CA FOUNDATION

ACCOUNTING
Test Paper -6
Time: 3 Hrs Marks: 100
Note : Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.
Question. 1
(a) State with reasons, whether the following statements are True or False:
(i) In case of admission of a new partner in a partnership firm, the profit/loss on revaluation
account is transferred to all partners in their new profit sharing ratio.
(ii) In the balance sheet of X Limited, preliminary expenses amounting to Rs. 5 lakhs and
securities premium account of Rs. 35 lakhs are appearing; The accountant can use the
balance in securities premium account to write off preliminary expenses.
(iii) Insurance claim received on account of plant and machinery completely damaged by fire is
a capital receipt.
(iv) Purchase of office furniture & fixtures of Rs. 2,500 has been debited to General Expense
Account. It is an error of omission.
(v) Discount at the time of retirement of a bill is a gain for the drawee.
(vi) A concern proposes to discontinue its business from December 2020 and decides to dispose
off all its plants within a period of 3 months. The Balance Sheet as on 31st December, 2020
should continue to indicate the plants at its historical costs as the assets will be disposed off
after the Balance Sheet date. (6 x 2 = 12 Marks)
(b) What services can a Chartered Accountant provide to the society ? (4 Marks)
(c) The following are some of the transactions of M/s. Kamal & Sons for the year ended 31st March,
2020. You are required to make out their Sales Book.
(i) Sold to M/s. Ashok & Mukesh on Credit :
40 Shirts @ Rs. 900 per shirt
30 trousers @ Rs. 1,000 per trouser
Less: Trade discount @ 10%
(ii) Sold furniture to M/s. XYZ & Co. on credit Rs. 8,000
(iii) Sold 15 shirts to Aman @ Rs. 750 each for cash.
(4 Marks)
Question. 2
(a) On 31-3-2020, Mahesh's Cash Book Showed a Bank overdraft of Rs. 98,700. On comparison he
finds the following :
(i) Out of the total cheques of Rs. 8,900 issued on 27th March, one cheque of Rs. 7,400 was
presented for payment on 4th April and the other cheque of Rs. 1,500 handed over to the
customer, was returned by him and in lieu of that a new cheque of the same amount was
issued to him on 1st April. No entry for the return was made.
(ii) Out of total cash and cheques of Rs. 6,800 deposited in the Bank on 24th March, one cheque
of Rs. 2,600 was cleared on 3rd April and the other cheque of Rs. 500 was returned
dishonoured by the bank on 4th April.
(iii) Bank charges Rs. 35 and Bank interest Rs. 2,860 charged by the bank appearing in the
passbook are not yet recorded in the cash book.
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 (iv) A cheque deposited in his another account of Rs. 1,550 wrongly credited to this account by
the bank.
(v) A cheque of Rs. 800, drawn on this account, was wrongly debited in another account by the
bank.
(vi) A debit of Rs. 3,500 appearing in the bank statement for an unpaid cheque returned for
being 'out of date' had been re-dated and deposited in the bank account again on 5th April
2020.
(vii) The bank allowed interest on deposit Rs. 1,000.
(viii) A customer who received a cash discount of 4% on his account of Rs. 1,00,000 paid a cheque
on 20th March, 2020. The cashier erroneously entered the gross amount in the bank column
of the Cash Book.
Prepare Bank Reconciliation Statement as on 31-3-2020. (10 Marks)

(b) Physical verification of stock in a business was done on 23rd February, 2020. The value of the stock
was Rs. 28,00,000. The following transactions took place from 23rd February to 29th February, 2020 :
(1) Out of the goods sent on consignment, goods at cost worth Rs. 2,30,000 were unsold.
(2) Purchases of Rs. 3,00,000 were made out of which goods worth Rs. 1,20,000 were delivered on
5th March, 2020.
(3) Sales were Rs. 13,60,000 which include goods worth Rs. 3,20,000 sent on approval. Half of these
goods were returned before 29th February, 2020, but no information is available regarding the
remaining goods.
(4) Goods are sold at cost plus 25%. However goods costing Rs. 2,40,000 had been sold for Rs.
1,50,000.
Determine the value of stock on 29th February, 2020. (10 Marks)

Question. 3
(a) Calculate the bad debts from the below information :
Opening balance of Debtors Rs. 5,00,000
Closing balance of Debtors Rs. 7,00,000
Amount received in cash Rs, 6,00,000
Discount allowed Rs. 10,000
Credit Sales Rs. 11,40,000
Bills Receivable Rs. 3,00,000
Bad Debts ???
(5 Marks)

(b) A ltd. Company having share capital of 25,000 equity shares of Rs. 10 each decides to issue rights share
at the ratio of 1 for every 4 shares held at par value. Assuming all the share holders accepted the right
issue and all money was duly received , pass journal entries in the books of the company.
(5 Marks)

(c) Suresh draws a bill for Rs.15,000 on Anup on 15th April, 2020 for 3 months, which is returned by
Anup to Suresh after accepting the same. Suresh gets it discounted with the bank for Rs. 14,700
on 18th April, 2020 and remits one-third amount to Anup. On the due date Suresh fails to remit
the amount due to Anup, but he accepts bill of Rs. 17,500 for 3 months, which Anup discounts for
Rs. 17,100 and remits Rs. 2,825 to Suresh. Before the maturity of the renewed bill Suresh
becomes insolvent and only 50% was realized from his estate on 31st October,2020.
Pass necessary Journal entries for the above transactions in the books of Suresh.
(10 Marks)

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Question. 4
(a) M/s. TB 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, 2020 was as under:
Balance Sheet of M/s. TB as on 30-6-2020
Liabilities Amount Assets Amount
(Rs.) (Rs.)

A's Capital A/c 1,24,000 Land 1,20,000

B's Capital A/c 96,000 Building 2,20,000
C's Capital A/c 1,60,000 Plant & Machinery 4,00,000
Long Term Loan 4,20,000 Investments 42,000
Bank Overdraft 64,000 Inventories 1,36,000
Trade Payables 2,13,000 Trade Receivables 1,59,000
10,77,000 10,77,000

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, 2020. For this purpose, following adjustments are to be made:
(a) Goodwill of the firm is to be valued at Rs. 3 lakhs due to the firm's location advantage but
the same will not appear as an asset in the books of the reconstituted firm.
(b) Building and Plant & Machinery are to be valued at 95% and 80% of the respective balance
sheet values. Investments are to be taken over by the retiring partner at Rs. 46,000. Trade
receivables are considered good only upto 85% of the balance sheet figure. Balance to be
considered bad.
(c) In the reconstituted firm, the total capital will be 4 lakhs, which will be contributed by A, C
and D in their new profit sharing ratio, which is 3:4:3.
(d) The amount due to retiring partner shall be transferred to his loan account.
You are required to prepare Revaluation Account and Partners' Capital Accounts after
reconstitution, along with working notes. (10 Marks)
(b) From the following balances and particulars of AS College, prepare Income & Expenditure Account
for the year ended March, 2020 and a Balance Sheet as on the date :
Particulars Amount Amount
(Rs.) (Rs.)

Security Deposit - Students - 1,55,000

Capital Fund - 13,08,000
Building Fund 19,10,000
Tuition Fee Received 8,10,000
Government Grants 5,01,000
Interest & Dividends on Investments - 1,75,000
Hostel Room Rent - 1,65,000
Mess Receipts (Net) 2,05,000
College Stores - Sales - 7,60,000
Outstanding expenses - 2,35,000
Stock of Stores and Supplies (opening) 3,10,000 -
Purchases - Stores & Supplies 8,20,000 -
Salaries - Teaching 8,75,000 -
Salaries - Research 1,25,000 -

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 Scholarships 85,000 -
Students Welfare expenses 37,000 -
Games & Sports expenses 52,000 -
Other investments 12,75,000 -
Land 1,50,000 -
Building 15,50,000 -
Plant and Machinery 8,50,000 -
Furniture and Fittings 5,40,000 -
Motor Vehicle 2,40,000 -
Provision for Depreciation : -
Building - 4,90,000
Plant & Equipment - 5,05,000
Furniture & Fittings - 3,26,000
Cash at Bank 3,16,000 -
Library 3,20,000
75,45,000 75,45,000
Adjustments :
(a) Materials & Supplies consumed (From college stores): Teaching Rs. 52,000.
Research - Rs. 1,45,000
Students Welfare - Rs. 78,000
Games or Sports - Rs. 24,000
(b) Tuition fee receivable from Government for backward class Scholars Rs. 82,000.
(c) Stores selling prices are fixed to give a net profit of 15% on selling price:
(d) Depreciation is provided on straight line basis at the following rates
Building 5%
Plant & Equipment 10%
Furniture & Fixtures 10%
Motor Vehicle 20% (10 Marks)

Question. 5
(a) M/s. Applied Laboratories were unable to agree the Trial Balance as on 31st March, 2020 and have
raised a suspense account for the difference. Next year the following errors were discovered:
(i) Repairs made during the year were wrongly debited to the building A/c - Rs. 12,500.
(ii) The addition of the 'Freight' column in the purchase journal was short by Rs. 1,500.
(iii) Goods to the value of Rs. 1,050 returned by a customer, Rani & Co., had been posted to the debit
of Rani & Co. and also to sales returns.
(iv) Sundry items of furniture sold for Rs. 30,000 had been entered in the sales book, the total of
which had been posted to sales account.
(v) A bill of exchange (received from Raja & Co.) for Rs. 20,000 had been returned by the bank as.
dishonoured and had been credited to the bank and debited to bills receivable account.
You are required to pass journal entries to rectify the above mistakes. (5 Marks)

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(b) Max & Co. employs a team of 9 workers who were paid Rs. 40,000 per month each in the year
ending 31st December, 2018. At the start of 2019, the company raised salaries by 10% to Rs.
44,000 per month each.
On 1 July, 2019 the company hired 2 trainees at salary of Rs. 21,000 per month each. The work
force are paid salary on the first working day of every month, one month in arrears, so that the
employees receive their salary for January on the first working day of February, etc.
You are required to calculate :
(i) Amount of salaries which would be charged to the profit and loss account for the year ended
31st December, 2019.
(ii) Amount actually paid as salaries during 2019.
(iii) Outstanding salaries as on 31st December, 2019. (5 Marks)

(c) Following are the Manufacturing A/c, Creditors A/c and Raw Material A/c provided by M/s. Shivam
related to financial year 2019-20. There are certain figures missing in these accounts.
Raw Material A/c
Particulars Amount Particulars Amount
(Rs.) (Rs.)
To Opening Stock A/c 1,27,000 By Raw Materials Consumed
To Creditors A/c - By Closing Stock -
Creditors A/c
Particulars Amount Particulars Amount
(Rs.) (Rs.)
To Bank A/c 23,50,000 By Balance b/d 15,70,000
To Balance c/d 6,60,000 -
Manufacturing A/c
Particulars Amount Particulars Amount
(Rs.) (Rs.)
To Raw Material A/c - By Trading A/c 17,44,000
To Wages 3,65,000
To Depreciation 2,15,000
to Direct Expenses 2,49,000
Additional Information:
(i) Purchase of machinery worth Rs. 12,00,000 on 1st April; 2019 has been omitted, Machinery is
chargeable at a depreciation rate of 15%.
(ii) Wages include the following:
Paid to factory workers - Rs. 3,15,000
Paid to labour at office - Rs. 50,000
(iii) Direct expenses included the following :
Electricity charges - Rs. 80,000 of which 25% pertained to office
Fuel charges - Rs. 25,000
Freight inwards - Rs. 32,000
Delivery charges to customers - Rs. 22,000
You are required to prepare revised Manufacturing A/c and Raw Material A/c. (10 Marks)

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Question. 6
(a) ABC Limited issued 20,000 equity shares of Rs. 10 each payable as:
Rs. 2 per share on application
Rs. 3 per share on allotment
Rs. 4 per share on first call
Rs. 1 per share on final call
All the shares were subscribed. Money due on all shares was fully received except for Mr. Bird, holding
300 shares, who failed to pay first call and final call money. All these 300 shares were forfeited. The
forfeited shares of Mr. Bird were subsequently re-issued to Mr. John.as fully paid up at a discount of Rs.
2 per share.
Pass the necessary Journal Entries to record the above transactions in the books of ABC Limited.
(10 Marks)
(b) Y Company Limited issue 10,000 12% Debentures of the nominal value of Rs. 60,00,000 as follows :
(i) To a vendor for purchase of fixed assets worth Rs. 13,00,000 - Rs. 15,00,000 nominal value.
(ii) To sundry persons for cash at 90% of nominal value of Rs. 30,00,000.
(iii) To the banker as collateral security for a loan of Rs. 14,00,000 - Rs. 15,00,000 nominal value,
You are required to pass necessary Journal Entries. (5 Marks)
(c) Discuss the factors taken into consideration for calculation of depreciation. (5 Marks)