Master Test – 03 Sampurna Dec-2023 (CA Foundation) Maximum Marks 100
Total Number of Questions: 15 Time allowed: 3 Hr.
Instructions to Candidates
Working Notes should form part of the respective answers
(a) State with reasons, whether the following statements are True or False:
1. Company is an artificial, legal person created by law.
(2 Marks)
2. When closing inventory is overstated, net income for the accounting period will be understated.
(2 Marks)
3. The bad debts in case of del credere commission shall be debited to the Consignment account.
(2 Marks)
4. If a company incurs loss, then it does not pay interest to the debenture holders.
(2 Marks)
5. Rent paid to the landlord of the proprietors’ house, must be debited to the ‘Rent account’
(2 Marks)
6. While preparing the bank reconciliation statement starting with debit balance as per pass book or bank statement,
the deposited cheques that are not yet cleared need not be adjusted.
(2 Marks)
(b) Subjective
7. Explain Cash and Mercantile system of accounting.
(4 Marks)
8. What are the basic considerations in distinguishing between capital and revenue expenditures?
(4 Marks)
9. From the following information, ascertain the value of stock as on 31.3.2020:
₹
Value of stock on 1.4.2019 7,00,000
Purchases during the period from 1.4.2019 to 31.3.2020 34,60,000
Manufacturing expenses during the above period 7,00,000
Sales during the same period 52,20,000
At the time of valuing stock on 31.3.2019 a sum of ₹60,000 was written off a particular item which was
originally purchased for ₹2,00,000 and was sold for ₹1,60,000. But for the above transaction the gross profit
earned during the year was 25% on cost.
(5 Marks)
10. Show the classification of the following Accounts under traditional and accounting equation approach:
a Rent outstanding g Capital
b Closing inventory h Sales tax payable
c Sales i Trade receivables
d Bank fixed Deposit j Depreciation
e Cash
f Bad Debts
(5 Marks)
11. An inexperienced bookkeeper has drawn up a Trial Balance for the year ended 30 June, 2020:
Particulars DR.(Rs.) Cr. (Rs.)
Provision for Doubtful Debts 200
Bank Overdraft 1,654
Capital 4,591
Trade Paybles 1,637
Trade Receivable 2,983
Discount Received 252
Discount Allowed 733
Drawings 1,200
Office Furniture 2,155
General Expenses 829
Purchases 10,923
Return Inward 330
Rent & Rates 314
Salaries 2,520
Sales 16,882
Inventory 2,418
Provision for Depreciation on Furniture 364
Total 24,983 25,002
Required: Draw up a corrected Trial Balance, debiting or crediting any residual errors to a suspense account.
(5 Marks)
12. You are required to pass necessary journal entries in the books of Vikas :
(i) Cheque amounting ₹ 9,000 from Rohan in full settlement of his account for ₹ 10,000 .
(ii) Withdrawn for personal use: Goods (Sales Price ₹ 8,000, Cost ₹ 6,000 ), cash ₹ 1,000
(iii) Goods costing ₹ 3,000 (Sale price ₹ 4,000 ) distributed as free samples.
(iv) Received commission ₹ 10,000, half of which does not relate to the current year and is received in advance.
(v) Purchased second hand machinery from Keerti for ₹ 30,000 against a cheque. Goods of ₹ 12,000 (Cost ₹
9,000) used in repairs of this machinery which is necessary to make it ready for working.
(5 Marks)
13. Himalaya Ltd. forfeited 600 shares of ₹ 10 each issued at a premium of 10 % to Jeetu for nonpayment of first and
final call money of ₹ 3 (including ₹ 1 premium). At different intervals of time out of these 400 shares were re-
issued to Lalit , credited as fully paid for ₹ 9 per share and 100 shares were re-issued to Meenakshi as ₹ 10 paid
up for ₹ 11 per share. Record the journal entries for forfeiture and reissue of shares.
(5 Marks)
14. Classify each of the following transactions into capital or revenue transactions:
- Inauguration expenses of a new manufacturing unit in an existing Business.
- Installation of a new central heating system.
- Repainting a delivery van.
- Providing drainage for a new piece of water-extraction equipment.
- Legal fees on the acquisition of land.
- Carriage costs on a replacement part for a piece of machinery.
(5 Marks)
15. The books of accounts of Sitaram Ltd. for the year ending 31.3.2023 were closed with a difference in books
carried forward. The following errors were detected subsequently:
(i) Return outward book was undercast by ₹ 1000 .
(ii) ₹ 1,800 being the total of discount column on the credit side of the cash book was not posted.
(iii) ₹ 6,000 being the cost of purchase of office furniture was debited to Purchase A/c.
(iv) A credit sale of ₹ 760 was wrongly posted as ₹ 670 to the customers' A/c. in the sales ledger.
(v) The Sales of ₹ 10,000 were omitted to be recorded.
Pass rectification entries in the next year.
(5 Marks)
16. On 1.1.2021, Mr. Amit of Bihar consigned to Mr. Alex of Chennai goods for sale at invoice price. Mr. Alex is
entitled to a commission of 5 % on sales at invoice price and 20 % of any surplus price realized over and above
the invoice price. Goods costing ₹ 5,00,000 were consigned to Chennai at the invoice price of ₹ 7,50,000. The
direct expenses of the consignor amounted to ₹ 50,000. On 31.3.2021, an account sales was received by Mr.
Amit from Mr. Alex showing that he had affected sales of ₹ 6,00,000 in respect of 4/5 th of the quantity of goods
consigned to him. Mr. Alex's direct expenses were ₹ 15,000 . Mr. Alex accepted a bill drawn by Mr. Sam for ₹
5,00,000 and remitted the balance due in cash.
You are required to prepare the consignment account and the account of Mr. Alex in the books of Mr. Amit.
(5 Marks)
17. On 1st April 2020, Rudra Ltd. took over assets of ₹4,50,000 and liabilities of 60,000 of Tara Ltd. for the
purchase consideration of ₹ 4,40,000. It paid the purchase consideration by issuing 8 % debenture of ₹ 100 each
at 10 % premium on the same date.
Rudra Ltd. issued another 3000, 8 % debenture of ₹ 100 at discount of 10 % redeemable at premium of 5 % after
5 years. According to the terms of the issue ₹ 30 is payable on application and the balance on the allotment on
debentures. It has been decided to write off the entire loss on the issue of discount in the current year itself.
You are required to pass the journal entries in the books of Rudra Ltd. for the financial year 2020-21.
(5 Marks)
18. The following are the transactions that took place between X and Y during the period from 1st October, 2020 to
31st March, 2021:
2020 ₹
Oct.1 Balance due to X by Y 3,000
Oct 18 Goods sold by X to Y 2,500
Nov. 16 Goods sold by Y to X (invoice dated November, 26) 4,000
Dec.7 Goods sold by Y to X (invoice dated December, 17) 3,500
2021 ₹
Jan. 3 Promissory note given by X to Y, at three months 5,000
Feb. 4 Cash paid by X to Y 1,000
Mar. 21 Goods sold by X to Y 4,300
Mar.28 Goods sold by Y to X (invoice dated April, 8) 2,700
Draw up an Account Current up to March 31st, 2021 to be rendered by X to Y, charging interest at 10% per
annum. Interest is to be calculated to the nearest rupee.
(10 Marks)
19. From the following particulars of M/s Raja enterprises, prepare a Bank reconciliation statement:
(1) Bank overdraft as per Pass Book as on 31st March, 2021 was ₹ 8,800
(2) Cheques deposited in the Bank for ₹ 5,800 but only ₹ 2,000 were cleared till 31 st March.
(3) Cheques issued were ₹ 2,500, ₹ 3,800 and ₹ 2,000 during the month. The cheque of ₹ 5,800 is still with the
supplier.
(4) Dividend collected by Bank ₹ 1,250 was wrongly entered as ₹ 1,520 in Cash Book.
(5) Amount transferred from fixed deposit A/c into the current A/c ₹ 2,000 appeared only in Pass Book
(6) Interest on overdraft ₹ 930 was debited by the Bank in the Pass Book and the information was received only
on 3rd April 2021.
(7) Direct deposit by M/s Vishnu Trader ₹ 400 not entered in Cash Book.
(8) Corporation tax ₹ 1,200 paid by Bank as per standing instruction appears in Pass Book only.
(10 Marks)
20. M/s. Raghav purchased a second-hand machine on 1st April, 2017 for ₹1, 60, 000. Overhauling and erection
charges amounted to ₹40, 000. Another machine was purchased for ₹80000 on 1st Oct, 2017.
On 1st Oct, 2019, the machine installed on 1st April, 2017 was sold for ₹1, 00, 000. Another machine for ₹30,
000 was purchased and was installed on 31st December, 2019.
Under the existing practice the company provides depreciation @ 10% p.a. on original cost. However, from 1st
April, 2020 it decided to adopt the WDV method and to charge depreciation @ 15% p.a. You are required to
prepare a Machinery Account for the years 2017 to 2021.
(15 Marks)
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