CA Inter Group 1 Accounts Marathon

INTER GROUP 1 MARATHON 1
Hire Purchase
1. On 1st April, 2007 X purchased a machine on the hire purchase system the cash price being
Rs.11,000. Payment was to be made Rs.3,000 down and the balance in 4 annual Instalments
of Rs.2,000 each plus interest. Interest is chargeable @ 10% p.a.
2. QP May 2019 (Q 2a)
M/s Amar bought six Scooters from M/s Bhanu on 1st April, 2015 on the following terms:
Down payment `3,00,000
1st instalment payable at the end of 1st year `1,59,000
2nd instalment payable at the end of 2nd year `1,47,000
3rd instalment payable at the end of 3rd year `1,65,000
Interest is charged at the rate of 10% per annum.
M/s Amar provides depreciation @ 20% per annum on the diminishing balance method.
On 31st March, 2018 M/s Amar failed to pay the 3rd instalment upon which M/s Bhanu
repossessed two Scooters. M/s Bhanu agreed to leave the other four Scooters with M/s Amar
and adjusted the value of the repossessed Scooters against the amount due. The Scooters
taken over were valued on the basis of 30% depreciation per annum on written down value.
The balance amount remaining in the vendor's account after the above adjustment was paid
by M/s Amar after 5 months with interest @15% per annum.
M/s Bhanu incurred repairing expenses of `15,000 on repossessed scooters and sold scooters
for ` 1,05,000 on 25th April, 2018.
You are required to :
1. Calculate the cash price of the Scooters and the interest paid with each instalment.
2. Prepare Scooters Account and M/s Bhanu Account in the books of M/s Amar.
3. Prepare Goods Repossessed Account in the books of M/s Bhanu.
CA Anand Bhangariya www.cavidya.com 84218 84218 / 75887 75887

Profit or Loss Prior to Incorporation
1. The accounts were made up to 31st December, 2007. The company was incorporated on 1st
May, 2007 to take over a business from the preceding 1st January. Total sales for the year
were Rs 12,00,000. It is ascertained that the sales for November and December are one and
half times the average of those for the year, while those for February and April are only
half the average.
2. Star Ltd was incorporated on 1st July, 2007 to acquire a running business with effect from
1st April, 2007. The accounts for the year ended 31st March, 2008 disclosed the following:
There was a gross profit of Rs 3,00,000.
The sales for the year amounted to Rs 12,00,000 of which Rs 2,40,000 were for the first six
months,
The expenses debited to the Profit and Loss Account included — directors' fees: Rs 15,000;
bad debts: Rs 3,600; advertising: Rs 12,000 (under a contract amounting to Rs 1,000 per
month); salaries and general expenses: Rs 64,000; preliminary expenses written off Rs 5,000:
and donation to a political party given by the company Rs.5,000.
Prepare a statement showing the amount of profit made before and after incorporation.
3. ICAI Module Illustration No. 5
ABC Ltd. took over a running business with effect from 1 st April 2013. The company was
incorporated on 1st August 2013. The following summarized Profit and Loss Account has
been prepared for the year ended 31.3.2014:

Particulars Rs. Particulars Rs.
To Salaries 48000 By Gross profit 320000
To Stationery 4800
To Travelling expenses 16800
To Advertisement 16000
To Miscellaneous trade expenses 37800
To Rent (office buildings) 26400
To Electricity charges 4200
To Director’s fee 11200
To Bad debts 3200
To Commission to selling agents 16000
To Tax Audit fee 6000
To Debenture interest 3000
To Interest paid to vendor 4200
To Selling expenses 25200
To Depreciation on fixed assets 9600
To Net profit 87600
Total 320000 Total 320000
Additional information:
(a) Total sales for the year which amounted to 1920000 arose evenly upto the date of 30.9.2013.
There after they spurted to record an increase of two- third during the rest of the year.
(b) Rent of office building was paid @ 2000 per month upto September 2013 and thereafter it
was increased by 400 per month.
(c) Travelling expenses include 4800 towards sales promotion.

(d) Depreciation includes 600 for assets acquired in the post incorporation period.
(e) Purchase consideration was discharged by the company on 30th September 2013 by issuing
equity shares of 10 each.
Prepare Statement showing calculation of profits and allocation of expenses between pre and
post incorporation periods.

Investment Accounts
1. In 2011, M/s. Wye Ltd. issued 12% fully paid debentures of ` 100 each, interest being payable
half yearly on 30th September and 31st March of every accounting year.
On 1st December, 2012, M/s. Bull & Bear purchased 10,000 of these debentures at ` 101
cum-interest price, also paying brokerage @ 1% of cum-interest amount of the purchase.
On 1st March, 2013 the firm sold all of these debentures at ` 106 cum-interest price, again
paying brokerage @ 1 % of cum-interest amount. Prepare Investment Account in the books
of M/s. Bull & Bear for the period 1st December, 2012 to 1st March, 2013.
2. On 1st April, 2010 Singh had 20,000 equity shares in X Limited. Face value of the shares
was Rs. 10 each but their book value was Rs. 16 per share. On 1st June 2010, Singh purchased
5,000 more equity shares in the company at a premium of Rs. 4 per share. On 30th June
2010 the Directors of X Limited, announced a bonus and right issue. Bonus was declared at
the rate of one equity share for every five shares held and these shares were received on
2nd August, 2010.
The terms of the right issue were:
a. Right shares to be issued to the existing holders on 10th August 2010.
b. Right issue would entitle the holders to subscribe to additional equity shares in the company
@ 1 share per every 3 held at Rs. 15 per share. The whole sum being payable by 30th
September, 2010.
c.Existing share holders may to the extent of their entitlement either fully or in part, transfer
their rights to outsiders.
d. Singh exercised his option under the rights issue for 50% of his entitlements and the
balance of rights sold to Anant for a consideration of Rs. 1.50 per right.

e.Dividends for the year ended 31st March 2010 @ 15% were declared by the company and
received by Singh on 20th October, 2010.
f. On 1st November 2010 Singh sold 20,000 equity shares at a premium of Rs. 3 per share
g. Market price of shares as on 31st December 2010 was Rs. 14.
Show the investment account as it would appeared in Singh's books as on 31.12.2010 and value
the shares held on that date.
3. Smart Investments made the following investments in the year 20X1-X2 : 12% State
Government Bonds having nominal value Rs. 100
01.04.20X1 Opening Balance (1200 bonds) book value of Rs. 126,000
12th April Purchased 2,000 bonds @ Rs. 100 cum interest
30.09.20X1 Sold 1,500 bonds at Rs.105 ex interest
Interest on the bonds is received on 30th June and 31st Dec. each year.
Equity Shares of X Ltd.
15.04.20X1 Purchased 5,000 equity shares @ Rs. 200 on cum right basis Brokerage of 1%
was paid in addition (Nominal Value of shares Rs. 10)
03.06.20X1 The company announced a bonus issue of 2 shares for every 5 shares held.
16.08.20X1 The company made a rights issue of 1 share for every 7 shares held at Rs. 250
per share. The entire money was payable by 31.08.20X1.
22.8.20X1 Rights to the extent of 20% was sold @ Rs. 60. The remaining rights were
subscribed.
02.09.20X1 Dividend @ 15% for the year ended 31.03.20X1 was received on 16.09.20X1
15.12.20X1 Sold 3,000 shares @ Rs. 300. Brokerage of 1% was incurred extra.
15.01.20X2 Received interim dividend @ 10% for the year 20X1 –X2

31.03.20X2 The shares were quoted in the stock exchange @ Rs. 220
Prepare Investment Accounts in the books of Smart Investments. Assume that the average
cost method is followed.

Insurance Claim
1. On 1st April, 2015 the stock of Shri Ramesh was destroyed by fire but sufficient records
were saved from which following particulars were ascertained:
Particulars Rs.
Stock at cost-1st January, 2014 73,500
Stock at cost-31st December, 2014 79,600
Purchases-year ended 31st December, 2014 3,98,000
Sales-year ended 31st December, 2014 4,87,000
Purchases-1-1-2015 to 31-3-2015 1,62,000
Sales-1-1-2015 to 31-3-2015 2,31,200
In valuing the stock for the Balance Sheet at 31st December, 2014 Rs. 2,300 had been written
off on certain stock which was a poor selling line having the cost Rs. 6,900. A portion of these
goods were sold in March, 2015 at loss of Rs. 250 on original cost of Rs. 3450. The remainder
of this stock was now estimated to be worth its original cost. Subject to the above exception,
gross profit had remained at a uniform rate throughout the year.
The value of stock salvaged was Rs. 5,800. The policy was for Rs. 50,000 and was subject to
the average clause. Work out the amount of the claim of loss by fire.
2. A fire engulfed the premises of a business of M/S Kite Ltd. in the morning, of 1st October,
2017. The entire stock was destroyed except, stock salvaged of ` 50,000. Insurance Policy
was for ` 5,00,000 with average clause.
The following information was obtained from the records saved for the period from 1st April
to 30th Sep.2017
Particulars `
Sales 27,75,000
Purchases 18,75,000
Carriage inward 35,000

Carriage outward 20,000
Wages 40,000
Salaries 50,000
Stock in hand on 31st March 2017 3,50,000
Additional Information
i. Sales upto 30th September, 2017, includes ` 75,000 for which goods had not been dispatched.
ii. On 1st June, 2017, goods worth ` 1,98,000 sold to Hari on approval basis which was included
in sales but no approval has been received in respect of 2/3 rd of the goods sold to him till
30th September, 2017.
iii. Purchases upto 30th September, 2017 did not include ` 1,00,000 for which purchase invoices
had not been received from suppliers, through goods have been received in godown.
iv. Past records show the gross profit rate of 25% on sales.
You are required to prepare the statement of claim for loss of stock for submission to
the Insurance Company.
3. A fire occurred on 1st February, 2014, in the premises of Pioneer Ltd., a retail store and
business was partially disorganized upto 30th June, 2014. The company was insured under a
loss of profits for Rs. 1,25,000 with a six months period indemnity. From the following
information, compute the amount of claim under the loss of profit policy.
Particulars Rs.
Actual turnover from 1st February to 30th June, 2014 80,000
Turnover from 1st February to 30th June, 2013 2,00,000
Turnover from 1st February, 2013 to 31st January, 2014 4,50,000
Net Profit for last financial year 70,000

Insured standing charges for last financial year 56,000
Total standing charges for last financial year 64,000
Turnover for the last financial year 4,20,000
The company incurred additional expenses amounting to Rs. 6,700 which reduced the loss
in turnover. There was also a saving during the indemnity period of Rs. 2,450 in the insured
standing charges as a result of the fire.
There had been a considerable increase in trade since the date of the last annual accounts
and it has been agreed that an adjustment of 15% be made in respect of the upward trend
in turnover.

Branch Accounting
1. From the following particulars relating to Patiala Branch for the year ending 31.12.2007,
prepare Branch Account in the books of head office
2. Relax Ltd. supply goods to its New Delhi branch at cost plus 25%. All cash sales at branch
are daily remitted to the head office, and the latter directly pays all the branch expenses.
From the following particulars, show by Debtors System the result of the branch operations
for the year ended December 31, 2007 :

3. X Ltd. of Calcutta has a branch at Delhi. Goods are invoiced to the branches at cost plus
331/3%. The branch remits all cash received to the head office and ail expenses are paid
by the head office.
From the following particulars prepare Branch Stock Account, Branch Adjustment Account,
Branch Debtors' Account and Branch Profit and Loss Account in the books of the head
office (all figures in rupees):
4. M/s Rani & Co. has head office at Singapore and branch at Delhi (India). Delhi branch is
an integral foreign operation of M/s Rani & Co., Delhi branch furnishes you with its Trial
Balance as on 31st March, 2019 and the additional information there after :
Dr. Cr.
Rupees in thousands
Stock on 1st April, 2018 600 —
Purchases and Sales 1,600 2,400
Sundry Debtors and Creditors 800 600
Bills of Exchange 240 480
Wages 1,120 —
Rent, rates and taxes 720 —
Sundry Expenses 320 —
Computers 600 —
Bank Balance 520 —
Singapore Office a/c — 3,040

Total 6,520 6,520

Additional information:
(a) Computers were acquired from a remittance of Singapore dollar 12,000 received from
Singapore Head Office and paid to the suppliers. Depreciate Computers at the rate of
40% for the year.
(b) Closing Stock of Delhi branch was ` 15,60,000 on 31st March,2019
(c) The Rates of Exchange may be taken as follows :
(i) On 1.4.2018 @ `50 per Singapore Dollar
(ii) On 31.3.2019 @`52 per Singapore Dollar
(iii) Average Exchange Rate for the year @ ` 51 per Singapore Dollar
(iv) Conversion in Singapore Dollar shall be made up to two decimal accuracy.
(d) Delhi Branch Account showed a debit balance of Singapore Dollar 59,897.43 on 31.3.2019
in the Head office books and there were no items pending for reconciliation.
In the books of Head office, you are required to prepare :
(1) Revenue statement for the year ended 31st March, 2019. (in Singapore Dollar)
(2) Balance Sheet as on that date, (in Singapore Dollar)
Head office Branch
Dr. Cr. Dr. Cr.
Goods sent to Branch 1,50,000 -
Goods recd. from H.O. A/c Branch A/c - 1,40,000
Head office A/c 1,12,000 78,500
- - -
On analysis of Branch A/c in Head office books and Head office A/c in branch books, you find:
➢ Goods valued `10,000 sent by head office has not been received by brand, hence not recorded in the branch
books.

➢ ` 15,000 remitted by the branch has not been received, hence not recorded in the head office books.
➢ Direct collection of ` 10,500 from a customer of the branch by Head office not informed to the branch,
hence not recorded by the branch.
➢ A sum of ` 14,500 paid by branch to the suppliers of head office not recorded at Head office.
➢ Head office expenditure allocation to the branch `12,000 not recorded in the
branch.
` 7,500 being FD interest of head office received by the branch on oral instructions from H.O., not recorded in the
head office books.
5. Pass necessary Journal entries in the books of an independent Branch of M/s TPL Sons,
wherever required, to rectify or adjust the following transactions: (RTP Nov 2018)
(i) Branch paid ` 5,000 as salary to a Head Office Manager, but the amount paid has
been debited by the Branch to Salaries Account.
(ii) A remittance of ` 1,50,000 sent by the Branch has not received by Head Office on
the date of reconciliation of Accounts.
(iii) Branch assets accounts retained at head office, depreciation charged for the year `
15,000 not recorded by Branch.
(iv) Head Office expenses ` 75,000 allocated to the Branch, but not yet been recorded
by the Branch.
(v) Head Office collected ` 60,000 directly from a Branch Customer. The intimation of
the fact has not been received by the Branch.
(vi) Goods dispatched by the Head office amounting to ` 50,000, but not received by the
Branch till date of reconciliation.
(vii) Branch incurred advertisement expenses of ` 10,000 on behalf of other Branches, but
not recorded in the books of Branch.

(viii) Head office made payment of ` 16,000 for purchase of goods by branch, but not
recorded in branch books.
6. Ring Bell Ltd. Delhi has a Branch at Bombay where a separate set of books is used. The
following is the trial balance extracted on 31st December, 2012.
Head Office Trial Balance
` `
Share Capital (Authorised: 10,000 Equity Shares of ` 100 each): 8,00,000
Issued: 8,000 Equity Shares
Profit & Loss Account -1-1-2012 25,310
General Reserve 1,00,000
Fixed Assets 5,30,000
Stock 2,22,470
Debtors and Creditors 50,500 21,900
Profit for 2012 52,200
Cash Balance 62,730
Branch Current Account 1,33,710
9,99,410 9,99,410
Branch Trial Balance
` `
Fixed Assets 95,000
Profit for 2012 31,700
Stock 50,460
Debtors and Creditors 19,100 10,400

Cash Balance 6,550
Head Office Current Account 1,29,010
1,71,110 1,71,110
The difference between the balances of the Current Account in the two sets of books is
accounted for as follows:
a) Cash remitted by the Branch on 31st December, 2012, but received by the Head Office on
1st January 2013 - ` 3,000.
b) Stock stolen in transit from Head Office and charged to Branch by the Head Office, but
not credited to Head Office in the Branch books as the Branch Manager declined to admit
any liability (not covered by insurance) - ` 1,700.
Give the Branch Current Account in Head Office books after incorporating Branch Trial Balance
through journal. Also prepare the company’s Balance Sheet as on 31 st December, 2012.

Departmental Accounts
1. M/s. Delta is a Departmental Store having three departments X, Y and Z. The information
regarding three departments for the year ended 31 st March, 2018 are given below:
Particulars Dept. X Dept. Y Dept. Z
Opening Stock 18,000 12,000 10,000
Purchases 66,000 44,000 22,000
Debtors at end 7,500 5,000 5,000
Sales 90,000 67,500 45,000
Closing Stock 22,500 8,750 10,500
Value of furniture in each Department 10,000 10,000 5,000
Floor space occupied by each Dept. (in sq. ft.) 1,500 1,250 1,000
Number of employees in each Department 25 20 15
Electricity consumed by each Department (in units) 300 200 100
Additional Information:
Particulars Amount (`)
Carriage inwards 1,500
Carriage outwards 2,700
Salaries 24,000
Advertisement 2,700
Discount allowed 2,250
Discount received 1,800
Rent, Rates and Taxes 7,500
Depreciation on furniture 1,000

Electricity Expenses 3,000
Labor welfare expenses 2,400
Prepare Departmental Trading and Profit & Loss Account for the year ended 31st March 2018
after providing provision for Bad Debts at 5%.
2. QP Nov 2018
Axe Limited has four departments, A,B,C and D. Department A sells goods to other departments
at a profit of 25% on cost. Department B sells goods to other department at a profit of 30%
on sales. Department C sells goods to other departments at a profit of 10% on cost, Department
D sells goods to other department at a profit of 15% on sales.
Stock lying at different departments at the year-end was as follows
Department Department Department Department
A B C D
Transfer from Department A - 45,000 50,000 60,000
Transfer from Department B 50,000 - - 75,000
Transfer from Department C 33,000 22,000 - -
Transfer from Department D 40,000 10,000 65,000 -
Departmental managers are entitled to 10% commission on net profit subject to unrealized
profit on departmental sales being eliminated. Departmental profits after charging manager’s
commission, but before adjustment of unrealized profit are as under :
Particulars `
Department A 2,25,000
Department B 3,37,500
Department C 1,80,000

Department D 4,50,000
Calculate the correct departmental profits after charging Manager’s commission.
3. ABC Ltd. has several departments. Goods supplied to each department are debited to
a Memorandum Departmental Stock Account at cost plus a fixed percentage (mark-up) to
give the normal selling price. The amount of mark-up is credited to a Memorandum
Departmental Markup account. If the selling price of goods is reduced below its normal
selling prices, the reduction (mark-down) will require adjustment both in the stock account
and the mark-up account. The mark-up for department X for the last three years has been
20%. Figures relevant to department X for the year ended 31st March, 2019 were as follows;
Stock as on 1st April 2018 at cost ` 1,50,000
Purchases at cost ` 4,30,000
Sales ` 6,50,000
It is further ascertained that:
1. Shortage of stock found in the year ending 31.3.2019, costing ` 4,000 were written off.
2. Opening stock on 1.4.2018 including goods costing ` 12,000 had been sold during the
year and had been marked-down in the selling price by ` 1,600. The remaining stock had
been sold during the year.
3. Goods purchased during the year were marked down by ` 3,600 from a cost of ` 30,000.
Marked-down stock costing ` 10,000 remained unsold on 31.3.2019.
4. The departmental closing stock is to be valued at cost subject to adjustment for mark-
up and mark-down.
You are required to prepare for the year ended 31st March, 2019 :

i. Departmental Trading Account for department X for the year ended 31st March,
2019 in the books of head office.
ii. Memorandum Stock Account for the year ended 31st March, 2019.
iii. Memorandum Mark-Up account for the year ended 31st March, 2019.

Single Entry
1. The following balance appeared in the books of M/s Sunshine Traders:
Particulars As on As on
31-03-2018 31-03-2019
(`) (`)
Land and Building 2,50,000 2,50,000
Plant and Machinery 1,10,000 1,65,000
Office Equipment 52,500 42,500
Sundry Debtors 77,750 1,10,250
Creditors for Purchases 47,500 ?
Provision for office expenses 10,000 7,500
Stock ? 32,500
Long Term loan from ABC Bank @
10% per annum 62,500 50,000
Bank 12,500 ?
Capital 4,65,250 ?
Other information was as follows:
Particulars In (`)
Collection from Sundry Debtors 4,62,500
Payments to Creditors for Purchases 2,62,500
Payment of office Expenses 21,000
Salary paid 16,000
Selling Expenses paid 7,500
Total sales 6,25,000
Credit sales (80% of Total sales)
Credit Purchases 2,70,000
Cash Purchases (40% of Total Purchases)
Gross Profit Margin was 25% on cost
Discount Allowed 2,750

Discount Received 2,250
Bad debts 2,250
• Depreciation to be provided as follows:
Land and Machinery 5% per annum
Plant and Machinery 10% per annum
Office Equipment 15% Per annum
• On 01.10.2018 the firm sold machine having Book Value ` 20,000 (as on 31.03.2018) at a
loss of ` 7,500. New machine was purchased on 01.01.2019.
• Office equipment was sold at its book value on 01.04.2018.
• Loan was partly repaid on 31.03.2019 together with interest for the year.
You are required to prepare :
i. Trading and Profit & Loss account for the year ended 31st March, 2019.
ii. Balance Sheet as on 31st March 2019
2. Aman, a readymade garment trader, keeps his books of account under single entry system.
On the closing on 31st March 2017 his statement of affairs stood as follows:
Liabilities Amount (`) Assets Amount (`)
Aman’s capital 4,80,000 Building 3,25,000
Loan 1,50,000 Furniture 50,000
Creditors 3,10,000 Motor Car 90,000
Stock 2,00,000
Debtors 1,70,000
Cash in hand 20,000
Cash at bank 85,000

9,40,000 9,40,000
Riots occurred and a fire broke out on the evening of 31 March, 2018, destroying the books of
accounts. On that day, the cashier had absconded with the available cash. You are furnished
with the following information:
i. Sales for the year ended 31% March, 2018 were 20% higher than the previous year’s
sales, out of which, 20% sales were for cash. He always sells his goods at cost plus 25%.
There were no cash purchases.
ii. Collection from debtors amounted to ` 14,00,000, out of which ` 3,50,000 was received
in cash.
iii. Business expenses amounted to ` 2,00,000 of which ` 50,000 were outstanding on 31st
March 2018 and ` 60,000 paid by cheques.
iv. Gross profit as per last year’s audited accounts was ` 3,00,000.
v. Provide depreciation on building and furniture at 5% each and motor car at 20%.
vi. His private records and the Bank Pass Book disclosed the following transaction for the
year 2017-18:
Particulars `
Payment to creditors (paid by cheques) 13,75,000
Personal drawings (paid by cheques) 75,000
Repairs (paid by cash) 10,000
Travelling expenses (paid by cash) 15,000
Cash deposited in bank 7,15,000
Cash withdrawn from bank 1,20,000
vii. Stock level was maintained at ` 3,00,000 all throughout the year.
viii. The amount defalcated by the cashier is to be written off to the Profit and Loss Account.

You are required to prepare Trading and Profit and Loss A/c for the year ended 31% March,
2018 and Balance Sheet as on that date of Aman. All the workings should form part of the
answer.
3. Archana Enterprises maintain their books of accounts under single entry system. The
Balance Sheet as on 31st March 2018 was as follows.
Amount Amount
Liabilities Assets
(`) (`)
Capital A/c 6,75,000 Furniture & fixtures 1,50,000
Trade creditors 7,57,500 Stock 9,15,000
Outstanding exp. 67,500 Trade debtors 3,12,000
Prepaid insurance 3,000
Cash in hand & at bank 1,20,000
15,00,000 15,00,000
The following was the summary of cash and bank book for the year ended 31st March, 2019:
Amount Amount
Receipts Payments
(`) (`)
Cash in hand & at on 1st April,
1,20,000 Payment to trade creditors 1,24,83,000
2018
Cash sales 1,10,70,000 Sundry expenses paid 9,31,050
Receipts from trade debtors 27,75,000 Drawings 3,60,000
Cash in hand & at Bank on 31st

1,90,950
March, 2019
1,39,65,000 1,39,65,000

Additional Information:
i. Discount allowed to trade debtors and received from trade creditors amounted to ` 54,000
and ` 42,500 respectively, (for the year ended 31st March, 2019)
ii. Annual fire insurance premium of ` 9,000 was paid every year on 1st August for the
renewal of the policy.
iii. Furniture & fixtures were subject to depreciation @15% p.a. on diminishing balance
method.
iv. The following are the balances as on 31st March, 2019 :
Stock ` 9,75,000
Trade debtors ` 3,43,000
Outstanding expenses ` 55,200
v. Gross profit ratio of 10% on sales is maintained throughout the year.
You are required to prepare Trading and Profit & Loss account for the year ended 31 st March
2019, and Balance Sheet as on that date.

Cash Flow Statement
1. Question 5 (ICAI Illustration No 5)
Prepare cash flow statement of M/s MNT Ltd. for the year ended 31 st March, 2015 with the
help of the following information:
(1) Company sold goods for cash only.
(2) Gross Profit Ratio was 30% for the year, gross profit amounts to 3,82,500.
(3) Opening inventory was lesser than closing inventory by 35,000.
(4) Wages paid during the year 4,92,500.
(5) Office and selling expenses paid during the year75,000.
(6) Dividend paid during the year 30,000 (including dividend distribution tax.)
(7) Bank loan repaid during the year 2,15,000 (included interest 15,000)
(8) Trade payables on 31st March,2014 exceed the balance on 31st March, 2015 by 25,000.
(9) Amount paid to trade payables during the year 4,60,000.
(10) Tax paid during the year amounts to 65,000 (Provision for taxation as on 31.03.2015
45,000).
(11) Investments of 7,00,000 sold during the year at a profit of 20,000.
(12) Depreciation on fixed assets amounts to 85,000.
(13) Plant and machinery purchased on 15November,2014 for 2,50,000.
(14) Cash and Cash Equivalents on 31st March,2014 2,00,000.
(15) Cash and Cash Equivalents on 31stMarch,2015 6,07,500.

The following data were provided by the accounting records of Ryan Ltd. at year-end, March
31,2015: Income Statement
Sales 698000
Cost of Goods Sold (520000)
Gross Margin 178000
Operating Expenses
(including depreciation expenses of Rs.37000) (147000)
31000
Other income/(Expenses)
Interest Expenses Paid (23000)
Interest Income Received 6000
Gain on sale of investment 12000
Loss on sale of plant (3000)
(8000)
23000
Income Tax (7000)
Total 16000
Comparative Balance Sheets
Particulars 31st March 2015 31st March 2014
Assets
Plant Assets 715000 505000
Less: Accumulated Depreciation (103000) (68000)
612000 437000

Investments (Long term) Current Assets: Inventory 115000 127000
144000 110000
Accounts receivable 47000 55000
Cash 46000 15000
Prepaid expenses 1000 5000
965000 749000
Liabilities
Share Capital 465000 315000
Reserves and surplus 140000 132000
Bonds 295000 245000
Current liabilities:
Accounts payable 50000 43000
Accrued liabilities 12000 9000
Income taxes payable 3000 5000
965000 749000
Analysis of selected accounts and transactions during 2014-15
1. Purchased investments for 78,000.
2. Sold investments for 1,02,000. These investments cost 90,000.
3. Purchased plant assets for 1,20,000.
4. Sold plant assets that cost 10,000 with accumulated depreciation of 2,000 for 5,000.
5. Issued 1,00,000 of bonds at face value in an exchange for plant assets on 31 st March,
2015.
6. Repaid 50,000 of bonds at face value at maturity.
7. Issued 15,000 shares of 10 each.

8. Paid cash dividends 8,000.
Prepare Cash Flow Statement as per AS-3 (Revised), using indirect method.
The following summary cash account has been extracted from the company’s accounting records:
Summary Cash Account
Particulars (’000)
Balance at 1.3.2014 35
Receipts from customers 2,783
Issue of Shares 300
Sale of Fixed Asset 128
3,246
Payment to suppliers 2,047
Payment for fixed asset 230
Payments for overheads 115
Wages And Salaries 69
Taxation 243
Dividends 80
Repayment of bank loan 250 (3,034)
Balance at 31.12.2014 212
PrepareCashFlowStatementofthiscompanyHillsLtd.fortheyearended31stMarch,2015
inaccordancewithAS-3(Revised).
The company does not have any cash equivalents.

Redemption of Preference Shares and Bonus Shares
1. The capital structure of a company consists of 20,000 Equity Shares of Rs. 10 each fully
paid up and 1,000 8% Redeemable Preference Shares of Rs. 100 each fully paid up (issued
on 1.4.20X1).
Undistributed reserve and surplus stood as: General Reserve Rs. 80,000; Profit and Loss
Account Rs. 20,000; Investment Allowance Reserve out of which Rs. 5,000, (not free for
distribution as dividend) Rs. 10,000; Securities Premium Rs. 2,000, Cash at bank amounted
to Rs. 98,000. Preference shares are to be redeemed at a Premium of 10% and for the
purpose of redemption, the directors are empowered to make fresh issue of Equity Shares
at par after utilising the undistributed reserve and surplus, subject to the conditions that a
sum of Rs. 20,000 shall be retained in general reserve and which should not be utilised.
Pass Journal Entries to give effect to the above arrangements and also show how the
relevant items will appear in the Balance Sheet of the company after the redemption carried
out.
2. Following is the extract of the Balance Sheet of Preet Ltd. as at 31st March, 2015.
Authorised Capital Rs.
15,000 12% Preference shares of Rs. 10 each 1,50,000
1,50,000 Equity shares of Rs. 10 each 15,00,000
16,50,000
Issued and Subscribed capital :
12,000 12% Preference shares of Rs. 10 each fully paid 1,20,000
1,35,000 Equity shares of Rs. 10 each, Rs. 8 paid up 10,80,000

Reserves and surplus :
Capital redemption Reserve 60,000
Securities premium (Collected in cash) 37,500
Profit and Loss Account 3,00,000
On 1st April, 2015, the Company has made final call @ Rs. 2 each on 1,35,000 equity
shares. The call money was received by 20 th April, 2015. Thereafter, the company decided
to capitalize its reserves by way of bonus at the rate of one share for every four shares
held.
Show necessary journal entries in the books of the company and prepare the extract of
the balance sheet as on 30th April, 2015 after bonus issue.
3. The following is the summarized Balance Sheet of Trinity Ltd. as at 31.3.20X1:
Liabilities Rs. Assets Rs.
Share Capital Fixed Assets
Authorised Gross Block 3,00,000
10,000 10% Redeemable Preference Less : Depreciation 1,00,000
Shares of Rs. 10 each 1,00,000 2,00,000
90,000 Equity Shares of Rs. 10 each 9,00,000 Investments 1,00,000
10,00,000 Current Asset & Loan &
Advance
Issued, Subscribed & Paid-up Inventory 45,000
Capital
10,000 10% Redeemable Preference Trade receivables 25,000

Shares of Rs. 10 each 1,00,000 Cash and Bank Balances 50,000
10,000 Equity Shares of Rs. 10 each 1,00,000
(A) 2,00,000
Reserves and Surplus
Securities Premium 70,000
Profit and Loss A/c 18,500
(B) 2,08,500
Current Liabilities and Provisions 11,500
(C)
Total (A + B + C) 4,20,000 Total 4,20,000
For the year ended 31.3.20X2, the company made a net profit of Rs. 35,000 after providing
Rs. 20,000 depreciation.
The following additional information is available with regard to company’s operation:
1. The preference dividend for the year ended 31.3.20X2 was paid.
2. Except cash and bank balances other current assets and current liabilities as on
31.3.20X2, was the same as on 31.3.20X1.
3. The company redeemed the preference shares at a premium of 10%.
4. The company issued bonus shares in the ratio of one share for every equity share held
as on 31.3.20X2.
5. To meet the cash requirements of redemption, the company sold investments.
6. Investments were sold at 90% of cost on 31.3.20X2.
You are required to prepare necessary journal entries to record redemption and issue of
bonus shares.

4. A company offers new shares of Rs. 100 each at 25% premium to existing shareholders on
one for four bases. The cum-right market price of a share is Rs. 150. Calculate the value of
a right. What should be the ex-right market price of a share?

CA Inter Group 1 Accounts Marathon

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INTER GROUP 1 MARATHON 1

of Rs.2,000 each plus interest. Interest is chargeable @ 10% p.a.

2. QP May 2019 (Q 2a)

Down payment `3,00,000

1st instalment payable at the end of 1st year `1,59,000

2nd instalment payable at the end of 2nd year `1,47,000

3rd instalment payable at the end of 3rd year `1,65,000

Interest is charged at the rate of 10% per annum.

by M/s Amar after 5 months with interest @15% per annum.

for ` 1,05,000 on 25th April, 2018.

You are required to :

3. Prepare Goods Repossessed Account in the books of M/s Bhanu.

CA Anand Bhangariya www.cavidya.com 84218 84218 / 75887 75887

Profit or Loss Prior to Incorporation

half the average.

There was a gross profit of Rs 3,00,000.

and donation to a political party given by the company Rs.5,000.

3. ICAI Module Illustration No. 5

been prepared for the year ended 31.3.2014:

CA Anand Bhangariya www.cavidya.com 84218 84218 / 75887 75887

Particulars Rs. Particulars Rs.

To Salaries 48000 By Gross profit 320000

To Travelling expenses 16800

To Miscellaneous trade expenses 37800

To Rent (office buildings) 26400

To Electricity charges 4200

To Director’s fee 11200

To Bad debts 3200

To Commission to selling agents 16000

To Tax Audit fee 6000

To Debenture interest 3000

To Interest paid to vendor 4200

To Selling expenses 25200

To Depreciation on fixed assets 9600

To Net profit 87600

Total 320000 Total 320000

was increased by 400 per month.

(c) Travelling expenses include 4800 towards sales promotion.

CA Anand Bhangariya www.cavidya.com 84218 84218 / 75887 75887

equity shares of 10 each.

post incorporation periods.

CA Anand Bhangariya www.cavidya.com 84218 84218 / 75887 75887

cum-interest price, also paying brokerage @ 1% of cum-interest amount of the purchase.

paying brokerage @ 1 % of cum-interest amount. Prepare Investment Account in the books

2nd August, 2010.

The terms of the right issue were:

a. Right shares to be issued to the existing holders on 10th August 2010.

their rights to outsiders.

CA Anand Bhangariya www.cavidya.com 84218 84218 / 75887 75887

received by Singh on 20th October, 2010.

g. Market price of shares as on 31st December 2010 was Rs. 14.

the shares held on that date.

Government Bonds having nominal value Rs. 100

01.04.20X1 Opening Balance (1200 bonds) book value of Rs. 126,000

12th April Purchased 2,000 bonds @ Rs. 100 cum interest

30.09.20X1 Sold 1,500 bonds at Rs.105 ex interest

Equity Shares of X Ltd.

was paid in addition (Nominal Value of shares Rs. 10)

per share. The entire money was payable by 31.08.20X1.

CA Anand Bhangariya www.cavidya.com 84218 84218 / 75887 75887

cost method is followed.

CA Anand Bhangariya www.cavidya.com 84218 84218 / 75887 75887

gross profit had remained at a uniform rate throughout the year.

was for ` 5,00,000 with average clause.