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 NEW SCHEME – NOV 2022
CA INTER – GROUP 2
PAPER 5 - ADVANCED ACCOUNTS
SYLLABUS 70%
QUESTION PAPER
Roll No. ………………………
Total No. of Questions – 6 Total No. of Printed Pages –12
Time Allowed – 3 hours Maximum Marks – 100

GENERAL INSTRUCTIONS TO CANDIDATES

1. Question paper comprises 6 questions. Answer Question No. 1 which is compulsory and any
4 out of the remaining 5 questions.
2. In case, any candidate answers extra question(s)/sub-question(s) over and above the required
number, then, only the requisite number of questions first answered in the answer book, shall
be valued and subsequent extra question(s) answered shall be ignored
3. Working Notes should form part of the answer.
4. Answers to the questions are to be given only in English except in case of candidates who
have opted for Hindi Medium. If a candidate has not opted for Hindi Medium, his/her
answers in Hindi will not be evaluated.

5. Duration of the examination is 3 hours.

PREPCA sets papers as per ICAI Paper Pattern.

However, we do make changes necessitated by our experts since there is no
fixed pattern that ICAI follows.

ADC ACC 70%

 Q1A) Shiva Ltd works in the field of long–term Construction Contracts. For recognising
revenue, it follows the given accounting policy –

Work Upto 25% – 51 – 75% 75% – Above

Completed 25% 50% 90% 90%

Percentage of NIL 25% 50% 75% 00%

Profit

The Company took a Contract valuing Rs. 150 Crores and started work on it from Year 1.
During Year 1, 30% of the work was completed at a cost of Rs. 35 Crores. During Year 2,
another 40% was completed at a cost of Rs. 48 Crores. During Year 3 the

Company completed the balance work at a cost of Rs. 40 Crores. Show how the Company
should reflect the Contract Revenue and Costs in the P&L A/c for the 3 years. Also list the
necessary disclosures under AS – 7. (5 Marks)

Q1 B) Vasu Ltd has four operations, P, Q, R and S. The following information is available to
you.

(a) Operations P, Q, R and S were all Continuing Operations in Year 1 and Year 2.

(b) Operation S is approved and announced for disposal in Year 3. Actual disposal takes
place in Year 4 only.

(c) Operation Q is abandoned in Year 4. Abandonment is complete in that year itself.

(d) Operations T and U are acquired in Year 4 and Year 5 respectively.

Explain the disclosure of comparative information in the Financial Statements of Year

1 to Year 6, as required under Para 34 of AS – 24. (5 Marks)

Q1C) Refiners and Projects Limited is a Company in the Oil and Gas Sector. It undertakes
extensive Research and Development work as part of its operations. It has till the end of
the Financial Year 31.03.2020, spent Rs. 592.23 Crores on research expenses.

The development of a new process was completed in the Accounting Year 2020–2021
after incurring an expenditure of Rs. 322.26 Crores. In the Accounting Year 2021–2022,
the Company implemented the new process resulting in a post-tax saving of Rs. 100
Crores in the first year of operation and savings of Rs. 80 Crores per annum thereafter for
the next four years. Cost of Capital to the Company is 12%.

Kindly indicate how you will proceed to record the transactions in the books of accounts of
ADC ACC 70%
 the Company.

You are informed that the Research Expenses shown above do not include any General or
Selling and Administrative Expenses. PVIF at 12% can be taken at 0.893, 0.797, 0.712,
0.636 & 0.567. (5 Marks)

Q1 D). Given the following information of Paper Products Ltd –

(a) Goods of Rs. 60,000 were sold on 20.03.2022 but at the request of the Buyer these
were delivered on 10.04.2022.

(b) On 15.01.2022 goods of Rs. 1,50,000 were sent on consignment basis of which 20% of
the goods unsold are lying with the consignee as on 31.03.2022.

(c) Rs. 1,20,000 worth of goods were sold on approval basis on 01.12.2021. The period of
approval was 3 months after which they were considered sold. Buyer sent approval for
75% goods up to 31.01.2022 and no approval or disapproval received for the remaining
goods till 31.03.2022.

(d) Apart from the above, the Company has made Cash Sales of Rs. 7,80,000 (Gross).
Trade Discount of 5% was allowed on the Cash Sales.

You are required to advise, with valid reasons, the amount to be recognized as Revenue in
above cases under AS–9 and also determine the Total Revenue to be recognized for the
year ending 31.03.2022. (5 Marks)

Q2. The Balance Sheets as on 31st March of Param Ltd and Karam Ltd are as under:
Liabilities Param Karam Assets Param Karam

Share Capital:

Authorised and Fixed Assets:

subscribed Goodwill – 4,00,00

Buildings 20,00,000 0

Equity Shares 60,00,000 20,00,000

of Rs. 100 each
Machineries
Reserves and 26,00,000 16,80,000
Surplus:
Furniture
Capital – 2,00,000 40,000 20,000
Reserve

ADC ACC 70%

General 8,00,000 1,00,000 Current
Reserve Assets:

Profit and Loss 4,80,000 1,40,000 Stock

Account Debtors 16,00,000 7,20,00

Cash in hand 0

Unsecured – 12,00,000 Cash at Bank 9,20,000 7,20,00

Loan: 12% 2,80,000 0
Expenditure on
Debentures 20,000
New Project
Current 8,00,000 1,60,00
Liabilities and – 0
Provisions:

Creditors 9,60,000 3,80,000 3,00,00

0

Total 82,40,000 40,20,000 Total 82,40,000

40,20,000

Karam Ltd was absorbed by Param Ltd on 1st April on the following terms:

(a) Fixed Assets other than Goodwill to be valued at Rs. 20,00,000, including Rs. 24,000 for
Furniture.

(b) Stock to be reduced by Rs. 80,000 and Debtors by 5%.

(c) Param Ltd to assume liabilities and to discharge the 12% Debentures by issue of 11%
Debentures of the same value and in addition a premium of 6% was paid in cash.

(d) The New Project to be valued at Rs. 3,80,000.

(e) The Shareholders of Karam Ltd to receive cash payment of Rs. 30 per Share, plus four
Equity Shares in Param Ltd for every five Shares held in Karam Ltd.

(f) Both the Companies to declare and pay dividend of 6% prior to absorption.

(g) Expenses of Liquidation of Karam Ltd are to be reimbursed by Param Ltd to the extent of
Rs. 20,000. The actual expenses amounted to Rs. 24,000.

Required: Draft Journal Entries recording the scheme in the books of Karam Ltd and
prepare the Balance Sheet of Param Ltd after absorption assuming that Param Ltd’s
Authorised Capital has been increased to Rs. 80,00,000. (20 Marks)

ADC ACC 70%

 Q3A Avi and Bishnu are Partners of Abhay & Co. sharing Profits and Losses in the ratio
3:1 and Bishnu and Joe are Partners of Bijoy & Co. sharing Profits and Losses in the ratio
2:1. On 31st March, they decided to amalgamate and form a new Firm M/s Abeejay & Co,
wherein Avi, Bishnu and Joe would be Partners sharing Profits and Losses in the ratio
3:2:1.The Balance Sheets of the two Firms on 31st March were as under: (in Rs.)

Liabilities Abhay & Bijoy & Assets Abhay Bijoy &

Co. Co. & Co. Co.

Capitals: Building 3,50,00 2,80,000

0

Avi 5,31,000 Plant & 2,00,00 1,50,000

Machinery 0

Bishnu 2,00,000 3,97,000 Vehicles – 90,000

Joe 2,00,000 Furniture – 10,000

Reserves 12,000 9,000 Office 38,000 45,000

Equipments

Sundry 1,20,000 89,000 Stock in 65,000 70,000

Creditors Trade

Bank O/D 90,000 – Sundry 1,00,00 90,000

Debtors 0

Due to R& – 1,00,000 Bank 80,000 60,000

Co. Balances

Cash in Hand 20,000 –

Due from R 1,00,00 –

& Co. 0

Total 9,53,000 7,95,000 Total 9,53,00 7,95,000

0

The amalgamated Firm M/s Abeejay & Co. took over the business on the following terms
–

Goodwill of Abhay & Co. was worth Rs. 42,000 and that of Bijoy & Co. Rs. 30,000.

ADC ACC 70%

 Goodwill account was not to be opened in the books of the new Firm; the adjustments
being recorded through Capital Accounts of the Partners.

The following Assets were valued as below: (amounts in Rs.)

Abhay & Co. Bijoy & Co.

Building 4,00,000 3,00,000

Plant & Machinery 2,50,000 2,00,000

Vehicles – 98,000

Furniture – 11,000

Office Equipments 39,000 50,000

Stock in Trade 70,000 80,000

Provision for Doubtful Debts was carried forward at Rs. 4,000 in respect of Debtors of
Abhay& Co and Rs. 3,000 in respect of Debtors of Bijoy & Co.

Partners of the New Firm brought necessary cash to pay other Partners, to adjust their
Capital according to the Profit Sharing Ratio.

You are required to –

Prepare the Balance Sheet of the New Firm as on 31st March.

Prepare Capital Accounts of the Partners in the books of Old Firms. (15 Marks)

Q3 B How are Banks classified? (5 Marks)

Q4 A) Guru Ltd acquired control in Sishya Ltd a few years back when Sishya Ltd had Rs.
25,000 in Reserve and Rs. 14,000 (Cr.) in Profit & Loss A/c. Plant Account (Book Value
Rs. 66,000) of Sishya Ltd was revalued at Rs. 62,000 on the date of purchase. Equity
Dividend of Rs. 7,500 was received by Guru Ltd out of pre–acquisition Profit and the
amount was correctly treated by Guru Ltd. Debenture Interest has been paid upto date.
Following are the Balance Sheets of Guru Ltd and Sishya Ltd as at 31st March (Rs. 000s)
–

Equity and Liabilities Gu Sish Assets Gur Sish

ru ya u ya

(1) Shareholders’ Funds: (1) Non–Current

ADC ACC 70%

(a) Share Capital Assets:

(i) Equity Shares of (Rs. 50 100 (a) Fixed Assets –

10) 0 (i) Tangible 200 50

(ii) 6% Pref. Shares of (Rs. 10 50 -Land & Buildings 105 100
100) 0 -Plant & Machinery
(b) Reserves & Surplus (ii) Intangible – 50 30
(i) General Reserve 30 30 Goodwill

(ii)Profit & Loss Account (b) Non–Current Invt

40 12
– in Sishya

(2) Non–Current 300 Preference

28 NIL
Liabilities: Long Term Shares
NI 100 85 NIL
Borrowings 7,500 Equity Shares
L
– 6% Debentures Debentures (FV Rs.
45 NIL
50,000)

(3) Current Liabilities: (2) Current Assets:

130 100
(a) Short Term (a) Inventories
10 NIL
Borrowings (b) Trade

– Due to Sishya Ltd Receivables

90 50
(b) Trade Payables Debtors
30 10
(i) Sundry Crs Bills Receivable

(ii) Bills Payable 90 60

Cash & Cash
20 25 27 25
Equivalents

Short Term Loans &

Adv NIL 12

– Due from Guru Ltd

Total 79 377 Total 790 377

0

ADC ACC 70%

Prepare Consolidated Balance Sheet as at 31st March from the above, and following
additional information –

Cheque of Rs. 2,000 sent by Guru Ltd to Sishya Ltd was in transit.

Bills Receivable of Sishya Ltd are due from Guru Ltd.

Balance Sheet of Sishya Ltd was prepared before providing for 6 months dividend on
Preference Shares, the first half being already paid.

Both the Companies have proposed Preference Dividend only, but no effect has been given
in the accounts.

Stock of Guru includes Rs. 6,000 purchased from Sishya on which Sishya made 20%
Profit on Cost. Stock of Sishya includes Rs. 10,000 purchased from Guru on which Guru
made 10% Profit on Selling Price.

Since acquisition, Sishya has written off 30% of the Book Value of Plant as on date of
acquisition by way of depreciation. (15 Marks)

Q4 B) A Commercial Bank has the following Capital Funds and Assets. Segregate the
Capital Funds into Tier–I and Tier–II Capitals. Find out the Risk–Adjusted and Risk–
Weighted Assets and Capital Adequacy Ratio:

Particulars Rs. Crores

Capital Funds:

Paid up Equity Share Capital 750

Statutory Reserve 150

Particulars Rs. Crores

Share Premium 150

Capital Reserve (of which Rs. 40 Crore were due to Revaluation of 90

Assets and Balance due to Sale)

Assets: 60
Cash Balances Claims on Banks Other Investments Loans and 170
Advances:
2,300

ADC ACC 70%

 Guaranteed by Government of India / State Government

Granted to Staff of Bank, fully covered by Superannuation Benefits & 400

Mortgage of Flat / House Other Loans and Advances 50
Premises, Furniture and Fixtures, Other Assets Intangible Assets 6,170
Off–Balance Sheet Items: Acceptance, Endorsements and Letter of 3,925
Credit, Guarantees and Other Obligations
15

1,550

( 5 Marks)

Q5. A) Maharudra Ltd furnished the following summarized Balance Sheet as at 31st
March:

Particulars Rs. in ‘000s Rs. in

‘000s

EQUITY &
LIABILITIES: Authorised Capital: 5,000
Share Capital: Issued and Subscribed Capital:

3,00,000 Equity Shares of Rs. 10 each 3,000

fully paid up 20,000 9% Preference Shares 2,000
of Rs. 100 each
5,000
(issued two months back for the purpose
of buy back)

Particulars Rs. in Rs. in

‘000s ‘000s

Reserves and Surplus: Capital Reserve 10

Revenue Reserve 4,000

Securities Premium 500

Profit and Loss Account 1,800 6,310

Non–Current Liabilities: 10% Debentures 400

ADC ACC 70%

 Current Liabilities and Provisions 40

Total 11,750

ASS Fixed Assets: Cost 3,000

ETS Less: Provision for Depreciation Non–Current 250 2,750
: Investments at Cost 5,000
Current Assets, Loans and Advances (including Cash 4,000
and Bank Balances)

Total 11,750

The Company passed a resolution to buy back 20% of its Equity Capital at Rs. 15 per Share.
For this purpose, it sold its Investments of Rs. 30 Lakhs for Rs. 25 Lakhs.

The Company redeemed the Preference Shares at a Premium of 10% on 1st April. Assume
that Securities Premium A/c is usable for providing the Premium on redemption of
Preference Shares.

Included in its Investments were ‘Investments in Own Debentures’ costing Rs. 3 Lakhs
(Face Value Rs. 3.30 Lakhs). These Debentures were cancelled on 1st April.

You are required to pass necessary Journal entries and prepare the Balance Sheet on 1st
April. (10 Marks)

Q5 B) i) The following was the Balance Sheet of “Gone” Limited as on 31st March –

Equity & Liabilities Rs. Assets Rs.

Share Capital: Fixed Assets:

14%, 4,000 Pref. Shares of Rs. 100 4,00,000 Land Buildings 40.000
fully paid up 8,000 Equity Shares of 4,80,000 Plant and Machinery 1,60,000
Rs. 100, Rs. 60 paid up Secured Loans: Patents 5,40,000
14% Debentures (Floating Charge on Current Assets:
2,30,000 40,000
all Assets)
Stock at Cost Sundry
32,200
Interest accrued on above Debentures Debtors Cash at Bank
1,00,000
(also having a Floating Charge as Profit and Loss A/c
above) Loan on Mortgage of Land and 1,50,000 2,30,000

Building 60,000

Current Liabilities and Provisions: 1,17,800 2,40,000

ADC ACC 70%

Sundry Creditors

Total 14,10,00 Total 14,10,00

0 0

On the above date, the Company went into voluntary liquidation. Dividend on 14%
Preference Shares was in arrears for one year. Sundry Creditors include Preferential
Creditors amounting to Rs. 30,000.

The Assets realised the following sums – Land Rs. 80,000, Buildings Rs. 2,00,000, Plant
& Machinery Rs. 5,00,000, Patent Rs. 50,000, Stock Rs. 1,60,000, Sundry Debtors Rs.
2,00,000.

Expenses of Liquidation amounted to Rs. 29,434. The Liquidator is entitled to a

Commission of 2% on all assets realised (except Cash at Bank) and 2% on amounts
distributed among Unsecured Creditors other than Preferential Creditors. All payments
were made on 30th June. Interest on Mortgage Loan shall be ignored at the time of
payment. From the above, prepare the Liquidator’s Final Statement of Account.

(5 Marks)

Q5 B ii) . Floating Charge created by the Company can be declared invalid in certain
situations, in the case of a Company being wound up. Comment. [Sec. 332] (5 Marks)

Q6 A) Abhirakshit Ltd has eight segments A, B, C, D, E, F, G and H. The following

information is available in relation to these segments. (Information in Rs. Lakhs)

Particulars A B C D E F G H Total

Segment
Revenue Nil 510 30 20 30 100 40 7 800
External 200 120 60 10 Nil Nil 10 0 400
Sales N
Inter– il
Segment
Sales

Total 200 630 90 30 30 100 50 7 1200

Revenue 0

ADC ACC 70%

Segment 10 (180) 30 (10) 16 (10) 10 1 (120)
Result – 4
Profit
(Loss)

Segment 45 141 15 33 9 15 15 2 300

Assets 7

Identify which of the above constitute Reportable Segments, if you were informed that A, B, C and E
were the Reported Segments in the last financial year. ( 5 Marks)

Q6B) Write short notes on Investment Fluctuation Reserve (IFR) and Investment Reserve
Account (IRA) in relation to Banks. (5 Marks)

Q6 C)

A Company has at its financial year ended 31st March, 15 law suits outstanding, none of
which has been settled by the time the accounts are approved by the Directors. The
Directors have estimated that the possible outcomes are as below –

Results For first ten cases For remaining five cases

Probability Amount of Probability Amount of

Loss Loss

Win 0.6 – 0.5 –

Lose – low damages 0.3 Rs. 90,000 0.3 Rs. 60,000

Lose – high damages 0.1 Rs. 1,60,000 0.2 Rs. 95,000

The Directors believe that the outcome of each case is independent of the outcome of all of
the others. Estimate the amount of Contingent Loss and state the accounting treatment of
such Contingent Loss. (5 Marks)

ADC ACC 70%

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