2,49,440 2,04,100

PVAF(10% Life) 2.486 1.735
Equated Annual costs 1,00,338 1,17,637
Since Equated Annual costs (EAC) of M1 is lower, Mahalaxmi Ltd should buy M1.
d) Annual requirement (A)= 50,000

Ordering costs (O) = `20
Carrying cost (C) = `0.5
2 2𝐴𝑂
EOQ = √( ) = 2000
𝐶
Safety stock = Two days usage = 277.78 i.e 278 units
Reorder level = (Lead time x consumption per day) + Safety stock = 694.44 + 278 = 972units
PRIME/41st /ME/IPC 1
2.
a)
Quarterly expense for using car
Depreciation# -
petrol and oil 128
Tyres and miscellaneous 52
180
Less: Share from Deepa 120
Net cost 60
# Depreciation will be incurred even if the car is not used and hence is ignored.
Decision: Since the cost of using own car (`60) is cheaper than expense of train travel (`188 per
quarter), Thara should accept Deepa’s offer as it would result in net quarterly savings of `128.
b)
Capital structure after expansion: Option I ` Option II `
5% Debt 4,00,000 4,00,000
Equity share capital 10,00,000 14,00,000
Y
Surplus 6,00,000 12,00,000
EM
7% Debt 10,00,000
30,00,000 30,00,000
AD
Capital structure after expansion:
No: of shares issued 10L/25 = 40,000
Share capital =4L and Share Premium =`6L
Sales 20 Lacs
AC
Additional Operating profit after tax 1,00,000

Therefore before tax(EBIT) 1,51,492
E
Option I ` Option II `
EBIT (6,20,000 +1,51,492) 7,51,492 7,51,492
IM
Less: Interest 90,000 20,000

EBT 6,61,492 7,31,492
PR
Less:Tax @33.99% 2,24,841 2,48,634

PAT 4,36,651 4,82,858
No: of shares 1,00,000 1,40,000
EPS 4.37 3.45
PER 6 7
MPS 26 24
Since debt option maximises value of shares, it should be prefered.
3.
a)
Particulars 50% 60% 80%
Selling price 75 73.5 67.5
Less: Variable costs
Materials 25 25 22.5
Labour 20 20 22
Overheads 9 9 9
Total 54 54 53.5
contribution 21 19.5 14
No: of units 15,000 18,000 24,000
Total contribution 3,15,000 3,51,000 3,36,000

Fixed cost 90,000 90,000 90,000
#𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠
𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑝. 𝑢
Break even point# 4,285.71 4,615.38 6,428.57
4,286 4615 6,429
i.e units units units
Fixed cost = 6 per unit x base 15,000 units = `90,000
b) 15% Long term debt=`8Lakhs

Debt/(E +P)= 2:1
Y
Equity+ Preference= `4 Lakhs
Equity = 4L-P
EM
Capital gearing ratio =3:1
Debt +Pref / E = 3
8L + P = 3(4L –P)
AD
4P =4 Lakhs or Preference capital is `1 Lakhs
Equity share capital = `3 Lakhs
Return on share holder’s funds = 25%
Return to share holder = `75,000
AC
`
Profit to Equity share holder 75,000
Add: preference dividend 15,000 (15% of 1L)
E
PAT 90,000
PBT(PAT/50%) 1,80,000
IM
Add: Interest 1,20,000 8L x15%

EBIT : Operating profit 3,00,000
PR
Sales (EBIT/12.50%) 24,00,000
Trading , Profit and loss a/c

` `
Materials :40% 9,60,000 By Sales 24,00,000
" Labour 25% 6,00,000
" Manufacturing Expenses 10% 2,40,000
" Depreciation on Plant 10% 2,40,000
" Gross Profit c/f 3,60,000
24,00,000 24,00,000
" Office & Selling Expenses 60,000 " Gross Profit b/f 3,60,000
" Interest 1,20,000
" Tax 90,000
" Preference dividend 15,000
" surplus to Equity shareholders 75,000
3,60,000 3,60,000
4.
a)
Statement of input output `
Opening stock 500
Input 14,000
Less: closing stock (1,000)
Processed production 13,500
Less: Normal loss 10% (1,400)
Expected output 12,100
Actual output 12,000
Abnormal loss 100
Statement of equivalent production

Particulars units materials Labour & overheads
% Eq.units % Eq.units
Y
Transfer 12,000 100 12,000 100 12,000
EM
Closing stock 1,000 100 1,000 70 700
Normal loss 1,400 0 - 0 -
Abnormal loss 100 100 100 60 60
AD
14,500 13,100 12,760
Computation of cost per equivalent unit

AC
Particulars Materials Labour & overheads

` `
Opening stock 27,000 20,500
E
Cost incurred this month 5,74,750 2,97,750

IM
RP of Nloss -14,000
Total 5,87,750 3,18,250
PR
Eq. Units 13,100 12,760

Cost per eq. units 44.87 24.94
Statement of evaluation
Transfer 12000 x (44.87 +24.94) 8,37,692
Closing stock (1000 x 44.87) + (700 x24.94) 62,325
Abnormal loss (100 x 44.87) + (60 x24.94) 5,983
Process a/c
Units ` Units `
To Opening stock 500 47,500 By normal loss 1,400 14,000
" Materials 14000 5,74,750 " abnormal loss 100 5,983
" Labour 1,19,300 " Transfer 12,000 8,37,692
" overheads 1,78,450 " Closing stock 1,000 62,325
14,500 9,20,000 14,500 9,20,000
b.
Funds flow statement
Sources ` Application `
Funds from operation 65,000 Land bought 10,000
Machine sold 5,000 Building 25,000
loan taken 10,000 Loan repaid 25,000
Drawings 17,000
Wcap increase 3,000
80,000 80,000
Workings:
(1) Statement of changes in Working capital
Particulars Opening ` Closing `
Cash 10,000 7,000
Debtors 30,000 50,000
Stock 35,000 25,000
Total 75,000 82,000
Less: Creditors -40,000 -44,000
Y
Working capital 35,000 38,000
Increase 3,000 (A)
Machinery
` EM
`
AD
To Bal b/d 80,000 By P&L 18,000 FFO
(depn)
" Bank(S) 5,000
AC
" P&L :Loss 2,000 FFO

" Bal c/d 55,000
80,000 80,000
E
Accumulated depreciation
` `
IM
To Bal b/d 25,000 By sale 3,000

" P&L 18,000 " Bal c/d 40,000
PR
(b.f)
43,000 43,000
Building acquired: 60,000 - 35,000 = 25,000(A)
(Depreciation no info given)
Loan repaid : `25,000 (A)
Increase in Bank loan : `10,000(S)
Capital
` `
To Bank(A) 17,000 By Bal b/d 1,25,000
(drawings) " Profit 45,000
" Bal c/d 1,53,000
1,70,000 1,70,000
Funds from operation:=

Profit + depreciation +loss on sale of asset = 45,000+18,000+2,000 =`65,000 (S)
5.
a) Treatment of by product costs
 Credit the Costing P & L a/c with sales proceeds of the by product
 Reduce sale proceeds from total costs
 Compute cost attributable to by product using reverse cost method or NRV and reduce from costs.
b) Cost allocation is allotting whole item of cost to cost centre and profit centre. Cost absorption is a
process by which the overheads of the company are charged to the jobs on the basis of the resources
which these jobs consume in the cost and profit centers
c) Reduction in debtors :20L x80% x(10/360) = Rs44,444
Benefit: Interest saved on debtors reduced : `44,444 * 20% = `8,889
Cost: Cash discount: `20L x 80% x 2% = `32,000
Since cost exceeds benefit, company should not introduce discount policy.
d) Investment decision is deciding whether a project should be accepted or not. Once viability is
established the next decision is regarding how to finance the investment and at what cost. Once the
finance is raised and investment done, it starts generating returns in due course. The next decision is
whether to distribute dividends or retain and invest in the business.
6.
a)
Y
Contract a/c
` `
EM
To Costs 19,80,000 By work certified 24,00,000
" Notional profit c/f 4,65,000 " work uncertified 45,000
24,45,000 24,45,000
AD
" P & L a/c 3,39,429 " Notional profit b/f 4,65,000
" WIP Reserve 1,25,571
4,65,000 4,65,000
AC
Estimated profits = 25Lakhs - (19.80L + 1.2L) = 4L

DOC = WC/CP = 96%. CR/WC = 21.6/24=90%
E
Since contract nearing completion: Estimated profit rule

𝐶𝑅
(1) 𝐸𝑃 ∗ 𝐷𝑂𝐶 ∗ ( )= 4L x 96% x 90% =`3,45,600
IM
𝑊𝐶
𝐶𝑇𝐷 𝐶𝑅
(2) 𝐸𝑃 ∗ ( )∗( )= 4L x (19.8/21) x 90% = `3,39,429√
𝑇𝐶 𝑊𝐶
PR
b) Statement showing Working Capital requirement

Particulars Basis of Calculation Amount (` lakhs)
Raw material in store 13,50,000 x 1.5/12 1,68,750
Work in progress 15000 units of one month
Raw Materials 15,000 x 7.50 = 1,12,500
Wages 15,000 x 2.25 x 50% = 16,875
Overheads 15,000 x 3.00 x 50% = 22,500 1,51,875
Stock of finished goods 15,000 x 3 x 12.75 = 5,73,750
Inventory 8,94,375
Debtors 2.5 x 15,000 x 15 = 5,62,500
Cash in Hand 60,000
Current Asset (A) 15,16,875
Creditors 1.5/12 x 13,50,000 = 1,68,750
Wages and Overheads 1/12 x 9,45,000 78,750
Current Liabilities (B) 2,47,500
Working Capital requirement
Current Assets– Current Liabilities (A-B) 12,69,375
Working Notes :
(i) Production during 2009-10 is 1,80,000 units. Production and sales are regular so sales is 1,80,000
units i.e., 15,000 units per month
(ii) Statement of Cost and Profit of Silver Coin Ltd.
Particulars ` per unit Amount in a Year (` Lakhs)
Raw material 50% of `15 7.50 13,50,000
Direct Wages 15% of `15 2.25 4,05,000
Overheads 20% of `15 3.00 5,40,000
Cost of Sales 12.75 22,95,000
Sales 15.00 27,00,000
Profit 2.25 4,05,000
Note: Wages and overheads for WIP has been charged 50%
Calculation of Maximum Permissible Bank Finance
Method Formula Results
I 75%[CA – CL] 9,52,031
II 75% CA – 100% CL 8,90,156
III 75%[CA – CCA] – 100%CL 6,05,742
Y
7.
a) Economic batch quantity
EM
 Is the quantity to be produced in a batch as a result of which the total cost represented by the
sum of setting up cost , carrying cost and other cost of production is lowest.
1
2𝐴𝑆 2
 Can be calculated using the formula( )
AD
𝐶
b) Zero based budgeting

 Budgets are made for the upcoming period , regardless of whether the budget is higher of lower
AC
than the previous one

 Budgets start from a zero base and every function within an organization is analyzed for its needs
and costs.
c) Liquidity vs. Profitability in working capital management
E
 Higher investment in working capital vs fixed assets means higher liquidity and thus lower risks.
IM
However returns from working capital is lower than from fixed assets and hence lower profitability
 A lower investment in working capital would lead to higher profitability but lower liquidity.
d) “Money in the future is worth less than similar money today.” Give the reasons and explain.
PR
 Money received today has more value than money received later because money has time value.
 Postponing consumption of money would require a compensation which would include
opportunity cost of riskless investment and compensation for risk.(Rf + Rp)
 Thus future cash flows will be discounted at that rate and hence their worth is lesser.
e) Do the NPV and Profitability index criterion lead to the same acceptance rejection and ranking
decisions?
 NPV is Present value of Inflows (PVIF) less Present value of outflows(PVOF) while Profitability
Index is PVIF/PVOF.
 Since both use the same parameters the decision regarding acceptance/ rejection is same for
both.
 However while selecting mutually exclusive projects, they may differ when the size of the projects
are unequal.
 Choice should be made on PI in such cases assuming projects are divisible and can be repeated,
TATA
No of Questions: 7 Time Allowed: 3 Hrs
Question No. 1 is compulsory.

Attempt any five questions from the remaining six questions.
Wherever necessary, suitable assumptions should be made by the candidates.
1.
a) Dr. Vijay, a resident individual at Chennai, aged 50 years is running a clinic. His Income and Expenditure
Account for the year ending March 31st 2015 is as under:
Expenditure ` Income `
To Medicine consumed 8,40,000 By Consultation and 21,00,000
To Staff salary 4,25,000 Medical charges
To Clinic consumables 1,55,000 By Income-tax refund 16,500
To Rent paid 1,20,000 (principal ` 15,000,
Y
Interest ` 1,500)
EM
To Administrative expenses 3,00,000
To Donation to IIT Delhi for 1,00,000 By Dividend from Indian 27,000
Research approved under companies
AD
section 35(2AA) By Winning from lottery
To Net Profit 2,92,500 Net of TDS 35,000
By Rent 54,000
AC
22,32,500 22,32,500
E
(i) Rent paid includes ` 36,000 paid by cheque towards rent for his residence.
(ii) Clinic equipments are :
IM
01.04.2014 Opening WDV ` 4,50,000

07.02.2015 Acquired (cost) ` 1,00,000
PR
(iii) Rent received relates to property let out at Chennai. Gross Annual Value ` 54,000. The municipal
tax of ` 9,000, paid in January 2015 has been included in “administrative expenses”.
(iv) Dr. Vijay availed a loan of ` 5,50,000 from a bank for higher education of his daughter. He repaid
principal of ` 50,000, and interest thereon ` 65,000 during the year 2014-15.
(v) He paid ` 60,000 as tuition fee to the university for full time education of his son.
From the above, compute the total income of Dr. Vijay for the A.Y.2015-16. (10 Marks)
b) Sarvesh Private Limited is engaged in providing taxable services. It received following amounts in the
month of July, 2014. Compute the value of taxable service and the service tax payable by it:-
Receipts Amount (`)
Advances received from clients for which no service has been rendered so Far 8,00,000
Demurrage charges recovered for use of the services beyond the agreed 50,000
Period
Security deposits forfeited for damages done by service receiver owing to 5,00,000
his negligence in the course of receiving a service
PRIME/41st ME/IPC 1
Besides the above receipts, one of the clients-XYZ Ltd. made a payment of ` 1,50,000 (out of which
`25,000 were paid extra by mistake). However, Sarvesh Private Limited refused to return the excess
payment received.
Note: Sarvesh Private Limited is not eligible for small service providers’ exemption under Notification
No. 33/2012 – ST dated 20.06.2012. (5 Marks)
c) Compute total customs duty along with EC and SHEC payable from the following details:
(i) Transaction Value u/s 14(1) = ` 1,00,000
(ii) Basic Customs Duty is 10%
(iii) Additional Customs Duty u/s 3(1) is 12%
(iv) Additional Customs Duty u/s 3(5) is 4% (5 Marks)
2.
a) Mr. Raja furnishes you the following information for the year ended 31.03.2015
(i) Income from plying of vehicles (as per books) (He owned 7 Vehicles throughout the year)
`6,94,400
(ii) Income from Retail Trade of Garments (computed as per books) (Sales Turnover ` 21,70,000)
Y
` 75,000
(iii) He has brought forward depreciation relating to Assessment Year 2013–2014 ` 1,00,000
EM
(iv) On 31.01.2015, he deposited `1,50,000 into his PPF A/c and purchased NSC for ` 1,00,000.
Compute Taxable Total Income of Mr. A for AY 2 015–2016. (6 Marks)
AD
b) Ms. Geetha was gifted a land by her father in December, 2001 at the occasion of her marriage. The land
was allotted to her father in November, 1991 at cost of ` 6 lac by DDA for commercial purpose. She set
up a nursery on land, earns profit of ` 4 lacs during the year 2014-15 from seedlings grown in nursery.
She sold the nursery to her friend at ` 50 lacs in October, 2014. Her friend paid ` 20 lacs in cash and
AC
` 30 lacs in the form of shares. Market value of land on date of sale was ` 90 lacs and shares ` 70 lacs.
Geetha, with an intention to earn profit, invested `20 lacs in shares by purchasing shares for ` 15 lacs
from National Stock Exchange and ` 5 lacs in subscription to equity shares forming part of eligible issue
of capital by a public company. She spent `60,000 on purchase of computers, ` 20,000 on net
E
connectivity and `2 lacs toward salary and other expenses. She paid monthly rent ` 2,500 for a shop
IM
which was taken in October 2014, for trading in shares. Depreciation rate on computers is 60%.
The value of shares purchased and sold during the year are as follows:
PR
Purchases including received from friend ` 80,00,000

Sales ` 1,00,00,000
The market value of shares remains unsold as on 31.03.2015 is ` 40 lakhs. Ms. Geetha
(i) Made contribution of ` 20,000 to approved pension fund.
(ii) Paid ` 25,000 to LIC for medical insurance premium of self and spouse.
(iii) Repaid loan ` 1,00,000 and interest ` 20,000 to SBI taken in February, 2015 for her son’s
admission in Sri Ram College of Commerce B.Com.
(iv) Contributed ` 25,000 to a research association, which has as its object undertaking of scientific
research.
Geetha did not earn any short term capital gain during the year. Geetha has not celebrated her 40th
birthday yet. Compute the total income of Ms. Geetha and tax thereon payable by her for the
Assessment Year 2015-16. Cost inflation index for financial year 1991-92 is 199, 2001-02 is 426 and 2014-
15 is 1024. (10 Marks)
PRIME/41st ME/IPC 2
3.
a) Roshan Professionals Ltd., engaged in providing services which became taxable with effect from July
01, 2014, furnishes you the following information for the month of July, 2014:
Particulars Amount
(`)
Advance received for the services to be performed in October, 2014 9,00,000
Free services rendered to the friends (Value of similar services is 20,000)
Services received from its associated enterprise located in UK 5,00,000
(Books of accounts were debited on July 14, 2014, but payment has
not yet been made)
Other services rendered during the month 8,00,000

(Invoices raised for the same in July, 2014)
Y
Note: The amounts given above are inclusive of service tax wherever
EM
applicable.
Compute the service tax liability of Roshan Professionals Ltd. for the month of July, 2014.
(8 Marks)
b) Shiva Ltd. of Delhi made a total purchases of input and capital goods of ` 55,00,000 during the month
AD
of January, 2015. The following further information is available:
(i) Goods worth ` 9,00,000 were purchased from Orissa on which C.S.T. @ 2% was paid.
(ii) The purchases made in January, 2015 include goods purchased from unregistered dealers
AC
amounting to ` 21,50,000.
(iii) It purchased capital goods (not eligible for input credit) worth ` 9,50,000 and those eligible for
input credit for ` 9,00,000.
(iv) Sales made in Delhi during the month of January, 2015 is ` 10,00,000 on which VAT @ 12.5% is
E
payable.
IM
Assuming that all purchases given are exclusive of tax and VAT @ 4% is paid on them, calculate (i) the
amount of input tax credit available for the month of January, 2015 (ii) VAT payable for the month of
January, 2015 and (iii) input tax credit carried forward.
PR
Note: The input VAT credit on eligible capital goods is available in 36 equal monthly installments.
(8 Marks)
4.
a) State with reason whether the following statements are true or false:
(i) An individual is not liable to file service tax return since he has not provided any service during
the first half year period of April to September.
(ii) The service tax return which is filed belatedly could not be revised.
(iii) Multiple Service Provider can use a single challan for payment of Service Tax for various services
rendered.
(iv) Input tax credit will not be taken from the Purchase of non creditable goods (4 x 2=8 Marks)
PRIME/41st ME/IPC 3
b) State whether the following are chargeable to tax under the head “Income from other sources” and if
so, what is the amount liable to tax:
(i) Mr. Anand received a cash gift of ` 75,000 from Jeevan Charitable Trust (registered under section
12AA) in January 2015 for meeting his medical expenses.
(ii) Prakash & Sons (HUF) received ` 60,000 in cash from elder son of Prakash. Prakash is the Karta of
the HUF.
(iii) Interest on enhanced compensation of ` 1,00,000 was received as per court decree in March,
2015 by Mr. Akash. Out of the said amount, a sum of ` 70,000 relates to preceding financial years
(iv) (iv) Arun took a loan of `18,00,000 from Reliance Power Ltd. in which he is holding 15% of equity
shares. On the date of granting the loan, the company had accumulated profit of ` 75,00,000.
(v) Interest of `5,000 on bank FDRs received by minor son of Sulochana (widow). These FDRs were
made by the minor son out of his earnings from application of his painting skills. (8 Marks)
5.
a) Safe Kitchen is a leading manufacturer of pressure cookers Legal Metrology Act, 2009 requires
declaration of retail sale price on the package of pressure cookers and pressure cookers are also
notified under section 4A of Central Excise Act, 1944 [Retail Sale Price (RSP) based valuation] with
Y
notified rate of abatement of 25%.
Calculate excise duty payable on 50 pieces cleared during October, 2014 using the following
EM
information furnished by Safe Kitchen assuming the rate of excise duty as 12% plus 2% education cess
and 1% secondary and higher education cess:
No. of Particulars
AD
Pieces sold
10 RSPs printed on the package of pressure cooker are ` 4,500 and ` 3,800.
20 RSP printed on the package of 15 pieces sold in Delhi is ` 3,000 per piece. RSP
printed on the package of 5 pieces sold in Haryana is `2,800 per piece
AC
20 RSP printed on the date of removal of package from factory is `3500 per unit.
However, after removal from factory RSP is increased to `4,100 per Piece
E
Would the provisions of section 4A of Central Excise Act, 1944 apply had the goods not been notified by
Central Government and manufacturer voluntarily affixed RSP on the products? (8 Marks)
IM
b) What is Income received or deemed to be received in India and explain the taxability of the same.
PR
(4 Marks)
c) what is the applicable TDS rate u/s 194 C, 194 I & 194 J (4 Marks)
6.
a) Explain the consequence of filing the income tax after the due date
A belated return cannot be revised and carried forward of loss other than depreciation loss is not
allowed. (4 Marks)
b) Explain the filing of tax returns by Universities, Colleges as per Section 139(4D) (4 Marks)
c) Calculate the excise duty payable for Mr. A from the following details?
`
Total invoice price (exclusive of taxes) 40,000
VAT paid by Mr. A 5,000
Insurance charges 500
Packing charges 1,000
Outward freight beyond the place of removal 6,200 (8 Marks)
PRIME/41st ME/IPC 4
7.
a) Compute net VAT liability of Rajesh from the following information:-
` `
Particulars
Raw materials from foreign market 1,20,000
(including duty paid on imports @ 20%)
Raw material purchased from local market 2,50,000
Cost of raw material 30,000
Add: Excise duty @ 12% ----------
2,80,000
11,200 2,91,200
Add: VAT @ 4% ----------- 51,000
Raw material purchased from neighbouring State 10,000

(including CST @ 2%) 21,000
Storage and transportation cost
Y
Manufacturing expenses
such goods is 4%.

EM
Rajesh sold goods to Kumar and earned profit @ 12% on the cost of production. VAT rate on sale of
(5 Marks)
AD
b) Details of Mr. Nithesh is provided below for the preparation of his Income Tax Return for AY
2015– 2016 –
AC
`
(i) Loss under the head ‘Business’ 1,00,000
(ii) Capital Gains on sale of House Property – Long Term 2,00,000
(iii) Capital Loss on Sale of Shares – Short Term 50,000
E
(iv) Loss in respect of Property used for the purpose of

IM
residence 10,000
(v) Loss in respect of Property let out 25,000
PR
Share of Loss from Firm brought forward from A.Y.

(vi) 2009–2010 60,000
Compute the Net Income / Loss, and Determine the loss, if any to be carried forward
along with reason.
(5 Marks)
c) Define service and input tax credit? (3 Marks)
d) Mr. B is an employee of Y Ltd. and has substantial interest in the company. His salary is ` 20,000 p.m.
Mr. B is also working in Y Ltd. at a salary of ` 12,000 p.m. without any qualifications. Mr. B also receives
` 30,000 as interest on securities. Mr. B owns a house property which she has let out. Rent received
from tenants is ` 6000 p.m. compute the gross total income of Mr. B for the A.Y.2015-16.
(3 Marks)
PRIME/41st ME/IPC 5
PRIME ACADEMY
41st SESSION MODEL EXAM – IPC -- TAXATION
SUGGESTED ANSWERS
1.
a)
Particulars ` ` `
I Income from house property
Gross Annual Value 54,000
Less: Municipal taxes paid _9,000
Net Annual Value 45,000
Less: Deduction under section 24 @30% 13,500 31,500
II Income from profession

Net profit as per Income and Expenditure account 2,92,500
Less: Items of income to be treated separately
(i) Income tax refund (including interest) 16,500
Y
(ii) Dividend from Indian companies 27,000
EM
(iii) Winning from lottery (net of TDS) 35,000
(iv) Rent received 54,000 1,32,500
1,60,000
AD
Add: Expenditure debited but not allowable
(i) Rent for his residence 36,000
(ii) Municipal tax paid relating to residential
AC
house at Chennai included in administrative 9,000 45,000

Expenses 2,05,000
Less: Expenditure allowable but not debited

E
IM
Depreciation on Clinic equipments u/s 32

on ` 4,50,000 @ 15% 67,500
on ` 1,00,000 @7.5% (i.e.50% of 15%) 7,500
PR
75,000
Additional deduction of 100% in respect of amount
paid to IIT [since weighted deduction of 200% is
available in respect of such payment under
section 35(2AA)] 1,00,000 1,75,000 30,000
III. Income from other sources

Interest on Income-tax refund 1,500
Dividend from Indian companies 27,000
Less: Exempt under section 10(34) 27,000 Nil
Winnings from lottery (See Note 1) 50,000 51,500
Gross Total Income 1,13,000
PRIME/41st ME/IPC 1
Less: Deductions under Chapter VI A:
- Under section 80C ` `
Tuition fee paid to university for full timeeducation
of his son 60,000
- Under section 80E
Interest on loan taken for higher education of
daughter 65,000
1,25,000
but restricted to (See Note 2) 63,000
Total income 50,000
Notes:
1. Winnings from lottery should be grossed up for the chargeability under the head “Income
from other sources”. The applicable rate of TDS is 30%. Gross income from lottery, would,
therefore, be ` 35,000/70% = `50,000
Y
2. Deduction under Chapter VI-A cannot exceed Gross Total Income. Further, no deduction is
allowable from income by way of winning from lottery. Therefore, the maximum deduction
EM
allowable would be ` 63,000.
`
AD
Less: Winnings from lottery 50,000
Maximum deduction under Chapter VI-A 63,000
The total income of `50,000 would, therefore, represent winnings from lottery taxable at a
AC
flat rate of 30%, without any basic exemption limit.

3. Dr. Vijay is staying in a rented premises in Chennai itself. Hence, he would not be eligible for
deduction under section 80GG, since he owns a house in Chennai which he has let out.
E
IM
b)
Particulars Amount (`)

PR
Advances received from clients for which no service has been rendered so far 8,00,000
(Note-1)
Demurrage charges recovered for use of the services beyond the agreed 50,000
period (Note-2)
Security deposits forfeited for damages done by service receiver owing to his
negligence in the course of receiving a service (Note-2) 5,00,000
Payment received from ABC Ltd. (Note-3) 1,50,000
Total 15,00,000
Value of taxable service= 15,00,000 100
× 112.3 13,34,995
Service tax liability = 15,00,000 12.36
x 112.6 1,65,005
PRIME/41st ME/IPC 2
Notes
1. Advances received in July, 2014 shall be taxable in the month of receipt of advance only [Rule 3
of the Point of Taxation Rules, 2011]
2. As per rule 6 of the Service Tax Valuation (Determination of Value) Rules, 2006,
(a) Demurrage charges recovered for use of the services beyond the period agreed upon are
includible in the value of taxable service.
(b) Accidental damages are excluded from the value of taxable services provided such damages
are due to unforeseen actions and are not related to provision of services. However since in
the given case, damages are due to negligence of the service receiver in the course of
receiving the service, forfeited security deposits relating to such damages shall be includible
in the value of taxable service.
3. Excess payment made as a result of a mistake, if not returned, but retained by the service
provider, becomes a part of the taxable value of services (entire `150000)
c) When ACD u/s 3(1) & 3(5) is levied (assuming Excise Duty is 12%) `
Y
1. Transaction Value u/s 14(1) 1,00,000
2. Basic Customs Duty (BCD) at 10% 10,000
EM
3. ACD u/s 3(1 ) at 12% = 12 % of (Transaction Value + B CD) = 12% of ` 1,10,000 13,200
4. BCD + ACD u/s 3(1) [(2) + (3)] 23,200
5. EC on Customs Duty = 2% on 23,200 AD 464
6. SHEC on Customs Duty = 1% on 23,200 232
7. ACD u/s 3(5 ) at 4% = 4% on [A.V. + BC D + ACD u/s 3(1) + EC + S HEC thereon +
Customs EC + SHEC] =4% on (1,00,0 00 + 10,000 + 13,200 + 464 + 232) 4,956
AC
8. Total Customs Duty, EC & SHEC payable [(4) + (5) + (6) + (7)] 28,852
2.
a)
E
Computation of Taxable Income of Mr. Raja ` `

IM
Profits and Gains of Business or Profession:

Plying Goods Carriage Vehicle u/s 44AE (Note 1) – Higher of the
PR
1. following
Presumptive Income (7 Carriages × 7,500 p.m .× 12 Months) 6,30,000
Actual 6,94,400 6,94,400
2. Retail Trade u/s 44 AD (21,70,000 x 8%) 1,73,600
Profits and Gains of Business or Profession 8,68,000

Brought Forward Depreciation 32(2) can be off against any head of
Less: set Income ( 1,00,000)
Gross Total Inco me 7,68,000

Less: Deductions under Chapter VI A Sec.80C (Investment in PPF, NSC) ( 1,50,000)
Total Income 6,18,000
PRIME/41st ME/IPC 3
b) Computation of total income of Ms. Geetha for A.Y. 2015-16
Particulars ` `
Business Income (Refer Note - 2) 17,03,250
Capital Gain on Sale of land
Sale consideration (Refer Note- 1) 90,00,000
Less: Indexed Cost of Acquisition (6,00,000 × 1024/426) (Refer
Note – 3) 14,42,254 75,57,746
Less: Deduction under Chapter VI-A
Section 80CCC
Contribution to approved pension fund 20,000
Section 80D
Y
Medical insurance premium paid for self and spouse 15,000
EM
25,000, deduction limited to 15,000
Section 80E
Interest paid on education loan for studies of son 20,000 _ 55,000
Total Income 92,05,996
AD
Computation of tax liability of Ms. Geetha for the A.Y. 2015-16
Particulars ` `
AC
Agricultural income (Profit from nursery business) 4,00,000

Non-agricultural income 92,05,996
96,05,996
Step 1 Tax on 96,05,996 (aggregate of agricultural and non-
E
agricultural income)
Long-term capital gain (75,57,746 x 20%) 15,11,549
IM
Tax on balance income of 20,48,250 4,39,475 19,51,024

agricultura
PR
Step 2 Tax on 6,50,000 (aggregate of l income (55,000)

and basic exemption limit of 2,50,000)
Step 3 Tax on non-agricultural income (Difference of step 1 & 18,96,024
Step 2 )
Add: Education Cess @ 2% 37,920
Add: Secondary and Higher Education Cess @1% __ 18,960
Total Tax Liability 19,52,904
Total tax liability (rounded off) 19,52,900
PRIME/41st ME/IPC 4
Notes:
(1) Computation of consideration on sale of land
Particulars `
Value of cash received 20,00,000
Market value of shares received 70,00,000
Total Sale consideration 90,00,000
(2) Computation of Business Income
Trading Account for the year ended 31.03.2015
Y
Particulars ` Particulars `
To Purchases (80 lacs - 1,20,00,000 By Sales 1,00,00,000
EM
30 lacs + 70 lacs) By Closing Stock
(Assuming Market
To Gross Profit 20,00,000 value is less than cost 40,00,000
AD
of shares)
AC
1,40,00,000 1,40,00,000
Particulars ` `
E
Gross Profit as per Trading Account 20,00,000

IM
Less: Expenses on net connectivity 20,000

2,00,00
PR
Salary 0
Rent (` 2,500 x 6) 15,000
Depreciation on Computers (` 60,000 × 60% × 50%)
(Assuming used for less than 180 days in the year) 18,000 2,53,000
17,47,000
Less: Contribution to Scientific Research Institution under
section 35(1) (` 25,000 x 175%) 43,750
Business Income 17,03,250
PRIME/41st ME/IPC 5
(3) Since the property was acquired by Ms. Geetha by way of gift, the cost of acquisition will be cost to
the previous owner.
As per the definition of indexation cost of acquisition under clause (iii) of Explanation below section
48, indexation benefit will be available only from the previous year in which Geetha first held the asset
i.e. P.Y. 2001-02.
However, as per the view expressed by Bombay High Court, in the case of CIT v. Manjula J. Shah 16
Taxmann 42, in case the cost of acquisition of the capital asset in the hands of the assessee is taken to
be cost of such asset in the hands of the previous owner, the indexation benefit would be available
from the year in which the capital asset is acquired by the previous owner. If this view is taken, the
indexed cost of acquisition would be 30,87,437 and long term capital gain would be 59,12,563.
(4) Deduction under section 80C is not provided in respect of 5 lacs subscription to equity shares forming
part of eligible issue of capital by a public company, assuming it has been sold in the current year.
(5) Repayment of principal portion of education loan does not qualify for deduction under Section 80E.
(6) Income from seedlings grown in nursery is exempt under section 10(1) as it is agricultural income.
However, the same would be aggregated for rate purposes.
Y
3.
EM
a) Computation of service tax liability of Roshan Professionals Ltd:-
Particulars AD Amount (`)

Service tax payable on taxable services provided:
Advance received for the services to be performed in October, 2014. 9,00,000

AC
(Note-1)
Value of free services rendered to the friends (Note-2) Nil
Other services rendered during the month 8,00,000
E
Total 17,00,000
IM
Less: Exemption available to small service providers (Note-3) 10,00,000

Value of taxable services 7,00,000
77,002
PR
Service tax payable = 12.36

7,00,000× 112.36 (A)
Service tax payable on taxable services received:

Services received from its associated enterprise located in UK (Note-4) 5,00,000
Service tax payable on services received =(5,00,000×12.36/112.36) (B) 55,002
Total service tax liability (A) + (B) 1,32,004
Notes:-
1. Advances received in July, 2014 is taxable in the month of receipt of advance only. [Rule 3 of POTR ]
2. Service is an activity carried out, inter alia, for a consideration. Therefore, since no consideration is
involved in case of free services, service tax is not payable thereon.
PRIME/41st ME/IPC 6
3. Since, services provided by Roshan Professional Ltd. became taxable on July 01, 2014, aggregate
value of taxable services rendered in preceding financial year 2013-14 is Nil. Hence, Roshan
Professional Ltd. is eligible for small service provider’s exemption.
4. In case where the taxable services are provided by any person which is located in a non taxable
territory and received by any person located in the taxable territory, entire service tax is payable by
service receiver. SSP exemption is not available in respect of services taxed under reverse charge
mechanism.
5. Further, in case of “associated enterprises”, where the person providing the service is located
outside India, POT is date of debit in the books of account of the person receiving the service or date
of making the payment whichever is earlier. [Rule 7 of the POTR]
b)
Particulars ` `
À. Purchases made in January, 2015 55,00,000
Less:
Y
(i) Inter-State purchases (input credit not available) 9,00,000
(ii) Purchase from unregistered dealer
EM
(input credit not available) 21,50,000
(iii) Capital goods (not eligible for input credit) 9,50,000 40,00,000
Total purchases eligible for tax credit AD 15,00,000
B. Input tax credit available
VAT credit on input @ 4%
4% of (`15,00,000 – `9,00,000)
i.e. 4% of ` 6,00,000 24,000
AC
VAT credit on eligible capital goods

(4% of `9,00,000) x 1/36 1,000
Input credit available for January, 2015 25,000
C. VAT on sales @ 12.5% of `10,00,000 1,25,000
E
Less: Input tax credit 25,000

IM
Net VAT payable 1,00,000

Input tax credit carried forward to February,2015 Nil
PR
4.
a)
1. False: Even if no s ervice has been provided during a half–year and no Service Tax is payable, the
Asses see has to file a NIL Return wi thin the prescribed time limit
2. False: Belated service tax return can be revised within 90 days from the date of filing the Original
Return, to rectify mistakes or omissions if any, in the Original Return.
3. True: Multiple Service Provider can either use single GAR 7 Challan for making payment in respect of
all services or separate challans for each services
4. True: Purchase of non creditable goods is not eligible for input tax credit
b)
(i) Not Taxable -The provisions of section 56(2)(vi ) would not apply to any sum of money or any
property received from any trust or institution registered under section 12AA. Therefore, the cash
gift of ` 75,000 received from Jeevan Charitable Trust, being a trust registered under section
12AA, for meeting medical expenses would not be chargeable to tax under section 56(2)(vi ) in the
hands of Mr. Anand.
PRIME/41st ME/IPC 7
(ii) Not taxable - Any sum of money received without consideration by a HUF from its relative is not
taxable under section 56(2)(vi ), even if the receipt exceeds `50,000. Since Prakash’s son is the
member of the HUF, he is a relative of the HUF. Therefore, the cash received from him is not
taxable in the hands of Prakash & Sons (HUF).
(iii) Taxable – ` 50,000 - As per section 56(2)(vi i), interest on enhanced compensation is taxable in
the year in which it is received. Deduction of 50% in respect of the said income is al owed under
section 57(iv). Therefore, ` 50,000 (i.e., `1,00,000 – ` 50,000) is taxable in the hands of Mr. Akash
in the F.Y.2014-15.
(iv) Not Taxable - Since the loan is given by a company in which public are substantial y interested, the
provisions of section 2(22)(e) would not get attracted and therefore, the loan would not be
taxable as deemed dividend in the hands of Arun.
(v) Taxable – `3,500 - Since interest of ` 5,000 on bank FDRs received (` 5,000- by minor son of
Sulochana does not arise to him on `1,500) account of his manual work or on account of an
activity involving his skill, talent or specialized knowledge or experience, therefore, such interest
should be included in income of Sulochana under section 64(1A). However, exemption of `1,500
Y
under section 10(32) would be available in respect of the interest so included in her hands.
EM
5.
(a) Since Legal Metrology Act, 2009 requires declaration of retail sale price on the package of
pressure cooker and pressure cookers are also notified under section 4A of Central Excise Act,
AD
1944 (RSP based valuation provisions), excise duty will be payable on the basis of RSP less
abatement.
Particulars ` `
RSP of 10 pieces (10 × `4,500) (Note-1) 45,000
AC
Less: Abatement @ 25% 11,250

Assessable value (A) 33,750
RSP of 15 pieces sold in Delhi (15 ×`3,000) (Note-2) 45,000
E
Assessable value (B) 33,750

IM
RSP of 5 pieces sold in Haryana (5 × `2,800) (Note 2) 14,000

Assessable value (C) 10,500
PR
RSP of 20 pieces (20 ×` 4,100) (Note-3) 82,000

Assessable value (D) 61,500
----------
Total assessable value (A) +(B)+(C)+(D) 1,39,500
Excise duty @ 12% [12% of `1,39,500] 16,740
Education cess @ 2% [2% of `16,740] 335
Secondary and Higher Education Cess @ 1% [1% of `16,740] 167
Total excise duty payable (rounded off) 17,242
Notes:
1. Where more than one RSP is declared on the package of excisable goods, the maximum of such price
will be deemed to be the RSP.
2. If different RSPs on different packages are declared for different areas, each such RSP is deemed to
be the RSP.
3. If RSP on the package is increased after removal from factory, increased RSP would be deemed to be
the RSP.
PRIME/41st ME/IPC 8
All goods on which RSP has been declared will not be covered under the provisions of section 4A. Only
when the declaration of RSP on the goods is mandatory under the Legal Metrology Act, 2009 or under
any other law and such goods have been notified by the Central Government for the purpose of section
4A, then the goods be valued under section 4A. Thus, provisions of section 4A of Central Excise Act, 1944
would not apply if the goods had not been notified by Central Government and manufacturer voluntarily
affixed RSP on the products.
b) All assessees are liable to tax in respect of the income received or deemed to be received by them in
India during the previous year irrespective of -
(i) their residential status, and
(ii) the place of its accrual.
Income is to be included in the total income of the assessee immediately on its actual or deemed
receipt. The receipt of income refers to only the first occasion when the recipient gets the money
under his control. Therefore, when once an amount is received as income, remittance or transmission
Y
of that amount from one place or person to another does not constitute receipt of income in the hands
of the subsequent recipient or at the place of subsequent receipt.
EM
Income deemed to be received – Under section 7, the following shall be deemed to be received by the
assessee during the previous year irrespective of whether he had actually received the same or not -
(i) The annual accretion in the previous year to the balance to the credit of an employee participating
AD
in a recognised provident fund (RPF). Thus, the contribution of the employer in excess of 12% of
salary or interest credited in excess of 9.5% p.a. is deemed to be received by the assessee.
(ii) The taxable transferred balance from unrecognized to recognized provident fund (being the
employer’s contribution and interest thereon).
AC
(iii) The contribution made by the Central Government or any other employer in the previous year to
the account of an employee under a pension scheme referred to under section 80CCD.
c) 194 C for contract payments – 2% for companies & 1% for others 194 I for rent payments – 2% for rent
of plant, machinery & equipment and 10% in respect of all other rent payments (threshold limit is
E
`180,000) 194 J for professional charges – 10 % ((threshold limit is `30,000)

IM
6.
a) A belated return cannot be revised and carried forward of loss other than depreciation loss is not
allowed.
PR
b) (1) It will be mandatory for every university, college or other institution referred to in clause (ii) and
clause (iii) of section 35(1), which is not required to furnish its return of income or loss under any
other provision of section 139, to furnish its return in respect of its income or loss in every previous
year.
(2) All the provisions of the Income-tax Act, 1961 shall apply to such return as if it were a return under
section 139(1).
c)
Particulars `
Invoice price exclusive of taxes 40,000
Less: Insurance charges 500
Outward freight 6,200
Assessable value 33,300
Computation of Excise duty:
33,300 x 12.36% 4,116
PRIME/41st ME/IPC 9
Note: Packing charges are includible in assessable value, deduction for the same has not been provided.
7.
a) Computation of VAT liability of Rajesh:-
Particulars ` `
Raw materials purchased from foreign market (including

duty paid on imports @ 20%) [Customs duty forms part of 1,20,000
cost of production, input tax credit of customs duty paid is
not available]
2,50,000
Raw material purchased from local market:- 30,000 2,80,000
Cost of raw material -------------
Add: Excise duty @ 12%
Y
[Input tax credit of excise duty is not available] 51,000
EM
Raw material purchased from neigh bouring State
(including CST @ 2%) [Input tax credit of CST is not
AD 10,000
available] 21,000
----------
Storage and transportation cost 4,82,000
AC
Manufacturing expenses 57,840

Nil -----------
Cost of production 5,39,840
Add: Profit @ 12% of cost of production Nil 21,593.6
E
21,594
IM
Sale Price 11,200

VAT @ 4% on `5,39,840 ---------
PR
Net VAT liability of Raja:-

VAT on sale price (rounded off) 11,200
Less: Input tax credit --------
Duty paid on imports 10,394
CST paid on inter-State purchases
VAT paid on local purchases
Net VAT payable by Rajesh
b) Computation of Total Income of Mr. Nithesh
` `
Income from House Property: Loss from Self Occupied Property (10,000)
Loss from Let Out Property (25,000)
(35,000)
Less: Set–o ff against Long Term Capital Gain 35,000 NIL
Profits and Gains of Business or Profession

Loss under the head Business or Profession (1,00,000)
Y
Less: Set–o ff against Long Term Capital Gain 1,00,000 NIL
EM
Capital Gains
Long Term Capital Gain o n Sale of Residential House Property 2,00,000
Set–off of Short Term Capital Loss on Sale of Shares
AD (50,000)
Taxable L ong Term Capital Gain 1,50,000

Less: Amount utilized to s et–off Business Loss (1,00,000)
AC
Less: Amount utilized to s et–off Loss fro m House Property (35,000) 15,000
Total Income 15,000

E
Notes:
IM
Share Income from Partnership Firm is exempt from tax u/s 10( 2A). Therefore, Share of Loss in relation to
1. Exempt
PR
Income is not eligible for Set off and Carry Forward.

As per Circular No. 58 7 of 11.12.1990, the order of set–off / carry–forward off losses, effect has to be firs t
2. given to
the provisions of Sec.70 and then Sec .71 and then Sec. 72 to 74. Therefore, first, current year losses have been
set–off against income under the same head, i.e. Short Term Capital Loss against Long Term
Capital Gains.
c) “Service” means (i) any activity for consideration (ii) carried out by a person for another and (iii)
includes a declared service.
1. Input tax credit is an aggregate total amount of tax paid by a registered dealer on the total
purchases made by him within the State from other registered dealers (for a particular period.);
but not eligible in some cases.
2. The input tax credit includes the purchase tax paid under Section 12 of the VAT Act.
3. The input tax credit can be adjusted against the tax payable by the purchasing dealer on his sales.
4. The dealers are not eligible for input tax credit on all inputs. There are certain restrictions and
conditions on eligibility of input tax credit. They are given in detail under TNVAT Act, 2006.
d) Since Mr B is not professionally qualified for the job, the clubbing provisions shall be applicable.
Computation of Gross total income of Mr.B
Particulars `
Income from Salary
Salary received by Mr. B (` 20,000 × 12) 2,40,000
Salary received by M` B (` 12,000 × 12) 1,44,000
3,84,000
Income from other sources
Y
Interest on securities 30,000
EM
4,14,000
Computation of Gross total income of M` B
Particulars
AD ` `
Income from Salary Nil
[clubbed in the hands of Mr. B]
AC
Income from house property

Gross Annual Value [` 6,000 × 12] 72,000
E
Less: Municipal taxes paid -

Net Annual Value (NAV) 72,000
IM
Less: Deductions under section 24

PR
- 30% of NAV i.e., 30% of ` 72,000 21,600

- Interest on loan - 50,400
Gross total income 50,400

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GATA

No. of Pages: 6 Total Marks: 100

the provisions of Accounting Standard 9.

12% Preference share capital (` 100 each) 8,00,000

Particulars Amount (INR)

(b) Reserves and Surplus

General Reserve 120,000

Trade payables 140,000

Bills Receivable discounted 8,000

Cash Purchases 197,800

Creditors as on 31.03.2012 95,000

Liabilities INR Assets INR

Opening balance: Salaries 1,20,000

Entrance donation 1,00,000 Telephone and fax 52,000

Sale of fixed assets 8,000 Glass and table linen 12,000

income Receipts at coffee Garden upkeep 8,000

(ii) Subscription received in advance as on 31.3.09 was ` 18,000.

on account of crockery, cutlery, glass and linen in the year of purchase.

(ii) Balance Sheet as on 31st March, 2009. (16 Marks)

Balance as on 31-3-2014 1,42,858

Deficiency of INR. 1,642 should be charged to Profit & Loss account.

c) As per para 11 of AS 9 “Revenue Recognition”, in a transaction involving the sale of goods,

Cash @ 10 per share (8000 pref share of `10) 80,000

Cash @ `20 per share (`15000*20) 3,00,000

2. Calculation of Purchase Consideration

To be satisfied by issue of shares of PQ Ltd. Of INR.10 each at par 18,900 56,500

Balance Sheet as at 1stApril, 2014

I. Equity and Liabilities

= INR.1,68,500 + INR.2,25,000 (W.N.1)

b) In the books of Mr. Brown

Mar 31 (W.N.3) c/d

To P& L A/C 2,55,000 (W.N.4)

To Revaluation A/C . 2,00,000

3 Revaluation A/c Dr 3,500

Old Ratio 7/15 : 5/15 : 3/15 New Ratio 7/10 : 3/10=

Gaining Ratio = 35 : 15 =7:3

1stApril, 2013 7:3 (ratio between old partners)

Add: Patents written off 35,000

Increase in trade debtors (67,500)

Decrease in prepaid expenses 2,850 (40,860)

Income taxes paid (net of refund) 1,15,775

Balance Sheet of Nanoo Club as on 31stMarch, 2009

Subscription received during the year 2,02,750

Add: Received in advance as on 1.4.2008 15,000

(4) Interest received

(7) Sundry Creditor

Closing Balance as on 31.3.2009 92,000

c) Depreciation per year = INR.60,000 / 10 = INR.6,000

d) Calculation of Average Due Date

business forever and anywhere in India.

company. Is the Board’s decision valid in the eye of law? (8 Marks)

7. Answer any four out of the following:

 Likes the way change is being communicated

Perception, that the change is necessary.

I, hereby request you to provide the statement at an earliest.

c) Following are the characteristics of group personality:

employee under any law for the time being in force.

Computation of Gratuity of disabled employee : [Section 4(4)]

communication lines are kept working effectively.

messages can be assumed unethical.

consistent ethical view point.

Question No. 1 is compulsory

Factor 0.909 0.826 0.751