MITTAL COMMERCE CLASSES CA FOUNDATION– MOCK TEST

(GCF-14, GCF-15, GCF-16, GCF-17 & GCF-17-A, VCF-3, VDCF-3)

DATE: 16.05.2023 MAXIMUM MARKS: 100 TIMING: 3 Hours

PRINCIPLES & PRACTICE OF ACCOUNTING

Question No. 1 is compulsory.
Candidates are required to answer any four questions from the remaining five questions .

Question 1:
(a) State with reasons weather the following statements are true or false:
(i) Wages paid for installation of machinery is revenue expenditure.
(ii) Interest paid on debenture is a charge against profit.
(iii) The sales book is kept to record both cash and credit sales.
(iv) Discount at the time of retirement of a bill is a gain for the drawee.
(v) In case of consignment the ownership of the goods is transferred to consignee
at the time of receiving the goods.
(vi) In case the due date of a bill falls after the date of closing the account, the
interest from the date of closing to such due date is known as red-ink interest.
(6×2 = 12 Marks)

(b) Differentiate between the following :

(1) Contingent Liability and Provision.
(2) Bills of Exchange and Promissory Note.
(2×2 = 4 Marks)

(c) From the following information, calculate the historical cost of inventories using
adjusted selling price method:
Sales during the year 8,00,000
Cost of purchases 8,00,000
Opening inventory Nil
Closing inventory at selling price 2,00,000
(4 Marks)
(Total 20 Marks)

Question 2:
(a) The Cash Book of Mr. X shows Rs. 4,18,200 as the balance at Bank as on 31st
December, 2017, but you find that it does not agree with the balance as per the
Bank Pass Book. On scrutiny, you find the following discrepancies:
(1) On 15th December, 2017 the payment side of the Cash Book was undercast
by Rs. 5,000.
(2) A cheque for Rs. 65,500 issued on 25th December, 2017 was not taken in the
bank column.
(3) One deposit of Rs. 75,000 was recorded in the Cash Book as if there is no
bank column therein.
(4) On 18th December, 2017 the debit balance of Rs. 7,630 as on the previous
day, was brought forward as credit balance.
(5) Of the total cheques amounting to Rs. 5,757 drawn in the last week of
December, 2017, cheques aggregating Rs. 3,908 were encashed in
December.
(6) Dividends of Rs. 12,500 collected by the Bank and subscription of Rs. 500
paid by it were not recorded in the Cash Book.
(7) One out-going Cheque of Rs. 1,75,000 was recorded twice in the Cash Book.
You are required:

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MITTAL COMMERCE CLASSES CA FOUNDATION– MOCK TEST
(a) To make appropriate adjustment in the cash book, and
(b) A bank reconciliation statement.
(10 Marks)

(b) The Profit and loss account of Krishna showed a net profit of Rs. 12,00,000, after
considering the closing stock of Rs. 7,50,000 on 31st March, 2016. Subsequently the
following information was obtained from scrutiny of the books:
(i) Purchases for the year included Rs. 30,000 paid for new electric fittings for
the shop.
(ii) Krishna gave away goods valued at Rs. 80,000 as free samples for which no
entry was made in the books of accounts.
(iii) Invoices for goods amounting to Rs. 5,00,000 have been entered on 27th
March, 2016, but the goods were not included in stock.
(iv) In March, 2016 goods of Rs. 4,00,000 sold and delivered were taken in the
sales for April, 2016.
(v) Goods costing Rs. 1,50,000 were sent on sale or return in March, 2016 at a
margin of profit of 33-1/3% on cost. Though approval was given in April,
2016 these were taken as sales for March, 2016.
Calculate the value of stock on 31st March, 2016 and the adjusted net profit for the
year ended on that date.
(10 Marks)

Question 3:
(a) A of Agra sent on consignment goods valued Rs. 2,00,000 to B of Mumbai on 1st
March, 2016. He incurred the expenditure of Rs. 24,000 on freight and insurance. A’s
accounting year closes on 31st December. B was entitled to a commission of 5% on
gross sales plus a del-credere commission of 3%. B took delivery of the consignment
by incurring expenses of Rs. 6,000 for goods consigned.
On 31.12.2016, B informed on phone that he had sold all the goods for Rs. 3,00,000
by incurring selling expenses of Rs. 4,000. He further informed that only Rs.
2,96,000 had been realized and rest was considered irrecoverable, and would be
sending the cheque in a day or so for the amount due along with the accounts sale.
On 5.1.2017, A received the cheque for the amount due from B and incurred bank
charges of Rs. 520 for collecting the cheque. The amount was credited by the bank
on 9.1.2017.
Write up the consignment account finding out the profit/loss on the consignment, B’s
account, Provision for expenses account and Bank account in the books of the
consignor, recording the transactions upto the receipt and collection of the cheque.
(10 Marks)

(b) Ajay had the following bills receivables and bills payable against Vijay. Calculate the
average due date, when the payment can be received or made without any loss of
interest.
Date Bills Receivable Tenure Date Bills Payable Tenure
Rs. Rs.
01/06/2016 6,000 3 month 29/05/2016 4,000 2 month
05/06/2016 5,000 3 month 03/06/2016 6,000 3 month
09/06/2016 12,000 1 month 09/06/2016 12,000 1 month
12/06/2016 2,000 2 month
20/06/2016 3,000 3 month
15 August, 2016 was a Public holiday. However, 6 September, 2016 was also
declared as sudden holiday.
(10 Marks)

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MITTAL COMMERCE CLASSES CA FOUNDATION– MOCK TEST
Question 4:
(a) From the following particulars extracted from the books of Sachin, prepare trading
and profit and loss account and balance sheet as at 31st March, 2016 after making
the necessary adjustments:
Sachin's capital account (Cr.) 5,40,500 Interest received 7,250
Stock on 1.4.2015 2,34,000 Cash with Traders Bank 40,000
Ltd.
Sales 14,48,000 Discounts received 14,950
Sales return 43,000 Investments (at 5%) as on 25,000
1.4.2015
Purchases 12,15,500 Furniture as on 1-4-2015 9,000
Purchases return 29,000 Discounts allowed 37,700
Carriage inwards 93,000 General expenses 19,600
Rent 28,500 Audit fees 3,500
Salaries 46,500 Fire insurance premium 3,000
Sundry debtors 1,20,000 Travelling expenses 11,650
Sundry creditors 74,000 Postage and telegrams 4,350
Loan from Dena Bank Ltd. 1,00,000 Cash in hand 1,900
(at 12%)
Interest paid 4,500 Deposits at 10% as on 1-4- 1,50,000
2015 (Dr.))
Printing and stationery 17,000 Drawings 50,000
Advertisement 56,000
Adjustments:
(1) Value of stock as on 31st March, 2016 is Rs. 3,93,000. This includes goods
returned by customers on 31st March, 2016 to the value of Rs. 15,000 for
which no entry has been passed in the books.
(2) Purchases include furniture purchased on 1st January, 2016 for Rs.10,000.
(3) Depreciation should be provided on furniture at 10% per annum.
(4) The loan account from Dena bank in the books of Sachin appears as follows:

31.3.2016 To Balance c/d 1,00,000 1.4.2015 By Balance b/d 50,000

31.3.2016 By Bank 50,000
1,00,000 1,00,000

(5) Sundry debtors include Rs. 20,000 due from Robert and sundry creditors
include Rs. 10,000 due to him.
(6) Interest paid include Rs. 3,000 paid to Dena bank.
(7) Interest received represents Rs. 1,000 from the sundry debtors and the
balance on investments and deposits.
(8) Provide for interest payable to Dena bank and for interest receivable on
investments and deposits.
(9) Make provision for doubtful debts at 5% on the balance under sundry debtors.
No such provision need to be made for the deposits.
(10 Marks)

(b) The partnership agreement of a firm consisting of three partners - A, B and C (who
share profits in proportion of 1/2, 1/4 and 1/4 and whose fixed capitals are Rs.
20,000; Rs. 12,000 and Rs. 8,000 respectively) provides as follows:
(a) That partners be allowed interest at 10 per cent per annum on their fixed
capitals, but no interest be allowed on undrawn profits or charged on
drawings.

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MITTAL COMMERCE CLASSES CA FOUNDATION– MOCK TEST
(b) That upon the death of a partner, the goodwill of the firm be valued at two
years’ purchase of the average net profits (after charging interest on capital)
for the three years to 31st December preceding the death of a partner.
(c) That an insurance policy of Rs. 20,000 each to be taken in individual names of
each partner, the premium is to be charged against the profit of the firm.
(d) Upon the death of a partner, he is to be credited with his share of the profits,
interest on capitals etc. calculated upon 31st December following his death.
(e) That the share of the insurance policy and goodwill be credited to a deceased
partner as on 31st December following his death.
(f) That the partnership books be closed annually on 31st December.
A died on 30th September 2016, the amount standing to the credit of his current
account on 31st December, 2015 was Rs. 900 and from that date to the date of
death he had withdrawn Rs. 6,000 from the business.
An unrecorded liability of Rs. 4,000 was discovered on 30th September, 2016. It was
decided to record it and be immediately paid off.
The trading result of the firm (before charging interest on capital) had been as
follows: 2013 Profit Rs. 19,280; 2014 Profit Rs. 13,440; 2015 Loss Rs. 1,280; 2016
Profit Rs. 7,340.
Assuming the surrender value of the policy to be 20 percent of the sum assured.
Required:
Prepare A's Capital account showing the amount due to A’s legal representative as on
31st December, 2016.
(10 Marks)

Question 5:
(a) On 1st January 2018, Akshay draws two bills of exchange for Rs. 32,000 and Rs.
50,000.
The bill of exchange for Rs. 32,000 is for two months while the bill of exchange for
Rs. 50,000 is for three months. These bills are accepted by Vishal. On 4th March,
2018, Vishal requests Akshay to renew the first bill with interest at 15% p.a. for a
period of two months. Akshay agreed to this proposal. On 25th March, 2018, Vishal
retires the acceptance for Rs. 50,000, the interest rebate i.e. discount being Rs. 500.
Before the due date of the renewed bill, Vishal becomes insolvent and only 50 paisa
in a rupee could be recovered from his estate.
Show the Journal Entries (with narrations) in the books of Akshay.
(10 Marks)

(b) M/s. ABC purchased a second-hand machine on 1st January, 2017 for 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.
2,00,000. Another machine amounted to Rs. 60,000 was purchased and was
installed on 30th September, 2019.
Under the existing practice the company provides depreciation @ 10% 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.
(10 Marks)

Question 6:
(a) Y Ltd. issued for Public subscription 80,000 equity shares of Rs. 10 each at a
premium of Rs. 2 per share payable as under; on application Rs. 4 Per share; on
allotment Rs. 5 per share (including premium) and on call Rs. 3 per share.

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MITTAL COMMERCE CLASSES CA FOUNDATION– MOCK TEST
Applications were received for 1,20,000 shares. Allotment was made pro-rata to the
applicants for 96,000 shares. the remaining applications being refused. Money
overpaid on application was utilized towards sums due on a allotment.
Shri Ramesh, to whom, 3,000 share were allotted, failed to pay the allotment and
call money and Shri Hasan to whom 4,000 shares were allotted failed to pay the call
money. These shares were subsequently forfeited. All the forfeited shares were sold
to Shri Balaji as fully paid up at Rs. 8 per share. Show the journal entries (without
narrations) to record the above transactions. Company doesn’t open calls in arrear
account.
(10 Marks)

(b) What are the basic considerations in distinguishing between capital and revenue
expenditures?
(5 Marks)

(c) Define Account Current. Explain ways of preparing an Account Current.

(5 Marks)

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