Adv AccM24 RRC
Adv AccM24 RRC
, ACMA
Accounting standards
AS 1
Question 1
ABC Ltd. was making provision for non-moving inventories based on no issues for the last 12
months up to 31.03.2019
The company wants to provide during the year ending 31.3.2020 based on technical evaluation:
Total value of inventory 100 lakhs
Provision required based on 12 months issue 3.5 lakhs
Provision required based on technical evaluation 2.5 lakhs
Does this amount to change in Accounting Policy? Can the company change the method of
provision?
Ans:
The decision of making provision for non-moving inventories on the basis of technical evaluation
does not amount to change in accounting policy. Accounting policy of a company may require that
provision for non-moving inventories should be made. The method of estimating the amount of
provision may be changed in case a more prudent estimate can be made. In the given case,
considering the total value of inventory, the change in the amount of required provision of non-
moving inventory from 3.5 lakhs to 2.5 lakhs is also not material.
The disclosure can be made for such change in the following lines by way of notes to the accounts
in the annual accounts of ABC Ltd. for the year 2019-20.
“The company has provided for non-moving inventories on the basis of technical evaluation unlike
preceding years. Had the same method been followed as in the previous year, the profit for the
year and the corresponding effect on the year end net assets would have been lower by 1 lakh”.
Ans
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CA. K. SHANMUGANATHAN FCA., ACMA
4. False: Any change in the accounting policies which has a material effect in the current period
or which is reasonably expected to have a material effect in later periods should be
disclosed. Where such amount is not ascertainable, wholly or in part, the fact should be
indicated.
AS 17 Segment reporting
Question 1
Calculate the segment results of a manufacturing organization from the following information:
Segments A B C Total
Directly attributed revenue 5,00,000 3,00,000 1,00,000 9,00,000
Enterprise revenue (allocated in 5:4:2 1,10,000
ratio)
Revenue from transactions with other
segments
Transactions from Segment B 1,00,000 50,000 1,50,000
Transactions from Segment C 10,000 50,000 60,000
Transactions from Segment A 25,000 1,00,000 1,25,000
Other income
Revenue from extra-ordinary items
Dividend income 5,000 10,000 15,000 30,000
Interest earned on Advances & loans 20,000 15,000 10,000 45,000
Gain on sale of Investments 30,000 40,000 50,000 1,20,000
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CA. K. SHANMUGANATHAN FCA., ACMA
Answer
As per paragraph 13 of AS 18 Related Party Disclosures, Enterprises over which a key management
personnel is able to exercise significant influence are related parties.
This includes enterprises owned by directors or major shareholders of the reporting enterprise that
have a member of key management in common with the reporting enterprise.
In the given case, Narmada Ltd. and Ganga Ltd are related parties and hence disclosure of
transaction between them is required irrespective of whether the transaction was done at normal
selling price.
Hence the contention of Chief Accountant of Narmada Ltd is wrong.
2. From the following information relating to X Ltd., calculate Diluted Earnings Per Share as per
AS 20:
3.“While calculating diluted earnings per share, effect is given to all dilutive potential equity shares
that were outstanding during that period.” Explain. Also calculate the diluted earnings per share
from the following information:
Net profit for the current year 85,50,000
Weighted average No. of equity shares outstanding 20,00,000
No. of 8% convertible debentures of 100 each 1,00,000
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CA. K. SHANMUGANATHAN FCA., ACMA
AS 25
1.Narayan Ltd. provides you the following information and asks you to calculate the tax expense for
each quarter with reference to Ind AS 34, assuming that there is no difference between the
estimated taxable income and the estimated accounting income:
Estimated Gross Annual Income 33,00,000 (inclusive of Estimated Capital Gains of 8,00,000)
Estimated Income of Quarter I is 7,00,000,
Quarter II is 8,00,000,
Quarter III (including Estimated Capital Gains of 8,00,000) is 12,00,000 and
Quarter IV is 6,00,000.
Tax Rates: On Capital Gains 12%
On Other Income: First 5,00,000 @ 30%
Balance Income· 40%
2 To comply with listing requirements and other statutory obligations Quaker Ltd. prepares interim
financial reports at the end of each quarter. The company has brought forward losses of 700 lakhs
under Income Tax Law, of which 90% is eligible for set off as per the recent verdict of the Court,
that has attained finality. No Deferred Tax Asset has been recognized on such losses in view of the
uncertainty over its eligibility for set off. The company has reported quarterly earnings of 700 lakhs
and 300 lakhs respectively for the first two quarters of Financial year 2023-24 and anticipates a
net earning of 800 lakhs in the coming half year ended March 2024 of which 100 lakhs will be
the loss in the quarter ended Dec. 2023. The tax rate for the company is 30% with a 10% surcharge.
3. Company A has reported 60,000 as pre tax profit in first quarter and expects a loss of 15,000
each in the subsequent quarters. It has a corporate tax slab of 20 percent on the first 20,000 of
annual earnings and 40 per cent on all additional earnings. Calculate the amount of tax to be shown
in each quarter.
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CA. K. SHANMUGANATHAN FCA., ACMA
The Profit & Loss Account of B Ltd. showed a credit balance of 30,000 on 1st January, 2020 out
of which a dividend of 10% was paid on 1st August, 2020; A Ltd. credited the dividend received to
its Profit & Loss Account. The balance of General reserves on 1 January 2020 was ₹ 1,00,000.
The Plant & Machinery which stood at 1,50,000 on 1st January, 2020 was considered as worth
1,80,000 on 1st July, 2020; this figure is to be considered while consolidating the Balance Sheets.
The rate of depreciation on plant & machinery is 10% (computed on the basis of useful lives).
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CA. K. SHANMUGANATHAN FCA., ACMA
3. A Ltd. acquire 45% of B Ltd. shares on April 01, 2021, the price paid was ₹15,00,000. Following
are the extracts of balance sheet of B Ltd. as of 1 April 2021:
Paid up Equity Share Capital ₹10,00,000
Securities Premium ₹1,00,000
Reserve & Surplus ₹5,00,000
B Ltd. has reported net profits of ₹3,00,000 and paid dividends of ₹1,00,000 for the year ended 31
March 2022. Calculate the amount at which the investment in B Ltd. should be shown in the
consolidated balance sheet of A Ltd. as on March 31, 2022.
4.A Ltd. acquired 25% of shares in B Ltd. as on 31.3.2021 for ₹3 lakhs. The Balance Sheet of B
Ltd. as on 31.3.2021 is given below: ₹
Share capital 5,00,000
Reserves & Surplus 5,00,000
Total 10,00,000
Property, Plant and equipment 5,00,000
Investments 2,00,000
Current Assets 3,00,000
Total 10,00,000
During the year ended 31.3.2022 the following are the additional information available:
(i)A Ltd. received dividend from B Ltd., for the year ended 31.3.2021 at 40% from the Reserves.
(ii)B Ltd., made a profit after tax of ₹7 lakhs for the year ended 31.3.2022.
(iii)B Ltd., declared a dividend @ 50% for the year ended 31.3.2022 on30.4.2022. A Ltd. is
preparing Consolidated Financial Statements in accordance with AS 21 for its various
subsidiaries.
(ii)How A Ltd., will reflect the value of investment in B Ltd., in the Consolidated Financial
Statements?
(iii)How the dividend received for 31.3.2022 on 30.4.2022 from B Ltd. will be shown in the
Consolidated Financial Statements?
5.A Ltd. entered into a joint venture with B Ltd. on 1:1 basis and a new company C Ltd. was
formed for the same purpose and following is the balance sheet of all the three companies:
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CA. K. SHANMUGANATHAN FCA., ACMA
AS 11
Question 1
Udyog Ltd. borrowed US$ 5,00,000 on 01/01/2019, which will be repaid as on 31/07/2019. Udyog
Ltd. prepares financial statement ending on 31/03/2019. Rate of exchange between reporting
currency (INR) and foreign currency (USD) on different dates are as under:
Date Exchange rate
01-01-2019 $1=69.72
31-03-2019 $1=70.72
31-07-2019 $1=71.22
Question 2
Rahul Ltd. purchased a plant for US$ 2,00,000 on 1st January 2017, payable after 5 months.
Company entered into a forward contract for five months @ 64.75 per dollar. Exchange rate per
dollar on 1st Jan. 2017 was 64.25. How will you recognize the profit or loss on forward contract
in the books of Rahul Ltd.?
Question 3
PPE Ltd. purchased fixed assets costing 6,000 lakh on 01.04.2016 payable in foreign currency
(US$) on 05.04.2017. Exchange rate of 1 US$ = 60.00 and 64.98 as on 01-04-2016 and 31-03-
2017 respectively.
The company also obtained a soft loan of US$ 1 lakh on 01-04-2016 payable in three annual equal
instalments. First instalment was due on 01-05-2017. You are required to state, how these
transactions would be accounted for in the books of accounts ending 31st March, 2017 as per the
relevant Accounting Standards.
Note: Assume that the company has availed the option under para 46A of AS 11.
AS 12 Government grant
Question 1
Alps Limited has received the following Grants from the Government during the year ended 31st
March, 2021:
(i) ₹120 Lacs received as subsidy from the Central Government for setting up an Industrial
undertaking in Medak, a notified backward area.
(ii) ₹15 Lacs Grant received from the Central Government on installation of Effluent Treatment
Plant.
(iii) ₹25 Lacs received from State Government for providing Medical facilities to its workmen
during the pandemic.
Advise Alps Limited on the treatment of the above Grants in its books of Account in accordance
with AS-12 "Government Grants".
Question 1)
State under which head the following accounts should be classified in Balance Sheet, as per
Schedule III of the Companies Act, 2013:
(i) Share application money received in
excess of issued share capital.
(ii) Share option outstanding account.
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CA. K. SHANMUGANATHAN FCA., ACMA
Question 2)
From the following particulars furnished by the Prashant Ltd., prepare the Balance Sheet as at
31st March, 2019 as required by Schedule III of the Companies Act, 2013 :
Particulars Debit Credit
(₹) (₹)
Equity share capital (face value of Rs. 10 each) 15,00,000
Calls-in-arears 5,000
Land 5,50,000
Building 4,85,000
Plant & Machinery 5,60,000
General reserve 2,70,000
Loan from State Financial Corporation 2,10,000
Inventories 3,15,000
Provision for taxation 72,000
Trade receivables 2,95,000
Short-term loans & advances 58,500
Profit & loss account 1,06,800
Cash in hand 37,300
Cash at bank 2,85,000
Unsecured loans 1,65,000
Trade payables 2,67,000
Total 25,90,800 25,90,800
The following additional information is also provided :
1) 10,000 equity shares were issued for consideration other than cash.
2) Trade receivables of Rs.55,000 are due for more than six months.
3) The cost of building and plant & machinery is Rs.5,50,000 and Rs.6,25,000 respectively.
4) The loan from State Financial Corporation is secured by hypothecation of plant &
machinery. The balance of Rs.2,10,000 in this account is inclusive of Rs.10,000 for
interest accrued but not due.
5) Balance at Bank included Rs.15,000 with Aakash Bank Ltd., which is not a scheduled
bank.
Question 3
Due to inadequacy of profits during the year ended 31st March, 2021, AS Ltd. proposes to declare
10% dividend out of general reserves. From the following particulars, ascertain the amount that can
be utilized from general reserves, according to the Companies (Declaration of dividend out of
Reserves) Rules, 2014:
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CA. K. SHANMUGANATHAN FCA., ACMA
Question 4)
Calculate the maximum remuneration payable to managing director based on effective capital of
the non-investment company for the year, from the information given below:
Particulars ₹in 000’s
Profit for the year calculated as per the companies Act,
2013 3,000
Paid up capital 18,000
Reserves & surplus 7,200
Securities premium 1,200
Long term loans 6,000
Investment 3,600
Preliminary expenses not written off 3,000
Remuneration paid to the managing director 600
Note: The effective capital should be calculated based on financial statement at the end of the
preceding financial year. (in which the appointment is made)
Additional information:
(1) Depreciation written off on land and building 20,000.
(2) The company sold some investment at a profit of 10,000, which was credited to Capital
Reserve.
(3) Income-tax provided during the year 55,000.
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CA. K. SHANMUGANATHAN FCA., ACMA
(4) During the year, the company purchased a machinery for 2,25,000. They paid 1,25,000 in
cash and issued 10,000 equity shares of 10 each at par.
You are required to prepare a cash flow statement for the year ended 31st March 2021 as per AS
3 by using indirect method.
Liabilities
Share capital:
Authorised capital 30,00
Issued and subscribed capital:
2,50,000 Equity shares of 10 each fully paid up 25,00
2,000, 10% Preference shares of 100 each
(Issued two months back for the purpose of buy back) 2,00 27,00
Reserves and surplus:
Capital reserve 10,00
Revenue reserve 30,00
Securities premium 22,00
Profit and loss account 35,00 97,00
Current liabilities and provisions 14,00
Total 1,38,00
Assets
Fixed assets 93,00
Investments 30,00
Current assets, loans and advances (including cash and
bank balance) 15,00
The company passed a resolution to buy back 20% of its equity capital @ 50 per share.
For this purpose, it sold all of its investment for 22,00,000.
You are required to pass necessary journal entries and prepare the Balance Sheet.
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CA. K. SHANMUGANATHAN FCA., ACMA
Assets
Goodwill 15
Land and Building 184
Plant and Machinery 286
Furniture and Fixtures 41
Stock 142
Debtors 80
Cash at Bank 27
Discount on Issue of Debentures 8
Profits and Loss Account 390
TOTAL 1173
The following scheme of internal reconstruction was framed, approved by the Court, all the
concerned parties and implemented:
(i) All the equity shares be converted into the same number of fully-paid equity shares of
2.50 each
(ii) Directors agree to forego their outstanding remuneration.
(iii) The debenture holders also agree to forego outstanding interest in return of their 12%
debentures being converted into 13% debentures.
(iv) The existing shareholders agree to subscribe for cash, fully paid equity shares of 2.50
each for 125 lacs
(v) Trade creditors are given the option of either to accept fully paid equity shares of 2.50
each for the amount due to them or to accept 80% of the amount due in cash. Creditors for
65 lacs accept equity shares whereas those for 100 lacs accept 80 lacs in cash in
full settlement.
(vi) The Assets are revalued as under;
In lacs
Land and Building 230
Plant and Machinery 220
Stock 120
Debtors 76
Pass journal entries for all the above mentioned transactions and draft the company’s balance sheet
immediately after the reconstruction.
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CA. K. SHANMUGANATHAN FCA., ACMA
Prepare Branch A/c in the books of the head office and determine the Profit and Loss of the Branch for the
year ended 31st December, 2020.
2. M/s SW Enterprises who carried on a retail business opened a branch in Jaipur on 1 st January 2021
where all the sales were on credit basis. All goods required by the branch were supplied from the head
office and were invoiced to the branch at 10% above cost.
JAN 2021 FEB 2021 MAR 2021
The stock of goods held by the branch on 31 st March 2021 amounted to 1,60,200 at invoice to
branch. Record these transactions in the books of head office, showing balance as on 31 st March
2021 and the branch gross profit for the three months ended on that date.
All workings should form part of your solution.
3. Positive Ltd. having head office at Mumbai has a branch at Chennai. The Head Office does
wholesale trade only at cost plus 80%. The goods are sent to branch at the wholesale price viz., Cost
plus 80%. The branch at Nagpur is wholly engaged in retail trade and the goods are sold at cost to H.O.
plus 100%.
Following details are furnished for the year ended 31st March, 2021:
Head Office Branch
You are required to prepare Trading and Profit and Loss Account of the Head Office and Branch for
the year ended 31st March, 2021.
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CA. K. SHANMUGANATHAN FCA., ACMA
4. Bismi Enterprises Delhi has a branch in London. London branch is an integral foreign operation
of Bismi Enterprises. At the end of the year 31st March, 2020 the branch furnishes the following
trial balance in U.K. Pound:
Particulars £ £
Dr. Cr.
Fixed assets (Acquired on 1st April, 2016) 24,000
Stock as on 1st April, 2019 11,200
Goods from head office 64,000
Expenses 4,800
Debtors 4,800
Creditors 9,200
Cash at bank 1,200
Head office account 22,800
Purchases 18,000
Sales 96,000
Total 1,28,000 1,28,000
(ii) Trading and profit and loss account for the year ended 31st March, 2020 and the Balance Sheet
as on that date of London branch as would appear in the books of Delhi head office of Bismi
Enterprises.
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CA. K. SHANMUGANATHAN FCA., ACMA
2. The Accounting Standards applicable for preparation of consolidated financial statements are
(a) AS 1, AS 7 and AS 9
(b) AS 1, AS 21 and AS 29
(c) AS21, AS 23 and AS 27.
(d) MCA
4. Accounting Standards
(a) Harmonise accounting policies and eliminate the non-comparability of financial statements.
(b) Improve the reliability of financial statements.
(c) Both (a) and (b).
(d) manipulate the data for the management.
6. Which committee is responsible for approval of accounting standards and their modification for
the purpose of applicability to companies?
(a) NFRA.
(b) MCA.
(c) Central Government Advisory Committee.
(d) IASB
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CA. K. SHANMUGANATHAN FCA., ACMA
11. Additional guidance given in Ind AS over and above the IFRS is termed as
a) carve outs
b) carve in
c) International Accounts Standards (IAS)
d) International Financial Reporting Standards( IFRS)
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CA. K. SHANMUGANATHAN FCA., ACMA
Applicability of AS
1. Non-corporate entities which are not Level I entities whose turnover (excluding other income)
exceeds rupees ___________ but does not exceed rupees two-fifty crores in the immediately
preceding accounting year are classified as Level II entities.
(a) five crores.
(b) two crores.
(c) fifty crores.
(d) ten crores.
2. The following Accounting Standard is not applicable to Non-corporate Entities falling in Level II
in its entirety
(a) AS 10.
(b) AS 17.
(c) AS 2.
(d) AS 13.
3. All non-corporate entities engaged in commercial, industrial and business reporting entities,
whose turnover (excluding other income) exceeds rupees 250 crores in the immediately
preceding accounting year, are classified as
(a) Level II entities.
(b) Level I entities.
(c) Level III entities.
(d) Level IV entities.
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CA. K. SHANMUGANATHAN FCA., ACMA
(b) whose turnover (excluding other income) does not exceed rupees two-fifty crores in the
immediately preceding accounting year;
(c) whose turnover (excluding other income) does not exceed rupees fifty crores in the
immediately preceding accounting year;
(d) whose turnover (excluding other income) does not exceed rupees five hundred crores in the
immediately preceding accounting year.
3) The major considerations governing the selection and application of accounting policies are
a) Prudence.
b) Substance over form.
c) Materiality.
d) All of the three.
Description: Refer AS 1
4. Which of the following is NOT a major consideration in selection and application of accounting
policies?
(a) Prudence
(b) Comparability
(c) Materiality
(d) Substance over form
5. Adoption of different accounting policies by different companies operating in the same industry
affects which of the qualitative characteristics the most?
(a) Comparability
(b) Relevance
(c) Faithful representation
(d) Reliability
6. Which of the following statement would not be correct in relation to disclosures to be made in the
financial statements after making any change in an accounting policy?
(a) Any change in an accounting policy which has a material effect should be disclosed.
(b) The amount by which any item in the financial statements is affected by such change should be
disclosed to the extent ascertainable. Where such amount is not ascertainable, wholly or in part,
the fact should be indicated.
(c) If a change is made in the accounting policies which has no material effect on the financial
statements for the current period but which is reasonably expected to have a material effect in later
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CA. K. SHANMUGANATHAN FCA., ACMA
periods, the fact of such change should be appropriately disclosed in the period in which the change
is adopted.
(d) If a change is made in an accounting policy which has material effect on the financial
statements for the current period and is reasonably expected to have a material effect in later
periods, the fact of such change should be appropriately disclosed only in the later periods i.e.
year(s) next to the year in which the change is adopted
AS 1
Questions
Answer:
1) Specific accounting principles, methods adopted in applying these principles
2) their substance (financial reality) and not merely
3) preparation, presentation
4) relative significance
5) Prudence, substance over form and materiality
6) current accounting period, or in later periods
2. As per AS 3 on Cash Flow Statements, cash received by a manufacturing company from sale
of shares ofABC Company Ltd. should be classified as
a) Operating activity.
b) Financing activity.
c) Investing activity.
d) None of the above.
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CA. K. SHANMUGANATHAN FCA., ACMA
3. XYZ Co. Ltd is a financial institution and has given loans and advances to its subsidiary and
earned interest of Rs. 5 lacs on that loan. Interest earned by XYZ Co. Ltd is shown as
a)Operating Cash Flow.
b)Investing Cash Flow.
c)Financing Cash Flow
d)cash and cash equivalent
Description: Refer AS 3
4.In the cash flow statement of a financial enterprise, interest paid and dividends received should
be
a)classified as operating cash flows
b)classified as financing cash flows
c)Not shown in cash flow statement
d)classified as investing cash flows
Description: Refer AS 3
5.XYZ Co. Ltd is a financial institution and has given loans and advances to its subsidiary and
earned interest of Rs. 5 lacs on that loan. Interest earned by XYZ Co. Ltd is shown as
a) Operating Cash Flow.
b) Investing Cash Flow.
c) Financing Cash Flow
d) cash and cash equivalent
7. Which of the following would be considered a ‘cash-flow item from an “investing" activity’?
(a) Cash outflow to the government for payment of taxes.
(b) Cash outflow to purchase bonds issued by another company.
(c) Cash outflow to shareholders as dividends
(d) Cash outflow to make payment to trade payables.
10. As per AS 3 on Cash Flow Statements, cash received by a manufacturing company from sale
of shares of ABC Company Ltd. should be classified as
(a) Operating activity.
(b) Financing activity.
(c) Investing activity.
(d) Non-cash transaction
11. Crown Ltd. wants to prepare its cash flow statement. It sold equipment of book value of
Rs.60,000 at a gain of Rs.8,000. The amount to be reported in its cash flow statement under
operating activities is
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CA. K. SHANMUGANATHAN FCA., ACMA
(a) Nil
(b)Rs.8,000
(c)Rs.68,000
(d)Rs.60,000
12. While preparing cash flows statement, an entity (other than a financial institution) should
disclose the dividends received from its investment in shares as
(a) operating cash inflow
(b) investing cash inflow
(c) financing cash inflow
(d) cash & cash equivalent
13. XYZ Co. is a financial enterprise. In its cash flow statement, interest paid and dividends received
should be
(a) classified as operating cash flows.
(b) classified as financing cash flows.
(c) Not shown in cash flow statement.
(d) classified as investing cash flows.
14. In the cash flow statement, ‘cash and cash equivalents’ do not include
(a) Bank balances
(b) Short-term investments readily convertible into Cash are subject to an insignificant risk of
changes in value.
(c) Cash balances.
(d) Loan from bank.
15. While preparing a Cash Flow Statement using the Indirect method as required under AS 3,
which of the following will not be deducted from/added to the Net Profit to arrive at the “Cash flow
from Operating activities”?
(a) Interest income
(b) Gain on sale of a fixed asset.
(c) Depreciation.
(d) Gain on sale of inventory
Questions
1) The term cash comprises of---------------and ----------------for the purpose of preparation of cash
flow statement under AS - 3.
2) The activities that result in change in the size and composition of capital and borrowings are
disclosed under -------------.
3) The receipts of income from investment are also shown under the head -------------
4) Only the cash flow from -------------can be presented either under direct method or under
indirect method.
Answer:
Answers
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CA. K. SHANMUGANATHAN FCA., ACMA
2) financing activities
3) investing activities
4) operating activities
AS 17 Segment reporting
1. Following is not included in Segment Expense.
a) Income tax expense
b) The expense resulting from the operating activities of a segment that is directly attributable to
the segment
c) The relevant portion of enterprise expense that can be allocated on a reasonable basis to the
segment
d) Expense relating to transactions with other segments of the enterprise
Description: Para 5.6 of AS 17
3. As per AS 17, reportable segments are those whose total revenue from external sales and inter-
segment sales is
(a) 10% or more of the total revenue of all segments
(b) 10% or more of the total revenue of all external segments
(c) 12% or more of the total revenue of all segments
(d) 12% or more of the total revenue of all external segments
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CA. K. SHANMUGANATHAN FCA., ACMA
(d) It is management choice whether they want to include both external and internal revenue for
computing threshold limit.
8) Identify the reportable segment by profitability test from the following particulars of MP ltd:
Segment V W X Y Z
Profit / (loss) (200) 250 150 (350) (50)
(A) W, X, Y and Z P‐
(B) V, W, X and Z
(C) V, W, X and Y
(D) V, W, X, Y and Z
2.A Ltd. sold goods for Rs. 90 lakhs to B Ltd. during financial year ended 31-3-2023. The
Managing Directors of A Ltd. exercise 100% control in B Ltd. The sales were made to B Ltd. at
normal selling prices followed by A Ltd. What should be treatment for this transaction in the
financial statements of A Ltd.?
a) Sales need not require a different treatment from the other sales made by the company.
c) A Ltd. and B Ltd. are related parties and hence disclosure of transaction between them is
required irrespective of whether the transaction was done at normal selling price.
d) A Ltd. and B Ltd. are related parties but no disclosure is necessary as per the accounting
standard because sales are made at normal selling prices.
Description: Refer AS 18
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CA. K. SHANMUGANATHAN FCA., ACMA
b) Transaction of one Central government controlled enterprise with other State government
controlled enterprise.
c) Transaction of one Central government controlled enterprise with other Central government
controlled enterprise.
d) Name of the related party where control exists even if there is no transaction in the financial
year.
Description: Para 21 of AS 18
5) X Ltd holds 69% of Y Ltd, Y Ltd holds 51% of W Ltd, Z Ltd holds 49% of W Ltd As per AS 18
related parties are:
(A) X Ltd, Y Ltd & W Ltd
(B) X Ltd & Z Ltd
(C) Y Ltd & Z Ltd
(D) X Ltd & Y Ltd
As per AS 18 holding of 20% or more is necessary to become a related party. Hence related
parties are X Ltd Y Ltd and W Ltd
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CA. K. SHANMUGANATHAN FCA., ACMA
4.Which of the following statements is correct? 1. Options are generally dilutive in nature. 2.
Options are generally more dilutive as compared to other potential equity shares.
a) Both (1) and (2) are correct.
b) Both (1) and (2) are incorrect.
c) Only (1) is correct.
d) Only (2) is correct.
Description: Refer AS 20
Your Answer: Reported Diluted EPS is always less than reported Basic EPS.
Description: Refer AS 20
6) ABC Ltd has equity capital of ₹40,00,000 consisting of fully paid equity shares of ₹10 each. The
net profit for the year 2017-18 was ₹60,00,000. It has also issued 36,000, 10% convertible
debentures of ₹50 each. Each debenture is convertible into five equity shares. The tax rate
applicable is 30%. The diluted earnings of 2017-18 are
(A) ₹61,80,000
(B) ₹61,26,000
(C) ₹60,00,000
(D) ₹62,34,000
7) What is the weighted avg. number of equity shares for the following situation prescribed under
AS-20:
Accounting year: 2016-17
01/04/2016 Balance 3600 equity shares
15/09/2016 Issued for Cash 1800 equity shares
01/02/2017 Buyback 120 equity shares
(A) 4630
(B) 4600
(C) 5280
(D) None of the above
Hint: (3600 x 12/12) + (1800 x 7/12) - (120 x 2/12) i.e. 4630 shares
AS 24 Discontinuing operation
1. AB decided to dispose of its Clothing division as part of its long-term strategy.
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2. To qualify as a component that can be distinguished operationally and for financial reporting
purposes, the condition(s) to be met is (are):
(a) The operating assets and liabilities of the component can be directly attributed to it.
(b) Its revenue can be directly attributed to it.
(c) At least a majority of its operating expenses can be directly attributed to it.
(d) All of the above
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CA. K. SHANMUGANATHAN FCA., ACMA
3.XYZ limited is incorporated on 01.10.2022 in India. Its first financial statement is prepared on
31.03.2023 for 6 months. AS 25 is applicable for XYZ Limited if financial statements are published
:
a) From 01.10.2022 to 31.03.2023
b) From 01.10.2022 to 31.12.2024
c) From 01.10.2022 to 31.12.2022
d) AS 25 is not applicable during 1st year of operations.
Description: Para 5 of AS 25
4. Income tax expense should be accrued using the best estimate of the weighted average annual
income tax rate expected for the __________
a) Interim period
b) Year to date period
c) Full financial year
d) Current period and comparative period
5. The standard defines Interim Financial Report as a financial report for an interim period that
contains a set of __________ financial statements.
a) Complete
b) Condensed
c) Financial statement similar to annual
d) Complete or condensed
6. An entity prepares quarterly interim financial reports in accordance with Ind AS 34. The entity is
engaged in sale of mobile phones and normally 5% of customers claim on their warranty. The
provision in the first quarter was calculated as 5% of sales to date, which was ₹10 million.
However, in the second quarter, a fault was found and warranty claims were expected to be 10%
for the whole of the year. Sales in the second quarter were ₹15 million. What would be the provision
charged in the second quarter's interim financial statements?
(a) ₹1 million
(b) ₹2 million
(c) ₹1.25 million
(d) ₹1.5 million
8. Which of the following is not the minimum components of an interim financial report?
a) condensed balance sheet
b) condensed statement of changes in equity
c) condensed statement of cash flows
d) Annual complete financial information in respect of the preceding period
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C) Dividend declared.
D) Provisions for employee benefits
3. Fixed assets held for sale will be classified in the company’s balance sheet as
A) Current asset
B) Non-current asset
C) Capital work- in- progress
D) Deferred tax assets
5. As per the Schedule III, separate disclosure is required in the financial statements for an item of
income or expenditure which exceeds
A) 5 % of Revenue from operations or Rs. 1,00,000 whichever is lower
B) 1% of Revenue or Rs. 5,000
C) 1% of Revenue from operations or Rs. 1,00,000 whichever is higher.
D) 1% of Revenue from operations or Rs. 50,000 whichever is higher.
6. Which item will form part of Share capital as per Schedule III to the Companies Act, 2013?
A) Share options outstanding account
B) Forfeited Shares
C) Share application money pending allotment
D) Capital work-in-progress.
8. Which of the following would be considered acash-flow item from an investing" activity?
A) Cash outflow to the government for payment of taxes.
B) Cash outflow to purchase bonds issued by another company.
C) Cash outflow to shareholders as dividends
D) Cash outflow to make payment to trade payables.
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CA. K. SHANMUGANATHAN FCA., ACMA
(ii) In case an associate has made a provision for proposed dividend (i.e. dividend declared after
the reporting period but it pertains to that reporting year) in its financial statements, the investor's
share of the results of operations of the associate should be computed after taking into
consideration the proposed dividend.
(iii) The potential equity shares of the investee held by the investor should not be taken into account
for determining the voting power of the investor.
(iv) The potential equity shares of the investee held by the investor should be taken into account for
determining the voting power of the investor.
A) Statement (i) and (iii).
B) Statement (ii) and (iv).
C) Statement (i) only.
D) Statement (iii) only.
10. A Ltd. acquired 10% stake of B Ltd. on April 01and further 15% on October 01 during the same
year. Other information is as follow: Cost of Investment for 10% ₹1,00,000 and for 15% ₹ 1,45,000
Net asset on April 01 ₹8,50,000 and on October 01 ₹ 10,00,000. What is the amount of goodwill or
capital reserve arising on significant influence?
A) Goodwill = ₹ 10,000.
B) Goodwill = ₹ 20,000.
C) Capital Reserve = ₹ 10,000.
D) Capital Reserve = ₹ 20,000.
11. If the subsidiary company follows weighted average method for valuation of inventories and the
holding company follows FIFO method, then while consolidating,
A) Financial statements of subsidiary company should be restated by adjusting the value of
inventories to bring the same in line with the valuation procedure adopted by the holding company.
B) Financial statements of holding company should be restated by adjusting the value of inventories
to bring the same in line with the valuation procedure adopted by the subsidiary company.
C) Financial statements of both companies may continue as per the basis followed by them.
D) No changes are required to be done for consolidation purposes.
12. A Ltd. is holding 90% share in B Ltd. and 10%shares in C Ltd., and B Ltd. is holding 11% shares
in C Ltd. Identity which of the statements are incorrect.
(i) In this case,A Ltd. is parent of B Ltd.
(ii) As far as the relationship between A Ltd. and C Ltd. is concerned; A Ltd. has a total of direct and
indirect holding of (10% + 90% of 11%) 19.9 % in C Ltd. (iii) C Ltd. is an associate of A Ltd.
A) Statement (ii) is incorrect.
B) Statement (iii) is incorrect.
C) Statement (ii) and (iii) both are incorrect.
D) All statements are incorrect.
13. Identify which of the following is not a feature of a Jointly controlled operations (JCO):
A) Each venturer has his own separate business.
B) There is a separate entity for joint venture business.
C) Each venturer record only his own transactions without any separately set of books maintained
for the joint venture business.
D) There is a common agreement between all of them.
14. A Ltd. acquired 10% stake of B Ltd. on April 01and further 15% on October 01 of the same year.
Other information is as follows: Cost of Investment for 10% ₹1,00,000 and for 15% ₹1,55,000. Net
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CA. K. SHANMUGANATHAN FCA., ACMA
asset on April 01 ₹8,50,000 and on October 01 ₹10,00,000. What is the amount of goodwill or
capital reserve arising on significant influence?
A) Goodwill = ₹10,000.
B) Goodwill = ₹20,000
C) Capital Reserve = ₹10,000.
D) Capital Reserve = ₹20,000.
2. Securities Premium Account is shown on the liabilities side in the Balance Sheet under the
heading:
(a) Reserves and Surplus.
(b) Current Liabilities.
(c) Share Capital.
(d) Share application money pending allotment
3. “Fixed assets held for sale” will be classified in the company’s balance sheet as
(a) Current asset
(b) Non-current asset
(c) Capital work- in- progress
(d) Deferred tax assets
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CA. K. SHANMUGANATHAN FCA., ACMA
3. When a company purchases its own shares out of free reserves; a sum equal to nominal value
of shares so purchased shall be transferred to
(a) Revenue redemption reserve.
(b) Capital redemption reserve.
(c) Buy-back reserve
(d) Special reserve
5. Premium (excess of buy-back price over the par value) paid on buy-back should be adjusted
against
(a) Free reserves.
(b) Securities premium.
(c) Both (a) and (b).
(d) Neither (a) nor (b).
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CA. K. SHANMUGANATHAN FCA., ACMA
1. When the object of reconstruction is usually tore-organise capital or to compound with creditors
or to effect economies then such type of reconstruction is called
A) Internal reconstruction with liquidation
B)Internal reconstruction without liquidation of the company
C)External reconstruction
D)None of the above.
3. A process of reconstruction, which is carried out without liquidating the company and forming a
new one is called
A) Internal reconstruction.
B)External reconstruction.
C)Amalgamation in the nature of merger.
D)Amalgamation in the nature of purchase.
4. The accumulated losses under scheme of internal reconstruction are written off against
A) Capital Reduction account
B)Share Capital account
C)Shareholders account
D)General Reserves.
6. For reduction of the share capital, the permission has to be sought from
A) Court.
B)Controller.
C)State government.
D)Shareholders.
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CA. K. SHANMUGANATHAN FCA., ACMA
B) Wholesale price.
C)Both (a) and (b).
D) Either (a) or (b).
3. If goods are invoiced to branches at cost, trading results of branch can be ascertained by
A) Debtors method.
B) Stock and debtors method.
C)Either (a) or (b).
D) Both (a) and (b).
6. The goods are sent by HO to Branch at Invoice price by including a profit margin of 33 1/3% on
cost. Compute the stock reserve if the Branch stock at the end of the year is ₹1,40,000.
A) 46,667
B) 93,333.
C) 35,000
D) 28,000.
7. The goods are sent by HO to Branch at Invoice price by including a profit margin of 33 1/3% on
Invoice price. Compute the stock reserve if the Branch stock at the end of the year is ₹1,50,000.
A) 37,500
B) 1,12,500.
C) 50,000
D) 30,000.
**********Best wishes**********
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