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VST3
NOV- 2022
CA INTERMEDIATE
PAPER - 01
ACCOUNTING

Time - 3 Hrs. Total No. of Printed Pages – 12

Total No. of Questions – 06 Maximum Marks – 100

GENERAL INSTRUCTIONS TO CANDIDATES

1. The question paper comprises DESCRIPTIVE QUESTIONS.
2. In case of Verification of your ans sheets by the experts please Scan your Ans sheet in One PDF Form
and Send the same on inter.vsmartexamprep@vsmartacademy.com (verification is chargeable)
3. The size of the scanned PDF file should be less than 25 MB.
4. Details to be compulsorily mentioned on your answer sheet:
Name: e.g. Aneesh
Course: CA Intermediate
Subject: Accounting
Syllabus: New/Old
Test No: (See on Page no. 2 )
5. If any of the details are missing there would be delay in checking your answer sheets.
6. Ans. Sheet will be evaluated within 7 days.
7. Answer sheet submitted after 6pm will be considered in next day Cycle.
8. Answer all the questions in English.
____________________________________________________________________________________
PART – 2
1. Question paper Comprise 6 questions. Question No. 1 which is compulsory, Attempt any 4 out of
remaining 5 Questions.
2. Working notes should form part of the answer.
3. Answers to the questions are to be given only in English except in the case of candidates who have
opted for Hindi Medium. If a candidate has not opted for Hindi Medium, his/her answers in Hindi
will not be evaluated.

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PORTIONWISE TEST ROUND – 3
CA INTERMEDIATE

PAPER 1: ACCOUNTING

Question no. 1 is compulsory.

Answer any four questions from the remaining five questions.

Question 1. A) (5 Marks)
Hema Ltd purchased a Machinery at the beginning of year 1 for ₹15,00,000. The
Company charged straight-line depreciation based on 15 years working life estimate and
Residual Value ₹3,00,000. At the beginning of the 4th year, the company by way of
systematic evaluation, revalued the Machinery upward by 20% of Net Book Value as on
date and also re-estimated the useful life as 7 years and Scrap Value as Nil. The increase
in Net Book value was credited directly to Revaluation Reserves. Depreciation (on SLM
basis) later on was charged to Profit & Loss Account. At the beginning of 8th year, the
Company decided to dispose-off the Machinery and estimated the Realizable Value to
₹2,00,000. Ascertain the amount to be charged to Profit & Loss Account at the beginning
of 8th year with reference to AS-10.

Question 1. B) (5 Marks)
Following are the extracts from the Balance Sheet of ABC Ltd.
Liabilities 31.3.2020 31.3.2021
(₹) (₹)
Equity Share Capital 25,00,0000 35,60,000
10% Preference Share Capital 7,00,000 6,00,000
Securities Premium Account 5,00,000 5,50,000
Profit & Loss A/c 20,00,000 28,00,000
Equity Share Capital for the year ended 31st March, 2021 includes ₹60,000 of equity
shares issued to Grey Ltd. at par for supply of Machinery of ₹60,000.
Profit & Loss account on 31st March, 2021 includes ₹50,000 of dividend received on
Equity shares invested in X Ltd.
Show how the related items will appear in the Cash Flow Statement of ABC Ltd. as per
AS-3 (Revised)?

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Question 1. C) (5 Marks)
Primus Hospitals Ltd had acquired 40 units of Doppler Scan Machines from Holiver
USA at a Cost of US $ 1,65,100 per unit in the beginning of Financial Year 2019-20. The
prevailing rate of exchange was ₹50 to 1 US $. The acquisition was partly funded out of a
Government Grant of ₹ 5 Crores. The Grant relating to such machines was given with a
rider that in the event of a change in Management, the Entity is bound to return the Grant.
In April 2022, 51% control in the Company was taken over by an Overseas Investor. The
expected Productive Period of such an asset is normally reckoned at 5 years. The
Depreciation Rate adopted was 20% p.a. SLM basis. The company had incurred
expenditure of US $ 4,000 towards Bank Charges and ₹ 7,500 per unit as Sea Freight.
You are also informed that neither Capital Reserve nor Deferred Income Account has
been maintained by the Company.
Suggest the accounting treatment as a result of the return of the Grant, in the light of the
relevant AS.

Question 1. D) (5 Marks)
Harish Construction Company is constructing a huge building project consisting of four
phases. It is expected that the full building will be constructed over several years but
Phase I and Phase II of the building will be started as soon as they are completed.
Following is the detail of the work done on different phases of the building during the
current year:
(₹ in lakhs)
Phase I Phase II Phase III Phase IV
₹ ₹ ₹ ₹
Cash expenditure 10 30 25 30
Building purchased 24 34 30 38
Total expenditure 34 64 55 68
Total expenditure of all phases 221
Loan taken @ 15% at the beginning 200
of the year
During mid of the current year, Phase I and Phase II have become operational. Find out
the total amount to be capitalized and to be expensed during the year.

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Question 2. A) (10 Marks)
Srikumar bought 2 cars from Fair Value Motors Pvt Ltd on 01.04.2018 on the following
terms: (₹)
Down Payment 1st Instalment 2nd Instalment 3rd Instalment
6,00,000 4,20,000 4,90,000 5,50,000

Interest is charged at 10% p.a. Srikumar provides Depreciation @ 25% on the

diminishing balances.
On 31.03.2021, Srikumar failed to pay the 3rd Instalment upon which Fair Value Motors
Pvt Ltd re-possessed 1 car. Srikumar agreed to leave one Car with Fair value Motors Pvt
Ltd and adjusted the value of the car against the amount due. The car taken over was
valued on the basis of 40% depreciation annually on written-down basis. The balance
amount remaining in the Vendor’s Account after the above adjustment was paid by
Srikumar after 3 months with Interest @ 20% p.a.
(a) Calculate the Cash Price of the Cars and the interest paid with each Instalment.
(b) Prepare Car Account and Fair Value Motors Pvt Ltd Account in the books of
Srikumar, assuming books are closed on 31st March every year. Figures may be
rounded off to the nearest rupee.

Question 2. B) (10 Marks)

A Fire occurred in the premises of M/s B & Co. on 30th September, 2019. The firm had
taken an insurance policy for ₹1,20,000 which was subject to an average clause.
Following particulars were ascertained from the available records for the period from 1st
April, 2018 to 30th September, 2019:

Amount
(₹)
Stock at cost on 1-04-2018 2,11,000
Stock at cost on 31-03-2019 2,52,000
Purchases during 2018-19 6,55,000
Wages during 2018-19 82,000
Sales during 2018-19 8,60,000
Purchases from 01-04-2019 to 30-09-2019 (including purchase of 4,48,000
machinery costing ₹58,000)

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Wages from 01-04-2019 to 30-09-2019 (including wages for 85,000
installation of machinery costing ₹7,000)
Sales from 01-04-2019 to 30-09-2019 6,02,000
Sale value of goods drawn by partners (1-4-19 to 30-9-19) 52,000
Cost of Goods sent to consignee on 18th September, 2019 lying 44,800
unsold with them
Cost of Goods distributed as free samples (1-4-19 to 30-9-19) 8,500
While valuing the Stock at 31st March, 2019, ₹8,000 were written off in respect of a slow
moving item, cost of which was ₹12,000. A portion of these goods was sold at a loss of
₹4,000 on the original cost of ₹9,000. The remainder of the stock is estimated to be worth
the original cost. The value of Goods salvaged was estimated at ₹35,000.
You are required to ascertain the amount of claim to be lodged with the Insurance
Company for the loss of stock.

Question 3. A) (12 Marks)

Archana Enterprises maintain their books of accounts under single entry system. The
Balance - Sheet as on 31st March, 2020 was as follows:
Liabilities Amount Assets Amount
(₹) (₹)
Capital A/c 6,75,000 Furniture & fixtures 1,50,000
Trade creditors 7,57,500 Stock 9,15,000
Outstanding expenses 67,500 Trade debtors 3,12,000
Prepaid insurance 3,000
Cash in hand & at bank 1,20,000
15,00,000 15,00,000
The following was the summary of cash and bank book for the year ended 31st March,
2021:
Receipts Amount (₹) Payments Amount (₹)
Cash in hand & at Bank 1,20,000 Payment to trade 1,24,83,000
st
on 1 April, 2020 creditors
Cash sales 1,10,70,000 Sundry expenses paid 9,31,050
Receipts from trade 27,75,000 Drawings 3,60,000
debtors
Cash in hand & at Bank
on 31st March, 2021 1,90,950
1,39,65,000 1,39,65,000

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Additional Information:
(i) Discount allowed to trade debtors and received from trade creditors amounted to
₹54,000 and ₹42,500 respectively (for the year ended 31st March, 2021).
(ii) Annual fire insurance premium of ₹9,000 was paid every year on 1st August for
the renewal of the policy.
(iii) Furniture & fixtures were subject to depreciation @ 15% p.a. on diminishing
balance method.
(iv) The following are the balances as on 31st March, 2021:
Stock ₹ 9,75,000
Trade debtors ₹ 3,43,000
Outstanding expenses ₹ 55,200
(v) Gross profit ratio of 10% on sales is maintained throughout the year.
You are required to prepare Trading and Profit & Loss account for the year ended 31st
March, 2021, and Balance Sheet as on that date.

Question 3. B) (8 Marks)
DM Delhi has a branch in London which is an integral foreign operation of DM. At the
end of the year 31st March, 2021, the branch furnishes the following trial balance in U.K.
Pound:
Particulars £ £
Dr. Cr.
Fixed assets (Acquired on 1st April, 2017) 24,000
Stock as on 1st April, 2020 11,200
Goods from head Office 64,000
Expenses 4,800
Debtors 4,800
Creditors 3,200
Cash at bank 1,200
Head Office Account 22,800
Purchases 12,000
Sales 96,000
1,22,000 1,22,000

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In head office books, the branch account stood as shown below:
London Branch A/c
Particulars Amount Particulars Amount
₹ ₹
To Balance b/d 20,10,000 By Bank A/c 52,16,000
To Goods sent to branch 49,26,000 By Balance c/d 17,20,000
69,36,000 69,36,000
The following further information is given:
a) Fixed assets are to be depreciated @ 10% p.a. on WDV.
b) On 31st March, 2021:

Expenses outstanding - £ 400

Prepaid expenses - £ 200
Closing stock - £ 8,000
c) Rate of Exchange:

1st April, 2017 - ₹ 70 to £ 1

1st April, 2020 - ₹ 76 to £ 1
31st March, 2021 - ₹ 77 to £ 1
Average - ₹ 75 to £ 1
You are required to prepare:
(1) Trial balance, incorporating adjustments of outstanding and prepaid expenses,
converting U.K. pound into Indian rupees; and
(2) Trading and profit and loss account for the year ended 31st March, 2021 of London
branch as would appear in the books of Delhi head office of DM.

Question 4.) (20 Marks)

Mr. Z has made following transactions during the financial year 2020-21:

Investment 1: 8% Corporate Bonds having face value ₹100.

Date Particulars
01-06-2020 Purchased 36,000 Bonds at ₹ 86 cum-interest. Interest is payable on 30th
September and 31st March every year
15-02-2021 Sold 24,000 Bonds at ₹ 92 ex-interest

Interest on the bonds is received on 30th September and 31st March.

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Investment 2: Equity Shares of G Ltd having face value ₹10
Date Particulars
01-04-2020 Opening balance 8,000 equity shares at a book value of ₹ 190 per share
01-05-2020 Purchased 7,000 equity shares@ ₹ 230 on cum right basis; Brokerage of
1% was paid in addition.
15-06-2020 The company announced a bonus issue of 2 shares for every 5 shares held
01-08-2020 The company made a rights issue of 1 share for every 7 shares held at
₹ 230 per share. The entire money was payable by 31.08.2020
25-08-2020 Rights to the extent of 30% of his entitlements was sold @ ₹75 per share.
The remaining rights were subscribed.
16-09-2020 Dividend @ ₹ 6 per share for the year ended 31.03.2020 was received on
16.09.2020. No dividend payable on Right issue and Bonus issue.
01-12-2020 Sold 7,000 shares @ 260 per share. Brokerage of 1% was incurred extra.
25-01-2021 Received interim dividend @ ₹ 3 per share for the year 2020-21.
31-03-2021 The shares were quoted in the stock exchange @ ₹ 260.

Both investments have been classified as Current investment in the books of Mr. Z. On
15th May 2021, Mr. Z decides to reclassify investment in equity shares of G. Ltd. as
Long term Investment. On 15th May 2021, the shares were quoted in the stock exchange
@ ₹180.
You are required to:
(i) Prepare Investment Accounts in the books of Mr. Z for the year 2020-21,
assuming that the average cost method is followed.
(ii) Profit and loss Account for the year 2020-21, based on the above information.
(iii) Suggest values at which investment in equity shares should be reclassified in
accordance with AS 13.

Question 5. A) (10 Marks)

M/s. Hero is a Departmental Store having three departments X, Y and Z. The information
regarding three departments for the year ended 31st March, 2021 are given below:
Particulars Dept. X Dept. Y Dept. Z
Opening Stock 18,000 12,000 10,000
Purchases 66,000 44,000 22,000
Debtors at end 7,500 5,000 5,000
Sales 90,000 67,500 45,000

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Closing Stock 22,500 8,750 10,500
Value of furniture in each Department 10,000 10,000 5,000
Floor space occupied by each Dept. (in Sq. ft.) 1,500 1,250 1,000
Number of employees in each Department 25 20 15
Electricity consumed by each Department (in units) 300 200 100
Additional Information:
Amount (₹)
Carriage inwards 1,500
Carriage outwards 2,700
Salaries 24,000
Advertisement 2,700
Discount allowed 2,250
Discount received 1,800
Rent, Rates and Taxes 7,500
Depreciation on furniture 1,000
Electricity Expenses 3,000
Labour welfare expenses 2,400
Prepare Departmental Trading and Profit & Loss Account for the year ended 31st March,
2021 after providing provision for Bad Debts at 5%.

Question 5. B) (10 Marks)

The Partners Kamal and Vimal decided to convert their existing partnership business into
a Private Limited Company called M/s. KV Trading Private Ltd. with effect from 1-7-
20X2.
The same books of account were continued by the company which closed its account for
first term on 31-3-20X3.
The summarised Profit and Loss Account for the year ended on 31-3-20X3 is below:
(₹) in lakhs (₹) in lakhs
Turnover 240.00
Interest on investments 6.00

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246.00
Less: Cost of goods sold 102.00
Advertisement 3.00
Sales Commission 6.00
Salary 18.00
Managing director’s remuneration 6.00
Interest on Debentures 2.00
Rent 5.50
Bad Debts 1.00
Underwriting Commission 2.00
Audit fees 2.00
Loss on sale of investment 1.00
Depreciation 4.00 152.50
93.50

The following additional information was provided:

(i) The average monthly sales doubled from 1-7-20X2. GP ratio was constant.
(ii) All Investments were sold on 31-5-20X2.
(iii) Average monthly salary doubled from 1-10-20X2.
(iv) The company occupied additional space from 1-7-20X2 for which rent of ₹ 20,000
per month was incurred.
(v) Bad debts recovered amounting to ₹50,000 for a sale made in 20X0, has been
deducted from bad debts mentioned above.
(vi) Audit fees pertains to the company.
Prepare a statement apportioning the expenses between pre and post-incorporation
periods and calculate the Profit/Loss for such periods.

Question 6: Answer any four of the following:

Question 6. A) (5 Marks)
(a) A company offers new right shares of ₹ 100 each at 20% premium to existing
shareholders on one for four shares. The cum-right market price of a share is ₹140.

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You are required to calculate (i) Ex-right value of a share; (ii) Value of a right.
(b) A company having 1,00,000 shares of ₹ 10 each as its issued share capital, and
having a market value of ₹ 45 issues rights shares in the ratio of 1:5 at an issue
price of ₹ 25. Pass journal entry for issue of right shares.

Question 6. B) (5 Marks)
XYZ Ltd. has issued 1,000, 12% convertible debentures of ₹ 100 each redeemable after a
period of five years. According to the terms & conditions of the issue, these debentures
were redeemable at a premium of 5%. The debenture holders also had the option at the
time of redemption to convert 20% of their holdings into equity shares of ₹ 10 each at a
price of ₹ 20 per share and balance in cash. Debenture holders amounting ₹ 20,000 opted
to get their debentures converted into equity shares as per terms of the issue. You are
required to calculate the number of shares issued and cash paid for redemption of
₹20,000 debenture holders.

Question 6. C) (5 Marks)
List the Criteria for classification of non-corporate entities as level I Entities for the
purpose of application of Accounting Standards as per the Institute of Chartered
Accountants of India.

Question 6. D) (5 Marks)
Following items appear in the Trail Balance of Star Ltd. as on 31st March, 2019:
Particulars ₹
80,000 Equity shares of ₹10 each, ₹ 8 paid-up 6,40,000
Capital Reserve (including ₹45,000 being profit on sale of 1,10,000
Machinery)
Revaluation Reserve 80,000
Capital Redemption Reserve 75,000
Securities Premium 60,000
General Reserve 2,10,000
Profit & Loss Account (Cr. Balance) 1,00,000

On 1st April,2019, the Company has made final call on Equity shares @₹ 2 per share.
The entire money was received in the month of April, 2019.

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On 1st June, 2019, the Company decided to issue to Equity shareholders bonus shares at
the rate of 2 shares for every 5 shares held and for this purpose, it was decided that there
should be minimum reduction in free reserves.
Pass necessary journal entries in the Books of Star Ltd.

Question 6. E) (5 Marks)
Following is the Balance Sheet of M/s. S Traders as on 31st March, 2019:
Liabilities (₹) Assets (₹)
Capital 1,50,000 Fixed Assets 1,05,000
11% Bank Loan 80,000 Closing stock 76,000
Trade payables 52,000 Debtors 68,000
Profit & Loss A/c 56,000 Deferred Expenditure 24,000
Cash & Bank 65,000
3,38,000 3,38,000
Additional Information:
(i) Remaining life of Fixed Assets is 6 years with even use. The net realizable value
of Fixed Assets as on 31st March, 2020 is ₹90,000.
(ii) Firm's Sales & Purchases for the year ending 31st March, 2020 amounted to
₹7,80,000 and ₹6,25,000 respectively.
(iii) The cost & net realizable value of the stock as on 31st March, 2020 was, ₹60,000
and ₹66,000 respectively.
(iv) General expenses (including interest on Loan) for the year 2019-20 were ₹ 53,800.
(v) Deferred expenditure is normally amortised equally over 5 years starting from the
Financial year 2018-19 i.e. ₹ 6,000 per year.
(vi) Debtors on 31st March, 2020 is ₹65,000 of which ₹5,000 is doubtful. Collection of
another ₹ 10,000 debtors depends on successful re-installation of certain products
supplied to the customer.
(vii) Closing Trade payable ₹ 48,000, which is likely to·be settled at 5% discount.
(viii) There is a prepayment penalty of ₹ 4,000 for Bank loan outstanding.
(ix) Cash & Bank balances as on 31st March, 2020 is ₹1,65,200.
Prepare Profit & Loss Account for the year ended 31st March, 2020 and Balance Sheet as
on 31st March, 2020 assuming the firm is not a going concern.

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NOV-2022
CA INTER NEW SYLLABUS
PORTIONWISE TEST ROUND – 3
ACCOUNTING
SUGGESTED ANSWERS

Question 1. A) (5 Marks)
Solution:-
Particulars Workings ₹
(a) Cost of the Machinery Given 15,00,000
(b) Depreciation p.a. ₹15,00,000 − ₹3,00,000 80,000
15 years
(c) Depreciation for 3 years ₹ 80,000 × 3 years 2,40,000
(d) Net Book Value of the Machinery as at year (a) – (c) 12,60,000
4 beginning
(e) Revised Net Book Value as at year 4 ₹ 12,60,000 + 20% 15,12,000
beginning
(f) Increase in Revaluation to be taken to (d) – (e) 2,52,000
Revaluation Reserve
(g) Revised Depreciation p.a. [Assuming ₹ 15,12,000 (−)Nil 2,16,000
balance Useful Life is 7 yrs] 7 years
(h) Depreciation from year 4 to year 8 ₹ 2,16,000 × 4 years 8,64,000
(i) Net Book Value of the Machinery as at year (e) – (h) 6,48,000
8 end
(j) Disposal value Given 2,00,000
(k) Loss on Disposal (i) – (j) 4,48,000
(l) Loss on Disposal debited to Revaluation 2,52,000
Reserve
(m) Loss on Disposal debited to P & L (k) – (l) 1,96,000

Note: Since it is given that the Depreciation later on was charged to P & L, it is assumed
that no Depreciation has been charged to Revaluation Reserve Account.

Question 1. B) (5 Marks)
Solution:-

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The related items given in the question will appear in the Cash Flow Statement of ABC
Limited for the year ended 31st March, 2021 as follows:
₹ ₹
Cash flows from operating activities
Closing Balance as per Profit and Loss Account 28,00,000
Less: Opening Balance as per Profit and Loss Account (20,00,000)
8,00,000
Less: Dividend received 50,000
7,50,000
Cash flows from investing activities
Dividend received 50,000
Cash flows from financing activities
Proceeds from issuance of share capital
Equity shares issued for cash ₹ 10,00,000
Proceeds from securities premium
(₹ 5,50,000 – 5,00,000) ₹ 50,000
10,50,000
Less: Redemption of Preference shares
(₹ 7,00,000 – ₹ 6,00,000) (1,00,000) 9,50,000

Note:
1. Machinery acquired by issue of shares does not amount to cash outflow, hence
also not considered in the cash flow statement.
2. ABC Ltd. has been considered as a non-financial company in the given answer.

Question 1. C) (5 Marks)
Solution:-
Particulars ₹
Price paid to Supplier = USD 1,65,100 × 40 units × ₹50 per USD 33,02,00,000
Add: Bank Charges: USD 4,000 × ₹50 2,00,000
Sea Freight: ₹ 7,500 per unit × 40 units 3,00,000
Total Purchase Cost 33,07,00,000
Less: Government Grant (5,00,00,000)
Net Cost after deduction of Government Grant 28,07,00,000
Less: Depreciation at 20% for 3 years: ₹28,07,00,000 × 20% × 3 years (16,84,20,000)
Written Down value of as at 1.4.2022 11,22,80,000
Add: Refund of Government Grant 5,00,00,000

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Revised Carrying Amount of the Asset 16,22,80,000
The WDV balance ₹16,22,00,000 should be depreciated for the balance period of 2 years,
i.e. ₹ 8,11,40,000 in each year.

Question 1. D) (5 Marks)
Solution:-

Particulars ₹
1. Interest expense on loan ₹ 2,00,00,000 at 15% 30,00,000
2 Total cost of Phases I and II (₹34,00,000 + 64,00,000) 98,00,000
3. Total cost of Phases III and IV (₹55,00,000 + ₹68,00,000) 1,23,00,000
4. Total cost of all 4 phases 2,21,00,000
5. Total loan 2,00,00,000
6. Interest on loan used for Phases I & II, based on proportionate 13,30,317
30,00,000
Loan amount =  98,00,000 (approx.)
2,21,00,000

Interest on loan used for Phases III & IV, based on

7. proportionate 16,69,683
30,00,000 (approx.)
Loan amount= 1,23,00,000
2,21,00,000

Accounting treatment:
1. For Phase I and Phase II
Since Phase I and Phase II have become operational at the mid of the year, half
of the interest amount of ₹6,65,158.50 (i.e. ₹13,30,317/2) relating to Phase I and
Phase II should be capitalized (in the ratio of asset costs 34:64) and added to
respective assets in Phase I and Phase II and remaining half of the interest
amount of ₹6,65,158.50 (i.e. ₹13,30,317/2) relating to Phase I and Phase II
should be expensed during the year.
2. For Phase III and Phase IV
Interest of ₹16,69,683 relating to Phase III and Phase IV should be held in
Capital Work-in-Progress till assets construction work is completed, and
thereafter capitalized in the ratio of cost of assets. No part of this interest amount
should be charged/expensed off during the year since the work on these phases
has not been completed yet.

Question 2. A) (10 Marks)

Solution:-

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1. Computation of Cash Price & Interest for Srikumar (Amount in ₹)
Period Closing Repayment/ Interest = Opening balance = Clg
Balance Instalment (𝐂𝐥𝐠 𝐁𝐚𝐥𝐚𝐧𝐜𝐞+𝐑𝐞𝐩𝐦𝐭)×𝟏𝟎 Balance + Repayment –
𝟏𝟏𝟎
Int.
3 Nil 5,50,000 50,000 5,00,000
2 5,00,000 4,90,000 90,000 9,00,000
1 9,00,000 4,20,000 1,20,000 12,00,000

Note: Total Cost of the Cars = ₹12,00,000 + ₹6,00,000 (Down Payment) = ₹18,00,000.
(i.e. ₹9,00,000 per Car)
2. Valuation of Cars & Loss on Takeover
Particulars Book Value for Taken over value for
Purchaser Vendor
Depreciation Rate 25% p.a. on Cash Price 40% p.a. on Cash Price
Value of 1 Car after 3 Years, i.e. 9,00,000 × (1 – 25%)3 = 9,00,000 × (1 – 40%)3 =
on 31.03.2021 3,79,688 1,94,400

Loss on Takeover = Book Value of Cars repossessed = ₹3,79,688 less Takeover Value
₹1,94,400 = Net ₹1,85,288
3. Car A/c (in the Books of Srikumar)
Date Particulars ₹ Date Particulars ₹
01.04.2018 To Fair Value 18,00,000 31.03.2019 By Depreciation 4,50,000
Motors A/c (18,00,000 × 25%)
31.03.2019 By Balance c/d 13,50,000
Total 18,00,000 Total 18,00,000
01.04.2019 To balance 13,50,000 31.03.2020 By depreciation 3,37,500
b/d (13,50,000 × 25%)
31.03.2020 By balance c/d 10,12,500
Total 10,12,500 Total 10,12,500
01.04.2020 To balance 10,12,500 31.03.2021 By Depreciation 2,53,125
b/d (10,12,500 × 25%)
31.03.2021 By Fair value Motors 1,94,400
A/c (takeover)
31.03.2021 By Loss on Takeover 1,85,288
31.03.2021 By balance c/d 3,79,687
Total 10,12,500 Total 10,12,500

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4. Fair Value Motors A/c
Date Particulars ₹ Date Particulars ₹
01.04.2018 To Bank A/c (Down 6,00,000 1.04.2018 By Car A/c 18,00,000
Pymt) 31.03.2019 By Interest (18,00,000 – 1,20,000
31.03.2019 To bank (Instalment) 4,20,000 6,00,000) × 10%
31.03.2019 To balance c/d
(bal.fig) 9,00,000
Total 19,20,000 Total 19,20,000
31.03.2020 To Bank 4,90,000 1.04.2019 By balance b/d 9,00,000
To balance c/d (bal. 5,00,000 31.03.2020 By Interest (9,00,000 × 10%) 90,000
fig.)
Total 9,90,000 Total 9,90,000
31.03.2021 To Car A/c (take 1,94,400 1.04.2020 By balance b/d 5,00,000
over) 31.03.2021 By Interest 5,00,000 × 10% 50,000
31.03.2021 To balance c/d (bal. 3,55,600
Fig)
Total 5,50,000 Total 5,50,000
30.06.2021 To Bank 3,73,380 1.04.2021 By balance b/d 3,55,600
30.06.2021 By Interest 3,55,600 × 20% × 17,780
3/12
Total 3,73,380 Total 3,73,380

Question 2. B) (10 Marks)

Solution:-
Memorandum Trading Account
for the period 1st April, 2019 to 30th September, 2019
Normal Abnormal Total Normal Abnormal Total
Items Items Items Items
₹ ₹ ₹ ₹ ₹ ₹
To Opening 2,48,000 12,000 2,60,000 By Sales 5,97,000 5,000 6,02,000
stock
To Purchases 3,39,900 - 3,39,900 By Goods
(W.N. 2) sent to 44,800 - 44,800
consignee

To Wages 78,000 - 78,000 By Loss - 4,000 4,000

(85,000 – 7,000)

To Gross 1,19,400 - 1,19,400 By Closing 1,43,500 3,000 1,46,500

profit @20% stock
(Bal. fig.)
7,85,300 12,000 7,97,300 7,85,300 12,000 7,97,300

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Statement of Claim for Loss of Stock

₹
Book value of stock as on 30.9.2019 1,46,500
Less: Stock salvaged (35,000)
Loss of stock 1,11,500
Amount of claim to be lodged with insurance company
Policy value
= Loss of stock x
Value of stock on the date of fire
= ₹ 1,11,500 x 1,20,000/1,46,500 = ₹91,331 (approx.)
Working Notes:
1. Rate of gross profit for the year ended 31st March, 2019

Trading Account for the year ended 31st March, 2019

₹ ₹
To Opening Stock 2,11,000 By Sales 8,60,000
To Purchases 6,55,000 By Closing stock 2,52,000
Add: written off 8,000
To Wages 82,000 2,60,000
To Gross Profit 1,72,000
(b.f.)
11,20,000 11,20,000

Rate of Gross Profit in 2018-19

Gross Profit
× 100

Sales
= 1,72,000 X 100 / 8,60,000 = 20%
2. Calculation of Adjusted Purchases
₹
Purchases (4,48,000 – 58,000) 3,90,000
Less: Drawings [52,000 – (20 % of 52,000)] (41,600)
Free samples (8,500)
Adjusted purchases 3,39,900

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Note: The answer has been given considering that the value of stock (at cost) on 31.3.19
amounting ₹2,52,000 is after adjustment of written off amount in respect of slow-moving
item.

Question 3. A) (12 Marks)

Solution:-
Trading and Profit and Loss Account of Archana Enterprises
for the year ended 31st March, 2021
₹ ₹
To Opening Stock 9,15,000 By Sales
To Purchases (W.N. 2) 125,97,000 Cash 110,70,000
To Gross profit c/d 13,93,000 Credit (W.N. 1) 28,60,000 139,30,000
(10% of 139,30,000) By Closing 9,75,000
stock
149,05,000 149,05,000
To Sundry expenses (W.N. 4) 9,18,750 By Gross profit 13,93,000
b/d
To Discount allowed 54,000 By Discount 42,500
received
To Depreciation 22,500
(15% ₹ 1,50,000)
To Net Profit (b.f.) 4,40,250
14,35,500 14,35,500
Balance Sheet of Archana Enterprises
as at 31st March, 2021

Liabilities Amount Assets Amount

₹ ₹
Capital Furniture & 1,50,000
Fittings
Opening balance 6,75,000 Less:
Depreciation (22,500) 1,27,500
Less: Drawing (3,60,000) Stock 9,75,000
3,15,000 Trade Debtors 3,43,000
Add: Net profit Unexpired insurance 3,000
for the years 4,40,250 7,55,250
Trade creditors 8,29,000 Cash in hand & at bank 1,90,950
(W.N. 3)

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Outstanding 55,200
expenses

16,39,450 16,39,450
Working Notes:
1. Trade Debtors Account
₹ ₹
To Balance b/d 3,12,000 By Cash/Bank 27,75,000
To Credit sales 28,60,000 By Discount allowed 54,000
(Bal. fig.) By Balance c/d 3,43,000
31,72,000 31,72,000
2. Memorandum Trading Account
₹ ₹
To Opening stock 9,15,000 By Sales 139,30,000
To Purchases (Balancing figure) 125,97,000 By Closing stock 9,75,000
To Gross Profit (10% on sales) 13,93,000
149,05,000 149,05,000
3. Trade Creditors Account
₹ ₹
To Cash/Bank 124,83,000 By Balance b/d 7,57,500
To Discount received 42,500 By Purchases (as calculated 125,97,000
To Balance c/d in W.N. 2)
(balancing figure) 8,29,000
133,54,500 133,54,500

4. Computation of sundry expenses to be charged to Profit & Loss A/c

₹
Sundry expenses paid (as per cash and Bank book) 9,31,050
Add: Prepaid expenses as on 31–3–2020 3,000
9,34,050
Less: Outstanding expenses as on 31–3–2020 (67,500)
8,66,550
Add: Outstanding expenses as on 31–3–2021 55,200
9,21,750

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Less: Prepaid expenses as on 31–3–2021 (Insurance paid till July,
2021) (9,000 x 4/12) (3,000)
9,18,750

Question 3. B) (8 Marks)
Solution:-
Trial Balance of London Branch
as on 31st March, 2021
Particulars U.K. Rate Per Dr. Cr.
Pound U.K. Pound (₹) (₹)
Fixed Assets 24,000 70 16,80,000
Stock (as on 1st April, 2020) 11,200 76 8,51,200
Goods from Head Office 64,000 - 49,26,000
Sales 96,000 75 72,00,000
Purchases 12,000 75 9,00,000
Expenses (4,800 + 400 – 200) 5,000 75 3,75,000
Debtors 4,800 77 3,69,600
Creditors 3,200 77 2,46,400
Outstanding Expenses 400 77 30,800
Prepaid expenses 200 77 15,400
Cash at Bank 1,200 77 92,400
Head office Account - 17,20,000
Difference in Exchange 12,400
. . 92,09,600 92,09,600
Closing stock will be (8,000 × 77) = ₹6,16,000
Trading and Profit & Loss A/c
for the year ended 31st March, 2021
Particulars Amount Particulars Amount
(₹) (₹)
To Opening Stock 8,51,200 By Sales 72,00,000
To Purchases 9,00,000 By Closing Stock 6,16,000
To Goods from H.O. 49,26,000
To Gross Profit 11,38,800
78,16,000 78,16,000
To Expenses 3,75,000 By Gross Profit 11,38,800

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To Depreciation 1,68,000 By Profit due to
Exchange difference 12,400
To Net Profit 6,08,200
11,51,200 11,51,200
Working Note:
Since London Branch is an integral foreign operation. Hence,
(1) Fixed assets (cost and depreciation) are translated using the exchange rate at the date
of purchase of the assets.
(2) Exchange difference arising on translation of the financial statement is charged to
Profit and Loss Account.

Question 4.) (20 Marks)

Solution:-
(i) In the books of Mr. Z
Investment in 8% Corporate Bonds Account

For the period 01 April 2020 to 31 March 2021

Date Particulars Nos Interest Amount Date Particulars Nos Interest Amount
(₹) (₹) (₹) (₹)
1/6/20 To Bank 36,000 48,000 30,48,000 30/9/20 By Bank A/c 1,44,000
A/c (WN1) (Interest
36,000 x 100 x
8% x 6/12)
15/2/21 To Profit & 1,76,000 15/2/21 By Bank A/c 24,000 72,000 22,08,000
Loss A/c (WN2)
(WN 3)
31/3/21 To Profit & 2,16,000 31/3/21 By Bank A/c 48,000
Loss A/c (Interest
12,000 x 100 x
8% x 6/12)
By Balance c/d 12,000 10,16,000
(WN 4)
Total 36,000 2,64,000 32,24,000 Total 36,000 2,64,000 32,24,000
Note: For computing the interest on the bonds sold on 15 Feb 2021, if number of days
(138 days) is taken instead of months, the interest received on 15.02.2021 should be
₹72,592 and the total interest transferred to Profit & Loss Account should be ₹ 2,16,592.

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Investment in Equity Shares of G Ltd
For the period 1st April 2020 to 31 March 2021
Date Particulars Nos Dividend Amount Date Particulars Nos Dividend Amount
(₹) (₹) (₹) (₹)
01/4/20 To Balance 8,000 15,20,000 16/9/20 By Bank A/c 48,000 42,000
b/d (WN 7)
01/5/20 To Bank A/c 7,000 16,26,100 1/12/20 By Bank A/c 7000 18,01,800
(WN 5) (WN 8)
15/6/20 To Bonus 6,000 25/1/21 By Bank A/c 48,300
Shares (WN 10)
25/8/20 To Bank A/c 2,100 4,83,000 31/3/21 By Balance 16,100 25,00,100
c/d
(Right (WN 11)
Shares)
(WN 6)
01/12/20 To Profit & 7,14,800
Loss A/c
(Sale of
shares)
(WN 9)
31/3/21 To Profit & 96,300
Loss A/c

Total 23,100 96,300 43,43,900 Total 23,100 96,300 43,43,900

Working Notes
1. Computation of the Interest element in the bonds purchased on 01 June 2020

No of Bonds purchased 36,000

Face value per bond ₹ 100
Face value of the bonds purchased ₹ 36,00,000
Interest Rate 8%
Interest Amount 36,00,000 x 8% x 2/12
₹ 48,000
Cum-interest per bond ₹ 86
Value of bond excluding interest 36,000 x ₹ 86 – ₹48,000
₹ 30,48,000

2. Computation of the Interest element in the bonds sold on 15 Feb 2021

No of Bonds sold 24,000

Face value per bond ₹ 100
Face value of the bonds sold ₹ 24,00,000

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Interest Rate 8%
Interest Amount ₹ 24,00,000 x 8% x 4.5/12
= ₹ 72,000

3. Computation of Profit on Sale of Bonds on 15 Feb 2021

No of Bonds sold 24,000

Face value per bond ₹ 100
Ex- interest Rate per bond ₹ 92
Sales proceeds ₹ 22,08,000
Average Cost of Bonds (30,48,000/36,000) x 24,000
₹ 20,32,000
Profit on sale of bonds Sale Proceeds – Average Cost
₹ 22,08,000 – ₹ 20,32,000
₹ 1,76,000
4. Valuation of Bonds as on 31 March 2021

No of Bonds held as on 31 Mar 2021 12,000

Average Cost of Bonds (₹ 30,48,000/36,000) x 12,000
₹ 10,16,000

5. Computation of the cost of the equity shares purchased on 01 May 2020

No of shares purchased 7,000

Cum right price per share ₹ 230
Cost of purchase ₹ 16,10,000
Brokerage @1% ₹ 16,100
Cost including brokerage ₹ 16,26,100
6. Right Shares

No of Right Shares Issued (8,000+7,000+6,000)/7 = 3,000 shares

No of right shares sold 3,000 shares x 30% = 900 shares
Proceeds from sale of right shares to be 900 shares x ₹ 75 = ₹ 67,500
credited to statement of profit & loss
No of right shares subscribed 3,000-900 = 2,100 shares
Amount of right shares subscribed 2,100 x 230 = ₹ 4,83,000
7. Computation of Dividend Received on 16 Sept 2020

No of shares held during the period of dividend 8,000 shares

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Dividend per share ₹6
Dividend Amount 8,000 x 6 = ₹ 48,000
No of shares received after the period of 7,000 shares
dividend (excluding bonus & right shares)
Dividend per share ₹6
Dividend Amount 7,000 x ₹ 6 = ₹ 42,000
The amount of dividend for the period for which the shares were not held by
the investor has been treated as capital receipt. Thus ₹ 42,000 shall be
treated as capital receipt
8. Sale Proceeds for the shares sold on 1st Dec. 2020

No of shares sold 7,000 Shares

Sale price per share ₹ 260
Proceeds from sale of share 7,000 x 260 = ₹ 18,20,000
Less: Brokerage @ 1% ₹ 18,200
Net Sale Proceeds ₹ 18,01,800
9. Profit on sale of shares on 1st Dec. 2020

Sales Proceeds ₹ 18,01,800

Average Cost (15,20,000+16,26,100+4,83,000-
42,000)/23,100x7,000
= ₹ 10,87,000
Profit on sale of Sales Proceeds – Average Cost
shares
= ₹ 18,01,800 - ₹ 10,87,000
= ₹ 7,14,800
10. Computation of Amount of Interim Dividend

No of shares held 8,000+7,000+6,000+2,100-7,000

= 16,100
Dividend per share ₹ 3 per share
Dividend Received 16,100 shares x ₹ 3 per share
= ₹ 48,300
11. Valuation of Shares as on 31 March 2021

Cost of Shares (15,20,000 + 16,26,100 + 4,83,000 – 42,000) / 23,100

x 16,100

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= 25,00,100
Market Value of Shares ₹ 260 x 16,100 = ₹ 41,86,000
Closing stock of equity shares has been value at ₹ 25,00,100 i.e. cost being lower
than its market value.
(ii) Profit & Loss Account (Extract)
For the period 01 April 2020 to 31 March 2021
Particulars Amount Particulars Amount
(₹) (₹)
To Balance 12,70,600 By Investment in 8% Corporate Bonds 1,76,000
c/d Account (Profit on sale of bonds)

By Investment in 8% Corporate Bonds 2,16,000

Account (Interest on bonds)
By Sale of Right Shares 67,500
By Investment in Equity Shares of G Ltd 7,14,800
(Profit on sale of shares)
By Investment in Equity Shares of G Ltd 96,300
(Dividend Income)
(iii) As per AS 13, when investments are classified from Current Investments to Long
term Investments, transfer is made at Cost and Fair value, whichever is less (as on
the date of transfer). So, in the given case valuation shall be done as follows:
Date of reclassification/transfer – 15 May 2021
Per Unit Cost of 16,100 shares held – ₹ 25,00,100/16,100 shares – ₹ 155.29
Market Price/Fair Value per share – ₹ 180

As the cost per unit is lower than its fair value, the shares are to be transferred at
its cost i.e., at ₹ 155.29 per share on 15 May 2021
Note:
1. The entire amount of sale proceeds from rights has been credited to Profit
and Loss account in the above solution. However, the sale proceeds of
rights in respect of 7,000 shares (purchased cum right on 1.5.20) can be
applied to reduce the carrying amount of such investments (without
crediting it to profit and loss account) considering that the value of these
shares has reduced after becoming their ex-right. In that case, ₹ 22,500
(67,500X 7/21) will be applied to reduce the carrying amount of investment
and ₹ 45,000 will be credited to profit and loss account.

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Question 5. A) (10 Marks)

Solution:-

1. In the Books of M/s Hero

Departmental Trading and Profit and Loss Account

for the year ended 31st March, 2021

Particulars Deptt. X Deptt. Deptt. Total Particulars Deptt. Deptt. Deptt. Total
Y Z X Y Z
₹ ₹ ₹ ₹ ₹ ₹ ₹ ₹
To Stock 18,000 12,000 10,000 40,000 By Sales 90,000 67,500 45,000 2,02,500
(opening)
To Purchases 66,000 44,000 22,000 1,32,000 By Stock 22,500 8,750 10,500 41,750
(closing)
To Carriage 750 500 250 1,500
Inwards
To Gross Profit 27,750 19,750 23,250 70,750
c/d (b.f.)
1,12,500 76,250 55,500 2,44,250 1,12,500 76,250 55,500 2,44,250
To Carriage 1,200 900 600 2,700 By Gross 27,750 19,750 23,250 70,750
Outwards Profit b/d
To Electricity 1,500 1,000 500 3,000 By Discount 900 600 300 1,800
received
To Salaries 10,000 8,000 6,000 24,000
To Advertisement 1,200 900 600 2,700
To Discount 1,000 750 500 2,250
allowed
To Rent, Rates 3,000 2,500 2,000 7,500
and Taxes
To Depreciation 400 400 200 1,000
To Provision for 375 250 250 875
Bad Debts @ 5%
of debtors
To Labour 1,000 800 600 2,400
welfare expenses
To Net Profit (b.f.) 8,975 4,850 12,300 26,125
28,650 20,350 23,550 72,550 28,650 20,350 23,550 72,550
Working Note:

Basis of allocation of expenses

Carriage inwards Purchases (3:2:1)
Carriage outwards Turnover (4:3:2)

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Salaries No. of Employees (5:4:3)
Advertisement Turnover (4:3:2)
Discount allowed Turnover (4:3:2)
Discount received Purchases (3:2:1)
Rent, Rates and Taxes Floor Space occupied (6:5:4)
Depreciation on furniture Value of furniture (2:2:1)
Labour welfare expenses No. of Employees (5:4:3)
Electricity expense Units consumed (3:2:1)
Provision for bad debts Debtors balances (3:2:2)

Question 5. B) (10 Marks)

Solution:-
Working Note I:
Computation of Sales ratio:
Let the average sales per month be x
Total sales from 01.04.20X2 to 30.06.20X2 will be 3x
Average sales per month from 01.07.20X2 to 31.03.20X3 will be 2x
Total Sales from 01.07.20X2 to31.03.20X3 will be 2x × 9 = 18x
Thus,
Sales ratio will be 3x: 18x i.e. 3:18 or 1:6

Working Note II:

Computation of Time ratio:
Pre-incorporation period = 1.4.2014 to 30.6.2014 = 3 months
Post-incorporation period = 1.7.2014 to 31.3.2015 = 9 months
Thus,
Time ratio = 3:9 i.e. 1:3
Statement showing computation of profit/loss
for pre and post incorporation periods:
(₹ in lakhs)
Particulars Basis of Total Pre- Post
Apportionment Incorporation Incorporation
(Ratio) Period Period
Sales 1:6 240.00 34.29 205.71
Interest on Investments Pre 6.00 6.00 -
Bad debts recovered Pre 0.50 0.50 -
246.50 40.79 205.71
Cost of Goods sold 1:6 102.00 14.57 87.43

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Advertisement 1:6 3.00 0.43 2.57
Sales commission 1:6 6.00 0.86 5.14
Salary (Note 1) 1:5 18.00 3.00 15.00
Managing director’s Post 6.00 - 6.00
remuneration
Interest on Debentures Post 2.00 - 2.00
Rent (Note 2) 5.50 0.93 4.57
Bad debts (1+0.5) 1:6 1.50 0.21 1.29
Underwriting commission Post 2.00 - 2.00
Audit fees Post 2.00 - 2.00
Loss on sale of Investment Pre 1.00 1.00 -
Depreciation 1:3 4.00 1.00 3.00
153.00 22.00 131.00
Net Profit 93.50
Transferred to Capital
Reserve 18.79
Transferred to P & L 74.71
Notes:
1. Apportionment of Salary:
Let the salary per month from 01.04.20X2 to 30.09.20X2 is x
Salary per month from 01.10.20X2 to 31.03.20X3 will be 2x
Thus,
Pre-incorporation salary (01.04.20X2 to 30.06.20X2) = 3x
Post-incorporation salary from (01.07.20X2 to 31.03.20X3) = (3x + 12x) i.e. 15x
Ratio for salary = 3x: 15x or 1:5
2. Apportionment of Rent
₹ Lakhs
Total Rent 5.5
Less: additional rent from 1.7.20X2 to 31.3.20X3 1.8
Rent of old premises for 12 months 3.7
Apportionment in time ratio 0.925 2.775
Add : Rent for new space . -- 1.80
Total 0.925 4.575

Question 6. A) (5 Marks)
Solution:-
(a) (i) Ex-right value of the shares = (Cum-right value of the existing shares + Rights
shares X Issue Price) / (Existing Number of shares + No. of right shares)
= (₹ 140 X 4 Shares + ₹ 120 X 1 Share) / (1 + 4) Shares

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= ₹ 680 / 5 shares = ₹ 136 per share.
(ii) Value of right = Cum-right value of the share – Ex-right value of the share
= ₹ 140 – ₹ 136 = ₹ 4 per share.
(b) The entry at the time of subscription of right shares by the existing shareholders
will be:
Bank A/c Dr. 5,00,000
To Equity Share Capital A/c 2,00,000
To Securities Premium A/c 3,00,000
(Being issue of 20,000 right shares @ ₹ 25 offered)

Question 6. B) (5 Marks)
Solution:-

Number of debentures
Debenture holders opted for conversion (20,000 /100) 200
Option for conversion 20%
Number of debentures to be converted (20% of 200) 40
Redemption value of 40 debentures at a premium of 5%
[40 x (100+5)] ₹ 4,200
Equity shares of ₹ 10 each issued on conversion
[₹ 4,200/ ₹ 20] 210 shares

Calculation of cash to be paid: ₹

Number of debentures 200
Less: number of debentures to be converted into equity shares (40)
160
Redemption value of 160 debentures (160 × ₹ 105) i.e. ₹ 16,800.

Question 6. C) (5 Marks)
Solution:-

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Criteria for classification of non-corporate entities as level 1 entities for purpose of
application of Accounting Standards decided by the Institute of Chartered Accountants of
India is given below:
Non-corporate entities which fall in any one or more of the following categories, at the
end of the relevant accounting period, are classified as Level I entities:
(i) Entities whose equity or debt securities are listed or are in the process of listing on
any stock exchange, whether in India or outside India.
(ii) Banks (including co-operative banks), financial institutions or entities carrying on
insurance business.
(iii) All commercial, industrial and business reporting entities, whose turnover
(excluding other income) exceeds rupees fifty crore in the immediately preceding
accounting year.
(iv) All commercial, industrial and business reporting entities having borrowings
(including public deposits) in excess of rupees ten crore at any time during the
immediately preceding accounting year.
(v) Holding and subsidiary entities of any one of the above.

Question 6. D) (5 Marks)
Solution:-
Journal Entries in the books of Star Ltd.
2019 Dr. Cr.
₹ ₹
April 1 Equity Share Final Call A/c Dr. 1,60,000
To Equity Share Capital A/c 1,60,000
(Final call of ₹ 2 per share on 80,000 equity shares
made due)
Bank A/c Dr. 1,60,000
To Equity Share Final Call A/c 1,60,000
(Final call money on 80,000 equity shares received)

June 1 Capital Redemption Reserve A/c Dr. 75,000

Capital Reserve Dr. 45,000*
Securities Premium A/c Dr. 60,000
General Reserve A/c (b.f.) Dr. 1,40,000**
To Bonus to Shareholders A/c 3,20,000

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(Bonus issue of two shares for every five shares
held, by utilizing various reserves as per Board’s
resolution dated…….)
Bonus to Shareholders A/c Dr. 3,20,000
To Equity Share Capital A/c 3,20,000
(Capitalization of profit)
* Considering it as free reserve as it has been realized.
** General reserve has been used here. Alternatively, different combination of profit
and loss balance and general reserve may also be used.

Question 6. E) (5 Marks)
Solution:-
Profit and Loss Account of M/s S Traders for the year ended 31st March, 2020
(business is not a going concern)
₹ ₹
To Opening Stock 76,000 By Sales 7,80,000
To Purchases 6,25,000 By Trade payables 2,400
To General expenses 53,800 By Closing Stock 66,000
To Depreciation (1,05,000 less 90,000) 15,000

To Provision for doubtful debts 15,000

To Deferred expenditure 24,000
To Loan penalty 4,000
To Net Profit (b.f.) 35,600
8,48,400 8,48,400
Balance Sheet M/s S Traders as on 31st March, 2020
Liabilities and ₹ Assets ₹
Capital
Capital 1,50,000 Fixed assets 90,000
Profit & Loss A/c Debtors
opening balance 56,000 (65,000 less provision for 50,000
doubtful debts ₹15,000)
Profit earned 35,600 91,600 Closing stock 66,000
during the year
11% Loan 84,000 Cash & Bank balance 1,65,200

VST3 P.T.O
 (21)
VST3
Trade payables 45,600
3,71,200 3,71,200

VST3 P.T.O