CA Foundation/Accounting/Practice Que.

Set Page |1

CHAPTER 2 – ACCOUNTING PROCESS

1. On 1st January, 1997, A sells goods for ` 10,000 to Band draws a bill at three months for the amount. B
accepts it and returns it to A. On 1st March, 1997, B retires his acceptance under rebate of 12% per annum.
Record these transactions in the journals of A and B.
Ans. Journal Entries in the Books of A
Amount Amount
Date Particulars
(Dr.) ` (Cr.) `
1997 B's A/c Dr. 10,000
Jan 1 To Sales A/c 10,000
(Being the goods sold to B on, credit]
Jan 1 Bills Receivable A/c Dr. 10,000
To B's A/c 10,000
(Being the acceptance of bill received)
Mar. 1 Bank A/c Dr. 9,900
Rebate on Bills A/c Dr. 100
To Bills Receivable A/c 10,000
(Being retirement of bill by B one month before maturity the rebate
being given to him@ 12% p.a.)

Journal Entries in the Books of B

Amount Amount
Date Particulars
(Dr.) ` (Cr.) `
1997 Purchase A/c Dr. 10,000
Jan 1 To A's A/c 10,000
(Being purchase of goods from A on Credit)
Jan 1 A's A/c Dr. 10,000
To Bills Payable A/c 10,000
(Being the acceptance of bill given to A)
Mar. 1 Bills Payable A/c Dr. 10,000
To Bank A/c 9,900
To Rebate on Bills A/c 100
(Being the bill discharged under rebate @ 12% p.a.)
Working Note:
12 1
Calculation of Rebate: 10,000 x  = ` 100
100 12
CA Foundation/Accounting/Practice Que. Set Page |2

CHAPTER 3 – BANK RECONCILIATION STATEMENTS

1. According to the Cash-book of Gopi, there was a balance of ` 44,500 standing to his credit in bank of 30th
June 1996. On investigation you find that:
(i) Cheques amounting to ` 60,000 issued to creditors have not been presented for payment till that
date.
(ii) Cheques paid into Bank amounting to ` 1,05,000 out of which cheques amounting to ` 55,000 only
collected by the Bank up to 30th June, 1996.
(iii) A dividend of ` 4,000 and rent amounting to ` 6,000 received by the Bank not entered in the Cash
book.
(iv) Insurance premium (upto 31st December 1996) paid by the Bank ` 2,700 not entered in the Cash-
book.
(v) The payment side of the Cash-book had been undercast by ` 50
(vi) Bank charge ` 50, shown in the Pass-book had not been entered in the cash- book.
(vii) A bill payable for ` 2,000 has been paid by the Bank but is not entered in the and bill receivable for
` 6,000 has been discounted with the Bank at a cost of ` 100 which has also not been recorded in
Cash-book.
You are required:
(a) To make the appropriate adjustments in the Cash-book, and
(b) To prepare a statement reconciling it with the Bank Pass-book. (15 Marks)
th
Ans. As on 30 June, 1996
Adjusted Cash Book
Particulars (`) Particulars (`)
To Balance b/d 44,500 By Insurance Premium A/c 2,700
To Dividend A/c 4,000 By Error in totaling A/c 50
To Rent A/c 6,000 By Bank Charges A/c 50
To Bill Receivable A/c 5,900 By Bills Payable A/c 2,000
By Balance c/d 55,600
60,400 60,400

Bank Reconciliation Statement

Particular (`)
Adjusted balance as per Cash Book (Cr.) 55,600
th
Add: Cheques issued but not presented for payment till 30 June, 1996 60,000
1,15,600
Less: Cheque paid into bank for collection but not collected till 30th June, 1996 50,000
Balance as per Pass Book 65,600
CA Foundation/Accounting/Practice Que. Set Page |3
2. Following are the entries recorded in the-Sank Column of the Cash Book of Mr. X for the month ending on
31.3.1997:
Cash Book (Bank Column)
Date Particulars (`) Date Particulars (`)
15.03.97 To Cash 36,000 01.03.97 By Balance b/d 40,000
20.03.97 To Roy 24,000 04.03.97 By John 2,000
22.03.97 To Kapoor 10,000 06.03.97 By Krishnan 400
31.03.97 To Balance c/d 7,640 15.03.97 By Kailash 240
20.03.97 By Joshi 35,000
77,640 77,640
By Balance b/d 7,640
On 31.03.1997 Mr. X received the Bank Statement. On perusal of the statement Mr. X ascertained the
following information:
(i) Cheques deposited but not credited by the bank ` 10,000.
(ii) Interest on securities collected by the bank but not recorded in cash book ` 1,080.
(iii) Credit transfer not recorded in the cash book ` 200.
(iv) Dividend collected by the bank directly but not recorded in the cash book ` 1,000.
(v) Cheques issued but not presented for payment ` 37,400.
(vi) Interest debited by the bank but not recorded in the cash book ` 1,000.
(vii) Bank charges not recorded in the cash book ` 340.
From the above information you are asked to prepare a Bank reconciliation statement to ascertain the
balance as per Bank Statement. (15 Marks)
Ans. Bank Reconciliation Statement as on 31st March, 1997
Particular + Items (`) - Items (`)
Overdraft as per Cash Book 7,640
Add: Cheques deposited but not credited by the bank 10,000
Interest debited by the bank but not recorded in the cash book 1,000
Bank Charges not recorded in the cash book 340
Less: Interest on securities collected by the bank but riot recorded in cash
book 1,080
Credit transfer not recorded in the cash book 200
Dividend collected by the bank directly but not recorded in the cash book 1,000
Cheques issued but bot presented for payment 37,400
Balance as per Bank Statement (bal. fig) 20,700
39,680 39,680
CA Foundation/Accounting/Practice Que. Set Page |4
3. Prepare a bank reconciliation statement from the following particulars on 31 March, 2002
(i) Debit balance as per bank column of cash book 3,72,000
(ii) Cheque issued to creditors, but not yet presented to the bank for payment 72,000
(iii) Dividend received by the bank, but not entered in the Cash book 5,000
(iv) Interest allowed by the bank 1,250
(v) Cheques deposited into bank for collection, but not collected by bank upto this date 15,400
(vi) Bank charges 200
(vii) A cheque deposited into bank was dishonored, but no intimation received. 320
(viii) Bank paid House tax on our behalf, but no information received from bank in this connection. 350
(6 Marks)
st
Ans. Bank Reconciliation Statement (as on 31 March, 2002)
Particular + Items (`) - Items (`)
Balance as per Cash Book 3,72,000
Add: Cheques issued but not presented for payment 72,000
Dividend received but not entered in cash book 5,000
Interested allowed by bank 1,250
Less: Cheque deposited, but not allowed 15,400
Bank charges 200
A cheque dishonoured, but not collected in cash book 320
House tax directly paid by bank 350
Balance as per Pass Book (Balancing Figure) 4,33,980
4,50,250 4,50,250

4. On 31st March 2003 Pass-book of a trader showed a Credit Balance of ` 1,565, but the pass-book balance
was different for the following reasons from the Cash Book Balance:
(i) Cheques issued to 'X' for ` 600 and to for ` 384 were not yet presented for payment.
(ii) Bank charged ` 35 Bank charges and 'Z' directly deposited ` 816 into the Bank account, which were
not entered in the Cash Book.
(iii) Two cheques from 'A' for 515 and another from 'B' for ` 1,250 were credited by the bank in the first
week of April, 2003 although they were deposited on 25.03.2003.
(iv) Interest allowed by bank ` 45.
Prepare Bank Reconciliation Statement as on 31st March, 2003. (6 Marks)
Ans. Bank Reconciliation Statement
Particular + Items (`) - Items (`)
Balance as per Pass Book (Cr) 1,565
Add: Bank charge 35
Cheque from A & B deposited on 25-03-03 but credited by bank in April
2003 1,765
Less: Cheque issued to X & Y for payment but not yet presented 984
Cash directly deposited by Z 816
Interest allowed by bank 45
Balance as per Cash Book (bal. fig.) 1,520
3,365 3,365
CA Foundation/Accounting/Practice Que. Set Page |5
th
5. Prepare a Bank Reconciliation Statement as on 30 September 2003 from the following particulars:
(`)
Bank balance as per the pass-book (credit) 10,000
Deposited into the bank, but no entry was passed in the Cash-Book 500
Cheque received, but not sent to bank 1,200
Insurance Premium paid directly by the bank under the standing advice 600
Bank charge entered twice in the Cash-book 20
Cheque issued, but not presented to the bank for payment 500
Cheque received entered twice in the Cash-Book 1,000
Bills discounted dishonored not recorded in the Cash-book 5,200 (9 Marks)
Ans. Bank Reconciliation Statement
(As on 30th September, 2003)
Particular + Items (`) - Items (`)
Bank (Credit) Balance as per Pass Book 10,000
Add: (1) Cheques received but not deposited in Bank 1,200
(2) Insurance premium paid directly by bank 600
(3) Cheque received but entered twice in the cash book 1,000
(4) Bills discounted dishonoured but not recorded in the cash book 5,200
Less: (1) Cheques deposited but not entered in cash book 500
(2) Bank charges entered twice in cash book 20
(3) Cheque issued but not presented for payment 500
Balance (Dr.) as per Cash Book (bal. fig.) 16,980
18,000 18,000

6. From the following particulars, prepare the Bank Reconciliation Statement as on 30th September, 2005:
(`)
(i) Bank overdraft as per Pass-book 21,494
(ii) A cheque deposited as per Pass-book, but not recorded in Cash-book 700
(iii) Debit side of Bank column under cost 100
(iv) A cheque of ` 5,000 deposited, but credited in Pass-book as 4,996
(v) A party's cheque returned dishonoured as per Pass-book only 530
(vi) Bills collected directly by Bank 3,500
(vii) Bank charges recorded twice in the Cash-book 25
(viii) A Bill for ` 8,000 discounted for ` 7,960 returned dishonoured by the Bank
noting charges being 15
(ix) Cheque deposited, but not yet collected by the Bank 2,320
(x) Cheque issued, but not yet presented to the bank for payment 1,250
(10 Marks)
CA Foundation/Accounting/Practice Que. Set Page |6
Ans. Bank Reconciliation Statement
(As on 30th September, 2005)
Particular + Items (`) - Items (`)
1. Overdraft as per Bank Pass Book 21,494
2. Cheque deposited but not yet entered in Cash Book 700
3. Under cast of debit side of the Bank column 100
4. Cheque deposited ` 5,000 but entire in Pass Book as ` 4,996 4
5. Cheque dishonored but not recorded in Cash Book 530
6. Bills collected by bank but not recorded in Cash- Book 3,500
7. Bank Charges recorded twice in Cash-Book 25
8. Bills dishonoured but not yet recorded in Cash Book 8,015
9. Cheque deposited but not yet Collected by Bank 2,320
10. Cheque issued but not yet presented for payment 1,250
11. Over draft as per Cash-Book 16,200
27,069 27,069

7. The Bank Pass Book of Account No. 5678 of Mrs. Rani showed an overdraft of ` 33,575 on 31st March,
2018. Ongoing through the Pass Book, the accountant found the following:
(i) A Cheque of ` 1,080 credited in the pass book on 28th March, 2018 being dishonoured is debited
again in the pass book on 1st April, 2018. There was no entry in the cash book about the dishonour of
the cheque until 15th April, 2018.
(ii) Bankers had credited her account with ` 2,800 for interest collected by them on her behalf, but the
same has not been entered in her cash book.
(iii) Out of ` 20,500 paid in by Mrs. Rani in cash and by cheques on 31st March, 2018 cheques amounting
to ` 7,500 were collected on 7th April, 2018.
(iv) Out of Cheques amounting to ` 7,800 drawn by her on 27th March, 2018 a cheque for ` 2,500 was
encashed on 3rd April, 2018.
(v) Bankers seems to have given her wrong credit for ` 500 paid in by her in Account No. 8765 and a
wrong debit in respect of a cheque for ` 300 against her account No. 8765.
(vi) A Cheque for ` 1,000 entered in Cash Book but omitted to be banked on 31st March, 2018.
(vii) A Bill Receivable for ` 5,200 previously dishonoured (Discount ` 200) with the Bank had been
dishonoured but advice was received on 1st April, 2018.
(viii) A Bill for ` 10,000 was retired / paid by the bank under a rebate of ` 175 but the full amount of the
bill was credited in the bank column of the Cash Book.
(ix) A Cheque tor ` 2,400 deposited into bank but omitted to be recorded in Cash Book and was
collected by the bank on 31st March, 2018. Prepare Bank Reconciliation Statement as on 31st March
2018.
(10 Marks)
Ans. Bank Reconciliation Statement as on 31.3.18
Particulars Details (`) Amount (`)
Balance as per Pass Book (Dr.) 33,575
Add: Interest collected by bank 2,800
CA Foundation/Accounting/Practice Que. Set Page |7
Particulars Details (`) Amount (`)
Add: Cheque issued not presented 2,500
Add: Wrong credit given by bank 500
Add: Overcasting of payment side of Cash Book 175
Add: Under casting of receipt side of CB 2,400 8,375
41,950
Less: Discounted bill dishonored 5,200
Less: Cheques deposited not collated 7,500
Less: Wrong debit given by bank 300
Less: Cheque omitted to be banked though entered in CB 1,000 (14,000)
Balance as per Cash Book (Cr.) 27,950

8. Prepare a bank reconciliation statement from the following particulars as on 31st March, 2018
Particulars (`)
Debit balance as per bank column of the cash book 18,60,000
Cheque issued to creditors but not yet presented to the Bank for payment 3,60,000
Dividend received by the bank but not entered in the Cash book 2,50,000
Interest allowed by the Bank 6,250
Cheques deposited into bank for collection but not collected by bank up to this date 7,70,000
Bank charges not entered in Cash Book 1,000
A cheque deposited into bank was dishonored, but no intimation received. 1,60,000
Bank paid house tax on our behalf, but no intimation received from bank in this connection 1,75,000
(10 Marks)
st
Ans. Bank Reconciliation Statement as on 31 March, 2018
Particulars (`) (`)
Debit balance as per CB 18,60,000
Add:
(a) Cheque issued but yet not presented to Bank for payment 3,60,000
(b) Dividend received by bank but not entered in CB 2,50,000
(c) Interest allowed by Bank 6,250 6,16,250
24,76,250
Less:
(a) Cheques deposited into Bank but yet not collected 7,70,000
(b) Bank charges 1,000
(c) Cheque deposited into Bank but dishonoured 1,60,000
(d) House tax paid by Bank Credit balance as per PB 1,75,000 11,06,000
13,70,250

*********
CA Foundation/Accounting/Practice Que. Set Page |8

CHAPTER 4 – BILL OF EXCHANGE

1. On 1st January, 1994 Vinod drew and Pramod accepted a bill at three months for ` 2,000. On 4th January,
1994 Vinod discounted the bill at his bank at 15% p.a. and remitted half the proceeds to Pramod. On 1 st
February, 1994 Pramod drew and Vinod accepted a bill at four months for ` 1,500. On 4th February, 1994
Pramod discounted the bill at 15% p.a. with his bank and remitted half the proceeds to Vinod. They both
agreed to share the discount equally.
At maturity Vinod met his acceptance, but Pramod dishonoured his and. Vinod had to pay the bill. Vinod
drew and Pramod accepted a new bill at three months for the original bill plus interest at 18% p.a. On 1 st
July, 1994 Pramod became insolvent and only 50 paise in the rupee was received from him.
Record the above transactions in Vinod's Journal (15 Marks)
Ans.
Date Debit Credit
Particulars
1994 ` `
Jan 1 Bills Receivable A/c Dr. 2,000
To Pramod A/c 2,000
(3 months' Bill drawn on Pramod accepted)
Jan 4 Bank A/c Dr. 1,925
Discount on bills A/c Dr. 75
To Bills Receivable A/c 2,000
(Bill accepted by Pramod discounted with the bank at 15%
Jan 4 Pramod A/c Dr. 1,000
To Bank A/c 962.50
To Discount on bills A/c 37.50
(Half of the proceeds of the bill remitted to Pramod)
Feb 1 Pramod A/c Dr. 1,500
To Bills Payable A/c 1,500
(Acceptance of 4 month's bill drawn by Pramod)
Feb4 Bank A/c Dr. 712.50
Discount on bills A/c Dr. 37.50
To Pramod A/c 750
(Half of the proceeds of the 4 months' bill received)
April 4 Pramod A/c Dr. 2,000
To Bank A/c 2,000
(Bill accepted by Pramod dishonoured)
April 4 Pramod A/c Dr. 90
To Interest A/c 90
(Interest receivable on ` 2,000 @ 18% for 3 months)
April 4 Bills Receivable A/c Dr. 2,090
To Pramod A/c 2,090
(Fresh 3 months' bill drawn on Pramod accepted).
June 4 Bills Payable A/c Dr. 1,500
To Bank A/c 1,500
(4 months' bill honored on maturity)
July 1 Pramod A/c Dr. 2,090
To Bills Receivable A/c 2,090
(Bill accepted by Pramod dishonoured on his becoming insolvent)
CA Foundation/Accounting/Practice Que. Set Page |9
Date Debit Credit
Particulars
1994 ` `
July 1. Bank A/c Dr. 920
Bad Debts A/c Dr. 920
To Pramod A/c 1,840
(Amount received from the estate of Pramod and balance transferred to
bad debt A/c)
Working Note:
Pramod Account
Amount (`) Amount (`)
To Bank A/c 962.50 By Bills Receivable A/c 2,000.00
To Discount on bills A/c 37.50 By Bank A/c 712.50
To Bills payable A/c 1,500.00 By Discount on bills A/c 37.50
To Bank A/c 2,000.00 By Bills Receivable A/c 2,090.00
To Interest A/c 90.00 By Bank A/c 920.00
To Bills Receivable A/c 2,090.00 (50% of the amount due)
To Discount on bills A/c 37.50 By Bank A/c 712.50
By Bad Debts A/c 920.00
6,680.00 6,680.00

2. Mr. David draws two bills of exchange on 1.1.95 for ` 6,000 and ` 10,000. The bills of exchange for ` 6,000
is for two months while the bill of exchange for ` 10,000 is for three months. These bills are accepted by
Mr. Thomas. On 4.3.95 Mr. Thomas requests Mr. David to renew the first bill with interest at 18% p.a. for a
period of two months. Mr. David agrees to this proposal. On 20.3.95 Mr. Thomas retires the acceptance for
` 10,000, the interest rebate i.e. discount being ` 100. Before the due date of the renewed bill, Mr.
Thomas becomes insolvent and only 50 paise in a rupee could be recovered from his estate.
You are to give the journal entries in the books of Mr. David. (15 Marks)
Ans. Journal Entries in the Books of Mr. David
Amount (`) Amount (`)
Date Particulars
(Dr.) (Cr.)
1995 Bills Receivable (No. 1) A/c Dr. 6,000
Jan. 1 Bills R5eceivable (No.2) A/c Dr. 10,000
To Mr. Thomas' A/c 16,000
(Being drawing of bills Receivable No. 1 due for maturity on
4.3.95 and bills receivable No. 2 due for maturity on 4.4.95)
March 4 Mr. Thomas' A/c Dr. 6,000
To Bills Receivable (No. 1) A/c 6,000
(Being the reversal entry for bill No. 1 on agreed renewal)
March 4 Bills Receivable (No.3) A/c Dr. 6,180
To Interest A/c 180 6,000
To Mr. Thomas' A/c
(Being the drawing of bill of exchange No. 3 due for maturity
on 7.5.1995 with interest @ 18% p.a. in lieu of the original
acceptance of Mr. Thomas)
CA Foundation/Accounting/Practice Que. Set P a g e | 10
Amount (`) Amount (`)
Date Particulars
(Dr.) (Cr.)
March 20 Bank A/c Dr. 9,900
Discount A/c Dr. 100
To Bills Receivable (No. 3) A/c 10,000
(Being the amount receive. from official assignee of Mr.
Thomas @ 50 Paise per rupee against dishonoured bill)
May 7 Mr. Thomas A/c Dr. 6,180
To Bills Receivable (No. 3) A/c 6,180
(Being the amount due from Mr. Thomas on dishonour of
acceptance of presentation on the due date).
May 7 Mr. Thomas A/c Dr. 3,090
To Bills Receivable (No. 3) A/c 3,090
(Being the amount due from Mr. Thomas on dishonour of
acceptance of presentation on the due date).
May 7 Mr. Thomas A/c Dr. 3,090
To Bill Receivable (No. 3) A/c 3,09
(Being the amount due from Mr. Thomas on dishonour of
acceptance of presentation on the due date.)

3. On 1st January, 1997, A sells goods for ` 10,000 to B and draws a bill at three months for the amount. B
accepts it and returns it to A. On 1st March, 1997, B retires his acceptance under rebate of 12% per annum.
Record these transactions in the journals of A and B. (6 Marks)
Ans. Journal Entries in the Books of A
Amount (`) Amount (`)
Date Particulars
(Dr.) (Cr.)
1997 B's A/c Dr. 10,000
Jan. 1 To Sales A/c 10,000
(Beings sale of goods to B on credit)
Jan. 1 Bills Receivable A/c Dr. 10,000
To B's A/c 10,000
(Being the acceptance of bill received)
Mar. 1 Bank A/c Dr. 9,900
Rebate on Bill A/c Dr. 100
To Bills Receivable A/c 10,000
(Being retirement of bill by B one month before maturity by giving
rebate @ 12% p.a.)
Journal Entries in the Books of B
Amount (`) Amount (`)
Date Particulars
(Dr.) (Cr.)
1997 Purchase A/c Dr. 10,000 10,000
Jan. 1 To A's A/c
(Being purchase of goods from A on Credit)
Jan. 1 A's A/c Dr. 10,000
To Bills Payable A/c 10,000
(Being the acceptance of bill given to A)
CA Foundation/Accounting/Practice Que. Set P a g e | 11
Mar. 1 Bills Payable A/c Dr. 10,000
To Bank A/c 9,900
To Rebate on Bills A/c 100
(Being the bill discharged under rebate @ 12% p.a.)
Working Note:
12 12
Calculation of Rebate: 10,000   = 100
100 100

4. Shubham draws on Rajendra a bill for ` 45,000 on 1st June, 1998 for 3 months. Rajendra accepts the bill
and sends it to Shubham who gets it discounted for ` 44, 100. Shubham immediately remits ` 14, 700 to
Rajendra. On the due date Shubham, being unable to remit the amount due, accepts a bill for ` 63,000 for
three months which is discounted by Rajendra for ` 61,650. Rajendra sends ` 11,100 to Shubham. On the
due date Shubham becomes insolvent, his estate paying forty paise in the rupee. Give Journal Entries in the
books of Shubham and Rajendra. (15 Marks)
Ans. Books of Shubham
Journal Entries
Amount (`) Amount (`)
Date Particulars
(Dr.) (Cr.)
1998 Bills Receivable A/c Dr. 45,000
June 1 To Rajendra A/c 45,000
(Being Acceptance received from Rajendra for Mutual
accommodation)
June 1 Bank A/c Dr. 44,100
Discount A/c Dr. 900
To Bills Receivable A/c 45,000
(Being Bill discounted)
June 1 Rajendra Dr. 15,000
To Bank A/c 14,700
To Discount A/c 300
(Being one-third of proceeds remitted to Rajendra)
Sept. 4 Rajendra Dr. 63,000
To Bills Payable A/c 63,000
(Being Acceptance given to Rajendra on failure of remittance
of the amount due)
Sept. 4 Bank A/c Dr. 11,100
Discount A/c Dr. 900
To Rajendra 12,000
(Being receipt of Amount from Rajendra and discount amount
credited to him.)
Dec. 7 Bills Payable A/c Dr. 63,000
To Rajendra 63,000
(Beings Acceptance to Rajendra dishonoured on insolvency.)
Dec. 7 Rajendra Dr. 42,000
To Bank A/c 16,800
CA Foundation/Accounting/Practice Que. Set P a g e | 12
Amount (`) Amount (`)
Date Particulars
(Dr.) (Cr.)
To Deficiency A/c 25,200
(Being Amount paid @ 40% and balance credited to Deficiency
Ne on failure of payment)

Books of Rajendra
Journal Entries
Amount (`) Amount (`)
Date Particulars
(Dr.) (Cr.)
1998 Shubham Dr. 45,000
June 1 To Bills Payable A/c 45,000
(Being Acceptance given for the bill)
June 1 Bank A/c Dr. 14,700
Discount A/c Dr. 300
To Shubham 15,000
(Being one third of the proceeds of bill after discounting
received from Shubham)
Sept. 4 Bill Receivable A/c Dr. 63,000
To Shubham 63,000
(Being Acceptance received from Shubham to cover the
amount due from him)
Sept. 4 Bank A/c Dr. 61,650
Discount A/c Dr. 1,350
To Bills Receivable Ne 63,000
(Being Shubham's Acceptance discounted)
Sept. 4 Bills Payable A/c Dr. 45,000
To Bank A/c 45,000
(Being own acceptance due on the date met)
Sept 4 Shubham Dr. 12,000
To Bank A/c 11,100
To Discount A/c 900
(Being Amount remitted to Shubham, after getting the bill
discounted)
Dec. 7 Shubham Dr. 63,000
To Bank A/c 63,000
(Being Shubham's Acceptance dishonoured on insolvency)
Dec. 7 Bank A/c Dr. 16,800
Bad Debts A/c Dr. 25,200
To Shubham 42,000
(Beings Amount and bad debts written off in respect of
amount due from Shubham)
CA Foundation/Accounting/Practice Que. Set P a g e | 13
Working Note:
Calculation of discount to be borne by Mr. Shubham:
` 15,000 paid to Rajendra out of bill of ` 45,000 as such ` (45,000 – 15,000) = 30,000 due to Rajendra and
` 11,100 further received from Rajendra. Therefore 30,000 + 11,100 = ` 41,100 are shared by Shubham,
out of total ` 61,650. In this proportion, discount is also related to Shubham. Discount shared by Shubham.
41,100 41,100
=  (63,000 – 61,650) =  1,350 = ` 900
61,650 61,650

5. On 1st July, 1999 G drew a bill for ` 80,000 for 3 months on H for mutual accommodation. accepted the bill
of exchange.
G had purchased goods worth ` 81,000 from J on the same date. G endorsed H's acceptance to J in full
settlement.
On 1st September, 1999 J purchased goods worth ` 90,000 from H. J endorsed the bill of exchange received
from G to H and paid ` 9,000 in full settlement of the amount due to H.
On 1st October, 1999 H purchased goods worth ` 1,00,000 from G. He paid the amount due to G by
cheque.
Give the necessary Journal Entries in the books of H. (6 Marks)
Ans. Books of H
Amount (`) Amount (`)
Date Particulars
(Dr.) (Cr.)
1.7.99 G's A/c Dr. 80,000
To Bills Payable A/c 80,000
(Being Acceptance of bill drawn by G)
1.9.99 J's A/c Dr. 90,000
To Sales A/c 90,000
(Being Sales made to J)
1.9.99 Bills Receivable A/c Dr. 80,000
Banks A/c Dr. 9,000
Discount A/c Dr. 1,000
To J's A/c 90,000
(Being Acceptance received from J's endorsement of bill received
from G and ` 9,000 received in full settlement of the amount due)
1.9.99 Bills Payable A/c Dr. 80,000
To Bills Receivable A/c 80,000
(Beings Own acceptance received from J's endorsement cancelled)
1.10.99 Purchase A/c Dr. 1,00,000 1,00,000
To G's A/c
(Being purchase made from G)
G's A/c Dr. 20,000
To Bank A/c 20,000
(Being Amount paid to G after adjustment of ` 80,000 for
accommodation extended to Him)
CA Foundation/Accounting/Practice Que. Set P a g e | 14
6. Record the following transactions in the Journals of Ram and Hari:
Ram sells goods for ` 1,00,000 to Hari on 1st January, 2001 and on the same day draws a bill on Hari at
three months for the amount. Hari accepts it and returns it to Ram, who discounts it on 4th January, 2001
with his bank at 12% per annum. The acceptance is dishonored on due date and the bank pays ` 250 as
noting charges. (9 Marks)
Ans. Ram's Journal
Data Particulars Amount (`) Amount (`)
(Dr.) (Cr.)
2001 Hari's A/c Dr. 1,00,000
Jan. 1 To Sales A/c 1,00,000
(Being Sale of goods to Hari on credit)
Jan. 1 Bills Receivable A/c Dr. 1,00,000
To Hari's A/c 1,00,000
(Being Bill accepted by Hari for the amount due)
Jan.4 Bank A/c Dr. 97,000
Discount A/c Dr. 3,000
To Bills Received A/c 1,00,000
(Being Bill accepted by Hari Discounted with the bank @ 12% p.a.)
Jan.4 Hari's A/c Dr. 1,00,250
To Bank A/c 1,00,250
(Being the amount the amount of bill dishonoured and noting
charges paid thereon, debited to Hari's account)
Hari's Journal
Amount (`) Amount (`)
Date Particulars
(Dr.) (Cr.)
2001 Purchase Account Dr. 1,00,000 1,00,000
Jan 1 To Ram's A/c
(Being purchases of Goods from Ram on credit)
Jan 1 Ram's A/c 1,00,000
To Bills Payable A/c 1,00,000
(Being Acceptance given on the bill drawn by Ram)
April 4 Bills Payable A/c Dr. 1,00,000
Trade Expenses A/c Dr. 250
To Ram's A/c 1,00,250
(Being Dishonour of the bill drawn by Ram on the due date)

7. Anil draws a bill for ` 9,000 on Sanjay on 5th April, 2003, for 3 months, which Sanjay returns it to Anil after
accepting the same. Anil gets it discounted with the bank for ` 8,820 and remits one -third amount to
Sanjay.
On the due date Anil fails to remit the amount due to Sanjay, but he accepts a bill for ` 12,600 for three
months, which Sanjay discounts it for ` 12,330 and remits ` 2,220 to Anil. Before the maturity of the
renewed bill Anil becomes insolvent and only 50% was realised from his estate on 15th October, 2003.
Pass necessary Journal entries for the above transactions in the books of Anil (9 Marks)
CA Foundation/Accounting/Practice Que. Set P a g e | 15
Ans. In the books of Anil
Journal Entries
Amount (`) Amount (`)
Date Particulars L.F.
(Dr.) (Cr.)
2003 Bills Receivable A/c Dr. 9,000
5 April To Sanjay's A/c 9,000
(Being acceptance received for material accommodation)
5 April Bank A/c Dr. 8,820
Discount A/c Dr. 180
To Bills Receivable A/c 9,000
(Being discounting of bills)
5 April Sanjay's A/c Dr. 3,000
To Bank A/c 2,940
To Discount A/c 60
(Being 1 /3 proceeds of the bill transfer to the Sanjay's A/c)
8 July Sanjay's A/c Dr. 12,600
To Bills Payable A/c 12,600
(Being acceptance of bill given)
8 July Bank A/c Dr.
 6,000  2,200 
Discount A/c   270 Dr.
 12,330 
To Sanjay's A/c
(Being amount received from Sanjay against 2nd bills)
11 Oct Bills Payable A/c Dr. 12,600
To Sanjay's A/c 12,600
(Being dishonour of bill due insolvency)
15 Oct Sanjay's A/c Dr. 8,400
To Bank A/c 4,200
To Deficiency A/c 4,200
(Being @ 50% of (6,000 + 2,400) paid to Sanjay)

8. Mr. B accepted a bill for ` 10,000 drawn on him by Mr. A on 1st August, 2005 for 3 months. This was for the
amount which B owed to A. And on the same date Mr. A got the bill discounted at his bank for ` 9,800. On
the due date, B approached A for renewal of the bill. Mr. A agreed on condition that ` 2,000 be paid
immediately along with interest on the remaining amount at 12% p.a. for 3 months and that for the
remaining balance B should accept a new bill for 3 months. These arrangements were carried through. On
31st December, 2005, B became insolvent and his estate paid 40%.
Give Journal Entries in the books of Mr. A.
Ans. Books of Mr. A Journal
Amount (`) Amount (`)
Date Particulars L.F.
(Dr.) (Cr.)
2005
Aug. 1 Bills Receivable A/c Dr. 10,000
To B 10,000
(Being the acceptance received from B to settle his
account)
CA Foundation/Accounting/Practice Que. Set P a g e | 16
Amount (`) Amount (`)
Date Particulars L.F.
(Dr.) (Cr.)
Aug. 1 Bank A/c Dr. 9,800
Discount A/c Dr. 200
To Bills Receivable 10,000
(Being the bill discounted for ` 9,800 from bank)
Nov. 4 B Dr. 10,000
To Bank Account 10,000
(Being the B's acceptance is to be renewed)
Nov. 4 B Dr. 240
To Interest Account 240
(Being the interest due from B for 3 months i.e.,
800  3/12  12% = 240)
Nov. 4 Cash A/c Dr. 2,240 10,240
Bills Receivable A/c Dr. 8,000
To B
(Being amount and acceptance of new bill received
from B)
Nov. 4 B A/c Dr. 8,000 8,000
To Bills Receivable A/c
(Being B became insolvent)
Dec. 31 Cash A/c Dr. 3,200
Bad Debts A/c Dr. 4,800
(Being the amount received and written off on B's 8,000
insolvency)

*********
CA Foundation/Accounting/Practice Que. Set P a g e | 17

CHAPTER 5 – RECTIFICATION OF ERROR

1. A book-keeper while preparing his trial balance finds that the debit exceeds by ` 7,250. Being required to
prepare the final account he the difference to a Suspense Account. In the next year the following mistakes
were discovered:
(i) A sale of ` 4,000 has been passed through the Purchase Daybook. The entry in customer's account
has been correctly recorded.
(ii) Goods worth ` 2,500 taken away by the proprietor for his use has been debited to Repairs Account.
(iii) A Bill receivable for ` 1,300 received from Krishna has been dishonoured on maturity but no entry
passed.
(iv) Salary ` 650 paid to a clerk has been debited to his Personal Account.
(v) A Purchase of ` 750 from Raghubir has been debited to his account. Purchases account has been
correctly debited.
(vi) A sum of ` 2,250 written off as depreciation on furniture has not been debited to Depreciation
Account.
Draft the Journal entries for rectifying the above mistakes and prepare Suspense Account. (15 Marks)
Ans. Journal Entries
Particulars (`) (`)
(a) Suspense A/c Dr. 8,000
To P& L Adjustment A/c. 8,000
(Rectification of a credit sale wrongly passed, through the purchase day book)
(b) Drawing A/c Dr. 2,500
To P&L Adjustment A/c 2,500
(Goods withdrawn for personal use wrongly_ debited to repairs account, now
rectified)
(c) Krishna A/c Dr. 1,300
To Bills Receivable A/c 1,300
(Entry for bill drawn on Krishna dishonored on maturity)
(d) P&L Adjustment A/c Dr. 650
To Clerk's personnel A/c 650
(Salary paid to a clerk wrongly debited to his personal account, now rectified)
(e) Suspense A/c Dr. 1,500
To Raghubir's A/c 1,500
(Goods purchased from Raghubir debited to his account, now rectified)
(f) P&L Adjustment A/c Dr. 2,250
To Suspense A/c 2,250
(Depreciation of furniture not posted to depreciation account now rectified)
-
Suspense A/c
Particular Amount (`) Particular Amount (`)
To P&L Adjustment A/c 8,000 By Balance b/d 7,250
To Raghubir's A/c 1,500 By P&L Adjustment A/c 2,250
9,500 9,500
CA Foundation/Accounting/Practice Que. Set P a g e | 18
Note:
Instead of using Profit & Loss. Adjustment Account for the purpose of rectification of errors affecting
revenue items, another account namely prior period adjustment account may be opened for this purpose.
The balance of the prior period adjustment account is to be ultimately transferred to Profit & Loss Account.

2. The accountant of X prepared the Trial Balance for the year ended 31st March. 1996. But there was a
difference and the accountant put the difference in Suspense Account:
Rectify the Following errors found and prepare the Suspense Account:
(i) The total of the Returns outward book, ` 420 has not been posted to the ledger.
(ii) A purchase of ` 350 from Y has been entered in the sales book. However, Y's account has been
correctly entered.
(iii) A sale of ` 390 to Z has been credited to his account as ` 290.
(iv) Old furniture sold for ` 5,400 had been entered as ` 4,500 in sales account.
(v) Goods taken by proprietor, ` 500 have not been entered in the books at all. (10 Marks)
Ans. Rectified Journal Entries
Transaction Particulars Debit (`) Credit (`)
(1) Suspense A/c Dr. 420
To Purchase Return A/c 420
(Being rectification of omission of amount not posted to Return
Outward Book)
(2) Sales A/c Dr. 350
Purchase A/c Dr. 350
To Suspense A/c 700
(Being rectification of purchase amount entered in the sales
book)
(3) Z's A/c Dr. 680
To Suspense A/c 680
(Being rectification of wrong amount and wrong side of
account)
(4) Sales A/c Dr. 4,500
Suspense A/c Dr. 900
To Furniture A/c 5,400
(Being rectification of wrongly entered amount)
(5) Drawings A/c Dr. 500
To Purchases A/c 500
(Being recording of the omission of goods taken by proprietor)
Suspense A/c
Particulars (`) Particulars (`)
To Difference in Trial Balance 60 By Sales A/c 350
To Purchase Return A/c 420 By Purchase A/c 350
To Furniture A/c 900 By Z's A/c 680
1,380 1,380
CA Foundation/Accounting/Practice Que. Set P a g e | 19
3. A book keeper finds the differences in the Trial Balance amounting to t 1,000 and puts it In the Suspense
Account.
Later on he detects the following errors:
(i) Purchased goods from Ravi ` 15,000 but entered into Sales Book.
(ii) Received one bill for ` 25,000 from Arun but recorded in Bills Payable Book.
(iii) An item of ` 3,500 relating to prepaid rent account was omitted to be brought forward.
(iv) An item of ` 2,000 in respect of purchase returns, had been wrongly entered m the purchase book.
(v) ` 25,000 paid to Harish against our acceptance were debited to Harish's Account.
(vi) Bills received from Janki for repairs done to radio ` 2,500 and radio supplied for ` 45,000 were
entered in the Purchase Book as ` 46,000.
Give rectifying journal entries with full narration and prepare Suspense Account. (15 Marks)
Ans. Rectified Journal Entries
Transaction Particulars Debit (`) Credit (`)
(1) Purchase A/c Dr. 15,000
Sales A/c Dr. 15,000
To Ravi's A/c 30,000
(Being rectification of purchases wrongly entered to sales book)
(2) Bills Receivable A/c Dr. 25,000
Bills Payable A/c Dr. 25,000
To Arun A/c 50,000
(Being rectification of Bills Receivable wrongly recorded in bills
Payable Book)
(3) Prepaid Rent A/c Dr. 3,500
To Suspense A/c 3,500
(Being rectification of omission of prepaid rent ale to be
brought forward)
(4) Customer A/c Dr. 4,000
To Purchase A/c 2,000
To Purchase Return A/c 2,000
(Being rectification of purchase return wrongly entered in
Purchase Book)
(5) Bills Payable A/c Dr. 25,000
To Harish A/c 25,000
(Being rectification of Bills Payable A/c wrongly debited to
Harish's A/c)
(6) Repairs A/c Dr. 2,500
Radio A/c Dr. 45,000
To Purchase A/c 46,000
To Janki A/c 1,500
(Being rectification of the amount wrongly entered in purchase
book as 46,000)
CA Foundation/Accounting/Practice Que. Set P a g e | 20
Suspense A/c
Particulars (`) Particulars (`)
To Balance b/d 1,000 By Prepaid Rent A/c 3,500
To Balance c/d 2,500
3,500 3,500

4. On 31st March 2001, a book-keeper finds the difference in the Trial Balance and he puts it in the Suspense
Account. Later on he detects the following errors:
(i) ` 50,000 received from A was posted to the debit of his account.
(ii) ` 20,000 being purchases returns were posted to the debit of Purchases Account.
(iii) Discount of ` 8,000 received were posted to the debit of Discount Account.
(iv ` 9,060 paid for repairs of Motor Car was debited to Motor Car Account as ` 7,060.
(v) ` 40,000 paid to B was debited to A's Account.
Give Journal Entries to rectify the above errors and ascertain the amount transferred to Suspense Account,
assuming that the Suspense Account is balanced after the above corrections. (9 Marks)
Ans. Rectified Journal Entries
Transaction Particulars Debit (`) Credit (`)
(1) Suspense A/c Dr. 10,000
To A's A/c 10,000
(Being rectification of amount received from A wrongly debited
to his account)
(2) Suspense A/c Dr. 40,000
To Purchase A/c 20,000
To Purchase Return A/c 20,000
(Being rectification of purchase return wrongly posted to
purchase A/c)
(3) Suspense A/c Dr. 16,000
To Discount A/c 16,000
(Being rectification of discount received wrongly debit to
Discount A/c)
(4) Motor Car Repairs A/c Dr. 9,060
To Motor Car A/c 7,060 7,06
To Suspense A/c 2,000 2,00
(Being rectification motor car repairs of ` 9,060 wrongly
debited to motor car A/c as ` 7060)
(5) B's A/c 40,000 Dr
To A's A/c 40,000
(Being rectiffc8tion of amount paid to B wrongly debited to A)
CA Foundation/Accounting/Practice Que. Set P a g e | 21
Suspense A/c
Particulars (`) Particulars (`)
To A's A/c 1,00,000 By Difference in trial Balance (Bal. fig.) 1,54,000
To Purchase A/c 20,000 By Motor Car Repairs A/c 2,000
To Purchase Return A/c 20,000
To Discount A/c 16,000
1,56,000 1,56,000

5. There was an error in the Trial Balance of Mr. Steel on 31st March, 2002, and the difference in Books was
carried to a Suspense Account. Ongoing through the Books you find that:
(i) ` 5,400 received from Mr. A was posted to the debit of his account.
(ii) ` 1,000 being purchases return were posted to the debit of purchases Account.
(iii) Discount received ` 2,000 was posted to the debit of Discount Account.
(iv) ` 2,740 paid for Repairs to Motor Car was debited to Motor Car Account as ` 1,740.
(v) ` 4,000 paid to B was debited to A's Account.
Give Journal Entries to rectify the above error and ascertain the amount transferred to Suspense Account
on 31st March, 2002 by showing the Suspense Account, assuming that the Suspense Account ill balanced
after the above corrections. (10 Marks)
Ans. Rectified Journal Entries
Transaction Particulars Debit (`) Credit (`)
(i) Suspense A/c Dr. 10,800
To Mr. A's A/c 10,800
(Being rectification of receipt from A wrongly posted to A's
Debit A/c)
(ii) Suspense A/c Dr. 2,000
To Purchase Return A/c 1,000
To Purchase A/c 1,000
(Being rectification of Purchase Return wrongly posted to
Purchase A/c)
(iii) Suspense A/c Dr. 4,000
To Discount A/c 4,000
(Being rectification of wrong posting of Discount received to
debit of. Discount A/c)
(iv) Repairs of Motor Car A/c Dr. 2,740
To Motor Car A/c 1,740
To Suspense A/c 1,000
(Being rectification of Motor car Repairs wrongly debited Motor
car A/c)
(v) B's A/c Dr. 4,000
To A's 4,000
(Being rectification of payment to B wrongly debited to A's A/c)
CA Foundation/Accounting/Practice Que. Set P a g e | 22
Suspense A/c
Particulars (`) Particulars (`)
To Mr. A A/c 10,800 By Difference in Trial Balance 15,800
To Purchase Return A/c 1,000 By Repairs Ne 1,000
To Purchase A/c 1,000
To Discount A/c 4,000
16,800 16,800

6. The Trial Balance of ABC Ltd, as on Dec 31,2002 did not agree. The difference was put to a Suspense
Account. During the next trading period, the following were discovered:
(i) The total of the Sales-book of one page ` 6,531 was carried forward to the next pages ` 6,351.
(ii) Goods returned by a customer for ` 1,200 but entered in Purchases Return Book.
(iii) Personal Car Expenses amounting to ` 250 were debited to Trade Expenses.
(iv) Sales Return Book was undercast by ` 2,750.
(v) ` 50 discount allowed by a supplier, was wrongly posted to debit side of Discount Account.
(vi) An item of purchases of ` 151 was entered in Purchases Book as ` 15 and posted to Supplier's
account as ` 51.
You are required to give journal entries to rectify the errors through Profit & Loss Adjustment A/c in a way
so as to show the current year's profit or loss correctly. (7 Marks)
Ans. Rectified Journal Entries
Transaction Particulars Debit (`) Credit (`)
(i) Suspense A/c Dr. 180
To P & L Adjustment A/c 180
(Being rectification of under-valuation of Sales Book)
(ii) P & L Adjustment A/c Dr. 2,400
To Customer A/c 23,400
(Being rectification of Personal car expenses wrongly debited to
Trade Expenses)
(iii) Drawings A/c Dr. 250
To P & L Adjustment A/c 250
(Being rectification of Personal car expenses wrongly debited to
Trade Expenses)
(iv P & L Adjustment A/c Dr. 2,750
To Suspense A/c 2,750
(Being rectification of Sales Return undervalued by ` 2,740)
(v) Suspense A/c Dr. 100
To P &L Adjustment A/c 100
(Being rectification of discount allowed wrongly, debited to
Discount A/c)
(vi) P & L Adjustment A/c Dr. 136
To Suspense A/c 36
To Creditors A/c 100
(Being rectification of undervaluation of Purchase Book and wrong,
posting to suppliers A/c as ` 51)
CA Foundation/Accounting/Practice Que. Set P a g e | 23
7. The difference in Trial Balance is kept by Rajesh in Suspense Account. Before preparing the Final Accounts,
the following errors were detected by him:
(i) Purchase for ` 1,080 was written in Sales day book but was posted to the correct side of the Party's
account.
(ii) Salary account total ` 25,200 was carried over to the next page as ` 2,520 on the wrong side.
(iii) Interest on Overdraft ` 1,300 was not posted to the Ledger from the Cash-book. Pass the
Rectification entries and prepare the suspense account. (5 Marks)
Ans. In the books of Rajesh
Rectification entries
Date Particular L.F. Dr. (`) Cr. (`)
1. Purchase A/c Dr. 1,080
Sales A/c Dr. 1,080
To Suspense A/c 2,160
(Being purchase was recorded by mistake in sales day book)
2. Salary ale (25,200 + 2,520) Dr. 27,720
To Suspense A/c 27,720
(Being total of salary ale Bal. of ` 25,200 written as 2,540 on the wrong
side.)
3. Interest on Overdraft A/c Dr. 1,300
To Suspense A/c 1,300
(Being posting of entry to the ledger omitted)
31,180 31,180

Suspense A/c
Particulars (`) Particulars (`)
To Bal. b/d 31,180 By Purchase 1,080
By Sales 1,080
By Salary 27,720
By Interest on overdraft 1,300
31,180 31, 180

8. On March 31, 2006, before preparing the final accounts, Mr. A prepared a trial balance, which didn't tally.
He put the difference in a newly opened suspense account. The following errors were located. You are
required to pass Journal Entries to rectify the errors and prepare suspense account.
(i) Purchase of ` 981 from Ram were posted as ` 918 to the debit side of Ram's account.
(ii) While carrying forward the total of sales-book from one page to the next page, the amount was
written as ` 16,857, instead of ` 16,758.
(iii) A purchase of an office table costing ` 2,0000 had been posted through purchase day-book.
(iv) The total of return outward book in March, 2006 had been undercast by ` 1,000.
(v) An amount of ` 3,000 received from Vijay was debited to his account.
(vi) A sum of ` 1,300 which had been previously written off as bad debts, was received from Anand, a
customer and the same was credited to Anand's personal account.
(vii) A sale of ` 1,200 to Singh & Co. was credited to their account.
CA Foundation/Accounting/Practice Que. Set P a g e | 24
Ans.
Particulars Debit (`) Credit (`)
(i) Suspense Account Dr. 1,899
To Ram 1,899
(Purchases of ` 981 from Ram was posted as ` 918 to the debit side of
Ram's account, now rectified).
(ii) Sales Account Dr. 99
To Suspense A/c 99
(The excess credit to sale account because of wrong carry forward from
one page to next page, now rectified)
(iii) Office Furniture Dr. 2,000
To Purchase Account 2,000
(The purchase of furniture has been wrongly entered in purchase book,
now rectified)
(iv) Suspense Account Dr. 1,000
To Return Outward 1,000
(Rectification of the error arising due to under casting of return outward
books)
(v) Suspense Account Dr. 6,000
To Vijay 6,000
(An amount of ` 3,000 received from Vijay was wrongly debited in his
account now rectified)
(vi) Anand 1,300
To Bad Debts Recovered 1,300
(Recovery of Bad Debts credited to payer's account, error now rectified)
(vii) Singh & Co. Dr. 2,400
To Suspense Account 2,400
(Being correction of mistake by which the account of Singh & Co. was
credited instead of being debited)

Suspense Account
Particulars Amount Particulars Amount
To Ratn 1,899 By Balance b/d (Balancing figure) 6,400
To Return Outward 1,000 By Sales Account 99
To Vijay 6,000 By Singh & Co. 2,400
8,899 8,899
9. Give journal entries (narrations not required) to rectify the following:
(i) Purchase of Furniture on credit from Nigam for ` 3,000 posted lo Subham account as ` 300.
(ii) A Sales Return of ` 5,000 to Joythy was not entered in the financial accounts though it was duly
taken in the stock book.
(iii) Investments were sold for ` 75,000 at a profit of ` 15,000 and passed through Sales account.
(iv) An amount of ` 10,000 withdrawn by the proprietor (Darshan) for his personal use has been debited
to Trade Expenses account. (4 Marks)
CA Foundation/Accounting/Practice Que. Set P a g e | 25
Ans.
(i) Shubham's A/c Dr. 300
Suspense A/c Dr. 2,700
To Nigam's A/c Dr. 3,000
(ii) Sales Return A/c Dr. 5,000
To Jyothy's A/c 5,000
(iii) Sales A/c Dr. 75,000
To Investment A/c 60,000
To P/L A/c 15,000
(iv) Drawing A/c 10,000 Dr.
To Trade Expenses A/c 10,000

10. Miss Daisy was unable to agree the Trial Balance last year and wrote off the difference to the profit and loss
account of that year. On verifying the old books by a Chartered Accountant next year, the following
mistakes were found.
(i) Purchase account was under cast by ` 8,000.
(ii) Sale of goods to Mr. Rahim for ` 2,500 was omitted to be recorded.
(iii) Receipt of cash from Mr. Asok was posted to the account of Mr. Anbu ` 1,200.
(iv) Amount of ` 4,167 of sales was wrongly posted as ` 4,617.
(v) Repairs to Machinery. was debited to Machinery Account ` 1,800.
(vi) A credit purchase of goods from Mr. Paul for ` 3,000 entered as sale. Suggest the necessary
rectification entries. (10 Marks)
Ans.
S. No. Particular L.F. Debit (`) Credit (`)
1. Profit & Loss Adjustment Dr. 8,000
To Suspense A/c 8,000
(Being purchase account under cast in previous year, now
rectified)
2. Mr. Rahim's A/c Dr. 2,500
To Profit & Loss Adj. A/c 2,500
(Being Sale omitted to be recorded in previous year, now
recorded)
3. Mr. Anbu's A/c Dr. 1,200
To Mr. 'Asok's A/c 1,200
(Being account wrongly posted now rectified)
4. Suspense A/c Dr. 450
To Debtor's A/c 450
(Being debtors account wrongly posted, now rectified)
5. Profit & Loss Adjustment A/c Dr. 1,800
To Machinery A/c 1,800
(Being repair wrongly debited to machinery in previous year,
now rectified)
CA Foundation/Accounting/Practice Que. Set P a g e | 26
6. Profit & Loss Adjustment A/c Dr. 6,000
To Paul's A/c 6,000
(Being purchases wrongly recorded as sales in previous year,
now rectified)

11. The following mistakes were located in the books of a concern after its books were closed and a Suspense
Account was opened in order to get the Trial Balance agreed:
(i) Sales Day Book was overcast by ` 1,000.
(ii) A sale of ` 5,000 to X was wrongly debited to the Account of Y.
(iii) General expenses ` 180 was posted in the General Ledger as ` 810.
(iv) A Bill Receivable for ` 1,550 was passed through Bills Payable Book. The Bill was given by P.
(v) Legal Expenses ` 1,190. paid to Mrs. Neetu was debited to her Personal Account.
(vi) Cash received from Ram was debited to Shyam ` 1,500.
(vii) While carrying forward the total of one page of the Purchases Book to the next, the amount of
` 1,235 was written as ` 1,325.
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. (10 Marks)
Ans. Journal Entries for Rectification
S. No. Particular Debit (`) Credit (`)
(i) Profit &. Loss Adjustment A/c Dr. 1,000
To Suspense A/c 1,000
(Being over casting of sales day book, now rectified)
(ii) X’s A/c Dr. 5,000
To Y’s A/c 5,000
(Being sale to X, wrongly debited to Y, now rectified)
(iii) Suspense A/c Dr. 630
To Profit & Loss Adjustment A/c 630
(Being general expenses wrongly posted in ledger. now rectified)
(iv) Bills Receivable A/c Dr. 1,550
Bills Payable A/c Dr. 1,550
To P 3,100
(Being B/R wrongly recorded as B/P, now rectified)
(v) Profit& Loss Adjustment A/c Dr. 1,190
To Mrs. Neetu's A/c 1,190
(Being legal expenses paid, wrongly debited to personal A/c, now
rectified)
(vi) Suspense A/c Dr. 3,000
To Ram's A/c 1,500
To Shyam's A/c 1,500
(Being cash received from Ram, wrongly debited to Shyam, now
rectified)
(vii) Suspense A/c Dr. 90
To Profit & Loss Adjustment A/c 90
(Being wrong total of purchase book carried forward, now rectified.)
CA Foundation/Accounting/Practice Que. Set P a g e | 27
Suspense Account
Particulars (`) Particulars (`)
To Profit & Loss Adjustment A/c 630 By Profit & Loss Adjustment A/c 1,000
To Ram's A/c 1,500 2,720
To Shyam's A/c 1,500
To Profit & Loss Adjustment A/c 90
3,720 3,720
Nature of Suspense Account: Nominal
Amount of Suspense Account: ` 2,720 Dr.

*********
CA Foundation/Accounting/Practice Que. Set P a g e | 28

CHAPTER 6 – DEPRECIATION
1. ABC Ltd. purchased on 1st January, 1988 second hand Plant for ` 30,000 and immediately spent ` 20,000 in
overhauling it. On 1st July, 1988 additional machinery of a cost of ` 25,000 was purchased. On 1st July, 1990,
the plant purchased on 1st January, 1988 became obsolete and was sold for ` 10,000. On that date new
machinery was purchased at a cost of ` 60,000.
Depreciation was provided for annually on 31st December, at 10% per annum on the original cost of the
asset. In 1991, however, the company changed this method of providing for depreciation and adopted the
method of writing off 15% on the diminishing value.
Show the Plant & Machinery Account as it would appear in the books of the company for the years 1988 to
1993. (15 Marks)
Ans. In the books of ABC Ltd.
Plant & Machinery A/c
Date Particulars (`) Date Particulars (`)
1988 1988
Jan 1 To Bank A/c 30,000 Dec. 31 By Depreciation 6,250
Jan 1 To Bank A/c (Overhauling) 20,000 Dec. 31 By Balance c/d 68,750
July 1 To Bank A/c 25,000
75,000 75,000
1989 1989
Jan 1 To Balance b/d 68,750 Dec. 31 By Depreciation A/c 7,500
Dec. 31 By Balance c/d 61,250
68,750 68,750
1990 1990
Jan 1 To Balance b/d 61,250 July 1 By Bank A/c (Sale proceeds) 10,000
July 1 To Bank A/c 60,000 Dec. 31 By Depreciation A/c 8,000
Dec. 31 By Profit & Loss A/c (Loss on sale of plant)
(W.N. 2) 27,500
Dec. 1 By Balance c/d 75,750
1,21,250 1,21,250
1991 1991
Jan 1 To Balance b/d 75,750 Dec. 31 By Depreciation A/c (see note) 11,363
Dec. 31 By Balance c/d 64,387
75,750 75,750
1992 1992
Jan 1 To Balance b/d 64,387 Dec. 31 By Depreciation A/c 9,658
Dec. 31 By Balance c/d 54,729
64,387 64,387
1993 1993
Jan 1 To Balance b/d 54,729 Dec. 31 By Depreciation A/c 8,209
Dec. 31 By Balance c/d 46,520
54,729 54,729
CA Foundation/Accounting/Practice Que. Set P a g e | 29
Working Notes:
1. Calculation of depreciation for the year 1990: (`)
The depreciation on plant sold (` 50,000 x 10/100 x 1/2) 2,500
Depreciation on ` 25,000 for one year 2,500
Depreciation on ` 60,000 for half year 3,000
8,000
2. Loss on Sale of Plant:
WDV oi Plant sold as on 1.7.1990 (` 50,000 - ` 12,500) 37,500
Less: Sale proceeds 10,000
Loss on sale 27,500

2. A purchased on 1st January, 1993 certain machinery for ` 1,94,000 and spent ` 6,000 on its erection. On
1st July, 1993 additional machinery costing ` 1,00,000 was purchased. On 1st July, 1995 the machinery
purchased on 1st January, 1993 having become obsolete was auctioned for ` 1,00,000 and on the same
date new machinery was purchased at a cost of ` 1,50,000. Depreciation was provided for annually on 31st
December at the rate of 10% per annum on the original cost of the machinery. No depreciation need be
provided when a machinery is sold or auctioned, for that part of the year in which sale or auction took
place. But for the above, depreciation shall be provided on time basis. In 1996 however, A changed this
method of providing depreciation and adopted the method of writing off 15% p.a. on the written down
value on the balance as appeared in machinery account on 1.1.1996.
Show the machinery account for the calendar years 1993 to 1996. (9 Marks)
Ans. Machinery Account
Date Particulars (`) Date Particulars (`)
1993 1993
Jan 1 To Bank A/c 1,94,000 Dec. 31 By Dep. A/c 25,000
July 1 To Bank A/c (Erection cost) 6,000 By Balance c/d 2,75,000
To Bank A/c 1,00,000
3,00,000 3,00,000
1994 1994
Jan 1 To Balance bid 2,75,000 Dec. 31 By Dep. A/c 30,000
Dec. 31 By Balance c/d 2,45,000
2,75,000 2,75,000
1995 1995
Jan 1 To Balance bid 2,45,000 July 1 By Bank A/c (Sales Proceeds) 1,00,000
July 1 To Bank A/c 1,50,000 Dec. 31 By P&L A/c (Loss on sale) 60,000
By Dep. A/c 17,500
By Balance c/d 2,17,500
3,95 000 3,95,000
1996 1996
Jan 1 To Balance bid 2,17,500 Dec. 31 By Dep. A/c (15% on 2,17,500) 32,625
By Balance c/d 1,84,875
2, 17,500 2 17,500
CA Foundation/Accounting/Practice Que. Set P a g e | 30
Notes:
(1) Calculation of Depreciation: Machinery I Machinery II Machinery Ill
(10% per annum on the original cost)
[Date of Purchase:
1993 1st Jan. 1993 1st July 1993 1St July 1995
` ` `
20,000 5,000 -
(10/100 x 2,00,000) (1,00,000 x 112 x 10/100) -
1994 20,000 10,000 -
1995 - 10,000 7,500
(1,50,000 x 6/12 x 10/100)

(2) Loss on Sale:

(`)
Cost (Purchase) 2,00,000
Less: Total Depreciation (on First Machinery) 40,000
W.D.V. on the date of sale 1,60,000
Less: Sale Value 1,00,000
Loss on sale 60,000

3. Green Channel Co. purchased a second-hand machine on 1st January, 1999 for ` 1,60,000. Overhauling and
erection charges amounted to ` 40,000.
Another machine was purchased tor ` 80,000 on 1st July, 1999.
On 1st July, 2001, the machine installed on 1st January, 1999 was sold for ` 1,00,000. On the same date
another machine was purchased for ` 30,000 and was installed on 30th September, 2001.
Under the existing practice the company provides depreciation @ 10% p.a. on original cost. However, from
the year 2002 it decided to adopt WDV method and to charge depreciation @ 15% p.a. This change was to
be made with prospective effect.
Prepare Machinery Account in the book of Green Channel Co. for the year 1999 to 2002. (12 Marks)
Ans. In the books of Green Channel Co.
Dr. Machinery Account Cr.
Date Particulars (`) Date Particulars (`)
1.1.1999 To Bank A/c 1,60,000 31.12.1999 By Depreciation A/c 24,000
(` 20,000 + ` 4,000)
1.7.1999 To Bank A/c (Erection charges) 40,000 31.12.1999 By Balance c/d 2,56,000
(` 1,80,000 + ` 76,000)
To Bank A/c 80,000
2,80,000 2,80,000
1.1.2000 To Balance b/d 2,56,000 31.12.2000 By Depreciation A/c 28,000
(` 20,000 + ` 8,000)
31.12.2000 By Balance c/d 2,28,000
(` 1,60,000 + ` 68,000)
2,56,000 2,56,000
CA Foundation/Accounting/Practice Que. Set P a g e | 31
Date Particulars (`) Date Particulars (`)
1.1.2001 To Balance b/d 2,28,000 1.7.2001 By Bank A/c 1,00,000
30.9.2001 To Bank A/c 30,000 By Profit & Loss A/c 50,000
(Loss on Sale - W.N.1)
31.12.2001 By Depreciation A/c 18,750
(` 10,000 + ` 8,000 + ` 750)
By Balance c/d 89,250
(` 60,000 + ` 29,250)
2,58,000 2,58,000
1.1.2002 To Balance b/d 89,250 31.12.2002 By Profit and Loss A/c (W.N. 3) 6,910
By Depreciation A/c 12,351
(` 8,019.75 + ` 4,331.25)
By Balance c/d 69,989
(` 45,445.25 + ` 24,543.75)
89,250 89,250

Working Notes:
1. Book Value of machines (Straight line method)
Machine I Machine II Machine Ill
(`) (`) (`)
Cost 2,00,000 80,000 30,000
Depreciation for 1999 20,000 4,000
Written down value as on 31.12.1999 1,80,000 76,000
Depreciation for 2000 20,000 8,000
Written down value as on 31.12.2000 1,60,000 68,000
Depreciation for 2001 10,000 8,000 750
Written down value as on 31.12.2001 1,50,000 60,000 29,250
Sale proceeds 1,00,000
Loss on sale 50,000

2. Depreciation of machines (Written down value method)

Machine II Machine Ill
(`) (`)
Cost 80,000 30,000
Depreciation
1999 6,000
2000 11,100
2001 9,435 1,125
Total depreciation for 1999-2001 26,535 1,125
CA Foundation/Accounting/Practice Que. Set P a g e | 32
3. Retrospective effect of change in depreciation method for machines II and III (1999-2001)
(`)
Depreciation under written down value method (` 26,535 + ` 1,125) 27,660
Depreciation under straight line method (` 20,000 + ` 750) 20,750
Deficiency arising from retrospective recomputations of
depreciation to be charged to Profit and Loss A/c 6,910

4. A company purchased second hand machinery on 1st January, 2000 for ` 3,00,000, subsequent to which
` 60,000 and ` 40,000 were spent on its repairs and installation, respectively. On 1st July, 2001 another
machinery was purchased tor ` 2,60,000. On 1st July, 2002, the first machinery having become outdated
was auctioned for ` 3,00,000 and on the same date, another machinery was purchased for ` 2,50,000.
On 1st July, 2003, the second machinery was also sold off and it fetched ` 2,30,000.
Depreciation was provided on machinery @ 10% on the original cost annually on 31st December, under the
Fixed Installment method. From 1st January, 2002, the method of providing depreciation was changed to
Reducing Balance method, the rate being 15% p.a.
You are required to prepare the following accounts in the books of the company:
(i) Machinery Account for the years ending 2000 to 2003. (ii) Machinery Disposal Account.
Note: The figures are rounded off to the nearest multiple to Rupees ten. (12 Marks)
Ans. Machinery Account
Date Particulars (`) Date Particulars (`)
2000 2000
Jan 1 To Bank A/c Dec. 31 By Depreciation (A) 40,000
(A) - Cost 3,00,000
-Repairs 60,000
- Installation 40,000
By Balance c/d (A) 3,60,000
4,00,000 4,00,000
2001 2001
Jan 1 To Balance b/d 3,60,000 Dec. 31 By Depreciation
(A) - 40,000
(B) - 13,000 53,000
July 1 To Bank A/c (B) 2,60,000 By Balance c/d
(A) - 3,20,000
(B) – 2,47,000 5,67,000
6,20,000 6,20,000
2002 2002
Jan 1 To Balance b/d 5,67,000 July 1 By Machinery Disposal A/c 2,67,320
(A) (W.N.1)
July 1 To Bank A/c (C) 2,50,000 Dec. 31 By Depreciation
(A) - 21,680 (W.N.1)
(B) - 36,080 (W.N.1)
(C) - 18,750 (W.N.1) 76,510
CA Foundation/Accounting/Practice Que. Set P a g e | 33
Date Particulars (`) Date Particulars (`)
By Profit and Loss A/c –
Short Depreciation
(A) - 31,000 (W.N.2)
(B) - 6,500 (W.N.2) 37,500
By Balance c/d
(B) - 2,04,420
(C) - 2,31,250 4,35,670
8,17,000 8,17,000
2003 2003
Jan. 1 To Balance b/d 4,35,670 July 1 By Machinery Disposal A/c
(B) (W.N.1) 1,89,090
Dec. 31 By Depreciation
(B) - 15,330
(C) - 34,690 50,020
By Balance c/d (C) 1,96,560
4,35,670 4,35,670
Machinery Disposal Account
2002 Particulars (`) 2002 Particulars (`)
July 1 To Machinery A/c (A) 2,67,320 July 1 By Bank A/c 3,00,000
To Profit and Loss A/c 32,680
(Profit)
3,00,000 3,00,000
2003 2003
July 1 To Machinery A/c (B) 1,89,090 July 1 By Bank A/c 2,30,000
To Profit and Loss A/c 40,910
(Profit)
2,30,000 2,30,000
Working Notes:
1. S.L.M W.D.V
Machinery Depreciation Book Depreciation Book
@ 10% p.a. value @ 15% p.a. value
(A) Purchased for
` 4,00,000 on Jan. 1, 2000 40,000 3,60,000 60,000 3,40,000
Year-2001 40,000 3,20,000 51,000 2,89,000
80,000 1,11,000
Year till July, 2002 21,680 2,67,320
(B) Purchased for
` 2,60,000 on July 1, 2001 13,000 2,47,000 19,500 2,40,500
Year-2002 36,080 2,04,420
Year till July 1, 2003 15,330 1,89,090
CA Foundation/Accounting/Practice Que. Set P a g e | 34
(C) Purchased for
` 2,50,000 on July 1, 2002 18,750 2,31,250
Year-2003 34,690 1,96,560

2. Adjusted Depreciation till 2001

S.L.M  W.D.V (`)
Machinery (A) ` 80,000  ` 1, 11,000 31,000 (deficit to be charged to profit and loss A/c)
Machinery (B) ` 13,000  ` 19,500 6,500 (deficit to be charged to profit and loss A/c)
37,500
Notes:
1. As per para 15 of AS 6 'Depreciation Accounting', when the method of depreciation is changed,
depreciation is recalculated in accordance with the new method from the date of the asset coming
into use. The deficiency or surplus arising from retrospective recomputation of depreciation in
accordance with the new method is adjusted in the accounts in the year in which the method of
depreciation is charged. Therefore, in the above solution, the retrospective recomputation of
depreciation as per new method has been considered.
2. The method of depreciation was changed on 1st January, 2002. Since, Machinery A existed on the
date of change in method of depreciation, therefore, retrospective effect has also been given to it.

5. A Plant & Machinery costing ` 10,00,000 is depreciated on straight line assuming 10 year working life and
zero residual value, for four years. At the end of the fourth year, the machinery was revalued upwards by
` 40,000. The remaining useful life was reassessed at 8 years. Calculate Depreciation for the fifth year.
(4 Marks)
Ans. Depreciation per year
= ` 10,00,000 / 10 = ` 1,00,000
Depreciation on Sum Basis for 4 years
= ` 1,00,000 x 4 years = ` 4,00,000
Book Value of Machine at the end of
4th year = ` 10,00,000 - 4.00,000 = ` 6,00,000
Depreciation amount after revaluation
= 6,00,000 + 40,000 = ` 6,40,000
Remaining useful life as per revised estimate = 8 years
Depreciation for fifth year and
Onwards = ` 6,40,000/8 = ` 80,000.

**********
CA Foundation/Accounting/Practice Que. Set P a g e | 35

CHAPTER 7 – CONSIGNMENT ACCOUNT

1. X of Delhi purchased 10,000 metres of cloth for ` 2,00,000 of which 5,000 metres were sent on
consignment to Y of Agra at the selling price of ` 30 per metre. X paid ` 5,000 for freight and ` 500 for
packing etc.
Y sold 4,000 metres at ` 40 per metre and incurred ` 2,000 for selling expenses. Y is entitled to a
commission of 5% on total sale proceeds plus a further 20 per cent on any surplus price realised over ` 30
per metre. 3,000 metres were sold at Delhi at ` 30 per metre less ` 3,000 for expenses and commission.
Owing to fall in market price, the stock of cloth in hand is to be reduced by 10 per cent.
Prepare the Consignment Account and Trading and Profit & Loss
Account in Books of X and his account in the books of Y. (15 Marks)
Ans. In the Books of X Consignment Account
Particulars Amt.. (`) Particulars Amt.. (`)
To Goods sent on Consignment A/c 1,50,000 By Y's Account- Sales 1,60,000
To Bank A/c By Goods sent on Consignment 50,000
Freight 5,000 By Stock on Consignment (2) 28,990
Packing etc. 500
To Y's Account 2,000
To Selling Expenses Commission (1) 16,000
To Stock Reserve 10,000
To Tracing and P & L A/c 55,490
2,37,000 2,37,000

Trading and profit & loss Account for the year ended
Particulars Amt.. (`) Particulars Amt.. (`)
To Purchases 2,00,000 By Sales 90,000
To Gross Profit c/d 26,000 By Goods sent on Consignment 1,00,000
By Stock in hand 40,000
Less: 10% 4,000 36,000
2,26,000 2,26,000
To Expenses & Commission 3,000 By Gross Profit b/d 26,000
To Net Profit 77,500 By Consignment A/c 55,490
80,500 80,500

In the books of Y
X's A/c
Particulars Amt.. (`) Particulars Amt.. (`)
To Cash A/c - Selling expenses 2,000 By Cash A/c sale proceeds 1,60,000
To Commission 16,000
To Balance c/d 1,42,000
1,60,000 1,60,000
CA Foundation/Accounting/Practice Que. Set P a g e | 36
Working Note:
(1) Calculation of commission payable to Y (`)
Total Sale to of Y 1,60,000
Surplus proceeds realised over r 30 per meter (4000 x (< 40-30)] 40,000
Commission:
 5 
  1,60 ,000  8,000
 100 
 20 
  40 ,000  8,000
 100 
16,000

(2) Calculation of Stock on Consignment: (`)

Cost of consignment stock (1000 mtrs @ ` 20) 20,000
Less: fall in price 10% 2,000
18,000
Add: Loading 50% on cost 9,000
27,000

2. M/s Ram & Co., of Delhi purchased 20,000 pieces of sarees @ ` 200 per saree. Out of these, 12,000 sarees
were sent on consignment to M/s Laxman Traders of Bombay at the selling price of ` 240 per saree. The
consignors paid ` 6,000 for packing and freight.
M/s Laxman Traders sold 10,000 sarees @ ` 250 per saree and incurred ` 2,000 towards selling expenses
and remitted ` 10,00,000 to Delhi on account. M/s Laxman Traders are entitled to a commission of 5
percent on total sales plus a further 20 percent commission on any surplus price realised over ` 240 per
saree.
6,000 sarees were sold at ` 220 per saree by the consignor. Owing to fall in the market price, the value of
stock of sarees in hand is to be reduced by 10 percent.
Prepare the consignment account and the account of M/s Laxman Traders in the books of the consignor.
(15 Marks)
Ans. In the Books of Mis Ram & Co.
Dr. Delhi Consignment Account Cr.
Particulars Amt. (`) Particulars Amt. (`)
To Goods sent on Consignment A/c By Laxman Traders A/c 25,00,000
(12,000 x 240) 28,80,000 (10,000 x 250)
To Bank 6,000 By Goods sent on Consignment 4,80,000
To Laxman Traders (expenses) 2,000 (12,000 x 40)
To Laxman Traders (Commission) 1,45,000 By Stock on consignment 4,32,900
To Stock Reserve 72,000
To Net Profit 3,07,900
(Profit on Consignment Transferred)
34,12,900 34,12,900
CA Foundation/Accounting/Practice Que. Set P a g e | 37
Laxman Traders Account
Particulars Amt. (`) Particulars Amt. (`)
To Consignment A/c (sales) 25,00,000 By Consignment Ne 2,000
By Consignment A/c (1) 1,45,000
By Bank A/c 10,00,000
By Balance c/d 13,53,000
25,00,000 25,00,000
Working Note:
1. Calculation of Commission Payable
5% on 25,00,000 = 1,25,000
20% on 1,00,000 = 20,000
1,45,000
2. Valuation of closing stock on consignment
2000 sarees @ ` 240 = 4,80,000
Add: Proportionate expenses
6,000  2,000
1,000
12,000
4,81,000
Less: Reduction in cast by 10% 48,100
Value of closing stock 4,32,900

3. X of Calcutta on 15th January, 1997 sent to Y of Bombay a consignment of 250 televisions costing ` 10,000
each. Expenses of ` 7,000 were met by the consignor. Y of Bombay spent ` 4,500 for clearance on 30th
January, 1997 and the selling expenses were ` 500 per television as and when the sale made by Y
Y sold, on 4th March, 1997, 150 televisions at ` 14,000 per television and again on 10th April, 1997, 75
televisions at ` 14,400.
Mr. Y was entitled to a commission of ` 500 per television sold plus one - fourth of the amount by which
the gross sale proceeds less total commission
there on exceeded a sum calculated at the rate of ` 12,500 per television sold. Y sent the account sale and
the amount due to X on 30th April, 1997 by bank demand draft.
You are required to show the consignment account and Y's account in the books of X. (15 Marks)
Ans. Dr. Consignment Account Cr.
Date Particulars Amt. (`) Date Particulars Amt. (`)
1997 1997
Jan. 15 To Goods Sent on Consignment A/c 25,00,000 Mar. 4 By Y A/c (Sales) 21,00,000
Jan. 15 To Bank A/c 7,000 Apr. 10 By Y A/c (Sales) 10,80,000
Jan. 30 To Y A/c (Clearance expenses) 4,500 Apr. 30 By Stock on Consignment A/c (2) 2,51,150
Mar. 4 To Y A/c (Selling Expenses) 75,000
Apr. 10 To Y A/c (Selling Expenses) 37,500
Apr. 30 To Y A/c (Commission) 1,63,500
Apr. 30 To Net Profit 6,43,650
34,31,150 34,31,150
CA Foundation/Accounting/Practice Que. Set P a g e | 38
Dr. Y (Bombay) Account Cr.
Date Particulars Amt. (`) Date Particulars Amt. (`)
1997 1997
Mar. 4 To Consignment A/c 21,00,000 Jan 30 By Consignment A/c 4,500
Apr. 10 To Consignment A/c 10,80,000 Mar. 4 By Consignment A/c 75,000
Apr. 1 By Consignment A/c 37,500
Apr. 30 By Consignment A/c (1) 1,63,500
Apr.30 By Bank A/c 28,99,500
31,80,000 31,80,000
Working Notes:
1. Computation of commission
Let Total Commission be x
x = 225 x 500 + 1/4[(21,00,000+ 10,80,000 - x - (12,500 x 225)]
x = 1, 12,500 + 1 /4 [31,80,000 - x - 28, 12,500]
X X
x = 1,12,500 + 91,875 - ; X = 1,12,500 + 91,875
4 4
5X
= 2,04,375
4
X = 1,63,500
Total Commission = ` 1,63,500

2. Valuation of closing stock (`)

25 televisions @ ` 10,000 2,50,000
 7,0000  25 
Add: Proportionate expenses of the consignor   700
 250 
 4 ,500  25 
Add: Proportionate clearance expenses paid by the consignee   450
 250 
2,51,150

4. D of Delhi appointed A of Agra as its selling agent on the following terms:

(a) Goods to be sold at invoice price or over.
(b) A to be entitled to a commission of 7.5% on the invoice price and 20% of any surplus price realised.
(c) The principals to draw on the agent a 30 days bill for 80% of the invoice price.
On 1st February, 1998, one thousand cycles were consigned to A, each cycle costing ` 640 including freight
and invoiced at ` 800.
Before 31st March, 1998 (when the principal's books are closed) A met his acceptance on the due date; sold
off 820 cycles at an average price of ` 930 per cycle, the sale expenses being ` 12,500; and remitted the
amount due by means of Bank Draft.
Twenty of the unsold cycles were shop-soiled and were to be valued at a depreciation of 50%.
Show by means of ledger accounts how these transactions would be recorded in the books of A and find
out the value of closing stock with A at which value D will account for the balance stock. (15 Marks)
CA Foundation/Accounting/Practice Que. Set P a g e | 39
Ans. Dr. D's Account Cr.
Date Particulars Amt.. (`) Date Particulars Amt.. (`)
1998 1998 Cash Bank A/c 7,62,600
Feb. 1 To Bill Payable A/c 6,40,000 Mar. 31 (820 cycles x ` 930)
(80% of ` 8,00,000) 12,500
Mar. 31 To Cash A/c 70,520
Mar. 31 To Commission A/c 39,580
Mar. 31 To Bank A/c
7,62,600 7,62,600

Dr. Bills Payable Account Cr.

Date Particulars Amt.. (`) Date Particulars Amt.. (`)
1998 1998 By D's A/c 6,40,000
Mar. 4 To Cash Bank A/c 6,40,000 Feb. 1
6,40,000 6,40,000

Value of Closing Stock with 'A'

at which value 'D' will account for balance stock
(`)
160 cycles at ` 640 (cost price including freight) 1,02,400
20 Cycles shop-soiled at 50 % of the ` 640 i.e. ` 320 each 6,400
Value of closing stock with A 1,08,800

5. Mr. Y consigned 800 packets of toothpaste, each packet containing 100 toothpastes. Cost price of each
packet was ` 900. Mr. Y spent ` 100 per packet as cartage, freight, insurance and forwarding charges. One
packet was lost on the way and Mr. Y lodged claim with the insurance company and could get ` 570 as
claim on average basis. Consignee took delivery of the rest of the packets and spent ` 39,950 as other non-
recurring expenses and ` 22,500 as recurring expenses. He sold 740 packets at the rate of ` 12 per
toothpaste. He was entitled to 2% commission on sales plus 1% del-credere commission.
You are required to prepare Consignment Account. Calculate the cost of stock at the end, abnormal loss
and profit or loss on consignment. (15 Marks)
Ans. Dr. Consignment Account Cr.
Particulars Amt. (`) Particulars Amt. (`)
To Goods sent on Consignment A/c 7,20,000 By Consignee's A/c 8,88,000
(800 x ` 900) each (sales 740 x 100 x ` 12)
To Cash A/c 80,000 By Cash A/c 570
(Expenses: 800 x ` 100) By Consignment Stock (ii) 61,950
To Consignee's A/c By Profit & Loss A/c 430
Recurring Expenses 22,500
Non-Recurring Expenses 39,950
Commission @ 2% on
Sale of ` 8,88,000 17,760
CA Foundation/Accounting/Practice Que. Set P a g e | 40
Particulars Amt. (`) Particulars Amt. (`)
Del-credere Commission 8,880
(1% on ` 8,88,000)
To Profit and loss A/c 61,860
9,50,950 9,50,950
Working Notes:
(1) Valuation of Abnormal Loss:
Particulars (`)
Cost pf packet lost during transit 900
Add: Expenses incurred by Y 100
1,000
Less: Insurance claim received 570
Value of Abnormal Loss 430

(2) Cost of stock at the end:

Particulars (`)
59 packets @ ` 900 per packet 53,100
Add: Expenses incurred by Y (59 x ` 100) 5,900
Add: Proportionate expenses incurred by the Consignee
 59 
 `39 ,950 
 799  2,950
Value of closing stock 61,950

6. A of Agra sent on consignment goods valued ` 1,00,000 to B of Bombay on 1st March, 1999. He incurred an
expenditure of ` 12,000 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 per cent. B took delivery
of the consignment by incurring expenses of ` 3,000 for goods consigned.
On 31.12.1999, B informed on phone that he had sold all the goods for ` 1,50,000 by incurring selling
expenses of ` 2,000. He further informed that only ` 1,48,000 had been realised 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 5.1.2000, A received the cheque for the amount due from B and incurred bank charges of ` 260 for
collecting the cheque. The amount was credited by the Bank on 9.1.2000.
Write up the Consignment account finding out the profit/loss on the consignment, B's A/c, Provision for
Expenses A/c and Bank account in the books of the consignor, recording the transactions upto the receipt
and collection of the cheque. (9 Marks)
CA Foundation/Accounting/Practice Que. Set P a g e | 41
Ans. Books of Mr. A
Dr. Consignment Account Cr.
Date Particulars Amt. (`) Date Particulars Amt. (`)
1999 1999
Mar. 1 To Goods sent on Consignment A/c 1,00,000 Dec. 31 By B's A/c 1,50,000
To B's A/c
Dec. 31 Clearance expenses 3,000
Selling expenses 2,000
Commission @ 5% on
` 1,50,000 7,500
Del-credre commission @ 3%
on ` 1,50,000 4,500 17,000
To Cash A/c 12,000
To Provision for Bank charges 260
To Profit and Loss A/c 20,740
1,50,000 1,50,000

Dr. B's Account Cr.

Date Particulars Amt. (`) Date Particulars Amt. (`)
1999 1999 By Consignment A/c
Dec. 31 To Consignment A/c 1,50,000 Dec. 31 Clearance Expenses 3,000
Selling Expenses 2,000
Commission 7,500
Delcredere commission 4,500 17,000
By Balance c/d 1,33,000
1,50,000 1,50,000
2000 1,33,000 2000
Jan. 1 To Balance b/d Jan. 5 By Bank A/c 1,33,000

Bank Account
Date Particulars Amt. (`) Date Particulars Amt. (`)
2000 2000
Jan 5 To B's Account 1,33,000 Jan. 5 By Consignment A/c 260
Jan. 5 By Balance C/d 1,32,740
1,33,000 1,33,000
CA Foundation/Accounting/Practice Que. Set P a g e | 42
7. 'X' of Delhi purchased 10,000 pieces of Sarees @ ` 100 per Saree. Out of these Sarees, 6,000 were sent on
consignment to 'Y' of Agra at a selling price of ` 120 per Saree. The consignor paid ` 3,000 tor packing and
freight.
'Y' sold 5,000 Sarees at ` 125 per Saree and incurred ` 1,000 for selling expenses and remitted ` 5,00,000
to Delhi on account. They are entitled to a commission of 5% on total sales plus a further 20% commission
on any surplus price realised over ` 120 per Saree.
3,000 Sarees were sold in Delhi at ` 110 per Saree. Owing to fall in market price, the value of stock of
Sarees in hand is to be reduced by 10%.
Prepare the consignment Account in the books of 'X' and their account in the books of the agent 'Y' of Agra.
(12 Marks)
Ans. Consignment Account
Particulars Amt. (`) Particulars Amt. (`)
To Goods sent on consignment A/c 7,20,000 By Goods sent on consignment A/c 1,20,000
[6,000 x 120] 3,000 [Unloading 6,000 x 20]
To Bank [Packing and Freight] By Y [ 5,000 x 125] 6,25,000
To Y By Consignment Stock
Selling Exps. 1,000 Cost 6,00,000 x 16 1,00,000
Commission (i) 31,250 Add; Exps.
Extra Comm. (ii) 5,000 [3,000 x 1/6] 500
To Profit & Loss A/c 37,250 1,00,500
75,250 Less: 10% 10,050 90,450
8,35,450 8,35,450

Books of Y
X’s Account
Particulars (`) Particulars (`)
To Bank A/c [Selling Exps.] 1,000 By Bank A/c (Sale] 6,25,000
To Commission A/c
Gen. Comm. 31,250
Extra Comm. 5,000 36,250
To Bank A/c (Remittance) 5,00,000
To Balance C/d 87,750
6,25,000 6,25,000
Working Notes:
(i) Commission = 6,25,000 x 5 % = 31,250
(ii) Extra Comm. = 20% [5,000 x (125 - 120)] = 5,000

8. Mr. Anand consigned 800 packets of soaps, each packet containing 100 soaps. Cost price of each packet
was ` 900. Mr. Anand spent ` 100 per packet as cartage, freight, insurance and forwarding charges. One
packet was. lost on the way and Mr. Anand lodged claim with the insurance company and could get ` 570
as claim on average basis. Consignee took delivery of the rest of the rackets and spent ` 39,950 as other
non-recurring expenses and ` 22,500 as recurring expenses. He sold 740 packets at the rate of ` 12 per
soap. He was entitled to 2% commission on sales plus 1% del-credere commission.
You are required to prepare Consignment Account. Calculate the cost of stock at the end, Abnormal loss
and Profit-Loss on consignment. (10 Marks)
CA Foundation/Accounting/Practice Que. Set P a g e | 43
Ans.
Consignment A/c
Particulars Amt. (`) Particulars Amt. (`)
To Goods sent on consignment 7,20,000 By Sales 8,88,000
To Cash A/c (Cartage, Freight etc.) 80,000 By Abnormal Loss 1,000
To Consignee: By Stock on Consignment 61,950
Non-recurring Exp. 39,950 (Closing Stock)
Recurring Exps. 22,500 62,450
To Consignee:
Ordinary Commission 17,760
Del-credere Commission 8,880 26,640
To P&L A/c on consignment 61,860
9,50,950 9,50,950

Abnormal Loss
Particulars Amount (`) Particulars Amount (`)
By Consignment A/c 1,000 By Cash A/c 570
(Insurance Claim Received)
By P & L A/c (Loss) 430
1,000 1,000

P & L A/c on Consignment

Particulars Amount (`) Particulars Amount (`)
To Abnormal Loss 430 By Consignment A/c 61,860
To P & L A/c 61,430
61,860 61,860

Working Note: Calculation of packet-remain unsold (i.e. closing stock)

Total packets sent 800
Less: Lost 1
799
Less: Sold 740
Packets remaining unsold 59
`
Cost of 59 packets = 59 x ` 900 53,100
Consignor's production expenses = 59 x ` 100 5,900
39,950
Consignee's Direct Proportionate Expenses =  59 2,950
799
Value of Closing Stock 61,950
CA Foundation/Accounting/Practice Que. Set P a g e | 44
th
9. Mr. A of Assam sent on 18 February, 2004 a consignment of 1000 DVD players to B of Bengal costing of
` 100 each. Expenses of ` 1,500 were met by the consignor. B spent ` 3,000, for clearance and selling
expenses were ` 20 per DVD player.
B sold on 15th March, 2004, 600 DVD Players @ ` 160 per DVD Player - and again on 20th May, 2004, 300
DVD Players@ ` 170.
B is entitled to a commission of ` 25 per DVD Player sold plus 1/4 of the amount by which the gross s A/c
proceeds less total commission thereon exceeded a sum calculated @ ` 125 per DVD Player sold. B sent
the amount due to A on 30th June, 2004.
You are requested to show the consignment account and B's account in the books of A. (10 Marks)
Ans. Dr. In the books of A Consignment Account Cr.
Amount Amount
Date Particulars Date Particulars
(`) (`)
2004 2004
Feb. 18 To Goods sent on consignment account 1,00,000 Mar. 15 By B's account (Sales) 96,000
Feb. 18 To Cash account (Expenses) 1,500 (600 x ` 160)
To B's account (Clearance charges) 3,000 May 20 By B's account (Sales) 51,000
Jun. 30 To B's account (Selling expenses) (300 x ` 170)
i.e. (900 x ` 20) 18,000 Jun. 30 By Consignment Stock 10,450
To Commission (W.N. 1) 24,900 (W.N. 2)
Jun. 30 To Profit and loss account 10,050
1,57,450 1,57,450

B’s Account
Amount Amount
Date Particulars Date Particulars
(`) (`)
2004 2004
Mar. 15 To Consignment account (Sales) 96,000 Feb 18 By Consignment account 3,000
May 20 To Consignment account (Sales) 51,000 (Clearance charges)
June 30 By Consignment account:
Selling expenses 18,000
Commission 24,900
June 30 By Cash account 1,01,100
1,47,000 1,47,000

Working Notes:
1. Computation of total commission:
Let total commission paid / payable be X.
1
X = 900 x ` 25 + [(` 96,000 + ` 51,000) - x - (900 x ` 125)]
4
1
X = ` 22,500 + [` 1,47,000 – x - ` 1, 12,500]
4
1
X = ` 22,500 + [` 34,500 - x]; 4X = ` 90,000 + ` 34,500 – X
4
4x + x = ` 90,000 + ` 34,500
5x = ` 1,24,500
x = ` 24,900
CA Foundation/Accounting/Practice Que. Set P a g e | 45
2. Computation of value of the stock: (`)
100 DVD players @ < 100 each 10,000
1,500  100
Add: Proportionate expenses of A 150
1,000
3,000  100
Proportionate expenses paid by B 300
1,000
10,450

10. M of Mathura consigned 5,000 kg. of oil costing ` 20 per kg. to S of Surat. M paid ` 25,000 as Freight and
Insurance. 125 kg. of oil was destroyed in transit. The insurance claim was settled at ` 2,250 and was paid
directly to the consignor. S took delivery of consignment and accepted a bill drawn upon him by M for
` 50,000. S reported as follow:
(i) 3,750 kg. of oil was sold at ` 30 per kg.
(ii) His expenses were - Godown rent ` 10,000; Wages ` 1,000; Printing and Stationery ` 5,000.
(iii) 125 kg. of oil was lost due to leakage, which is quite normal.
S is entitled to a commission of 5% on the sales effected. S paid the amount due in respect of the
consignment. Show the Consignment Account, the Account of Sand Abnormal Loss Account in the books of
M. (9 Marks)
Ans. Dr. In the books of M Consignment A/c Cr.
Particulars ` Particulars `
To Goods sent to Consignee A/c (5,000.x ` 20) 1,00,000 By S A/c
To Bank Freight & insurance 25,000 (Sales) (3,750 kg. x ` 30) 1,12,500
To S A/c By Cash A/c insurance paid) 2,250
Godown Rent 10,000 By Abnormal Loss A/c 875
Wages 1,000 By Stock on Consignment 25,658
Printing & Stationary 5,000 By P&L A/c (loss) 5,342
Commission (1,12,500 x 5%) 5,625
1,46,625 1,46,625

Dr. S A/c Cr.

Particulars ` Particulars `
To Consignment (3750 x ` 30) 1,12,500 By Bills Receivable 50,000
By Consignment
Godown Rent
Wages 1,000
Printing & Stationary 5,000
Commission 5,625
By Bank A/c 40,875
1,12,500 1,12,500

(i) Calculation of Closing Stock:

Particular Kg.
Goods Sent 5,000
CA Foundation/Accounting/Practice Que. Set P a g e | 46
(-) Destroyed in transit (125)
(-) Sold by 'S' (3,750)
(-) Lost due to leakage (125)
Closing Stock 1,000 kg

(ii) Calculation of Value of Closing Stock:

Total Cost 1,25,000
(-) Abnormal loss (3,125)
1,21,875
(+) Consignee's exp. (Note) NIL
1,21,575

Units remaining Cost

4,750 1,21,875
1.000 25,658
Note on Consignee expenses: It is assumed that expenses paid by consignee are selling expenses in nature
& hence are not included in closing stock.

11. M/s Polypack and Company financial year ends on 31st March, 2006. Their actual physical stock as on 31st
March was ` 6,25,000 (net realizable value ` 6,40,000).
Following information regarding stock are also available:
(i) Goods costing ` 40,000 were damaged badly and it was expected that only ` 5,000 could be realized.
(ii) Goods costing ` 25,000 were sold on sale or return basis for which no confirmation has been
received till 31st March, 2006. Invoice value of these goods was ` 30,000
(iii) Goods were sent on consignment to Mr. B at invoice value (120% of cost) ` 1,50,000 on 31st March,
2006. He informed that halt of the material remains unsold.
You are required to ascertain the value of closing stock as on 31st March, 2006 as per AS 2. (5 Marks)
Ans. M/s Polypack & Company
Calculation of closing stock on 31st March, 2006
Amount (`)
st
Stock as on 31 March, 2006 6,25,000
Add:
(a) Goods on sale or return basis 25,000
(b) Goods unsold with consignee
 1,50 ,000 
  50  62,500 87,500
 120 % 
7,12,500
Less: Reduction in value of stock due to badly damaged goods ` (40,000 - 5,000) 35,000
Value of Closing Stock 6,77,500
CA Foundation/Accounting/Practice Que. Set P a g e | 47
12. Shri Ganpath of Nagpur consigns 500 cases of goods costing ` 1,500 each to Rawat of Jaipur. Shri Ganpath
pays the following expenses in connection with the consignment:
Particulars `
Carriage 15,000
Freight 45,000
Loading Charges 15,000
Shri Rawat sells 350 cases at ` 2,100 per case and incurs the following
Clearing charges 18,000
Warehousing and Storage charges 25,000
Packing and selling expenses 7,000
It is found that 50 cases were lost in transit and another 50 cases were in transit. Shri Rawat is entitled to a
commission of 10% on gross sales. Draw up the Consignment Account and Rawat's Account in the books of
Shri Ganpath. (10 Marks)
Ans. In books of Shri Ganpath of Nagpur Consignment A/c
Particulars (`) Particulars (`)
To Goods sent on 7,50,000 By Rawat (Sales) (350 x 2,100) 7,35,000
Consignments A/c By Loss in transit (W.N. 1) 82,500
To Cash: By Goods in transit 82,500
Carriage 15,000 By Stock on Consignment 84,750
Freight 45,000
Loading Ch. 15,000 75,000
To Rawat:
Clearing Ch. 18,000
Warehouse Ch. 25,000
Packing & Selling 7,000 50,000
To Rawat:
Commission 73,500
To P/L A/c (b/f) (profit) 36,250
9,84,750 9,84,750
Working Notes:
1. Calculation of loss in transit, goods in transit and closing stock
Cases Amount (`)
500 7,50,000
+ Consignor -
Expenses:
Carriage 15,000
Freight 45,000
Loading Charges ____ 15,000
500 8,25,000
- Loss in transit (50 cases) 50 82,500
450 7,42,500
- Goods in transit 50 82,500
400 6,60,000
+ Consignee D. Exp:
Clearing Charges - 18,000
CA Foundation/Accounting/Practice Que. Set P a g e | 48
400 6,78,000
- Sold 350
50
6,78,000
Closing Stock = x 50 = ` 84,750
400

2. Working of Commission
7,35,000 x 10% = ` 73,500

13. Raj of Gwalior consigned 15,000 kgs. of Ghee at ` 30 per kg. to his agent Siraj at Delhi. He spent ` 5 per kg.
as freight and insurance for sending the Ghee at Delhi. On the way 100 kgs. of Ghee was lost due to the
leakage (which is to be treated as normal loss) and 400 kgs. of Ghee was destroyed in transit. ` 9,000 was
paid to consignor directly by the Insurance company as Insurance claim.
Siraj sold 7 ,500 kgs. at ` 60 per kg. He spent ` 33,000 on advertisement and recurring expenses.
You are required to calculate:
(i) The amount of abnormal loss.
(ii) Value of stock at the end and
(iii) Prepare Consignment account showing profit or loss on consignment, if Siraj is entitled to 5%
commission on sales. (10 Marks)
Ans. In books of Raj of Gawalior Consignment Account
Particulars (`) Particulars (`)
To Goods sent on Consignments 4,50,000 By Siraj 4,50,000
To Cash: (freight & Ins.) 75,000 (Sales)
To Siraj By Loss in transit 14,094
Advst. 33,000 By Stock on Consignment 2,46,644
Commission 22,500 55,500
To P&L A/c (Profit in Consignment) 1,30,238
7,10,738 7,10,738
Working Notes:
1. Calculation of normal loss, abnormal loss and value of stock at end.
Qty (kg.) Amount (`)
15,000 4,50,000
+Freight - 75,000
15,000 5,25,000
- Net Loss 100 -
14,900 5,25,000
- Ab Loss 400 14,094
14,500 5,10,906
- Sold 7,500
Stock left 7,000 5,10,906 x 7,000
14,500
2,46,644
CA Foundation/Accounting/Practice Que. Set P a g e | 49
2. Loss in transit A/c
Amount (`) Amount (`)
To Consignment A/c 14,094 By Bank (Ins. Claim) 9,000
By P/L A/c (loss) 5,094
14,094 14,094

*********
CA Foundation/Accounting/Practice Que. Set P a g e | 50

CHAPTER 9: FINAL ACCOUNTS

1. From the following particulars extracted from the books of Ganguli, prepare Trading and Profit & Loss
Account and Balance Sheet as at 31st March, 1994 after making the necessary adjustments:
(`) (`)
Ganguli's Capital Interest Received 725
Account (Cr.) 54,050 Cash with Traders Bank Ltd. 4,000
Stock on 1.4.1993 23,400 Discounts Received 1,495
Sales 1,44.,800 Investments (at 5%) as on 1.4.1993 2,500
Sales Returns 4,300 Furniture as on 1.4.1993 900
Purchases 1,21,550 Discounts Allowed 3,770
Purchases Returns 2,900 General Expenses 1,960
Carriage Inwards 9,300 Audit Fees 350
Rent 2,850 Fire Insurance Premium 300
Salaries 4,650 Travelling Expenses 1,165
Sundry Debtors 12,000 Postage and Telegrams 435
Sundry Creditors 7,400 Cash on Hand 190
Loan from Dena Bank Ltd. (at 12%) 10,000 Deposits at 10% as on 1.4.1993 (Dr.) 15,000
Interest Paid 450 Drawings 5,000
Printing and Stationery 1,700
Advertisement 5,600
Adjustments:
(1) Value of stock as on 31st March, 1994 is ` 39,300. This includes goods returned by customers on 31st
March, 1994 to the value of ` 1,500 for which no entry has been passed in the books.
(2) Purchases include furniture purchased on 1st January, 1994 for ` 1,000.
(3) Depreciation should be provided on furniture at 10% per annum.
(4) The loan account from Dena Bank in the books of Ganguli appears as follows:
(`) (`)
31.03.1994 To Balance c/d 10,000 01.04.1993 By Balance b/d 5,000
______ 31.03.1994 By Bank 5,000
10,000 10,000
(5) Sundry Debtors include ` 2,000 due from Robert and Sundry Creditors include ` 1,000 due to him.
(6) Interest paid include ` 300 paid to Dena Bank.
(7) Interest received represent ` 100 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 a provision for doubtful debts at 5% on the balance under "Sundry Debtors". No such provision
need be made for the deposits. (20 Marks)
CA Foundation/Accounting/Practice Que. Set P a g e | 51
Ans. In the Books of Ganguli
Trading Profit & Loss Account for the year ended 31.3.1994
Particulars Amount Particulars Amount
To Opening Stock 23,400 By Sales 1,44,800
To Purchases 1,21,550 Less: Returns
Less: Transfer to (4,300 +
Furniture A/c 1,000 1,500) 5,800 1,39,000
1,20,550 By Closing Stock 39,300
Less: Returns 2,900 1,17,650
To Carriage Inwards 9,300
To Gross Profit c/d 27,950
1,78,300 1,78,300
To Salaries 4,650 By Gross profit b/d 27,950
To Rent 2,850 By Interest 1,725
To Advertisement 5,600 By Discount received 1,495
To Printing & Stationery 1,700
To Interest 750
To Discount allowed 3,770
To General expenses 1,960
To Traveling expenses 1,165
To Fire Insurance premium 300
To Postage. & telegrams 435
To Provision for doubtful debts 475
To Depreciation on Furniture 115
To Audit Fees 350
To Capital A/c (Profit trans.) 7,050
31,170 31,170

Balance Sheet
as on 31.3.1994
Liabilities Amount (`) Assets Amount (`)
Capital Accounts: Furniture 900
Balance on 1.4.93 54,050 Additions during the year 1,000
Add: Net Profit 7,050 1,900
61,100 Less: Depreciation 115 1,785
Less: Drawings 5,000 56,000 Investments 2,500
Loan from Dena Bank Ltd. 10,000 Deposits 15,000
Interest accrued on Bank loan 300 Interest accrued on
Sundry Creditors 6,400 Investments & Deposits 1,000
Stock in trade 39,300
Sundry Debtors 9,500
Less: Provision 475 9,025
Cash with Traders Bank Ltd. 4,000
Cash in hand 190
72,800 72,800
CA Foundation/Accounting/Practice Que. Set P a g e | 52
Working Notes:
1. Calculation of provision for doubtful debts: (`)
Sundry debtors (opening) 12,000
Less: Sales returns not recorded 1,500
10,500
Less: Cancellation against sundry creditors 1,000
Adjusted balance of sundry debtors 9,500
Provision for doubtful debts@ (5% on 9,500) 475
2. Accrued interest on bank loan:
Annual interest @ 12% 600
Less: Interest paid to Dena Bank 300
Accrued Interest 300
3. Interest accrued on Investments and Deposits:
Annual interest on investments @ 5% 125
Annual interest on deposits @ 1 0% 1,500
1,625
Less: Interest received on Investments and Deposits 625
Accrued Interest 1,000

2. From the following Trial Balance of Hari and additional information prepare Trading and Profit & Loss
Account for the year ended 31st March, 1995 and a Balance Sheet as on that date:
Trial Balance as at 31st March, 1995
Dr. (`) Cr. (`)
Capital - 1,00,000
Furniture 20,000 -
Purchases 1,50,000 -
Debtors 2,00,000 -
Interest Earned - 4,000
Salaries 30,000 -
Sales - 3,21,000
Purchase Returns - 5,000
Wages 20,000 -
Rent 15,000
Sales Return 10,000
Bad Debt Written off 7,000
Creditors - 1,20,000
Drawings 24,000 -
Provision for Bad Debts - 6,000
Printing & Stationery 8,000 -
Insurance 12,000 -
Opening Stock 50,000 -
Office Expenses 12,000 -
Provision for Depreciation - 2,000
5,58,000 5,58,000
CA Foundation/Accounting/Practice Que. Set P a g e | 53
Additional information:
(1) Depreciate Furniture by 10% on original cost;
(2) A provision for Doubtful Debts is to be created to the extent of 5% on Sundry Debtors;
(3) Salaries for the month of March, 1995 amounting to ` 3,000 were unpaid which must be provided
for. However, salaries included ` 2,000 paid in advance;
(4) Insurance amounting to ` 2,000 is prepaid;
(5) Provide for outstanding office expenses ` 8,000;
(6) Stock used for private purpose ` 6,000;
(7) Closing Stock-in-Trade ` 60,000. (20 Marks)
Ans. In the books of Hari
Trading & Profit & Loss Account
for the year ended 31.3.1995
Particulars Amount (`) Particulars Amount (`)
To Opening Stock 50,000 By Sales 3,21,000
To Purchases 1,50,000 Less: Sales
Less: Purchase Returns 10,000 3,11,000
Return 5,000 By Closing Stock 60,000
1,45,000
Less: Stock used
for private purposes 6,000 1,39,000
To Wages 20,000
To Gross Profit c/d 1,62,000
3,71,000 3,71,000
To Rent 15,000 By Gross profit bid 1,62,000
To Printing & Stationery 8,000 By Interest 4,000
To Salaries 30,000
Add: Outstanding for the year 3,000
33,000
Less: paid in Advance 2,000 31,000
To Insurance 12,000
Less: Prepaid 2,000 10,000
To Office Exp. 12,000
Add: Outstanding for the year 8,000 20,000
To Provision for Bad Debts
(New) 10,000
Add: Bad Debt 7,000
Less: Old 6,000 11,000
To Provision for Dep. 2,000
To Net Profit 69,000
1,66,000 1,66,000
CA Foundation/Accounting/Practice Que. Set P a g e | 54
Balance Sheet As on 31.3.1995
Liabilities Amount (`) Assets Amount (`)
Capital: Furniture 20,000
Balance 1,00,000 Less: Prov. For Dep. 4,000 16,000
Add: Net Profit 69,000 Stock in trade 60,000
1,69,000 Debtors 2,00,000
Less: Drawings 30,000 1,39,000 Less: Prov. for D/D 10,000 1,90,000
Creditors 1,20,000 Prepaid Expenses:
Outstanding: Salaries 2,000
Salaries 3,000 Insurance 2,000 4,000
Office Expenses 8,000 11,000
2,70,000 2,70,000
Note: It is assumed that stock used for private purpose has been taken from fresh purchases

3. The following is the Trial Balance of Hari as at 31st December, 1994:

Dr. (`) Cr. (`)
Hari's Capital Account - 76,690
st
Stock 1 January, 1994 46,800 -
Sales - 3,89,600
Returns Inwards 8,600 -
Purchases 3,21,700 -
Returns Outwards - 5,800
Carriage Inwards 19,600 -
Rent & Taxes 4,700 -
Salaries & Wages 9,300 -
Sundry Debtors 24,000 -
Sundry Creditors - 14,800
Bank Loan @ 14% p.a. - 20,000
Bank Interest 1,100 -
Printing and Stationery Expenses 14,000 -
Bank Balance 8,000 -
Discount Earned - 4,440
Furniture & Fittings 5,000 -
Discount Allowed 1,800 -
General Expenses 11,450 -
Insurance 1,300 -
Postage & Telegram Expenses 2,330 -
Cash Balance 380 -
Travelling Expenses 870 -
Drawings 30,000 -
5,11,330 5,11,330
CA Foundation/Accounting/Practice Que. Set P a g e | 55
The following adjustments are to be made:
(1) Included amongst the Debtors is ` 3,000 due from Ram and included among the Creditors ` 1,000
due to him.
(2) Provision for Bad and Doubtful Debts be created at 5% and for Discount @ 2% on Sundry Debtors.
(3) Depreciation on Furniture & Fittings @ 10% shall be written off.
(4) Personal Purchases of Hari amounting to ` 600 had been recorded in the Purchases Day Book.
(5) Interest on Bank loan shall be provided for the whole year.
(6) A quarter of the amount of Printing and Stationery Expenses is to be carried forward to the next year
(7) Credit Purchase Invoice amounting to ` 400 had been omitted from the Books.
(8) Stock on 31.12.1994 was ` 78,600.
Prepare: (i) Trading & Profit and Loss Account for the year ended 31.12.1994 and (ii) Balance Sheet as on
31st December, 1994. (20 Marks)
Ans. Trading and Profit and Loss Account of Mr. Hari
(for the year ended 31st December, 1994)
Amount Amount
Particulars Particulars
(`) (`)
To Opening Stock 46,800 By Sales 3,89,600 3,81,000
To Purchases 3,21,700 Less: Returns 8,600 78,600
Add: Omitted Invoice 400 By Closing Stock
3,22, 100
Less: Returns 5,800
3,16,300
Less: Drawing 600 3,15,700
To Freight & Carriage 19,600
To Gross Profit c/d 77,500
4,59,600 4,59,600
To Rent and taxes 4,700 By Gross Profit bid 77,500
To Salaries and wages 9,300 By Discount 4,440
To Bank Interest 1,100
Add: Due 1,700 2,800
To Printing & Stationery 14,400
Less: Prepaid 3,600 10,800
To Discount allowed 1,800
To General Expenses 11,450
To Insurance 1,300
To Postage & Telegram Expenses 2,330
To Traveling Expenses 870
To Provision for Bad Debts (New) 1,175
To Provision for Discount on Debtors 437
To Depreciation on Furniture & Fittings 500
To Net Profit transferred to Capita A/c 34,500
81,940 81,940
CA Foundation/Accounting/Practice Que. Set P a g e | 56
Balance Sheet of Hari
as at 31st December. 1994
Amount Amount
Liabilities Assets
(`) (`)
Capital 76,690 Furniture & Fittings 5,000
Add: Net Profit 34 503 Less: Dep. 500 4,500
1,11,193 Sundry Debtors 23,000
Less: Less: Prov. for D/D 1,150
Drawings: 21,850
Cash 30,000 Less: Provision for Discount 437 21,413
Goods 600 30,600 80,593 Stock 78,600
Bank Loan 20,000 Prepaid:
Bank Interest Due 1,700 Printing & Stationery 3,600
Sundry Creditors (1] 14,200 Bank Balance 8,000
Cash Balance 380
1,16,493 1,16,493
(`)
(1) Sundry Creditors Balance as per Trial Balance 14,800
Less: Set off in respect of Ram 1,000
13,800
Add: Purchases Invoice which were omitted 400
14,200

4. From the following particulars prepare trading and profit and loss account of Mr. R for the year ended
31.3.1997 and a balance sheet as on 31.3.1997:
Dr. (`) Cr. (`)
Building 5,00,000
Machineries 2,00,000
Furniture 1,00,000
Cash at Bank 90,000
Cash on hand 10,000
18% p.a. loan obtained by Mr. R on 1.6.1996 on Mortgage of his building 3,00,000
R's capital 5,20,000
Sundry debtors/Sundry creditors 5,00,000 4,00,000
Stock on 1.4.1996 1,20,000
Purchases/Sales 25,00,000 32,20,000
Sales returns/Purchases returns 1,20.000 1,00,000
Rent 60,000
Establishment expenses 1,80.000
Electricity charges 15,000
Telephone charges 10,000
Commission on sales 30,000
Insurance premium 10,000
Bad debts 20,000
Bills receivable 75,000 ________
45,40,000 45,40,000
CA Foundation/Accounting/Practice Que. Set P a g e | 57
You are required to provide for depreciation on buildings at 5% p.a.; on machineries at 25% p.a.; on
furniture at 10% p.a. Provision for bad and doubtful debts is to be made at 5% on sundry debtors. Mr. R's
manager is entitled to a commission of 10% on the net profit after charging his commission. Closing stock
was not taken on 31.3.1997 but only on 7.4.1997. Following transactions had taken place during the period
from 1.4.1997 to 7th April, 1997. Sates ` 2,50,000, purchases 1,50,000, stock on 7th April, 1997 was
` 1,80,000 and the rate of gross profit on sales was 20%. Insurance premium mentioned in the trial balance
was in respect of building and machineries. Interest on mortgage loan to be provided up to 31.3.1997.
(20 Marks)
Ans. Trading and Profit and Loss Account of Mr. R
For the year ended 31st March, 1997
Amount Amount
Particulars Particulars
(`) (`)
To Opening Stock 1,20,000 By Sales 32,20,000 31,100
To Purchases 25,00,000 Less: Return 1,20,000
Less: Returns 1,00,000 24,00,000 By Closing Stock (1)
To Gross Profit c/d 8,10,000
33,30,000 33,30,000
To Rent 60,000 By Gross Profit b/d 8,10,000
To Establishment expenses 1,80,000
To Electricity charges 15,000
To Telephone Charges 10,000
To Commission on sales 30,000
To Insurance Premium 10,000
To Bad debts 20,000
To Provision for doubtful debts 25,000
To Interest on loan 45,000
To Depreciation (2) 85,000
To Manager's Commission (3) 30,000
To Net profit transferred to Capita Account 3,00,000
8,10,000 8,10,000

Balance Sheet of Mr. R (as at 31st March, 1997)

Amount Amount
Liabilities Assets
(`) (`)
Capital Account: Building 5,00,000
Opening Balance 5,20,000 Less: Dep. 25,000 4,75,000
Add: Profit 3,00,000 8,20,000 Machineries 2,00,000
18% Mortgage Loan 3,00,000 Less: Dep. 50,000 1,50,000
Interest accrued on Loan 45,000 Furniture 1,00,000
Sundry Creditor 4,00,000 Less: Dep 10,000 90,000
Commission due to Manager 30,000 Closing Stock 2,30,000
Sundry Debtors 5,00,000
Less: Prov. for DID 25,000 4,75,000
Bills Receivable 75,000
Cash at Bank 90,000
Cash in Hand 10,000
15,95,000 15,95,000
CA Foundation/Accounting/Practice Que. Set P a g e | 58
Working Notes: (`) (`)
1. Value of closing Stock:
Stock (As on 7th April 1997) 1,80,000
Add: Cost of sales
Sales (1.4.1997 to 7.4.1997) 2,50,000
Less: Gross Profit @20% on sales 50,000 2,00,000
3,80,000
Less: Purchases 1,50,000
Closing Stock 2,30,000
2. Depreciation:
On Building (5% of 5,00,000) 25,000
On Machineries (35% of 2,00,000) 50,000
On Furniture (10% of 1,00,000) 10,000
85,000
3. Manager's Commission:
Profit before charging commission 3,30,000
Commission (3,30,000 x 10/110) 30,000

5. From the following balances and information, prepare Trading and Profit and Loss Account of Mr. X for the
year ended 31st March, 1998 and a Balance Sheet as on that date:
Dr. (`) Cr. (`)
X's Capital Account - 10,000
Plant and Machinery 3,600 -
Depreciation on Plant and Machinery 400 -
Repairs to Plant 520 -
Wages 5,400 -
Salaries 2,100 -
Income-tax of Mr. X 100 -
Cash in Hand and at Bank 400
Land and Building 14,900 -
Depreciation on Building 500 -
Purchases 25,000 -
Purchases Return - 300
Sales - 49,800
Bank Overdraft - 760
Accrued Income 300 -
Salaries Outstanding - 400
Bills Receivable 3,000. -
Provision for Bad Debts - 1,000
Bills Payable - 1,600
Bad Debts 200 -
Discount on Purchases - 708
Debtors 7,000 -
Creditors - 6,252
Opening Stock 7,400 -
70,820 70,820
CA Foundation/Accounting/Practice Que. Set P a g e | 59
Information:
(i) Stock on 31st March, 1998 was ` 6,000.
(ii) Write off further ` 600 for Bad Debt and maintain a provision for Bad Debts at 5% on Debtors.
(iii) Goods costing ` 1,000 were sent to customer for ` 1,200 on 30th March, 1998 on sale or return basis.
This was recorded as actual sales.
(iv) ` 240 paid as rent of the office were debited to Landlord account and were included in the list of
debtors,
(v) General Manager is to be given commission at 10% of net profit after charging the commission of the
works manager and his own.
(vi) Works manager is to be given commission at 12% of net profit before charging the commission of
General Manager and his own. (20 Marks)
Ans. Trading and Profit and Loss Account (For the year ended 31st March 1998)
Amount Amount
Particulars Particulars
(`) (`)
To Opening Stock 7,400 By Sales 49,800
To Purchases 25,000 Less: Sales on Approval
Less: Returns 300 24,700 Basis 1,200 48,600
To Wages 5,400 By Closing Stock 6,000
To Gross Profit c/d 18,100 Add: Stock with Customer 1,000 7,000
55,600 55,600
To Repairs to Plant 520 By Gross Profit b/d 18,100
To Salaries 2,100 By Discount on Purchases 708
To Rent 240 By Provision for Bad Debts (2) 752
To Bad Debts (200 + 600) 800
To Depreciation on:
Plant & Machinery 400
Building 500 900
To Commission to Work Manager 1,800
To Commission to General Manager (3) 1,200
To Net Profit 12,000
19,560 19,560

Balance Sheet of Mr. X

as on 31st March. 1998
Amount Amount
Liabilities Assets
(`) (`)
Capital Account 10,000 Land and Building 14,900
Less: Income Tax 100 Plant and Machinery 3,600
9,900 Stock in Hand 6,000
Add: Net Profit 12,000 21,900 Add: Stock with Customers 1,000 7,000
Bank Overdraft 760
Bills Payable 1,600 Debtors (1) 4,960
Sundry Creditors 6,252 Less: Provision for Bad Debts 248 4,712
Salaries Outstanding 400 Bill Receivable 3,000
CA Foundation/Accounting/Practice Que. Set P a g e | 60
Amount Amount
Liabilities Assets
(`) (`)
Outstanding Commission: Accrued Income 300
Works Manager 1,800 Cash in hand and at Bank 400
General Manager 1,200 3,000
33,912 33,912
Working Notes: (`) (`)
(1) Debtors as per Trial Balance 7,000
Less: Debtors on account of goods sold on approval basis 1 ,200
Landlord account wrongly taken as debtor 240 1,440
5,560
Less: Bad Debts Written off 600
4,960
(2) Provision for Bad Debts Required (Adjusted Debtor):
5% on Debtors ` 4,960 = ` 248 = 1000 – 248 = 752
(3) Calculation of Commission of General Manager:
10/10 x ` (15,000 – 1,800) = 1,200

6. The following is the Trial Balance of Shri Arihant as on 31st December, 1999:
Debit (`) Credit (`)
Capital - 14,00,000
Drawings 75,000 -
Opening Stock 80,000 -
Purchases 16,20,000 16,20,000
Freight on Purchases 15,000 -
Wages 1,10,000 -
Sales - 25,00,000
Salaries 1,00,000 -
Travelling Expenses 23,0000 -
Miscellaneous Expenses 35,000 -
Printing and Stationery 27,000 -
Advertisement Expenses 25,000 -
Postage and Telegrams 13,000 -
Discounts 7,600 14,500
Bad Debts written off (after adjusting recovery of bad debts of
` 6,000 written off in 1997) 14,000 -
Building 10,00,000 -
Machinery 75,000 -
Furniture 40,000 -
Debtors 1,50,000
Provision for Doubtful Debts - 19,000
Creditors - 1,60,000
Investments (12% Purchased on 1.10.99) 6,00,000 -
Bank Balance 83,900 -
40,93,500 40,93,500
CA Foundation/Accounting/Practice Que. Set P a g e | 61
Adjustments:
(i) Closing Stock ` 2,25,000.
(ii) Goods worth ` 5,000 were taken for personal use, but no entry was made in the books.
(iii) Machinery worth ` 35,000 purchased on 1.1.97 was wrongly written off against Profit and Loss
Account. This asset is to be brought into account on 1.1.99 taking depreciation at 10% per straight
line basis upto 31.12.98.
(iv) Depreciate Building at 2½ p.a., Machinery at 10% p.a. and Furniture at 10% p.a.
(v) Provision for Doubtful Debts should be 6% on Debtors.
(vi) The Manager is entitled to a commission of 5% of Net Profits after charging his commission.
Prepare Trading and Profit and Loss Account for the year ending 31st December, 1999 and a Balance Sheet
as at that date. (20 Marks)
Ans. Trading and Profit and Loss Account of Shri Arihant
(For the year ended 31st Decmber, 1999)
Amount Amount
Particulars Particulars
(`) (`)
To Opening Stock 80,000 By Sales 25,00,000
To Purchases 16,20,000 By Closing Stock 2,25,000
Less: Drawings 5,000 16,15,000
To Freight 15,000
To Wages 1,10,000
To Gross-Profit c/d 9,05,000
27,25,000 27,25,000
To Salaries 1,00,000 By Gross Profit b/d 9,05,000
To Traveling expenses 23,000 By Discount received 14,500
To Miscellaneous Expenses 35,000 By Bad debts Recovered 6,000
To Printing and Stationery 27,000 By Interest on investments 18,000
To Advertisement expenses 25,000  12 3 
To Postage and telegrams 13,000 6,00,000  100  12 
To Discounts 7,600
To Provision for doubtful debts (New) 9,000
Add: Bad Debts (14,000 + 6,000) 20,000
29,000
Less: Old Provision 19,000 10,000
Depreciation:
Machinery 11,000
Furniture 4,000
Building 25,000 40,000
To Manager's Commission 31,567
(5/105 x 6,62,900)
To Net profit transferred to 6,31,333
capital account
9,43,500 9,43,500
CA Foundation/Accounting/Practice Que. Set P a g e | 62
Balance Sheet of Shri Arihant
(As at 31st December, 1999)
Amount Amount
Liabilities Assets
(`) (`)
Capital 14,00,000 Building 10,00,000
Add: Machinery Capitalised 28,000 Less: Depreciation 25,000 9,75,000
14,28,000 Machinery 1,03,000
Less: Profits 6,31,333 Less: Depreciation 11,000 92,000
20,59,333 Furniture 40,000
Less: Drawings 80,000 19,79,333 Less: Depreciation 4,000 36,000
Creditors 1,60,000 Investments 6,00,000
Outstanding Commission 31,567 Interest Accrued 13,000
Stock 2,25,000
Debtors 1,50,000
Less: Prov. for DID 9,000 1,41,000
Bank Interest 83,900
21,70,900 21,70,900
Working Notes: (`)
Machinery purchased on 1.1.97 (wrongly written off to be capitalised on 1.1.99):
Cost of Machinery as on 1.1.97 35,000
Less: Depreciation for the years 1997 and 1998 @ 10% p.a. 7,000
Value of machinery capitalised 28,000
Depreciation for the current year 1999 @ 10% p.a. 3,500
Value of Machinery (as. on 31.12.99)
Value of Machinery (` 75,000 + ` 28,000) 1,03,000
Less: Depreciation (` 7,500 + ` 3,500) 11,000
92,000

7. The following is the Trial Balance of K on 31st March, 2000:

Dr. (`) Cr. (`)
Capital - 8,00,000
Drawings 60,000 -
Opening Stock 75,000 -
Purchases 15,95,000 -
Freight on Purchases 25,000 -
Wages (11 months upto 29.02.2000) 66,000 –
Sales - 23,10,100
Salaries 1,40,000 -
Postage, Telegrams, Telephones 12,000 -
Printing and Stationery 18,000 –
Miscellaneous Expenses 30,000 –
Creditors – 3,00,000
Investments 1,000,000 -
Discounts Received – 15,000
CA Foundation/Accounting/Practice Que. Set P a g e | 63
Debtors 2,50,000 -
Bad Debts 15,000 -
Provision for, Bad Debts - 8,000
Building 3,00,000 -
Machinery 5,00,000 -
Furniture 40,000 -
Commission on Sales 45,000 -
Interest on Investments - 12,000
Insurance (Year upto 31.07.2000) 24,.000 -
Bank Balance 1,50,000 -
34,45,000 34,45,000
Adjustments:
(i) Closing Stock ` 2,25,000.
(ii) Machinery worth ` 45,000 purchased on 1. 10.99 was shown as Purchases. Freight paid on the
Machinery was ` 5,000, which is included in Freight on Purchases.
(iii) Commission is payable at 2% on Sales.
(iv) Investments were sold at 10% profit, but the entire sales proceeds have been taken as Sales.
(v) Write off Bad Debts ` 10,000 and create a provision for Doubtful Debts at 5% of-Debtors.
(vi) Depreciate Building by 2½ p.a., and Machinery and Furniture at 10% p.a.
Prepare Trading and Profit and Loss Account for the year ending 31st March. 2000 and a Balance Sheet as
on that date. (20 Marks)
Ans. Trading and Profit and Loss Account of Mr. K
for the year ended 31st March, 2000
Amount Amount
Particulars Particulars
(`) (`)
To Opening Stock 75,000 By Sales 23,10,000
To Purchases 15,95,000 Less: Sales of Investment 1,10,000 22,00,000
Less: Transfer 45,000 15,50,000 By Closing Stock 2,25,000
To Freight 25,000
Less: Transfer to
Machinery A/c 5,000 20,000
To Wages 66,000
Add: Outstanding 6,000 72,000
To Gross Profit c/d 7,08,000
24,25,000 24,25,000
To Salaries 1,40,000 By Gross Profit b/d 7,08,000
To Miscellaneous Expenses, 30,000 By Interest on investments 12,000
To Printing and Stationary 18,000 By Discounts 15,000
To Postags, Telegrams, telephones 12,000 By Profit of sales of invest. 10,000
To Commission on Sales 45,000
Add: Outstanding 10,000 55,000
To Insurance 24,000
Less: Prepaid 8,000 16,000
To Provisions for D/D (New provision)
CA Foundation/Accounting/Practice Que. Set P a g e | 64
Amount Amount
Particulars Particulars
(`) (`)
Bad Debts 15,000
Add: Written off 10,000
Add: Prov. 12,000
37,000
Less: Old Prov. 8,000 29,000
To Depreciation: 7,500
Building Machinery 52,500
Furniture 4,000 64,000
To Net Profit 3,81,000
7,45,000 7,45,000

Balance Sheet of Mr. K as at 31st March 2000

Amount Amount
Liabilities Assets
(`) (`)
Capital 8,00,000 Building 3,00,000
Add: Profit 3,81,000 Less: Depreciation 750 2,29,500
11,81,000 Machinery 5,00,000
Less: Drawing 60,000 11,21,000 Add: New 50,000
Creditors 3,00,000 5,50,000
Outstanding Expenses Less: Depreciation 52,500 4,97500
Wages Outstanding 6,000 Furniture 40,000
Commission Outstanding 10,000 Less: Depreciation 4 000 36,000
Debtors 2,50,000
Less: Bad Debts 10,000
2,40,000
Less: Provision for D/D 12,000 1,28,000
Prepaid Insurance 8,000
Stock 2,25,000
Cash ad Bank 1,50,000
14,37,000 14,37,000

8. Shri Patit Bansali submitted to you the following Trial 'Balance, which he has not been able to agree,
Rewrite the Trial Balance and prepare Trading and Profit and Loss Account for the year ended 31.12.2000
and a Balance Sheet as on that date after giving effect to the undermentioned adjustments:
Dr. (`) Cr (`)
Capital - 16,000
Opening Stock 17,500 -
Closing Stock - 18,790
Drawings 3,305 -
Return inward - 550
Carriage Inward 1,240 -
Deposit with X - 1,400
CA Foundation/Accounting/Practice Que. Set P a g e | 65
Return outward 840 -
Carriage outward - 725
Rent paid 800 -
Rent outstanding 150 -
Purchases 13,000 -
Sundry Debtors 5,000 -
Sundry Creditors - 4,000
Furniture 1,500 -
Sales - 29,000
Wages 850 -
Cash 1,370 -
Goodwill 1,800 -
Advertisement 950 -
48,305 70,465
Adjustments:
(1) Write off ` 600 as Bad Debts and make Reserve for Bad Debts on Sundry Debtors at 5%.
(2) Stock valued at ` 2,000 was destroyed by fire on 25th December, 2,000, but Insurance Company
admitted a claim for ` 1,500 only and paid the sum in January 2001.
(3) Depreciate Furniture by 10%. (20 Marks)

Ans. Trial Balance of Shri Patit Bansali (Rectified)

(as on 31st Decenber,2000)
Dr. (`) Cr. (`)
Capital 16,000
Opening Stock 17,500
Drawings 3,305
Return inward 550
Carriage inward 1,240
Deposit with x 1,400
Return outward 840
Carriage outward 725
Rent Paid 800
Rent outstanding 150
Purchases 13,000
Sundry debtors 5,000
Sundry Creditors 4,000
Furniture 15,000
Sales 29,000
Wages 850
Cash 1,370
Goodwill 1,800
Advertisement 950
49,990 49,990
CA Foundation/Accounting/Practice Que. Set P a g e | 66
Trading and Profit and Loss Account of Shri Patit Bansal
for the year ended 31st December, 2000
Amount Amount
Particulars Particulars
(`) (`)
To Opening Stock 17,500 By Sales 29,000
To Purchases 13,000 Less: Return
Less: Return Inward 550 28,450
outward 840 12,160 By Stock lost by fire 2,000
To Wages 850 By Closing stock 18,790
To Carriage inward 1,240
To Gross profit c/d 17,490
49,240 49,240
To Carriage outward 725 By Gross profit b/d 17,490
To Rent 800
To Advertisement 950
To Bad debts 600
To Reserve for bad debts 220
To Loss of stock by fire 500
To Depreciation on furniture 150
To Net profit transferred to Capital Account 13,545
17,490 17,490

Balance Sheet of Shri Patit Bansali

as at 31st December 2000
Amount Amount
Liabilities Assets
(`) (`)
Capital 16,000 Goodwill 1,800
Add: Net Profit 13,545 Furniture 1,500.
29,545 Less: Depreciation 150 1,350
Less: Drawings 3,305 26,240 Deposit with X 1,400
Sundry creditors 4,000 Closing stock 18,790
Outstanding rent 150 Sundry Debtors 5,000
Less: Bad Debts 600
Pro. for DID 4,400
Less: Reserve 220 4,180
Insurance claim 1,500
Cash 1,370
30,390 30,390
CA Foundation/Accounting/Practice Que. Set P a g e | 67
9. Mr. James submits you the following information for the year ended 31.3.2001:
(`)
Stock as on 1.4.2000 1,50,500
Purchases 4,37,000
Manufacturing Expenses 85,000
Expenses on Sales 33,000
Expenses on Administration 18,000
Financial Charges 6,000
Sales 6,25,000
During the year damaged goods costing ` 12,000 were sold for ` 5,000. Barring the above transaction, the
Gross Profit has been @ 20% on Sales. Compute the Net Profit of Mr. James for the year ended 31.3.2001.
(6 Marks)
Ans. Trading and Profit and Loss Account of Mr. James
(For the year ended 31st March, 2001)
Particulars (`) Particulars (`)
To Opening Stock 1,50,500 By sates 6,25,000
To Purchase 4,37,000 By Closing stock 1,64,500
To Manufacturing expenses 85,000
To Gross Profit c/d 1,17,000
7,89,500 7,89,500
To Administration Expenses 18,000 By Gross Profit b/d 1,17,000
To Selling expenses 33,000
To Financial Charges 6,0000
To Net profit transferred to capital account 60,000
1,17,000 1,17,000

10. The following is the Trial Balance of Mr. 'A' as on 31st March 2003. You are required to prepare the Trading
and Profit & Loss Account lo the year ended 31st March, 2003 and Balance Sheet as on that date after
making the necessary adjustments:
(`) (`)
Stock 1.4.2002 5,50,000 -
Purchases and Sale 19,25,000 29,35,000
Wages and Salaries 1,25,000 –
Discount - 2,000
Carriage inward 40,000 -
Bill receivable and Bill payable 2,25,000 1,85,000
Insurance 35,000 -
Debtors and Creditors 15,00,000 9,32,500
Consignor's Balance (1.4.2002) - 4,00,000
Capital - 8,95,000
Commission 40,000 -
Cash sent to Consignor 8,00,000 -
Interest 35,000 -
CA Foundation/Accounting/Practice Que. Set P a g e | 68
Trade Expenses 34,000 -
Furniture (1.4.2002) 60,000 -
Consignment Sales - 6,40,000
Cash in hand and at Bank 4,22,500 -
Rent and Taxes 1,27,000 -
Sale of furniture (31.3.2003) - 10,000
Charges paid against Consignment 80,000 -
59,99,500 59,99,500
Adjustments:
(i) Stock on 31st March, 2003 was valued at ` 8,00,000 (including stock of stationery ` 800)
(ii) Bill receivable include a dishonoured bill of ` 8,000.
(iii) Trade expenses include payment for stationery of ` 22,500.
(iv) Stock in the' beginning include stock of stationery ` 1,800.
(v) Furniture sold was appearing in the Balance Sheet on 31st March, 2002 at ` 13,000.
(vi) Creditors at the end include creditors for stationery ` 3,000 for credit purchases.
(vii) Commission receivable on sale of consignment is` 40,000.
(viii) Stationery of ` 2,000 was consumed by Mr. 'A'.
(ix) Make provision for bad and doubtful debts at 5% on debtors.
(x) Depreciate furniture at 10% p.a. (20 Marks)
Ans. Trading and Profit & Loss Account
(for the year ended 31st march, 2003)
Amount Amount
Particulars Particulars
(`) (`)
To Open. Stock 5,50,000 By Sales 29,35,000
Less: Stationery 1,800 5,48,200 By Closing Stock (8,00,000 – 800) 7,99,200
To Purchase 19,25,000
To Wages & Salaries 1,25,000
To Carriage Inward 40,000
To Gross Profit 10,96,000
37,34,200 37,34,200
To Insurance 35,000 By Gross Profit bid 10,96,000
To Commission Paid 40,000 By Discount 2,000
To Interest 35,00 By Outstanding Commission 40,000
To Trade Expenses (34,500 - 22,500) 12,000
To Rent & Taxes 1,27,000
To Stationery 21,500
To Loss on sale of Furniture 1,700
To Dep. on Furniture 6,000
To Provision for Bad debts 75,400
To Net Profit c/f 7,83,900
11,38,000 11,38,000
CA Foundation/Accounting/Practice Que. Set P a g e | 69
st
Balance Sheet (as on 31 March, 2003)
Amount Amount
Liabilities Assets
(`) (`)
Capital 8,95,000 Furniture 42,000
Add: Net Profit 7,83,900 Debtors 15,00,000
Less: Drawings 2,000 16,76,900 Add: Dishonored 8,000
Bills Payable 1,85,000 14,32,600
Creditors (9,32,500 - 3,000) 9,29,500 Less: Prov. for DID 75,400
Creditors for stationery 3,000 Bills Receivable 2,25,000 2,17,000
Due to consignor 1,20,000 Less: Dishonored 8,000 4,22,500
Cash & Bank 7,99,200
Closing Stock 800
Stock for Stationary
29,14,400 29,14,400
Working Notes:
Furniture Account
Amount Amount
Particulars Particulars
(`) (`)
To Balance b/d 60,000 By Cash 10,000
By Depreciation 1,300
By Loss 1,700
By Depreciation 4,700
By Balance c/d 42,300
60,000 60,000

Stock for Stationery

Amount Amount
Particulars Particulars
(`) (`)
To Balance b/d 1,800 By Drawings 2,000
To Trade Expenses By Profit & Loss A/c 21,500
(Transfer entry) By Balance c/d 8,000
24,300 24,300

Consignor’s Account
Amount Amount
Particulars Particulars
(`) (`)
To Cash 8,00,000 By Balance b/d 4,00,000
To Charges 80,000 By Sales 6,40,000
To Commission 40,000
To Balance c/d 1,20,000
10,40,000 10,40,000
CA Foundation/Accounting/Practice Que. Set P a g e | 70
st
11. Mr. Neel had prepared the following Trial Balance from his Ledger as on 31 March, 2004:
Dr. (`) Cr. (`)
Stock as on 1" April, 2003 5,00,000
Purchases and Returns 31,00,000 45,000
Sales and Returns 55,000 41,50,000
Cash in Hand 2,50,000
Cash at Bank 5,00,000
Trader's Capital 22,89,200
Rates and Taxes 50,000
Drawings 45,000
Salaries 95,000
Postage and Telegram 1,05,000
Insurance 90,000
Salesman Commission 78,000
Printing and Stationery 95,500
Advertisement 1,70,000
Furniture and Fittings 5,50,000
Motor Car 48,000
Discounts 50,000 75,000
General Expenses 65,700
Carriage Inward 10,000
Carriage Outward 22,000
Wages 50,000
Sundry Debtors/Creditors 10,00,000 4,00,000
Total 69,29,200 69,29,200
st
You are required to prepare Trading and Profit & Loss Account for the year ended on 31 March, 2004 and
Balance Sheet as on that date after making the necessary adjustments.
You are provided with the following information:
(i) Closing Stock as on 31st March, 2004 ` 1,45,000.
(ii) Neel had withdrawn goods worth ` 50,000 during the year.
(iii) Purchases include Purchase of furniture worth ` 1,00,000.
(iv) Debtors include ` 50.000 bad debts.
(v) Sales include goods worth ` 1,50,000 sent out to NN & Co. on approval and remained unsold as on
31st March, 2004. The cost of the goods was ` 1,00,000.
(vi) Provision for Bad debts is to be created at 5% of Sundry Debtors.
(vii) Depreciate Furniture and Fittings by 10% and Motor Car by 20%.
(viii) The salesman is entitled to a commission of 10% on total sales. (20 Marks)
CA Foundation/Accounting/Practice Que. Set P a g e | 71
Ans. Trading and Profit & Loss Account
(For the year ended 31st March, 2004)
Amount Amount
Particulars Particulars
(`) (`)
To Opening Stock 5,00,000 By Sales 41,50,000
To Purchases 31,00,000 Less: Returns 55,000
Less: Returns 45,000 40,95,000
30,55,000 Less: Goods sent on
Less: Furniture 1,00,000 approval 1,50,000 39,45,000
29,55,000 By Goods sent on Approval 1,00,000
Less: Drawings 50,000 29,05,000 By Closing Stock 1,45,000
To Gamage Inward 10,000
To Wages 50,000
To Gross Profit c/d 7,25,000
41,90,000 41,90,000
To Salaries 95,000 By Gross Profit bid 7,25,000
To Rates & Taxes 50,000 By Discount received 75,000
To Postage & Telegram 1,05,000 By Net Loss transferred to Capital A/c 5,02,300
To Insurance 90,000
To Printing & Stationery 95,500
To Advertisement 1,70,000
To Discount allowed 50,000
To General Expenses 66,700
To Carriage Outward 22,000
To Bad debts 50,000
To Provision for Doubtful Debts 40,000
To Salesman Commission 78,000
Add: Outstanding 3,16,500 3,94,500
To Depreciation on:
Furniture 65,000
Motor Car 9,600 74,600
13,02,300 13,02,300

Balance Sheet of Mr. Neel

(As on 31st Marchm 2004)
Amount Amount
Liabilities Assets
(`) (`)
Capital 22,59,200 Furniture 5,50,000
Less: Drawings 45,000 Add: Purchased 1,00,000
Less: Goods With-drawn 50,000 6,50,000
21,64,200 Less: Dep. 65,000 5,85,000
Less: Net Loss 5,02,300 16,61,900 Motor Car 48,000
Sundry Creditors 4,00,000 Less: Dep. 9,600 38,400
Outstanding Salesman’s Commission 3,16,500 Stock in hand 1,45,000
Goods sent on Approval 1,00,000
CA Foundation/Accounting/Practice Que. Set P a g e | 72
Amount Amount
Liabilities Assets
(`) (`)
Sundry Debtors 10,00,000
Less: Goods sent on
Approval 1,50,000
8,50,000
Less: Bad Debts 50,000
8,00,000
Less: Provision for Doubtful
Debts 40,000 7,60,000
Cash in hand 2,50,000
Cash in Bank 5,00,000
23,78,400 23,78,400

12. The following are the balances as at 31st March, 2004 extracted from the books of Mr. XYZ.
(`) (`)
Plant and Machinery 19,550 Bad debts 1,100
Furniture and Fittings 10,250 Bad debt recovered 450
Bank Overdraft 80,000 Salaries 22,550
Capital Account 65,000 Salaries payable 2,450
Drawings 8,000 Prepaid rent 300
Purchases 1,60,000 Rent 4,300
Opening Stock 32,250 Carriage inward 1,125
Wages 12, 165 Carriage outward 1,350
Provision for doubtful debts 3,200 Sales 2,15,300
Provision for Discount on debtors 1,375 Advertisement Expenses 3,350
Sundry Debtors 1,20,000 Printing and Stationery 1,250
Sundry Creditors 47,500 Cash in hand 1,450
Cash at Bank 3,125
Office Expenses 10,160
Int. paid on loan 3,000
Additional Information:
1. Purchases include sales return of ` 2,575 and sales include purchase return of ` 1,725.
2. Goods withdrawn by Mr. XYZ for own consumption ` 3,500 included in purchases.
3. Wages paid in the month of April for installation of Plant and Machinery amounting to ` 450 were
included in wages account.
4. Free samples distributed for Publicity costing ` 825.
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 @15% p. a. and on furniture and fittings @
10% p.a.
7. Bank overdraft is secured against hypothecation of stock. Bank overdraft outstanding as on
31.3.2004 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 on overdraft. Prepare a
trading and Profit Loss Account for the year ended 31st March, 2004, and a Balance Sheet as on that
date. Also show the rectification entries. (20 Marks)
CA Foundation/Accounting/Practice Que. Set P a g e | 73
Ans. In the books of Mr. XYZ
Rectification Entries
Dr. Cr.
Date Particulars LF. Amount Amount
(`) (`)
(i) Return inward account Dr. 2,575
Sales account Dr. 1,725
To Purchases account 2,575
To Returns outward account 1,725
(Being sales return and purchases return wrongly included in
purchases and sales respectively, now it is rectified)
(ii) Drawings account Dr. 3,500
To Purchases account 3,500
(Being goods withdrawn for own consumption included in purchases,
now it is rectified)
(iii) Plant and machinery account Dr. 450
To Wages account 450
(Being wages paid for installation of plant and machinery wrongly
debited to wages now it is rectified)
(iv) Advertisement expenses account Dr. 825
To Purchases account 825
(Being free samples distributed for publicity out of purchases, now it is
rectified)

In the books of Mr. XYZ

Trading and Profit and Loss Account for the year ended 31st March, 2004
Amount Amount Amount Amount
Particulars Particulars
(`) (`) (`) (`)
To Opening stock 32,250 By Sales 2,13,575
To Purchases 1,53,100 Less: Sales return 2,575 2,11,000
Less: Purchases return 1,725 1,51,375 By Closing stock
To Carriage inward 1,125  100 100  1,25,000
 8,000   
To Wages 11,715  80 8 
To Gross profit c/d 1,39,535
3,36,000 3,36,000
To Salaries 22,550 By Gross profit b/d 1,39,535
To Rent 4,300 By Bad debts recovered 450
To Bad debts 1,100
To Carriage outward 1,350
To Advertisement expenses 4,175
To Printing and stationery 1,250
To Provision for-doubtful debts
5% of ` 1,20,000 6,000
CA Foundation/Accounting/Practice Que. Set P a g e | 74
Amount Amount Amount Amount
Particulars Particulars
(`) (`) (`) (`)
Less: Existing provision 3,200 2,800
To Provision for discount on
debtors 2.5% off ` 1,14,000 2,850
Less: Existing provision 1,375 1,475
To Depreciation:
Plant and machinery 3,000
Furniture and fittings 1,025 4,025
To Office expenses 10,160
To Interest on loan 3,000
To Net profit 83,800
1,39,985 1,39,985

In the books of Mr. XYZ

Balance Sheet of Mr. XYZ (as on 31'1 March, 2004)
Amount Amount Amount Amount
Liabilities Assets
(`) (`) (`) (`)
Capital account 65,000 Plant and machinery 20,000
Add: Net profit 83,800 Less: Depreciation 3,000 17,000
1,48,800 Furniture and fittings 10,250
Less: Drawings 11,500 1,37,300 Less: Depreciation 1,025 9,225
Bank overdraft 80,000 Closing stock 1,25,000
Sundry creditors 47,500 Sundry debtors 1,20,000
Payable salaries 2,450 Less: Provision for doubtful debts 6,000
Provision for bad debts 2,850 1,11,150
Prepaid rent 300
Cash in hand 1,450
Cash at bank 3,125
2,67,250 2,67,250

13. From the following Trial Balance of Shri Shivam as on 31st March, 2005, you are required to prepare a
Trading and Profit and Loss Account for the year ended 31st March, 2005 and Balance Sheet as on that date,
after making the necessary adjustments as mentioned hereunder:
Particulars Dr. (`) Cr. (`)
Shivam's capital 1,60,000
Shivam's drawings 24,000
Furniture and Fixtures 8,000
Plant and machinery 60,000
Patents (ten years from 1.4.2004) 40,000
Stock on 1.4.2004 40,000
Purchases 1,70,000
Salaries 14,800
Wages 30,000
CA Foundation/Accounting/Practice Que. Set P a g e | 75
Sundry debtors 20,400
Sales 2,64,000
Cash in hand 13,250
Land 28,350
Loan from Shyam (at 6% from 1.10.2004) 20,000
Postage and Fax 3,000
Rent, rates and taxes 7,200
Bad debts 800
Sundry creditors 24,000
Discount 1,200
Carriage Inward 400
Interest on loan 300
Insurance 1,600
Travelling expenses 1,000
Sundry Expenses 600
Cash at bank 20,500
Bank overdraft _______ 15,000
Total 4,84,200 4,84,200
Adjustments:
(i) Stock as on 31.3.2005 is valued at ` 30,000.
(ii) A new machine was installed on 1st April, 2004 for ` 3,000. No entry. in this respect was passed in the
books. Wages of ` 1,000 paid for installing the machine were debited to Wages account.
(iii) Of the Sundry debtors, ` 200 are bad and are to be written off. You are required to maintain a
provision for doubtful debts @ 5% on debtors and provision for discount on debtors @ 2%.
(iv) Goods costing ` 2.000 were given away as free samples for publicity.
(v) Depreciate Plant and Machinery at 20% per annum and Furniture and Fixtures at 10% per annum.
(vi) On 1.4.2004, machinery of the value of ` 10,000 was destroyed by fire and the insurance claim
settled at ` 8,000 was credited to Machinery account.
(vii) Goods costing ` 1,000 were sent to a customer for ` 1,200 on 30th March, 2005 on sale or return
basis. This was recorded as actual sales. (20 Marks)
Ans. In the books of Shri Shivam Trading Profit & Loss A/c
(For the year ended 31.3.05)
Amount Amount
Particulars Particulars
(`) (`)
To Opening Stock 40,000 By Sales 2,64,000
To Purchases 1,70,000 Less: Sale or Return basis (1200) 2,62,800
To Wages 29,000 By Goods given as tree sample 2,000
To Carriage Inward 400 By Closing Stock
To Gross Profit 56,400 - Given 30,000
- With Costumer 1,000
31,000
2,95,800 2,95,800
To Depreciation By Gross Profit 56,400
Furnitures & Fixtures 800 By Discount 1,200
CA Foundation/Accounting/Practice Que. Set P a g e | 76
Amount Amount
Particulars Particulars
(`) (`)
Plant & Machinery 12,400 13,200
To Loss by fire 2,000
To Patent written-off 4,000
To Salaries 14,800
To Bad Debts 800
Add: Additional 200 1,000
To Prov. for Doubtful Debts 950
To Prov. for Discount 360
To Postage & Fax 3,000
To Rent, Rates & Taxes 7,200
To Interest on loan Paid 300
Add: Outstanding 300 600
To Insurance 1,600
To Travailing exp. 1,000
To Sundry Exp. 600
To Advertisement (Goods gives as Sample) 2,000
To Net profit transfer to Capital A/c 5,290
59,600 59,600

Balance Sheet (as on 31.3.2005)

Amount Amount
Liabilities Assets
(`) (`)
Capital Furniture & Fittings 8,000
Op. Balance 1,60,000 (-) Depreciation 800 7,200
(-) Drawings (24,000) Plant & Mach. (Note- 1) 62,000
(+) NP 5,290 1,41,290 (-) Depreciation 12,400 49,600
Creditor for Plant & Mach. [Note 1] 3,000 Patent 40,000
Loan from Shyam 20,000 (-) Written-off (4,000) 36,000
(+) Interest 300 20,300 Land 28,350
Sundry Creditors 24,000 Debtor [Note 2] 19,000 31,000
Bank Overdraft 15,000 (-) Prov. for DID (950)
(-) Prov. for discount (360) 17,690
Cash in hand 13,250
Cash at Bank 20,500
2,03,590 2,03,590
Working' Notes:
(1) Computation of plant & Machinery (`)
Balance given 60,000
(+) New Machinery (1.4.04) 4,000
(-) Machinery Sold. (2,000)
62,000
CA Foundation/Accounting/Practice Que. Set P a g e | 77
(2) Computation of Debtor (`)
Balance 20,400
(-) Bad Debts (200)
(-) Sale or return (1,200)
19,000

14. The following are the balances extracted from the books of Shri Raghuram as on 31.03.2018, who carries
on business under the name and style of M/s Raghuram and Associates., at Chennai:
Particulars Debit (`) Credit (`)
Capital A/c 14, 11,400
Purchases 12,00,000
Purchase Returns 18,000
Sales 15,00,000
Sales Returns 24,000
Freight Inwards 62,000
Carriage Outwards 8,500
Rent of Godown 55,000
Rates and Taxes 24,000
Salaries 72,000
Discount allowed 7,500
Discount received 12,000
Drawings 20,000
Printing and Stationery 6,000
Insurance premium 48,000
Electricity charges 14,000
General expenses 11,000
Bank charges 3,800
Bad debts 12,200
Repairs to Motor vehicle 13,000
Interest on loan 4,400
Provision for Bad debts 10,000
Loan from Mr. Rajan 60,000
Sundry creditors 62,000
Motor vehicles 1,00,000
Land and Buildings 5,00,000
Office equipment 2,00,000
Furniture and Fixtures 50,000
Stock as on 31.03.2017 3,20,000
Sundry debtors 2,80,000
Cash at Bank 22,000
Cash in Hand 16,000 _________
Total 30,73,400 30,73,400
Prepare Trading and Profit and Loss Account for the year ended 31.03.2018 and the Balance Sheet as at
that date after making provision for the following:
CA Foundation/Accounting/Practice Que. Set P a g e | 78
(a) Depreciate Building by 5%, Furniture and Fixtures by 10%, Office Equipment by 15% and Motor Car
by 20%.
(b) Value of stock at the close of the year was ` 4,10,000.
(c) One month rent for godown is outstanding.
(d) Interest on loan from Rajan is payable @ 10% per annum. This loan was taken on 01.07.2017.
(e) Reserve for bad debts is to be maintained at 5% of Sundry debtors.
(f) Insurance premium includes ` 42,000 paid towards proprietor's life insurance policy and the balance
of the insurance charges cover the period from 01.04.2017 to 30.06.21018. (20 Marks)
Ans. In books of Mis. Raghuram & Associates
Trading Account for the year Ended 31.3.18
Amount Amount
Particulars Particulars
(`) (`)
To Opening Stock 3,20,000 By Sales 15,00,000
To Purchases 12,00,000 - Sales Return 24,000 14,76,000
- Pur. Ret 18,000 11,82,000 By Closing Stock 4,10,000
To Freight Inwards 62,000
To Gross Profit c/d 3,22,000
18,86,000 18,86,000

M/s. Raghuram & Associates

Profit/Loss Account for the year ended 31.3.18
Amount Amount
Particulars Particulars
(`) (`)
To Carriage Outward 8,500 By G.P. c/d 3,22,000
To Rent of godown 55,000 By Discount received 12,000
+ O/s for interest 5,000 60,000
To Rate & Taxes 24,000
To Salaries 72,000
To Disallowed 7,500
To Printing & Stat. 6,000
To Ins. Premium (W.N. 2) 4,800
To Electricity Charges 14,000
To Gen. Expenses 11,000
To Bank Charges 3,800
To Provision for bad debts (W.N. 3) 16,200
To Repair to Vehicle 13,000
To Interest on loan (W.N. 4) 4,500
To Depreciation:
Building 25,000
Furniture 5,000
Office Equipment 30,000
Motor Car 20,000 80,000
To Net Profit c/d 8,700
3,34,000 3,34,000
CA Foundation/Accounting/Practice Que. Set P a g e | 79
Balance Sheet of M/s. Raghuram & Associates as at 31.3.18
Amount Amount
Liabilities Assets
(`) (`)
Capital 14,11,400 Motor ven. 1,00,000
Add: N.P. 8,700 - Dep. 20,000 80,000
Less: Drawings 20,000 Land & Building 5,00,000
Less: Ins. Premium 42,000 13,58,100 - Dep. 25,000 4,75,000
Loan from Rajan 60,000 Office Equity 2,00,000
Interest payables on above loan 100 - Dep. 30,000 1,70,000
Sundry Creditors 62,000 Furniture 50,000
Outstanding rent of godown 5,000 - Dep. 5,000 45,000
Stock 4,10,000
Debtors 2,80,000
Provision for Bad Debts 14,000 2,66,000
Prepaid Insurance 1,200
Cash at Bank 22,000
Cash in hand 16,000
14,85,200 14,85,200
Working Notes:
1. Outstanding Rent of godown
55,000
 1 = ` 5,000
11

2. Insurance Premium: (`)

Insurance Premium as given in trial balance 48,000
Less: Personal Premium 42,000
6,000
Less: Prepaid for 3 months
 6,000 
  3 1,200
 15 
Transfer to P/L 4,800

3. Provision for bad-debts:

Bad-debts 12,200
Add: Prov. Req. as on
31.3.18 (2,80,000 x 5%) 14,000
26,200
Less: Prov. As on 1.4.17 10,000
Transfer to P/L 16,200

4. Interest on loan:
9
60,000 x 10% x = 4,500
12
100 is payable interest.
CA Foundation/Accounting/Practice Que. Set P a g e | 80
15. Mr. Fazhil is a proprietor in business of trading. An abstract of his Trading and P&L Account is as follows:
Trading and P&L A/c for the year ended 31st March, 2018.
Amount Amount
Particulars Particulars
(`) (`)
To Cost of Goods sold 22,00,000 By Sales 45,00,000
To Gross Profit C/d ?
? 45,00,000
To Salaries paid 12,00,000 By Gross Profit-Bid ?
To General Expenses 6,00,000 By Other Income 45,000
To Selling Expenses ?
To Commission to Manager
(On Net profit before charging
such commission) 1,00,000
To Net Profit ?
? ?
Selling expenses amount to 1% of total Sales.
You are required to compute the missing figure. (5 Marks)
Ans. Trading and P&L A/c
for the year ended 31.3.2018
Amount Amount
Particulars Particulars
(`) (`)
To Cost of Goods sold 22,00,000 By Sales 45,00,000
To Gross Profit c/d 23,00,000
45,00,000 45,00,000
To Salaries paid 12,00,000 By Gross Profit-Bid 23,00,000
To General Expenses 6,00,000 By Other Income 45,000
To Selling Expenses (45,00,000 x 1%) 45,000
To Commission to Manager 1,00,000
To Net Profit 4,00,000
23,45,000 23,45,000
% of Commission = 25% (1,00,000 / 5,00,000).

*********
CA Foundation/Accounting/Practice Que. Set P a g e | 81

CHAPTER 10 – SALE OF GOODS ON APPROVAL OR RETURN BASIS

1. 'X' supplied goods on sale or return basis to customers, the particulars of which are as under:
Date of Party's Amount Remarks
Dispatch Name
10.12.2002 ABC Co. 10,000 No information till 31.12.2002
12.12.2002 DEF Co. 15,000 Returned on 16.12.2002
15.12.2002 GHI Co. 12,000 Goods worth ` 2,000
Returned on 20.12.2002
20.12.2002 DEF Co. 16,000 Goods Retained on 24.12.2002
25.12.2002 ABC Co. 11,000 Goods Retained on 28.12.2002
30.12.2002 GHI Co, 13,000 No information till 31.12.2002
Goods are to be returned within 15 days from the date of dispatch, failing which it will be treated as Sales.
The books of 'X' are closed on 31st December, 2002.
Prepare the following account in the book of 'X':
(i) Goods on Sales or Return, Sold and Returned Day Books.
(ii) Goods on Sales or Return Total Account. (6 Marks)
Ans. In the Books of 'X'
Goods on Sales or Return, Sold and Returned Day Books
Date Amount Date Sold Returned
Party to whom goods sent LF
(2002) (`) (2002) (`) (`)
Dec. 10 M/S ABC Co. 10,000 Dec. 25 10,000 -
Dec. 12 M/S DEF Co. 15,000 Dec. 16 - 15,000
Dec. 15 M/S GHI Co. 12,000 Dec. 20 10,000 2,000
Dec. 20 M/S DEF Co. 16,000 Dec.24 16,000 -
Dec.25 M/s ABC Co 11,000 Dec.28 11,000 -
Dec.30 Mis GHI Co. 13,000 - -
77,000 47,000 17,000

Goods on Sales or Return Total Account

Date Amount Date Amount
Particulars Particulars
(2002) (`) (2002) (`)
To Returns 17,000 Dec. 31 By goods sent on Sales or Return 77,000
To Sales 47,000
To Balance c/d 13,000
77,000 77,000

2. Mr. Badhri sends goods to his customers on Sale or Return. The following transactions took place during
the month of December 2017.
December 2nd - Sent goods to customers on sale or return basis at cost plus 25%- ` 80,000
December 10th - Goods returned by customers - ` 35,000
December 17th - Received letters from customers for approval - ` 35,000
December 23rd - Goods with customers awaiting approval - ` 15,000.
ML Badhri records sale or return transactions as ordinary sales. You are required to pass the necessary
Journal Entries in the books of Mr. Badhri assuming that the accounting year closes on 31st Dec. 2017.
(5 Marks)
CA Foundation/Accounting/Practice Que. Set P a g e | 82
Ans. In the books of Mr. Bhandari
Journal Entries
Date Particulars L.F. Dr. (`) Cr. (`)
2017 Debtor's A/c Dr. 80,000
Dec 2 To Salcs A/c 80,000
(Beirig the goods sent to customer on salc or return basis)
Dec 10 Salcs Return A/c Dr. 35,000
To Debtor's A/c 35,000
(Being the goods returned by customer)
Dec 17 No Entry
Dec 23 Sales A/c Dr. 15,000
To Debtor's A/c 15,000
(Being the cancellation of original entry of sales)
Dec 23 Stock with Customer A/c Dr. 12,000
To Trading a/c 12,000
(Being the adjustment for cost of goods lying with customer's
awaiting approval)
Notes:
1. No entry is required for receiving letter of approval from customers.
100
2. Cost of goods with customers = 15,000 x = ` 12,000
125

3. Mr. Ganesh sends out goods on approval to few customers and includes the same in the Sales Account. On
31.03.2018, the Trade Receivables balance stood at ` 75,000 which included ` 6,500 goods sent on
approval against which no intimation was received during the year. These goods were sent out at 30% over
and above cost price and were sent to -
Mr. Adhitya ` 3,900 and Mr. Bakkiram ` 2,600.
Mr. Adhitya sent intimation of acceptance on 25th April, 2018 and Mr. Bakkiram returned the goods on
15th April, 2018.
Make the adjustment entries and show how these items will appear in the Balance Sheet as on 31st March,
2018. Show also the entries to be made during April, 2018. Value of Closing Inventories as on 31st March,
2018 was ` 50,000. (5 Marks)
Ans. Journal Entries as 31.3.2018
(a) Cancellation of Sale
Sale A/c Dr. 6,500
To debtor's A/c 6,500
(Being sale of unapproved goods cancelled)________________
(b) Inclusion in Stock
Stock with Customer A/c Dr. 5,000
To Trading A/c 5,000
(Being goods included in stock at cost price. [6,500 x 100/130])

*******
CA Foundation/Accounting/Practice Que. Set P a g e | 83

CHAPTER 11 – INVENTORY VALUATION

1. X Who was closing his books on 31.3.1996 failed to take the actual stock, which he did only on 9th April,
1996, when it was ascertained by him to be worth ` 25,000. It was found that sales are entered in the sales
book in the same day of dispatch and return inwards in the returns book as and when the goods are
received back. Purchases are entered in the purchases daybook when the invoices are received.
It was found that sales between 31.3.1996 and 9.4.1996 as per the sales daybook are ` 1,720. Purchases
between 31.3.1996 and 9.4.1996 as per purchases daybook are ` 120, out of these goods amounting to
` 50 were not received until after the stock was taken.
Goods invoiced during the month of March 1996 but goods received only on 4 th April, 1996 amounted to
` 100. Rate of gross profit is 33 1/3% on cost.
Ascertain the value of physical stock as on 31.3.1996. (15 Marks)
st
Ans. Statement of Valuation of Physical as on 31 March, 1996
Particulars (`) (`)
Value of stock as on 9'" April, 1996 25,000
Add: Cost of sales during the intervening period
Sales made between 31.3.1996 and 9.4.1996 1,720
Less: Gross profit @ 25% on sales 430 1,290
26,290
Less: Purchases actually received during the intervening period
Purchases from 1.4.1996 to 9.4.1996 120
Less: Goods not received up to 9.4.1996 50 70
26,220
Less: Purchases during March, 1996 received on 4.4.1996 100
Value of Physical Stock as on 31.3.1996 26,120

2. D of Delhi appointed A of Agra as its selling agent on the following terms:

(a) Goods to be sold at invoice price or over.
(b) A to be entitled to a commission of 7.5% on the invoice price and 20% of any surplus price realised.
(c) The principals to draw on the agent a 30 days bill for 80% of the invoice price.
On 1 February, 1998, one thousand cycles were consigned to A, each cycle costing ` 640 including freight
st

and invoiced at ` 800.

Before 31st March. 1998 (when the principal's books are closed) A met his acceptance on the due date; sold
off 820 cycles at an average price of ` 930 per cycle, the sale expenses being ` 12,500; and remitted the
amount due by means of Bank Draft.
Twenty of the unsold cycles were shop-soiled and were to be valued at a depreciation of 50%. Show by
means of ledger accounts how these transactions would be recorded in the books of A and find out the
value of closing stock with A at which value D will account for the balance stock. (15 Marks)
Ans. D's Account
Dr. Cr.
Date Particular Amt. (`) Date Particular Amt. (`)
1998 1998
Feb. 1 To Bill Payable A/c 6,40,000 Mar. 31 By Cash/Bank A/c 7,62,600
CA Foundation/Accounting/Practice Que. Set P a g e | 84
Date Particular Amt. (`) Date Particular Amt. (`)
(80% of ` 8,00,000) (820 cycles x ` 930)
Mar. 31 To Cash A/c (Exp.) 12,500
Mar. 31 To Commission A/c 70,520
Mar. 31 To Bank A/c 39,580
7,62,600 7,62,600

Dr. Bills Payable Account Cr.

Date Particular Amt. (`) Date Particular Amt. (`)
1998 1998
March 4 To Cash/Bank A/c 6,40,000 Feb. 1 By D's A/c 6,40,000
6,40,000 6,40,000

Value of Closing Stock with 'A'

(`)
160 cycles at ` 640 (cost price including freight) 1,02,400
20 Cycles shop-soiled at 50 % of the t 640 i.e. ` 320 each 6,400
Value of closing stock with A 1,08,800

3. Navkar Ltd. was following LIFO method of valuation of stock. Due to promulgation of revised accounting
standard, they want to switch over to FIFO method. Form the following information:
(i) Draw up stock ledger under FIFO method of valuation of stocks.
(ii) Find out the closing stock and cost of materials consumed under each of the above two methods:
Opening stock 5,000 MT @ ` 22 per MT ` 1,10,000.
Purchases: Issues:
01.06.99 1,000 Mt @ ` 30 per MT 01-05.06.99 2,000 MT
05.06.99 2,000 Mt @ ` 35 per MT 06-10.06.99 3,000 MT
10.06.99 1,500 Mt @ ` 38 per MT 11-20.06.99 4,000 MT
15.06.99 1,500 Mt @ ` 35 per MT 21-25.06.99 3,000 MT
20.06.99 2,000 Mt @ ` 32 per MT 26-30.06.99 3,000 MT
28.06.99 2,000 Mt @ ` 35 per MT
30.06.99 1,500 Mt @ ` 30 per MT (8 Marks)
Ans. (i) Navkar Ltd.
Stock Ledger (Under FIFO Method)
Receipt Issues Balance
Date Units Rate Amount Units Rate Amount Units Rate Amount
(MT) (`) (`) (MT) (`) (`) (MT) (`) (`)
Opening
Balance 5,000 22 1,10,000 5,000 22 1,10,000
1.6.99 1,000 30 30,000 5,000 22 1,10,000
1,000 30 30,000
5.6.99 2,000 35 70,000 2,000 22 44,000 3,000 22 66,000
1,000 30 30,000
CA Foundation/Accounting/Practice Que. Set P a g e | 85
Receipt Issues Balance
Date Units Rate Amount Units Rate Amount Units Rate Amount
(MT) (`) (`) (MT) (`) (`) (MT) (`) (`)

10.6.99 1,500 38 57,000 3,000 22 66,000 1,000 30 30,000

2,000 35 70,000
1,500 38 57,000

15.6.99 1,500 35 52,500 1,000 30 30,000

2,000 35 70,000
1,500 38 57,000
1,500 35 52,000

20.6.99 2,000 32 64,000 1,000 30 30,000 500 38 19,000

2,000 35 70,000 1,500 35 52,500
1,000 38 38,000 2,000 32 64,000
25.6.99
500 38 19,000 1,000 32 32,000
1,500 35 52,500
1,000 32 32,000

28.6.99 2,000 35 70,000 1,000 32 32,000

2,000 35 70,000

30.6.99 1,500 30 45,000 1,000 32 32,000 1,500 30 45,000

2,000 35 70,000

16,500 4,98,500 15,000 4,53,500

(ii) Value of closing stock (`)

Under FIFO Method 45,000
(1,500 Mts @ ` 30)
Cost of Materials consumed (15,000 Mts)
Under FIFO Method ` 4,53,500

4. The Profit and Loss Account of Hanuman showed a net profit of ` 60,000, after considering the closing
stock of ` 37,500 on 31st March, 1999. Subsequently the following information was obtained from scrutiny
of the books:
(i) Purchases for the year included ` 1,500 paid for new electric fittings for the shop.
(ii) Hanuman gave away goods valued at ` 4,000 as free samples for which no entry was made in the
books of accounts.
(iii) Invoices for goods amounting to ` 25,000 have been entered on 27th March, 1999, but the goods
were not included in stock.
(iv) In March, 1999 goods of ` 20,000 sold and delivered were taken in the Sales for April 1999.
(v) Goods costing ` 7,500 were sent on sale or return in March, 1999 at a margin of Profit of 33-1/3% on
cost, though approval was given in April, 1999 these were taken as sales for March, 1999.
Calculate the value of stock on 31st March, 1999 and the adjusted Net Profit for the year ended on that
date. (9 Marks)
CA Foundation/Accounting/Practice Que. Set P a g e | 86
Ans. Profit and Loss Adjustment Account
(`) (`)
To Advertisement (samples) 4,000 By Net Profit 60,000
To Sales (Goods approved in April to be By Electric fittings 1,500
taken as April sales: 7,500 + 2,500) 10,000 By Samples 4,000
By Stock (Purchases of March,
not included in stock) 25,000
To Adjusted net profit 1,04,000 By Sales (goods sold in March wrongly
taken as April sales) 20,000
By Sales (goods sold in March wrongly
taken as April sales) 7,500
1,18,000 1,18,000

Calculation of value of stock on 31st March, 1999

(`)
Stock on 31st March, 1999 (given) 37,500
Add: Purchases of March, 1999 not included in stock 25,000
Goods lying with customers on approval basis 7,500
70,000

5. Physical verification of stock in a business was done on 23rd June. 2000. The value of the stock was
` 4,80,000. The following transactions took place between 23rd June to 30th June 2000:
(i) Out of the goods sent on consignment goods at cost worth ` 24,000 were unsold.
(ii) Purchases of ` 40,000 were made out of which goods worth ` 16,000 were delivered on 5th July
2000.
(iii) Sales were ` 1,36,000 which include goods worth ` 32,000 sent on approval. Half of these goods
were returned before 30th June 2000, but no information is available regarding the remaining goods.
(iv) Goods are sold at cost plus 25%. However, goods costing ` 24,000 had been sold for ` 12,000.
Determine the value of stock on 30th June 2000. (9 Marks)
th
Ans. Statement of Valuations of Stock on 30 June, 2000
Particular (`) (`)
Value of stock as on 23rd June, 2000 4,80,000
Add: Unsold stock out of the goods sent on consignment 24,000
rd th
Purchase during the period from 23 June, 2000 to 30 June, 2000 24,000
th
Goods in transit on 30 June, 2000 16,000
Cost of goods sent on approval basis (80% of ` 16,000) 12,800 76,800
5,56,800
Less: Cost of sales during the period from 23rd June, 2000 to 30th June, 2000
Sales (` 1,36,000 - ` 16,000) 1,20,000
Less: Gross profit 9,600 1,10,400
Value of stock as on 30th June, 2000 4,46,400
CA Foundation/Accounting/Practice Que. Set P a g e | 87
Working Notes:
(`)
1. Calculation of normal sales Actual Sales 1,36,000
Less: Abnormal sales 12,000
Return of goods sent on approval 16,000 28,000
Normal Sales 1,08,000
2. Calculation of gross profit
Gross profit on normal sales 20/100 x ` 1,08,000 21,000
Less: Loss on sale of particular (abnormal) goods (` 24,000 - ` 12,000) 12,000
Gross Profit 9,600

6. A trader prepared his accounts on 31st March each year. Due to some avoidable reasons, no stocktaking
could be possible till 15th April, 2002. On which date total cost of goods in his godown came to ` 50,000.
The following facts were established between 31st March and 15th April 2002.
(i) Sales ` 41,000 (Including cash sales ` 10,000)
(ii) Purchase ` 5,034 (including cash purchase ` 1,990)
(iii) Sales Return ` 1,000
(iv) On 15th March goods of the sale value of ` 10,000 were sent on sale or return basis to customer, the
period of approval being four weeks. He returns 40% of the goods on 10th April approving the rest;
the customer was billed on 16th April.
(v) The trader had also received goods costing ` 8,000 in March, for sale on consignment basis, 20% of
the goods had been sold by 31st March and another 50% by 15th April. These sales. are not included
in above sales.
Goods are sold by the trader at a profit of 20% on sales.
You are required to ascertain the value of inventory as on 31st March, 2002. (9 Marks)
st
Ans. Valuation of stock as on 31 March 2002
Particular (`) (`)
1. Stock to godown on 15th April 50,000
2. Add: (a) Cost of goods sold after 31st March till stock taking
(` 41,000 - ` 1,000) x 80 / 100] 32,000
(b) Cost of stock with customer on approval
[(` 10,000 - ` 4,000) x 80 / 100] 4,800 36,800
86,800
st
3. Less: (a) Cost of goods purchased after 31 March till stock taking is made 5,034
(b) Stock belonging to consignors (` 8.000 x 30/1 00) 2,400 7,434
4. Stock as on March 31, (at cost) 79,366

7. From the following information ascertain the value of stock as 31st March 2004 and also the profit for the
year:
(`)
Stock as on 1.4.2003 14,250
Purchases 76,250
Manufacturing Expenses 15,000
CA Foundation/Accounting/Practice Que. Set P a g e | 88
Selling Expenses 6,050
Administrative Expenses 3,000
Financial Charges 2, 150
Sales 1,24,500
At the time of valuing stock as on 31 March 2003, a sum of ` 1,750 was written off on a particular item,
st

which was originally purchased for ` 5,000 and was sold during the year at ` 4,500. Barring the transaction
relating to this item, the gross profit earned during the year was 20 percent on sales. (5 Marks)
Ans. Valuation of Stock as on 31st March, 2004
Particular (`) (`)
Opening Stock 14,250
Add: Written off last year 1,750 16,000
Add: Purchases 76,250
Add: Manufacturing Expenses 15,000
Cost of production 1,07,250
Less: Cost of Goods sold:
Sales 1,24,500
Less: Abnormal Sales 4,500
1,20,000
Less: Gross Profit @ 20% on sales 24,000
96,000
Add: Cost of Abnormal Sales 5,000
1,01,000 1,01,000
Value of Closing Stock 6,250

Statement of Profit (`) (`)

Gross Profit 24,000
Less: Loss on Sale of Goods 500
Administrative Expenses 3,000
Selling Expenses 6,050
Financial Charges 2,150 11,700
Profit for the year 2004 12,300

8. V's accounting year ends on 30.06.2004 but actual stock was not taken till 8.7.2004 on which date it is
valued at ` 129,700. The following additional information is available:
(i) Sales are entered in the sales book on the date of dispatch and returns inward entered in the credit
note register on the day goods are received back.
(ii) Purchases are entered in the purchase book on the day invoices are received.
(iii) Sales from 1.7.2004 to 8.7.2004 are ` 34,400.
(iv) Purchases from 1.7.2004 to 8.7.2004 were of ` 2,640 out of which goods of ` 240 was not received
upto 8.7.2004.
(v) Invoices for goods purchased upto 30.6.2004 were of ` 2,000 of which goods worth ` 1,400 were
received between 1.7.2004 to 8.7.2004.
(vi) Rate of G.P. 33.33% on cost, (7 Marks)
CA Foundation/Accounting/Practice Que. Set P a g e | 89
Ans. Statement of valuation of stock as on 30.06.2004
(`)
Value of stock as on 8.7.2004 29,700
Add: Cost of goods sold from 1.7.2004 to 8. 7.2004 (75% of ` 34,400) 25,800
Purchases ‘invoiced’ upto 30.06.2004 though goods not received till 08.07.2004
(` 2,000 - ` 1,400) 600
56,100
Less: Cost of goods purchased and received during the period from
1.7.2004 to 8.7.2004 (` 2,640 - ` 240) 2,400
53,700

9. M/s Polypack and Company's financial year ends on 31st March, 2006. Their actual physical stock as on 31st
March was ` 6,25,000 (net realizable value ` 6,40,000).
Following information regarding stock are also available:
(i) Goods costing ` 40,000 were damaged badly and it was expected that only ` 5,000 could be realized.
(ii) Goods costing ` 25,000 were sold on sale or return basis for which no confirmation has been
received till 31st March, 2006. Invoice value of these goods was ` 30,000.
(iii) Goods were sent on consignment to Mr. B at invoice value (120% of cost) ` 1,50,000 on 31st March,
2006. He informed that half of the material remains unsold.
You are required to ascertain the value of closing stock as on 31st March, 2006 as per AS-2. (5 Marks)
Ans. M/s Polypack & Company
Calculation of closing stock on 31st March, 2006
Amount (`)
st
Stock as on 31 March, 2006 6,25,000
Add: (a) Goods on sale or return basis 25,000
(b) Goods unsold with consignee
 1,50,000 
  50%  62,500 87,500
 120% 
Less: Reduction in value of stock due to badly damaged goods ` (40,000 - 5,000) 35,000
Value of Closing Stock 6,77,500

*********
CA Foundation/Accounting/Practice Que. Set P a g e | 90

CHAPTER 12: PARTNERSHIP ACCOUNTS

1. A, B and C entered into partnership on 1.1.2004 to Share profits and losses in the ratio of 5 : 3 : 2. A
personally guaranteed that C's share of profit after charging interest on capitals at 5% p.a. would not be
less than e 30,000 in any year. Capital of A, Band C were ` 3,20,000, ` 2,00,000 and ` 1,60,000
respectively.
Profits for the year. ending 31.12.2004 before providing for interest on partners’ capital was ` 1,59,000.
Show the Profit and Loss Appropriation Account. (8 Marks)
st
Ans. Profit and Loss Appropriation Account for the year ended 31 December, 2004
Particulars (`) (`) Particulars (`)
To Interest on capital By Net profit bid 1,59,000
A (5% of ` 3,20,000) 16,000 (Profit before interest)
B (5% of ` 2,00,000) 10,000
C (5% of ` 1,60,000) 8,000 34,000
To Partner's capital accounts
 5 
A of ` 1,25,000 62,500
 10 
Less: Transferred to C 5,000 57,500
 3 
B of ` 1,25,000 37,500
 10 
 2 
C of ` 1,25,000 25,000
 10 
Add: Transferred from A 5,000 30,000
1,59,000 1,59,000

2. A, B and C are partners in a firm sharing profits and losses as 8 : 5 : 3. Their Balance Sheet as at 31 st
December, 1993 was as follows:
(`) (`)
Sundry Creditors 1,50,000 Cash 40,000
General Reserve 80,000 Bills Receivable 50,000
Partners' Loan Accounts: Sundry Debtors 60,000
A 40,000 Stock 1,20,000
B 30,000 Fixed Assets 2,80,000
Partners' Capital Accounts:
A 1,00,000
B 80,000
C 70,000 _______
5,50,000 5,50,000
st
From 1 January, 1994 they agreed to alter their profit-sharing ratio as 5 : 6 : 5. It is also decided that:
(a) the fixed assets should be valued at ` 3,31,000;
(b) a provision of 5% on sundry debtors be made for doubtful debts;
(c) the goodwill of the firm at this date be valued at three years' purchase of the average net profits of
the last five years before charging insurance premium; and
(d) the Stock be reduced to ` 1, 12,000.
CA Foundation/Accounting/Practice Que. Set P a g e | 91
There is a joint life insurance policy for ` 2,00,000 for which an annual premium of ` 10,000 is paid, the
premium being charged to Profit and Loss Account. The surrender value of the policy on 31st December,
1993 was ` 78,000.
The net profits of the firm for the last five years were ` 14,000, ` 17,000, ` 20,000, ` 22,000 and ` 27,000.
Goodwill and the surrender value of the joint life policy was not to appear in the books.
Draft Journal Entries necessary to adjust the capital accounts of the partners and prepare the revised
Balance Sheet. (20 Marks)
Ans. M/s. A.B.C.
Journal Entries
Date Particulars (`) (`)
1994 Fixed Assets A/c Dr. 51,000
1 Jan To Revaluation A/c 51,000
(Being Revaluation of Fixed Assets)
Revaluation A/c Dr. 11,000
To Stock A/c 8,000
To Provision for Doubtful Debts A/c 3,000
(Beinq Reduction in the value of stock and
Provision @ 5% on sundry debtors created for
doubtful debts)
B's Capital A/c Dr. 10,500
C's Capital A/c Dr. 21,000
-To A's Capital A/c 31,500
(Being Adjustment for goodwill and joint life policy) (W.N. 1)
Revaluation A/c Dr. 40,000
To A's Capital A/c 20,000
To B's Capital A/c 12,500
To C's Capital A/c 7,500
(Being Transfer of revaluation profit)
General Reserve A/c Dr. 80,000
To A's Capital A/c 40,000
To B's Capital A/c 25,000
To C's Capital A/c 15,000
(Being Transfer of general reserve)

Balance Sheet (Revised) as on 1st January,1994

Liabilities (`) Assets (`)
Sundry Creditors 1,50,000 Cash 40,000
Partner's Loan A/cs: Bills Receivable 50,000
A 40,000 Sundry Debtors 60,000
B 30,000 70,000 Less: Provision 3,000 57,000
Partner's Capital A/cs: Stock 1,12,000
A 1,91,500 Fixed Assets 3,31,000
B 1,07,000
C 71,500 3,70,000
5,90,000 5,90,000
CA Foundation/Accounting/Practice Que. Set P a g e | 92
Working Notes:
1. Adjustment for Goodwill and joint life policy: (`)
Average profit last five years 20,000
Add: Insurance premium per annum 10,000
Average profit before charging premium 30,000
Value of goodwill (3 x ` 30,000) 90,000
Surrender value of joint life policy 78,000
Total amount for adjustment 1,68,000

A (`) B (`) C (`)

Raised in old profit sharing ratio (8 : 5 : 3) 84,000 52,500 31,500
Written off in new profit sharing ratio (5 : 6 : 5) 52,500 63,000 52,500
Net effect in Capital A/cs 31,500 10,500 21,000
(Dr.) (Dr.) (Dr.)

2. Partner's Capital Account

Particulars A (`) B (`) C (`) Particulars A (`) B (`) C (`)
1994, Jan. 1 1994, Jan. 1
To A's Capital A/c - 10,500 21,000 By Balance b/d 1,00,000 80,000 70,000
To Balance c/d 1,91,500 1,07,000 71,500 By B and C's Capital A/c 31,500 - -
(as per contra)
By Revaluation A/c 20,000 12,500 7,500
(Revaluation Profit)
By General Reserve 40,000 25,000 15,000
1,91,500 1,17,500 92,500 1,91,500 1,17,500 92,500

3. A and B are in partnership sharing profits and losses in the proportion of three-fourth and one-fourth
respectively. Their Balance Sheet on 31st march, 1995 was as follows:
Cash ` 1,000; Sundry Debtors ` 25,000; Stock ` 22,000; Plant and machinery ` 4,000; Sundry Creditors
` 12,000; Bank Overdraft ` 15,000; A's Capital ` 15,000; B's Capital ` 10,000 on 1st April, 1995 they
admitted C into partnership on the following terms:
(a) C to purchase one-third of the Goodwill for ` 2,000 and provide ` 10,000 as capital. Goodwill not to
appear in books.
(b) Future profits and losses are to be shared by A, B and C equally.
(c) Plant and Machinery is to be reduced by 10% and ` 500 is to be provided for estimated bad debts.
Stock is to be take at a valuation of ` 24,940.
(d) By bringing in or withdrawing cash and capital of A and B are to be made proportionate to that of C
on their profit- sharing basis.
Set our entries relating to the above arrangement in the firm's journal, give partner's Capital Account in
tabular form and submit the opening balance Sheet of the new firm. (20 Marks)
CA Foundation/Accounting/Practice Que. Set P a g e | 93
st
Ans. Journal as on 1 April,1995
Particulars (`) (`)
Revaluation Account Dr. 900
To Plant & Machinery Account 400
To Provision for Bad Debts Account 500
(Plant & machinery reduced by 10% and ` 500 provided for bad debts)
Stock Account Dr. 2,940
To Revaluation Account 2,940
(Value of stock increased by ` 2,940)
Revaluation. Account Dr. 2,040
To A's Capital Account 1,530
To B's Capital Account 510
(Profit on revaluation transferred)
Cash Account Dr. 10,000
To C's capital Account 10,000
(Cash brought in by C as his Capital)
Cash Account Dr. 2,000
B's Capital Account Dr. 500
To A's capital Account 2,500
(Entry for Goodwill purchased by Band C)
A's Capital Account Dr. 9,030
B's Capital Account Dr. 10
To Cash Account 9,040
(Cash withdrawn by A & B)

Capital Accounts
Particulars A (`) B (`) C (`) Particulars A (`) B (`) C (`)
To A's Capital Account - 500 - By balance bid 15,000 10,000 -
To cash 9,030 10 - By Revaluation A/c 1,530 510 -
To Balance c/d 10,000 10,000 10,000 By Cash 2,000 - 10,000
By B's Capital A/c 500 - -
19,030 10,510 10,000 19,030 10,510 10,000

Balance Sheet of A, B and C as at 1st April 1995

Liabilities (`) Assets (`)
Sundry Creditors 12,000 Cash (1) 3,960
Bank overdraft 15,000 Sundry Debtors 25,000
Capital Account Less: Provision for bad debts 5,000 24,500
A 10,000 Stock 24,940
B 10,000 Plant and Machinery 3,600
C 10,000
57,000 57,000
CA Foundation/Accounting/Practice Que. Set P a g e | 94
Working Notes:
(1) Determination of cash balance as on 31.3.95
Cash Account
Particulars (`) Particulars (`)
To Balance b/d 1,000 By A's Capital A/c 9,030
To C's Capital A/c 10,000 By B's Capital A/c 10
To A's Capital A/c 2,000 By balance c/d 3,960
13,000 13,000
(2) Calculation of Goodwill:
C pays ` 2,000 on account of goodwill for 1/3 share of profit/loss. Total goodwill is
` 2,000 x 3 = 6,000
Sacrificing:
1 1 1 1
B :  = C=
3 4 12 3
Goodwill to be paid to A:
By B ` 6,000 x 1/12 ` 500
By C ` 6,000 x 1/3 ` 2,000
Total ` 2,500

4. On 31st March, 1996 the Sheet of M/s P, Rand S sharing profit and losses in the ratio of 6 : 5 : 3, stood as
follows:
Liabilities (`) Assets (`)
Sundry Creditors 37,800 Cash 3,780
Bills Payable 12,600 Sundry Debtors 52,920
General Reserve 21,000 Stock 58,920
Capital Accounts: Furniture 14,700
P 70,800 Land & Buildings 90,300
S 29,100 Goodwill 10,500
R 59,700
2,31,000 2,31,000
th
They agree to admit Q into partnership giving him 1 /8 share, on 1.4.1996 on the following terms:
1 Furniture be depreciated by ` 1,840.
2. Stock shall be valued 10% less than the balance sheet. Value.
3. A provision of ` 2,640 be made, for outstanding repair bill.
4. The value of land and buildings having appreciated be brought up-to ` 1,19,700.
5. Value oi Good will be brought up-to ` 28,140.
6. Q should bring in cash ` 29,400 as his capital.
After making the above adjustments the capital accounts of the old partners be adjusted on the basis of
proportion of Q's Capital to his share in the business by bringing in or taking out cash.
You are required to prepare Revaluation Account, Capital Accounts of Partners, Cash Account and Balance
Sheet as on 1.4.1996 after Q's admission. (20 Marks)
CA Foundation/Accounting/Practice Que. Set P a g e | 95
Ans. Dr. Revaluation Account Cr.
Date Particulars (`) Date Particulars (`)
1996 To Stock A/c 5,880 1996 By Land and Building A/c 29,400
April 1 To Furniture A/c 1,840 April 1
April 1 To Repairs Payable A/c 2,640
April 1 To Profit on revaluation
April 1 transferred to capital Account
P 8,160
R 6,800
S 4,080
29,400 29,400

Partners’ Capital Accounts

P R S Q P R S Q
Date Particulars Date Particulars
(`) (`) (`) (`) (`) (`) (`) (`)
1996 1996
Apr. 1 To Cash 7,320 6,800 
 Apr. 1 By Balance b/d 70,800 59,700 29,100 
Apr. 1 To Balance c/d 88,200 73,500 44,100 29,400 Apr. 1 By General Reserve 9,000 7,500 4,500 
Apr. 1 By Goodwill A/c 7,560 6,300 3,780 
Apr. 1 By Revaluation A/c 8,160 6,800 4,080 
Apr. 1 By Cash   2,640 29,400
95,520 80,300 44,100 29,400 95,520 80,300 44,100 29,400

Cash Account
Date Particulars (`) Date Particulars (`)
1996 1996
April 1 To Balance b/d 3,780 April 1 By P's Capital A/c 7,320
April 1 To Q's Capital A/c 29,400 April 1 By R's Capital A/c 6,800
April 1 To S's Capital A/c 2,640 April 1 By Balance c/d 21,700
35,820 35,820

Balance Sheet of M/s P, R, S and Q

as on 1st April, 1996
Liabilities Amount (`) Assets Amount (`)
Capital Account Goodwill 28,140
P 88,200 Land and Buildings 1,19,700
R 73,500 Furniture 12,860
S 44,100 Stock 52,920
Q 29,400 2,35,200 Sundry Debtors 52,920
Sundry Creditors 37,800 Cash 21,700
Bills Payable 12,600
Repairs Payable 2,640
2,88,240 2,88,240
CA Foundation/Accounting/Practice Que. Set P a g e | 96
Working Notes:
(1) New Profit Sharing Ratio:
Old Ratio New ratio. Sacrificing ratio = Old ratio – New ratio
6 6  1 6 6 6 6
P  1     
14 14  8  16 14 16 112
5 5 7 5 5 5 5
R    
14 14 8 16 14 16 112
3 3 7 3 3 3 3
S    
14 14 7 16 14 16 112
1 2
Q i.e.
8 16
P: R:S:Q
New Ratio: 5 : 3 : 2
Sacrificing: 6 : 5 : 3

(2) Proportionate capital of partners:

Total Capital taking Q's capital as base is
` 29,400  8 = ` 2,35,200
Proportionate Capital of
6
P:  2,35,200 = ` 88,200
16
5
R:  2,35,200 = ` 73,500
16
5
S:  2,35,200 = ` 44,100
16

5. A, B, C were in partnership, sharing profits and losses as to A one-half, Bone-third and Cone- sixth. As from
1st January 1996 they admitted D into Partnership on the following terms:
D to have a one-sixth share which he purchased entirely from A paying A ` 8,000 for that share of Goodwill.
Of this amount, A had withdrawn ` 6,000 and put the balance in the firm as additional capital. As a
condition to admission of D as a partner D also brought ` 5,000 capital into the firm. It was further agreed
that the investment should be valued at its market value of ` 3,600 and plant be valued at ` 5,800.
The Balance Sheet of the old firm on 31.12.1995 was as following:
Cash at Bank` 8,000 Debtors ` 12,000; Stock ` 10,000; Investments at cost ` 6,000; Furniture` 2,000;
Plant ` 7,000; Creditors ` 21,000; Capital: A ` 12,000; B ` 8,000 and C ` 4,000.
The profits for the year 1996 were ` 12,000 and the drawings were: A ` 6,000, B ` 6,000, C ` 3,000 and D `
3,000.
You are required to Journalise the opening adjustments, prepare the opening Balance Sheet of the new
firm as on 1st January, 1996 and five the capital account of each partner as on 31st December, 1996.
(15 Marks)
CA Foundation/Accounting/Practice Que. Set P a g e | 97
Ans. Journal Entries
Particulars Dr. (`) Cr. (`)
(i) Bank A/c Dr. 8,000
To A's Capital A/c 8,000
(Being amount paid by D for share of goodwill purchased form A)
(ii) A's Capital Ac Dr. 6,000
To Bank A/c 6,000
(Being amount withdrawn by A)
(iii) Bank A/c Dr. 5,000
To D's Capital A/c 5,000
(Being capital brought in by D)
(iv) Revaluation A/c Dr. 3,600
To Investments A/c 2,400
To Plant A/c 1,200
(Being revaluation of lnvestments and plant recorded)
(v) A's Capital A/c Dr. 1,800
B's Capital A/c Dr. 1,200
C's Capital A/c Dr. 6000
To Revaluation A/c 3,600
(Being loss on revaluation transferred to old partners in 3 : 2 : 1 ratio)

Balance Sheet of New Firm

as on 1st January, 1996
Liabilities (`) Assets (`)
Capital Accounts: Plant 5,800
A 12,200 Furniture 2,000
B 6,800 Stock 10,000
C 3,400 Investments 3,600
D 5,000 Debtors 12,000
Creditors 21,000 Cash at Bank 15,000
48,400 48,400

Dr. A's Capital Account Cr.

Date Particulars (`) Date Particulars (`)
1996 1996
Dec. 31 To Drawing A/c 6,000 Jan. 1 By Balance b/d 12,200
Dec. 31 To Balance C/d 10,200 Dec. 31 By Profit 4,000
16,200 16,200
CA Foundation/Accounting/Practice Que. Set P a g e | 98
Dr. B's Capital Account Cr.
Date Particulars (`) Date Particulars (`)
1996 1996
Dec. 31 To Drawing A/c 6,000 Jan. 1 By Balance b/d 6,800
Dec. 31 To Balance C/d 4,800 Dec. 31 By Profit 4,000
10,800 10,800

Dr. C's Capital Account Cr.

Date Particulars (`) Date Particulars (`)
1996 1996
Dec. 31 To Drawing A/c 3,000 Jan. 1 By Balance b/d 3,400
Dec. 31 To Balance C/d 2,400 Dec. 31 By Profit 2,000
5,400 5,400

Dr. D's Capital Account Cr.

Date Particulars (`) Date Particulars (`)
1996 1996
Dec. 31 To Drawing A/c 3,000 Jan. 1 By Bank 5,000
Dec. 31 To Balance C/d 4,000 Dec. 31 By Profit 2,000
7,000 7,000

Working Notes:
(1) Balance Sheet of old firm
As on 31st December, 1995
Liabilities (`) Assets (`)
Capital Accounts: Plant 7,000
A 12,000 Furniture 2,000
B 8,000 Investments 6,000
C 4,000 Stock 10,000
Creditors 21,000 Debtors 12,000
Cash at Bank 8,000
45,000 45,000

(2) New Profit Sharing Ratio:

Old Ratio 3 New Ratio
3 3 1 2
A  
6 6 6 6
2 2
B
6 6
1 1
C
6 6
1 1
D
6 6
CA Foundation/Accounting/Practice Que. Set P a g e | 99

6. A and B are Partners of X & Co. sharing profits and losses in 3 : 2 ratio between themselves. On 31st March,
1998, the Balance Sheet of the firm was as follows;
Balance Sheet of X & Co. as at 31. 3. 1998
Liabilities (`) Assets (`)
Capital Accounts: Plant and Machinery 20,000
A 37,000 Furniture and Fitting 5,000
B 28,000 65,000 Stock 15,000
Sundry Creditors 5,000 Sundry Debtors 20,000
Cash on Hand 10,000
70,000 70,000
X agrees to join the business on the following conditions as and firm 1.4.1999
(a) He will; introduce ` 25,000 as his capita! and pay ` 15,000 at the partners as premium for Goodwill
for 1/3rd share of the future profits of the firm.
(b) A revaluation of assets of the firm will be made by reducing the value of Plant and Machinery to
` 15,000, Stock by 10% Furniture and Fittings by ` 1,000 and by making a provision of bad and
doubtful debts at ` 750 on Sundry debtors.
You are asked to prepare Profit and Loss Adjustment Account, Capital accounts of partners including the
incoming partner X, Balance Sheet of the firm after admission of X and also find out the new profit sharing
ratio assuming that the relative ratios of the old partners will be in equal proportion after admission.
(15 Marks)
Ans. Dr. Profit and Loss Adjustment A/c Cr.
Date Particulars (`) Date Particulars (`)
1998 1998
April.1 To Plant and Machinery A/c 5,000 April.1 By Partner's Capital A/c
To Furniture and fitting A/c 1,000 Loss on revaluation
To Stock A/c 1,500 A 4,950
To Provision for Bad and Doubtful A/c 750 B 3,300
8,250 8,250

Dr. Partners' Capital Accounts Cr.

Particulars A (`) B (`) C (`) Particulars A (`) B (`) C (`)
To Profit & Loss By Balance b/d 37,000 28,000
Adjustment A/c 4,950 3,300 - By Cash A/c 40,000
To A's B's Capital A/cs - - 15,000 By A's Capital A/c 12,000 3,000
To Balance c/d 44,050 27,700 25,000
49,000 31,000 40,000 49,000 31,000 40,000
CA Foundation/Accounting/Practice Que. Set P a g e | 100

Balance Sheet of A, B and X as on 1st April 1998

Liabilities (`) Assets (`)
Capital Accounts: Plant and Machinery 15,000
A 44,050 Furniture and Fitting 4,000
B 27,700 Stock 13,500
X 25,000 96,750 Sundry Debtors 20,000
Sundry Creditors 5,000 Less: Provision for bad and Doubtful
Debts 750 19,250
Cash on Hand 50,000
1,01,750 1,01,750
Working Notes:
(1) Adjustment of Goodwill:
A pays ` 15,000 as premium for goodwill for 1 /3rd share of the future profits.
Thus, total value of goodwill is ` 15,000 x 3 i.e., ` 45,000.
Sacrificing ratio:
A: 3/5 – 1/3 = 4/15
B: 2/5 – 1/3 = 1/15
Hence, Sacrificing ratio is 4 : 1
Adjustment of X's share of goodwill through existing partner's capital accounts in the profit sacrificing
ratio:
(`)
4
A : ` 15,000  = 12,000
5
1
B : ` 15,000  = 3,000
5
15,000

7. Hari and Ram were in partnership, sharing profits and losses equally. On 1st January, 1999, Suraj was
admitted into partnership on the following terms:
Suraj is to have one- sixth share in the profits/ losses, which he has got from Hari, paying him ` 40,000 for
that share as goodwill. put of this amount. Hari is to withdraw ` 30,000 and the balance amount is to
remain in the firm. It was further agreed that the value of investments should be reduced to ` 3,000 as one
of the creditors has closed his business and gone.
Suraj is to bring in proportionate capital on his admission.
The Balance sheet is at 31st December, 1998 was as follows:
Liabilities (`) Assets (`)
Creditors: 1,05,000 Cash at Bank 40,000
Capitals: Book Debts 60,000
Hari 60,000 Stock 50,000
Ram 60,000 1,20,000 Investments 30,000
Furniture 10,000
Plant 35,000
CA Foundation/Accounting/Practice Que. Set P a g e | 101
2,25,000 2,25,000
The profits for the year ended 31st December 1999 were ` 60,000 and the. drawings were: Hari ` 15,000;
Ram ` 22,500 and Suraj ` 7,500
Journalise the entries on Suraj's admission and give the Capital Accounts and the Balance Sheet as at 31 st
December 1999. (15 Marks)
Ans. Journal Entries
Date Particulars (`) (`)
Bank A/c Dr. 40,000
To Hari's Capital A/c 40,000
(Being amount paid by Suraj credited to Hari)
Hari's Capital A/c Dr. 30,000
To Bank A/c 30,000
(Being amount withdrawn by Hari)
Sundry Creditors A/c Dr. 3,000
Revaluation A/c Dr. 15,000
To Investments A/c 12,000
To Plant A/c 6,000
(Being revaluation of investments, plant and sundry creditors recorded)
Hari's Capital A/c Dr. 7,500
Ram's Capital A/c Dr. 7,500
To Revaluation A/c 15,000
(Being loss on revaluation transferred to old partners in equal ratio)
Bank A/c Dr. 23,000
To Suraj's Capital A/c 23,000
(Being proportionate capital brought in by Suraj)

Dr. Partners’ Capital Account Cr.

Date Particulars Hari (`) Ram (`) Suraj (`) Date Particulars Hari (`) Ram (`) Suraj (`)
1999 1999
Jan. 1 To Revaluation A/c 7,500 7,500 - Jan. 1 By Balance b/d 60,000 60,000 -
Jan .1 To Bank A/c 30,000 - - Jan. 1 By Bank A/c 40,000 - -
Dec. 31 To Bank A/c 15,000 22,500 7,500 Jan. 1 By Bank A/c - - 23,000
Dec. 31 To Balance c/d 67,500 60,000 25,500 Dec. 31 By Profit & Loss A/c 20,000 30,000 10,000
1,20,000 90,000 33,000 1,20,000 90,000 33,000

Balance Sheet as at 31st December, 1999

Liabilities (`) Assets (`)
Capital Accounts: Plant 29,000
Hari 67,500 Furniture 10,000
Ram 60,000 Investments 18,000
Suraj 25,500 1,53,000 Stock 50,000
Creditors 1,02,000 Debts 60,000
Bank 88,000
CA Foundation/Accounting/Practice Que. Set P a g e | 102
2,55,000 2,55,000
Working Notes:
(1) New profit sharing ratio:
Old ratio New ratio
1 1 1 2
Hari - =
2 2 6 6
1 1 3
Ram or
2 2 6
1
Suraj
6
New Ratio = 2 : 3 : 1

(2) Amount of capital brought In by Suraj:

(`)
Capital on 1.1.99
Hari (1,00,000 - 30,000-7,500) 62,500
Ram (60,000 - 7,500) 52,500
1,15,000
Let the total capital after admission of Suraj is ` X
1x
` 1, 15,000 + =x
2
5
x = ` 1,15,000
6
6
x = 1,15,000 x = ` 1,38,000
5
1
Suraj's proportionate capital = ` 1,38,000 x
6
= ` 23,000

(3) Cash at Bank on 31st December, 1999

(`)
Cash at bank on 31" December, 1998 40,000
Add: Amount paid by Suraj for goodwill 40,000
Amount paid by Suraj for capital 23,000
profits earned during the year 60,000
1,63,000
Less: Drawings - Hari (30,000 + 15,000) 45,000
Ram 22,500
Suraj 7,500 75,000
88,000
CA Foundation/Accounting/Practice Que. Set P a g e | 103

8. The Balance Sheet of A & B, a partnership firm, as at 31st March, 2001 is as follows:
Labilities (`) Assets (`)
Capital Account: Goodwill 14,000
A 26,400 Land and Building 14,400
B 33,600 60,000 Furniture 2,200
Contingency Reserve 6,000 Stock 26,000
Sundry Creditors 9,000 Sundry Debtors 6,400
Cash at Bank 12,000
75,000 75,000
A & B share profits and losses as 1 : 2. They agree to admit C (who is also in business on his own) as a third
partner from 1.4.2001:
The Assets are revalued as under:
Goodwill - ` 18,000; Land and Building ` 30,000; Furniture ` 6,000. C bring the followings assets into the
partnership-Goodwill ` 6,000; Furniture ` 2,800, Stock ` 13,600.
Profit in the new firm are to be shared equally by the three partners and the Capital Account are to be so
adjusted as to be equal. For this purpose, additional cash should be brought in by the partner or partners
concerned.
Prepare the necessary accounts and the opening Balance Sheet of nee firm showing the amount for cash, if
any, which each partner may have to provide. (15 Marks)
Ans. Dr. Profit and Loss Adjustment Account Cr.
Particulars (`) Particulars (`)
To partner's Capital A/c By Goodwill 4,000
A 7,800 By Land & Building 15,600
B 15,600 23,400 By Furniture 3,800
23,400 23,400

Dr. Partners' Capital Accounts Cr.

Particulars A (`) B (`) C (`) Particulars A (`) B (`) C (`)
By Balance b/d 26,400 33,600 -
By Contingency Reserve 2,000 4,000 -
By profit & Loss Adjustment A/c 7,800 15,600 -
To Balance c/d 53,200 53,200 53,200 By Sundry Assets - - 22,400
By Bank A/c 17,000 - 30,800
53,200 53,200 53,200 53,200 53,200 53,200

Dr. Bank Account Cr.

Particulars (`) Particulars (`)
To Balance b/d 12,000 By Balance c/d 59,800
To A's Capital A/c 17,000 By Land & Building
To C's Capital A/c 30,000 By Furniture
CA Foundation/Accounting/Practice Que. Set P a g e | 104
59,800 59,800

9. The Balance Sheet of X & Y, a partnership firm, as at 31st March, 2004 is as follows:
Liabilities (`) Assets (`)
Capital Account: Goodwill 14,000
X 26,400 Land & Building 14,400
Y 33,600 60,000 Furniture 2,200
General Reserve 6,000 Stock 26,000
Sundry Creditors 9,000 Sundry Debtors 6,400
______ Cash at Bank 12,000
75,000 75,000
X & Y share profits and losses as 1 : 2. They agree to admit Z (who is also in business on his own) as a third
partner from 1.4.2004.
The Assets are revalued as under:
Goodwill - ` 18,000, Land and Building ` 30,000, Furniture ` 6,000. Z brings the following assets into the
partnership-Goodwill ` 6,000, Furniture ` 2,800, Stock ` 13,600.
Profit in the new firm are to be shared equally by three partners and the Capital Accounts are to be so
adjusted as to be equal. For this purpose, additional cash should be brought in by the partner or partners
concerned.
Prepare the necessary accounts and the opening Balance Sheet of new firm, showing the amounts of cash,
if any, which each partner may have to provide. (15 Marks)
Ans. Profit and Loss Adjustment A/c
Particulars Amount (`) Particulars Amount (`)
To Profit transferred to: 23,400 By Goodwill 4,000
To X's Capital A/c 7,800 By Land & Building A/c 15,600
To Y's Capital A/c 15,600 By Furniture A/c 3,800
23,400 23,400

Partner’s Capital A/c

Particulars X Y Z Particulars X Y Z
To Balance c/d 53,200 53,200 53,200 By Balance b/d 26,400 33,600 -
By Profit & Loss Adj. 7,800 15,600 -
By General Reserve A/c 2,000 4,000 -
By Sundry Assets - - 22,400
By Bank A/c 17,000 - 30,800
53,200 53,200 53,200 53,200 53,200 53,200

Bank A/c
Particulars Amount (`) Particulars Amount (`)
To Profit transferred to: 12,000 By Balance c/d 59,800
To X's Capital A/c 17,000
To Y's Capital A/c 30,800
CA Foundation/Accounting/Practice Que. Set P a g e | 105
59,800 59,800

Balance Sheet of New Firm as on 1st April, 2004

Liabilities Amount (`) Assets Amount (`)
Capital Account Goodwill (18,000 + 6,000) 24,000
X 53,200 Land & Building 30,000
Y 53,200 Furniture (6,000 + 2,800) 8,800
Y 53,200 1,59,600 Stock (26,000 + 13,600) 39,600
Sundry Creditors 9,000 Sundry Debtors 6,400
Cash at Bank 59,800
1,68,600 1,68,600
Working notes:
The capital account of the partners are to be equally adjusted and so the additional cash is to be brought by
the incoming partner. For this purpose, the highest capital i. e. of Y is taken as the base and
 Y's Total capital = Y's Capital = profit on Revaluation + general Reserve
= 33,600 + 15,600 + 4,000
= ` 53,200
 X has to bring ` 17,000 (53,200 - (26,400 + 2,000 + 7,800) and
Z has to bring ` 30,800 (53,200 - 22,400).

10. The following is the Balance Sheet of A, B and C Sharing Profits and Losses in the proportion of 6/14, 5/14
and 3/14 respectively:
(`) (`)
Creditors 37,800 Cash 3,780
Bill Payable 12,600 Debtors 52,920
General Reserve 21,000 Stock 58,800
Capital Account: Furniture 14,700
A 70,800 Land and Building 90,300
B 59,700 Goodwill 10,500
C 29,100 _______
2,31,000 2,31,000
th
They agreed to take D into partnership and give him 1 /8 share on the following terms:
(i) That furniture be depreciated by ` 1,840.
(ii) That stock be depreciated by 10%.
(iii) That a provision of ` 2,640 be made for outstanding repair bills.
(iv) That the value of land and building, having appreciated, be brought upto ` 1,19,700.
(v) That the value of goodwill be brought up to ` 28,140.
(vi) That D should bring in ` 29,400 as his capital.
(vii) That after making the above adjustments the Capital accounts of old partners be adjusted on the
basis of the proportion of D's capital to his share in the business and actual cash to be paid off or
brought in by the old partners, as the case may be.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the new firm.
CA Foundation/Accounting/Practice Que. Set P a g e | 106
(15 Marks)

Ans. Revaluation A/c

Particulars (`) Particulars (`)
To Furniture 1,840 By Land & Building 29,400
To Stock 5,880
To Prov. for O/s bills 2,640
To Partner's Capital A/c 19,040
29,400 29,400

Dr. Partner’s Capital Cr.

Particulars A B C D Particulars A B C D
By Bal. bid 70,800 59,700 29,100 -
By General Reserve 9,000 7,500 4,500 -
By Revaluation 8,160 6,800 4,080 -
Cash A/c 7,320 6,800 By Cash - - - 29,400
To Bal. c/d 88,200 73,500 44,100 29,400 By Goodwill 7,560 6,300 3,780 -
By Cash 2,640
95,520 80,300 44,100 29,400 95,520 80,300 44,100 29,400

Dr. Cash A/c Cr.

Particulars (`) Particulars (`)
To Balance b/d 3,780 By A 7,320
To D's Capital 29,400 By B 6,800
To C's Capital 2,640 By Balance C/d 21,700
35,820 35,820

Balance Sheet of the new firm (After admission of D)

Liabilities (`) Assets (`)
Capital Land & Building 1,19,700
A 88,200 Furniture 12,860
B 73,500 Goodwill 28,140
C 44,100 Stock 52,920
D 29,400 2,35,200 Debtors 52,920
Creditors 37,800 Cash 21,700
Bills payable 12,600
Provision for O/s bills 2,640
2,88,240 2,88,240
CA Foundation/Accounting/Practice Que. Set P a g e | 107

Working Note:
1. Calculation of old Ratio:
A B C
6 5 3
: :
14 14 14
6 : 5 : 3

2. Calculation of New Ratio:

1
D's Share -
8
1 7
1- =
8 8
7 6 6
A. x =
8 14 16
7 5 5
B. x =
8 14 16
7 3 3
C. x =
8 14 16

A B C D
6 5 3 1
: : :
16 16 16 8
6 5 3 2
= : : :
16 16 16 16
6 : 5 : 3 : 2

3. Calculation of Closing Bal. of Capital A/c:

Ratio Capital
2 29,400  16
: 29 400 =
16 2
= 2,35,200
6
A - 2,35,200  = 88,200
16
5
B - 2,35,200  = 73,500
6
3
C - 2,35,200  = 44,100
16
2
D - 2,35,200  = 29,400
16
CA Foundation/Accounting/Practice Que. Set P a g e | 108

11. On 31st March, 2006, the Balance Sheet of P, Q and A sharing profit and losses in proportion to their Capital
stood as below:
Liabilities (`) Assets (`)
Capital Account: Land and Building 30,000
Mr. P 20,000 Plant and Machinery 30,000
Mr. Q 30,000 Stock of goods 12,000
Mr. R 20,000 Sundry debtors 11,000
Sundry Creditors 10,000 Cash and Bank Balances 7,000
80,000 80,000
st
On 1 April, 2006, P desired to retire from the firm and remaining partners to carry on the business. It was
agreed to revalue the assets and liabilities on that date on the following basis:
(i) Land and Building be appreciated by 20%
(ii) Plant and Machinery by depreciated by 30%
(iii) Stock of goods to be valued at ` 10,000.
(iv) Old credit balances of Sundry creditors, ` 2,000 to be written back.
(v) Provisions for bad debts should be provided at 5%.
(vi) Joint life policy of the partners surrendered and cash obtained ` 7 ,550.
(vii) Goodwill of the entire firm is valued at ` 14,000 and P's share of the goodwill is adjusted in the A/cs
of Q and R, who would share the future profits equally. No goodwill account being raised.
(viii) The total capital of the firm is to be the same as before retirement Individual capital is in their profit
sharing ratio.
(ix) Amount due to Mr. P is to be settled on the following basis:
50% on retirement and the balance 50% within one year.
Prepare (a) Revaluation Account, (b) The Capital accounts of the partners, (c) Cash account and (d) Balance
Sheet of the new firm M/s Q and A as on 01.04.2006. (15 Marks)
Ans.
(a) Revaluation Account
Date Particulars (`) Date Particulars (`)
2006 2006
April To Plant & Machinery 6,000 April By Land & Building 6,000
To Stock of goods 2,000 By Sundry creditors 2,000
To Provision for bad and doubtful debts 550 By Cash & Bank – Joint 7,550
To Capital accounts life Policy surrendered
(profit on revaluation transferred)
Mr. P (2/7) 2,000
Mr. Q (3/7) 3,000
Mr. R (2/7) 2,000 7,000
15,550 15,550
CA Foundation/Accounting/Practice Que. Set P a g e | 109

(b) Dr. Partners' Capital Accounts Cr.

Particulars P (`) Q (`) R (`) Particulars P (`) Q (`) R (`)
To P's Capital A/c goodwill - 1,000 3,000 By Balance b/d 20,000 30,000 20,000
To Cash & bank A/c 13,000 - - By Revaluation A/c 2,000 3,000 2,000
(50% dues paid) By Q & R's Capital A/cs - goodwill 4,000 - -
To P's Loan A/c - (50% transfer) 13,000 - - By Cash & bank A/c - 3,000 16,000
To Balance c/d - 35,000 35,000 - amount brought in
(Balancing in figures)
26,000 36,000 38,000 26,000 36,000 38,000

(c) Cash and Bank Accounts

Particulars (`) Particulars (`)
To Balance b/d 7,000 By P's Capital A/c - 50% Dues paid 13,000
To Revaluation A/c - Surrender value of By Balance b/d 20,550
joint life policy 7,550
To Q's Capital A/c 3,000
To R's Capital A/c 16,000
33,550 33,550

(d) Balance Sheet of M/s Q & R as on 01.04.2006

Liabilities (`) Assets (`)
Partners' Capital account Land and Building 30,000
Mr. Q 35,000 Add: Appreciation 20% 6,000 36,000
Mr. R 35,000 70,000 Plant & Machinery 20,000
Mr. P's Loan account 13,000 Less: Depreciation 30% 6,000 14,000
Sundry Creditors 8,000 Stock of goods 12,000
Less: devalued 2,000 10,000
Sundry Debtors 11,000
Less: Provision for bad debts - 5% 550 10,450
Cash & Bank balances 20,550
91,000 91,000
Working Notes:
Adjustment for Goodwill:
Goodwill of the firm
Mr. P's Share (2/7).
Gaining ratio of Q & R
Q = 1/2 – 3/7 = 1/14
R = 1/2 – 2/7 = 3/14
Q:R =1:3
CA Foundation/Accounting/Practice Que. Set P a g e | 110
Therefore, Q will bear - 1/4 x 4000 or ` 1,000
R will bear - 3/4 x 4000 or ` 3,000

12. Dinesh, Ramesh and Naresh are partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. Their
Balance Sheet as on 31st March, 2018 is as below:
Liabilities (`) Assets (`)
Trade Payables 22,500 Land & Buildings 37,000
Outstanding Liabilities 2,200 Furniture & fixtures 7,200
General Reserve 7,800 Closing Stock 12,600
Capital Accounts: Trade Receivables 10,700
Dinesh 15,000 Cash in Hand 2,800
Ramesh 15,000 Cash at Bank 2,200
Naresh 10,000 40,000
72,500 72,500
The partners have agreed to take Suresh as a partner with effect from 1st April, 2018 on the following
terms:
(i) Suresh shall bring ' 8,000 towards his capital.
(ii) The value of stock- to be increased to ` 14,000 and Furniture & Fixtures to be depreciated by 10%.
(iii) Reserve for bad and doubtful debts should be provided at 5% of the Trade Receivables.
(iv) The value of Land & Buildings to be increased by ` 5,600 and the value of the goodwill be fixed at
` 18,000.
(v) The new profit sharing ratio shall be divided equally among the partners.
The outstanding liabilities include ` 700 due to Ram which has been paid by Dinesh. Necessary entries were
not made in the books.
Prepare: (i) Revaluation Account, (ii) Capital Accounts of the partners, (iii) Balance Sheet of the firm after
admission of Suresh. (15 Marks)
Ans. Revaluation Account
Particulars (`) Particulars (`)
To Furniture & Fixtures 720 By Stock 1,400
To Reserve tor doubtful debts 535 By Land & Building 5,600
To Partner Capital A/c (Profit on revaluation)
Dinesh 2,873
Ramesh 1,915
Naresh 957 5,745
7,000 7,000

Partner's Capital Accounts

D R M S D M R S
To G/w 4,500 4,500 4,500 4,500 By Bal b/d 15,000 15,000 10,000 -
To bal. c/d 26,973 21,015 10,757 3,500 By Cash - - - 8,000
By Revaluation 2,873 1,915 957 -
By Gen. Res. 3,900 2,600 1,300 -
By O/s Liabilities 700 - - -
CA Foundation/Accounting/Practice Que. Set P a g e | 111
By G/w 9,000 6,000 15,257 -
31,473 25,515 15,257 8,000 31,473 25,515 15,257 8,000

Balance Sheet Extract on 31.03.2018

Liabilities (`) Assets (`)
Closing Stock 50,000
Add: Stock with Customers 5,000 55,000
Trade receivables 75,000
Less: Cancelled 6,500 68,500

Journal Entries in April, 2018

Date Particulars (`) (`)
15.4.18 No Entry for return of goods
Subsequently as sale had already been cancelled
25.4.18 Trade receivables A/c (Adhityas A/c) Dr. 3,900
To Sales A/c 3,900
(Being sales recorded as acceptance received)

Balance Sheet as on 1.4.2018

(After admission of Suresh)
Liabilities (`) Assets (`)
Trade Payables 22,500 Land & Buildings 42,600
O/s. Liabilities 1,500 Furniture & Fixture 6,480
Capital Accounts: Closing Stock 14,000
Dinesh 26,973 Trade Receivable 10,700
Ramesh 21,015 Less Provisions 535 10,165
Naresh 10,757 Cash in hand 2,800
Suresh 3,500 62,245 Cash at bank 10,200
86,245 86,245

13. On 31st March, 1995 the Balance Sheet of M/s. A, B & C sharing profits and losses in proportion to their
capitals, stood as follows:
(`) (`)
Capital Accounts: Land and Buildings 2,00,000
A ` 2,00,000 Machinery 3,00,000
B ` 3,00,000 Closing Stock 1,00,000
C ` 2,00,000 7,00,000 Sundry Debtors 1,00,000
Sundry Debtors 1,00,000 Cash and Bank Balances 1,00,000
8,00,000 8,00,000
On 31st March, 1995, A desired to retire from the firm and the remaining partners decided to carry on. It
was agreed to revalue the Assets and Liabilities on that date on the following basis:
CA Foundation/Accounting/Practice Que. Set P a g e | 112
1. Land and Buildings be appreciated by 30%.
2. Machinery be depreciated by 20%.
3. Closing stock to be valued at ` 75,000.
4. Provision for bad debts be made at 5%.
5. Old credit balances of Sundry Creditors ` 20,000 be written back.
6. Joint Lile Policy of the partners surrendered and cash obtained ` 80,000.
7. Goodwill of the entire firm be valued at ` 1,40,000 and A's share of the Goodwill be adjusted in the
accounts of B and C who share the future profits equally. No Goodwill Account being raised.
8. The total capital of the firm is to be the same as before retirement. Individual capital be in their profit
sharing ratio.
9. Amount due to A is to be settled on the following basis: 50% on retirement and the balance 50%
within one year.
Prepare Revaluation Account, Capital Accounts of Partners, Cash Account and Balance Sheet as on 1.4.1995
of M/s. B & C. (20 Marks)
Ans. M/s. ABC
Revaluation Account
Particular (`) Particular (`)
To Machinery A/c 60,000 By Land and Buildings 60,000
To Closing stock 25,000 By Sundry Creditors 20,000
To Provision for bad debts 5,000 By Cash and Bank A/c
To Partner's Capital A/cs: - Joint life policy surrendered 80,000
Profit on revaluation
A (2/7) 20,000
B (3/7) 30,000
C (2/7) 20,000 70,000
1,60,000 1,60,000

Partners Capital Accounts

Particular A (`) B (`) C (`) Particular A (`) B (`) C (`)
To A's Capital A/c - 10,000 30,000 By Balance b/d 2,00,000 3,00,000 2,00,000
To Cash and Bank A/c By Revaluation A/c 20,000 30,000 20,000
50% of dues paid 1,30,000 By B&C's Capital A/c 40,000 - -
To A's Loan A/c By Cash & Bank A/c
Balance transferred 1,30,000 amount Brought in - 30,000 1,60,000
To Balance c/d - 3,50,000 3,50,000
2,60,000 3,60,000 3,80,000 2,60,000 3,60,000 3,80,000

Cash and Bank Account

Particular (`) Particular (`)
To Balance b/d 1,00,000 By A's Capital A/c - 50% due paid 1,30,000
To Revaluation A/c: By Balance c/d 2,40,000
Surrender value of joint life policy 80,000
To B's Capital A/c 30,000
CA Foundation/Accounting/Practice Que. Set P a g e | 113
To C's Capital A/c 1,60,000
3,70,000 3,70,000

Balance Sheet of Mis B & C

as on 1st April. 1995
Liabilities (`) Assets (`)
Partner's Capital A/cs: Land and Buildings 2,60,000
B 3,50,000 Machinery 2,40,000
C 3,50,000 7,00,000 Closing Stock 75,000
A'S Loan A/c 1,30,000 Sundry Debtors 1,00,000
Sundry Creditors 80,000 Less: Provision for bad debts 5,000 95,000
Cash and Bank Balances 2,40,000
9,10,000 9,10,000
Working Notes:
Adjustment for Goodwill:
Goodwill of the firm ` 1,40,000
A's Share (2/7) ` 40,000
Gaining ratio of B & C:
1 3 1
B = - =
2 7 14
1 2 3
C = - =
2 7 14
So B : C = 1 : 3
1
Therefore, B should bear = x ` 40,000 = ` 10,000
4
3
and C should bear = x ` 40,000 = ` 30,000
14

14. Dowell & Co. is a partnership firm with partners Mr. A, Mr. B and Mr. C, sharing profits and losses in the
ratio of 10:6:4. The Balance Sheet of the firm as at 31st March. 1996 is as under
(`) (`)
Capital Land 10,000
Mr. A 80,000 Buildings 2,00,000
Mr. B 20,000 Plant and Machinery 1,30,000
Mr. C 30,000 1,30,000 Furniture 43,000
Reserves (Unappropriated Profit) 20,000 Investments 12,000
Long Term Debt 3,00,000 Stock 1,30,000
Bank Overdraft 44,000 Debtors 1,39,000
Trade Creditors 1,70,000
Total 6,64,000 Total 6,64,000
It was mutually agreed that Mr. B will retire from partnership and in his place Mr. D will be admitted as a
partner with effect from 1st April, 1996. For this purpose, the following adjustments are to be made:
CA Foundation/Accounting/Practice Que. Set P a g e | 114
(i) Goodwill is to be valued at ` 1 lakh but the same will not appear as an asset in the books of the
reconstituted firm.
(ii) Buildings and Plant and Machinery are to be depreciated by 5 percent and 20 percent respectively.
Investments are to be taken over by the retiring partner at ` 15,000. Provision of 20 percent is to be
made on debtors to cover doubtful debts.
(iii) In the reconstituted firm, the total capital will be ` 2 lakhs which will be contributed by Mr. A, Mr. C
and Mr. D in their new profit sharing ratio, which is 2 : 2 : 1.
(iv) The surplus funds, if any, will be used for repaying the Bank Overdraft.
(v) The amount due to the retiring partner shall be transferred to his loan account.
You are to prepare:
(a) Revaluation. A/c;
(b) Partner's Capital Accounts;
(c) Bank Account; and
(d) Balance Sheet of the reconstituted firm as on 1ST April, 1996. (20 Marks)
Ans. Dr. Revaluation Account Cr.
Particulars (`) Particulars (`)
To Buildings A/c 10,000 By Investments A/c 3,000
To Plant and Machinery A/ 26,000 By Loss to. Partners:
To Provision for Doubtful Debts A/c 27,800 A 30,400
B 18,240
C 12,160 60,800
63,800 63,800

A's Capital Account

Particulars (`) Particulars (`)
To Revaluation A/c 30,400 By Balance b/d 80,000
To Goodwill A/c 40,000 By Reserves A/c 10,000
To Balance c/d 80,000 By Goodwill A/c 50,000
By Bank A/c (bal. figure) 10,400
1,50,400 1,50,400

B's Capital Account

Particulars (`) Particulars (`)
To Revaluation A/c 18,240 By Balance b/d 20,000
To Goodwill A/c 15,000 By Reserves A/c 6,000
To Balance c/d 22,760 By Goodwill A/c 30,000
56,000 56,000

C's Capital Account

Particulars (`) Particulars (`)
To Revaluation A/c 12,160 By Balance b/d 30,000
To Goodwill A/c 40,000 By Reserves A/c 4,000
CA Foundation/Accounting/Practice Que. Set P a g e | 115
To Balance c/d 80,000 By Goodwill A/c 20,000
By Bank A/c 78,160
1,32,160 1,32,160

D's Capital Account

Particulars (`) Particulars (`)
To Goodwill A/c 20,000 By Bank A/c 60,000
To Balance c/d 40,000
60,000 60,000

Bank Account
Particulars (`) Particulars (`)
To A's Capital A/c 10,400 By Bank Overdraft A/c 44,000
To C's Capital A/c 78,160 By Balance c/d 1,04,560
To D's Capital A/c 60,000
1,48,560 1,48,560

Balance Sheet of Dowell & Co.

As on 1st April 1996
Liabilities (`) Assets (`)
Capital Account: Land 10,000
A 80,000 Buildings 1,90,000
B 80,000 Plant and Machinery 1,04,000
C 40,000 Furniture 43,000
Long Term Debt 3,00,000 Stock 1,30,000
Trade Creditors 1,70,000 Debtors 1,39,000
B's Loan Account 22,760 Less: Provision for 27,800 1,11,200
Doubtful
Debts
Balance at Bank 1,04,560
6,92,760 6,92,760

15. On 31st March, 1997 the Balance Sheet of Mis Ram, Hari & Mohan sharing profits and losses in the ratio of
2 : 3 : 2, stood as follows:
Liabilities (`) (`) Assets (`)
Capital Accounts: Land and Buildings 10,00,000
Ram 10,00,000 Machinery 17,00,000
Hari 15,00,000 Closing Stock 5,00,000
Mohan 10,00,000 35,00,000 Sundry Debtors 6,00,000
CA Foundation/Accounting/Practice Que. Set P a g e | 116
Sundry Creditors 5,00,000 Cash and Bank Balances 2,00,000
40,00,000 40,00,000
On 31st March, 1997 Hari desired to retire from the firm and the remaining partners decided to carry on. It
was agreed to revalue the Assets and Liabilities on that date on the following basis:
1. Land & Buildings be appreciated by 30%.
2. Machinery be depreciated by 20%.
3. Closing Stock to be valued at ` 4,50,000.
4. Provision for bad debts be made at 5%.
5. Old credit balances of Sundry Creditors ` 50,000 be written back.
6. Joint Lile Policy of the partners surrendered and cash obtained ` 3,50,000.
7. Goodwill of the entire firm be valued at ` 6,30,000 and Hari's share of the Goodwill be adjusted in
the accounts of Ram and Mohan who share the future profits & losses in the ratio of 3:2. No
Goodwill Account being raised.
8. The total capital of the firm ls to be the same as before retirement. Individual capital be in their profit
sharing ratio.
9. Amount due to Hari is to be settled on the following basis: 50% on retirement and the balance 50%
within one year.
Prepare Revaluation Account, Capital Accounts of Partners, Cash Account and Balance Sheet as on 1.4.1997
of M/s Ram & Mohan. (15 Marks)
Ans. Dr. Revaluation Account Cr.
Particulars (`) Particulars (`)
To Machinery A/c To Closing Stock A/ 3,40,000 By Land and buildings A/c 3,00,000
To Provision for Bad 50,000 By Sundry Creditors A/c 50,000
Debts A/c 30,000 By Partner's Capitals A/cs:
Ram 20,000
Hari 30,000
Mohan 20,000
4,20,000 4,20,000

Dr. Partner's Capital Accounts Cr.

Ram Hari Mohan Ram Hari Mohan
Particular Particular
(`) (`) (`) (`) (`) (`)
To Hari's Capital A/c 1,98,000 - 72,000 By Balance b/d 10,00,000 15,00,000 10,00,000
To Revaluation A/c 20,000 30,000 20,000 By Joint Life Policy A/c 1,00,000 1,50,000 1,00,000
To Cash & Bank A/c - 9,45,000 By Ram's Capital - 1,98,000 -
To Hari's Loan A/c - 9,45,000 By Mohan's Capital A/c - 72,000 -
To Balance c/d 21,00,000 - 14,00,000 By Cash & Bank A/c (Bal. figure) 12,18,000 - 3,92,000
23,18,000 19,20,000 14,92,000 23,18,000 19,20,000 14,92,000

Dr. Cash and Bank Account Cr.

Particulars (`) Particulars (`)
To Balance b/d 2,00,000 By Hari's Capital A/c 9,45,000
To Joint Life policy A/c 3,50,000 By Balance c/d 12,15,000
To Ram's Capital A/c 12,18,000
CA Foundation/Accounting/Practice Que. Set P a g e | 117
To Mohan's Capital A/c 3,92,000
21,60,000 21,60,000

M/s Ram & Mohan

Balance Sheet as on 1st April. 1997
Liabilities (`) Assets (`)
Capital Accounts: Land and buildings 13,00,000
Ram 21,00,000 Machinery 13,60,000
Mohan 14,00,000 35,00,000 Closing Stock 4,50,000
Sundry Creditors 4,50,000 Sundry Debtors 6,00,000
Hari's Loan A/c 9,45,000 Less: Provision 30,000 5,70,000
for Bad Debts
Cash and Bank Balances
48,95,000 48,95,000
Working Notes:
1. Gaining ratio of existing partners:
Ram 3/5 – 2/7 = 11/35
Mohan 2/5 – 2/7 = 4/35
2. Adjustment of goodwill
Total goodwill of the firm = 6,30,000
Han's share (3/7 x 6,30,000) = 2,70,000
Hari's share of goodwill is to be borne by Ram and Mohan is their gaining ratio i.e., 11 : 4.
Ram= 11/15 x 2,70,000 = 1,98,000
Mohan= 4/15 x 2,70,000 = 72,000

16. A, B and C were in partnership sharing profits in the proportions of 5 : 4 : 3. The Balance Sheet of the firm
as on 31st March, 1998 was as under:
Liabilities (`) Assets (`)
Capital: Goodwill 40,000
A 1,35,930 Fixtures 8,200
B 95,120 Stock 1,57,300
C 61,170 Sundry Creditors 93,500
Sundry Creditors 41,690 Cash 34,910
3,33,910 3,33,910
A had been suffering from ill-health and gave notice that he wished to retire. An agreement was, therefore,
entered into as on 31st March, 1998, the terms of which were as follows:
(i) The Profit and Loss Account for the year ended 31st March, 1998 which showed a net profit of
` 48,000 was to be re-opened. B was to be credited with ` 4,000 as bonus, in consideration of the
extra work which had devolved upon him during the year. The profit-sharing ratio was to be revised
as from 1st April, 1998 to 3 : 4 : 4.
(ii) Goodwill was to be valued at two years purchase of the average profits of the preceding five years.
The Fixtures were to be valued by an independent valuer. A provision of 2% was to be made for
doubtful debts and the remaining assets were to be taken at their book values.
The valuations arising out of the above agreement were Goodwill ` 56,800 and Fixtures ` 10,980.
CA Foundation/Accounting/Practice Que. Set P a g e | 118
B and C agreed, as between themselves, to continue the business, sharing profits in the ratio of 3 : 2 and
decided to eliminate Goodwill from the Balance Sheet, to retain the Fixtures on the books at the revised
value, and to increase the provision for doubtful debts to 6%.
You are required to submit the journal entries necessary to give effect to the above arrangements and to
draw up the capital account of the partners after carrying out all adjusting entries as stated above.
(15 Marks)

Ans. Journal Entries

Particulars (`) (`)
(i) A's Capital A/c Dr. 20,000
B's Capital A/c Dr. 16,000
C's Capital A/c Dr. 12,000
To Profit and Loss Adjustment A/c 48,000
Being Profit written back for adjustments)
(ii) Profit and Loss Adjustment A/c Dr. 4,000
To B's Capital A/c 4,000
(Being Bonus credited to B's Capital Account)
(iii) Profit and Loss Adjustment A/c Dr. 44,000
To A's Capital A/c 12,000
To B's Capital A/c 16,000
To C's Capital A/c 16,000
(Being Distribution of profits in the new ratio)
(iv) Goodwill A/c Dr. 16,800
Fixtures A/c Dr. 2,780
To Provision for Bad Debts A/c 1,870
To A's Capital A/c 4,830
To B's Capital A/ 6,440
To C's Capital A/c 6,440
(*Being Revaluation of asset on A's retirement)
(v) A's Capital A/c Dr. 1,32,760
To A's Loan A/c 1,32,760
(Being Transfer of A's Capital Account to his Loan A/c)
(vi) B's Capital A/c Dr. 36,324
C's Capital A/c Dr. 24,216
To Goodwill A/c 56,800
To Provision for Bad Debts A/c 3,740
(Being goodwill written off and provision for bad debts raised
Note: Effect of the revaluation is directly adjust with the partner's capital accounts. It can be solved by
opening a new account i.e. revaluation accounts.
Dr. Partner’s Capital Accounts Cr.
Particular A (`) B (`) C (`) Particular A (`) B (`) C (`)
To Profit & Loss By Balance b/d 1,35,930 95,120 61,170
Adjustment A/c 20,000 16,000 12,000 By Profit & Loss - 4,000 -
CA Foundation/Accounting/Practice Que. Set P a g e | 119
To A’s Loan A/c 1,32,760 - - Adjustment A/c
To Goodwill A/c & - 36,324 24,216 By Profit & Loss 12,000 16,000 16,000
and Provision for Adjustment A/c
bad debts A/c By Goodwill A/c and 4,830 6,440 6,440
To Balance C/d - 69,236 47,394 Fixture A/c
1,52,760 1,21,560 83,610 1,52,760 1,21,560 83,610
17. K, L and M are partners sharing Profits and Losses in the ratio 5 : 3 : 2. Due to illness, L wanted to retire
from the firm on 31.3.99 and admit his son N in his place.
Balance Sheet of K, Land Mas on 31.3.99
Liabilities (`) Assets (`)
Capital: Goodwill 30,000
K 40,000 Furniture 20,000
L 60,000 Sundry Debtors 50,000
M 30,000 1,30,000 Stock in Trade 50,000
Reserve 50,000 Cash and Bank Balances 50,000
Sundry Creditors 20,000
2,00,000 2,00,000
On retirement of 'L' assets were revalued:
Goodwill ` 50,000, Furniture ` 0,000, Stock in Trade ` 30,000.
50% of the amount due to 'L' was paid off in cash and the balance was retained in the firm as capital of N.
On admission of the new partner, goodwill has been written off.
M is paid off his extra balance to make capital proportionate.
Pass necessary Journal Entries and prepare Balance Sheet of M/s K, M, N as on 01.04.99. Show necessary
workings. (15 Marks)
Ans. Journal Entries
Date Particular Dr. (`) Cr. (`)
(i) Goodwill A/c Dr. 20,000
To Profit and Loss Adjustment A/c 20,000
(Being revaluation of goodwill on L's retirement)
(ii) Profit and Loss Adjustment A/c Dr. 30,000
To Furniture A/c 10,000
To Stock in Trade A/c 20,000
(Being revaluation of furniture and stock-in-trade recorded)
(ii) K's Capital A/c Dr. 5,000
L's Capital A/c Dr. 3,000
M's Capital A/c Dr. 2,000
To Profit and Loss Adjustment A/c 10,000
(Being net revaluation loss debited to partners capital account on the ratio
of 5 : 3 : 2)
(iv) Reserve A/c Dr. 50,000
To K's Capital A/c 25,000
To L's Capital A/c 15,000
CA Foundation/Accounting/Practice Que. Set P a g e | 120
Date Particular Dr. (`) Cr. (`)
To M's Capital A/c 10,000
(Being reserve transferred to Partners capital accounts)
(v) L's Capital A/c Dr. 72,000
To Cash A/c 36,000
To N's Capital A/c 36,000
(Being 50% of the amount due to L paid off in cash and the balance retained
in the firm as capital of N)
(vi) K's Capital A/c Dr. 25,000
M's Capital A/c Dr. 10,000
N's Capital A/c Dr. 15,000
To Goodwill A/c 50,000
(Being goodwill written off, as agreed after retirement of L and admission of
N in the new profit sharing ratio)
(vii) M's Capital A/c Dr. 14,000
To Bank/Cash A/c 14,000
(Being amount paid to M to make his capital proportionate)

Balance Sheet M/s K, M N

As on 1st April, 1999
Liabilities (`) Assets (`)
Capital Account: Furniture 10,000
K 35,000 Sundry Debtors 50,000
M 14,000 Stock in Trade 30,000
N 21,000 70,000
Sundry Creditors 20,000
90,000 90,000

Working Notes:
Partner’s Capital Accounts
Particular K (`) L (`) M (`) N (`) Particular K (`) L (`) M (`) N (`)
To Profit & Loss - By Balance b/d 40,000 60,000 30,000 -
Adjustment A/c 5,000 3,000 2,000 - By Reserve 25,000 15,000 10,000 -
To Cash A/c - 36,000 - - By L’s Capital A/c - - - 36,000
To N’s Capital A/c - 36,000 - 15,000
To Goodwill A/c 25,000 - 10,000 -
To Bank - - 14,000 21,000
(Bal. Figure)
To Balanced c/d 35,000 - 14,000
65,000 75,000 40,000 36,000 65,000 75,000 40,000 36,000
CA Foundation/Accounting/Practice Que. Set P a g e | 121
18. M/s X and Co. is a partnership firm with the partners A, B and C Sharing Profits and Losses in the ratio of
3 : 2 : 5. The Balance Sheet of the firm as on 30th June 2001 was as under:
Balance Sheet of X and Go. as on 30.6.2001
Liabilities (`) Assets (`)
A's Capital A/c 1,04,000 Land 1,00,000
B's Capital A/c 76,000 Building 2,00,000
C's Capital A/c 1,40,000 Plant and Machinery 3,80,000
Long term Loan 4,00,000 Investments 22,000
Bank overdraft A/c 44,000 Stock 1,16,000
Trade Creditors 1,93,000 Sundry Debtors 1,39,000
9,57,000 9,57,000
It was mutually agreed that B will retire from Partnership and in his place, D will be admitted as a partner
with effect from 1st July, 2001. For this purpose, the following adjustments are to be made:
(a) Goodwill of the firm is to be valued at ` 2 lakh due to the firm's locational advantage but the same
will not appear as an asset in the books of the reconstituted firm.
(b) Buildings and Plant and Machinery are to be valued at 90% and 85% of the respective Balance Sheet
values. Investments are to be taken over by the retiring partner at ` 25,000. Sundry Debtors are
considered g6od only 90% of Balance Sheet figure. Balance to be considered Bad.
(c) In the reconstituted firm, the total Capital will be ` 3 lakh, which will be contributed by A, C and Din
their new profit sharing ratio, which is 3 : 4 : 3.
(d) The surplus funds, if any, will be used for repaying bank overdraft.
(e) The amount due to retiring partner shall be transferred to his Loan Account. You are required to
prepare (1) Revaluation Account (2) Partner's Capital Account (3) Bank Account and (4) Balance Sheet
of the reconstituted firm as on 1st July, 2001. (20 Marks)
Ans.
Books of Mis X and Co.
Revaluation Account
Particular (`) Particular (`)
To Buildings (10%) 20,000 By Investments 3,000
To Plant and Machinery (15%) 57,000 By Loss
To P.B.D. (10%) 13,900 A 26,370
B 17,580
C 43,950 87,900
90,900 90,900

Partner’s Capital Accounts

Particular A (`) B (`) C (`) D (`) Particular A (`) B (`) C (`) D (`)
To Goodwill 60,000 - 80,000 60,000 By Balance b/d 1,40,000 76,000 1,40,000 -
To Investment - 25,000 - - By Goodwill 60,000 40,000 1,00,000 -
To Revaluation (Loss) 26,370 17,580 43,950 - By Bank A/c
To B’s Loan (bal. fig.) - 73,420 - - (Bal. fig.) 12,730 - 3,950 1,50,000
To Balance c/d 90,000 - 1,20,000 90,000
1,76,730 1,16,000 2,43,950 1,50,000 1,76,730 1,16,000 2,43,950 1,50,000
CA Foundation/Accounting/Practice Que. Set P a g e | 122
Working Notes:
Calculation of closing Balance of Partner Capital
Total Capital of Reconstituted firm = 3,00,000
New Ratio of A : C : D = 3 : 4 : 3
A’s share = 3,00,000 x 3/10 = ` 90,000
C’s share = 3,00,000 x 4/10 = ` 1,20,000
D’s share = 3,00,000 x 3/10 = ` 90,000

Bank Account
Particular (`) Particular (`)
To A's Capital A/c 12,370 By Bank Overdraft 44,000
To C's Capital A/c 3,950 By Balance c/d 1,22,000
To D's Capital A/c 1,50,000
1,66,320 1,66,320

Balance Sheet as on 1st July 2001

Liabilities Amount (`) Assets Amount (`)
Capital A/c: Land 1,00,000
A 90,000 Buildings 1,80,000
B 1,20,000 [90% of 2,00,000]
C 90,000 3,00,000 Plant and Machinery 3,23,000
Long Term Debt 4,00,000 [85% of 3,80,000]
B's Loan 73,420 Stock 1,16,000
Trade Creditors 1,93,000 Sundry Debtors 1,93,000
Less: Provisions for Bad
Debts 13,900 1,25,100
Cash at Bank 1,22,320
9,66,420 9,66,420

19. A, B, C were in partnership sharing profits and losses in the ratio of 3 : 2 : 1. The Balance Sheet of the firm
as on 31.3.2002 was as under:
Liabilities Amount (`) Assets Amount (`)
Capital Accounts: Goodwill 40,000
A 1,50,000 Fixtures 30,000
B 1,00,000 Stock 1,70,000
C 50,000 3,00,000 Sundry Debtors 90,000
Sundry Creditors 40,000 Cash 10,000
3,40,000 3,40,000
A on account of ill health, gave notice that he wished to retire from the firm. A retirement agreement was,
therefore, entered into as on 31.3.2002, the terms of which were as follows:
(a) The Profit and Loss account for the year ended 31.3.2002, which showed a net profit of ` 42,000 was
to be re-opened. B was to be credited with ` 6,000 as bonus, in consideration of the extra work,
which had devolved upon him during the year. The profit sharing basis was to be revised and the
revised ratio to be 2 : 3 : 1 as and from 1st April, 2001.
CA Foundation/Accounting/Practice Que. Set P a g e | 123
(b) Goodwill was to be valued at two year's purchase of the average profits of live years. Profits for these
five years ending on 31st March were as under:
(`)
31.03.1998 15,000
31.03.1999 23,000
31.03.2000 25,000
31.03.2001 35,000
31.03.2002 42,000
(c) Fixtures are to be valued at ` 39,800 and a provision of 2% was to be made for doubtful debts and
the remaining assets were to be taken at their book value.
(d) That the amount payable to A shall be paid by B.
B and C agreed, as between themselves, to continue the business, sharing profits and losses in the
ratio of 3:1 and decided to eliminate goodwill from Balance Sheet, to retain fixtures in the books at
the revised value and increase the provision for doubtful debts to 6%. Total capital of the firm will
tie'!' 3 lakhs as before to be maintained in the new ratio as between B and C.
You are required to give the necessary entries to give effect to the above arrangements. Prepare
Capital Account of Partners. Cash Account and Balance Sheet of B and C after giving effect to the
above arrangements on the retirement of A. (20 Marks)
Ans. Journal Entries
Particular Dr. (`) Cr. (`)
(i) A's capital account Dr. 21,000
B's capital account Dr. 14,000
C's capital account Dr. 7,000
To Profit and loss adjustment account 42,000
(Profit written back for making adjustment)
(ii) Profit and loss adjustment account Dr.
To B's capital account 6,000
(Bonus credited to B's capital account) 6,000
(iii) Profit and loss adjustment a/c Dr. 36,000
To A's capital account 12,000
To B's capital account 18,000
To C's capital account 6,000
(Distribution of profits in the new ratio)
(iv) Goodwill account (56,000 - 40,000) Dr. 16,000
Fixtures account Dr. 9,800
To Provision for bad debts account 1,800
To A's capital account 8,000
To B's capital account 12,000
To C's capital account 4,000
(Revaluation of assets on A's retirement)
(v) B's capital account Dr. 44,700
C's capital account Dr. 14,900
To Goodwill account 56,000
To Provision for bad debts account 3,600
(Written off goodwill and raising provision for bad debts)
(vi) A's capital account Dr. 1,49,000
To B's capital account 1,49,000
(Amount payable to A paid by B)
CA Foundation/Accounting/Practice Que. Set P a g e | 124
Dr. Partner’s Capital Accounts Cr.
A (`) B (`) C (`) A (`) B (`) C (`)
To P&L Adjustment A/c 21,000 14,000 7,000 By Balance b/d 1,50,000 1,00,000 50,000
To Goodwill and Provision for bad debts - 44,700 14,900 By P&L Adjustment A/c - 6,000 -
To B’s Capital A/c 1,49,000 - - By P&L Adjustment A/c 12,000 18,000 6,000
To Cash A/c - 1,300 - By Goodwill and Fixtures 8,000 12,000 4,000
To Balance c/d - 2,25,000 75,000 By A’s Capital A/c - 1,49,000 -
By Cash A/c - - 36,900
1,70,000 2,85,000 96,900 1,70,000 2,85,000 96,900

Cash Account
(`) (`)
To Balance b/d 10,000 By B’s Capital A/c 1,300
To C’s Capital A/c 36,900 By Balance c/d 45,600
46,900 46,900

Balance Sheet of B and C

st
as on 31 March, 2002 (after retirement of A)
Liabilities Amount (`) Assets Amount (`)
Capital Accounts: Fixtures 39,800
B 2,25,000 Stock 1,70,000
C 75,000 3,00,000 Sundry debtors 90,000
Sundry Creditors 40,000 Less: Provision for bad debts 5,400 84,600
Cash 45,600
3,40,000 3,40,000

Working Note:
Calculation of goodwill
1. Average of last five year’s profits
Year ended on Profit (`)
31.3.1998 15,000
31.3.1999 23,000
31.3.2000 25,000
31.3.2001 35,000
31.3.2002 42,000
1,40,000
1,40,000
Average profit = ` = ` 28,000
5
2. Goodwill at two year’s purchase
` 28,000 x 2 = ` 56,000
CA Foundation/Accounting/Practice Que. Set P a g e | 125
20. A, B and C are partners in a firm sharing profits and losses in the ratio of 4 : 3 : 2. B decides to retire from
the firm. Calculate the new profit sharing ratio of A and C in the following circumstances:
(i) If B gives his share to A and C in the original ratios of A and C.
(ii) If B gives his share to A and C in equal proportion,
(iii) If B gives his share to A and C in the ratio of 3 : 1.
(iv) If B gives his share to A only. (5 Marks)
Ans. (i) Gain New Ratio
3 2 6 4 6 12  6 18
A- x = A: + = =
9 9 27 9 27 27 27
3 1 3 2 3 63 9
C- x = C: + = = Therefore the new ratio 2 : 1
9 3 27 9 27 27 27

(ii) Gain New Ratio

3 1 3 4 3 8  3 11
A- x = A: + = =
9 2 18 9 18 18 18
3 1 3 2 3 43 7
B- x = B: + = = Therefore the new ratio 11 : 7
9 2 18 9 18 18 18

(iii) Gain New Ratio

3 3 9 4 9 16  9 25
A- x = A: + = =
9 4 36 9 36 36 36
3 1 3 2 3 8  3 11
B- x = B: + = = Therefore the new ratio 25 : 11
9 4 36 9 36 36 36

(iv) Gain
4 3 7
A- x =
9 9 9
2
B- Therefore the new ratio 7 : 2
9

21. A, B and C are partners sharing profits in the ratio of 3 : 2 : 1. Their Balance Sheet as at 31 st March, 2018
stood as:
Liabilities (`) Assets (`)
Capital Building 10,00,000
Accounts Furniture 2,40,000
A 8,00,000 Office equipments 2,80,000
B 4,20,000 Stock 2,50,000
C 4,00,000 16,20,000 Sundry debtors 3,00,000
Sundry Creditors 3,70,000 Less: Provision for Doubtful
General Reserves 3,60,000 Debts 30,000 2,70,000
Joint life policy 1,60,000
Cash at Bank 1,50,000
23,50,000 23,50,000
CA Foundation/Accounting/Practice Que. Set P a g e | 126
st
B retired on 1 April, 2018 subject to the following conditions:
(i) Office Equipments revalued at ` 3,27,000.
(ii) Building revalued at ` 15,00,000. Furniture is written down by ` 40,000 and Stock is reduced to
` 2,00,000.
(iii) Provision for Doubtful Debts is to be created @ 5% on Debtors.
(iv) Joint Life Policy will appear in the Balance Sheet at surrender value after B's retirement. The
surrender value is ` 1,50,000.
(v) Goodwill was to be valued at 3 years purchase of average 4 years profit which were:
Year (`)
2014 90,000
2015 1,40,000
2016 1,20,000
2017 1,30,000
(vi) Amount due to B is to be transferred to his Loan Account. Prepare the Revaluation Account, Partners'
Capital Accounts and the Balance Sheet immediately alter B's retirement. (10 Marks)
Ans. Revaluation A/c
Particular Amount (`) Particular Amount (`)
To Furniture 10,000 By Office Equipment. 47,000
To Stock 50,000 By Building 5,00,000
To Joint life policy 10,000 By Provision for doubtful debts 15,000
To Profit on reval:
A 2,46,000
B 1,64,000
C 82,000 4,92,000
5,62,000 5,62,000

Partner’s Capital Accounts

Particular A B C Particular A B C
To B’s Capital (G/W) 90,000 - 30,000 By bal. b/d 8,00,000 4,20,000 4,00,000
To B’s Capital 37,500 - 12,500 By Gen. Res. 1,80,000 1,20,000 60,000
To B’s loan By Reveal profit 2,46,000 1,64,000 82,000
A/c (b/f) 10,98,500 8,74,000 4,99,500 By A’s Cap. - 90,000 -
By C’s Cap. - 30,000 -
By A’s Cap. - 37,500 -
By C’s Cap. - 12,500 -
12,26,000 8,74,000 5,42,000 12,26,000 8,74,000 5,42,000

Balance sheet as on 1.4.2010 (after B's retirement)

Liabilities (`) Assets (`)
Capital Accounts: Building 15,00,000
A: 10,98,500 Furniture 2,30,000
B: 4,99,500 15,98,000 Office Equipment 3,27,000
Sundry Creditor 3,70,000 Stock 2,00,000
B's loan Account 8,74,000 Sundry Debtor 3,00,000
Less: Prov. @ 5% 15,000 2,85,000
CA Foundation/Accounting/Practice Que. Set P a g e | 127
Joint life policy 1,50,000
Cash at Bank 1,50,000
28,42,000 28,42,000
Working Notes:
1. Calculation of Goodwill
90,000  1,40,000  1,30,000
Average Profit = = 1,20,000
4
Goodwill = 1,20,000 x 3 = 3,60,000

2. Adjustment for goodwill

(GR A's Capital A/c Dr. 90,000
(3 : 1) C's Capital A/c Dr. 30,000
To B's Capital A/c 1,20,000
2
(3,60,000 x )
6
3. Adjustment for Joint life policy
(GR A's Capital A/c Dr. 37,500
(3 : 1) C's Capital A/c Dr. 12,500
To B's Capital A/c 50,000
2
(1,50,000 x )
6

22. The following was the Balance Sheet of Om & Co. in which X, Y and Z were partners sharing profits and
losses in the ratio of 1 : 2 : 2 as on 31.3.1999. Mr. Z died on 31st December, 1999: His account has to be
settled under the following terms:
Balance Sheet of Om & Co. as on 31.3.1999
Liabilities (`) Assets (`)
Sundry Creditors 20,000 Goodwill 30,000
Bank Loan 50,000 Building 1,20,000
General Reserve 30,000 Computers 80,000
Capital Accounts: Stock 20,000
X 40,000 Sundry Debtors 20,000
Y 80,000 Cash at Bank 20,000
Z 80,000 2,00,000 Investments 10,000
3,00,000 3,00,000
Goodwill is to be calculated at the rate of two years' purchase on the basis of average of last three years'
profits and losses. The profits and losses for the three years were as detailed below:
Year ending on Profit/Loss (`)
31.3.1999 30,000
31.3.1998 20,000
31-3-1997 (10,000) Loss
Profit for the period from 1.4.1999 to 31.12.1999 shall be ascertained proportionately on the basis of
average profits and losses of the preceding three years.
CA Foundation/Accounting/Practice Que. Set P a g e | 128
During the year ending on 31.3.1999 a car costing ` 40,000 was purchased on 1.4.1998 and debited to
travelling expenses account on which depreciation is to be calculated at 20% p.a. This asset is to be brought
into account at the depreciated value.
Other values of assets were agreed as follows:
Stock at ` 16,000; Building at ` 1,40,000; Computers at ` 50,000; Investments at ` 6,000. Sundry Debtors
were considered good. You are asked to prepare partners' Capital Accounts and Balance Sheet of the firm
Om & Co. as on 31.12.1999 assuming that other items of assets and liabilities remained the same.
(15 Marks)
Ans. Partners’ Capital Accounts
Particular X (`) Y (`) Z (`) Particular X (`) Y (`) Z (`)
To Revaluation A/c 3,600 7,200 7,200 By Balance b/d 40,000 80,000 80,000
To Z's Executor's A/c - - - By General Reserve 6,000 12,000 123,000
To Balance c/d 52,400 1,04,800 1,12,000 By Goodwill A/c 3,600 7,200 7,200
By Car Account 6,400 12,800 12,800
By P&L Suspense A/c - - 7,200
56,000 1,12,000 1,19,200 56,000 1,12,000 1,19,200

Balance Sheet of M/s OM & Co.

(as at 31.12.1999)
Liabilities (`) Assets (`)
Sundry Creditors 20,000 Goodwill 48,000
Bank Loan 50,000 Building 1,40,000
Capital Accounts: Car 32,000
X 52,400 Stock 16,000
Y 1,04,800 Computers 50,000
Z's Executor's Account 1,12,000 Investments 6,000
Sundry Debtors 20,000
Cash at Bank 20,000
P & L Suspense Account 7,200
3,39,200 3,39,200
Working Notes:
(1) Calculation of goodwill and Z's share of profits: (`)
(a) Adjusted profit (For the year ended 31.3.99) Profit 30,000
Add back: Cost of car wrongly written off 40,000
Less: Depreciation for the year 1998-99 (20% on ` 40,000) 8,000 32,000
62,000
(b) Average of last three year's profit/losses:
Year ended on: Profit/(Loss)
31.3.1997 (10,000)
31.3.1998 20,000
31.3.1999 62,000
72,000
 72,000 
Average profit   ` 24,000
 3 
CA Foundation/Accounting/Practice Que. Set P a g e | 129
(c) Goodwill at 2 year's purchase
` 24,000 x 2 = ` 48,000

(d) Z's share of profits (for 9 months)

9 2
` 24,000 x  = ` 7,200
12 5

Dr. Revaluation Account Cr.

Particular (`) Particular (`)
To Stock A/c 4,000 By Building A/c 20,000
To Computers A/c 30,000 By Loss transferred to:
To Investment A/c 4,000 X Capital A/c 3,600
Y Capital A/c 7,200
Z Capital A/c 7,200
38,000 38,000

********
CA Foundation/Accounting/Practice Que. Set P a g e | 130

CHAPTER 13 – COMPANY ACCOUNTS

1. Piyush Limited is a company with an authorized share capital of ` 2,00,00,000 in equity shares of ` 10 each,
of which 15,00,000 shares had been issued and fully paid on 30th June, 2017. The company proposed to
make a further issue of 1,30,000 shares of ` 10 each at a price of ` 12 each, the arrangements for payment
being:
(i) ` 2 per share payable on application, to be received by 1st July, 2017:
(ii) Allotment to be made on 10st July, 2017 and a further ` 5 per share (including the premium) to be
payable;
(iii) The final call for the balance to be made, and the money received by 30th April, 2018.
Application were received for 4,20,000 shares and were dealt with as follows:
(1) Applicants for 20,000 shares received allotment in full;
(2) Applicants for 1,00,000 shares received an allotment of one share for every two applied for; no
money was returned to these applicants, the surplus on application being used to reduce the
amount due on allotment.
(3) Applicants for 3,00,000 shares received an allotment of one share for every five shares applied,
for; the money due on allotment was retained by the company, the excess being returned to
the applicants; and
(4) The money due on final call was received on the due date.
You are required to record these transactions (including cash items) in the journal of Piyush limited.
(10 Marks)
Ans. Journal Entries of Piyush Limited
Date Particulars Debit (`) Credit (`)
2017
July 1 Bank A/c Dr. 8,40,000
To Equity share application A/c 8,40,000
(Being application received tor 4,20,000 shares @ 2/- per share)
July 10 Equity share application A/c Dr. 8,40,000
To Equity share capital A/c 2,60,000
To Equity share allotment A/c 4,00,000
To Bank A/c 1,80,000
(Being application money on 1,30,000 shares transferred to capital
A/c, surplus on 1, 10,000 shares kept for adjustment in allotment
and balance refunded)
July 10 Equity share allotment A/c Dr. 6,50,000
To Equity share capital A/c 3,90,000
To Security premium A/c 2,60,000
(Being allotment money due on 1,30,000 shares @ 5/- each
including premium of ` 2/- each)
July 10 Bank A/c Dr. 2,50,000
To Equity share allotment A/c 2,50,000
(Being balance allotment money received)
Equity share final call. A/c Dr. 6,50,000
To Equity share capital A/c 6,50,000
(Being final call money due on 1,30,000 shares @ ` 5/- share)
CA Foundation/Accounting/Practice Que. Set P a g e | 131
Date Particulars Debit (`) Credit (`)
April 30 Bank A/c. Dr. 6,50,000
To Equity share final call A/c 6,50,000
(Being final call money on 1,30,000 shares @ 5/- each received)
Working Notes:
1. Pattern of Share Allotment:
Applied Allotted
(a) 20,000 20,000
(b) 1,00,000 50,000
(c) 3,00,000 60,000
4,20,000 share 1,30,000 share

2. Excess Application Money of (b) Category Adjusted towards Allotment:

1,00,000 x 2 = 2,00,000
50,000 x 2 = 1,00,000 (application)
Surplus 1,00,000

3. Excess application money of (c) category adjusted towards allotment and balance refunded
3,00,000 x 2 = 6,00,000
60,000 x 2 = 1,20,000 (application)
4,80,000
60,000 x 5 = 3,00,000 (allotment)
Refund amount 1,80,000

2. Give necessary journal entries for the forfeiture and reissue of share:
X Ltd. forfeited 300 shares of ` 10 each fully called up, held by Ramesh for non-payment of allotment
money of ` 3 per share and final call of ` 4 per share. He paid the application money of ` 3 per share.
These shares were re-issued to Suresh for ` 8 per share. (4 Marks)
Ans.
Particulars (`) (`)
(a) Share Capital A/c (300 x ` 10) Dr. 3,000
To Share forfeiture A/c (300 shares x ` 3) 900
To Share allotment A/c (300 shares x ` 3) 900
To Share final call A/c (300 shares x ` 4) 1,200
(Being share forfeited)
(b) Bank A/c (300 shares x ` 8) Dr. 2,400
Share forfeiture A/c (300 shares x ` 2) Dr. 600
To Share Capital A/c (300 shares x ` 10) 3,000
(Being share re-issued)
(c) Share Forfeiture A/c Dr. 300
To Capital Reserve A/c 300
(Being balance tfd. to C/R)
CA Foundation/Accounting/Practice Que. Set P a g e | 132
3. Give necessary journal entries for the forfeiture and re-issue of shares:
(i) X Ltd. forfeited 200 shares of ` 10 each (` 7 called up) on which Naresh had paid application and
allotment money of ` 5 per share. Out of these, 150 shares were re-issued to Mahesh as fully paid up
for ` 6 per share. (3 Marks)
(ii) X Ltd. forfeited 100 shares of ` 10 each (` 6 called up) issued at a discount of 10% to Dimple on
which she paid ` 2 per share. Out of these, 80 shares were re-issued to Simple at ` 8 per share and
called up for ` 6 per share. (3 Marks)
Ans. (i) Journal Entries
Particulars Dr. (`) Cr. (`)
(a) Share Capital A/c (200 x ` 7) Dr. 1,400
To Share Forfeiture A/c (200 shares x ` 5) 1,000
To Call –in-arrear A/c (200 x ` 2) 400
(Being share forfeited)
(b) Bank A/c (150 x ` 6) Dr. 900
Share forfeiture A/c (150 x ` 4) Dr. 600
To Share Capital A/c (150 shares x ` 1 O) 1,500
(Being share re-issued)
(c) Share Forfeiture A/c Dr. 150
To Capital Reserve A/c 150
(Being balance tfd. to C/R) [(150 shares x 5) -600]

(ii)
Particulars Dr. (`) Cr. (`)
(a) Share Capital A/c (100 x ` 6) Dr. 600
To Share Forfeiture A/c (100 x ` 2) 200
To Share Discount A/c (100 x 1) 100
To Call-in-arrear A/c (100x ` 3) 300
(Being share forfeited)
(b) Bank A/c (80 shares x ` 8) Dr. 640
To Share Capital A/c (80 x ` 6) 480
To Security Premium A/c (80 Shares x ` 2) 160
(Being share re-issued)
(c) Share Forfeiture A/c Dr. 160
To Capital Reserve A/c 160

4. Pure Ltd. issues 1,00,000 12% Debentures of ` 10 each at ` 9.40 on 1st January, 2018. Under the terms of
issue, the Debentures are redeemable at the end of 5 years from the date of issue.
Calculate the amount of discount to be written-off in each of the 5 years. (5 Marks)
Ans. Total Amount of discount = 1,00,000 x 0.60
= ` 60,000
60,000
Discount to be w/o each year = = ` 12,000
5
Amount of discount to be w/o in each of the 5 years is ` 12,000.
**********
CA Foundation/Accounting/Practice Que. Set P a g e | 133

CHAPTER 15 – AVERAGE DUE DATE

1. Calculate Average Due Date from the following information:
Date of the bill Term Amount (`)
August 10, 1994 3 months 6,000
October 23, 1994 60 days 5,000
December 4, 1994 2 months 4,000
January 14, 1995 60 days 2,000
March 8, 1995 2 months 3,000 (15 Marks)
Ans. Calculation of Average Due Date
No. of Days
Amount
Date of Bill Term Due Date from 10th Product
(`)
Aug. 1994
Aug. 10, 1994 3 months Nov. 13, 1994 95 6,000 5,70,000
Oct. 23, 1994 60 days Dec. 25, 1994 137 5,000 6,85,000
Dec. 04, 1994 2 months Feb. 07, 1995 181 4,000 7,24,000
Jan. 14, 1995 60 days Mar. 18, 1995 220 2,000 4,40,000
Mar. 08, 1995 2 months May 11, 1995 274 3,000 8,22,000
20,000 32,41,000
Average Due Date
Total of Pr oduct
= Base Date + days equal to
Total of Amount
32,41,000
= 10th Aug. 1994 +
20,000
= 10th Aug. 1994 + 162.05
= 162 days (approx.) after Aug. 10, 1994]
i.e. January, 19, 1995

2. Hari owes Ram ` 2,000 on 1st April, 1995. From 1st April, 1995 to 30th June, 1995 the following further
transactions took place between Hari and Ram:
April 10 Hari buys goods from Ram for ` 5,000.
May 15 Hari receives cash loan of ` 10,000 from Ram.
June 9 Hari buys goods from Ram for ` 3,000.
Hari pays the whole amount, together with interest @ 15% per annum, to Ram on 30th June, 1996.
Calculate the interest payable on 30th June, 1996 by the Average due-date method. (5 Marks)
Ans. Calculation of Average Due Date:
Due Amount No. of Days
Products
Dates (`) from April 1
Apr. 1, 1996 2,000 0 0
Apr. 10, 1996 5,000 9 45,000
May 15, 1996 10,000 45 4,50,000
Jun. 9, 1996 3,000 59 2,07,000
Total 20,000 7,02,000
CA Foundation/Accounting/Practice Que. Set P a g e | 134
Total of Pr oduct
Average Due Date = Base Date + Days equal to
Total of Amount
7,02,000
Average Due Date = 1st April +
20,000
= 1st April + 35 days
= 6th May, 1995
Interest therefore has been calculated on ` 20,000 from 5th May, 1995 i.e.,
15 55
Interest = 20,000   = ` 450.82
100 366

3. Calculate Average Due Date from the following information:

Date of the bill Term Amount
August 10, 1996 3 Months 6,000
October 23, 1996 60 Days 5,000
December 4, 1996 2 Months 4,000
January 14, 1997 60 Days 2,000
March 8, 1997 2 Months 3,000 (10 Marks)
Ans. Calculation of Average Due Date:
No. of Days
from the Amount
Date of Bill Term Due Date Product
base date (`)
(10th August)
Aug. 10, 1996 3, months Nov. 13, 1996 95 6,000 5,70,000 6,80,000
Oct. 23, 1996 60 days Dec. 24, 1996 136 5,000 7,24,000
Dec. 14, 1997 2 months Feb.07, 1997 181 4,000 4,40,000
Jan. 14, 1997 60 days Mar. 18, 1997 220 2,000 8,22,000
Mar. 08, 1997 2 months May 11, 1997 274 3,000
Total 20,000 32,36,000
Total of Pr oduct
Average Due Date = Base date + days equal to
Total of Amount
32,36,000
= 10th August +
20,000
= 10th August + 161.8
= 162 days (Approx.) after 10th August, 1996
i.e. 19th January, 1997.
Note: The due date of the second bill dated 23rd October, 1996 is 25th December, 1996. Since 25th
December is a public holiday, the preceding day i.e., 24th December has been considered as the due date.

4. E owes to F the following amounts:

(i) ` 5,000 due on 10th March, 1999
(ii) ` 18,000 due on 2nd April, 1999
(iii)` 60,000 due on 30th April, 1999
(iv) ` 2,000 due on 10th June, 1999.
He desires to make full payment on 30th June, 1999 with interest at 10% per annum from the average due
date. Find out the average due date and the amount of interest. (6 Marks)
CA Foundation/Accounting/Practice Que. Set P a g e | 135
Ans. Calculation of Average Due Date
Taking 10th March, 1999 as the Base Date
Due Date Amount No. of days from the base date i.e.,
Products
(`) 10th March
10th March 5.000 0 0
nd
2 April 18,000 23 4,14,000
30th April 60,000 51 30,60,000
th
10 June 2,000 92 1,84,000
Total 85,000 36,58,000
Sum of Product
Average due date = Base date + days equal to
Sum of Amount
36,58,000
= 10th March + i.e. 43 days (approx.)
85,000
= 22nd April, 1999
Computation of Interest: Interest can be calculated on ` 85,000 from 22nd 0 April, 1999 to 30th June, 1999
at 10% p.a. i.e., interest on ` 85,000 for 69 days at 10%.
10 69
= ` 85,000  
100 365
= ` 1,607 (approx.)

5. Calculate average due date from the following information:

Date of Bill Term Amount (`)
1st March, 2002 2 months 4,000
th
10 March, 2002 3 months 3,000
5th April, 2002 2 months 2,000
10th May, 2002 1 months 3,750
20th April, 2002 2 months 5,000 (7 Marks)
Ans. Calculation of Average Due Date
(Taking 4th May, 2002 as the base date)
Date of Bill Due Date No. of Days from the
Term Amount Product
2002 2002 base date i.e. May 4
1st March 2 months 4th May 4,000 0 0
th th
10 March 3 months 13 June 3,000 40 1,20,000
th th
5 April 2 months 8 June 2,000 35 70,000
th rd
20 April 1 months 23 May 3,750 19 71,250
th th
10 May 2 months 13 July 5,000 70 3,50,000
17,750 6,11,250
Sum of Pr oduct
Average Due Date= Base Date +days equal to
Sum of Amount
6,11,250
= 4th May 2002 + ` i.e. 34 days (approx)
17,750
= 7th June, 2002.
CA Foundation/Accounting/Practice Que. Set P a g e | 136

6. Calculate average due date from the following information:

Date of Bill Term Amount (`)
16 August, 03 3 months 3,000
20 October, 03 60 days 2,500
14 December, 03 2 months 2,000
24 January, 04 60 days 1,000
06 March, 04 2 months 1,500 (6 Marks)
Ans.
Due date (D) No. of days Product
Bill Date (B) (C)
(Including grace (Taking (E) (F) = (B) x (E)
(A) Amount ` Term
period) 19 Nov 03 as base) (`)
16 Aug, 2003 3,000 3 Months 19 Nov 03 0 0
20 Oct, 2003 2,500 60 Days 22 Dec, 03 33 82,500
14 Dec, 2003 02,000 2 Months 17Feb04 90 1,80,000
24 Jan, 2004 1,000 60 Days 27 March 04 129 1,29,000
06 March, 2004 1,500 2 Months 09 May 04 172 2,58,000
10,000 6,49,500
Sum of Pr oduct
Average due date = Base date + Days equal to
Sum of Amount
6,49,500
= 19 Nov., 03 +
10,000
= 19 Nov., 03 + 65 days (approx)
= 23 Jan, 2004

7. M/s. Stairs & Co. draw upon M/s Marble & Co. several bills of exchange due for payment on different dates
as under:
Date of Bill Amount (`) Tenure of Bill
th
12 May 44,000 3 months
10th June 45,000 4 months
st
1 July 14,000 1 month
th
19 July 17,000 2 months
Find out the average due date on which payment may be made in one single amount by M/s Marble & Co.
to M/s Stairs & Co. 15th August, Independence Day, is national holiday and 22nd September declared
emergency holiday, due to death of a national leader. (4 Marks)
Ans. Calculation of Average Due Date
(Taking 4th August as the base date)
Amount No. of days from the base
Date of bill Term Due date Product
` date i.e. 4th August
12th May 3 months 14th August 44,000 10 4,40,000
th th
10 June 4 months 13 October 45,000 70 31,50,000
st th
1 July 1 months 4 August 14,000 0 0
th th
19 July 2 months 23 September 17,000 50 8,50,000
1,20,000 44,40,000
CA Foundation/Accounting/Practice Que. Set P a g e | 137

Total of Pr oduct
Average due date = Base date + Days equal to
Total Amount
44,40,000
= 4th August +
1,20,000
= 4th August + 37 days = 10th September

8. T owes to K the following amounts:

` 7,000 due on 15th March, 2012
` 12,000 due on 5th April, 2012
` 30,000 due on 25th April, 2012
` 20,000 due on 11th June, 2012
He desires to make the full payment on 30th June, 2012 along with interest @ 10% per annum from the
average due date. Find out the average due date and the amount of interest. Amount of Interest may be
rounded off to the nearest rupee. (4 Marks)
Ans. Calculation of Average Due Date taking 15th March, 2012 as the base date:
No. of days from the base
Due date Amount ` Product
date i.e. 15th March; 2012
15th March, 2012 7,000 0 0
5th April, 2012 12,000 21 2,52,000
th
25 April, 2012 30,000 41 12,30,000
th
11 June, 2012 20,000 88 17,60,000
69,000 32,42,000
Total of Pr oduct
Average due date= Base date+ Days equal to
Total Amount
32,42,000
= 15t" March 2012 +
69,000
= 15th March, 2012 + 47 days (approx.) = 1st May, 2012
Interest amount: Interest can be calculated on ` 69,000 from 1st May, 2012 to 30th June, 2012 at 10% p.a.
i.e. interest on ` 69,000 for 60 days at 10% p.a. = ` 69,000 x 10/100 x 60/366 = ` 1,131 (approx.)

9. The following transactions took place between Thick and Thin. They desire to settle their account on
average due date.
Purchases by Thick from Thin (`)
th
9 July, 2013 7,200
14th August, 2013 12,200

Sales by Thick to Thin (`)

15th July, 2013 18,000
st
31 August, 2013 16,500
Calculate Average Due Date and the amount to be paid or received by Thick. (4 Marks)
CA Foundation/Accounting/Practice Que. Set P a g e | 138

Ans. 1. Computation of Products for Thick's Payment (Base date = 9th July)
Due Date No. of days from base date Amount (`) Product (`)
(1) (2) (3) (4) = (2) x (3)
9th July 0 7,200 0
14th Aug. 36(22+14) 12,200 4,39,200
19,400 4,39,200

2. Computation of Products for thin's Payment (Base Date = 9th July)

Due Date No. of days from base date Amount (`) Product (`)
(1) (2) (3) (4) = (2) x (3)
15th July 6 18,000 1,08,000
31st Aug. 53(22+31) 16,500 8,74,500
34,500 9,82,500
Difference in Pr oducts
Average Due Date = Base Date +
Difference in Amounts
9,82,500  4,39,200 5,43,300
= 9th July + = 9th July +
34,500  19,400 15,100
= 9th July + 36 days = 14th Aug, 2013
Thus, on 14TH August 2013. Thin has to pay ` 15, 100 (34,500 – 19,400) to Thick.

10. Kishanlal has made the following sales to Babulal. He allows a credit period of 10 days beyond which he
charges interest @ 12% per annum.
Date of SALEs Amount (`)
26-05-14 12,000
18-07-14 18,000
02-08-14 16,500
28-08-14 9,500
09-09-14 15,500
17-09-14 13,500
Babulal wants to settle his accounts on 30.09.2014. Calculate the interest payable by him using Average
Due Date (ADD). If Babulal wants to save interest of ` 588, how many days before 30.09.2014 does he have
to make payment? Also find the payment date in this case. (4 Marks)
Ans. Calculation of Average Due Date
Sale Date Add Date Amt.. Days Product
26/5 10 5/6 12,000 0 -
18/7 10 28/7 18,000 53 9,54,000
21/8 10 12/8 16,500 68 11,22,000
28/8 10 7/9 9,500 94 8,93,000
9/9 10 19/9 15,500 106 16,43,000
17/9 10 27/9 13,500 114 15,39,000
85,000 61,51,000
CA Foundation/Accounting/Practice Que. Set P a g e | 139

Pr oduct
Average Date = Base date +
Amount
61,51,000
Average due elate = 5.6.14 +
85,000
= 5.6.14 + 72 days (app.)
= 16.08.2014
Interest if settlement is done on 30.9.14
45
8,5,000 x 12% x = ` 1,258 (approx.)
365
If Babulal wants to save interest of ` 588, then the calculation of days before 30.09.2014 will be:
588/1258 x 45 days (16.08.2014 to 30.09.2014) = 21 days earlier
Payment date in the above case will be 09.09.2014.

11. From the following details, find out the average due date:
Date of Bill Amount (`) Usance of bill
29th January, 2014 10,000 1 month
th
20 March, 2014 8,000 2 months
th
12 July, 2014 14,000 1 month
th
10 August, 2014 12,000 2 months (4 Marks)
Ans. Calculation of Average Due Date:
No. of days from
Bill date Tenure Due date Amount (`) Product (`)
Base date
29/1/2014 1 3/3/2014 0 10,000 -
20/3/2014 2 23/5/2014 81 8,000 6,48,000
12/7/2014 1 14/8/2014 164 14,000 22,96,000
10/8/2014 2 13/10/2014 224 12,000 26,88,000
Total 44,000 56,32,000
Total Pr oducts
Average due date = Base date 
Total of Amount
56,32,000
= 3rd March +
44,000
= 3rd March + 128 days
Average due date = 9th July

12. Anand purchased goods from Amirtha, the average due date for payment in cash is 10.08.2015 and the
total amount due is ` 67,500. How much amount should be paid by Anand to Amirtha, if total payment is
made on following dates and interest is to be considered at the rate of 12% p.a.
(i) On average due date.
(ii) On 25th August, 2015.
(iii) On 30th July, 2015. (4 Marks)
Ans. Amount to be paid:
(i) On average due date:
 No interest amount paid as payment made on ADD. So amount paid is ` 67 ,500
CA Foundation/Accounting/Practice Que. Set P a g e | 140

(ii) On 25th August, 2015

12 15
Interest = 67,500 x  = 333
100 365
Total amount paid = 67,500 + 333 = ` 67,833
(iii) On 30th July, 2015
12 11
Interest = 67,500 x  = 244
100 365
 67,500 - 244 = 67,256
Being rebate allowed for unexpired credit period of 11 days.

13. X owes Y the following sums of money due on the dates started
` 400 due. on 5th January, 2016
` 200 due on 20th January, 2016
` 800 due on 4th February, 2016.
` 100 due on 26th February, 2016
` 50 due on 10th March, 2016
Calculate such a date when payment may be made by X in .one installment resulting in no loss of interest to
either party. Assume base date as 5th January, 2016. (4 Marks)
Ans. Taking 5th January 2016 as base date:
Due Date 2016 Amount No. of days from base date Product
5th January 400 0 0
th
20 January 200 15 3,000
th
4 February 800 30 24,000
th
26 February 100 52 5,200
th
10 March 50 65 3,250
1,550 35,450
Average due date = Base date + Days equal to (Total of Product +Total amount)
35,450
= 5th January, 2016 + = 5th January, 2016 + 22.8 days
1,550
= 5th January, 2016 + 23 days
If the payment is made by X in one installment on 28th January, 2016 no loss. of interest would arise to any
of the parties. = 28th January, 2016.

14. A merchant trader having accepted the following several bills falling due on different dates, now desires to
have these bills cancelled and to accept a new bill for the whole amount payable on the average due date:
SI. No. Date of Bills Amount ` Usance of the bill
st
1 1 May, 2016 500 2 months
2 10th May, 2016 300 3 months
th
3 5 June, 2016 400 2 months
th
4 20 June, 2016 375 1 months
th
5 10 July, 2016 500 2 months
You are required to find the said average due date.
CA Foundation/Accounting/Practice Que. Set P a g e | 141
Any fraction of a day arising from the calculation to be considered as full day. (4 Marks)
Ans. Calculation of Average due date
Date Due Date Amount (`) Days Product
01.05.16 04.07.16 Base Date 500 0 0
10.06.16 13.08.16 300 40 12,000
05.06.16 08.08.16 400 35 14,000
20.06.16 23.07.16 375 19 7,125
10.07.16 13.09.16 500 71 35,500
2,075 68,625
 Average due date
Total Pr oducts
= Base Date +
Total of Amount
68,625
= 4.7.16 +
2,075
= 4.7.16 + 33.07  34 days
= 7.8.16.

15. Mr. Praveen buys goods on Credit on following dates. 10 days credit is allowed to him after which interest
@ 8% p.a. is charged by supplier.
(1) 30th July ` 12,000
(2) th
12 August ` 25,000
(3) th
27 July ` 18,000
(4) th
10 September ` 7,000
(5) 12th September ` 21,000
th
It was agreed to be settled on 30 September. Compute interest payable by him using average due date
method. Due Date of earliest purchase shall be taken as base date: (one year = 365 days)
Any fraction of a day arising from the calculation to be considered as full day. (4 Marks)
Ans.
No. of days
Date of Bill Due Date Amount Product
from 6th August
30th July 9th August 12,000 3 36,000
12th August 22nd August 25,000 16 4,00,000
nd th
2 July 6 August 18,000 0 0
th th
10 September 20 September 7,000 45 3,15,000
th nd
12 September 22 September 21,000 47 9,87,000
83,000 17,38,000
Sum of Pr oduct 17,38,000
Average Due Date = Base Date + = 6th August +
Sum of Amount 83,000
= 6th August + 21 = 27th August
No. of days after 27th August to 30th September = 34 days
Interest Payable by Praveen on ` 83,000 for 34 days @ 8% p.a.
34 8
= 83,000 x x = ` 618.52
365 100
CA Foundation/Accounting/Practice Que. Set P a g e | 142

16. Mr. Alok owes Mr. Chirag ` 650 on 1st January 2018. From January to March, the following further
transactions took place between Alok and Chirag:
January 15 Alok buys goods ` 1,200
February 10 Alok buys goods ` 850
March 7 Alok receives Cash loan ` 1,500
st
Alok pays the whole amount on 31 March, 2018 together with interest @ 6% per annum. Calculate the
interest by average due date method; (5 Marks)
Ans.
Due Date 2018 Amount (`) No. of days from Jan 1 Product (`)
Jan 1 650 0 0
Jan 15 1,200 14 16,800
Feb 10 850 40 34,000
March 7 1,500 65 97,500
4,200 1,48,300
Sum of Pr oduct 1,48,300
Average Due Date = Base date + = 1.1.18 +
Sum of Amount 4,200
= 1.1.18 + 35 days. = 5.2.18
Interest therefore, will be calculated on ` 4,200 from 5.2.18 to 31.3.18 i.e. for 54 days.
6 54
Interest = 4,200 x x
100 365
= ` 37.28 i.e. ` 37/ (approx)

17. Karan purchased goods from Arjun, the average due date for payment in cash is 10.08.2018 and -the total
amount due is ` 1,75,800. How much amount should be paid by Karan to Arjun, if total payment is made on
following dates and interest is to be considered at the rate of 15% p.a.
(i) On average due date
(ii) On 28th August, 2018
(iii) On 29th July, 2018. (5 Marks)
Ans. (i) If payment is made on ADD, then no party gains or looses the interest. Hence, payment to be made is
` 1,75,800.
(ii) Payment on 28.08.2018 i.e. after the ADD, Karan will have to pay interest for 18 days.
15 18
1,75,800 x x = 1300.44
100 365
Total Payment = 1, 75,800 + 1300.44
= 1,77,100.44
(iii) Payment on 29. 7.2018 i.e. before ADD.
Karan will get a rebate of interest for 12 days.
15 18
1,75,800 x x = ` 866.96
100 365
Total Payment = ` 1,75,800 - 866.96
= ` 1,74,933.04

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CA Foundation/Accounting/Practice Que. Set P a g e | 143
CA Foundation/Accounting/Practice Que. Set P a g e | 144

CHAPTER 17 – ACCOUNT CURRENT

1. Mr. A owed ` 4,000 on 1st January, 2004 to Mr. X. The following transactions took place between them. It is
agreed between the parties that interest @ 10% p.a. is to be calculated on all transactions.
(`)
th
15 January, 2004 Mr. X sold goods to Mr. A 2,230
th
29 January, 2004 Mr. X bought goods from Mr. A 1,200
th
10 February, 2004 Mr. A paid cash to Mr. X 1,000
th
13 March, 2004 Mr. A accepted a bill drawn by Mr. X for one Month 2,000
They agree to settle their complete accounts by one single payment on 15th March, 2004. Prepare Mr. A in
Account Current with Mr. X and ascertain the amount to be paid. Ignore days of grace. (8 Marks)
Ans. Mr. A in Account Current with Mr. X
Dr. (Interest upto 15th March, 2004@ 10% p.a.) Cr.
Date Particulars Amount Days Product Date Particulars Amount Days Product
2004 2004
Jan. 01 To Balance b/d 4,000 75 3,00,000 Jan. 29 By Purchase account 1,200 46 55,200
Jan. 15 To Sales account 2,230 60 1,33,800 Feb. 10 By Cash account 1,000 34 34,000
Mar. 13 To Red Ink product 58,000 Mar. 13 By Bills Receivable Account 2,000
(` 2,000 x 29) Mar. 15 By Balance of product
To Interest account By Balance c/d (amount to be paid) 4,02,600
Mar. 15  4 ,02,600  10  1  110
 
 100  366  2,140

6,340 4,91,800 6,340 4,91,800

Note: Interest is charged @ 10% p. a. upto 15th March 2004.

2. From the following prepare an account current, as sent by Avinash to Bhuvanesh on 31st March, 2018 by
means of products method charging interest @ 5% per annum:
Date Particulars Amount (`)
2018
January 1 Balance due from Bhuvanesh 1,800
January 10 Sold goods to Bhuvanesh 1,500
January 15 Bhuvanesh returned goods 650
February 12 Bhuvanesh paid by cheque 1,000
February 20 Bhuvanesh accepted a bill drawn by Avinash for one month 1,500
March 11 Sold goods to Bhuvanesh 720
March 14 Received cash from Bhuvanesh 800
(5 Marks)
Ans. Bhuvanesh in Current Account with Avinash
(interest to 31.3.18 @ 5% p.a.)
Date 2018 Particulars Due Date Amount (`) Days Product (`) Date 2018 Particulars Due Date Amount Days Product
Jan. 01 To bal. c/d 1,800 90 1,62,000 Jan. 15 By Sales ret Jan. 15 650 75 48,750
Jan. 10 To Sales Jan. 10 1,500 80 1,20,800 Feb. 12 By Bank Feb. 12 1,000 47 47,000
Mar. 11 To Sales Mar. 11 720 20 14,400 Feb. 20 By Bills Rece.
Mar. 31 To Interest 22.34 (Note 1) Mar. 15 1,500 16 24,000
 5 1  Mar. 14 By Cases Mar. 14 800 17 13,600
 1,63,050  
 100 365  Mar. 31 By Bal. b/d 92.34 1,63,050

4042.34 2,96,400 4042.34 2,89,400

Note: While calculating the number of days, for opening balances, the opening date as well as date upto
which the account is prepared, is counted.
CA Foundation/Accounting/Practice Que. Set P a g e | 145
3. From the following particulars prepare an account current, as sent by Mr. AB to Mr. XY as on 31st October,
2016 by means of product method charging interest @ 5% p.a.
Date Particulars (`)
1st July Balance due from XY 1,500
20th August Sold goods to XY 2,500
th
28 August Goods returned by XY 400
25th September XY paid by cheque 1,600
20th October Received cash from XY 1,000
(5 Marks)
st
Ans. Mr. XV in Account Current with Mr. AB as on 31 October, 2018
Date Particulars Amount Days Product Date Particulars Amount Days Product
01.07.18 To Balance b/d 1,500 123 1,84,500 28.08.18 By Sales Return 400 64 25,600
20.08.18 To Sales 2,500 72 1,80,000 25.09.18 By Bank 1,600 57,600
31.10.18 To Interest 37.03 20.10.18 By Cash 1,000 36 11,000
31.10.18 By Balance C/d 1,037.03 11 2,70,300
4,037.03 3,64,500 4,037.03 3,64,500
Working Note:
5 1
1. Interest = 2, 70,300 x  = ` 37.03
100 365

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CA Foundation/Accounting/Practice Que. Set P a g e | 146

CHAPTER 19 – FINANCIAL STATEMENT OF NON-PROFIT ORGANISATIONS

1. From the following Receipts and Payments Account of Excellent Recreation Club for the year ended
31.3.1996 and additional information given, prepare an Income and Expenditure Account for the year
ended 31.3.1996 and Balance Sheet as on 31.3.1996:
Receipt (`) Payments (`)
Opening Balance: Secretary's Salary 12,000
Cash in hand and at Bank 3,180 Salaries to Staff 25,000
Subscription 18,000 Charities 1,000
Sale of Old Newspapers 2,500 Printing and Stationery 600
Legacies 4,000 Postage Expenses 120
Interest on Investments 2,000 Rates and Taxes 1,500
Endowment Fund Receipts 20,000 Upkeep of the Land 2,000
Proceeds of Sport and Concerts 4,020 Purchase of Sports Materials. 10,000
Advertisement in the Year Book 5,000 Telephone Expenses 3,480
Closing Balance:
Cash in hand and at Bank 3,000
58,700 58,700
Assets and Liabilities as on 31.3.1995 and 31.3.1996 were as follows:
31.3.1995 31.3.1996
` `
Subscription in arrears 2,000 1,000
Subscription received in advance 500 400
Furniture 2,000 1,800
Land 10,000 10,000
Depreciation shall be charged at 10% p.a. under the diminishing value method. Legacies received shall be
capitalised. Investments were made in Securities, the rate of interest being 12% p.a., the date of
investment was 1.6.1994 and the amount of investments was ` 20,000. Due date of interest 31st March
every year. Stock of sports materials on 31.3.1996 were useless and valued at NIL price. (15 Marks)
Ans. Recreation Club
Income and Expenditure Account
(For the year ended 31st March, 1996)
Expenditure (`) Income (`)
To Secretary's Salary 12,000 By Subscription 17,100
To Salaries to staff 25,000 By Sales of old newspapers 2,500
To Charities 1,000 By Interest on securities 2,400
To Printing & Stationary 600 Add: Outstanding 400 2,400
To Upkeep of land 2,000 By Proceeds of sport and concerts 4,020
To Sports materials written off 10,000 By Advertisement in the year book 5,000
To Telephone expenses 3,480 By Excess of Expenditure over Income 24,880
To Postage expenses 120
To Rates and taxes 1,500
To Depreciation on furniture 200
55,900 55,900
CA Foundation/Accounting/Practice Que. Set P a g e | 147
Balance Sheet
of Excellent Recreation Club
as on 31st March 1996
Liabilities (`) Assets (`)
Capital Fund Opening Land 10,000
balance Furniture 2,000
Less: Excess of 36,680 Less: Depreciation 200 1,800
Expenditure over income 24,880 Sports Materials 10,000
11,800 Less: Written off 10,000 Nil
Add: Legacies 4,000 15,800 Investment in securities 20,000
Endowment Fund 20,000 Subscriptions Receivable 1,000
Subscription received in Advance 400 Interest Due 400
Cash in hand and at Bank 3,000
36,200 36,200

Working Notes:
1. Balance Sheet of Excellent Recreation Club as on 31st March 1995
Liabilities (`) Assets (`)
Capital Fund (Balancing Amount) 36,680 Land 10,000
Subscription Received in Advance 500 Furniture 2,000
Arrears of Subscription 2,000
Investments in Securities 20,000
Cash in hand and at Bank 3,180
37,180 37,180

2. Subscription pertaining to the period ended 31st March 1996

(`)
Subscription received during the year 18,000
Add: Outstanding Subscription on 31.3.1996 1,000
19,000
Add: Received.in advance as on 31 .. 1995 500
19,500
Less: Outstanding subscription as on 31 .3.1995 2,000
17,500
Less: Received.in advance as on 31 .3. 1996 400
17,100
CA Foundation/Accounting/Practice Que. Set P a g e | 148
2. A and B are in partnership practicing as Chartered Accountants under the name and style AB & Co. sharing
profits / losses in the manner stated below. They close their accounts on 31 st March every year. The
following was their Balance Sheet as at 31st March. 1995:
Balance Sheet as at 31st March, 1995
(`) (`)
Partners' Capital: Furniture 20,000
A 65,000 Office Machinery 15,000
B 40,000 1,05,000 Library Books 8,000
Audit Fees collected in Car 60,000
Advance (A's client) 10,000 Outstanding Audit
Liability for Salary 5,000 Fees:
Provision against A's Client 30,000
outstanding Audit Fees 50,000 B's Client 20,000 50,000
Cash at Bank 15,000
Cash in Hand 2,000
1,70,000 1,70,000
The following is the summary of their cash/bank transactions for the year ended 31st March, 1996:
Receipt (`) Payments (`)
Opening: Salary Charges 2,60,000
Bank Balance 15,000 Car Expenses 35,000
Cash Balance 2,000 Traveling Expenses 21,000
Audit Fees: Printing and Stationery 18,000
A's Clients 2,80,000 Postage Expenses 3,000
B's Clients 1,80,000 4,60,000 Telephone 15,000
Fees for other Services: Subscription for Journals 7,000
A's Clients 50,000 Library Books 12,000
B's Clients 40,000 90,000 Fax Machine 16,000
Miscellaneous Income 4,000 Membership Fees 2,000
Drawings:
A 72,000
B 60,000 1,32,000
Cash at Bank 48,000
Cash in Hand 2,000
5,71,000 5,71,000
The following further information is available:
1. Audit Fees Receivable:
A's Clients ` 30,000
B's Clients 50,000
2. Audit Fees Collected in Advance
B's Client 20,000
3. Outstanding Liability for Salary on 31st March, 1996 20,000
4. Depreciation to be provided on:
Furniture 10%
CA Foundation/Accounting/Practice Que. Set P a g e | 149
Office Machinery 20%
library Books 10%
Car 20%
5. It has been agreed that 80% of audit fees and 40% of fees for other services should be transferred to
income and expenditure account in respect of each partner's account, the balance being credited
directly to the capital accounts. Profits/Losses to be divided between A and Bin the ratio of 2:1
respectively.
You are required to prepare Income and Expenditure Account for the year ended 31st March, 1996
and a Balance Sheet as at 31st March, 1996. (20 Marks)
Ans. AB & Co. Chartered Accountants
Income and Expenditure Account
(For the year ended 31st March, 1996)
Expenditure (`) Income (`)
To Salary charges 2,75,000 By Audit fees 3,60,000
(2,60,000 + 20,000 - 5,000) By Fees for other services 36,000
To Car expenses 35,000 By Miscellaneous income 4,000
To Travelling expenses 21,000
To Printing & stationery 18,000
To Postage expenses 3,000
To Telephone 15,000
To Subscription for journals 7,000
To Membership fees 2,000
To Depreciation:
Furniture 2,000
Office machinery 6,200
Library books 2,000
Car 12,000 22,200
To Profit:
A's share 12,00
B's share 600
4,00,000 4,00,000

Balance Sheet
As on 31st March 1996
Liabilities (`) Assets (`)
Partners' Furniture 20,000
Capital: (2) Less: Depreciation 2,000 18,000
A 82,200 Office Machinery 15,000
B 36,600 1,18,800 Add: Addition 16,000
Audit Fees Collected in Advance 20,000 31,000
Liability for Salary 20,000 Less: Depreciation 6,200 24,800
Provision against Library books 8,000
outstanding Audit Fees 80,000 Add: Additions 12,000
CA Foundation/Accounting/Practice Que. Set P a g e | 150
Liabilities (`) Assets (`)
20,000
Less: Depreciation 2,000 18,000
Car 60,000
Less: Depreciation 12,000 48,000
Outstanding Audit
Fees:
A's clients 30,000
B's clients 50,000 80,000
Cash in Bank 48,000
Cash in Hand 2,000
2,38,800 2,38,800

Working Notes:
1. Audit Fees:
Audit Fees: A (`) B (`)
Collections 2,80,000 1,80,000
Add: Outstanding on 31.3.96 30,000 50,000
Add: Received Last year 10,000 -
3,20,000 2,30,000
Less: Outstanding on 31.3.95 30,000 20,000
2,90,000 2,10,000
Less: Received in advance on 31.3.96 - 20,000
2,90,000 1,90,000
Add: Provision (Opening) 30,000 20,000
3,20,000 2,10,000
Less: Provision (Closing) 30,000 50,000
2,90,000 1,60,000
80% thereof transferred to
income and Expenditure A/c 2,32,000 1,28,000
20% taken to Capital A/c 58,000 32,000
2,90,000 1,60,000

2. Capital Accounts:
Particulars A (`) B (`) Particulars A (`) B (`)
To Drawings 72,000 60,000 By Balance b/d 65,000 40,000
To Balance c/d 82,200 36,600 By Audit fees (20%) 58,000 32,000
By Fees for other services (60%) 30,000 24,000
By Share of Profit 1,200 600
1,54,400 96,600 1,54,400 96,600
CA Foundation/Accounting/Practice Que. Set P a g e | 151
3. From the following Receipts and Payments Ne of Mumbai Club, prepare Income and Expenditure A/c for
the year ended 31.12.1996 and its Balance Sheet as on that date:
Receipts (`) Payments (`)
Cash in Hand 4,000 Salary 2,000
Cash at Bank 10,000 Repair Expenses 500
Donations 5,000 Purchase of Furniture 6,000
Subscriptions 12,000 Misc. Expenses 500
Entrance Fees 1,000 Purchase of Investments 6,000
Interest on Investments 100 Insurance Premium 200
Interest Received from Bank 400 Billiard Table 8,000
Sale of Old Newspaper 150 Paper, Ink, etc. 150
Sale of Drama Tickets 1,050 Drama Expenses 500
Cash in Hand (Closing) 2,650
______ Cash at Bank (Closing) 7,200
33,700 33,700
Information:
(1) Subscriptions in arrear for 1996 ` 900 and subscriptions in advance for 1997 ` 350.
(2) Insurance premium outstanding ` 40.
(3) Misc. Expenses Prepaid ` 90.
(4) 50% of donation is to be capitalised.
(5) Entrance Fees are to be treated as revenue income.
(6) 8% interest has accrued on investment tor five months.
(7) Billiard Table costing ` 30,000 was purchased during the last year and ` 22,000 were paid for it.
(20 Marks)
Ans. Income and Expenditure Account of Mumbai Club
(For the year ended 31st December, 1996)
Expenditure (`) Income (`)
To Salary 2,000 By Donations 5,000
To Repair Expenses 500 Less: Capitalised 50% 2,500 2,500
To Misc. Expenses 500 By Subscriptions 12,000
Less: Prepaid 90 410 Add: Outstanding __900 12,500
To Insurance Premium 200 12,900
Add: Outstanding 40 240 Less: Advance for '97 350 12,550
To Paper, ink, etc. 150 By Entrance Fees 1,000
To Drama Expenses 500 By Interest on Investment 300
To Surplus-Excess of Income over  8 5
100  100  6,000  12 
Expenditure 14,150
By Interest received from Bank 400
By Sale of Old Newspapers 150
By Sale of Drama Tickets 1,050
17,950 17,950
CA Foundation/Accounting/Practice Que. Set P a g e | 152
Balance Sheet of Mumbai Club
as on 31st December, 1996
Liabilities (`) Assets (`)
Capital Fund 52,650 Billiard Table 30,000
Opening Balance 36,000 40 Furniture 6,000
Add: Surplus 14, 150 350 Investments 6,000
Donations 2,500 Interest Accrued 200
Outstanding Insurance Premium Prepaid Expenses 90
Subscriptions Received in Advance Subscriptions Receivable 900
Cash in Hand 2,650
Cash at Bank 7,200
53,040 53,040
Working Notes:
Balance sheet of Mumbai Club
(As on 31st December, 1995)
Liabilities (`) (`)
Capital Fund (Balancing Figure) 36,000 Billiard Table 30,000
Creditors for Billiard table 800 Cash in Hand 4,000
Cash at Bank 10,000
44,000 44,000

4. The following information’s were obtained from the books o Delhi Club as on 31.3.1998, at the end of the
first year of the Club. You are required to prepare Receipts and Payments Account, Income an Expenditure
Account for the year ended 31.3.1998 and a Balance Sheet a at 31.3.1998 on mercantile basis:
(i) Donations received for Building and Library Room ` 2,00,000.
(ii) Other revenue income and actual receipts:
Revenue Income Actual Receipts
(`) (`)
Entrance Fees 17,000 17,000
Subscription 20,000 19,000
Locker Rents 600 600
Sundry Income 1,600 1,060
Refreshment Account - 16,000
(iii) Other revenue expenditure and actual payments:
Revenue Expenditure Actual Payments
(`) (`)
Land (cost ` 10,000) - 10,000
Furniture (cost ` 1,46,000) - 1,30,000
Salaries 5,000 4,800
Maintenance of Playgrounds, 2,000 1,000
Rent 8,000 8,000
Refreshment Account - 8,000
CA Foundation/Accounting/Practice Que. Set P a g e | 153
Donations to the extent of ` 25,000 were utilised for the purchase of Library Books, balance was still
unutilised. In order to keep it safe, 9% Govt. Bonds of ` 1,60,000 were purchased on 31.3.1998. Remaining
amount was put in the Bank on 31.3.1998 under the term deposit. Depreciation at 10% p.a. was to be
provided for the whole year on Furniture and Library Books. (20 Marks)
Ans. Delhi Club
Receipts and Payments Account
(For the year ended 31st March, 1998)
Receipts (`) Income (`)
To Donations for Building and Library Room 2,00,000 By Land 10,000
To Entrance Fees 17,000 By Furniture 1,30,000
To Subscription 19,000 By Salaries 4,800
To Locker Rents 600 By Maintenance of Playgrounds 1,000
To Sundry Income 1,060 By Rent 8,000
To Refreshment Account 16,000 By Refreshment Account 8,000
To Balance c/d: Overdraft 1,08,140 By Library Books 25,000
By 9% Govt. Bonds 1,60,000
By Bank Term Deposit 15,000
3,61,800 3,61,800

Income and Expenditure Account

for the year ended 31st March, 1998
Expenditure (`) Income (`)
To salaries 4,800 By Entrance Fees 17,000
Add: Outstanding 200 5,000 By Subscription 19,000
To Maintenance of Add: Outstanding 1,000 20,000
Playgrounds 1,000 By Locker Rents 600
Add: Outstanding 1,000 2,000 By Sundry Income 1,060
To Rent 8,000 Add: Outstanding 540 1,600
To Depreciation: By Refreshment Account 8,000
Furniture 14,600 (16,000 – 8,000)
Library Books 2,500 17,100
To Surplus - Excess of Income over Expenditure 15,100
47,200 47,200

Balance Sheet of Delhi Club

as on 31st March, 1998
Liabilities (`) Assets (`)
Capital Fund (Surplus) 15, 100 Land 10,000
Building & Library Room Fund 2,00,000 Furniture 1,46,000
Creditors for Furniture 16,000 Less: Depreciation 14,600 1,31,400
CA Foundation/Accounting/Practice Que. Set P a g e | 154
Liabilities (`) Assets (`)
Creditors for Expenses: Library Books 25,000
Salaries Outstanding 200 Less: Depreciation 2,500 22,500
Maintenance of Playground 1,000 1,200 9% Govt. Bonds 1,60,000
Bank Overdraft 1,08,140 Bank Term Deposits 15,000
Subscription Receivable 1,000
Sundry Income Receivable 540
3,40,440 3,40,440

5. Mahaveer Sports Club gives the following Receipts & Payments Account for the year ended March 31,
1998:
Receipts and Payments Account
Receipts (`) Payments (`)
To Opening Cash & Bank Balances 5,200 By Salaries 15,000
To Subscriptions 34,800 By Rent & Taxes 5,400
To Donations 10,000 By Electricity Charges 600
To Interest on Investments 1,200 By Sports Goods 2,000
To Sundry Receipts 300 By Library Books 10,000
By Newspapers & Periodicals 1,080
By Misc. Expenses 5,400
______ By Closing Cash & Bank Balances 12,020
51,500 51,500

Liabilities: As on 31.3.97 (`) As on 31.3.98 (`)

Outstanding Expenses:
Salaries 1,000 2,000
Newspapers & Periodicals 400 500
Rent & Taxes 600 600
Electricity Charges 800 1,000
Assets:
Library Books 10,000
Sports Goods 8,000
Furniture and Fixtures 10,000
Subscriptions Receivable 5,000 12,000
Investment - Govt. Securities 50,000
Accrued Interest 600 600
Provide Depreciation on:
Furniture & Fixtures @ 10% p.a.
Sports Goods @ 20% p.a.
Library Books @ 10% p.a.
You are required to prepare Club's opening Balance Sheet as on 01.04.97, Income and Expenditure Account
for the year ended on 31.3.98 and the Balance Sheet as on that date. (20 Marks)
CA Foundation/Accounting/Practice Que. Set P a g e | 155
Ans. Balance sheet of Mahaveer Sports Club
(As on 1st April, 1997)
Liabilities (`) Assets (`)
Capital Fund (Balancing Figure) 86,000 Library Books 10,000
Outstanding Expenses: Sports Goods 8,000
Salaries Furniture and Fixtures 10,000
Newspapers and 1,000 Subscriptions Receivable 5,000
Periodicals 400 Investment:
Electricity charges 800 Govt. Securities 50,000
Rent and taxes 600 2,800 Accrued Interest 600
Cash and Bank Balance 5,200
88,800 88,800

Income and Expenditure Account

for the Year ended on 31st March 1998
Expenditure (`) Income (`)
To Salaries 16,000 By Subscription 41,800
To Electricity Charges 800 By Interest on Investments 1,200
To Rent and Taxes 5,400 By Sundry Receipts 300
To Newspapers and periodicals 1,180
To Misc. Expenses 5,400
To Depreciation on fixed Assets 5,000.
To Excess of income over Expenditure 9,520
43,300 43,300

Balance Sheet of Mahaveer Sports Club

as on 31st March 1998
Liabilities (`) Assets (`)
Capital Fund Fixed Assets:
Opening Balance 86,000 Furniture and Fixtures 9,000
Add: Excess of Income over Exp. 9,520 Sport Goods 8,000
Add: Donations 10,000 1,05,520 Library Books 18,000
Outstanding Expenses (W.N.3) Investment:
Salaries 2,000 Govt. Securities 50,000
Newspapers and Periodicals 500 Accrued Interest 600
Electricity Charges 1,000 Subscription Receivable 12,000
Rent and taxes 600 4,100 Cash and Bank Bal. 12,000
1,09,620 1,09,620
CA Foundation/Accounting/Practice Que. Set P a g e | 156
Working Notes:
(1) Subscription for the year ended 31st march 1998: (`)
Subscription received during the year 34,800
Add: Subscriptions received on 31.3.98 12,000
46,800
Less: Subscriptions receivable on 31.3.97 5,000
41,800
(2) Expenses Calculation:
Salaries Electricity Rent and Newspapers and
Expenses
(`) Charges (`) Taxes (`) Periodicals (`)
Paid during the year 15,000 600 5,400 1,080
Add: Outstanding (as on 31.3.98) 2,000 1,000 600 500
17,000 1,600 6,000 1,580
Less: Outstanding (as on 31 .3.97) 1,000 800 600 400
Expenses for the year 16,000 800 5,400 1,180

(3) Depreciation Calculation:

Assets Book value Additions Total Rate of Depreciation W.D.V. on as
(31.3.97) during the year (`) (`) Depreciation p.a. (`) (31.3.98) (`)

Furniture & fixtures 10,000 - 10,000 10% 1,000 9,000

Sports goods 8,000 2,000 10,000 20% 2,000 8,000

Library books 10,000 10,000 20,000 10% 2,000 18,000

28,000 12,000 40,000 5,000 35,000

6. Summary of Receipts and Payments of Bombay Medical Aid Society for the year ended 31.12.2000 are as
follows:
Opening Cash balance in hand ` 8,000, Subscription ` 50,000, Donation ` 15,000, Interest on Investments
@ 9% p.a. ` 9,000, Payments for medicine supply ` 30,000, Honorarium to Doctors ` 10,000, Salaries `
28,000, Sundry Expenses ` 1,000, Equipment purchase ` 15,000, Charity show expenses ` 1,500, Charity
show collection ` 12,500.
Additional information’s:
1.1.2000 (`) 31.12.2000 (`)
Subscription due 1,500 2,200
Subscription received in advance 1,200 700
Stock of medicine 10,000 15,000
Amount due for medicine supply 9,000 13,000
Value of equipment 21,000 30,000
Value of building 50,000 48,000
You are required to prepare Receipts and Payments Account and Income and Expenditure Account for the
year ended 31.12.2000 and Balance Sheet as on 31.12.2000. (20 Marks)
CA Foundation/Accounting/Practice Que. Set P a g e | 157
Ans. Receipt and Payment Account of
Bombay Medical Aid Society
(For the year ended 31st December, 2000)
Liabilities (`) Assets (`)
To Cash Balance 8,000 By Purchase of Equipment 15,000
To Subscription 50,000 By Charity show expenses 1,500
To Donation 15,000 By Medical supply 30,000
To Interest 9,000 By Honorarium 10,000
To Charity show collections 12,500 By Salaries 28,000
By Sundry Expenses 1,000
By Cash in hand 9,000
94,500 94,500

Income and Expenditure Account

Bombay Medical Aid Society
for the year ended 31st December, 2000
Expenditure (`) Income (`)
To Medicine consumed (3) 29,000 By Subscription (1) 51,200
To Honorarium to doctors 10,000 By Donation 15,000
To Salaries. 28,000 By Interest on 9,000
To Sundry expenses 1,000 Investments 11,000
To Depreciation Equipment 6,000 By Profit on charity show:
To Building 2,000 Show collection 12,500
To Surplus 10,200 Show expenses -1,500
86,200 86,200

Balance Sheet of Bombay Medical Aid Society

(As on 31st Dec. 2000)
Liabilities (`) Assets (`)
Capital Fund (5) Building 50,000
Opening Balance 1,80,300 Less: Depreciation 2,000 48,000
Add: Surplus 10,200 1,90,500 Equipment. 21,000
Subscription received in advance 700 Add: Purchases 15,000
Amount due for medicine supply 13,000 36,000
Less: Depreciation 6,000 30,000
Stock of medicine 15,000
Investments 1,00,000
Subscription receivable 2,200
Cash in hand 9,000
2,04,200 2,04,200
CA Foundation/Accounting/Practice Que. Set P a g e | 158
Working Notes:
1. Subscription for the year ended 31st December 2000 (`)
Subscription receivable during the year 50,000
Less: Subscription receivable on 1.1.2000 1,500
Less: Subscription received in advance on 31.12.2000 700
47,800
Add: Subscription receivable on 31.12.200 2,200
Add: Subscription received in advance on 1.1.2000 1,200
51,200

2. Purchase of Medicine:
Payment for Medicine Supply 30,000
Less: Amount due for medicine supply on 1 .1.2000 9,000
21,000
Add: Amount due for medicine supply on 31.12.2000 13,000
34,000

3. Medicine consumed:
Stock of medicine on 1.1.2000 10,000
Add: Purchase of Medicine during the year 34,000
44,000
Less: Stock of Medicine on 31.12.2000 15,000
29,000

4. Depreciation of Equipment:
Value of equipment on 1.1.2000 21,000
Add: Purchase of equipment during the year 15,000
36,000
Less: Value of equipment on 31.12.2000 30,000
Depreciation on equipment for the year 6,000

5. Balance Sheet of Medical Aid Society

as on 31st December 1999
Liabilities (`) Assets (`)
Capital fund (balance figure) 1,80,300 Building 50,000
Subscription received in advantage 1,200 Equipment 21,000
Amount due for medicine supply 9,000 Stock of medicine 10,000
Investments 1,00,000
Subscription receivable 1,500
Cash in hand 8,000
1,90,500 1,90,500
CA Foundation/Accounting/Practice Que. Set P a g e | 159
7. Smith Library Society showed the following position on 31st March, 2001:
Balance Sheet as on 31st March, 2001
Liabilities (`) Assets (`)
Capital Fund 7,93,000 Electrical Fittings 1,50,000
Expenses Payable 7,000 Furniture 50,000
Books 4,00,000
Investment in Securities 1,50,000
Cash at Bank 25,000
_______ Cash in hand 25,000
8,00,000 8,00,000
The Receipts and Payments Account for the year ended on 31st March, 2002 is given below:
(`) (`)
To Balance b/f By Electric Charges 7,200
Cash at Bank 25,000 By Postage and Stationery 5,000
Cash in hand 25,000 50,000 By Telephone Charges 5,000
To Entrance Fees 30,000 By Books Purchased 60,000
By Outstanding Expenses paid 7,000
By Rent 88,000
By Investment in Securities 40,000
By Salaries 66,000
By Balance c/f
Cash at Bank 20,000
_______ Cash in hand 11,300
3,09,500 3,09,500
You are required to prepare an Income and Expenditure Account for the year ended 31st March, 2002 and
a Balance Sheet as at 31st March, 2002 after making the following adjustments:
(i) Membership Subscription included ` 10,000 received in advance.
(ii) Provide for outstanding rent ` 4,000 and salaries ` 3,000.
(iii) Books to be depreciated @ 10% including additions. Electrical Fittings and Furnitures are also to be
depreciated at the same rate.
(iv) 75% of the Entrance Fees is to be capitalised.
(v) Interest on Securities is to be calculated @ 5% p.a. including purchases made on 1.10.2001 for
` 40,000. (20 Marks)
Ans. M/s Smith Library Society
Income & Expenditure Account
(for the ended on 31st March 2002)
Expenditure (`) Income (`)
To Electric charges 7,200 By Entrance fees 30,000
To Postage & Stationery 5,000 Less: 75% Capitalised 22,500 7,500
To Telephone charges 88,000 By Membership Fee 2,00,000
To Rent 4,000 92,000 Less: Advance 10,000 1,90,000
To salaries 66,000 By Sale of old news-papers 1,500
Add: Outstanding 3,000 69,000 By Hire of lecture Hall 20,000
To Depreciation on: Intl. on Securities 8,000
Books 10% 46,000 Add: Outstanding 500 8,500
CA Foundation/Accounting/Practice Que. Set P a g e | 160
Expenditure (`) Income (`)
Electric fitting 10% 15,000 By Excess of Expenditure over Income 16,700
Furniture 10% 10,000 71,000
2,44,200 2,44,200

M/s Smith Library Society - Balance Sheet

As on 31st March 2002
Liabilities (`) Assets (`)
Capital Fund 7,93,000 Electric fitting 1,50,000
Add: 75% Ent. Fee 22,500 Less: Depreciation 15,000 1,35,000
8,15,500 Furniture 50,000
Less: Depreciation 16,700 7,98,800 Less: Depreciation 5,000 45,000
Advance Membership fees 10,000 Books 4,00,000
Outstanding Expenses Add: Additions 60,000
Rent 4,000 4,60,000
Salaries 3,000 7,000 Less: Depreciation 46,000 4,14,000
Investment in securities 1,90,000
Outstanding interest on Securities 500
Cash in Hand 20,000
Cash at Bank 11,300
8,15,800 8,15,800

Working Notes:
Interest on securities
1,50,000 x 5% = 7,500
40,000 x 5% x ½ = 1,000
8,500
Less: Received 8,000
Outstanding = 500

8. A doctor, after retiring from Government Service, started private practice on 1st April, 2001 with ` 20,000
of his own and ` 30,000 borrowed at an interest of 15% 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:
(Dr.) (Cr.)
(`) (`)
Own Capital 20,000 Medicines purchased 24,500
Loan 30,000 Surgical Equipment’s 25,000
Prescription Fees 52,500 Motor Car 32,000
Gifts from Patients 13,500 Motor Car Expenses 12,000
Visiting Fees 25,000 Wages and Salaries 10,500
Fees from Lectures 2,400 Rent of Clinic 6,000
Pension received 30,000 General Charges 4,900
CA Foundation/Accounting/Practice Que. Set P a g e | 161
Household Expenses 18,000
Household Furniture 2,500
Expenses on daughter's Marriage 21,500
Interest on Loan 4,500
Balance at Bank 11,000
_______ Cash in Hand 1,000
1,73,400 1,73,400
You are required to prepare his Capital Account and Income and Expenditure Account for the year ended
31st March, 2002 and a Balance Sheet as on that date. One-third of the motor car expenses may be treated
PS applicable to the private use of car and ` 3,000 of the wages and salaries are in respect of domestic
servants.
The stock of medicines in hand on 31st March, 2002 was valued at ` 9,500. (15 Marks)
Ans. Capital Account
for the year ended 31st March, 2002
(`) (`)
To Drawing 4,000 By Cash/ bank 20,000
Motor car Expenses 18,000 By Cash/bank (pension) 30,000
(one-third of ` 12,000) 21,500 By Net income from Practice 47,500
Household expenses 3,000 (derived from income and
Daughter’s marriage exp. 2,500 Expenditure A/c)
Wages of domestic servant 48,500
Household furniture
To Balance c/d
97,500 97,500

Income and Expenditure Account

for the year ended 31st March, 2002
(`) (`)
To Medicines consumed By Prescription Fees 52,500
Purchases 24,500 By Gifts from patients 13,500
Less: Stock on 31.3.02 9,500 15,000 By Visiting fees 25,000
To Motor car expenses 8,000 By Fees from lectures 2,400
To Wages and Salaries (` 10,500 - ` 7,500
3,000) 6,000
To Rent of clinic 4,900
To General charges 4,500
To Interest on loan 47,000
To Net Income
93,400 93,400
CA Foundation/Accounting/Practice Que. Set P a g e | 162
Balance Sheet
as on 31st March, 2002
Liabilities (`) Assets (`)
Capital 48,500 Motor Car 32,000
Loan 30,000 Surgical Equipment’s 25,000
Stock of medicines 9,500
Cash at Bank 11,000
Cash in hand 1,000
78,500 78,500

9. The Receipts and Payments account of Trustwell Club prepared on 31st March, 2003, is as follows:
Receipts and Payments Account
Receipts (`) Payments (`)
To Balance b/d 450 By Expenses (including payment for
To Annual Income from Sports material ` 2,700) 6,300
Subscription ` 4,590 By Loss on sale of Furniture
Add: Outstanding of last (cost price ` 450) 180
Year received this year ` 180 By Balance c/d 90,450
4,770
Less: Prepaid of last year ` 90 4,680
To Other fees 1,800
To Donation for Building 90,000 ______
96,930 96,930
Additional information:
Trustwell club had balances as on 1.4.2002:
Furniture ` 1,800; Investment at 5% ` 27,000;
Sports material ` 6,660;
Balance as on 31.3.2003: Subscription Receivable ` 270;
Subscription received in advance ` 90;
Stock of sports material ` 1,800.
Do you agree with above Receipts and Payments account? If not, prepare correct Receipts and Payments
account and Income and Expenditure account for the year ended 31st March, 2003 and Balance Sheet on
that date. (20 Marks)
Ans. Trustwell Club
Correct Receipt & Payments Account
For the year ended 31st March 2003
Receipt (`) Payments (`)
To Balance b/d 450 By Expenses 3,600
To Subscription A/c [W.N. 1] 4,500 By Sports Material 2,700
To Other fees 1,800 By Balance c/d 90,720
To Donation for buildings 90,000
To Sale of furniture 450-180] 270
97,020 97,020
CA Foundation/Accounting/Practice Que. Set P a g e | 163
Income & Expenditure Account
for the year ended 31st March 2003
Particulars (`) Particulars (`)
To Expenses 3,600 By Subscription A/c 4,590
To Sports Material By Other Fee 1,800
Opening Stock 6,660 By Interest on Investment (5% of 27,000) 1,350
Add: Purchase 2,700 By Deficiency 3,600
9,360
Less: Closing Stock 1,800 7,560
To Loss on sale of furniture 180
11,340 11,340

Balance Sheet
(As on 31st March 2003)
Liabilities (`) Assets (`)
Prepaid Subscription 90 Cash in Hand 90,720
Donation for building 90,000 Outstanding subscription 270
Capital Fund 36,000 furniture 1,800
Less: Deficiency 3,600 32,400 Less: Sold 450 1,350
5% Investment 27,000
Add: Intl accrued 1,350 28,350
Sports Material 1,800
1,22,490 1,22,490

Working Notes:
Subscription Account
Particulars (`) Particulars (`)
To Outstanding Subscription 180 By Prepaid Subscription 90
To Prepaid Subscription 90 By Cash A/c [Subscription recd. during
To Income & Expenditure A/c 4,590 the year: (Bal. Fig) 4,500
(given) By Outstanding Subscription (closing) 240
4,860 4,860

Balance Sheet
(As on 1st April 2002)
Liabilities (`) Assets (`)
Prepaid Expenses 90 Outstanding Subscription 180
Capital fund (Balancing fig.) 36,000 Furniture 1,800
5% Investment 27,000
Sport Material 6,660
Cash in Hand 450
36,090 36,090
CA Foundation/Accounting/Practice Que. Set P a g e | 164
10. Following is the Income and Expenditure Account of Victoria Club for the year ending 31st March, 2006:
Expenditure Amount (`) Income Amount (`)
To Salaries & Wages 19,000 By Subscription 30,000
To Misc. Expenses (including Insurance) 2,000 By Entrance Fees received 1,000
To Audit fees 1,000 By Annual Sports Income
To Chief Executives' Honorarium 4,000 Receipts 6,000
To Printing and Stationary 1,800 Less - Expenses 3,000 3,000
To Annual day
Celebration Exp. 6,000
Less: Donation 4,000 2,000
To Interest on Bank Loan 600
To Depreciation on Sports Equipment 1,200
To Excess of Income over Expenditure 2,400 ______
34,000 34,000
Additional Information:
31.03.05 (`) 31.03.06 (`)
(i) Subscription outstanding 2,400 3,000
(ii) Subscription received in advance 1,800 1,080
(iii) Salaries outstanding 1,600 1,800
(iv) Sports equipment (after deducting depreciation) 10,400 10,800
(v) Prepaid Insurance - 240
(vi) Cash in Hand ? 6,400
(vii) The Club owned a Sports' ground of ` 40,000
(viii) The Club took a loan of ` 8,000 from a bank during the year 2004-05, which was not paid in 2005-06.
(ix) Audit fee of 2005-06 was outstanding, but Audit fees of ` 800 for 2004- 05 was paid in 2005-06.
Prepare Receipts and Payments Account for the year ending 31" March, 2006 and a Balance Sheet on that
date. (20 Marks)
Ans. In the books of Victoria. Club Receipt & Payment A/c
Dr. for the year ended 31st March, 2006 Cr.
Particular (`) Particular (`)
To Bal. b/d 5,560 By Salaries 19,000
To Subscription Add: Paid for 2005 16,000
As per income & Exp. A/c 30,000 Less: Unpaid for 2006 (1,800) 18,800
+ 2004-05 Received 2,400 By Misc. Expense 2,000
+ 2006-07 Advance 1,080 (+) prepaid 240 2,240
(-) 2005-6 Recei. in 2004-05 (1,800) By Audit fee 1,000
(-) O/s of 2005-06 (3,000) 28,680 (+) Paid for 2004-05 800
To Entrance fee 1,000 (-) O/s for 2005- 06 (1,000) 800
To Profit on annual Sports 3,000 By Chief executing Honorarium 4,000
By Printing & Stationary 1,8000
By Annual day exe. 2,000
By Interest on Bank loan 600
By Purchase of sports equip. 1,600
10,800 - (10,400 - 1,200)
By Bal. c/d. 6,400
37,340 37,340
CA Foundation/Accounting/Practice Que. Set P a g e | 165
st
Balance Sheet as on 31 March, 2006
Liabilities (`) Assets (`)
Capital Fund 46,160 Sports equip. 10,400
(+) Excess of Income over expend. 2,400 48,560 (+) Purchase 700
Subscription Recd. in Adv. 1,080 (-) Dep. 1,200 10,800
O/s salaries 1,800 Sports ground 40,000
O/s Audit fee 1,000 Cash in hand 6,400
Bank loan 8,000 Subscription Receivable 3,000
Prepaid insurance 240
60,440 60,440

Working Note:
Balance sheet as on 31st March, 2005
Particular (`) Particular (`)
Capital fund (Bal. figure) 46, 160 Sports equipment 10,400
Bank Loan 8,000 Sports ground 40,000
Subscription Received in advance 1,800 Cash in hand 5,560
O/s salaries 1,600 O/s subscription Receivable 2,400
O/s audit lee 800
58,360 58,360

11. Following is the Receipts and Payments Account of M/s Tiptop Club for the year ended 31st March, 2006:
Receipts (`) Payments (`)
To Cash in hand on 1st April, 2005 9,000 By Payments for cosmetics 15,000
To Subscription 45,000 By Honorarium to 8,000
To Donation 4,500 Beautician
To Interest on Investments at 6% for the year 3,000 By Salaries 18,000.
To Fashion show proceeds 50,500 By Sundry expenses 1,000
By Rent for building 12,000
By Equipments purchased 13,000
By Fashion show expenses 34,000
_______ By Cash in hand on 31st March, 2006 11,000
1,12,000 1,12,000
Additional information:
On 1st April, 2005 On 31st March, 2006
(`) (`)
(i) Subscription due 500 2,000
(ii) Subscription received in advance 1,500 1,000
(iii) Stock of cosmetics 10,000 7,000
(iv) Amount due to cosmetics suppliers 8,000 11,000
(v) Rent paid in advance 1,000 1,500
CA Foundation/Accounting/Practice Que. Set P a g e | 166
(vi) Salary outstanding 1,500 2,000
(vii) Value of Equipment’s 21,500 29,000
(viii) Value of Furniture and Fixtures 40,000 36,000
You are required to prepare Income and Expenditure Account for the year ended 31st March, 2006 and
Balance Sheet as on date of M/s Tiptop Club. Show all workings. (20 Marks)
Ans. M/s Tiptop Club
Income and Expenditure Account
for the year ended 31st March, 2006
Expenditure (`) Income (`)
To Cosmetics consumed (W.N.1) 21,000 By Subscription (W.N.6) 47,000
To Honorarium to beautician 8,000 By Donation 4,500
To Salaries (W.N.2) 18,500 By Interest on Investments 3,000
To Sundry expenses 1,000 By Fashion show proceed 50,500
To Rent for building (W.N.3) 11,500 Less: Fashion show exp. 34,000 16,500
To Depreciation on Equipment’s (W.N.4) 5,500
To Depreciation on Furnitures
and Fixtures (W.N.5) 4,000
To Excess of Income over Expenditure 1,500
71,000 71,000

M/s Tiptop Club

Balance Sheet as on 31st March, 2006
Liabilities (`) Assets (`)
Capital Fund Equipment’s 29,000
Opening balance (W.N. 8) 1,21,000 Furniture and Fixtures 36,000
Add: Excess of Income over Investments (W.N. 7) 50,000
expenditure 1,500 1,22,500 Subscription due 2,000
Amount due to cosmetics suppliers 11,000 Stock of cosmetics 7,000
Salary outstanding 2,000 Rent prepaid 1,500
Subscription received in advance 1,000 Cash in hand 11,000
1,36,500 1,36,500

12. You are provided with the followings:

Balance Sheet as on 31st March, 2017
Liabilities (`) Assets (`)
Capital Fund 1,06,200 Building 1,50,000
Subscription received in Advance 6,000 Outstanding Subscription 3,800
Outstanding Expenses 14,000 Outstanding Locker Rent 2,400
Loan 40,000 Cash in Hand 20,000
Sundry Creditors 10,000 _______
Total 1,76,200 Total 1,76,200
CA Foundation/Accounting/Practice Que. Set P a g e | 167
The Receipts and Payment Account for the year ended on 31st March, 2018
Receipts (`) Payments (`)
To Balance b/d By Expenses:
Cash in Hand 20,000 For 2017 12,000
To Subscriptions: For 2018 20,000 32,000
For 2017 2,000 By Land 40,000
For 2018 21,000 By Interest 4,000
For 2019 1,000 24,000 By Miscellaneous Expenses 4,700
To Entrance Fees 38,000 By Balance c/d
To Locker Rent 7,000 Cash in Hand 18,300
To Sale proceeds of old newspapers 1,000
To Miscellaneous Income 9,000 ______
99,000 99,000
You are required to prepare Income and Expenditure Account for the year ended 31st March, 2018 and a
Balance Sheet as at 31st March, 2018 (Workings should form part of your answer). (10 Marks)
Ans. Income and Expenditure Account
for the year ending 31st March, 2018
Expenditure (`) Income (`)
To Expenses 20,000 By Subscriptions 21,000
To Interest 4,000 + Op. adv. 6,000 27,000
To Misc. Expenses 4,700 By Entrance fees 38,000
To Excess of Income 50,900 By Locker Rent 7,000
over Expenditure (Surplus) Op. O/s 2,400 4,600
By Sale proceeds of old newspaper 1,000
By Misc. Income 9,000
79,600 79,600

Balance Sheet as at 31st March, 2018

Liabilities (`) Assets (`)
Capital Fund 1,06,200 Land 40,000
(+) Surplus 50,900 1,57,100 Building 1,50,000
Subscription Recd. in Advance 1,000 Outstanding Subscription
O/s Expenses 2017 2,000 2017 1,800
Loan 40,000 2018 Nil 1,800
Creditors 10,000 Cash in hand 18,300
2,10,100 2,10,100

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