CA - FOUNDATION

PRINCIPLES AND PRACTICE

ACCOUNTING
SERIES – 2
Nov 2023
VOL – 23, 24 & 25
Date : 17.10.2023

Vidya Sagar Institute

K-50, Bhawna Tower, Income Tax Colony, Tonk Road,
Near Durga Pura, Bus Stand, Jaipur - 302018
Mobile :- 93514-68666 Ph. :- 7821821250, 7821821251, 7821821252,
7821821253, 7821821254. web : www.vsijaipur.com
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 VIDYA SAGAR
CAREER INSTITUTE LIMITED

CA FOUNDATION
PRINCIPLES AND PRACTICE OF ACCOUNTING
SERIES - 2

Time : 3 Hours Maximum Marks: 50

(100% Course) Date : 17.10.2023
Vol – 23, 24 & 25 Attempt : Nov. - 2023
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Questions 1 is compulsory, attempt any 4 from the remaining
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1(a) State with reasons whether the following statements are True or False: 2x6 = 12
i. Sale of Return day book and Sale or Return Ledger Both are financial book and part of
regular books.

ii. A cheque for ` 25,000 that was issued and was also presented for payment in same
month but erroneously recorded on debit side of the cash book would cause a
difference of ` 50,000 from the balance in pass book.

iii. Trial balance agrees in case of compensating errors.

iv. In the balance sheet of X Limited, preliminary expenses amounting to ` 5 lakhs and
securities premium account of ` 35 lakhs are appearing; The accountant can use the
balance in securities premium account to write off preliminary expenses.

v. “Salary paid in advance” is not an expense because it neither reduces assets nor
increases liabilities.

vi Date of transaction or the due date whichever is earlier is considered for computation
of the number of days.

(b) The following are some of the transactions of M/s. Kamal & Sons for the year ended 4
31st March, 2020. You are required to make out their Sales Book.
(i) Sold to M/s. Ashok & Mukesh on Credit :

40 Shirts @ ` 900 per shirt

30 trousers @ ` 1,000 per trouser
Less: Trade discount @ 10%
(ii) Sold furniture to M/s. XYZ & Co. on credit ` 8,000
(iii) Sold 15 shirts to Aman @ ` 750 each for cash.

(c) Write short notes on Trade bill vs. Accommodation bill. 4

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2(a) M/s. JP Wires Co. purchased a second-hand machine on 1st January, 2017 for 10
Rs. 3,20,000. Overhauling and erection charges amounted to Rs. 80,000.
Another machine was purchased for Rs. 1,60,000 on 1st July, 2017.
On 1st July, 2019, the machine installed on 1st January, 2017 was sold for Rs.
1,60,000. Another machine amounted to Rs. 60,000 was purchased and was installed
on 30th September, 2019.
Under the existing practice the company provides depreciation @ 20% p.a. on original
cost. However, from the year 2020 it decided to adopt WDV method and to charge
depreciation @ 15% p.a. You are required to prepare Machinery account for the years
2017 to 2020.

(b) On 31st March 2019, the Bank Pass Book of Namrata showed a balance of ` 1,50,000 5
to her credit while balance as per cash book was ` 1,12,050. On scrutiny of the two
books, she ascertained the following causes of difference:
(i) She has issued cheques amounting to ` 80,000 out of which only ` 32,000 were
presented for payment.
(ii) She received a cheque of ` 5,000 which she recorded in her cash book but forgot
to deposit in the bank.
(iii) A cheque of ` 22,000 deposited by her has not been cleared yet.
(iv) Mr. Gupta deposited an amount of ` 15,700 in her bank which has not been
recorded by her in Cash Book yet.
(v) Bank has credited an interest of ` 1,500 while charging ` 250 as bank charges.
Prepare a bank reconciliation statement.

(c) A Products Limited of Kolkata has given the following particulars regarding tea 5
sent on consignment to C Stores of Mumbai:
Cost Selling Qty
5 Kg. Tin price
` 100 each `price
150 each consigned
1,000 Tins
10 Kg. Tin ` 180 each ` 250 each 1,000 Tins
(i) The consignment was booked on freight "To Pay" basis. The freight was
charged @ 5% of selling value.
(ii) C Stores sold 500, 5 kg Tins and 800, 10 kg Tins. It paid insurance of
`10,000 and storage charges of ` 20,000.
(iii) C Stores is entitled to a fixed commission @ 10% on Sales.
(iv) During transit 50 quantity of 5 kg Tin and 20 quantity of 10 kg Tin got
damaged and the transporter paid ` 5,000 as damage charge.
Prepare the Consignment Account in the books of A Products Limited.

3(a) The following mistakes were located in the books of a concern after its books were 10
closed and a Suspense Account was opened in order to get the Trial Balance agreed:
(i) Sales Day Book was overcast by ` 7,000.
(ii) Legal Expenses ` 7,670 paid to Mr. Bansal was debited to her personal account.
(iii) General expenses ` 4,900 was posted in the General Ledger as ` 9,400.
(iv) A Bill Receivable for ` 1,550 was passed through Bills Payable Book. The Bill
was given by Jai.
(v) Cash received from Deepak was debited to Vivek ` 7,500.
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 (vi) A sale of ` 25,000 to Reema was wrongly debited to the Account of Shikha.
(vii) While carrying forward the total of one page of the Purchases Book to the next,
the amount of ` 21,690 was written as ` 21,960.
(viii) ` 7,000 due by Mr. Surya was omitted to be taken to trial balance.
Find out the nature and amount of the Suspense Account and Pass entries (including
narration) for the rectification of the above errors in the subsequent year’s books.

(b) A firm sends good on "Sale or Return basis. Customers have the choice of 5
returning the goods within a month. During May 2018, the following are the details
of goods sent:
Date (May) 2 8 12 18 20 27
Customers P B Q D E R
Value (`) 17,000 22,000 25,000 5,500 2,000 28,000
Within the stipulated time, P and Q returned the goods and B, D and E signified that
they have accepted the goods.
Show in the books of the firm, the Sale or Return Account and Customer Q for
Sale or Return Account as on 15th June 2019.

(c) Classify the following errors under the three categories – Errors of Omission, Errors 5
of Commission and Errors of Principle.
(i) Sale of furniture credited to Sales Account.
(ii) Purchase worth Rs. 500 from M not recorded in subsidiary books.
(iii) Credit sale wrongly passed through the Purchase Book.
(iv) Machinery sold on credit to Mohan recorded in Journal Proper but omitted to
be posted.
(v) Goods worth Rs. 5000 purchased on credit from Ram recorded in the
Purchase Book as Rs. 500.

OR
(c) On 1st January, 2020, Ankur account in Varun ledger showed a debit balance of 5
`2,500. The following transactions took place between Varun and Ankur during the
quarter ended 31st March, 2020:
2020 `
Jan. 11 Varun sold goods to Ankur 3,000
Jan. 24 Varun received a promissory note from Ankur 2,500
due after 3 months
Feb. 01 Ankur sold goods to Varun 5,000
Feb. 04 Varun sold goods to Ankur 4,100
Feb. 07 Ankur returned goods to Varun 500
March 01 Ankur sold goods to Varun 2,800
March 18 Varun sold goods to Ankur 4,600
March 23 Ankur sold goods to Varun 2,000

Accounts were settled on 31st March, 2020 by means of a cheque. Prepare an Account
Current to be submitted by Varun to Ankur as on 31st March, 2020, taking interest
into account @ 10% per annum. Calculate interest to the nearest multiple of a rupee.

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4(a) Isha, Misha, and Disha were partners in a firm sharing profits in the proportions of 15
1/2, 1/3, and 1/6 respectively. The Balance Sheet of the firm on 31st March 2010 was
as follows:
Liabilities Rs. Assets Rs.
Trade Creditors 15,000 Cash at Bank 5,000
Employees’ Provident Fund 6,000 Debtors 40,000
Reserve Fund 18,000 Less: Provision 2,000 38,000
Isha’s Capital 65,000 Stock 30,000
Misha’s Capital 30,000 Investments 15,000
Disha’s Capital 20,000 Patents 10,000
Plant & Machinery 50,000
Advertisement Expenditure 6,000

1,54,000 1,54,000
The firm had a Joint Life Policy for Rs. 40,000. The surrender value of the policy was
Rs. 4,800 as on 31st March 2010.
Disha retired on the above date on the following terms:
(a) Goodwill of the firm was valued at Rs. 30,000 but it was not to remain in the
books of the new firm.
(b) Value of patents was to be reduced by 20% and that of Plant and Machinery
to 90%.
(c) Provision for doubtful debts was to be raised to 6%.
(d) Disha took over the investments at a value of Rs. 17,600.
(e) Liability on account of Provident Fund was only Rs. 2,400.
(f) Liability for workmen compensation to the extent of Rs. 375 is to be created.
(g) Trade Creditors to the extent of 2-1/2% are not likely to claim their dues.
(h) Amount due to Disha is to be settled on the following basis:
50% on retirement, out of the remaining, 50% within one year and the balance
by a Bill of Exchange (without interest) at 3 months.
Show the necessary journal entries for the treatment of Goodwill and Joint Life Policy,
prepare Revaluation account, Capital accounts of the partners and the Balance Sheet of
Isha and Misha after Disha’s retirement

(b) M/s Sam, Profit and loss account showed a net profit of ` 24,00,000, after considering 5
the closing stock of ` 22,50,000 on 31st March, 2022. Subsequently the following
information was obtained from scrutiny of the books:
(i) Purchases for the year included ` 90,000 paid for new electric fittings for the
shop.
(ii) M/s Sam gave away goods valued at ` 2,40,000 as free samples for which no
entry was made in the books of accounts.
(iii) Invoices for goods amounting to ` 15,00,000 have been entered on 27th March,
2022, but the goods were not included in stock.
(iv) In March, 2022 goods of ` 12,00,000 sold and delivered were taken in the sales
for April, 2022.
(v) Goods costing ` 4,50,000 were sent on sale or return in March, 2022 at a margin
of profit of 33-1/3% on cost. Though approval was given in April, 2022 these
were taken as sales for March, 2022.
You are required to determine the adjusted net profit for the year ended on 31.3.2022
and calculate the value of stock on 31st March, 2022.

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5 The following are the balances as at 31st March, 2021 extracted from the books of 20
Mr. Satender.
` `
Plant and Machinery 78,200 Bad debts recovered 1800
Furniture and Fittings 41,000 Salaries 90,200
Bank Overdraft 3,20,000 Salaries payable 9,800
Capital Account 2,60,000 Prepaid rent 1,200
Drawings 32,000 Rent 17,200
Purchases 6,40,000 Carriage inward 4,500
Opening Stock 1,29,000 Carriage outward 5,400
Wages 48,660 Sales 8,61,200
Provision for doubtful debts 12,800 Advertisement Expenses 13,400
Provision for Discount on debtors 5,500 Printing and Stationery 5,000
Sundry Debtors 4,80,000 Cash in hand 5,800
Sundry Creditors 1,90,000 Cash at bank 12,500
Bad debts 4,400 Office Expenses 40,640
Interest paid on loan 12,000
Additional Information:
1. Purchases include sales return of ` 10,300 and sales include purchases
return of ` 6,900.
2. Goods withdrawn by Mr. Satender for own consumption ` 14,000 included
inpurchases.
3. Wages paid in the month of April for installation of plant and machinery
amountingto ` 1,800 were included in wages account.
4. Free samples distributed out of purchases for publicity costing ` 3,300.
5. Create a provision for doubtful debts @ 5% and provision for discount on
debtors@ 2.5%.
6. Depreciation is to be provided on plant and machinery @ 20% p.a. and on
furniture and fittings @ 10% p.a.
7. Bank overdraft is secured against hypothecation of stock. Bank overdraft
outstanding as on 31.3.2020 has been considered as 80% of real value of stock
(deducting 20% as margin) and after adjusting the marginal value 80% of the
same has been allowed to draw as an overdraft.
Prepare a Trading and Profit and Loss Account for the year ended 31st March,
2021, and a Balance Sheet as on that date. Also show the rectification entries.

6(a) PQR Limited issued 2,00,000 equity shares of, 10 each payable as ` 3 per share on 10
application & ` 5 per share (including ` 2 as premium) on allotment and ` 4 per
share on call. All these shares were subscribed. Money due on all shares was fully
received except from Mr. J, holding 5,000 shares who failed to pay ·the allotment and
call money and Mr. K, holding 10,000 shares, who failed to pay the call money. All
these 15,000 shares were forfeited. Out of the forfeited shares, 10,000 shares
(including whole of J's shares) were subsequently re-issued to Mr. L as fully paid up at
a discount of ` 1 per share.
Pass necessary journal entries in the books of PQR Limited. Also prepare Balance
Sheet and notes to accounts of the company.

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(b) Doctor Dinesh after retiring from Govt. service, started private practice on 10
1 st April, 2018 with ` 1,00,000 of his own and ` 1,50,000 borrowed at an
interest of 12% per annum on the security of his life policies. His accounts for
the year were kept on a cash basis and the following is his summarized cash
account:
Receipts ` Payments `
Own capital 1,00,000 Medicines purchased 1,22,500
Loan 1,50,000 Surgical equipment’s 1,25,000
Prescription fees 3,30,000 Motor car 1,60,000
Visiting fees 1,25,000 Motor car expenses 60,000
Fees from lectures 12,000 Wages and salaries 52,500
Pension received 1,50,000 Rent of clinic 30,000
General charges 24,500
Household expenses 90,000
Household Furniture 12,500
Expenses on daughter’s marriage 1,07,500

Interest on loan 18,000

Balance at bank 55,000
Cash in hand 9,500
One-third of the motor car expense may be treated as applicable to the
private use of car and ` 15,000 of salaries are in respect of domestic servants.
The stock of medicines in hand on 31st March, 2019 was valued at ` 47,500.
You are required to prepare his capital account and income and expenditure
account for the year ended 31st March, 2019 and balance sheet as on that
date. Ignore depreciation of fixed assets.

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