Professional Documents
Culture Documents
Q1)
(a)
i. True: The closing stock appears in the trial balance only when it is adjusted against purchases
by passing the entry (in which Closing Stock A/c is debited and Purchases A/c is credited). In
this case, closing stock is not entered in Trading Account and is shown only in Balance sheet.
ii. False: After preparing the trial balance the accountant finds that the total of debit side is short
by Rs. 1399/-. This difference is debited to the suspense account by the accountant.
iii. True: A partnership firm is not a distinct legal entity and therefore can’t own any assets.
The partners own the assets of the firm.
iv. False: Bank reconciliation statement is prepared to reconcile and explain the causes of
differences between bank balance as per cash book and the same as per bank statement as on a
particular date.
v. True: Accounting is a process of identifying, measuring and communicating information to
permit informed judgement and decisions. It covers the preparation of financial statements
and communication to the users of accounts.
vi. True: In case the due date of a bill falls after the date of closing the account, then no interest
is allowed for that. However, interest from the date of closing to such due date is written
in 'Red Ink' in the appropriate side of Account Current. This Red Ink Interest is treated as
negative interest.
(b) Provision means “any amount written off or retained by way of providing for depreciation, renewal
or diminution in the value of assets or retained by way of providing for any known liability of which
the amount cannot be determined with substantial accuracy”. It is important to know the difference
between provisions and contingent liabilities. The distinction between both of them can be explained
as follows:
CA-FOUNDATION- A/C Round-I
(4) If the management estimates that it is If the management estimates, that it is less
probable that the settlement of an likely that any economic benefit will
obligation will result in outflow of outflow from the firm to settle the
economic benefits, it recognizes a obligation, it discloses the obligation as a
provision in the balance sheet. contingent liability.
i. Depreciation per year charged for four years = Rs. 20,00,000 / 10 = Rs. 2,00,000
ii. WDV of the machine at the end of fourth year = Rs. 20,00,000 – Rs. 2,00,000 × 4
= Rs. 12 ,00,000.
iii. Depreciable amount after revaluation = Rs. 12,00,000 + Rs. 80,000 = Rs. 12,80,000
iv. Remaining useful life as per previous estimate = 6 years
v. Remaining useful life as per revised estimate = 8 years
vi. Depreciation for the fifth year and onwards = Rs. 12,40,000 / 8 = Rs. 160,000.
CA-FOUNDATION- A/C Round-I
Q2)
(a)
Note: Bank has credited Mr. Shah by 40,000 in error on 6th September, 2020. If this mistake is rectified
in the bank statement, then this will not be deducted in the above statement along with Rs. 26,52,000
resulting in debit balance of Rs. 1,516 as per pass-book.
(b)
Pizza Ltd.
Consignment to Small Basket Account
Particulars Rs. Particulars Rs.
To Goods sent on By Small Basket Stores
Consignment A/c
2,000 1 kg. tins @ Rs.10 20,000 1,500 1 kg. tins @ Rs.15 22,500
6,000 1/2 kg. pkts. @ Rs. 6 36,000 56,000 4,000 1/2 kg. pkts. @ Rs. 7 28,000 50,500
To Small Basket Stores: By Insurance – Claim 450
Freight 1,440 By Profit & Loss A/c -
Rent and insurance 600 abnormal loss(Net) 65
Commission 2,525 4,565 By Inventory on 16,915
consignment A/c
To Profit & Loss A/c – 7,365
Profit
67,930 67,930
CA-FOUNDATION- A/C Round-I
Working Notes:
(i) Sale value of total consignment:
2,000 1 kg. tins @ Rs.15
30,00
0
6,000 1/2 kg. pkts. @ Rs. 7
42,00
0
72,000
(ii) Freight @ 2% of above 1,440
(iii) Inventories at the end:
450 1 kg. tins @ Rs.10 (Selling Price Rs. 6,750)
4,50
0
2,000 1/2 kg. pkts. @ Rs. 6 (Selling Price Rs. 14,000)
12,00
0
16,500
Add: Freight 2% of (Selling Price Rs. 20,750) 415
16,915
Q3)
(a)
M/s Tasty Burger.
Trading A/c for the year ended 31st March 2020
23,80,000 23,80,000
Working Notes:
1. Insurance Premium
2. Depreciation
3. Interest on Loan
4.
63,000 63,000
CA-FOUNDATION- A/C Round-I
(b)
Income Statement is sub-divided into following Apart from balance sheet, to judge financial position
two parts for a non-manufacturing concern: of the business, sometimes additional statements are
(i) Trading account; and also prepared like cash flow statement, value added
statement etc. which is not mandatory for non-
(ii) Profit and Loss account corporate entities. These additional statements are
prepared for the better understanding of the financial
position of the business.
Income Statement discloses net profit of the Position statement discloses the assets and liabilities
business after adjusting from the income earned position as on a particular date.
during the year, all the expenditures of the business
incurred in that year.
Q4)
Revaluation Account
Dr. Cr.
Particulars P Q R Particulars P Q R
(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
To P’s Capital - 1,000 3,000 By Balance b/d 20,000 30,000 20,000
A/c - goodwill
To Cash & bank 13,000 - - By Revaluation 2,000 3,000 2,000
A/c - (50% A/c
dues paid)
To P’s Loan A/c 13,000 - - By Q & R’s 4,000 - -
- (50% Capital A/cs
transfer) - goodwill
To Balance c/d - 35,000 35,000 By Cash & bank - 3,000 16,000
A/c - amount
brought in
(Balancing
figures)
26,000 36,000 38,000 26,000 36,000 38,000
Working Notes:
Q5)
(a)
In the Books of Jaspal Singh
Transaction Dr. Cr.
d)B.R. which was endorsed renewed Mr. John’s A/c Dr. 710
Old bill cancelled To Ghosh’s A/c 710
We pay Mukherjee Ghosh’s A/c Dr. 710
To Bank A/c 710
Interest due Mr. John’s A/c Dr. 15
To Intt. A/c 15
2nd bill drawn on Dutta B.R. A/c Dr. 725
To Mr. John’s A/c 725
(b)
Bat Ltd.
Journal
2020 Dr. Cr.
Rs. Rs.
May 20 Bank Account Dr. 18,00,000
To Share Application A/c 18,00,000
(Application money on 60,000 shares at ` 30 per
share received.)
June 1 Share Application A/c Dr. 18,00,000
To Share Capital A/c 18,00,000
(The amount transferred to Capital Account on
60,000 shares ` 30 on application. Directors’
resolution no........ dated ......)
Share Allotment A/c Dr. 18,00,000
To Share Capital A/c 18,00,000
(Being share allotment made due at ` 30 per share.
Directors’ resolution no...... dated ......)
July 15 Bank Account Dr. 18,00,000
To Share Application and Allotment A/c 18,00,000
(The sums due on allotment received.)
Oct. 1 Share First Call Account Dr. 12,00,000
To Share Capital Account 12,00,000
(Amount due from members in respect of first call -on
60,000 shares at ` 20 as per Directors, resolution
no... dated...)
Oct. 20 Bank Account Dr. 12,00,000
To Share First Call Account 12,00,000
(Receipt of the amounts due on first call.)
2021
Feb. 1 Share Second and Final Call A/c Dr. 12,00,000
To Share Capital A/c
(Amount due on 60,000 shares at 12,00,000
Rs. 20 per share on second and
final call, as per Director’s
resolution
Bank Account
To Share Second and 12,00,000
Final Call A/c 12,00.000
(Amount received against the
final call on 60,000 shares at Rs.
20 per share)
Mar 31
CA-FOUNDATION- A/C Round-I
Q6)
(a)
Date Particulars Due Amount Days Product Date Particulars Due Amount Days Product
2020 Date ` 2020 Date `
June 11 To SalesA/c June 11 1,020 81 82,620 June 15 By Cash A/c June 15 500 77 38,500
June 20 To SalesA/c June 20 650 72 46,800 Aug.8 By Cash A/c Aug.8 1,100 23 25,300
July 7 To SalesA/c July 7 700 55 38,500 Aug.31 By Balance of 1,04,120
product
Aug.31 To Interest A/c 28.53 Aug. 31 Balance c/d 798.53
1,04,120 10
x100
365
(b)
(c)
This method is also called retail inventory method. It is used widely in retail business or in business
where the inventory comprises of items, the individual costs of which are not readily ascertainable. The
use of this method is appropriate for measuring inventories of large numbers of rapidly changing items
that have similar margins and for which it is impracticable to use other costing methods. The cost of the
inventory is determined by reducing from the sales value of the inventory an appropriate percentage of
gross margin. The percentage used takes into consideration inventory which has been marked below its
original selling price. An average percentage for each retail department is often used. The calculation
CA-FOUNDATION- A/C Round-I
of the estimated gross margin of profit may be made for individual items or groups of items or by
departments, as may be appropriate to the circumstances.
This method is used when there is frequent change in the price per unit of the goods and goods are
purchased frequently by the business e.g. crude oil. Based on the experience a standard cost is
determined on the basis of frequent changes in prices and inventory is valued on that price per unit.
(d) The balance sheet may be defined as “a statement which sets out the assets and liabilities of a
firm or an institution as at a certain date.” Since even a single transaction will make a diuerence
to some of the assets or liabilities, the balance sheet is true only at a particular point of time. That is
the significance of the word “as at.”
The assets are shown on the right hand side and liabilities and capital on the left hand side.
Characteristics
The balance sheet has certain characteristics, which should be noted. These are the following:
i. It is prepared at a particular date, rather the close of a day and not for a period. It is true only
on that date and not later. Suppose, in the example given above, a part of the goods were sold
on 1st January, 2017. This will mean that the value of the Inventory will be reduced, the cash
in hand will increase and the capital account will be reduced or increased depending upon loss
or profit on sale.
ii. The balance sheet is prepared only after the preparation of the Profit and Loss Account.
This is the reason why the Profit and Loss Account (including the Trading Account) and
the Balance Sheet are together called Final Accounts (Of course, the Balance Sheet is not
an account, the two sides are not the debit and the credit sides.) Without being accompanied
by the Profit and Loss Account, the Balance Sheet will not be able to throw adequate light on
the financial position of the firm. For that purpose an appreciation of the profits of the firm
is necessary.
iii. Since capital always equals the difference between assets and liabilities and since the capital
account will independently arrive at this figure, the two sides of the Balance Sheet must have
the same totals. If it is not so, there is certainly an error somewhere.