May 23 G1 RTP

INTERMEDIATE COURSE
GROUP – I
REVISION TEST PAPERS
MAY, 2023
BOARD OF STUDIES
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
(Set up by an Act of Parliament)
New Delhi
© The Institute of Chartered Accountants of India

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Edition : March, 2023
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Contents
Page Nos.
Objective & Approach ................................................................................................... i – vii
Objective of RTP.................................................................................................................... i
Planning & Preparing for Examination ....................................................................................ii
Subject-wise Guidance – An Overview .................................................................................. iii
Paper-wise RTPs
Paper 1: Accounting ................................................................................................. 1 – 34
Part – I : Announcements Stating Applicability & Non-Applicability ................ 1 – 2
Part – II : Questions and Answers ............................................................... 2 – 34
Paper 2: Corporate and Other Laws ....................................................................... 35 – 56
Part – I : Announcements Stating Applicability & Non-Applicability ............. 35 – 44
Part – II : Questions and Answers ............................................................. 45 – 56
Paper 3: Cost and Management Accounting ..................................................................57 – 83
Paper 4 : Taxation........................................................................................................... 84 – 107
Section A: Income-tax Law.................................................................................84 – 98
Section B: Indirect taxes...................................................................................99 – 107
Applicability of Standards/Guidance Notes/Legislative Amendments etc.
for May, 2023 – Intermediate Examination ............................................................ 108 – 112

REVISION TEST PAPER, MAY, 2023 – OBJECTIVE & APPROACH
(Students are advised to go through the following paragraphs carefully to derive
maximum benefit out of this RTP)
I Objective of Revision Test Paper
Revision Test Papers are one among the many educational inputs provided by the Board
of Studies (BOS) to its students. Popularly referred to as RTP by the students, it is one of
the very old publications of the BOS whose significance and relevance from th e
examination perspective has stood the test of time.
RTPs provide glimpses of not only the desirable ways in which examination questions are
to be answered but also of the professional quality and standard of the answers expected
of students in the examination. Further, aspirants can assess their level of preparation for
the examination by answering various questions given in the RTP and can also update
themselves with the latest developments in the various subjects relevant from the
examination point of view.
The primary objectives of the RTP are:
• To help students get an insight of their preparedness for the forthcoming examination;
• To provide an opportunity for a student to find all the latest developments relevant for
the forthcoming examination at one place;
• To supplement earlier studies;
• To enhance the confidence level of the students adequately; and
• To leverage the preparation of the students by giving guidance on how to approach
the examinations.
RTPs contain the following:
(i) Planning and preparing for examination
(ii) Subject-wise guidance – An overview
(iii) Updates applicable for a particular exam in the relevant subjects
(iv) Topic-wise questions and detailed answers thereof in respect of each paper
(v) Relevant announcement applicable for the particular examination
Students must bear in mind that the RTP contains a variety of questions based on different
sections of the syllabi and thus a comprehensive study of the entire syllabus is a pre -
requisite before answering the questions of the RTP. In other words, in order to derive
maximum benefit out of the RTPs, it is advised that before proceeding to solve the
questions given in the RTP, students ought to have thoroughly read the Study Materials.
The topics on which the questions are set herein have been carefully selected and
meticulous attention has been paid in framing different types of questions. Detailed

REVISION TEST PAPER ii
answers are provided to enable the students to do a self-assessment and have a focused
approach for effective preparation.
Students are welcome to send their suggestions for fine tuning the RTP to the Director,
Board of Studies, The Institute of Chartered Accountants of India, A -29, Sector-62, Noida
201 309 (Uttar Pradesh). RTP is also available on the Institute’s website www.icai.org
under the BOS knowledge portal in students section for downloading.
II. Planning and preparing for examination
Ideally, when the RTP reaches your hand, you must have finished reading the relevant
Study Materials of all the subjects. Make sure that you have read the Study Materials
thoroughly as they cover the syllabus comprehensively. Get a good grasp of the concepts/
provisions discussed therein. Solve each and every question/illustration given therein to
understand the application of the concepts and provisions.
After reading the Study Materials thoroughly, you should go through the Updates provided
in the RTP and then proceed to solve the questions given in the RTP on your own. RTP
is in an effective tool to revise and refresh the concepts and provisions discussed in the
Study Material. RTPs are provided to you to help you assess your level of preparation.
Hence you must solve the questions given therein on your own and thereafter compare
your answers with the answers given therein.
Examination tips
How well a student fares in the examination depends upon the level and depth of his
preparation. However, there are certain important points which can help a student better
his performance in the examination. These useful tips are given below:
 Reach the examination hall well in time.
 As soon as you get the question paper, read it carefully and thoroughly. You are
given separate 15 minutes for reading the question paper.
 Plan your time so that appropriate time is awarded for each question. Keep sometime
for checking the answers as well.
 First impression is the last impression. The question which you can answer in the
best manner should be attempted first.
 Always attempt to do all questions. Therefore, it is important that you must finish
each question within allocated time.
 Read the question carefully more than once before starting the answer to understand
very clearly as to what is required.
 Answer all parts of a question one after the other; do not answer different parts of the
same question at different places.
 Write in a neat and legible hand-writing.

iii INTERMEDIATE EXAMINATION: MAY, 2023
 Always be concise and write to the point and do not try to fill pages unnecessarily.
 There must be logical expression of the answer.
 In case a question is not clear, you may state your assumptions and then answer the
question.
 Check your answers carefully and underline important points before leaving the
examination hall.
III. Subject-wise Guidance – An Overview
PAPER – 1 : ACCOUNTING
The Revisionary Test Paper (RTP) of Accounting is divided into two parts viz
Part I - Relevant announcement stating Applicability and Non-Applicability for May, 2023
examination and Part II –Questions and Answers.
It may be noted that the September 2021 edition of the Study Material is relevant for
May, 2023 Examination.
Part I of the Revisionary Test consists of the relevant notifications and information
applicable and not applicable for May, 2023 examination. The purpose of this information
in the RTP is to apprise the students with the latest developments applicable for May, 2023
examination. The brief summary of the same has been given as under:
A. Applicable for May, 2023 examination:
I. Relevant Legislative Amendments
II. Amendments in Schedule III (Division I) to the Companies Act, 2013
III. Criteria for classification of Non-Company entities for applicability of Accounting
Standards
B. Not applicable for May, 2023 examination:
Ind ASs issued by the Ministry of Corporate Affairs.
Part II of the Revisionary Test Paper consists of twenty questions together with their
answers. First fifteen questions are based on different topics discussed in the study
material. Last five questions of this RTP are based on Accounting Standards. For easy
reference the topic / accounting standard name and number on which the question is based
has been quoted at the top of each question. The details of topics, on which questions in
the RTP are based, are as under:
Question Topic
No.
1 and 2. Preparation of Statement of Profit and Loss and Balance Sheet of
Company including Managerial Remuneration

REVISION TEST PAPER iv
3. Cash Flow Statement

4. Profit or Loss prior to Incorporation
5. Accounting for Bonus Issue
6. Issue of Right Shares
7. Redemption of Preference Shares
8. Redemption of Debentures
9. Investment Accounts
10. Insurance Claim for Loss of Stock
11. Hire purchase Transactions
12. Departmental Accounts
13. Branch Accounting
14. Accounts from Incomplete Records
15 Framework for Preparation and Presentation of Financial Statements
16-20 Accounting Standards
Answers to the questions have been given in detail along with the working notes for easy
understanding and comprehending the steps in solving the problems. The answers to the
questions have been presented in the manner which is expected from the students in the
examination. The students are expected to solve the questions under examination conditions
and then compare their solutions with the solutions given in the Revisionary Test Paper and
further strategize their preparation for scoring more marks in the examination.
PAPER – 2: CORPORATE AND OTHER LAWS

In the paper of Corporate and Other Laws, for the ‘Company Law’ portion, the objective is
‘To develop an understanding of the provisions of company law and acquire the ability to
address application-oriented issues’ and for ‘Other Laws’ the objective is ‘To develop an
understanding of the provisions of select legislations and acquire the ability to address
application-oriented issues, and to develop an understanding of the rules for interpretation
of statutes’. The students need to prepare on basis of the objective entrusted in the
syllabus for the subject. Students should also give importance to the terms/definitions for
proper conceptualization of the answers. Students have to focus their study based on the
major legal provisions, case laws, if any, and understand their practical implications. Also,
Language is an important point of concern. This problem among many of the candidates
can be overcome by way of practice writing and also undertaking self-examination by going
through Revisionary Test Papers (RTP).
RTP gives an idea to the student attempting law paper to give the answer of any practical
oriented questions by pinpointing the legal points or issues involved in any statement,
problem or situation given in the question, explaining the relevant legal provisions clearly,
co-relating the legal provisions to the given statement or problem or situa tion and cite the
relevant case law in support of their reasoning for reflecting on the quality of the answer.

v INTERMEDIATE EXAMINATION: MAY, 2023
For the theoretical question, the answer should be laid down by highlighting the main points
with brief description and explain the same with the help of an example.
Generally, the RTP is divided into two parts -
Part I: Containing the relevant legislative amendments which are applicable for May
2023 examinations.
Part II: Topic wise questions with detailed answers
It is broadly categorised into two divisions – Division A (Multiple Choice Question-
Integrated Case Scenario and Independent MCQs) and Division B (Detailed Questions)
with their answers.
Guidance on the citation of the Case Laws and Section
Students may kindly note that in view of various Acts covered under the subject, you may
find it difficult to remember various sections of the law and related case laws on the matter.
Case laws and citing of the Sections reflects on the quality of your preparation for the
examination and making yourself set to become a perfect professional. The answers that
are reflected here have reference to sections and case laws wherever applicable. It may
kindly be noted that these are given for knowledge and to mainly inculcate such a habit.
However, at this level it may not affect on the scoring of the marks.
PAPER – 3: COST AND MANAGEMENT ACCOUNTING
The Revision Test Paper (RTP) of Cost and Management Accounting comprises of fifteen
questions for full coverage of the syllabus. Theoretical questions along with computational
problems have also been incorporated so that you are able to give emphasis to the theoretical
portion of the syllabus as well. Since this paper’s inclination is more towards numerical-
oriented questions which involve mathematical calculations, therefore, it is very important
that you have thoroughly studied the theoretical aspects of the subject and are also clear
about the concepts and logic behind the mathematical workings and formulae.
A summary of the questions both theoretical and computational has been given for your
reference:
Q. Topic About the Problem
No.
1. Material Cost Calculation of EOQ.
2. Employee cost Calculation of labour Turnover.
3. Overheads Distribution and re-distribution of overheads.
4. Activity Based Costing Calculation of production cost using ABC
(ABC) Method costing.
5. Cost Sheet Preparation of Statement of Cost.
6. Cost Accounting System Preparation of Reconciliation.

REVISION TEST PAPER vi
7. Job and Batch Costing Compute the cost and profit per piece of each
batch order .
8. Contract Costing Preparation of Contract Account.
9. Process Costing Preparation of Statement of equivalent
production, cost per unit and process account.
10. Joint Product By Product Preparation of statement showing Income.
11. Service Costing Preparation of cost statement of Thermal
Power Station showing the cost of electricity
generated
12. Standard Costing Calculation of Material and Labour variances.
13. Marginal Costing Calculation of PV ratio, total contribution, profit
and Break-even sales.
14. Budget and Budgetary Preparation of budget.
Control
15(a) Introduction to Cost and Unit of costs.
Management Accounting
15(b) Contract Costing Difference between Job costing and Batch
costing.
15(c) Cost Accounting Systems Essential pre-requisite for Integrated
Accounting system
15(d) Introduction to Cost and Difference between cost control and cost
Management Accounting reduction
PAPER – 4: TAXATION
Section A: Income-tax Law (60 Marks)
The Income-tax law, as amended by the Finance Act, 2022 and significant notifications,
circulars and other legislative amendments upto 31.10.2022 are relevant for May, 2023
Examination. The relevant assessment year for May, 2023 examination is A.Y. 2023 -24.
The May, 2022 edition of the Study Material, comprising of three modules (Modules 1 -3),
is applicable for May, 2023 Examination. Further, a list of topic-wise exclusions from the
syllabus has been specified by way of “Study Guidelines” in the initial pages of Module
1 of the Study Material.
The above referred study material has to be read along with Statutory Update for May, 2023
Examination webhosted at https://resource.cdn.icai.org/72468bos58397.pdf at BoS
Knowledge Portal, which contains the significant notifications/circulars issued between
1.5.2022 and 31.10.2022, which are also relevant for May, 2023 Examination.
You have to read the Study Material thoroughly to attain conceptual clarity. Tables,
diagrams and flow charts have been extensively used to facilitate easy understanding of

vii INTERMEDIATE EXAMINATION: MAY, 2023
concepts. The amendments made by the Finance Act, 2022 and latest notifications and
circulars have been given in italics/bold italics. Examples and Illustrations given in the
Study Material would help you understand the application of concepts. Work out the
exercise questions at the end of each chapter and then, compare your answers with the
answers given to test your level of understanding. Thereafter, solve the MCQs webhosted
at https://resource.cdn.icai.org/73140bos58983.pdf. This will help you gain speed and
accuracy in solving MCQ based questions in the Examination.
Finally, solve the questions given in this RTP independently and compare the same with the
answers given to assess your level of preparedness for the examination.
Section B: Indirect Taxes (40 Marks)
For Section B: Indirect Taxes of Paper 4: Taxation, the provisions of the CGST Act, 2017
and the IGST Act, 2017 as amended by the Finance Act, 2022, including significant
notifications and circulars issued and other legislative amendments made, up to
31st October, 2022, are applicable for May 2023 examination.
Further, a list of topic-wise exclusions from the syllabus has been specified by way of
“Study Guidelines for May, 2023 Examination”. The same is given as part of
“Applicability of Standards/Guidance Notes/Legislative Amendments etc. for
May, 2023 - Intermediate Examination” appended at the end of this Revision Test Paper.
The August, 2021 edition of the Study Material alongwith the Supplementary Study Paper
2022 is applicable for Intermediate Course Paper 4: Taxation, Section B: Indirect Taxes.
The Study Material has been divided into two modules for ease of handling by students.
Study Material is based on the provisions of the CGST Act and IGST Act as amended upto
30.04.2021. The amendments in the GST law made between 01.05.2021 and 31.10.2022
are covered in the Supplementary Study Paper for May 2023 examination and Statutory
Update for May 2023 examination. For the ease of reference, the amendments have been
grouped into Chapters which correspond with the Chapters of the Study Material.
You have to read the Study Material alongwith the Supplementary Study Paper and
Statutory Update thoroughly to attain conceptual clarity. You are advised to solve the
questions given in this RTP independently and compare the same with the answers given
to assess your level of preparedness for the examination.

PAPER – 1: ACCOUNTING
PART – I: ANNOUNCEMENTS STATING APPLICABILITY & NON-APPLICABILITY
A. Applicable for May, 2023 examination
I. Relevant Legislative Amendments
The Central Government has amended Companies (Specification of definition details)
Rules, 2014, through the Companies (Specification of definition details) Amendment
Rules, 2022 vide Notification G.S.R. 700(E) dated 15th September, 2022.
Amendment in definition of Small Company:
In the Companies (Specification of definition details) Rules, 2014, in Rule 2, in sub -
rule (1), for clause (t), the following clause shall be substituted, namely: -
“(t) For the purposes of sub-clause (i) and sub-clause (ii) of clause (85) of section 2
of the Act, paid up capital and turnover of the small company shall not exceed rupees
four crore and rupees forty crore respectively.”.
II. Amendments in Schedule III (Division I) to the Companies Act, 2013
In exercise of the powers conferred by sub-section (1) of section 467 of the
Companies Act, 2013 (18 of 2013), the Central Government made amendments in
Schedule III (Division I) to the said Act, vide MCA Notification dated 24 th March, 2021,
applicable with effect from 1 st day of April, 2021. These amendments have been
incorporated in Annexure “Schedule III to the Companies Act” to chapter 4 of
September, 2021 Edition. The students are advised to refer the link
https://resource.cdn.icai.org/66494bos53751-cp4-annex.pdf for the revised content.
III. Criteria for classification of Non-Company entities for applicability of
Accounting Standards
The Council, at its 400th meeting, held on March 18-19, 2021, revised the criteria
relating to applicability of Accounting Standards issued by The Institute of Chartered
Accountants of India (ICAI), to Non-company entities (Enterprises). The scheme for
applicability of Accounting Standards to Non-company entities shall come into effect
in respect of accounting periods commencing on or after April 1, 2020. For the
purpose of applicability of Accounting Standards, Non-company entities are classified
into four categories, viz., Level I, Level II, Level III and Level IV. Level I entities are
large size entities, Level II entities are medium size entities, Level III entities are small
size entities and Level IV entities are micro entities. Level IV, Level III a nd Level II
entities are referred to as Micro, Small and Medium size entities (MSMEs). The terms
‘Small and Medium Enterprise’ and ‘SME’ used in Accounting Standards shall be read
as ‘Micro, Small and Medium size entity’ and ‘MSME’ respectively. Level I entities
are required to comply in full with all the Accounting Standards. However, certain

2 INTERMEDIATE EXAMINATION: MAY 2023
exemptions/relaxations have been provided to Level II, Level III and Level IV Non -
company entities.
The revised criteria for classification of Non-Company entities reg. applicability of
Accounting Standards has been incorporated in the revised chapter 3 unit 1 of
September, 2021 Edition of the Study Material. The students are advised to refer the
link https://resource.cdn.icai.org/66492bos53751-cp3-u1.pdf for the revised content.
NOTE: September, 2021 Edition of the Study Material on Paper 1 Accounting is applicable
for May, 2023 Examination. The students who have editions prior to September, 2021 may
refer the uploaded chapters for the revised content.
B. Not applicable for May, 2023 examination

Non-Applicability of Ind AS for May, 2023 Examination
The Ministry of Corporate Affairs has notified Companies (Indian Accounting Standards)
Rules, 2015 on 16 th February, 2015, for compliance by certain class of companies. These
Ind AS are not applicable for May, 2023 Examination.
PART – II: QUESTIONS AND ANSWERS
QUESTIONS
Preparation of Balance Sheet of a Company

1. On 31st March 2022, Hari Ltd. provides you the following particulars:
Particulars Debit ` Credit `
Equity Share Capital (Face value of ` 100 each) 12,50,000
Call in Arrears 1,250

Land & Building 6,87,500
Plant & Machinery 6,56,250
Furniture 62,500
General Reserve 2,62,500
Loan from State Financial Corporation 1,87,500
Inventory:
Raw Materials 62,500
Finished Goods 2,50,000 3,12,500

PAPER – 1 : ACCOUNTING 3
Provision for Taxation 1,60,000

Trade Receivables 2,50,000
Advances 53,375
Profit & Loss Account 1,08,375
Cash in Hand 37,500
Cash at Bank 3,08,750
Unsecured Loan (Long-term) 1,51,250
Trade Payables 2,50,000
The following additional information is also provided:
(i) 2,500 Equity shares were issued for consideration other than cash.
(ii) Debtors of ` 65,000 (included in trade receivables) are due for more than 6 months.
(iii) The cost of the assets were:
Building ` 7,50,000, Plant & Machinery ` 8,75,000 and Furniture ` 78,125
(iv) The balance of ` 1,87,500 in the Loan Account with State Finance Corporation is
inclusive of ` 9,375 for Interest accrued but not due. The loan is secured by
hypothecation of Plant & Machinery.
(v) Balance at Bank includes ` 2,500 with Global Bank Ltd., which is not a Scheduled
Bank.
You are required to prepare the Balance sheet of Hari Ltd. as on 31 st March, 2022 as per
Schedule III to the Companies Act, 2013.
Managerial remuneration
2. Omega Ltd. provides the following information as on 31st March, 2022:
Liabilities `
Authorized capital:
50,000, 14% preference shares of `100 50,00,000
5,00,000 Equity shares of `100 each 5,00,00,000
5,50,00,000
Issued and subscribed capital:
38,750, 14% preference shares of ` 100 each fully paid 38,75,000
2,70,000 Equity shares of ` 100 each, ` 80 paid-up 2,16,00,000
Share suspense account 45,00,000
Reserves and surplus:

Capital reserves (` 2,50,000 is revaluation reserve) 4,38,750

Securities premium 1,12,500
Secured loans:
15% Debentures 1,46,25,000
Unsecured loans:
Public deposits 8,32,500
Cash credit loan from SBI (short term) 2,96,250
Current Liabilities:
Trade Payables 7,76,250
Assets:
Investment in shares, debentures, etc. 1,75,25,000
Profit and Loss account (Dr. balance) 34,25,000
Share suspense account represents application money received on shares, the allotment
of which is not yet made. You are required to compute effective capital as per the provisions
of Schedule V if Omega Ltd is non-investment company. Would your answer differ if
Omega Ltd. is an investment company?
Cash Flow Statement
3. Following is the Balance Sheet of Fox Ltd. You are required to prepare cash flow statement
using Indirect Method.
Particulars Note 31st March,2021 31st March,2020
No. (`) (`)
(I) Equity and Liabilities
1. Shareholders’ Funds
(a) Share capital 1 5,60,000 3,00,000
(b) Reserve and Surplus 2 35,000 25,000
2. Current Liabilities
(a) Trade payables 1,50,000 60,000
(b) Short-term provisions 8,000 5,000
(Provision for taxation)
Total 7,53,000 3,90,000

(II) Assets
1. Non-current assets
(a) Property, Plant and 3,50,000 1,80,000
Equipment
2. Current assets
(a) Inventories 1,20,000 50,000
(b) Trade receivables 1,00,000 25,000
(c) Cash and cash equivalents 1,05,000 90,000
(d) Other current assets 78,000 45,000
Total 7,53,000 3,90,000
Notes to Accounts
Particulars 31st March,2021 (`) 31st March,2020
(`)
1. Share capital
(a) Equity share capital 4,10,000 2,00,000
(b) Preference share capital 1,50,000 1,00,000
5,60,000 3,00,000
2. Reserve and surplus
Surplus in statement of profit and loss at the 25,000
beginning of the year
Add: Profit of the year 20,000
Less: Dividend (10,000)
Surplus in statement of profit and loss at the 35,000 25,000
end of the year
Additional Information:
1. Dividend paid during the year ` 10,000
2. Depreciation charges during the year ` 40,000.
Profit/Loss prior to Incorporation
4. M/s New Venture, who was carrying on business from 1 st June, 2021 gets itself
incorporated as a company on 1 st October, 2021. The first accounts are drawn upto
31st March 2022. The gross profit for the period is ` 1,20,000.
Following information is given :
(a) General Expenses are ` 24,000.

(b) Director's Fees is ` 24,000 p.a.

(c) Incorporation Expenses ` 4,000.
(d) Rent upto 31st December, 2021 was ` 6,000 p.a., after which it was increased to
` 8,000 p.a.
(e) Salary of the Manager, who upon incorporation of the company was made a director,
is ` 12,000 p.a. His remuneration as director is included in the above figure of fees
to the directors.
(f) Advertisement Expenses of ` 5,000 pertains to the incorporated company.
(g) Bad debts` 4,000.
Give statement showing pre and post incorporation profit. The net sales are ` 20,00,000,
the monthly average of which, for the first four months is one-half of that of the remaining
period. The company earned a uniform profit. Interest and tax may be ignored.
Accounting for Bonus Issue
5. Following items appear in the Trial Balance of Satish Limited as on 31 st March, 2022:
Particulars Amount
9,000 Equity shares of ` 100 each 9,00,000
Capital Reserves (including ` 80,000 being profit on sale of plant) 1,80,000
Securities Premium 80,000
Capital Redemption Reserve 60,000
Profit and Loss Account (Cr. Balance) 1,30,000
The company decided to issue bonus shares to equity shareholders at the rate of 1 share
for every 3 shares held. Company decided that there should be the minimum reduction in
free reserves. Pass necessary Journal Entries in the books of Satish Ltd.
Issue of Right Shares
6. A company having 1,00,000 shares of ` 10 each as its issued share capital, and having a
market value of ` 46, issues rights shares in the ratio of 1:10 at an issue price of
` 31. Pass journal entry for issue of right shares.
Redemption of Preference Shares
7. (a) The Board of Directors of a Company decided to issue minimum number of equity
shares of ` 9 to redeem ` 2,50,000 preference shares. The maximum amount of
divisible profits available for redemption is ` 1,50,000. Calculate the number of shares
to be issued by the company to ensure that the provisions of Section 55 are not
violated. Also determine the number of shares if the company decides to issue shares
in multiples of ` 50 only.

(b) Make Ltd. had 6,000, 14% Redeemable Preference Shares of ` 100 each, fully paid
up. The company had to redeem these shares at a premium of 10%.
It was decided by the company to issue the following:
(i) 50,000 Equity Shares of ` 10 each at par,
(ii) 2,000 12% Debentures of ` 100 each.
The issue was fully subscribed and all amounts were received in full. The payment
was duly made. The company had sufficient profits. Show Journal Entries in the books
of the company.
Redemption of Debentures
8. Alfa Ltd. (listed company) issued ` 3,00,000 5% Debentures on 30 th September 20X0 on
which interest is payable half yearly on 31st March and 30th September. The company has
power to purchase debentures in the open market for cancellation thereof. The following
purchases were made during the year ended 31st December, 20X2 and the cancellati on
were made on the same date. On 31 December 20X0, investments had been made for the
purpose of redemption were ` 45,000.
1st March 20X2 - ` 50,000 nominal value purchased for ` 49,450 ex-interest.
1st September 20X2 - ` 40,000 nominal value purchased for ` 40,250 cum-interest.
You are required to draw up the following accounts for the year ended 31st December, 20X2:
(i) Debentures Account; and
(ii) Own Debentures (Investment) Account.
Ignore taxation. Interest to be rounded off to the nearest rupee on the higher side.
Investment Accounts
9. Remo Ltd. held on 1st April, 2021, 1000 9% Government Securities at ` 90,000 (Face Value
of Security ` 100 each). Three month's interest had accrued on the above date. On 1 st
May, the company purchased the same Government Securities of the face value of
` 80,000 at ` 95 cum-interest. On 1 st June, ` 60,000 face value of the security was sold
at ` 94 cum-interest. Interest on the security was paid each year on 30 th June and
31st December and was credited by the bank on the same date. On 30 th September,
` 40,000 face value of the Govt. securities were sold at ` 97 cum-interest. On
1st December, the company purchased the same security ` 10,000 at par ex-interest. On
1st March, the company sold ` 10,000 face value of the government securities at ` 95 ex-
interest.
You are required to draw up the 9% Government Security Account in the books of Remo
Limited. FIFO method shall be followed.
Calculation shall be made to the nearest rupee or multiple thereof.

Insurance Claim for loss of stock

10. A fire occurred in the premises of M/s Star & Sons on 21 st March 2022. The concern had
taken Insurance Policy of ` 75,000 which was subject to average clause. From the books
of accounts, the following particulars are available relating to the period 1st April 2021 to
March 21st 2022 :
(i) Stock as on April 1st 2021 ` 1,50,500
(ii) Purchases (including purchase of ` 40,000 for which purchase
invoices had not been received from suppliers, though goods
have been received in godown) ` 3,17,000
(iii) Cost of goods distributed as, samples for advertising
from April 1 st 2021 to the date of fire, included in above purchases ` 32,000
(iv) Sales (excluding goods sold on approval basis
having sale value ` 35,000) ` 4,55,000
Approval has been received for goods before the date of fire.
(v) Purchase return ` 15,000
(vi) Wages (including salary of Manager ` 10,000) ` 65,000
(vii) Average Rate of Gross Profit @ 20% on sales
(viii) Cost of goods salvaged ` 12,000
You are required to calculate the amount of claim to be lodged to Insurance Company.
Hire Purchase Transactions
11. The following particulars relate to hire purchase transactions:
(i) R (hire purchaser) purchased three machineries from S on hire purchase system.
The cash price of each machinery being ` 3,00,000.
(ii) The hire purchaser charged depreciation @ 20% on written down value method.
(iii) Two machineries were seized by hire vendor when second installment was not paid
at the end of the second year. The hire vendor valued the two machineries at cash
price less 30% depreciation charge for each of the years under written down value
method.
(iv) The hire vendor spent ` 15,000 on repairs of the machineries and then sold them for
a total amount of ` 2,55,000.
You are required to compute:
(1) Agreed value of two machineries taken back by the hire vendor.
(2) Book value of one machine left with the Hire purchaser.

(3) Profit or loss to hire purchaser on two machineries taken, back by the hire vendor.
(4) Profit or loss on machineries repossessed, when sold by the hire vendor.
Departmental Accounts
12. The following balances were extracted from the books of Beta. You are required to prepare
Departmental Trading Account and general Profit & Loss Account for the year ended
31st December, 2022:
Particulars Deptt. A Deptt. B
` `
Opening Stock 3,00,000 2,40,000
Purchases 39,00,000 54,60,000
Sales 60,00,000 90,00,000
General expenses incurred for both the Departments were ` 7,50,000 and you are also
supplied with the following information:
(i) Closing stock of Department A ` 6,00,000 including goods from Department B for
` 1,20,000 at cost to Department A.
(ii) Closing stock of Department B ` 12,00,000 including goods from Department A for
` 1,80,000 at cost to Department B.
(iii) Opening stock of Department A and Department B include goods of the value of
` 60,000 and ` 90,000 taken from Department B and Department A respectively at
cost to transferee departments.
(iv) The gross profit is uniform from year to year.
Accounting for Branches
13. PQR has a branch at Houston (USA). Business of the Branch is carried out subst antially
independent by way of accumulating cash and other monetary items, incurring expenses,
generating income and arranging borrowing in its local currency. The trial balance of the
Branch as at 31 st March, 2022 is as follows:
US$
Particulars Debit Credit
Office equipment (Cost) 56,400
Opening Accumulated Depreciation (Office equipment) 5,400
Furniture and Fixtures (Cost) 36,000
Opening Accumulated Depreciation 6,840
(Furniture and Fixtures)
Opening Stock as on 1 st April, 2021 24,500

Purchases 96,500
Sales 1,76,250
Salaries 4,250
Carriage inward 256
Rent, Rates & Taxes 956
Trade receivables 12,560
Trade payables 8,650
Cash at bank 2,540
Cash in hand 500
Head office Account _______ 37,322
Total 2,34,462 2,34,462
Following further information are given:
(i) Salaries outstanding as on 31st March, 2022 is US$ 600.
(ii) Depreciate office equipment and furniture & fixtures @ 10% at written down value.
(iii) Closing stock as on 31st March, 2022 is US $, 24,650.
(iv) You are informed that the Head office is showing receivable from the Branch as
` 23,75,614 as on 31 st March, 2022. No transaction in respect of the Branch is
pending in Head office.
(v) Office equipment (cost) includes one office equipment of US $ 2,400 purchased on
1/04/2021.
(vi) One furniture of carrying value of US $ 450 as on 01/04/2021 (cost: US $ 500 and
Accumulated depreciation: US $ 50) has been sold for US $ 405 on 31/03/202 2 to
Mr. M at no profit no loss. Mr. M has not paid the amount till the finalization of branch
account. No entry has been passed for this sale of furniture in the above trial balance.
(vii) The rate of exchange on different dates are:
Date 1 US $ is equivalent to
1st April, 2021 ` 64
31st December, 2021 ` 70
31st March, 2022 ` 75
Average for the year ` 72
You are required to prepare the trial Balance after incorporating adjustments given and
converting US $ into rupees.

Accounts from Incomplete Records

14. The following information relates to the business of ABC Enterprises, who requests you to
prepare a Trading and Profit & Loss A/c for the year ended 31 st March, 2022 and a Balance
Sheet as on that date.
(a) Assets and Liabilities as on:
in `
1.4.2021 31.3.2022
Furniture 60,000 63,500
Stock 80,000 70,000
Sundry Debtors 1,60,000 ?
Sundry Creditors 1,10,000 1,50,000
Prepaid Expenses 6,000 7,000
Outstanding Expenses 20,000 18,000
Cash in Hand & Bank Balance 12,000 26,250
(b) Cash transaction during the year:
(i) Collection from Debtors, after allowing discount of ` 15,000 amounted to
` 5,85,000.
(ii) Collection on discounting of Bills of Exchange, after deduction of discount of
` 1,250 by bank, totalled to ` 61,250.
(iii) Creditors of ` 4,00,000 were paid ` 3,92,000 in full settlement of their dues.
(iv) Payment of Freight inward of ` 30,000.
(v) Amount withdrawn for personal use ` 70,000.
(vi) Payment for office furniture ` 10,000.
(vii) Investment carrying annual interest of 6% were purchased at ` 95 (200 shares,
face Value ` 100 each) on 1st October 2021 and payment made thereof.
(viii) Expenses including salaries paid ` 95,000.
(ix) Miscellaneous receipt of ` 5,000.
(c) Bills of exchange drawn on and accepted by customers during the year amounted to
` 1,00,000. Of these, bills of exchange of ` 20,000 were endorsed in favour of
creditors. An endorsed bill of exchange of ` 4,000 was dishonoured.
(d) Goods costing ` 9,000 were used as advertising material.
(e) Goods are invariably sold to show a gross profit of 20% on sales.

(f) Difference in cash book, if any, is to be treated as further drawing or introduction of

capital by proprietor of ABC enterprises.
(g) Provide at 2% for doubtful debts on closing debtors.
Framework for Preparation and Presentation of Financial Statements
15. A Ltd. has entered into a binding agreement with Gamma Ltd. to buy a custom -made
machine ` 1,00,000. At the end of 20X1-X2, before delivery of the machine, A Ltd. had to
change its method of production. The new method will not require the machine ordered
and it will be scrapped after delivery. The expected scrap value is nil.
You are required to advise the accounting treatment and give necessary journal entry in
the year 20X1-X2.
AS 1 “Disclosure of Accounting Policies”
16. (a) In the books of Rani Ltd., closing inventory as on 31.03.2022 amounts to ` 1,75,000
(valued on the basis of FIFO method).
The Company decides to change from FIFO method to weighted average method for
ascertaining the costs of inventory from the year 2021-22. On the basis of weighted
average method, closing inventory as on 31.03.2022 amounts to ` 1,59,000.
Realizable value of the inventory as on 31.03.2022 amounts to ` 2,07,000.
Discuss disclosure requirements of change in accounting policy as per AS 1.
AS 2 Valuation of Inventories
(b) An enterprise ordered 20,000 KG of certain material at ` 110 per unit. The purchase
price includes GST ` 12 per KG, in respect of which full input tax credit (ITC) is
admissible. Freight incurred amounted to ` 1,17,600. Normal transit loss is 2%. The
enterprise actually received 19,500 KG and consumed 18,000 KG of the material.
(i) You are required to calculate cost of material per KG;
(ii) Allocation of material cost.
AS 10 Property, Plant and Equipment
17. Star Limited purchased machinery for ` 6,80,000 (inclusive of GST of ` 40,000). Input
credit is available for entire amount of GST paid. The company incurred the following other
expense for installation.
`
Cost of preparation of site for installation 21,200
Total Labour charges 56,000
(200 out of the total of 500 men hours worked,
were spent on installation of the machinery)

Spare parts and tools consumed in installation 5,000

Total salary of supervisor 26,000
(Time spent for installation was 25% of the total time worked)
Total technical expense 34,000
(1/10 relates to the plant installation)
Test run and experimental production expenses 18,000
Consultancy charges to architect for plant set up 11,000
Depreciation on assets used for installation 12,000
The machine was ready for use on 15.01.2021 but was used from 01.02.2021. Due to this
delay further expenses of ` 8,900 were incurred. Calculate the value at which the plant
should be capitalized in the books of Star Limited.
AS 11 The Effects of Changes in Foreign Exchange Rates and AS 16 Borrowing Costs
18. ABC Builders Limited had borrowed a sum of US $ 15,00,000 at the beginning of Financial
year 2020-21 for its residential project at London Interbank Offered Rate (LIBOR) + 4 %.
The interest is payable at the end of the Financial Year. At the time of availing the loan,
the exchange rate was ` 72 per US $ and the rate as on 31 st March, 2021 was ` 76 per
US $. If ABC Builders Limited borrowed the loan in Indian Rupee equivalent, the pricing of
loan would have been 9.50%. Compute Borrowing Cost and exchange difference for the
year ending 31st March, 2021 as per applicable Accounting Standards. (Applicable LIBOR
is 1%).
AS 12 Accounting for Government Grants
19. (a) Hygiene Ltd. had received a grant of ` 50 lakh in 2012 from a State Government
towards installation of pollution control machinery on fulfilment of certain conditions.
The company, however, failed to comply with the said conditions and consequently
was required to refund the said amount in 2022. The company debited the said
amount to its machinery account in 2022 on payment of the same. It also reworked
the depreciation for the said machinery from the date of its purchase and passed
necessary adjusting entries in the year 2022 to incorporate the retrospective impact
of the same. State whether the treatment done by the company is correct or not.
AS 13 Accounting for Investments
(b) Gowtham Limited invested in shares of another company (with the intention to hold
the shares for short-term period) on 30 th November, 2021 at a cost of ` 4,25,000. It

also earlier purchased Gold of ` 8,00,000 and Silver of ` 3,50,000 on 31st March,
2019.
Market values as on 31st March, 2022, of the above investments are as follows:
Shares ` 3,50,000
Gold ` 10,25,000
Silver ` 5,10,000
You are required to explain how will the above investments be shown (individually
and in total) in the books of account of Gowtham Limited for the year ending 31st
March, 2022 as per the provisions of AS 13.
AS 16 Borrowing Costs
20. Expert Limited issued 12% secured debentures of ` 100 lakhs on 01.06.2021. Money
raised from debentures to be utilized as under:
Intended Purpose Amount ` in lakhs
Construction of factory building 40
Working Capital 30
Purchase of Machinery 15
Purchase of Furniture 2
Purchase of truck 13
Additional Information:
(i) Interest on debentures for the Financial Year 2021-2022 was paid by the Company.
(ii) During the year, the company invested idle fund of ` 5 lakhs (out of the money raised
from debentures) in Bank's fixed deposit and earned interest of ` 50,000.
(iii) In March, 2022 construction of factory building was not completed (it is expected that
it will take another 6 months).
(iv) In March 2022, Machinery was installed and ready for its intended use.
(v) Furniture was put to use at the end of March 2022.
(vi) Truck is going to be received in April, 2022.
You are required to show the treatment of interest as per AS 16 in respect of borrowing
cost for the year ended 31 st March, 2022 in the Books of Expert Limited.

SUGGESTED ANSWERS
1. (a) Hari Ltd.

Balance Sheet as on 31 st March, 2022
Particulars Notes `
Equity and Liabilities
1 Shareholders' funds
a Share capital 1 12,48,750
b Reserves and Surplus 2 3,70,875
2 Non-current liabilities
Long-term borrowings 3 3,29,375
3 Current liabilities
a Trade Payables 2,50,000
b Other current liabilities 4 9,375
c Short-term provisions 5 1,60,000
Total 23,68,375
Assets
1 Non-current assets
Property, Plant & Equipment (PPE) 6 14,06,250
2 Current assets
a Inventories 7 3,12,500
b Trade receivables 8 2,50,000
c Cash and cash equivalents 9 3,46,250
d Short-term loans and advances 53,375
Total 23,68,375
Notes to accounts
`
1 Share Capital
Equity share capital
Issued & subscribed & called up

12,500 Equity Shares of ` 100 each

(of the above 2,500 shares have been issued for
consideration other than cash) 12,50,000
Less: Calls in arrears (1,250) 12,48,750
Total 12,48,750
2 Reserves and Surplus
Surplus (Profit & Loss A/c) 1,08,375
Total 3,70,875
3 Long-term borrowings
Secured Term Loan
State Financial Corporation Loan 1,78,125
(1,87,500–9,375)
(Secured by hypothecation of Plant and
Machinery)
Unsecured Loan 1,51,250
Total 3,29,375
4 Other current liabilities
Interest accrued but not due on loans (SFC) 9,375
5 Short-term provisions
Provision for taxation 1,60,000
6 PPE
Land and Building 7,50,000
Less: Depreciation (62,500) 6,87,500
Plant & Machinery 8,75,000
Less: Depreciation (2,18,750) 6,56,250
Furniture & Fittings 78,125
Less: Depreciation (15,625) 62,500
Total 14,06,250
7 Inventories
Raw Materials 62,500
Finished goods 2,50,000
Total 3,12,500

8 Trade receivables
Outstanding for a period exceeding six months 65,000
Other Amounts 1,85,000
Total 2,50,000
9 Cash and cash equivalents
Cash at bank
with Scheduled Banks 3,06,250
with others (Global Bank Ltd.) 2,500 3,08,750
Cash in hand 37,500
Total 3,46,250
2. Computation of effective capital:
Where Omega Where Omega
Ltd.is a non- Ltd.is an
investment investment
company company
Paid-up share capital —
38,750, 14% Preference shares 38,75,000 38,75,000
2,70,000 Equity shares 2,16,00,000 2,16,00,000
Capital reserves 1,88,750 1,88,750
Securities premium 1,12,500 1,12,500
15% Debentures 1,46,25,000 1,46,25,000
Public Deposits 8,32,500 8,32,500
(A) 4,12,33,750 4,12,33,750
Investments 1,75,25,000
Profit and Loss account (Dr. balance) 34,25,000 34,25,000
(B) 2,09,50,000 34,25,000
Effective capital (A–B) 2,02,83,750 3,78,08,750
3. Fox Ltd.
Cash Flow Statement for the year ended 31 st March, 2021
` `
Cash flows from operating activities
Net Profit (35,000 less 25,000) 10,000

Add: Dividend 10,000

Provision for tax 8,000
Net profit before taxation and extraordinary items 28,000
Adjustments for:
Depreciation 40,000
Operating profit before working capital changes 68,000
Increase in trade receivables (75,000)
Increase in inventories (70,000)
Increase in other current assets (33,000)
Increase in trade payables 90,000 (88,000)
Cash used in operating activities (20,000)
Less: Tax paid* (5,000)
Net cash used in operating activities (25,000)
Cash flows from investing activities
Purchase of PPE (2,10,000)
Net cash used in investing activities (2,10,000)
Cash flows from financing activities
Issue of equity shares for cash 2,10,000
Issue of preference shares 50,000
Dividends paid (10,000)
Net cash generated from financing activities 2,50,000
Net increase in cash and cash equivalents 15,000
Cash and cash equivalents at beginning of period 90,000
Cash and cash equivalents at end of period 1,05,000
*Provision for tax of last year considered to be paid in the current year.
Working Note:
`
Property, plant and equipment acquisitions
W.D.V. at 31.3.2021 3,50,000
Add back:
Depreciation for the year 40,000
3,90,000

Less: W.D.V. at 31.12.2020 1,80,000

Acquisitions during 2020-2021 2,10,000
4.
Particulars Basis Pre- Post- Total
incorporation incorporation
period period
` ` `
Gross Profit Sales Ratio 30,000 90,000 1,20,000
Less: General expenses Time Ratio 9,600 14,400 24,000
Director’s fee Actual --- 12,000 12,000
Incorporation expenses Actual --- 4,000 4,000
Rent W.N.2 2,000 3,500 5,500
Manager’s salary Actual 4,000 --- 4,000
Advertisement expenses Post --- 5,000 5,000
Bad Debts Sales Ratio 1,000 3,000 4,000
Pre-incorporation Profit
transferred to Capital Reserve
Post-incorporation Profit 13,400 48,100 61,500
transferred to P/L Account
Working Notes:
1. Calculation of sales ratio `
Let the average monthly sales of first four months = 100
Next six months = 200
Total sales of first four months = 100 x 4 = 400
Total sales of next six months = 200 x 6 = 1,200
Ratio of sales = 400 : 1,200 = 1:3
2. Rent
Till 31st December, 2021, rent was ` 6,000 p.a., i.e. ` 500 p.m.
So, pre-incorporation rent = ` 500 x 4 = ` 2,000
Post incorporation rent = (` 500 x 3) + (8,000 x 3/12) = ` 3,500.
3. Time Ratio
Pre-incorporation period = 1 st June, 2021 to 30th Sept, 2021 = 4 months
Post-incorporation = 1 st October, 2021 to 31st March, 2022 = 6 months
= 4 months: 6 months
Thus, time ratio is 2:3

5. Journal Entries in the Books of Satish Ltd

Particulars Debit (`) Credit (`)
Capital Redemption Reserve A/c Dr. 60,000
Securities Premium A/c Dr. 80,000
Capital Reserve A/c Dr. 80,000
General Reserve A/c * Dr. 80,000
To Bonus to Shareholders 3,00,000
(Being issue of one bonus shares for every 3 shares
held, by utilization of various Reserves, as per
Board’s resolution dated ………………)
Bonus to Shareholders A/c Dr. 3,00,000
To Equity Share Capital A/c 3,00,000
(Being capitalisation of profit)
*Note: Instead of general reserve, Profit and Loss Account may also be used.
6. The entry at the time of subscription of right shares by the existing shareholders will be:
Bank A/c Dr. 3,10,000
To Securities Premium A/c 2,10,000
(Being issue of 10,000 right shares @ ` 31 offered)
7. (a) Nominal value of preference shares ` 2,50,000
Maximum possible redemption out of profits ` 1,50,000
Minimum proceeds of fresh issue ` 2,50,000 – 1,50,000 = ` 1,00,000
Proceed of one share =`9
Minimum number of shares = 1,00,000 = 11,111.11 shares

9
As fractional shares are not permitted, the minimum number of shares to be issued
is 11,112 shares.
If shares are to be issued in multiples of 50, then the next higher figure which is a
multiple of 50 is 11,150. Hence, minimum number of shares to be issued in such a
case is 11,150 shares.

(b) In the books of Make Ltd.

Journal Entries
Date Particulars Dr. (`) Cr. (`)
Bank A/c Dr. 5,00,000
(Being the issue of 5,00,000 equity shares
of ` 10 each at par as per Board’s
resolution No……dated…..)
Bank A/c Dr. 2,00,000
To 12% Debenture A/c 2,00,000
(Being the issue of 2,000 Debentures of
` 100 each as per Board’s Resolution
No…..dated……)
Profit & Loss A/c Dr. 1,00,000
To Capital Redemption Reserve A/c 1,00,000
(Being the amount transferred to Capital
Redemption Reserve Account as per the
requirement of the Act)
12% Redeemable Preference Share Dr. 6,00,000
Capital A/c
Premium on Redemption of Preference Dr. 60,000
Shares A/c
To Preference Shareholders A/c 6,60,000
(Being the amount payable on redemption
transferred to Preference Shareholders
Account)
Preference Shareholders A/c Dr. 6,60,000
To Bank A/c 6,60,000
(Being the amount paid on redemption of
preference shares)
Profit & Loss A/c Dr. 60,000
To Premium on Redemption of 60,000
Preference Shares A/c
(Being the adjustment of premium on
redemption against Profits & Loss
Account)

Working Note:
Amount to be transferred to Capital Redemption Reserve Account
Face value of shares to be redeemed 6,00,000
Less: Proceeds from new issue (5,00,000)
Total Balance 1,00,000
8. Alfa Ltd.
Debentures Account
20X2 ` 20X2 `
March 1 To Own Debentures 49,450 Jan 1 By Balance b/d 3,00,000
March 1 To Profit on cancellation
(50,000-49,450) 550
Sep 1 To Own Debentures
(Note 3) 39,416
Sep 1 To Profit on cancellation
(40,000-39,416) 584
Dec 31 Balance c/d 2,10,000
3,00,000 3,00,000
Own Debentures (Investment) Account
Nominal Interest Cost Nominal Interest Cost
Cost Cost `
` ` ` ` `
20X2 20X2
March To Bank 50,000 1,042 49,450 March By Debentures 50,000 - 49,450
1 (W.N. 1) 1 A/c
Sep 1 To Bank 40,000 834 39,416 Sep 1 By Debentures 40,000 - 39,416
(W.N. 2 & 3) A/c
- - Dec. By P&L A/c 1,876 -
31
90,000 1,876 88,866 90,000 1,876 88,866
Working notes:
1. 50,000 x 5% x 5/12 = 1,042
2. 40,000 x 5% x 5/12 = 834
3. 40,250 – 834 = 39,416

9. In the Books of Remo Ltd.

9% Government Securities (Investment) Account
Particulars Face Interest Cost Particulars Face Interest Cost
Value Value
2021 ` ` ` 2021 ` ` `
April 1 To Balance June 1 By Bank
b/d 1,00,000 2,250 90,000 A/c 60,000 2,250 54,150
May 1 To Bank June 30 By Bank
A/c 80,000 2,400 73,600 A/c - 5,400 -
June 1 To P&L A/c - - 150 Sept. 30 By Bank A/c
40,000 900 37,900
Sept. To P & L A/c - - 1,900 Dec. 31 By Bank A/c - 4,050 -
30
Dec. 1 To Bank Mar.1 By Bank
A/c 10,000 375 10,000 2022 A/c 10,000 150 9,500
Mar. 1 To P&L A/c - - 300 Mar. 31 By Balance
2022 2022 c/d 80,000 1,800 74,400
Mar. To P&L A/c
31, (Transfer) - 9,525 -
2022
1,90,000 14,550 1,75,950 1,90,000 14,550 1,75,950
Working Notes:
1. Interest accrued on 1 st April 2021 = `1,00,000 x 9% x 3/12 = ` 2,250
2. Accrued Interest on 800 units as on 01.05.2021 = ` 80,000 x 9/100 x 4/12 = ` 2,400
3. Cost of Investment for purchase on 01.05.2021 = ` 76,000 - ` 2,400 = ` 73,600
4. Accrued Interest on 600 units as on 01.06.2021 = ` 60,000 x 9/100 x 5/12 = ` 2,250
5. Profit on Securities sold on 1 st June = ` 54,150 (56,400 – 2,250)- ` 54,000 (60,000 x
90,000/1,00,000) = ` 150
6. Interest received on 30.06.2021 = `1,20,000 x 9/100 x 6/12 = ` 5,400
7. Accrued Interest on 400 units as on 30.09.2021 = ` 40,000 x 9/100 x 3/12 = ` 900
8. Cost of 400 Govt. Securities sold on 30.09.2021 = 40,000 x 90,000/1,00,000 =
` 36,000
9. Profit on securities sold on 30 th September = `37,900 (38,800-900) - ` 36,000 =
` 1,900
10. Accrued Interest on 1.12.2021 = ` 10,000 x 9/100 x 5/12 = ` 375
11. Interest received on 31.12.2021 = ` 90,000 x 9/100 x 6/12 = ` 4,050
12. Accrued Interest on 100 units as on 01.03.2022 = ` 10,000 x 9/100 x 2/12 = ` 150

13. Cost of 100 Govt. Securities sold on 01.03.2022 = ` 10,000 x 73,600/80,000 =

` 9,200
14. Profit on securities sold on 01.03.2022 = ` 9,500 - ` 9,200 = ` 300
15.
Calculation of closing balance: Units `
Securities in hand remained in hand at 31/3/2022
From original holding (1,00,000 – 60,000 – 40,000) -
Purchased on 1st May (80,000 – 10,000) 70,000 64,400
Purchased on 1 st December 10,000 10,000
80,000 74,400
10. Memorandum Trading Account for the period 1 st April, 2021 to 21st March, 2022
` `
To Opening Stock 1,50,500 By Sales 4,90,000
(4,55,000 + 35,000)
To Purchases 3,17,000
Less: Returns (15,000) By Closing Stock (Bal. fig.) 83,500
Goods distributed as
samples (32,000) 2,70,000
To Wages 55,000
To Gross Profit 98,000
(20% of Sales)
5,73,500 5,73,500
Statement of Insurance Claim
`
Value of stock destroyed by fire 83,500
Less: Salvaged Stock 12,000
Loss of stock 71,500
Note: Since policy amount is less than vale of stock on date of fire, average clause will
apply. Therefore, claim amount will be computed by applying the formula.
Insured Value
Claim = x Loss suffered
Total Cost
Claim amount = ` 71,500 x 75,000/ 83,500 = ` 64,222 (rounded off)

11.
`
(i) Price of two machines = ` 3,00,000 x 2 6,00,000
Less: Depreciation for the first year @ 30% 1,80,000
4,20,000
30
Less: Depreciation for the second year = ` 4,20,000 x
100 1,26,000
Agreed value of two machines taken back by the hire vendor 2,94,000
(ii) Cash purchase price of one machine 3,00,000
Less: Depreciation on ` 3,00,000 @20% for the first year 60,000
Written drown value at the end of first year 2,40,000
Less: Depreciation on ` 2,40,000 @ 20% for the second year 48,000
Book value of machine left with the hire purchaser 1,92,000
(iii) Book value of one machine as calculated above 1,92,000
Book value of Two machines = ` 1,92,000 x 2 3,84,000
Value at which the two machines were taken back, calculated in 2,94,000
(i) above
Hence, loss to hire purchaser on machine taken back by hire
vendor (`3,84,000 – ` 2,94,000) ` 90,000
(iv) Profit or loss on machines repossessed when sold by hire
vendor
Sale proceeds 2,55,000
Less: Value at which machines were taken back 2,94,000
Repairs 15,000 (3,09,000)
Loss on resale 54,000
12. Departmental Trading Account for the year ended on 31 st December, 2022
Particulars A B Particulars A B
` ` ` `
To Opening Stock 3,00,000 2,40,000 By Sales 60,00,000 90,00,000
To Purchases 39,00,000 54,60,000 By Closing Stock 6,00,000 12,00,000
To Gross Profit 24,00,000 45,00,000
66,00,000 1,02,00,000 66,00,000 1,02,00,000

General profit and loss account of Beta for the year ended on 31 st December, 2022
Particulars Amount Particulars Amount
` `
To General expenses  7,50,000 By Stock reserve (opening stock)
To Stock reserve (Closing Dept. A 30,000
Stock)
Dept. A 60,000 Dept. B 36,000
Dept. B 72,000 By Gross Profit
To Net Profit 60,84,000 Dept. A 24,00,000
____ Dept. B 45,00,000
69,66,000 69,66,000
Working Notes:
Dept. A Dept. B
1. Percentage of Profit 24,00,000/60,00,000 x 100 45,00,000/90,00,000 x 100
40% 50%
2. Opening Stock 60,000 x 50% = 30,000 90,000 X 40% = 36,000
reserve
3. Closing Stock 1,20,000 x 50%=60,000 1,80,000 x 40% = 72,000
reserve
13. In the books of PQR
Trial Balance (in Rupees) of Houston (USA) Branch – Non Integral
foreign operation
as on 31 st March, 2022
Dr. Cr. Conversi Dr. Cr.
on
US $ US $ rate ` `
Office Equipment 56,400 75 42,30,000
Depreciation on Office 10,500 75 7,87,500
Equipment (Accumulated)
(5,400+5,100)
Depreciation 8,016 75 6,01,200

General expenses have not been allocated to individual department and are charged to General Profit
and Loss Account.

Furniture and fixtures 35,500 75 26,62,500

(36,000-500)
Depreciation on furniture and 9,661 75 7,24,575
fixtures (Accumulated)
(6,840-50-45 +2,916)
Stock (1st April, 2021) 24,500 64 15,68,000
Purchases 96,500 72 69,48,000
Sales 1,76,250 72 126,90,000
Carriage inward 256 72 18,432
Salaries (4,250+600) 4,850 72 3,49,200
Rent, rates and taxes 956 72 68,832
Salaries payable 600 75 45,000
Head Office A/c 37,322 23,75,614
(given)
Trade receivables 12,560 75 9,42,000
Trade payables 8,650 75 6,48,750
Cash at bank 2,540 75 1,90,500
Cash in hand 500 75 37,500
Mr. M 405 75 30,375
(Receivable for sale of
furniture)
Exchange gain (bal. fig.) 3,75,100
2,42,983 2,42,983 176,46,539 176,46,539
Closing stock 24,650 US$ x ` 75 =`18,48,750.
14. Trading and Profit and Loss Account of ABC enterprise
for the year ended 31st March, 2022
` `
To Opening Inventory 80,000 By Sales 6,08,750
To Purchases 4,56,000 By Closing inventory 70,000
Less: For advertising (9,000) 4,47,000
To Freight inwards 30,000
To Gross profit c/d 1,21,750
6,78,750 6,78,750

To Sundry expenses 92,000 By Gross profit b/d 1,21,750

To Advertisement 9,000 By Interest on investment 600
To Discount allowed – (20,000 x 6/100 x ½)
Debtors 15,000 By Discount received 8,000
Bills Receivable 1,250 16,250 By Miscellaneous income 5,000
To Depreciation on 6,500
furniture
To Provision for 1,455
doubtful debts
To Net profit 10,145
1,35,350 1,35,350
Balance Sheet as on 31st March, 2022
Liabilities Amount Assets Amount
` ` ` `
Capital as on 1,88,000 Furniture (w.d.v.) 60,000
1.4.2021 Additions during the year 10,000
Less: Drawings (91,000) Less: Depreciation (6,500) 63,500
97,000 Investment 19,000
Add: Net Profit 10,145 1,07,145 Interest accrued 600
Sundry creditors 1,50,000 Closing inventory 70,000
Sundry debtors 72,750
Outstanding 18,000 Less: Provision for doubtful 1,455 71,295
expenses debts
Bills receivable 17,500
Cash in hand and at bank 26,250
Prepaid expenses 7,000
2,75,145 2,75,145
Working Notes:
(1) Capital on 1st April, 2021
Balance Sheet as on 1st April, 2021
Liabilities ` Assets `
Capital (Bal.fig.) 1,88,000 Furniture (w.d.v.) 60,000

Creditors 1,10,000 Closing Inventory 80,000

Outstanding expenses 20,000 Sundry debtors 1,60,000
Cash in hand and at bank 12,000
Prepaid expenses 6,000
3,18,000 3,18,000
(2) Purchases made during the year
Sundry Creditors Account
` `
To Cash and bank A/c 3,92,000 By Balance b/d 1,10,000
To Discount received A/c 8,000 By Sundry debtors A/c 4,000
To Bills Receivable A/c 20,000 By Purchases A/c 4,56,000
To Balance c/d 1,50,000 (Balancing figure)
5,70,000 5,70,000
(3) Sales made during the year
`
Opening inventory 80,000
Purchases 4,56,000
Less: For advertising (9,000) 4,47,000
Freight inwards 30,000
5,57,000
Less: Closing inventory (70,000)
Cost of goods sold 4,87,000
Add: Gross profit (25% on cost) 1,21,750
6,08,750
(4) Debtors on 31st March, 2022
Sundry Debtors Account
` `
To Balance b/d 1,60,000 By Cash and bank A/c 5,85,000
To Sales A/c 6,08,750 By Discount allowed A/c 15,000
To Sundry creditors A/c By Bills receivable A/c 1,00,000
(bill dishonoured) 4,000 By Balance c/d (Bal.fig.) 72,750
7,72,750 7,72,750

(5) Additional drawings by proprietors of ABC enterprises

Cash and Bank Account
` `
To Balance b/d 12,000 By Freight inwards A/c 30,000
To Sundry debtors A/c 5,85,000 By Furniture A/c 10,000
To Bills Receivable A/c 61,250 By Investment A/c 19,000
To Miscellaneous income A/c 5,000 By Expenses A/c 95,000
By Creditors A/c 3,92,000
By Drawings A/c
[` 70,000 + ` 21,000) 91,000
(Additional drawings)]
By Balance c/d 26,250
6,63,250 6,63,250
(6) Amount of expenses debited to Profit and Loss A/c
Sundry Expenses Account
` `
To Prepaid expenses A/c 6,000 By Outstanding expenses A/c 20,000
(on 1.4.2021) (on 1.4.2021)
To Bank A/c 95,000 By Profit and Loss A/c 92,000
(Balancing figure)
To Outstanding expenses By Prepaid expenses A/c
A/c (on 31.3.2022) 18,000 (on 31.3.22) 7,000
1,19,000 1,19,000
(7) Bills Receivable on 31st March, 2022
Bills Receivable Account
` `
To Debtors A/c 1,00,000 By Creditors A/c 20,000
By Bank A/c 61,250
By Discount on bills receivable A/c 1,250
By Balance c/d (Balancing figure) 17,500
1,00,000 1,00,000
Note: All sales and purchases are assumed to be on credit basis.

15. A liability is recognised when outflow of economic resources in settlement of a present

obligation can be anticipated and the value of outflow can be reliably measured. In the
given case, A Ltd. should recognise a liability of ` 1,00,000 to Gamma Ltd.
When flow of economic benefit to the enterprise beyond the current accounting period is
considered improbable, the expenditure incurred is recognised as an expense rather than
as an asset. In the present case, flow of future economic benefit from the machine to the
enterprise is improbable. The entire amount of purchase price of the machine should be
recognised as an expense.
Journal entry
Loss on change in production method Dr. 1,00,000
To Gamma Ltd. 1,00,000
(Loss due to change in production method)
Profit and loss A/c Dr. 1,00,000
To Loss on change in production method 1,00,000
(Loss transferred to profit and loss account)
16. (a) As per AS 1 “Disclosure of Accounting Policies”, any change in an accounting policy
which has a material effect should be disclosed in the financial statements. The
amount by which any item in the financial statements is affected by such change
should also be disclosed to the extent ascertainable. Where such amount is not
ascertainable, wholly or in part, the fact should be indicated. Thus Rani Ltd. should
disclose the change in valuation method of inventory and its effect on financial
statements. The company may disclose the change in accounting policy in the
following manner:
“The company values its inventory at lower of cost and net realizable value. Since net
realizable value of all items of inventory in the current year was greater than
respective costs, the company valued its inventory at cost. In the present year i.e.
2021-22, the company has changed to weighted average method, which better
reflects the consumption pattern of inventory, for ascertaining inventory costs from
the earlier practice of using FIFO for the purpose. The change in policy has reduced
current profit and value of inventory by ` 16,000 (1,75,000 – 1,59,000).”
(b) Calculation of Normal cost per Kg.
`
Purchase price (20,000 Kg. x ` 110) 22,00,000
Less: Input Tax Credit (20,000 Kg. x ` 12) (2,40,000)
19,60,000
Add: Freight 1,17,600

A. Total material cost 20,77,600

B. Number of units normally received = 98% of 20,000 Kg. Kg. 19,600
C. Normal cost per Kg. (A/B) 106
Allocation of material cost
Kg. ` /Kg. `
Materials consumed 18,000 106 19,08,000
Cost of inventory 1,500 106 1,59,000
Abnormal loss 100 106 10,600
Total material cost 19,600 106 20,77,600
Note: Abnormal losses are recognized as separate expense.
17. Calculation of Cost of Plant
Particulars `
Purchase Price Given 6,80,000
Add: Site Preparation Cost Given 21,200
Labour charges (56,000×200/500) Given 22,400
Spare parts 5,000
Supervisor’s Salary 25% of ` 26,000 6,500
Technical costs 1/10 of ` 34,000 3,400
Test run and experimental production Given 18,000
charges
Architect Fees for set up Given 11,000
Depreciation on assets used for installation Given 12,000
Total Cost of Asset 7,79,500
Less: GST credit receivable (40,000)
Value to be capitalized 7,39,500
Note: Further Expenses of ` 8,900 from 15.1.2021 to 1.2.2021 to be charged to profit and
loss A/c as plant was ready for production on 15.1.2021.
18. (i) Interest for the period 2020-21
= US $ 15 lakhs x 5% × ` 76 per US $ = ` 57 lakhs
(ii) Increase in the liability towards the principal amount
= US $ 15 lakhs × ` (76 - 72) = ` 60 lakhs

(iii) Interest that would have resulted if the loan was taken in Indian currency
= US $ 15 lakhs × ` 72 x 9.5% = ` 102.60 lakhs
(iv) Difference between interest on local currency borrowing and foreign currency
borrowing = ` 102.60 lakhs less ` 57 lakhs = ` 45.60 lakhs.
Therefore, out of ` 60 lakhs increase in the liability towards principal amount, only
` 45.60 lakhs will be considered as the borrowing cost. Thus, total borrowing cost would
be ` 102.60 lakhs being the aggregate of interest of ` 57 lakhs on foreign currency
borrowings plus the exchange difference to the extent of difference between interest on
local currency borrowing and interest on foreign currency borrowing of ` 45.60 lakhs.
Hence, ` 102.60 lakhs would be considered as the borrowing cost to be accounted for as
per AS 16 “Borrowing Costs” and the remaining ` 14.4 lakhs (60 - 45.60) would be
considered as the exchange difference to be accounted for as per AS 11 “The Effects of
Changes in Foreign Exchange Rates”.
19. (a) As per the facts of the case, Hygiene Ltd. had received a grant of ` 50 lakh in 2012
from a State Government towards installation of pollution control machinery on
fulfilment of certain conditions. However, the amount of grant has to be refunded
since it failed to comply with the prescribed conditions. In such circumstances,
AS 12, “Accounting for Government Grants”, requires that the amount refundable in
respect of a government grant related to a specific fixed asset is recorded by
increasing the book value of the asset or by reducing the capital reserve or the
deferred income balance, as appropriate, by the amount refundable. The Standard
further makes it clear that in the first alternative, i.e., where the book value of the
asset is increased, depreciation on the revised book value should be provided
prospectively over the residual useful life of the asset. Accordingly, the accounting
treatment given by Hygiene Ltd. of increasing the value of the plant and machinery is
quite proper. However, the accounting treatment in respect of depreciation given by
the company of adjustment of depreciation with retrospective effect is improper and
constitutes violation of AS 12.
(b) As per AS 13 (Revised) ‘Accounting for Investments’, for investment in shares - if the
investment is purchased with an intention to hold for short-term period (less than one
year), then it will be classified as current investment and to be carried at lower of cost
and fair value, i.e., in case of shares, at lower of cost (` 4,25,000) and market value
(` 3,50,000) as on 31 March 2022, i.e., ` 3,50,000.
Gold and silver are generally purchased with an intention to hold it for long term period
(more than one year) until and unless given otherwise. Hence, the investment in Gold
and Silver (purchased on 31 stMarch, 2019) should continue to be shown at cost (since
there is no ‘other than temporary’ diminution) as on 31 st March, 2022, i.e., ` 8,00,000
and `3,50,000 respectively, though their market values have been increased.

Thus the shares, gold and silver will be shown at ` 3,50,000, ` 8,00,000 and
` 3,50,000 respectively and hence, total investment will be valued at ` 15,00,000 for
the year ending on 31st March, 2022 as per AS 13.
20. According to AS 16 “Borrowing Costs”, a qualifying asset is an asset that necessarily takes
a substantial period of time to get ready for its intended use. As per the Standard,
borrowing costs that are directly attributable to the acquisition, construction or production
of a qualifying asset should be capitalized as part of the cost of that asset. The amount o f
borrowing costs eligible for capitalization should be determined in accordance with this
Standard. Other borrowing costs should be recognized as an expense in the period in
which they are incurred. It also states that to the extent that funds are borrowed specifically
for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for
capitalization on that asset should be determined as the actual borrowing costs incurred
on that borrowing during the period less any income on the temporary investment of those
borrowings.
Thus, eligible borrowing cost = ` 10,00,000 (100 lakhs x 12% x 10/12) – ` 50,000 =
` 9,50,000
Particulars Nature of assets Interest to be Interest to be
capitalized (`) charged to Profit
& Loss Account
(`)
Construction of factory Qualifying Asset 9,50,000x40/100 NIL
building = ` 3,80,000
Purchase of Machinery Not a Qualifying Asset NIL 9,50,000x15/100
= 1,42,500
Purchase of and Not a Qualifying Asset NIL 9,50,000x2/100
furniture =19,000
Purchase of truck Not a Qualifying Asset NIL 9,50,000x13/100
= 1,23,500
Working Capital Not a Qualifying Asset NIL 9,50,000x30/100
= ` 2,85,000
Total ` 3,80,000 ` 5,70,000

PAPER – 2: CORPORATE AND OTHER LAWS
PART – I: ANNOUNCEMENTS STATING APPLICABILITY FOR MAY, 2023 EXAMINATIONS

Applicability for May, 2023 examinations
The Study Material (September 2021 edition) is applicable for May, 2023 examinations. This
study material is updated for all amendments till 30 th April, 2021.
Further, all relevant amendments/ circulars/ notifications etc. in the Company law part for the
period 1st May, 2021 to 31st October, 2022 are mentioned below:
THE COMPANIES ACT, 2013
I. Chapter 1: Preliminary
Notification G.S.R. 700(E) dated 15 th September, 2022
The Central Government has amended Companies (Specification of definition details) Rules,
2014, through the Companies (Specification of definition details) Amendment Rules, 2022.
Amendment:
In the Companies (Specification of definition details) Rules, 2014,
in Rule 2, in sub-rule (1), for clause (t), the following clause shall be substituted, namely: -
“(t) For the purposes of sub-clause (i) and sub-clause (ii) of clause (85) of section 2 of the Act,
paid up capital and turnover of the small company shall not exceed rupees four crore and rupees
forty crore respectively.”.
Old Law (Pg 1.22)
As per the Companies (Specification of Definitions Details) Rules, 2014, for the purposes of
sub-clause (i) and sub-clause (ii) of clause (85) of section 2 of the Act, paid up capital and
turnover of the small company shall not exceed rupees two crores and rupees twenty crores
respectively.
II. Chapter 2: Incorporation of company and matters incidental thereto

Notification S.O. 2904(E) dated 22 nd July, 2021
The Central Government has amended section 16 of the Companies Act, 2013, through the
Companies (Amendment) Act, 2020.
Amendment:
In section 16 of the Companies Act, 2013:
(i) in sub-section (1), in clause (b), for the words "period of six months", the words "perio d of
three months" shall be substituted;

36 INTERMEDIATE EXAMINATION: MAY, 2023
(ii) for sub-section (3), the following sub-section shall be substituted, namely:—
"(3) If a company is in default in complying with any direction given under sub-section (1), the
Central Government shall allot a new name to the company in such manner as may be
prescribed and the Registrar shall enter the new name in the register of comp anies in place of
the old name and issue a fresh certificate of incorporation with the new name, which the
company shall use thereafter:
Provided that nothing in this sub-section shall prevent a company from subsequently changing
its name in accordance with the provisions of section 13."
[Enforcement Date: 1 st September, 2021]
For point (i)- Old Law (Pg 2.39)
(b) on an application by a registered proprietor of a trade mark that the name is identical with
or too nearly resembles to a registered trade mark of such proprietor under the ……….. it
may direct the company to change its name and the company shall change its name or new
name, as the case may be, within a period of 6 months from the issue of such direction,
after adopting an ordinary resolution for the purpose.
For point (ii)- Old Law (Pg 2.39)
If a company makes default in complying with any direction—
Liable person Penalty/punishment
Company Fine of 1,000 rupees for every day during which the
default continues
Every Officer who is in Fine varying from 5,000 rupees to 1 lakh rupees.
default
III. Chapter 3: Prospectus and Allotment of Securities

Notification G.S.R. 338(E) dated 5th May, 2022
The Central Government has amended the Companies (Prospectus and Allotment of Securities)
Rules, 2014, through the Companies (Prospectus and Allotment of Securities) Amendment
Rules, 2022.
Amendment:
In the Companies (Prospectus and Allotment of Securities) Rules, 2014, ―
in rule 14, in sub-rule (1), after the fourth proviso, the following proviso shall be inserted,
namely:-
“Provided also that no offer or invitation of any securities under this rule shall be made to a body
corporate incorporated in, or a national of, a country which shares a land border with India,
unless such body corporate or the national, as the case may be, have obtained Government

PAPER – 2: CORPORATE AND OTHER LAWS 37
approval under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 and
attached the same with the private placement offer cum application letter.”.
Old Law (Pg 3.39)
The proviso is newly inserted after the fourth proviso to Rule 14(1), “in case of offer ……. such
buyers during the year”.
IV. Chapter 5: Acceptance of Deposits by Companies
Notification G.S.R. 663(E) dated 29th August, 2022
The Central Government has amended the Companies (Acceptance of Deposits) Rules, 2014,
through the Companies (Acceptance of Deposits) Amendment Rules, 2022.
Amendment:
In rule 16, after the words ― “auditor of the company”, the words, letters and figure ― “and
declaration to that effect shall be submitted by the auditor in Form DPT-3” shall be inserted.
Old Law (Pt 20 on Pg 5.16) and (Pt 19 on Pg 5.24)
The words are to be inserted in pt 20 on page 5.16 and in pt 19 on page 5.24
A duly audited return of deposits in DPT-3 (containing particulars as on 31st March of every
year) shall be filed with the Registrar of Companies along with requisite fee on or before the
30th June of that year.
V. Chapter 6: Registration of Charges
A. Notification S.O. G.S.R. 320 (E) dated 27th April, 2022
The Central Government has amended the Companies (Registration of Charges) Rules, 2014,
through the Companies (Registration of Charges) Amendment Rules, 2022.
Amendment:
In rule 3, after sub-rule (4), the following sub-rule shall be inserted, namely:—
"(5) Nothing contained in this rule shall apply to any charge required to be created or modified
by a banking company under section 77 in favour of the Reserve Bank of India when any loan
or advance has been made to it under sub-clause (d) of clause (4) of section 17 of the Reserve
Bank of India Act, 1934.”
Old Law (Pg 6.6)
Sub- rule (5) is newly inserted
B. Notification G.S.R. 664 (E) dated 29th August, 2022
The Central Government has amended the Companies (Registration of Charges) Rules, 2014,
through the Companies (Registration of Charges) Second Amendment Rules, 2022.

Amendment:
In the Companies (Registration of Charges) Rules, 2014, after rule, 12, the following rule shall
be inserted, namely:-
“13. Signing of charge e-forms by insolvency resolution professional or resolution professional
or liquidator for companies under resolution or liquidation.-
The Form No.CHG-1, CHG-4, CHG-8 and CHG-9 shall be signed by Insolvency resolution
professional or resolution professional or liquidator for companies under resolution or
liquidation, as the case may be and filed with the Registrar.”
Old Law
Rule 13 is newly inserted
VI. Chapter 7: Management and Administration
Notification S.O. G.S.R. 279(E) dated 6 th April, 2022
The Central Government has amended the Companies (Management and Administration)
Rules, 2014, through the Companies (Management and Administration) Amendment Rules,
2022.
Amendment:
in rule 14, after sub-rule (2), the following sub-rule shall be inserted, namely: —
"(3) Notwithstanding anything contained in sub-rules (1) and (2), the following particulars of the
register or index or return in respect of the members of a company shall not be made available
for any inspection under sub-section (2) or for taking extracts or copies under sub-section (3) of
section 94, namely: —
(i) address or registered address (in case of a body corporate);
(ii) e-mail ID
(iii) Unique Identification Number
(iv) PAN Number
Old Law (Pg 7.21)
Sub- rule (3) of Rule 14 is newly inserted
VII. Chapter 8: Declaration and Payment of Dividend
Notification No. G.S.R. 396(E) dated 9 th June, 2021

The Central Government has amended the Investor Education and Protection Fund Authority
(Accounting, Audit, Transfer and Refund) Rules, 2016, through the Investor Education and
Protection Fund Authority (Accounting, Audit, Transfer and Refund) Amendment R ules, 2021.
Amendment:
In rule 3, in sub-rule (2), after clause (f), the following shall be inserted, namely:-
“(fa) all shares held by the Authority in accordance with proviso of sub -section (9) of section 90
of the Act and all the resultant benefits arising out of such shares, without any restrictions;”
Old Law (Pg 8.21)
Clause (fa) is newly inserted
VIII. Chapter 9: Accounts of Companies
A. The Ministry of Corporate Affairs has made clarifications with respect to CSR:
General Circular No. 09/2021 Dated 5 th May, 2021
1. In continuation to this Ministry's General Circular No. 10/2020 dated 23.03.2020, wherein
it was clarified that spending of CSR funds for COVID-19 is an eligible CSR activity, it is further
clarified that spending of CSR funds for ‘creating health infrastructure for COVID care’,
‘establishment of medical oxygen generation and storage plants’, ‘manufacturing and supply of
Oxygen concentrators, ventilators, cylinders and other medical equipment for countering
COVID-19’ or similar such activities are eligible CSR activities under item nos. (i) and (xii) of
Schedule VII of the Companies Act, 2013 relating to promotion of health care, including
preventive health care, and, disaster management respectively.
2. Reference is also drawn to item no. (ix) of Schedule VII of the Companies Act, 2013 which
permits contribution to specified research and development projects as well as contribution to
public funded universities and certain Organisations engaged in conducting research in scien ce,
technology, engineering, and medicine as eligible CSR activities.
3. The companies including Government companies may undertake the activities or projects
or programmes using CSR funds, directly by themselves or in collaboration as shared
responsibility with other companies, subject to fulfillment of Companies (CSR Policy) Rules,
2014 and the guidelines issued by this Ministry from time to time.
General Circular 13/2021 dated 30 th July, 2021
The Ministry of Corporate Affairs vide General Circular 10/2020 dated 23.03.2020 clarified that
spending of CSR funds for COVID- 19 is an eligible CSR activity. In continuation to the said
circular, it is further clarified that spending of CSR funds of COVID- 19 vaccination for persons
other than the employees and their families, is an eligible CSR activity under item no. (i) of

Schedule VII of the Companies Act, 2013 relating to promotion of health care including
preventive health care and item no. (xii) relating to disaster management.
General Circular 08/2022 dated 26th July, 2022
Subject: Clarification on spending of CSR funds for ‘Har Ghar Tiranga’ campaign reg.
‘Har Ghar Tiranga’, a campaign under the aegis of Azadi Ka Amrit Mahotsav, is aimed to invo ke
the feeling of patriotism in the hearts of the people and to promote awareness about the Indian
National Flag. In this regard, it is clarified that spending of CSR funds for the activities related
to this campaign, such as mass scale production and supply of the National Flag, outreach and
amplification efforts and other related activities, are eligible CSR activities under item no. (ii) of
Schedule VII of the Companies Act, 2013 pertaining to promotion of education relating to culture.
The companies may undertake the aforesaid activities, subject to fulfilment of the Companies
(CSR Policy) Rules, 2014 and related circulars/ clarifications issued by the Ministry thereof, from
time to time.
Old Law (Pg 9.47)
The clarifications are newly inserted
B. Notification No. G.S.R. 107(E) dated 11th February 2022
The Central Government has amended the Companies (Accounts) Rules, 2014, through the
Companies (Accounts) Amendment Rules, 2022.
Amendment:
in rule 12, after sub-rule (1A), the following sub-rule shall be inserted, namely: —
"(1B) Every company covered under the provisions of sub-section (1) to section 135 shall furnish
a report on Corporate Social Responsibility in Form CSR-2 to the Registrar for the preceding
financial year (2020-2021) and onwards as an addendum to Form AOC-4 or AOC-4 XBRL or
AOC-4 NBFC (Ind AS), as the case may be:
Provided that for the preceding financial year (2020-2021), Form CSR-2 shall be filed separately
on or before 31st March 2022, after filing Form AOC-4 or AOC-4 XBRL or AOC-4 NBFC (Ind
AS), as the case may be."
Old Law (Pg 9.54)
Rule (1B) is newly inserted
C. Notification No. G.S.R. 235(E) dated 31st March 2022
Companies (Accounts) Second Amendment Rules, 2022.

Amendment:
In the Companies (Accounts) Rules, 2014,-
(i) in the proviso to sub-rule (1) of rule 3, for the figures, letters and words “1st day of April,
2022”, the figures, letters and words “1st day of April, 2023” shall be substi tuted;
(ii) in the proviso to sub-rule (1B) of rule 12, for the figures, letters and word “31st March,
2022”, the figures, letters and word “31st May, 2022” shall be substituted.
For point (i)- Old Law (Pg 9.5)
Provided that for the financial year commencing on or after the 1st day of April, 2022, every
company which uses accounting software for maintaining its books of account ….
For point (ii)- Old Law
As covered above in point B.
on or before 31st March 2022, after filing Form AOC-4 or AOC-4 XBRL or AOC-4 NBFC (Ind
AS), as the case may be.
D. Notification No. G.S.R. 407(E) dated 31 st May 2022
Companies (Accounts) Third Amendment Rules, 2022.
Amendment:
In the Companies (Accounts) Rules, 2014, in rule 12, in sub-rule (1B),-
(i) for the figures, letters and word “31st May, 2022”, the figures, letters and word “30th June,
2022”, shall be substituted;
(ii) after the proviso, the following proviso shall be inserted, namely:-
"Provided further that for the financial year 2021-2022, Form CSR-2 shall be filed
separately on or before 31st March, 2023 after filing Form AOC-4 or AOC-4 XBRL or AOC-
4 NBFC (Ind AS), as the case may be".
For point (i)- As covered above in point C.
on or before 31st May, 2022, after filing Form AOC-4 or AOC-4 XBRL or AOC-4 NBFC (Ind AS),
as the case may be.
For point (ii)- Old Law
The proviso is newly inserted.

E. Notification No. G.S.R. 624(E) dated 5th August, 2022

Companies (Accounts) Fourth Amendment Rules, 2022.
Amendment:
In the Companies (Accounts) Rules, 2014, in rule 3,-
(i) in sub-rule (1), for the words “accessible in India”, the words “accessible in India, at all
times,” shall be substituted;
(ii) in sub-rule (5), in the proviso, for the words “periodic basis”, the words “daily basis” shall
be substituted;
(iii) in sub-rule (6), after clause (d), the following clause shall be inserted, namely:-
“(e) where the service provider is located outside India, the name and address of the
person in control of the books of account and other books and papers in India.”.
For point (i) - Old Law (Pg 9.5)
(1) The books of account and other relevant books and papers maintained in electronic mode
shall remain accessible in India so as to be usable for subsequent reference.
For point (ii) - Old Law (Pg 9.5)
(5) The back-up of the books of account and other books and papers of the company
maintained in electronic mode, including at a place outside India, if any, shall be kept in
servers physically located in India on a periodic basis.
For point (iii) - Old Law (Pg 9.6)
(e) is newly inserted in point (6)
F. Notification No. G.S.R. 715(E) dated 20th September, 2022

The Central Government has amended the Companies (Corporate Social Responsibility Policy)
Rules, 2014, through the Companies (Corporate Social Responsibility Policy) Amendment
Rules, 2022.
Amendment:
1. In the Companies (Corporate Social Responsibility Policy) Rules, 2014, in rule 3, -
(i) in sub-rule (1), after the proviso, the following proviso shall be inserted, namely: -
“Provided further that a company having any amount in its Unspent Corporate Social
Responsibility Account as per sub-section (6) of section 135 shall constitute a CSR

Committee and comply with the provisions contained in sub-sections (2) to (6) of the
said section.”;
(ii) sub-rule (2) shall be omitted.
For point (i) - Old Law (Pg 9.35)
The proviso is newly inserted
For point (ii) - Old Law (Pg 9.36)
Exclusion of Companies [Rule 3(2) of the Companies (CSR) Rules, 2014]
Every company which ceases to be a company covered under subsection (1)
of section 135 of the Act for three consecutive financial years shall not be required
to-
(a) constitute a CSR Committee; and
(b) comply with the provisions contained in sub-section (2) to (6) of the said
section,
till such time it meets the criteria specified in sub-section (1) of section 135.
2. In the Companies (Corporate Social Responsibility Policy) Rules, 2014, in rule 4, for sub-
rule (1), the following sub-rule shall be substituted, namely: -
‘(1) The Board shall ensure that the CSR activities are undertaken by the company itself
or through, –
(a) a company established under section 8 of the Act, or a registered public trust or a
registered society, exempted under sub-clauses (iv), (v), (vi) or (via) of clause (23C)
of section 10 or registered under section 12A and approved under 80 G of the Income
Tax Act, 1961, established by the company, either singly or along with any other
company; or
(b) a company established under section 8 of the Act or a registered trust or a registered
society, established by the Central Government or State Government; or
(c) any entity established under an Act of Parliament or a State legislature; or
(d) a company established under section 8 of the Act, or a registered public trust or a
registered society, exempted under sub-clauses (iv), (v), (vi) or (via) of clause (23C)
of section 10 or registered under section 12A and approved under 80 G of the Income
Tax Act, 1961, and having an established track record of at least three years in
undertaking similar activities.

Explanation.- For the purpose of clause (c), the term “entity” shall mean a statutory body
constituted under an Act of Parliament or State legislature to undertake activities covered
in Schedule VII of the Act.’.
Old Law (Pg 9.42)
(1) The Board shall ensure that the CSR activities are undertaken by the company
itself or through-
(a) a company established under section 8 of the Act, or a registered public trust
or a registered society, registered under section 12A and 80 G of the Income Tax
Act, 1961, established by the company, either singly or along with any other
company, or
(b) a company established under section 8 of the Act or a registered trust or a
registered society, established by the Central Government or State Government; or
(c) any entity established under an Act of Parliament or a State legislature; or
(d) a company established under section 8 of the Act, or a registered public trust
or a registered society, registered under section 12A and 80G of the Income Tax Act,
1961, and having an established track record of at least three years in undertaking
similar activities.
3. In the Companies (Corporate Social Responsibility Policy) Rules, 2014, in rule 8, in sub-
rule (3), in clause (c),-
(i) for the words “five percent”, the words “two per cent.” shall be substituted;
(ii) for the words “whichever is less”, the words “whichever is higher” shall be substituted.
Old Law (Pg 9.44)
(c) A Company undertaking impact assessment may book the expenditure towards
Corporate Social Responsibility for that financial year, which shall not exceed five percent
of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is less.

PART – II : QUESTIONS AND ANSWERS
QUESTIONS
DIVISION A: CASE SCENARIO/ MULTIPLE CHOICE QUESTIONS

Modern Limited is a company limited by shares that manufactures furniture items apart from
material used in modular kitchens. Modern Limited is an unlisted company with a registered
office in Mumbai, Maharashtra. It has a corporate office in Delhi and branch offices throughout
the country. Following are facts regarding the 18th annual general meeting (AGM) of Modern
Limited.
Modern Limited is the lead sponsor of the furniture trade event India Furniture EXPO 2022 and
a member of the Association of Furniture Manufacturers and Traders. Modern Limited, on behalf
of the Association, booked the Expo Hall in Mumbai for the event and also decided to convene
its 18th AGM at the same hall after the conclusion of EXPO 2022.
But later, they found that the India Furniture Expo 2022, which was scheduled to be held from
September 16–19, 2022, had to be postponed as Bombay Municipal Corporation (BMC)
continued to occupy the hall as a vaccination center. Therefore, Modern Limited has to rethink
its plan and now convene its 18th annual general meeting on September 27, 2022, at the IMA
Auditorium in Delhi, near its corporate office. All the members consented to same. The notice
of the said meeting was posted on September 5, 2022, specifying place, date and day, in
additions to business to be transacted. In case of Mr. Ashok, who is declared insolvent but
undischarged, notice was sent to assignee, while a wilful omission was made in giving notice in
case of Ms. Anjum.
At the meeting, Mr. Singh was elected as chairman of the meeting by a show of hands, while
Mr. Manohar registered his dissent on the appointment of Mr. Singh as chairman of the meeting
and sought a poll to elect the chairperson. Mr. Manohar has substantial voting right of company
being part of promoter group. A poll was held to elect the chairman of the meeting, and
Mr. Singh voted twice in his capacity as a member as well as chairman while the poll was taking
place. Mr. Singh was elected chairman through the poll as well, by overwhelming majority.
Ms. Varnika, who is not a member of company, attended the meeting as Mr. Alok's proxy, voted
both times: when Mr. Singh was elected by show of hands and when he was elected by poll.
When she initially voted, she raised her hand in favour of electing Mr. Singh as chairman of the
meeting, while during the election through a poll, she cast a vote against.
Mr. Manohar raises the question on a vote that is casted by Mr. Singh in his capacity as
chairman, hence he pass the remarks on him and his allies; which can be considered defamatory
in nature. Chairman at his opinion, instructed the company secretary to exclu de the remarks
passed by Mr. Manohar while preparing the minutes; but some members raised a voice against
the discretion of Mr. Singh, because they find remarks didn’t carry any matter which can be

considered defamatory, while some other members feel remarks are made with intent to defame
chairman.
1. Regarding the notice of meeting given by Modern Limited, you are required to pick the
correct option in light of provisions of the Companies Act, 2013 and rules notified
thereunder.
I Modern Limited observe the length of notice, as required.
II Notice shall be given to member irrespective he is solvent, adjudged or declared
insolvent, or discharged insolvent; Modern Limited committed default
III Notice shall be given to assignee of insolvent member, Modern Limited correctly did
so
IV Wilful omission in giving notice will invalidate the proceeding of the meeting in case
of Modern Limited
Options
(a) Only I, II and IV are correct
(b) Only III and IV are correct
(c) Only I is correct
(d) Only IV is correct
2. Regarding the place of 18 th AGM of Modern Limited, decide whether applicable provisions
violated or not; in light of provisions of the Companies Act, 2013 and rules notified
thereunder.
(a) Violation, because Modern Limited shall convene and conduct AGM only at its
registered office
(b) Violation, because AGM shall be held either at the registered office of the company
or at some other place within the city, town or village in which the registered office of
the company is situate
(c) No violation, because AGM shall be held either at the register or corporate office of
the company or even at some other place within the city, town or village in which the
registered or corporate office of the company is situate
(d) No violation, because AGM of the said company may be held at any place in India
3. Regarding vote casted by Ms Varnika, which of following statements hold truth; in light of
provisions of the Companies Act, 2013 and rules notified thereunder.
(a) Being proxy Ms. Varnika is not allowed to cast vote on a poll, while she can c ast vote
by show of hand
(b) Being proxy Ms. Varnika is not allowed to cast vote by show of hand, while she can
cast vote on a poll

(c) Despite being non-member Ms. Varnika can be proxy, but can’t cast vote either by
show of hand or on a poll
(d) Ms. Varnika can cast vote in both the cases; by show of hand as well as on a poll
4. Regarding the inclusion/exclusion of the remarks by Mr. Manohar, advice the company
secretary; which of the following statement hold truth, in light of provisions of the
Companies Act 2013 and rules notified thereunder.
(a) Mr. Manohar’s remark shall be included in minutes because minutes shall contain fair
summary of the proceedings.
(b) Mr. Manohar’s remark shall be excluded from minutes because remarks are made
with intent to defame chairman, the chairman’s opinion of inclusion and exclusion is
immaterial in such case.
(c) Mr. Manohar’s remark shall be excluded from minutes because chairman has
absolute discretion to exclude any matter which is defamatory in his opinion
(d) Mr. Manohar’s remark shall be included in minutes because many members challenge
the chairman’s opinion and feels remarks were not defamatory.
5. ______________ is the cardinal rule of construction that words, sentences and phrases of
a statute should be read in their ordinary, natural and grammatical meaning so that they
may have effect in their widest amplitude.
(a) Rule of Literal Construction
(b) Rule of Harmonious Construction
(c) Rule of Beneficial Construction
(d) Rule of Exceptional Construction
6. ABC Limited has its shares listed on a recognized stock exchange in India. During the
current financial year ending on 31 st March 2023, the Securities and Exchange Board of
India (SEBI) has found some irregularities in the filings made by the company. Accordingly,
SEBI proposes to make an application to the Tribunal for reopening of the books of
accounts of the Company. You, as an expert, are called upon by SEBI to advise with which
last financial year for reopening of books of accounts an application can be made?
(a) 2018-2019
(b) 2016-2017
(c) 2013-2014
(d) 2014-2015
7. The amount accumulated in the Investor Education and Protection Fund shall not be used for:
(a) refunds in respect of unclaimed dividends, matured deposits, matured debenture s,
application money due for refund and interest thereon.

(b) reimbursement of legal expenses incurred in pursuing class action suits under section
37 and 245.
(c) grants or donation to the Central Government for the purpose of investor’s education
and training.
(d) distribution of any disgorged amount among eligible and identifiable applicants who
have suffered losses.
8. Which among the following will not be considered as a “Foreign Instrument” under the
provisions of the Negotiable Instruments Act, 1881?
(a) A bill drawn on a person residing outside India but payable in India or outside India
(b) A bill drawn on a person resident outside India but payable outside India
(c) A bill drawn on a person residing outside India but payable in India
(d) A bill drawn on a person resident in India but payable outside India
9. Who cannot inspect the register of charges and instrument of charges, during business
hours, without paying any fees:
(a) Any member of the company
(b) The Creditor of the company
(c) Persons other than member and creditor of the company
(d) No person is allowed to inspect the register of charges
10. As per the provisions of the Companies Act, 2013 and relevant rules thereunder, an eligible
company is not permitted to accept from public or renew the same deposits (whether
secured or unsecured) which is repayable on demand or in less than ______________
months. Further, the maximum period of acceptance of deposit cannot exceed
________________ months. But, for the purpose of meeting any of its short - term
requirements of funds, a company may accept or renew deposits for repayment earlier
than ______________ months subject to certain conditions.
(a) six, thirty six, six
(b) three, twenty four, three
(c) six, sixty, six
(d) three, sixty, six

DIVISION B: DESCRIPTIVE QUESTIONS

PART I: COMPANY LAW
The Companies Act, 2013

11. Hastprat Ltd. is an unlisted public company, having five directors in its board which
includes two independent directors.
Sankul (P) Ltd., is subsidiary company of Hastprat Ltd., actively carrying on its business,
having paid up capital of ` 1.5 crore with 40 members and turnover of ` 18 crore,
respectively and the said company is not a start-up company.
In the context of aforesaid case-scenario, please answer to the following question(s):-
Whether Sankul (P) Ltd. is mandatorily required to prepare cash flow statement for the
financial year as a part of its financial statements?
Provide your answer by analyzing Sankul (P) Ltd. into following category of companies:-
(i) One person company, (ii) Small company, (iii) Dormant company and (iv) Private
company, respectively.
12. Aman an engineer has started a new company with the name of Nuts and Bolts Private
Limited. He got registered a company with the same name. However, Nuts and Bolts is a
registered trademark. After 5 years when the owner of trademark came to know about the
same, it filed an application with relevant authority. Can the company be compelled to
change its name by the owner of trademark? Can the owner of registered trademark
request the company and then company change its name at its discretion?
13. Yellow Ltd. received a communication from Central Government for preparation of
periodical financial results and complete audit or limited review of such periodical financial
results. The Board of Directors have raised an objection on the ground that as it is an
unlisted company, periodical financial results need not to be prepared. Examine, referring
the provisions of the Companies Act, 2013, in this regard.
14. Upkaar Nidhi Ltd., was about to hold an AGM on 25th August, 2022, for which the notice
of AGM along with relevant documents, as prescribed, was sent to all its members
including the following:-
Sr. No. Particulars
1 A member individually holding shares with face value of ` 800 which amounted
to 0.16% of the total paid-up share capital.
2 Two members jointly holding shares with face value of ` 1,600 which amounted
to 0.32% of the total paid-up share capital.

3 Forty-two members each holding individually shares with face value of ` 600
which amounted to holding 0.12% of the total paid-up share capital for each
such member.
4 All the remaining members holding individually more than 1.2% of the total paid-
up share capital of the company.
In the AGM held on 25 th August, 2022, the members were not provided with the facility to
vote by electronic means.
In the context of aforesaid case-scenario, please answer whether Upkaar Nidhi Ltd. was
required to send the notice of AGM along with relevant documents to all its members as
aforesaid?
15. Answer the following citing relevant provisions of the Companies Act, 2013:
(a) Wire Electricals Limited having paid-up capital of ` 1.00 crore availed a term loan of
` 10,00,000 from ABC Bank Limited to purchase electrical items. Mr. Taar, one of
the directors of the company, is of the opinion that it shall be considered as ‘deposit’.
Is his contention correct?
(b) A Government Company, which is eligible to accept deposits under Section 76 of the
Companies Act, 2013, cannot accept deposits from public exceeding 25% of the
aggregate of its paid-up capital, free reserves and security premium account. Is this
correct?
16. Red Limited (the Company) was incorporated on 01.04.2020. The balances extracted from
its audited financial statement are as given below:
Financial Year (FY) Net Profit before tax Net Profit after tax (Ignore
Income Tax computation)
2020-21 ` 5.00 crore ` 3.75 crore
2021-22 ` 7.00 crore ` 5.25 crore
The Company proposes to allocate the minimum required amount for CSR Activities to be
undertaken during FY 2022-23, if it is mandatory. You are requested to advice the
Company in this regard and compute the minimum amount to be allocated, if so required,
taking into account the relevant provisions of the Companies Act, 2013.
PART II: OTHER LAWS
The Indian Contract Act, 1872
17. Mr. Salil purchased furniture of worth ` 1,00,000 from Mr. Pooran on credit. Mr. Raman
entered in contract with Mr. Pooran for the guarantee of the payment by Mr. Salil. On due
date, Mr. Salil could not make the payment due to his financial crisis. Mr. Pooran filed the
suit against Mr. Raman for payment. Meanwhile father of Mr.Salil paid ` 20,000 to

Mr. Pooran on behalf of his son. Mr. Raman, in ignorance of above payment, paid
`1,00,000 to Mr. Pooran as surety. Afterwards, when Mr. Raman knew the facts, he asked
Mr. Pooran for refund of ` 20,000. Mr. Pooran denied for refund with the words, that’s only
Mr. Salil who can claim the amount of ` 20,000. Explain, with reference to Indian Contract
Act 1872, whether Mr. Raman (surety) can claim the refund of ` 20,000 from Mr. Pooran?
The Negotiable Instruments Act, 1881
18. A bill of exchange is drawn payable to ‘Amir’ or order. ‘Amir’ endorses it to ‘Rani’, ‘Rani’ to
‘Kajol’, ‘Kajol’ to ‘Sharukh’, ‘Sharukh’ to ‘Madhuri’ and ‘Madhuri’ to ‘Amir’. State with
reasons under the provisions of the Negotiable Instrument Act, 1881 whether ‘Amir’ can
recover the amount of the bill from ‘Rani’, ‘Kajol’, ‘Sharukh’ and ‘Madhuri’, if he has
originally endorsed the bill to ‘Rani’ by adding the words ‘Sans Recourse’.
The General Clauses Act, 1897
19. M owned a land with fifty tamarind trees. He sold his land and the timber (obtained after
cutting the fifty trees) to N. M wants to know whether the sale of timber tantamount to sale
of immovable property. Advise him with reference to provisions of the General Clauses
Act, 1897.
Interpretation of Statutes
20. When can the Preamble be used as an aid to interpretation of a statute?
SUGGESTED ANSWERS
ANSWERS
1. (b)
2. (d)
3. (b)
4. (c)
5. (a)
6. (d)
7. (c)
8. (d)
9. (c)
10. (a)

11. According to section 2(10) of the Companies Act, 2013,

Financial statement in relation to a company, includes—
(i) a balance sheet as at the end of the financial year;
(ii) a profit and loss account, or in the case of a company carrying on any activity not for
profit, an income and expenditure account for the financial year;
(iii) cash flow statement for the financial year;
(iv) a statement of changes in equity, if applicable; and
(v) any explanatory note annexed to, or forming part of, any document referred to in sub -
clause (i) to sub-clause (iv):
Provided that the financial statement, with respect to one person company, small company,
dormant company and private company (if such private company is a start-up) may not
include the cash flow statement.
For considering the applicability of preparation cash flow statement in case of Sankul (P)
Ltd., it is required first to be analyzed that Sankul (P) Ltd. does not fall in any of the
categories of companies mentioned under proviso to section 2(10) of the Companies Act,
2013:
(i) One person company – It is given that the company is having 40 members and also
its name does not contain the words ‘OPC’, so it is not a one person company.
(ii) Small company – A company which is a subsidiary company cannot be categorized
as a small company as per proviso to section 2(85) even though its paid up capital
and turnover are within the prescribed limits and accordingly, as Sankul (P) Ltd. is a
subsidiary company of Hastprat Ltd., it cannot be considered as small company also.
(iii) Dormant company – It is given that the company is actively carrying on its business,
so it cannot be also categorized as a dormant company based upon the facts given.
(iv) Private company (which is a start-up) – It is given that Sankul (P) Ltd. is not a start-
up company and also, as per proviso to section 2(71) of the Act, a company which is
a subsidiary of a company, not being a private company, shall be deemed to be public
company for the purposes of this Act even where such subsidiary company continues
to be a private company in its articles.
So, Sankul (P) Ltd. shall be deemed to be a public company as it is subsidiary of Hastprat
Ltd., an unlisted public company and so it will not fall into this category of exemption as
well.
Thus, it can be concluded that Sankul (P) Ltd. is mandatorily required to prepare cash flow
statement for the financial year as a part of its financial statements as it does not fall in
any of the categories of companies mentioned under proviso to section 2(10) of the
Companies Act, 2013.

12. According to section 16 of the Companies Act, 2013 if a company is registered by a name
which,—
 in the opinion of the Central Government, is identical with the name by which a
company had been previously registered, it may direct the company to change its
name. Then the company shall by passing an ordinary resolution change its name
within 3 months.
 is identical with a registered trade mark and owner of that trade mark apply to the
Central Government within three years of incorporation of registration of the
company, it may direct the company to change its name. Then the company shall
change its name by passing an ordinary resolution within 3 months.
Company shall give notice to ROC along with the order of Central Government within 15
days of change. In case of default company and defaulting officer are punishable.
In the given case, owner of registered trade-mark is filing objection after 5 years of
registration of company with a wrong name. While it should have filed the same within 3
years. Therefore, the company cannot be compelled to change its name.
As per section 13, company can anytime change its name by passing a special resolution
and taking approval of Central Government. Therefore, if owner of registered trademark
request the company for change of its name and the company accepts the same then it
can change its name voluntarily by following the provisions of section 13.
13. Periodical Financial Results [Section 129A of the Companies Act, 2013]
The Central Government may, require such class or classes of unlisted companies, as may
be prescribed,—
(a) to prepare the financial results of the company on periodical basis and in prescribed
form
(b) to obtain approval of the Board of Directors and complete audit or limited review of
such periodical financial results in the prescribed manner; and
(c) file a copy with the Registrar within a period of thirty days of completion of the relevant
period with such fees as may be prescribed.
Therefore, the objection of the Board of Directors on the ground that as Yellow Ltd. is an
unlisted company, periodical financial results need not be prepared, is not correct. Section
129A clearly specifies that even unlisted company has to prepare Periodical Financial
Results.
14. In case of Nidhi company –
Section 136 (1) of the Companies Act, 2013, shall apply, subject to the modification that,
in the case of members who do not individually or jointly hold shares of mor e than one
thousand rupees in face value or more than one per cent, of the total paid-up share capital,
whichever is less, it shall be sufficient compliance with the provisions of the section if an

intimation is sent by public notice in newspaper circulated in the district in which the
Registered Office of the company is situated stating the date, time and venue of AGM and
the financial statement with its enclosures can be inspected at the registered office of the
company and the financial statement with enclosures are affixed in the notice board of the
company and a member is entitled to vote either in person or through proxy.
Here, Upkaar Nidhi Ltd. was only required to send such notice of AGM and other relevant
documents to members who individually or jointly hold shares of more than ` 1,000 in face
value or more than 1%, of the total paid-up share capital, whichever is less. Accordingly,
Upkaar Nidhi Ltd. would have send notice and other relevant documents to only following
category of members:-
(i) Two members jointly holding shares with face value of ` 1,600 which amounted to
0.32% of the total paid-up share capital
(ii) All the remaining members holding individually more than 1.2% of the total paid -up
share capital of the company.
For the category of members mentioned in Sr. no. 1 & 3, of the aforesaid table given in
case scenario, it would have been sufficient compliance if an intimation for the AGM was
sent in the newspaper as per the provisions, as aforesaid, and there was no need to sen d
the notice of AGM along with relevant documents to such category of members personally.
15. (a) In terms of Rule 2 (1) (c) (iii) of the Companies (Acceptance of Deposits) Rules, 2014,
any amount received as a loan or facility from any banking company shall not be
considered as ‘deposit’.
In view of the above, the contention of Mr. Taar that the term loan of ` 10,00,000
availed by the company from ABC Bank Limited shall be considered as ‘deposit’ is
not correct.
(b) As per Rule 3 (5) of the Companies (Acceptance of Deposits) Rules 2014, a
Government Company is not eligible to accept or renew deposits under section 76, if
the amount of such deposits together with the amount of other deposits outstanding
as on the date of acceptance or renewal exceeds thirty five per cent of the aggregate
of its paid-up share capital, free reserves and securities premium account.
Therefore, the given statement where the limit of 25% has been stated for acceptance
of deposits is not correct.
16. According to section 135(1) of the Companies Act, 2013, every company having net worth
of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or
a net profit of rupees five crore or more during the immediately preceding financial
year shall constitute a Corporate Social Responsibility Committee of the Board.
Further, according to section 135(5), the Board of every company referred to in sub -section
(1), shall ensure that the company spends, in every financial year, at least two per cent. of
the average net profits of the company made during the three immediately preceding

financial years or where the company has not completed the period of three financial years
since its incorporation, during such immediately preceding financial years, in pursuance of
its Corporate Social Responsibility Policy.
Here, the “Net Profit” shall not include such sums as may be prescribed, and shall be
calculated in accordance with the provisions of section 198.
In the instant case,
1. Net Profit before tax of Red Limited for the FY 2021-22 is ` 7 crore, hence, Red
Limited is required to constitute a CSR committee during FY 2022-23 as the Net profit
before tax for the FY exceeds ` 5 crore.
2. Minimum contribution towards CSR will be: 2% of average net profits since
incorporation (Red Limited was incorporated on 1.04.2020.)
Average Net Profit since incorporation: (` 5 crore + ` 7 crore)/ 2 = ` 6 crore
Minimum contribution towards CSR will be: 2% of ` 6 crore = ` 0.12 crore or ` 12 Lacs.
17. As per the provisions of section 128 of the Indian Contract Act, 1872, the liability of the
surety is co-extensive with that of the principal debtor, unless it is otherwise provided by
the contract. In other words, the surety is liable for all those amounts, the principal debtor
is liable for.
In the given question, before Mr. Raman makes the payment (on default of Mr. Salil), the
father of Mr. Salil paid ` 20,000 to Mr. Pooran on behalf of his son. Unaware of the payment
of ` 20,000, Mr. Raman paid the full amount to Mr. Pooran.
The liability of Mr. Raman (surety) is co-extensive with that of Mr. Salil (principal debtor).
As the father of Mr. Salil made payment of ` 20,000 on Salil’s behalf, Mr. Raman is liable
only for ` 80,000 to Mr. Pooran (creditor). Mr. Raman made the full payment without the
knowledge of facts. Therefore, he can claim the refund of ` 20,000 from Mr. Pooran.
18. In the course of negotiation, if a negotiable instrument is circulated/negotiated back by an
indorser to any of the prior party on the negotiable instruments, it is termed as negotiation
back. The person who becomes the holder in due course under this negotiation back
cannot make any of the intermediate indorsers liable on the instruments. But wher e an
indorser had excluded his liability, by the use of the words ‘sans recourse’ or ‘without
recourse to me’ and after that becomes the holder of the instrument in his own right under
the ‘negotiation back’ all intermediate indorsers are liable to him and in case of dishonour,
he can recover the amount from all or any one of them.
In the given question, on the basis of above facts it is clear that ‘Amir’, the endorser
becomes the holder after it is negotiated to several parties. In normal situation none of the
intermediate parties would be liable to ‘Amir’. But in the given problem ‘Amir’s original
endorsement is ‘sans recourse’ and therefore, he is not liable to ‘Rani’, ‘Kajol’, ‘Sharukh’
and ‘Madhuri’. But if the bill is negotiated back to ‘Amir’, all of them are liable to him and
he can recover the amount from all or any of them.

19. “Immovable Property” [Section 3(26) of the General Clauses Act, 1897]: ‘Immovable
Property’ shall include:
(i) Land,
(ii) Benefits to arise out of land, and
(iii) Things attached to the earth, or
(iv) Permanently fastened to anything attached to the earth.
It is an inclusive definition. It contains four elements: land, benefits to arise out of land,
things attached to the earth and things permanently fastened to anything att ached to the
earth. Where, in any enactment, the definition of immovable property is in the negative and
not exhaustive, the definition as given in the General Clauses Act will apply to the
expression given in that enactment.
In the instant case, M sold Land along with timber (obtained after cutting trees) of fifty
tamarind trees of his land. According to the above definition, Land is immovable property;
however, timber cannot be immovable property since the same are not attached to the
earth.
20. While the Preamble can be used to know the aims and objects of the legislation it cannot
be used to control or qualify the precise and unambiguous language of an enactment. The
preamble is the key to the mind of the maker of the law, but it cannot override in order to
enlarge or restrict the enacting provision of the Act. A provision contained in the Act cannot
be considered as invalid because they do not accord with the preamble, which is only a
brief summary of legislative objectives behind the Act, and if there is any conflict between
the preamble and any provision of an Act, the provision prevails.
The preamble merely affords help in the matter of construction if there is any ambiguity.
Where the language of the Act is clear, the court is bound to give it effect.
When will courts refer to the preamble as an aid to construction?
Situation 1: Where there is any ambiguity in the words of an enactment the assistance of
the preamble may be taken to resolve the conflict.
Situation 2: Where the words of an enactment appear to be too general in scope or
application then courts may resort to the preamble to determine the scope or limited
application for which the words are meant.

PAPER – 3: COST AND MANAGEMENT ACCOUNTING
QUESTIONS
Material Cost
1. Reliable India Pvt Ltd is a startup company engaged in manufacturing of Agro Tech product
from a raw material, which is purchased at `190 per kg. The company incurs a handling
cost of `1,470 plus, freight of `770 per order. The incremental carrying cost of inventory
of raw material is `3 per kg per month. In addition, the cost of working capital finance on
the investment in inventory of raw material is `20 per kg per annum. The annual production
of the product is 1,50,000 units and 3 units are obtained from one kg. of raw material.
Assume 360 days in a year.
Required:
(i) Calculate the economic order quantity of raw materials.
(ii) Determine, how frequently company should order for procurement be placed.
(iii) If the company proposes to rationalize placement of orders on quarterly basis,
determine the percentage of discount in the price of raw materials should be
negotiated?
Employee Cost
2. Following information are available from the cost records of BMR Limited, CALCULATE
Labour turnover rate and Labour flux rate:
No. of Employees as on 01.04.2021 = 9,400
No. of Employees as on 31.03.2022 = 10,600
During the year, 160 Employees left while 640 Employees were discharged and 1,500
Employees were recruited during the year; of these, 400 Employees were recruited
because of exits and the rest were recruited in accordance with expansion plans.
Overhead
3. SANDY Ltd. is a manufacturing company having three production departments, ‘A’, ‘B’ and
‘C’ and two service departments ‘X’ and ‘Y’. The following is the budget for December
2022:
Total (`) A (` ) B (` ) C (` ) X (` ) Y (` )
Direct material 1,60,000 3,20,000 6,40,000 3,20,000 1,60,000
Direct wages 8,00,000 3,20,000 12,80,000 1,60,000 3,20,000
Factory rent 6,40,000
Power 4,00,000
Depreciation 1,60,000

Other overheads 14,40,000

Additional
information:
Area (Sq. ft.) 800 400 800 400 800
Capital value of 32 64 32 16 16
assets (`) lakhs)
Machine hours 1,600 3,200 6,400 1,600 1,600
Horsepower of 80 64 32 24 40
machines
Apportionment of expenses of service departments is as under:
A B C X Y
Service Dept. ‘X’ 72 24 48 – 16
Service Dept. ‘Y’ 96 56 – 8 –
Required:
(i) PREPARE a statement showing distribution of overheads to various departments.
(ii) PREPARE a statement showing re-distribution of service departments expenses to
production departments using Repeated Distribution method. Also CALCULATE
machine hour rate of the production departments 'A', 'B', 'C'.
ABC Costing
4. Hygiene Care Ltd. is a manufacturer of a range of goods. The cost structure of its different
products is as follows:
Particulars Hand Wash Detergent Dishwasher
Powder
Direct Materials (` / Pu) 150 120 120
Direct Labour @ `10/ hour (` / 45 60 75
Pu)
Production Overheads ( ` / Pu) 40 50 40
Total Cost (` / Pu) 235 230 235
Quantity Produced (Units) 30,000 60,000 90,000
Hygiene Care Ltd. was absorbing overheads on the basis of direct labour hours.
Management accountant has suggested that the company should introduce ABC system
and has identified cost drivers and cost pools as follows:

PAPER – 3: COST AND MANAGEMENT ACCOUNTING 59
Activity Cost Pool Cost Driver Associated Cost

(`)
Goods Receiving Number of Dispatch Order 8,88,000
Inspecting and Testing costs Number of Production Runs 26,82,000
Dispatching Number of dispatch order 6,30,000
Storage Cost Number of Batches of material 36,00,000
The following information is also supplied:
Details Hand Wash Detergent Powder Dishwasher
Batches of material 720 780 900
Number of dispatch order 360 540 600
No. of Production Runs 1,500 2,100 2,400
Number of Dispatch Orders 600 900 1,000
Required:
CALCULATE activity-based production cost of all the three products.
Cost Sheet
5. From the following data of Motilal Ltd., CALCULATE Cost of production:
(`)
(i) Repair & maintenance paid for plant & machinery 9,80,500
(ii) Insurance premium paid for inventories 26,000
(iii) Insurance premium paid for plant & machinery 96,000
(iv) Raw materials purchased 64,00,000
(v) Opening stock of raw materials 2,88,000
(vi) Closing stock of raw materials 4,46,000
(vii) Wages paid 23,20,000
(viii) Value of opening Work-in-process 4,06,000
(ix) Value of closing Work-in-process 6,02,100
(x) Quality control cost for the products in manufacturing process 86,000
(xi) Research & development cost for improvement in production 92,600
process
(xii) Administrative cost for:
- Factory & production 9,00,000
- Others 11,60,000

(xiii) Amount realised by selling scrap generated during the 9,200

manufacturing process
(xiv) Packing cost necessary to preserve the goods for further 10,200
processing
(xv) Salary paid to Director (Technical) 8,90,000
Reconciliation
6. The financial records of Riva Private Limited showed a net profit of `1,69,500 for the year
ended 31st March, 2022. The cost accounts, however, disclosed a net loss of ` 88,500 for
the same period. The following information were revealed as a result of scrutiny of the
figures of cost accounts and financial accounts:
(`)
(i) (Administrative overhead under recovered 63,750.0
(ii) Factory overhead over recovered 3,37,500.0
(iii) Depreciation under charged in Cost Accounts 65,000.0
(iv) Dividend received 50,000.0
(v) Loss due to obsolescence charged in Financial Accounts 42,000.0
(vi) Income tax provided 1,09,000.0
(vii) Bank interest credited in Financial Accounts 34,000.0
(viii) Value of opening stock:
In Cost Accounts 4,12,500.0
In Financial Accounts 3,62,500.0
(ix) Value of closing stock:
In Cost Accounts 3,13,750.0
In Financial Accounts 3,30,000.0
(x) Goodwill written-off in Financial Accounts 62,500.0
(xi) Notional rent of own premises charged in Cost Accounts 1,50,000.0
(xii) Provision for doubtful debts in Financial Accounts 37,500.0
Prepare a reconciliation statement by taking costing net loss as base.
Job and Batch Costing
7. A jobbing factory has undertaken to supply 200 pieces of a component per month for the
ensuing six months. Every month a batch order is opened against which materials and
labour hours are booked at actual. Overheads are levied at a rate per labour hour. The
selling price contracted for is ` 80 per piece. From the following data.

COMPUTE the cost and profit per piece of each batch order and overall position of the
order for 1,200 pieces.
Month Batch Output Material cost Direct wages Direct labour
(Pieces) (`) (`) (Hours)
January 210 6,500 1,200 240
February 200 6,400 1,400 280
March 220 6,800 1,500 280
April 180 6,300 1,400 270
May 200 7,000 1,500 300
June 220 7,200 1,600 320
The other details are:
Month Chargeable expenses Direct labour
(`) Hours
January 1,20,000 4,800
February 1,05,600 4,400
March 1,20,000 5,000
April 1,05,800 4,600
May 1,30,000 5,000
June 1,20,000 4,800
Contract Costing
8. XYZ LLP, contractors and civil engineers, are building a new wing to a school. The quoted
fixed price for the contract is `30,00,000. Work commenced on 1 st January 20X2 and is
expected to be completed on schedule by 30 June 20X3.
Data relating to the contract at the year ended 31 st March 20X3 is as follows.
(`)
Plant sent to site at commencement of contract 2,40,000
Hire of plant and equipment 77,000
Materials sent to site 6,62,000
Materials returned from site 47,000
Direct wages paid 9,60,000
Wage related costs 1,32,000
Direct expenses incurred 34,000

Supervisory staff salaries 90,000

- Direct
- Indirect 20,000
Regional office expenses apportioned to contract 50,000
Head office expenses apportioned to contract 30,000
Surveyor’s fees 27,000
Progress payments received from school 18,00,000
Additional information:
1. Plant is to be depreciated at the rate of 25 % per annum following straight line method,
with no residual value.
2. Unused materials on site at 31st March are estimated at ` 50,000.
3. Wages owed to direct workers total ` 40,000
4. Budgeted profit on the contract is ` 8,00,000
5. Value of work certified by the surveyor is ` 24,00,000.
6. The surveyor has not certified the work costing ` 1,80,000
You are required to PREPARE the account for the school contract for the fifteen months
ended 31st March 20X3, and CALCULATE the notional profit to date.
Process Costing
9. ‘Dairy Wala Private limited’ is engaged in the production of flavoured milk. Its process
involve filtration and boiling of milk after that some sugar, flavour, colour is added and then
letting it cool to fill the product into clean and sterile bottles. For Producing 10 litre of flavour
milk, 100 litre of Raw milk is required, which extracts only 45 litres of standardized milk.
Following information regarding Process – I has been obtained from the manufacturing
department of Dairy Wala Private limited for the month of December 2022:
Items (`)
Opening work-in process (13,500 litre)
Milk 1,50,000
Labour 45,000
Overheads 1,35,000
Milk introduced for filtration and boiling (3,00,000 litre) 15,00,000
Direct Labour 6,00,000
Overheads 18,00,000
Abnormal Loss: 3,000 litres

Degree of completion:
Milk 100%
Labour and overheads 80%
Closing work-in process: 27,000 litres
Degree of completion:
Milk 100%
Labour and overheads 80%
Milk transferred for Packing: 1,18,500 litres
You are required to PREPARE using average method:
(i) Statement of equivalent production,
(ii) Statement of cost,
(iii) Statement of distribution cost, and
(iv) Process-I Account.
Joint Product by Product
10. Key Pee Limited produces and sells the following products:
Products Units Selling price at split-off Selling price after
point (`) further processing (`)
A 500000 42.5 62.5
B 75000 32.5 42.5
C 62500 20 30
D 50000 25 -
E 187500 35 50
Cost of raw material ` 89,75,000 and other manufacturing ex-penses cost `13,67,500 in
the manufacturing process which are absorbed on the products on the basis of their ‘Net
realisable value’. The further processing costs of A, B, C and E are `31,25,000;
` 3,75,000; `1,25,000 and `3,75,000 respectively. Fixed costs are `11,82,500.
You are required to PREPARE the following in respect of the coming year:
(a) Statement showing income forecast of the company assuming that none of its
products are to be further processed.
(b) Statement showing income forecast of the company assuming that products A, B, C
and E are to be processed further.

Service Costing
11. PREPARE cost statement of Panipat Thermal Power Station showing the cost of electricity
generated per kwh, from the following data.
Total units generated 16,50,000 kWh
(`)
Operating labour 21,75,000
Repairs & maintenance 7,25,000
Lubricants, spares and stores 5,80,000
Plant supervision 4,35,000
Administration overheads 29,00,000
Insurance Charges 15,00,000
Fuel Charges 8,00,000
7 kWh. of electricity generated per kg. of coal consumed @ `4.75 per kg. Depreciation
charges @ 5% on capital cost of `3,10,00,000.
Standard Costing
12. XYZ Manufacturing Ltd. had prepared the following estimation for the month of January:
Quantity Rate (`) (`)
Raw Material-DF 1,600 kg. 50 80,000
Raw Material-CE 1,200 kg. 35 42,000
Skilled labour 2,000 hours 40 80,000
Semiskilled labour 1,600 hours 25 40,000
Standard loss in the process was expected to be 10% of total input materials and an idle
labour time of 5% of expected labour hours was also estimated.
At the end of the month the following information has been collected from the cost
accounting department:
The company has produced 2,960 kg. finished product by using the followings:
Quantity Rate (`) (`)
Raw Material-DF 1,800 kg. 40 72,000
Raw Material-CE 1,300 kg. 30 39,000
Skilled labour 2,400 hours 35 84,000
Semiskilled labour 1,720 hours 20 34,400

You are required to CALCULATE:

(a) Material Cost Variance;
(b) Material Price Variance;
(c) Material Mix Variance;
(d) Material Yield Variance;
(e) Labour Cost Variance;
(f) Labour Efficiency Variance and
(g) Labour Yield Variance
Marginal Costing
13. The following data are available from the budget records of Finesign Women's Handbag
Company for the forthcoming budget period.
`
Selling Price per unit 1000
Variable cost per unit:
Cost of Material used 750.00
Sales commission 50.00
Total Variable Cost 800.00
Annual fixed expenses:
Rent 7,00,000
Salaries 11,00,000
Other fixed expenses 5,00,000
Total Fixed Cost 23,00,000
Although the firm manufactures Bags with different styles, they have identical purchase
costs and selling price.
Requirement:
(a) What is the annual break-even point both in terms of units and value?
(b) If the store manager is paid 1 per cent commission on sales, what would be the annual
break-even point both in terms of units and value?
(c) If the firm decides to pay a fixed salary of ` 9,00,000 in lieu of sales commission,
what would be the annual break-even point in terms of units and value.
Considering break-even point in requirement (a), If the stores manager is paid 2 per
cent commission on each bag sold in excess of the break-even point, what would be
the profit if 20000 bags were sold.

Budget and Budgetary Control

14. EDF Ltd. produces two products using Skilled labour and two types of materials. Shown
below the information for the next month’s budget:
Product- A Product-B
Budgeted sales (in units) 4,080 6,120
Budgeted material consumption per unit (in kg):
Material-X 8.5 5.1
Material-Y 6.8 10.2
Standard labour hours allowed per unit of product 5.1 8.5
Material-X and Material-Y cost `8 and `10 per kg and labours are paid `30 per hour.
Overtime premium is 75% and is payable, if a worker works for more than 45 hours a week.
There are 400 direct workers.
The target efficiency ratio for the productive hours worked by the direct workers in actually
manufacturing the products is 85%. In addition the non-productive down-time is budgeted
at 15% of the productive hours worked.
There are four 6-days weeks in the budgeted period and it is anticipated that sales and
production will occur evenly throughout the whole period.
It is anticipated that stock at the beginning of the period will be:
Product-A 550 units
Product-B 350 units
Material-X 1,200 kgs.
Material-Y 600 kgs.
The anticipated closing stocks for budget period are as below:
Product-A 5 days sales
Product-B 5 days sales
Material-X 10 days consumption
Material-Y 5 days consumption
Required:
CALCULATE the Material Purchase Budget and the Wages Budget for the direct workers,
showing the quantities and values, for the next month.

Miscellaneous
15. (a) SUGGEST the unit of cost for following industries:
(a) Transport
(b) Power
(c) Hotel
(d) Hospital
(e) Steel
(f) Coal mining
(g) Professional Services
(h) Gas
(i) Engineering
(j) Oil
(b) DISCUSS the difference between Job costing and Batch costing.
(c) EXPLAIN what are the essential pre-requisite for Integrated Accounting system?
(d) DISCUSS the difference between cost control and cost reduction.
ANSWERS
1. (i) Calculation of Economic Order Quantity (E.O.Q)

1,50,000units
Annual requirement (usage) of raw material in kg. (A) = = 50,000kg.
3unitsperkg.
Ordering Cost (Handling & freight cost) (O) = `1,470 + `770 = `2,240
Carrying cost per unit per annum (C) i.e. inventory carrying cost + working capital
cost= (`3 × 12 months) + `20 = `56 per kg.
2AO 2×50,000 kg.× ` 2,240

E.O.Q = √ = √ = 2,000 kg.
C ` 56
(ii) Frequency of placing orders for procurement :
Annual consumption (A) = 50,000 kg.
Quantity per order (E.O.Q) = 2,000 kg.
A 50,000kg.
No. of orders per annum = = = 25 orders
E.O.Q 2,000kg.

360days
Frequency of placing orders (in days) = = 14.4 Days
25orders
(iii) Percentage of discount in the price of raw materials to be negotiated:
Particulars On Quarterly Basis On E.O.Q Basis
1. Annual Usage (in Kg.) 50,000 kg. 50,000 kg.
2. Size of the order 12,500 kg. 2,000 kg.
3. No. of orders (1 ÷ 2) 4 25
4. Cost of placing orders ` 8,960 ` 56,000
or Ordering cost
(No. of orders × Cost (4 order × ` 2,240) (25 orders × ` 2,240)
per order)
5. Inventory carrying `3,50,000 `56,000
cost
(Average inventory × (12,500 kg. × ½ × ` 56) (2,000 kg. × ½ × ` 56)
Carrying cost per unit)
6. Total Cost (4 + 5) ` 3,58,960 ` 1,12,000
When order is placed on quarterly basis the ordering cost and carrying cost increased
by `2,46,960 (`3,58,960 - `1,12,000). So, discount required = ` 2,46,960
Total annual purchase = 50,000 kg. × `190 = `95,00,000 So, Percentage of discount
` 2,46,960
to be negotiated = = ×100 = 2.60%
` 95,00,000
2. Employee turnover rate:
It comprises of computation of Employee turnover by using following methods:
Number of employees seperated during the period
(i) Separate Method: = x 100
Average number of employees during the period on roll
Number of employees left + Number of employees discharged
OR, = x 100
(160 + 640)
= x100
(9,400 + 10,600) ÷
800
= x 100 = 8%
10,000
Number of employees replaced during the period
(ii) Replacement Method = x 100

400
= x 100 = 4%
10,000
Number of employees joining in a period (excluding replacement)
(iii) New Recruitment = x 100
Number of Recruitments - Number of Replacements

= x 100
1500 - 400
= x 100
10,000
1,100
= 10,000 𝑥 100 = 11%
Number of separation + Number of replacement + Number of new joining

Flux Method = x 100
(800 + 400 + 1,100)

= x 100
(9,400 + 10,600) ÷ 2
2,300
= x 100 = 23%
10,000
3. (i) Overhead Distribution Summary
Basis Total (`) A (`) B (`) C (`) X (` ) Y (` )
Direct materials Direct – – – – 3,20,000 1,60,000
Direct wages Direct – – – – 1,60,000 3,20,000
Factory rent Area 6,40,000 1,60,000 80,000 1,60,000 80,000 1,60,000
(2:1:2:1:2)
Power H.P. × 4,00,000 80,000 1,28,000 1,28,000 24,000 40,000
(10:16:16:3:5)* Machine
Hrs.
Depreciation Capital 1,60,000 32,000 64,000 32,000 16,000 16,000
(2:4:2:1:1) value of
assets
Other overheads Machine 14,40,000 1,60,000 3,20,000 6,40,000 1,60,000 1,60,000
(1:2:4:1:1) hrs.
Total 26,40,000 4,32,000 5,92,000 9,60,000 7,60,000 8,56,000
*{(1600×80) : (3200×64) : (6400×32) : (1600×24) : (1600×40)}

(1,28,000 : 2,04,800 : 2,04,800 : 38,400 : 64,000)
(10:16:16:3:5)

(ii) Redistribution of service department’s expense using repeated distribution

Method:
A (`) B (`) C (`) X (` ) Y (` )
Total overheads 4,32,000 5,92,000 9,60,000 7,60,000 8,56,000
Dept. X overhead 3,42,000 1,14,000 2,28,000 -7,60,000 76,000
apportioned in the ratio
(72:24:48: —:16)
Dept. Y overhead 5,59,200 3,26,200 - 46,600 -9,32,000
(96:56: —:8: —)
Dept. X overhead 20,970 6,990 13,980 -46,600 4,660
(72:24:48: —:16)
Dept. Y overhead 2,796 1,631 - 233 -4,660
(96:56: —:8: —)
Dept. X overhead 105 35 70 -233 23
(72:24:48: —:16)
Dept. Y overhead 15 8 - - -23
(96:56: —:8: —)
13,57,086 10,40,864 12,02,050 - -
Calculation of machine hour rate

A B C
A Total overheads (`) 13,57,086 10,40,864 12,02,050
B Machine hours 1,600 3,200 6,400
C Machine hour rate (`) [A ÷ B] 848.18 325.27 187.82
4. 1. The Total Production Overhead are 78,00,000
Items Labour Hour Overheads allocation on the
basis of direct Labour Hour (`)
Labour Hour Ratio (4.5:6:7.5)
Hand Wash 1,35,000 9,00,000
Detergent Powder 3,60,000 24,00,000

Dishwasher 6,75,000 45,00,000

Total 11,70,000 78,00,000
2. On the basis of ABC analysis this amount will be apportioned as follows:
Statement Showing "Activity Based Production Cost"
Activity Cost Cost Driver Ratio Total Hand Detergent Dishwas
Pool Amount Wash (`) Powder her
(` ) (` ) (` )
Goods Receiving Dispatch order 06:09:10 8,88,000 2,13,120 3,19,680 3,55,200
Inspecting and Production Runs 05:07:08 26,82,000 6,70,500 9,38,700 10,72,800
Testing costs
Dispatching Dispatch Order 06:09:10 6,30,000 1,51,200 2,26,800 2,52,000
Storage Cost Batches of 12:13:15 36,00,000 10,80,000 11,70,000 13,50,000
material
Total Activity Cost 21,14,820 26,55,180 30,30,000
Quantity Produces 30,000 60,000 90,000
Unit Cost
(Overheads) 70.49 44.25 33.67
Add: Conversion
Cost (Material +
Labour) 195 180 195
Total 265.49 224.25 228.67
Note: This question can also be solved by using cost driver rate
5. Calculation of Cost of Production of Motilal Ltd for the period…..
Particulars (`)
Raw materials purchased 64,00,000
Add: Opening stock 2,88,000
Less: Closing stock (4,46,000)
Material consumed 62,42,000
Wages paid 23,20,000
Prime cost 85,62,000
Repair and maintenance cost of plant & machinery 9,80,500
Insurance premium paid for inventories 26,000
Insurance premium paid for plant & machinery 96,000
Quality control cost 86,000

Research & development cost 92,600

Administrative overheads related with factory and production 9,00,000
1,07,43,100
Add: Opening value of W-I-P 4,06,000
Less: Closing value of W-I-P (6,02,100)
1,05,47,000
Less: Amount realised by selling scrap (9,200)
Add: Primary packing cost 10,200
Cost of Production 1,05,48,000
Notes:
(i) Other administrative overhead does not form part of cost of production.
(ii) Salary paid to Director (Technical) is an administrative cost.
6. Statement of Reconciliation
Sl. No. Particulars (`) (`)
Net loss as per Cost Accounts (88,500)
Additions
1 Factory O/H over recovered 3,37,500
2 Dividend Received 50,000
3 Bank Interest received 34,000
4 Difference in Value of Opening Stock 50,000
(4,12,500 – 3,62,500)
5 Difference in Value of Closing Stock 16,250
(3,30,000 – 3,13,7500)
6 Notional Rent of own Premises 1,50,000 6,37,750
Deductions
1 Administration O/H under recovered 63,750
2 Depreciation under charged 65,000
3 Loss due to obsolescence 42,000
4 Income tax Provided 1,09,000
5 Goodwill written-off 62,500
6 Provision for doubtful debts 37,500 (3,79,750)
Net Profit as per Financial A/c. 1,69,500

7.
Particulars Jan. Feb. March April May June Total
(`) (`) (`) (`) (`) (`) (`)
Batch output 210 200 220 180 200 220 1,230
(in pieces)
Sale value @ `80 16,80 16,00 17,60 14,40 16,00 17,60 98,40
0 0 0 0 0 0 0
Material cost 6,500 6,400 6,800 6,300 7,000 7,200 40,20
0
Direct wages 1,200 1,400 1,500 1,400 1,500 1,600 8,600
Chargeable 6,000 6,720 6,720 6,210 7,800 8,000 41,45
expenses* 0
Total cost 13,70 14,52 15,02 13,91 16,30 16,80 90,25
0 0 0 0 0 0 0
Profit per batch 3,100 1,480 2,580 490 (300) 800 8,150
Total cost per piece 65.2 72.6 68.3 77.3 81.5 76.4 73.4
Profit per piece 14.8 7.4 11.7 2.7 (1.5) 3.6 6.6
Overall position of the order for 1,200 pieces
Sales value of 1,200 pieces @ ` 80 per piece ` 96,000
Total cost of 1,200 pieces @ ` 73.4 per piece ` 88,080
Profit ` 7,920
Chargeable expenses
*  Direct labour hours for batch
Direct labour hour for the month
8. School Contract Account
Particulars (`) Particulars (`)
To Plant 2,40,000 By Material returned 47,000
To Hire of plant 77,000 By Plant c/d 1,65,000
To Materials 6,62,000 By Materials c/d 50,000
To Direct wages 9,60,000 By WIP c/d:
Add: Accrued 40,000 10,00,000 Value of work certified 24,00,000
To Wages related costs 1,32,000 Cost of work not certified 1,80,000
To Direct expenses 34,000
To Supervisory staff:
Direct 90,000

Indirect 20,000 1,10,000

To Regional office 50,000
expenses
To Head office expenses 30,000
To Surveyors’ fees 27,000
To Notional profit c/d 4,80,000
28,42,000 28,42,000
9. (i) Statement of Equivalent Production
Particulars Input Particulars Output Equivalent Production
Units Units Milk Labour & O.H.
% Units % Units
Opening WIP 13,500 Completed and 1,18,500 100 1,18,500 100 1,18,500
transferred to Process-II
Units 3,00,000 Normal Loss (55%* of 1,65,000 -- -- -- --
introduced 3,00,000)
Abnormal loss 3,000 100 3,000 80 2400
Closing WIP 27,000 100 27,000 80 21,600
3,13,500 3,13,500 1,48,500 1,42,500
* 100 litre of milk extracts only 45 litre of standardized milk. Thus, normal loss = 100 – 45 = 55%
(ii) Statement showing cost for each element

Particulars Milk (`) Labour (`) Overhead (`) Total (`)
Cost of opening work-in- 1,50,000 45,000 1,35,000 3,30,000
process
Cost incurred during the 15,00,000 6,00,000 18,00,000 39,00,000
month
Total cost: (A) 16,50,000 6,45,000 19,35,000 42,30,000
Equivalent units: (B) 1,48,500 1,42,500 1,42,500
Cost per equivalent unit: (C) 11.111 4.526 13.578 29.216
= (A ÷ B)
(iii) Statement of Distribution of cost
(`) (`)
1. Value of units completed and transferred (1,18,500 34,62,096
units × ` 29.216)

2. Value of Abnormal Loss: -

Milk (3,000 units × ` 11.111) 33,333
Labour (2400 units × ` 4.526) 10,863
Overheads (2400 units × ` 13.579) 32,590 76,786
3. Value of Closing W-I-P:
Milk (27,000 units × ` 11.111) 299997
Labour (21,600 units × ` 4.526) 97,762
Overheads (21,600 units × ` 13.579) 2,93,306 6,91,065
(iv) Process-I A/c
Particulars Units Amount Particulars Units Amount
(` ) (` )
To Opening W.I.P: By Normal Loss 1,65,000 --
Milk 13,500 1,50,000 By Abnormal Loss 3,000 76,839
(`.44 difference due
to approximation)
Labour -- 45,000 By Process-II A/c 1,18,500 34,62,096
Overheads -- 1,35,000 By Closing WIP 27,000 6,91,065
To Milk introduced 3,00,000 15,00,000
To Direct Labour 6,00,000
To Overheads 18,00,000
3,13,500 42,30,000 3,13,500 42,30,000
10. Working Note:

Apportionment of joint costs on the basis of Net Realisable Value method
Products Sales Value (`) Post separation Net Realisable Apportioned
Cost (`) Value (`) Cost (`)
A 3,12,50,000 31,25,000 2,81,25,000 67,74,563
(5,00,000 units x ` 62.50)
B 31,87,500 3,75,000 28,12,500 6,77,456
(75,000 units x ` 42.5)
C 18,75,000 1,25,000 17,50,000 4,21,528
(62,500 units x ` 30)
D 12,50,000 --- 12,50,000 3,01,092
(50,000 units x ` 25)

E 93,75,000 3,75,000 90,00,000 21,67,860

(1,87,500 units x ` 50)
4,29,37,500 1,03,42,500
Total joint cost =Raw material costs + Manufacturing expenses = `89,75,000 +

`13,67,500 = `1,03,42,500
Apportioned joint cost = (Total Joint Cost/ Total Net Realisable value of each X Net
Realisable value of each product)
Apportioned joint cost for Product A = (1,03,42,500 / 4,29,37,500 X 2,81,25,000) =
`67,74,563.32
Similarly, the apportioned joint cost for products B, C, D and E are `6,77,456, `4,21,528,
`3,01,092 and `21,67,860 respectively.
(a) Statement showing income forecast of the company assum-ing that none of its
products are further processed.
Products
A (`) B (`) C (`) D (`) E (`) Total (`)
Sales revenue 2,12,50,000 24,37,500 12,50,000 12,50,000 65,62,500 3,27,50,000
(`42.5 × (` 32.5 × (` 20 × (` 25 × (` 35 ×
5,00,000) 75,000) 62,500) 50,000) 1,87,500)
Less: Apportioned
Costs (Refer
Working note) 67,74,563 6,77,456 4,21,528 3,01,092 21,67,860 1,03,42,500
1,44,75,437 17,60,044 8,28,472 9,48,908 43,94,640 2,24,07,500
Less: Fixed Cost 11,82,500
Profit 2,12,25,000
(b) Statement showing income forecast of the company: assuming that products A, B, C
and E are further processed (Refer to working note)
Products
A (`) B (` ) C (`) D (`) E (` ) Total (`)
A. Sales revenue 3,12,50,000 31,87,500 18,75,000 12,50,000 93,75,000 4,69,37,500
B. Apportioned 67,74,563 6,77,456 4,21,528 3,01,092 21,67,860 1,03,42,500
Costs
C. Further 31,25,000 3,75,000 1,25,000 - 3,75,000 40,00,000
processing cost

D. Total 98,99,563 10,52,456 5,46,528 3,01,092 25,42,860 1,43,42,500

processing cost
(B+ C)
E. Excess of sales 2,13,50,437 21,35,044 13,28,472 9,48,908 68,32,140 3,25,95,000
revenue (A-D)
F. Fixed Cost 11,82,500
G. Profit (E - F) 3,14,12,500
11. Total units generated 16,50,000 kWh.

Cost Statement of Panipat Thermal Power Station
Per annum (`) Per kWh. (`)
Fixed costs:
Plant supervision 4,35,000
Administration overheads 29,00,000
Insurance Charges 15,00,000
Depreciation (5% of ` 3,10,00,000 p.a.) 15,50,000
Total fixed cost: (A) 63,85,000 3.87
Variable costs:
Operating labour 21,75,000
Fuel Charges 8,00,000
Lubricants, spares and stores 5,80,000
Repairs & maintenance 7,25,000
Coal cost (Refer to working note) 11,19,643
Total variable cost: (B) 53,99,643 3.27
Total cost [(A) + (B)] 1,17,84,643 7.14
Working Note:
Coal cost (16,50,000 kWh. ÷ 7 kWh) × `4.75 per kg. = `11,19,643
12. Material Variance
Raw SQ SP SQ × SP RSQ RSQ × SP AQ AQ × SP AP AQ × AP
Material (kg.) (WN-2)
(WN-1) ( `) ( `) (kg.) ( `) ( `) ( `) ( `)
DF 1879 50 93,950 1771 88,550 1800 90,000 40 72,000
CE 1410 35 49,350 1329 46,515 1300 45,500 30 39,000
3289 1,43,300 3,100 1,35,065 3100 1,35,500 1,11,000

WN-1: Standard Quantity (SQ):

 1,600 kg. 
1879.365 or 1879 kg. =  × 2,960 kg. 
 0.9 × 2,800 kg. 
 1,200 kg. 
Raw Material DF =  × 2,960 kg. 
 0.9 × 2,800 kg. 
 1,200 kg. 
Raw Material CE = 1409.52 or 1410 kg.  × 3,100 kg. 
 2,800 kg. 
WN- 2: Revised Standard Quantity (RSQ):
 1,200 kg. 
Raw Material DF = 1,771.43 or 1,771 kg.  × 3,100 kg. 
 2,800 kg. 
Raw Material CE = 1,328.57 or 1,329 kg.
(a) Material Cost Variance (A + B) = {(SQ × SP) – (AQ × AP)}
{1,43,300 –1,11,000} = 32,300(F) (F)
(b) Material Price Variance (A + B) = {(AQ × SP) – (AQ ×AP)
{1,35,500 – 1,11,000} = 24,500(F)
(c) Material Mix Variance (A + B) = {(RSQ × SP) – (AQ × SP)}
{1,35,065 – 1,35,500} = 435 (A)
(d) Material Yield Variance (A + B) = {(SQ × SP) – (RSQ × SP)}
{1,43,300 – 1,35,065} = 8,235 (F)
Labour Variances:
Labour SH SR SH × SR RSH RSH × SR AH AH × SR AR AH × AR
(WN-3) (`) (WN-4)
(` ) (` ) (` ) (` ) (` )
Skilled 2232 40 89,280 2289 91,560 2,400 96,000 35 84,000
Semiskilled 1785 25 44,625 1831 45,775 1720 43,000 20 34,400
4,017 hrs 1,33,905 4,120 1,37,335 4,120 1,39,000 1,18,400
WN- 3: Standard Hours (SH):

 0.95 x 2,000 hr 
Skilled labour = 2,231.746 or 2,232 hrs  x 2,960 kg 
 0.90 x 2,800 kg 

 0.95 x 1600 hr 
Semiskilled labour = 1785.397 or 1785 hrs  x 2,960 kg 
 0.90 x 2,800 kg 
WN- 4: Revised Standard Hours (RSH):
 2,000 hrs 
Skilled labour = 2,288.889 or 2,289 hrs. =  x 4,120 hrs 
 3,600 kg 
 1,600 hrs 
Semiskilled labour = 1831.11 or 1831 hrs. =  x 4,120 hrs 
 3,600 kg 
(e) Labour Cost Variance (Skilled + Semiskilled) = {(SH × SR) – (AH × AR)}
{1,33,905 – 1,18,400} =15,505 (F)
(f) Labour Efficiency Variance (Skilled + Semiskilled) = {(SH × SR) – (AH × SR)}
{1,33,905 – 1,39,000} = 5,095 (A)
(g) Labour Yield Variance (Skilled + Semiskilled) = {(SH × SR) – (RSH × SR)}
= {1,33,905 – 1,37,335} = 3,430 (A)
Sales per unit - Variable Cost per unit
13. (a) P/V ratio: 100
Selling price per unit
1000 − 800
=  100
1000
200
=  100 = 20%
1000
Annual fixed cost
Annual BEP in units:
Contribution per unit
` 23,00,000
= = 11,500 units
` 200
Annual fixed cost
Annual BEP in value:
P / V ratio
` 23,00,000
= `1,15,00,000
` 20%
(b) Revised P/V ratio and BEP :
commission on sales per unit= 1% of 1,000= `10

1000 − ( 750 + 50 + 10 )
So, P/V ratio :
1000
190
=  100 = 19%
1000
Annual fixed cost
BEP in terms of units:
Contribution per unit
23,00,000
= = 12,106 units
190
Annual fixed cost
BEP in terms of value:
P/V
23,00,000
= = `1,21,05,263
19%
(c) Break-even point under fixed salary plan:
Contribution per unit 1000 − 750 250
P/V ratio = =  100 = ×100 =25%
Selling price per unit 1000 1000
Revised fixed cost :

Original fixed cost ` 23,00,000
Proposed fixed salary ` 9,00,000
Total ` 32,00,000
Annual fixed cost 32,00,000
BEP in terms of units: = = 12,800 units
Contribution per unit 250
Annual fixed cost 32,00,000
BEP in terms of value: = = 1,28,00,000
P / v ratio 25%
(d) Annual break-even point under requirement (a) is 11,500 units.
Margin of safety at sales volume of 20,000 unit of bags (20,000 – 11,500) = 8500
units
Contribution on sales beyond break-even sales:
Revised contribution per unit: 200 – (2% of 1000) = 180
Profit = Margin of safety (in units) × Contribution per unit
= 8500 × 180 = ` 15,30,000

14. Number of days in budget period = 4 weeks × 6 days = 24 days

Number of units to be produced
Product-A (units) Product-B (units)
Budgeted Sales 4,080 6,120
Add: Closing stock 850 1275
 4,080 units   6,120 units 
  5 days    5 days 
 24 days   24 days 
Less: Opening stock 550 350
4,380 7,045
(i) Material Purchase
Budget
Material-X (Kg.) Material-Y (Kg.)
Material required:
Product-A 37,230 29,784
(4,380 units × 8.5 kg.) (4,380 units × 6.8 kg.)
Product-B 35,930 71,859
(7,045 units × 5.1 kg.) (7,045 units × 10.2 kg.)
73,160 1,01,643
Add: Closing stock 30,483 21,176
73,160 kgs. 1,01,643 kgs.
( × 10 days) ( × 5 days)
24 days 24 days
Less: Opening stock 1,200 600
Quantity to be purchased 1,02,443 1,22,219
Rate per kg. of Material 8 10
Total Cost 8,19,541 12,22,186
(ii) Wages Budget
Product-A (Hours) Product-B (Hours)
Units to be produced 4,380 7,045
Standard hours allowed per 5.1 8.5
unit
Total Standard Hours 22,338 59,883
allowed

Productive hours required 22,338 hours 59,883 hours

for production  26,280  70,450
85% 85%
Add: Non-Productive down 3942 10568
time hours (15% of 26,280 hours) (15% of 70,450 hours)
Hours to be paid 30,222 81,018
Total Hours to be paid = 1,11,240
Hours to be paid at normal 72000
rate (4 weeks × 45 hours ×
400 workers) =
Hours to be paid at premium 39,240
rate
Total wages to be paid = ` 21,60,000 + ` 20,60,100 = ` 42,20,100
= (72,000 hours × `30 +
39,240 hours × ` 52.5)
15. (a) Cost units are as follows:
Industry or Product Cost Unit Basis
Transport Passenger- kilometer
Power Kilo-watt hour (kWh)
Hotel Room
Hospitals Patient day
Steel Ton
Coal mining Tonne/ton
Professional services Chargeable hour, job, contract
Gas Cubic feet
Engineering Contract, job
Oil Barrel, tonne, litre
(b) Differences between Job costing and Batch costing:

Sr. No Job Costing Batch Costing
1. Method of costing used for non- Homogeneous products
standard and non- repetitive produced in a continuous
products produced as per customer production flow in lots.

specifications and against specific

orders.
2. Cost determined for each Job. Cost determined in aggregate
for the entire Batch and then
arrived at on per unit basis.
3. Jobs are different from each other Products produced in a batch
and independent of each other. are homogeneous and lack of
Each Job is unique. individuality.
(c) Essential pre-requisites for Integrated Accounts: The essential pre-requisites for
integrated accounts include the following steps-
1. The management’s decision about the extent of integration of the two sets of
books. Some concerns find it useful to integrate up to the stage of prime cost or
factory cost while other prefers full integration of the entire accounting records.
2. A suitable coding system must be made available so as to serve the accounting
purposes of financial and cost accounts.
3. An agreed routine, with regard to the treatment of provision for accruals, prepaid
expenses, other adjustment necessary for preparation of interim accounts.
4. Perfect coordination should exist between the staff responsible for the financial
and cost aspects of the accounts and an efficient processing of accounting
documents should be ensured.
(d)
S. No. Cost Control Cost Reduction
1 Cost control aims at maintaining Cost reduction is concerned with
the costs in accordance with the reducing costs. It challenges all
established standards. standards and endeavours to
improvise them continuously
2 Cost control seeks to attain lowest Cost reduction recognises no
possible cost under existing condition as permanent, since a
conditions. change will result in lower cost.
3 In case of cost control, emphasis In case of cost reduction, it is on
is on past and present present and future.
4 Cost control is a preventive Cost reduction is a corrective
function function. It operates even when an
efficient cost control system exists.
5 Cost control ends when targets Cost reduction has no visible end and
are achieved. is a continuous process.

PAPER 4: TAXATION
SECTION A: INCOME TAX LAW
The Income-tax law, as amended by the Finance Act, 2022, including significant
notifications/circulars issued upto 31st October, 2022, is applicable for May, 2023 examination.
The relevant assessment year for May, 2023 examination is A.Y.2023-24. The May, 2022
edition of the Study Material is based on the provisions of Income-tax law as amended by the
Finance Act, 2022 and significant notifications/circulars issued upto 30.04.2022, and hence,
the same is relevant for May 2023 examination. The Statutory Update containing significant
notifications/circulars issued between 1.5.2022 and 31.10.2022 which are relevant for May,
2023 examination is webhosted at https://resource.cdn.icai.org/72468bos58397.pdf
QUESTIONS AND ANSWERS
Case Scenario
Kishore & Sons is a dealer of coal. Its turnover for the F.Y. 2021-22 was ` 12 crores. The
State Government of Hyderabad granted a lease of coal mine to Kishore & Sons on 1.5.2022
and charged ` 11 crores for the lease. Kishore & Sons sold coal of ` 95 lakhs to M/s BAC Co.
during the P.Y. 2022-23. M/s XYZ Ltd. purchased coal of ` 55 lakhs from Kishore & Sons for
trading purpose in July 2022. Turnover of M/s XYZ Ltd. during the P.Y. 2021-22 was ` 12
crores. PAN is duly furnished by the buyer and seller to each other. Details of sale to and
payments from M/s BAC Co. by Kishore & Sons are as follows:
S. Date of sale Date of receipt/ Amount (`)
No. Payment
1 29.05.2022 10.05.2022 35,00,000
2 30.06.2022 10.07.2022 25,00,000
3 25.11.2022 25.10.2022 8,00,000
4 20.01.2023 22.01.2023 15,00,000
5 01.03.2023 15.02.2023 12,00,000
Turnover of M/s BAC Co. during the P.Y. 2021-22 was ` 11 crores. The above amounts were
credited to Kishore & Sons account in the books of M/s BAC Co. on the date of sale. M/s BAC
Co. furnishes a declaration to Kishore & Sons that coal is to be utilised for generation of
power.
Based on the above facts, choose the most appropriate answer to Q. No. 1 to 5 –
1. Who is required to deduct/ collect tax at source in respect of lease of coal mine by the
State Government of Hyderabad to Kishore & Sons and at what rate?

PAPER – 4: TAXATION 85
(a) State Government of Hyderabad is liable to collect tax at source @ 2% on ` 11 crores

(b) State Government of Hyderabad is liable to collect tax at source @0.1% on ` 10.50
crores, being the amount exceeding ` 50 lakhs
(c) Kishore & Sons is liable to deduct tax at source @0.1% on ` 10.50 crores, being
the amount exceeding ` 50 lakhs
(d) Neither State Government of Hyderabad is liable to collect tax at source nor Kishore
& Sons is liable to deduct tax at source
2. Is Kishore & Sons required to collect tax at source in respect of the sale transactions with
M/s BAC Co. If yes, when and what is the amount of tax to be collected?
(a) Yes; ` 1,000 on 30.6.2022, ` 800 on 25.10.2022, ` 1,500 on 20.1.2023 and
` 1,200 on 15.2.2023
(b) Yes; ` 35,000 on 10.5.2022, ` 25,000 on 30.6.2022, ` 8,000 on 25.10.2022,
` 15,000 on 20.1.2023 and ` 12,000 on 15.2.2023
(c) Yes; ` 1,000 on 10.7.2022, ` 800 on 25.10.2022, ` 1,500 on 22.1.2023 and
` 1,200 on 15.2.2023
(d) No, Kishore & Sons is not liable to collect tax at source
3. Is Kishore & Sons required to collect tax at source in respect of the sale transaction with
M/s XYZ Ltd. If yes, what is the amount of tax to be collected?
(a) Yes; ` 55,000
(b) Yes; ` 5,500
(c) Yes; ` 500
(d) No, Kishore & Sons is not liable to collect tax at source
4. Is M/s BAC Co. required to deduct tax at source in respect of the purchase transactions
with Kishore & Sons. If yes, when and what is the amount of tax to be deducted?
(a) Yes; ` 1,000 on 30.6.2022, ` 800 on 25.10.2022, ` 1,500 on 20.1.2023 and
` 1,200 on 15.2.2023
(b) Yes; ` 3,500 on 10.5.2022, ` 2,500 on 30.6.2022, ` 800 on 25.10.2022, ` 1,500 on
20.1.2023 and ` 1,200 on 15.2.2023
(c) Yes; ` 1,000 on 10.7.2022, ` 800 on 25.10.2022, ` 1,500 on 22.1.2023 and
` 1,200 on 15.2.2023
(d) No, M/s BAC Co. is not liable to deduct tax at source
5. Assume for the purpose of this MCQ, M/s BAC Co.’s turnover for the F.Y. 2021-22 was
` 9 crore, who will be required to deduct/ collect tax at source in respect of transactions
between Kishore & Sons and M/s BAC Co. and at what rate?

(a) Kishore & Sons is liable to collect tax at source @1% of ` 95 lakhs
(b) Kishore & Sons is liable to collect tax at source @0.1% of ` 45 lakhs, being the sum
exceeding ` 50 lakhs
(c) M/s BAC Co. is liable to deduct tax at source @0.1% of ` 45 lakhs, being the sum
exceeding ` 50 lakhs
(d) Neither Kishore & Sons is liable to collect tax at source nor M/s BAC Co. is liable to
deduct tax at source
6. Mr. Virat has a house property in Chennai which he let out to Mr. Sumit. For acquisition
of this house, Mr. Virat has taken a loan of ` 30,00,000 @10% p.a. on 1-4-2016. He has
further taken a loan of ` 5 lakhs @12% p.a. on 1.7.2022 towards repairs of the house.
He has not repaid any amount of loan so far. The amount of interest deduction u/s 24(b)
to Mr. Virat for A.Y. 2023-24 if he opted for the provisions of section 115BAC is -
(a) ` 2,00,000
(b) ` 2,30,000
(c) ` 3,45,000
(d) ` 3,60,000
7. Mr. Rishabh, aged 65 years and a resident in India, has a total income of ` 4,50,00,000,
comprising long term capital gain taxable under section 112 of ` 85,00,000, long term
capital gain taxable under section 112A of ` 75,00,000 and other income of
` 2,90,00,000. What would be his tax liability for A.Y. 2023-24. Assume that
Mr. Rishabh has opted for the provisions of section 115BAC.
(a) ` 1,41,40,750
(b) ` 1,38,86,990
(c) ` 1,38,84,390
(d) ` 1,39,81,240
8. Mr. A engaged in the retail trading of toys, had acquired a motor vehicle - A for ` 4 lakhs
on 20.08.2020, put to use on 04.10.2021 and another motor vehicle - B for ` 3 lakhs on
19.02.2021, put to use on 03.09.2021. On 01.04.2021, Mr. A took a vehicle loan of ` 5
lakhs at 10% p.a. and acquired the motor vehicle - C for ` 5 lakhs on 31.05.2021, put to
use on 30.06.2021. On 30.07.2022 the same vehicle - C was sold for ` 5.50 lakhs and
reacquired it back on 28.08.2022 for ` 6 lakhs. Assuming the above mentioned assets
are the only assets in the block of assets for Mr. A, what would be its total depreciation
claim under section 32 for P.Y. 2022-23?
(a) ` 1,66,594

(b) ` 1,62,094
(c) ` 1,37,438
(d) ` 1,60,500
9. Mrs. Roma, an Indian Citizen, is a government employee working for the Indian
Government. She submits the following information for the previous year ending
31.03.2023:
`
1 Salary income received in Malaysia for services rendered there 2,00,000
2 Profit from business carried on in Orissa 80,000
3 Loss from business carried on in Baroda (20,000)
4 Profit from business carried on in Paris (income is earned and 42,000
received in Sydney and business is controlled from Paris)
5 Loss from business carried on in Canada (though profits are not (46,000)
received in India, business is controlled from Dehradun)
6 Unabsorbed depreciation of business in Canada 16,000
7 Profit from Indonesia business (controlled form Delhi) and 60% of 70,000
profit deposited in a bank in Indonesia and 40% received in India
8 Rent from house property situated in Canada and received in 1,92,000
Canada
Determine the gross total income of Roma for the A.Y. 2023-24 ignoring the provisions of
section 115BAC on the assumption that she is:
(1) Resident but not ordinarily resident in India
(2) Non-resident in India.
10. Mr. Akash owns a residential house property whose Municipal Value, Fair Rent and
Standard Rent are ` 1,60,000, ` 1,70,000 and ` 1,90,000, respectively. The house has
two independent units. Unit I (25% of floor area) is utilized for the purpose of his
profession and Unit II (75% of floor area) is let out for residential purposes at a monthly
rent of ` 8,500. Municipal taxes @8% of the Municipal Value were paid during the year
by Mr. Akash. He made the following payments in respect of the house property during
the previous year 2022-23:
Light and Water charges ` 2,000, Repairs ` 1,45,000, Interest on loan taken for the
repair of property ` 36,000. Mr. Akash has taken a loan of ` 5,00,000 in July, 2016 for
the construction of the above house property. Construction was completed on 30 th June,

2019. He paid interest on loan @12% per annum and every month such interest was
paid. No repayment of loan has been made so far.
Income of Mr. Akash from his profession amounted to ` 8,00,000 during the year
(without debiting house rent and other incidental expenditure including admissible
depreciation of ` 8,000 on the portion of house used for profession).
Determine the Gross total income of Mr. Akash for the A.Y. 2023-24 ignoring the
provisions of section 115BAC.
11. Mr. Suresh has a sole proprietory manufacturing unit. On 1st April, 2022, he owns Plant A
and Plant B (rate of depreciation 15%). Depreciated value of the block on 1 st April, 2022
is ` 10,00,000. Plant B is transferred on 15 th October, 2022 for ` 19,00,000. Expenditure
on transfer of Plant B is ` 20,000. Plant C (rate of depreciation 15%) is purchased on
10th March, 2023 for ` 22,00,000. However, Plant C is put to use on 2 nd September, 2023
Business income of Mr. Suresh before claiming any depreciation is ` 11,00,000.
On 1st March, 2023, Mr. Suresh transfers 900 equity shares in A Ltd. (unlisted) for
` 23,50,000. Mr. Suresh does not own any residential house property. These shares
were purchased on 2 nd April, 2015 for ` 2,00,000. To avail of the benefit of exemption
under different sections, he made the following investments on 1 st May, 2023.
(i) A residential house property at Kolkata: ` 19,00,000 (out of which stamp duty
expenditure is ` 30,000).
(ii) NHAI bonds: ` 3,00,000.
Find out the gross total income of Mr. Suresh for the A.Y. 2023-24.
CII – F.Y. 2022-23: 331; F.Y. 2015-16:254
12. Mr. Ram, a resident Individual aged 65 years, submits the following details of his income
for the assessment year 2023-24:
Particulars `
Loss from speculative business A 30,000
Income from speculative business B 1,50,000
Loss from specified business covered under section 35AD 20,000
Income from Salary (computed) 2,00,000
Loss from let out house property 1,90,000
Loss from cloth business 80,000
Long-term capital gain from sale of urban land 3,00,000
Long-term capital loss on sale of shares (STT not paid) 1,00,000
Long-term capital loss on sale of listed shares in recognized stock 1,50,000

exchange (STT paid at the time of acquisition and sale of shares)

Income from betting (Gross) 80,000
Loss from gambling 8,000
Interest on saving bank deposits 12,000
Interest on fixed deposits with banks 40,000
Compute the total income of Mr. Ram and show the items eligible for carry forward,
assuming that he does not opt for the provisions of section 115BAC.
13. Examine the tax implication of each transaction and compute the total income of
Mr. Tushar and Mrs. Tushar and their minor son for the assessment year 2023-24,
assuming they do not wish to opt for section 115BAC.
(1) Mr. Tushar has a fixed deposit of ` 6,00,000 in State bank of India. He instructed
the bank to credit the interest on the deposit @9% from 1 st April, 2022 to 31st March,
2023 to the savings bank account of Mr. Raj, son of his brother, to help him in his
education.
(2) Mr. Tushar started a proprietary business on 1st May, 2022 with capital of
` 6,00,000. His wife, Mrs. Tushar, a software Engineer, gave cash of ` 5,00,000 on
1st May, 2022, which was immediately invested in the business by Mr. Tushar. He
earned a profit of ` 4,00,000 during the previous year 2022-23.
(3) Mr. Tushar's minor son derived an income of ` 20,000 through a business activity
involving application of his skill and talent.
14. Mr. Kamal, a resident individual aged 48 years, is working at a senior management
position in a private bank since past 20 years. During the previous year 202 2-23, he
received the following emoluments from the employer:
(a) Basic Salary ` 3,50,000 per month.
(b) Client entertainment reimbursement of ` 20,000 per month out of which he
submitted bills for ` 2,00,000 for the relevant year.
(c) Leave travel allowance of ` 4,00,000 per annum. He took a trip to Goa with his
spouse and two children in December 2022, for which plane boarding tickets of
` 1,00,000 and hotel bookings of ` 3,00,000 were submitted to the employer.
(d) Performance bonus amounting to 20% of annual basic salary.
(e) He is eligible to take a staff housing loan upto ` 20,00,000 at a concessional rate of
2.5% p.a. He availed a housing loan of ` 15,00,000 out of the same on 1 st June
2022. No repayment of loan has been made during the F.Y. 2022-23. The lending
rate of SBI as on 1.4.2022 for housing loan may be taken as 8% p.a.

(f) The Bank also allotted 1,500 sweat equity shares to Mr. Kamal in May 2022 at the
rate of ` 1,300 per share. The Fair market value of the share was ` 1,500 per share
on the date of exercise of option by Mr. Kamal. He sold all the shares for ` 2,100
per share on 31.03.2023 on recognised stock exchange. Assume Securities
transaction tax has been paid.
The following transactions were made by Mr. Kamal during the previous year 2022-23:
(a) He earned rental income of ` 35,000 per month from a 3 BHK residential flat
situated at Delhi. He purchased the said flat for ` 45 Lakhs in June, 2022 using the
housing loan availed from the employer and his own savings. It was let out from
July, 2022. Municipal taxes of ` 12,000 for F.Y. 2022-23 was paid by Mr. Kamal.
(b) He invested ` 30,00,000 in RBI Floating Rate Savings Bonds on 1 st September
2022 earning an interest of 7% p.a. Interest is credited half yearly on 1 st January
and 1 st July every year. (Assume receipt basis for taxation)
(c) He also paid LIC premium of ` 15,000 for self, ` 20,000 for wife and ` 30,000 for
dependent father, aged 75 years. Medical insurance premium paid on the health of
dependent brother and major dependent son amounted to ` 5,000 (paid by cheque)
and ` 10,000 (paid in cash), respectively.
(d) In December 2022, he earned dividend income of ` 5,00,000 (gross) on shares of
the bank held by him.
You are required to compute his total income and tax liability for the assessment year
2023-24, clearly showing all workings. (Ignore section 115BAC provisions)
15. Mr. Aakash has undertaken certain transactions during the F.Y.2022 -23, which are listed
below. You are required to identify the transactions in respect of which quoting of PAN is
mandatory in the related documents –
S.No. Transaction
1. Opening a current account with HDFC Bank
2. Sale of shares of ABC (P) Ltd. for ` 1,50,000
3. Purchase of two wheeler motor vehicle of ` 1 lakh
4. Purchase of a professional laptop of ` 3 lakhs

SUGGESTED ANSWERS
MCQ No. Most Appropriate Answer MCQ No. Most Appropriate Answer
1. (a) 5. (d)
2. (d) 6. (c)
3. (a) 7. (b)
4. (a) 8. (c)
9. Computation of gross total Income of Mrs. Roma for the A.Y. 2023-24
Particulars of income Resident Non-
but not Resident
ordinarily (`)
Resident
(`)
1 Salary income received in Malaysia for services 2,00,000 2,00,000
rendered there (Note 1)
Less: Standard deduction under section 16(ia) 50,000 50,000
1,50,000 1,50,000
2 Profit from business carried on in Orissa [Since it 80,000 80,000
accrues or arises in India]
3 Loss from business carried on in Baroda [Since it (20,000) (20,000)
accrues or arises in India]
4 Profit from business carried on in Paris (income is Nil Nil
earned and received in Sydney and business is
controlled from Paris) [Since it accrues or arises
outside India]
5 Loss from business carried on in Canada (business is (46,000) Nil
controlled from Dehradun)
6 Unabsorbed depreciation of business in Canada (16,000) Nil
7 Profit from Indonesia business (business is controlled 70,000 28,000
from Delhi)
8 Rent from property situated in Canada and received in Nil Nil
Canada
Gross Total Income 2,18,000 2,38,000
Note 1 - Income from “Salaries” payable by the Government to a citizen of India for
services rendered outside India is deemed to accrue or arise in India as per section

9(1)(iii). Standard deduction under section 16(ia) is allowable, irrespective of residential

status.
Note 2 – In case of a non-resident, only income received or deemed to be received in
India and income accruing or arising or deemed to accrue or arise in India is chargeable
to tax. However, in case of a resident but not ordinarily resident, income derived from a
business controlled in or profession set up in India is also taxable even though it accrues
or arises outside India.
Therefore, income referred to in S. No. 1, 2 and 3 are taxable in the hands of Mrs. Roma
in both cases if she is a resident but not ordinarily resident or if she is a non-resident.
Loss from business carried on in Canada, unabsorbed depreciation of business in
Canada and Profit from Indonesia business would be fully chargeable to tax in India if
she is a resident but not ordinarily resident as it derived from a business controlled in
India. However, Profit from Indonesia business is taxable in case of non-resident to the
extent of such profits received in India.
10. Computation of Gross total income of Mr. Akash for the A.Y. 2023-24
Particulars ` `
I Income from House Property
Unit-II (75% of floor area)
Gross Annual Value
(a) Actual rent received (` 8,500 x 12) ` 1,02,000
(b) Expected rent ` 1,27,500
[Higher of municipal value (i.e. ` 1,60,000) and fair rent
(i.e. ` 1,70,000) but restricted to standard rent (i.e.
` 1,90,000) ` 1,70,000 x 75%]
Higher of (a) or (b) is GAV 1,27,500
Less: Municipal taxes (` 1,60,000 x 8% x 75%) 9,600
NAV 1,17,900
Less: Deductions u/s 24
(a) 30% of NAV ` 35,370
(b) Interest on loan (See note) ` 96,750 1,32,120 (14,220)
II Profits & Gains of business & profession

Income from Profession 8,00,000
Less: Light & Water Charges (25% of ` 500
` 2,000)

Municipal taxes (25% of ` 12,800) ` 3,200

Repairs (25% of ` 1,45,000) ` 36,250
Interest on loan taken for repair (25% of ` 9,000
` 36,000)
Interest on loan taken for construction of ` 15,000
house property (25% of ` 60,000)
Depreciation ` 8,000 71,950 7,28,050
Gross Total Income 7,13,830
Note:
Computation of Interest on loan
`
Interest for the year (` 5,00,000 x 12%) 60,000
Pre-construction period Interest-
12% of ` 5,00,000 for 33 months = ` 1,65,000
To be allowed in 5 equal instalments from the year of completion 33,000
(` 1,65,000 x 1/5)
Interest on loan taken for repair (no restriction for let out property) 36,000
Total Interest deduction u/s 24(b) 1,29,000
Total Interest deduction u/s 24(b) for let out property (75% x 96,750
` 1,29,000)
11. Computation of gross total income of Mr. Suresh for the A.Y. 2023-24
Particulars Amount (`) Amount (`)
Profits and gains of business or profession
Business income before depreciation 11,00,000
Depreciated value of the block on April 1, 2022 10,00,000
Add: “Actual cost” of Plant C acquired on March 10, 22,00,000
2023
Less: Sale Consideration of Plant B 19,00,000
Written down value on March 31, 2023 13,00,000
Normal depreciation (not available as Plant C is not put Nil
to use during the P.Y. 2022-23)
Additional depreciation (not available as Plant C is not Nil
put to use during the P.Y. 2022-23)

Capital Gains
Long term capital gain on transfer of unlisted equity
shares [Since shares were held for more than 24
months]
Sale consideration 23,50,000
Less: Indexed Cost of Acquisition [2,00,000 x 331/254] 2,60,630
20,89,370
Less: Exemption under section 54EC Nil
[Deduction under section 54EC is allowable only in
respect of long term capital gain on transfer of land and
building]
Exemption under section 54F 16,89,278 16,89,278
[20,89,370 x 19,00,000/23,50,000]
4,00,092
12. Computation of total income of Mr. Ram for the A.Y. 2023-24
Salaries
Income from Salary 2,00,000
Less: Loss from house property set-off against salary 1,90,000
10,000
Profits and gains from business or profession
Income from speculative business B 1,50,000
Less: Loss of ` 30,000 from speculative business A 30,000
Less: Loss from cloth business [Loss from non-
speculative business can be set off against profits from
speculative business] 80,000
40,000
Capital Gains
Long-term capital gain from sale of urban land 3,00,000
Less: Long-term capital loss on sale of shares (STT not 1,00,000
paid)
Less: Long-term capital loss on sale of listed shares in
recognizes stock exchange (STT paid at the time of
acquisition and sale of shares) 1,50,000
50,000

Income from Other Sources

Income from betting 80,000
Interest on savings bank deposits 12,000
Interest on fixed deposits with banks 40,000 1,32,000
Less: Deduction under section 80TTB (Maximum being 50,000
` 50,000, since Mr. Ram is a senior citizen)
Total Income 1,82,000
Notes:
(i) Loss from specified business covered under section 35AD can be set off only
against profits and gains of any other specified business. Therefore, such loss
cannot be set off against any other income. The unabsorbed loss of ` 20,000 has to
be carried forward for set-off against profits and gains of any specified business in
the following year.
(ii) Loss from gambling can neither be set off against any other income, nor can be
carried forward.
13. Computation of total income of Mr. Tushar and Mrs. Tushar
and minor son for the A.Y. 2023-24
Particulars Amount Amount Amount
(`) (`) (`)
Mr. Tushar Mrs. Tushar Minor Son
Interest on Mr. Tushar fixed Deposit 54,000
with State bank of India (` 6,00,000 x
9%)
As per section 60, in case there is a
transfer of income without transfer of
assets from which such income is
derived, such income shall be treated
as income of the transferor. Therefore,
the fixed deposit interest of ` 54,000
transferred by Mr. Tushar to Mr. Raj
shall be included in the total income of
Mr. Tushar
Profit for P.Y. 2022-23 to be 2,18,182 1,81,818
apportioned on the basis of capital
employed on the first day of previous
year i.e. as on 1 st May, 2022, since
business started on 1.5.2022 (6:5)

Share of income of Mr. Tushar

[` 4,00,000 x 6/11]
Share of Income of Mrs. Tushar
[` 4,00,000 x 5/11]
Section 64(1)(iv) of the Income-tax Act,
1961 provided for the clubbing of
income in the hands of the individual, if
the income earned is form the assets
(other than house property) transferred
directly or indirectly to the spouse of the
individual, otherwise than for adequate
consideration or in connection with an
agreement to live apart.
Income of minor son through a business 20,000
activity involving application his skill and
talent.
In case the income earned by minor
child is on account of any activity
involving application of any skill or
talent, then, such income of the minor
child shall not be included in the income
of the parent, but shall be taxable in the
hands of the minor child.
Therefore, the income of ` 20,000
derived by minor son through a
business activity involving the
application of his skill and talent shall
not be clubbed in the hands of the
parent. Such income will be taxable in
the hands of the minor son.
Total Income 2,72,182 1,81,818 20,000
14. Computation of total income of Mr. Kamal for the A.Y. 2023-24
I Income from salaries
Basic Salary [` 3,50,000 x 12] 42,00,000
Client entertainment reimbursement [` 2,40,000 - 40,000
` 2,00,000]
Leave Travel Allowance [` 4,00,000 - ` 1,00,000] 3,00,000
[Note 1]

Performance Bonus (20% of Basic Salary) 8,40,000

Interest on Housing loan 68,750
[` 15,00,000 x (8% - 2.5%) x 10/12]
Sweat Equity allotted by the employer 3,00,000
(` 1,500 - ` 1,300) x 1,500
Gross Salary 57,48,750
Less: Standard deduction 50,000
Taxable Salary 56,98,750
II Income from house property
Gross Annual Value under section 23(1) [Rent 3,15,000
received for 9 months has been taken as the
Gross Annual Value in the absence of other
information relating to Municipal Value, Fair Rent
and Standard Rent] [` 35,000 x 9]
Less: Municipal taxes paid [Paid by Mr. Kamal] 12,000
Net Annual Value (NAV) 3,03,000
Less: Deduction u/s 24
(a) @30% of NAV 90,900
(b) Interest on borrowed capital [15,00,000 x 2.5% 31,250
x 10/12]
1,80,850
III Capital gains
STCG on sale of sweat equity shares [1,500 X 9,00,000
(` 2,100 - ` 1,500)]
IV Income from other sources
Dividend Income 5,00,000
Interest on RBI bonds [` 30,00,000 X 7% X 4/12) 70,000 5,70,000
Gross total Income 73,49,600
Less: Deduction under Chapter VI-A
Deduction u/s 80C for LIC premium paid for self 35,000
and wife [Note 2]
Deduction u/s 80 D [Note 3] Nil 35,000
Total Income 73,14,600

Computation of tax liability of Mr. Kamal for the A.Y. 2023-24

Tax on STCG u/s 111A @15% on ` 9,00,000 1,35,000
Tax on other income of ` 64,14,600
Upto ` 2,50,000 Nil
` 2,50,001 - ` 5,00,000 @5% 12,500
` 5,00,001 - ` 10,00,000 @20% 1,00,000
` 10,00,001 - ` 64,14,600 @30% 16,24,380 17,36,880
18,71,880
Add: Surcharge@10% since total income exceeds 1,87,188
` 50 lakhs but does not exceed ` 1 crore
20,59,068
Add: Health and Education cess @ 4% 82,363
Tax Liability 21,41,431
Tax Liability (Rounded off) 21,41,430
Notes:
(1) Hotel Bookings and lodgings are not covered under leave travel facility. Hence, only
` 1,00,000 of cost of tickets would be exempt under section 10(5).
(2) Premium for life insurance policy of father is not allowed as deduction under
section 80C.
(3) Medical insurance premium on the health of brother is not allowable since brother
does not come within the meaning of family u/s 80D. In case of son, premium is
paid in cash, hence, the same is not allowed.
15.
Transaction Is quoting of PAN mandatory in related
documents?
1. Opening a current account with Yes, quoting of PAN is mandatory on opening
HDFC Bank of a current account by a person with bank.
2. Sale of shares of ABC (P) Ltd. Yes, since the amount for sale of unlisted
for ` 1,50,000 shares exceeds ` 1,00,000
3. Purchase of two wheeler motor Since the purchase is of two wheeler motor
vehicle of ` 1 lakh vehicle, quoting of PAN is not mandatory
4. Purchase of a professional Yes, since the amount paid exceeds
laptop of ` 3 lakhs ` 2,00,000

PAPER 4B - INDIRECT TAXES
QUESTIONS
(1) All questions should be answered on the basis of the position of GST law as
amended up to 31.10.2022.
(2) The GST rates for goods and services mentioned in various questions are
hypothetical and may not necessarily be the actual rates leviable on those goods
and services. Further, GST compensation cess should be ignored in all the
questions, wherever applicable.
Manavtaa Trust is a charitable trust registered under section 12AB of the Income-tax Act, 1961.
The trust is well known for its educational, charitable and religious activities. The trust became
liable to registration under GST in the current financial year since it exceeded the threshold limit
for registration and thus, got itself registered in the State of Gujarat in the month of May.
In the month of June, a multinational company, Dhruvtara Ltd., gifted 500 laptops worth ` 50
lakh to the trust free of cost for the charitable purposes, without any intention of seeking any
business promotion from the same. Manavtaa Trust distributed these laptops for free in the
same month to the needy students for facilitating them in their higher studies.
Manavtaa Trust owns a higher secondary school – Manavtaa Higher Secondary School - in
Gujarat. In the month of July, the trust availed security personnel services from ‘Perfect
Security Solutions’, Gujarat, a proprietorship concern, for security of the school premises for a
consideration of ` 2,00,000. It also received legal consultancy services from ‘Maya & Co.’ a
firm of advocates for the issues relating to the said school for ` 1,20,000, in the same month.
Manavtaa Trust furnished the following information regarding the expenses incurred by it in
the month of August; all transactions being inter-State:
(i) Services received and used for supplying taxable outward supplies – ` 3,50,000.
(ii) Catering services received for students of Manavtaa Higher Secondary School
– ` 2,00,000.
(iii) Buses purchased with seating capacity of 25 persons including driver – ` 10,50,000
(Buses were delivered in the first week of September).
Manavtaa Trust provided the following information in respect of the services provided by it
during the month of August:
(i) It runs an old age home for senior citizens. Nominal monthly charges of ` 15,000 for
boarding, lodging and maintenance are charged from each member. Total number of
members is 20.

(ii) It rents out a community hall situated within the precincts of a temple managed by it on
15th August for a religious function in first half for `5,000 and for an art exhibition in
second half for ` 6,000.
(iii) It rents out the rooms in the precincts of said temple to the devotees for a rent of ` 950
per room per day. Total rent collected in August amounts to ` 35,000.
All the figures given above are exclusive of taxes wherever applicable. Aggregate turnover of
Manavtaa Trust for the preceding financial year was ` 15 lakh. All the conditions necessary
for availment of ITC are fulfilled subject to the information given. Manavtaa Trust intends to
avail exemption from GST wherever applicable.
Based on the information given above, choose the most appropriate answer to the following
questions-
1. Which of the following activities of Manavtaa Trust does not amount to supply under the
GST law?
(a) Free laptops distributed to the needy students
(b) Boarding, lodging and maintenance of the senior citizens by the old age home run
by the trust
(c) Renting of community hall situated within the precincts of the temple managed by
the trust
(d) Renting of rooms in the precincts of the temple managed by the trust
2. Compute the value of inward supplies on which tax is payable by Manavtaa Trust under
reverse charge, for the month of July.
(a) ` 2,00,000
(b) ` 3,20,000
(c) ` 1,20,000
(d) Nil
3. Compute the value of exempt supply made by Manavtaa Trust for the month of August.
(a) ` 3,00,000
(b) Nil
(c) ` 3,35,000
(d) ` 35,000
4. Compute the value of taxable supply made by Manavtaa Trust for the month of August.
(a) ` 3,00,000
(b) ` 11,000

(c) Nil
(d) ` 35,000
5. Determine the amount of ITC that can be credited to the Electronic Credit Ledger of
Manavtaa Trust, in the month of August assuming rate of GST to be 18%.
(a) ` 36,000
(b) ` 63,000
(c) ` 1,89,000
(d) ` 2,88,000
6. Mr. Prithviraj, registered under GST, is engaged in supplying services (as discussed in
the table below) in Maharashtra. He has furnished the following information with respect to
the services provided/ received by him, during the month of February:
S. Particulars Amount
No. (`)
(i) Carnatic music performance given by Mr. Prithviraj to promote a 1,40,000
brand of readymade garments (Intra-State transaction)
(ii) Outdoor catering services availed for a marketing event organised 50,000
for his prospective customers (Intra-State transaction)
(iii) Services of transportation of students provided to Subhaskar 1,00,000
College providing education as part of a curriculum for obtaining a
recognised qualification (Intra-State transaction)
(iv) Legal services availed for official purpose from an advocate 1,75,000
located in Gujarat (Inter-State transaction)
(v) Services provided to Wealth Bank as a business correspondent 2,00,000
with respect to accounts in a branch of the bank located in urban
area (Intra-State transaction)
(vi) Recovery agent’s services provided to a car dealer (Intra-State 15,000
transaction)
(vii) General insurance taken on a car (seating capacity 5) used for 40,000
official purposes (Intra-State transaction)
Note:
(i) Rates of CGST, SGST and IGST are 9%, 9% and 18% respectively.
(ii) All inward and outward supplies are exclusive of taxes, wherever applicable.
(iii) All the conditions necessary for availing the ITC have been fulfilled.

(iv) The turnover of Mr. Prithviraj was ` 2.5 crore in the previous financial year.
Compute the net GST payable in cash, by Mr. Prithviraj for the month of February.
7. Determine whether GST is payable in each of the following independent transactions:
(i) Dhruv Developers sold a plot of land in Greater Noida after levelling, laying down of
drainage lines, water lines and electricity lines.
(ii) Deccan Shipping Pvt. Ltd., registered under GST in Andaman and Nicobar islands,
provided the passenger transportation services to the local residents in the ferries
owned by it from Neil Island to Havelock Island.
8. State the person liable to pay GST in the following independent services provided:
(i) Siddhi Builders, registered in Haryana, rented out 20 residential units owned by it in
Sanskriti Society to Rudra Technologies, an IT based firm registered in the State of
Haryana, for accommodation of its employees.
(ii) M/s. Purohit Consultants, a partnership firm registered in Delhi as a regular tax
payer, paid sponsorship fees of ` 70,000 at a seminar organized by a private NGO
(a partnership firm) in Delhi.
9. Briefly enumerate the contraventions which make a registered person liable to
cancellation of registration, as prescribed under rule 21 of the CGST Rules, 2017.
10. State the order in which every taxable person discharges his tax and other dues under
GST law, as provided under section 49 of the CGST Act, 2017.
SUGGESTED ANSWERS
Question Answer
No.
1 (a) Free laptops distributed to the needy students
2 (d) Nil
3 (c) ` 3,35,000
4 (b) ` 11,000
5 (b) ` 63,000

6. Computation of GST payable

Particulars Value of CGST SGST IGST
supply @ 9% (`) @ 9% @ 18%
(`) (`) (`)
GST payable under forward charge
Carnatic music performance given to 1,40,000 12,600 12,600 Nil
promote a brand of readymade
garments
[Carnatic music performance by
Mr. Prithviraj is not exempt from GST
even though the consideration charged
does not exceed ` 1,50,000 since said
performance has been made by him as
a brand ambassador.]
Services of transportation of students 1,00,000 9,000 9,000 Nil
provided to Subhaskar College
[Services of transportation of students
provided to an educational institution
other than an institution providing pre-
school education or education up to
higher secondary school, are not
exempt.]
Services provided to Wealth Bank as a 2,00,000 18,000 18,000 Nil
business correspondent
[Services provided by a business
correspondent to a banking company
are not exempt when such services are
provided with respect to accounts in its
urban area branch.]
Services provided as a recovery agent 15,000 1,350 1,350 Nil
[Tax is payable under forward charge
since recovery agent’s services are
being provided to a person other than
banking company/financial institution/
non-banking financial company.]
Total GST payable under forward 40,950 40,950 Nil
charge (A)
GST payable under reverse charge
Legal services availed from an advocate 1,75,000 Nil Nil 31,500

[Legal services received by a business

entity with aggregate turnover in the
preceding financial year exceeding
threshold limit for registration (` 20 lakh)
are not exempt and tax on the same is
payable under reverse charge.]
Total GST payable under reverse Nil Nil 31,500
charge (B)
Total GST payable [(A)+(B)] 40,950 40,950 31,500
Computation of total ITC available
Particulars Value of CGST SGST IGST
supply @ 9% @ 9% @ 18%
(`) (`) (`) (`)
Outdoor catering services availed 50,000 Nil Nil Nil
[ITC on outdoor catering services is
blocked except when such services are (i)
used by the taxpayer who is in the same
line of business or (ii) provided by the
employer to its employees under a
statutory obligation.]
Legal services availed 1,75,000 Nil Nil 31,500
[ITC is available as said services are used
in course or furtherance of business.]
General insurance taken on a car (seating 40,000 Nil Nil Nil
capacity 5) used for official purposes
[ITC on motor vehicles for transportation
of persons with seating capacity ≤ 13
persons (including the driver) is blocked
except when the same are used for (i)
making further taxable supply of such
motor vehicles (ii) making taxable supply
of transportation of passengers (iii)
making taxable supply of imparting
training on driving such motor vehicles.
Further, ITC is not allowed on services of
general insurance relating to such
ineligible motor vehicles.]
Total ITC available Nil Nil 31,500

Computation of net GST payable in cash

Particulars CGST SGST IGST
@ 9% @ 9% @ 18%
(`) (`) (`)
GST payable under forward charge 40,950 40,950 Nil
Less: ITC of IGST1 (15,750) (15,750) -
IGST IGST
25,200 25,200 Nil
Add: GST payable under reverse charge in cash Nil Nil 31,500
[Tax payable under reverse charge, being not an
output tax, cannot be set off against ITC and thus,
will have to be paid in cash.]
Net GST payable in cash 25,200 25,200 31,500
Note: CGST and SGST is payable on the intra-State transaction and IGST is payable on
the inter-State transactions.
7. (i) GST is not payable by Dhruv Developers on sale of plot of land. Circular No.
177/09/2022 GST dated 03.08.2022 clarifies applicability of GST on sale of land
after levelling, laying down of drainage lines etc. As per Para 5 of Schedule III of
the CGST Act, 2017, ‘sale of land’ is neither a supply of goods nor a supply of
services. Therefore, the sale of land does not attract GST. Land may be sold either
as it is or after some development such as levelling, laying down of drainage lines,
water lines, electricity lines, etc. It is clarified that sale of such developed land is
also sale of land and is covered by Para 5 of Schedule III and accordingly, does not
attract GST.
(ii) Transportation of passenger services provided by the private operator - Deccan
Shipping Pvt. Ltd. - are exempt from GST. Circular No. 177/09/2022 GST dated
03.08.2022 clarifies the applicability of GST on private ferry tickets. Transportation
of passengers by public transport, other than predominantly for tourism purpose, in
a vessel between places located in India is exempt from GST vide Notification No.
12/2017 CT (R) dated 28.06.2017. It is clarified that this exemption would apply to
tickets purchased for transportation from one point to another irrespective of
whether the ferry is owned or operated by a private sector enterprise or by a
PSU/Government.
1ITC of IGST can be utilised towards payment of CGST and SGST in any proportion and in any order.
Therefore, there can be multiple ways of setting off of IGST credit against CGST and SGST liability and
accordingly, in the given case, amount of net GST payable in cash under the heads of CGST and
SGST will vary. However, total amount of net GST payable in cash will be ` 81,900 in each case.

It is further clarified that, the expression ‘public transport’ used in the said
exemption notification only means that the transport should be open to public. It can
be privately or publicly owned. Only exclusion is on transportation wh ich is
predominantly for tourism, such as services which may combine with transportation,
sightseeing, food and beverages, music, accommodation such as in shikara, cruise
etc.
8. (i) Services provided by way of renting of residential dwelling for use as residence is
exempt from GST. However, where the residential dwelling is rented to a registered
person, said exemption is not available. Further, tax on service provided by way of
renting of residential dwelling to a registered person is payable by the recipient
under reverse charge.
Therefore, in the given case, Rudra Technologies is liable to pay GST on the
residential dwellings taken on rent by it from Siddhi Builders, under revers e charge
mechanism.
(ii) In case of services provided by any person by way of sponsorship to any body
corporate or partnership firm, GST is liable to be paid under reverse charge by such
body corporate or partnership firm located in the taxable territory.
Since in the given case, sponsorship services are being provided by the private
NGO to a partnership firm – M/s. Purohit Consultants, GST is payable by Purohit
Consultants on said services under reverse charge.
9. Rule 21 of the CGST Rules, 2017 prescribes the contraventions which make a registered
person liable to cancellation of registration. As per said rule, the registration granted to a
person is liable to be cancelled, if the said person -
(a) does not conduct any business from the declared place of business.
(b) issues invoice/bill without supply of goods/services in violation of the provisions of
this Act, or the rules made thereunder.
(c) violates the provisions of section 171 of the CGST Act. Section 171 contains
provisions relating to anti-profeetering measure.
(d) violates the provision of rule 10A of the CGST Rules relating to furnishing of bank
account details.
(e) avails input tax credit in violation of the provisions of section 16 of th e CGST Act or
the rules made thereunder.
(f) furnishes the details of outward supplies in Form GSTR-1 under section 37 of the
CGST Act for one or more tax periods which is in excess of the outward supplies
declared by him in his valid return under section 39 for the said tax periods.

(h) being a registered person required to file return under section 39(1) of the CGST
Act for each month or part thereof (i.e. monthly return filer), has not furnished
returns for a continuous period of 6 months.
(i) being a registered person required to file return under proviso to section 39(1) of the
CGST Act for each quarter or part thereof (i.e. quarterly return filer), has not
furnished returns for a continuous period of 2 tax periods.
10. Section 49 of the CGST Act, 2017 stipulates that every taxable person shall discharge
his tax and other dues under the GST law in the following order, namely:–
(a) self-assessed tax, and other dues related to returns of previous tax periods;
(b) self-assessed tax, and other dues related to the return of the current tax period;
(c) any other amount payable under this Act or the rules made thereunder including the
demand determined under section 73 or section 74.

Applicability of Standards/Guidance Notes/Legislative Amendments etc. for
May, 2023 Examination
Intermediate Level
Paper 1: Accounting
List of Applicable Accounting Standards
AS 1 : Disclosure of Accounting Policies

AS 2 : Valuation of Inventories
AS 3 : Cash Flow Statements
AS 10 : Property, Plant and Equipment

AS 11 : The Effects of Changes in Foreign Exchange Rates
AS 12 : Accounting for Government Grants
AS 13 : Accounting for Investments
AS 16 : Borrowing Costs
Applicability of the Companies Act, 2013 and other Legislative Amendments for May, 2023
Examination
The relevant notified Sections of the Companies Act, 2013 and legislative amendments including
relevant Notifications / Circulars / Rules / Guidelines issued by Regulating Authorities up to
31st October, 2022 will be applicable for May, 2023 Examination.
Non-Applicability of Ind AS
The Ministry of Corporate Affairs has notified Companies (Indian Accounting Standards) Rules,
2015 on 16th February, 2015, for compliance by certain class of companies. These Ind AS do
not form part of the syllabus and hence are not applicable.
Paper 2: Corporate and Other Laws
The provisions of the Companies Act, 2013 along with significant Rules/ Notifications/ Circulars/
Clarification/ Orders issued by the Ministry of Corporate Affairs and the laws covered under the
Other Laws, as amended by concerned authority, including significant notifications and circulars
issued up to 31 st October 2022 are applicable for May 2023 examination.

REVISION TEST PAPER 109
Inclusions /Exclusions from the syllabus

(1) (2) (3)
Chapters/Topics Inclusions Exclusions
of the syllabus (Provisions which are (Provisions which are excluded
included from the from the corresponding chapter/
corresponding chapter/topic topic of the syllabus)
of the syllabus)
Part I: Company Law
The Companies The entire content included in (i) Sections 24, 30, 33, 38 & 41
Act, 2013 (Sections the September 2021 edition of [from chapter 3- Prospectus
1 to 148) the Study Material is applicable. and Allotment of Securities]
Also, the Legislative (ii) Sections 44, 45, 60, 65 & 72
amendments hosted on the [from chapter 4- Share capital
website for May 2023 and Debentures]
examinations, shall also be (iii) Section 75 [from chapter 5-
relevant for the said Acceptance of deposits by
examinations. companies]
(iv) Section 81 & 85 [from chapter
6- Registration of Charges]
Part II: Other Laws
1. The Indian The entire content included in -
Contract Act, the September 2021 edition of
1872 (Specific the Study Material is applicable.
contracts from
section 123
onwards)
2. The The entire content included in -
Negotiable the September 2021 edition of
Instruments the Study Material is applicable.
Act, 1881
3. The General The entire content included in -
Clauses Act, the September 2021 edition of
1897 the Study Material is applicable.
4. Interpretation The content of the chapter -
of Statutes covering Principles of
Interpretation in the September
2021 edition of the study
material shall form the base for
May 2023 examination.

Note: September 2021 edition of the Study Material is relevant for May 2023 examinations.
The amendments made after the issuance of this Study Material for the period of 1 st May 2021
to 31st October 2022– are also relevant for May 2023 examinations. The Relevant Legislative
amendments will be available on the BoS Knowledge Portal.
Paper 4: Taxation
Section A: Income-tax Law
The provisions of income-tax law, as amended by the Finance Act, 2022, including significant
circulars, notifications, press releases issued and legislative amendments made upto 31st
October, 2022, are applicable for May, 2023 examination. The relevant assessment year for
income-tax is A.Y. 2023-24.
Note – The May, 2022 edition of the Study Material for Intermediate (New) Paper 4A, based
on the provisions of income-tax law, as amended by the Finance Act, 2022, is relevant for
May, 2023 examination. The said Study Material is available at
https://www.icai.org/post.html?post_id=18481. The Study Material has to be read along with
the Statutory Update for May, 2023 examination, webhosted at the BoS Knowledge Portal.
The initial pages of the Study Material available at https://resource.cdn.icai.org/71132bos57143-
m-ip1.pdf contains the Study Guidelines which specifies the list of topic -wise exclusions from
the scope of syllabus.
Section B: Indirect Taxes
Applicability of the GST law : The provisions of the CGST Act, 2017 and the IGST Act, 2017
as amended by the Finance Act, 2022, including significant notifications and circulars issued
and other legislative amendments made, up to 31 st October, 2022, are applicable for May 2023
examination.
The Study Guidelines given below specify the exclusions from the syllabus for May 2023
examination.
List of topic-wise exclusions from the syllabus
(1) (2) (3)

S. No. in Topics of the Exclusions
the syllabus (Provisions which are excluded from the corresponding
syllabus topic of the syllabus)
2(ii)(c) Charge of tax CGST Act, 2017
including reverse (i) Rate of tax prescribed for supply of goods*
charge (ii) Rate of tax prescribed for supply of services*
(iii) Categories of supply of goods, tax on which is payable
on reverse charge basis under section 9(3)

REVISION TEST PAPER 111
IGST Act, 2017

(iv) Rate of tax prescribed for supply of goods
(v) Rate of tax prescribed for supply of services
(vi) Categories of supply of goods, tax on which is payable
on reverse charge basis under section 5(3)
(vii) Determination of nature of supply – Inter-State supply;
Intra-State supply; Supplies in territorial waters
(viii) Special provision for payment of tax by a supplier of
online information and database access or retrieval
[OIDAR] services
2(ii)(d) Exemption from CGST Act, 2017 & IGST Act, 2017
tax Exemptions for supply of goods
2(iii) Basic concepts of CGST Act, 2017 & CGST Rules, 2017
time and value of (i) Provisions relating to change in rate of tax in respect
supply of supply of goods or services
(ii) Chapter IV: Determination of Value of Supply [Rules
27-35] of CGST Rules, 2017
2(iv) Input tax credit CGST Act, 2017 read with CGST Rules, 2017
(i) Manner of determination of input tax credit in respect
of inputs or input services and reversal thereof [Rule
42]
(ii) Manner of determination of input tax credit in respect
of capital goods and reversal thereof in certain cases
[Rule 43]
(iii) Input tax credit provisions in respect of inputs and
capital goods sent for job work
(iv) Input tax credit provisions relating to distribution of
credit by Input Service Distributor [ISD]
(v) Manner of recovery of credit distributed in excess
(vi) Manner of reversal of credit of additional duty of
customs in respect of Gold dore bar
2(ix) Payment of tax CGST Act, 2017
(i) Tax deduction at source
(ii) Collection of tax at source
*Rates specified for computing the tax payable under composition levy are included in
the syllabus.

Notes:
(1) The syllabus includes select provisions of the CGST Act, 2017 and IGST Act, 2017 and
not the entire CGST Act, 2017 and the IGST Act, 2017. The provisions covered in any
topic(s) of the syllabus which are related to or correspond to the topics not covered in the
syllabus shall also be excluded.
(2) In the above table, in respect of the topics of the syllabus specified in column (2) the related
exclusion is given in column (3). Where an exclusion has been so specified in any topic
of the syllabus, the provisions corresponding to such exclusions, covered in other topic(s)
forming part of the syllabus, shall also be excluded. For example, since provisions relating
to ISD and tax collection at source are excluded from the topics “Input tax credit” and
“Payment of tax including reverse charge” respectively, the provisions relating to (i)
registration of ISD and person required to collect tax at source and (ii) filing of returns by
an ISD and submission of TCS statement by an electronic commerce operator required to
collect tax at source are also excluded from the topics “Registration” and “Returns”
respectively.
(3) August 2021 edition of the Study Material read with Supplementary Study Paper for May
2023 examination are relevant for said examination. The amendments in the GST law
made after the issuance of the Study Material - to the extent covered in the Supplementary
Study Paper for May 2023 examination alone shall be relevant for the said examination.
(4) The entire content included in the August 2021 edition of the Study Material (except the
exclusions mentioned herein) and the Supplementary Study Paper for May 2023
examination shall be relevant for the said examination.

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INTERMEDIATE COURSE

REVISION TEST PAPERS

© The Institute of Chartered Accountants of India

Edition : March, 2023

Department/Committee : Board of Studies

Published by : The Publication Department on behalf of The Institute of Chartered

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

3. Cash Flow Statement

PAPER – 2: CORPORATE AND OTHER LAWS

© The Institute of Chartered Accountants of India

PAPER – 3: COST AND MANAGEMENT ACCOUNTING

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

B. Not applicable for May, 2023 examination

PART – II: QUESTIONS AND ANSWERS

Preparation of Balance Sheet of a Company

Call in Arrears 1,250

© The Institute of Chartered Accountants of India

Provision for Taxation 1,60,000

© The Institute of Chartered Accountants of India

Capital reserves (` 2,50,000 is revaluation reserve) 4,38,750

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

(b) Director's Fees is ` 24,000 p.a.

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

Insurance Claim for loss of stock

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

Accounts from Incomplete Records

© The Institute of Chartered Accountants of India

(f) Difference in cash book, if any, is to be treated as further drawing or introduction of

© The Institute of Chartered Accountants of India

Spare parts and tools consumed in installation 5,000

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

1. (a) Hari Ltd.

© The Institute of Chartered Accountants of India

12,500 Equity Shares of ` 100 each

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

Add: Dividend 10,000

© The Institute of Chartered Accountants of India

Less: W.D.V. at 31.12.2020 1,80,000

© The Institute of Chartered Accountants of India

5. Journal Entries in the Books of Satish Ltd

Minimum number of shares = 1,00,000 = 11,111.11 shares

© The Institute of Chartered Accountants of India

(b) In the books of Make Ltd.

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

9. In the Books of Remo Ltd.

© The Institute of Chartered Accountants of India

13. Cost of 100 Govt. Securities sold on 01.03.2022 = ` 10,000 x 73,600/80,000 =

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India