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CA Final | CA Inter | CA IPCC | CA Foundation Online Test Series

Answer Paper

Foundation Accounting Duration: 180

Details: Full Test 2 Marks: 100

Instructions:
 All the questions are compulsory
 Properly mention test number and page number on your answer sheet, Try to
upload sheets in arranged manner.
 In case of multiple choice questions, mention option number only Working notes are
compulsory wherever required in support of your solution
 Do not copy any solution from any material. Attempt as much as you know to fairly
judge your performance.

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CATESTSERIES.ORG
Ans-1 (a)

(i) True: Where in case of a Non-Profit organization separate trading activity, the profit and loss from
the trading account shall be transferred to Income and Expenditure Account at the time of
consolidation.

(ii) True: According to Section 52 of the Companies Act, 2013, Securities Premium Account may be
used by the company to write off preliminary expenses of the company. Thus, the accountant can
use the balance in securities premium account to write off the preliminary expenses amounting ₹ 5
lakhs

(iii) False: Debenture interest is payable before the payment of any dividend on shares.

(iv) True - Discount at the time of retirement of a bill is a gain for the drawee and loss for the
drawer.

(v) False - Surviving partners may continue to carry on the business in case of partnership.

(vi) False - Receipts and payments account is a classified summary of cash receipts and payments
over a certain period together with cash and bank balances at the beginning and close of the period.

(6 x 2 = 12 Marks)

(b) Calculation of depreciation for 5th year

Depreciation per year charged for four years = ₹ 80,00,000 / 10 = ₹ 8,00,000

WDV of the machine at the end of fourth year = ₹ 80,00,000 – ₹ 8,00,000 × 4 = ₹ 48,00,000.

Depreciable amount after revaluation = ₹ 48,00,000 + ₹ 3,20,000 = ₹ 51,20,000

Remaining useful life as per previous estimate = 6 years

Remaining useful life as per revised estimate = 8 years

Depreciation for the fifth year and onwards = ₹ 51,20,000 / 8 = ₹ 6,40,000

(4 Marks)

CATESTSERIES.ORG
(c) Limitations which must be kept in mind while evaluating the Financial Statements are as
follows:

• The factors which may be relevant in assessing the worth of the enterprise don’t find place
in the accounts as they cannot be measured in terms of money.

• Balance Sheet shows the position of the business on the day of its preparation and not on
the future date while the users of the accounts are interested in knowing the position of the
business in the near future and also in long run and not for the past date.

• Accounting ignores changes in some money factors like inflation etc.

• There are occasions when accounting principles conflict with each other.

• Certain accounting estimates depend on the sheer personal judgement of the accountant.

• Different accounting policies for the treatment of same item adds to the probability of
manipulations.

(4 Marks)

Ans-2 (a)

Trading and Profit and Loss Account

for the year ended 31st December, 2023

Amount (₹) Amount (₹)

To Opening stock 50,000 By Sales 3,25,000

(₹ 2,60,000 x 125/ 100)

To Purchases (balancing 2,72,500 By Closing stock 62,500

figure)

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To Gross profit c/d 65,000

(₹ 2,60,000 x 25/ 100)

3,87,500 3,87,500

To Expenses 49,250 By Gross profit b/d 65,000

To Loss on sale of fixed 750

assets

To Depreciation on fixed 1,000

assets (W.N.1)

To Net profit 14,000

65,000 65,000

Balance Sheet as on 31st December, 2023

Liabilities Amount (₹) Assets Amount (₹)

Capital (W.N. 5) 1,69,000 Fixed assets 9,000

Add: Additional capital 5,000 Debtors (W.N. 3) 87,500

Net profit 14,000 Stock 62,500

1,88,000 Bank balance 50,000

Less: Drawings (25,000) 1,63,000

Creditors 46,000

2,09,000 2,09,000

Working Notes:

CATESTSERIES.ORG
 1. Fixed assets account

Amount (₹) Amount (₹)

To Balance b/d 7,500 By Bank (sale) 1,750

To Bank 5,000 By Loss on sale of fixed 750

asset (2,500-1,750)

By Depreciation (balancing 1,000

figure)

By Balance c/d 9,000

12,500 12,500

2. Bank account

Amount (₹) Amount (₹)

To Balance b/d (balancing 62,500 By Creditors 2,80,000

figure)

To Debtors 3,40,000 By Expenses 49,250

To Capital 5,000 By Drawings 25,000

To Sale of fixed assets 1,750 By Fixed assets 5,000

By Balance c/d 50,000

4,09,250 4,09,250

3. Debtors account

Amount (₹) Amount (₹)

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To Balance b/d 1,02,500 By Bank 3,40,000

To Sales 3,25,000 By Balance c/d (balancing 87,500

figure)

4,27,500 4,27,500

4. Creditors account

Amount (₹) Amount (₹)

To Bank 2,80,000 By Balance b/d (balancing 53,500

figure)

To Balance c/d 46,000 By Purchases (from trading 2,72,500

account)

3,26,000 3,26,000

5. Balance Sheet as on 1st January, 2023

Liabilities Amount (₹) Assets Amount (₹)

Creditors (W.N. 4) 53,500 Fixed assets 7,500

Capital (balancing figure) 1,69,000 Debtors 1,02,500

Stock 50,000

Bank balance (W.N. 2) 62,500

2,22,500 2,22,500

(10 Marks)

CATESTSERIES.ORG
(b) Revaluation Account

Amount (₹) Amount (₹)

To Stock 1500 By Land & Building 25,000

To revaluation profit By Provision for doubtful 2,000

debt
Arun 8,500

Varun 8,500

Tarun 8,500

27,000 27,000

Partners’ Capital Accounts

Particulars Arun Varun Tarun Particulars Arun Varun Tarun

To Tarun 4,375 4,375 -- By Bal b/d 1,00,000 75,000 75,000

To Tarun’s -- -- 98,125 By General reserve 4,000 4,000 4,000

Executor

To Bal. c/d 1,08,125 83,125 By Arun & Varun -- -- 8,750

By Profit and Loss -- -- 1,875

Adjustment*(suspense)
A/c

By Revaluation 8,500 8,500 8,500

1,12,500 87,500 98,125 1,12,500 87,500 98,125

*Profit and Loss Adjustment = [(25,000 + 20,000 + 22,500)/3] x 3/12 x 1/3 = 1,875

Balance Sheet of Firm as on 1st July,2024

CATESTSERIES.ORG
 Liabilities Amount (₹) Assets Amount (₹)

Arun 1,08,125 Land & Building 1,75,000

Varun 83,125 Investment 65,000

Tarun Executor 98,125 Stock 13,500

Creditors 20,000 Trade receivable 35,000

Profit & Loss Adjustment 1,875

Cash in hand 7,000

Cash at bank 12,000

3,09,375 3,09,375

Calculation of goodwill and Tarun’s share

Average of last five year’s profits and losses for the year ended on 31 st March

31.3.2019 28,750

31.3.2019 35,000

31.3.2019 22,500

31.3.2019 20,000

31.3.2019 25,000

Total 1,31,250

Average profit 26,250

Goodwill at 1 year purchase = ₹ 26,250 x 1 = ₹ 26,250

Tarun’s Share of Goodwill = ₹ 26,250X1/3 = ₹ 8,750

CATESTSERIES.ORG
Which is contributed by Arun and Varun in their gaining Ratio

Arun = ₹ 8,750X1/2 =₹ 4375

Varun =₹ 8,750X1/2 = ₹ 4375

(10 Marks)

Ans-3 (a)

Date Particulars L.F. Debit (₹) Credit (₹)

2023

April,5 Bank A/c Dr. 19,600

Discounting Charges A/c (20,000X2%) Dr. 400

To Bills Receivable A/c 20,000

(Being bill discounted from bank at 2%)

April,8 Malik’s A/c Dr. 25,200

To Sales 22,500

To Output CGST A/c 1,350

To Output SGST A/c 1,350

(Being goods sold at a profit of 25% and trade discount of 10% CGST and SGST at
6% each)

April,10 Purchases A/c Dr. 8,000

Input CGST A/c Dr. 480

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 Input SGST A/c Dr. 480

To Trends Industries 8,960

(Being goods purchased and CGST and SGST payable at 6% each)

April,16 Cash A/c Dr. 5,800

Discount Allowed A/c Dr 200

To Amar Singh 6,000

(Being cash received form Amar Singh after allowing him discount of ₹ 200)

April,19 Charity A/c Dr. 896

To Purchases A/c 800

To Input CGST A/c 48

To Input SGST A/c 48

(Being goods given as charity, input CGST and input SGST debited at the time of
purchases reversed)

April,23 Cash A/c Dr. 510

Discount allowed A/c 90

To Ganesh’s A/c 600

(Being cash received form Ganesh on account)

April,25 Interest on Loan A/c Dr. 1,000

To interest on Loan Outstanding A/c 1,000

(Being interest on loan due but not paid)

CATESTSERIES.ORG
 (10 Marks)

(b) The objectives of accounting can be given as follows:

1. Systematic recording of transactions – Basic objective of accounting is to systematically

record the financial aspects of business transactions, i.e., book-keeping. These recorded
transactions are later on classified and summarized logically for the preparation of financial
statements and for their analysis and interpretation.

2. Ascertainment of results of above recorded transactions – Accountant prepares profit

and loss account to know the results of business operations for a particular period of time. If
revenue (Sales) exceeds expenses then it is said that business is running profitably but if
expenses exceed revenue, then it can be said that business is running under loss. The profit
and loss account helps the management and different stakeholders in taking rational
decisions. For example, if business is not proved to be remunerative or profitable, the cause
of such a state of affair can be investigated by the management for taking remedial steps.

3. Ascertainment of the financial position of the business – A businessman is not only

interested in knowing the results of the business in terms of profits or loss for a particular
period but is also anxious to know that what he owes (liability) to the outsiders and what he
owns (assets) on a certain date. To know this, accountant prepares a financial position
statement popularly known as Balance Sheet. The balance sheet is a statement of assets
and liabilities of the business at a particular point of time and helps in ascertaining the
financial health of the business.

4. Providing information to the users for rational decision-making – Accounting as a

‘language of business’ communicates the financial results of an enterprise to various
stakeholders by means of financial statements. Accounting aims to meet the information
needs of the decision-makers and helps them in rational decision-making.

5. To know the solvency position – By preparing the balance sheet, management not only
reveals what is owned and owed by the enterprise, but also it gives the information
regarding concern’s ability to meet its liabilities in the short run (liquidity position) and also
in the long-run (solvency position) as and when they fall due.

CATESTSERIES.ORG
 (5 Marks)

(c) Distinction between Book-keeping and Accounting

Book-keeping Accounting

It is a process concerned with recording of It is a process concerned with summarising

transactions. of the recorded transactions.

It constitutes as a base for accounting. It is considered as a language of the

business.

Financial statements do not form part of this Financial statements are prepared in this
process. process on the basis of book-keeping
records.

Managerial decisions cannot be taken with Management takes decisions on the basis of
the help of these records. these records.

There is no sub-field of bookkeeping. It has several sub-fields like financial

accounting, management accounting etc.

Financial position of the business cannot be Financial position of the business is

ascertained through book-keeping records. ascertained on the basis of the accounting
reports.

(5 Marks)

Ans-4 (a) Bank Reconciliation Statement as on 31st March, 2024

Particulars ₹

Bank balance (Debit i.e. overdraft) as per Bank Pass book 1,34,300

CATESTSERIES.ORG
(i) No adjustment required as there would be no difference on 31.3.24

(ii) Add: No entry in Cash book for interest collection by Bank 11,200

(iii) Less: Amount debited in cash book for pending cheques in collection (30,000)
but not credited in Pass Book

(iv) Add: Cheque credited in cash book but not debited in pass book 10,000

(v) Add: Reversal of wrong Credit 2,000

Less: Reversal of wrong debit (1,200)

(vi) Less: Cheque of ₹ 1,000 entered in cash book but omitted to be (4,000)
banked

(vii) Less: Discounted dishonored but no entry in Cash book (20,800)

(viii) Add: Rebate on bill retired not entered in cash book 700

(viii) Add: Cheques deposited in bank not yet recorded in cash book 9,600

Balance (Cr. i.e. overdraft) as per Cash book 1,11,800

Note: A cheque of ₹ 4,320 credited in Pass Book on 28th March, 2024 and later debited in
Pass Book on 1st April, 2024 has no effect on Bank Reconciliation statement as at 31st
March, 2024.

(10 Marks)

(b)

Date Particulars L.F. Debit (₹) Credit (₹)

(i) Suspense Account Dr. 936

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 To Profit and Loss Adjustment A/c 936

(Correction of error by which Purchase

Account was over debited last year)

(ii) Profit & Loss Adjustment A/c 180

Customer’s Account 1,104

To Suspense Account 1,284

(Correction of the entry by which (a) Sales

A/c was over credited by ₹ 180 (b) customer
was credited by ₹642 instead of being
debited by ₹ 462)

(iii) Suspense Account 600

To Profit & Loss Adjustment A/c 600

(Correction of error by which Returns Inward

Account was debited by ₹ 300 instead of
Returns Outwards Account being credited by
₹ 300)

(iv) Suspense Account 1,790

To Geet Account 895

To Meet Account 895

(Removal or wrong debit to Meet and giving

credit to Geet from whom cash was received)

(v) Customer’s Account 1,400

To Profit & Loss Adjustment A/c 1,400

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 (Rectification of the error arising from non-
preparation of invoice for goods delivered)

(vi) Profit & Loss Adjustment A/c 1,600

To Customer’s Account 1,600

(The Customer’s A/c credited with goods not

yet purchased by him)

(vii) Inventory A/c 1,280

To Profit & Loss Adjustment A/c 1,280

(Cost of goods debited to inventory and

credited to Profit & Loss Adjustment A/c)

(viii) Trade receivable/ Manas’s Account 500

To Suspense Account 500

(₹500 due by Manas not taken into trial

balance, now rectified)

(ix) Deep’s account/Trade receivable 6,000

To Profit & Loss Adjustment A/c 6,000

(Sales to Deep omitted, now rectified)

(x) Profit & Loss Adjustment A/c 8,436

To Bhatt’s Capital Account 8,436

(Transfer of the Profit & Loss Adjustment A/c

balance to the Capital Account)

(10 Marks)

CATESTSERIES.ORG
Ans-5 (a)

In the Books of Mr. Mandeep

Manufacturing Account for the Year ended 31.03.2024

Particulars Units Amount Particulars Units Amount

(₹) (₹)

To Opening Work- 27,000 78,000 By Closing Work- 42,000 1,44,000

in- Process in- Process

To Raw Materials By Trading A/c – 15,00,000 58,00,800

Consumed: Cost of finished
goods transferred

Opening 7,80,000
Inventory

Add: Purchases 24,60,000

32,40,000

Closing Inventory (9,60,000) 22,80,000

To Direct Wages – 12,16,800

W.N. (1)

To Direct
expenses:

Hire charges on 10,50,000

Machinery – W.N.
(2)

To Indirect

CATESTSERIES.ORG
expenses:

Hire charges of 7,80,000

Factory

Repairs & 5,40,000

Maintenance

59,44,800 59,44,800

Working Notes:

(1) Direct Wages – 1,500,000 units @ ₹0.80 = ₹ 12,00,000

42,000 units @ ₹0.40 = ₹ 16,800

₹ 12,16,800

(2) Hire charges on Machinery – 15,00,000 units @ ₹ 0.70 = ₹ 10,50,000

(5 Marks)

(b) Trial Balance of Shri. Hari Om as on 31st March, 2024

Particulars Debit Credit

Amount (₹) Amount (₹)

Capital 4,20,000

Purchases 1,08,000

Discount Allowed 3,600

Carriage Inward 26,100

Carriage Outwards 6,900

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Sales 1,80,000

Return Inward 900

Return Outwards 2,100

Rent and taxes 3,600

Plant and Machinery 2,42,100

Stock on 1st April,2023 46,500

Sundry Debtors 60,600

Sundry Creditors 36,000

Investments 10,800

Commission Received 5,400

Cash in Hand 300

Cash at Bank 30,300

Motor Cycle 1,03,800

Total 6,43,500 6,43,500

Note: Stock as on 31st March,2024 will not appear in trail balance.

(5 Marks)

(c) Journal of A Limited

Date Particulars Debit (₹) Credit (₹)

CATESTSERIES.ORG
 2023

May 31 Bank A/c (Note 1 – Column 3) Dr. 11,20,000

To Equity Share Application A/c 11,20,000

(Being application money received on

5,60,000 shares @ ₹ 2 per share)

June 10 Equity Share Application A/c 11,20,000

To Equity Share Capital A/c 2,70,000

To Equity Share Allotment A/c (Note 1 - 5,50,000

Column 5)

To Bank A/c (Note 1– Column 6) 3,00,000

(Being application money on 1,35,000 shares

transferred to Equity Share Capital Account;
on 2,75,000 shares adjusted with allotment
and on 1,50,000 shares refunded as per
Board’s Resolution No…..dated…)

Equity Share Allotment A/c 6,75,000

To Equity Share Capital A/c 1,35,000

To Securities Premium A/c 5,40,000

(Being allotment money due on 1,35,000

shares @ ₹ 5 each including premium at ₹4
each as per Board’s Resolution No….dated….)

Bank A/c (Note 1 – Column 8) 1,25,000

To Equity Share Allotment A/c 1,25,000

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 (Being balance allotment money received)

Dec. 31 Equity Share Final Call A/c 9,45,000

To Equity Share Capital A/c 9,45,000

(Being final call money due on 1,35,000

shares @₹ 7 per share as per Board’s
Resolution No…..dated….)

Bank A/c 9,45,000

To Equity Share Final Call A/c 9,45,000

(Being final call money on 1,35,000 shares @

₹ 7 each received)

Working Note:

Calculation for Adjustment and Refund

Category No. of No. of Amount Amount Amount Refund Amount Amount

Shares Shares Received Required adjusted [3 – (4 + due on received
Applied Allotted on on on 5)] Allotment on
for Application Application Allotment Allotment

(1) (2) (3) (4) (5) (6) (7) (8)

(i) 10,000 10,000 20,000 20,000 Nil Nil 50,000 50,000

(ii) 50,000 25,000 1,00,000 50,000 50,000 Nil 1,25,000 75,000

(iii) 5,00,000 1,00,000 10,00,000 2,00,000 5,00,000 3,00,000 5,00,000 Nil

Total 5,60,000 1,35,000 11,20,000 2,70,000 5,50,000 3,00,000 6,75,000 1,25,000

Also,

(i) Amount Received on Application (3) = No. of shares applied for (1) X ₹2

CATESTSERIES.ORG
(ii) Amount Required on Application (4) = No. of shares allotted (2) X ₹2

(10 Marks)

Ans-6 (a)

Smith Library Society

Income and Expenditure Account

for the year ended 31st March, 2022

Dr. Cr.

Expenditure ₹ ₹ Income ₹ ₹

To Electric charges 7,200 By Entrance fee (25% of 7,500

₹ 30,000)

To Postage and 5,000 By Membership 2,00,000

stationary subscription

To Telephone charges 5,000 Less: Received in 10,000 1,90,000

advance

To Rent 88,000 By Sale proceeds of old 1,500

papers

Add: Outstanding 4,000 92,000 By Hire of lecture hall 20,000

To Salaries 66,000 By Interest on 8,000

securities(W.N.2)

Add: Outstanding 3,000 69,000 Add: Receivable 500 8,500

To Depreciation By Deficit- excess of 16,700

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(W.N.1) expenditure over
income

Electrical fittings 15,000

Furniture 5,000

Books 46,000 66,000

2,44,200 2,44,200

Balance Sheet of Smith Library Society

as on 31st March, 2022

Liabilities ₹ ₹ Asset ₹ ₹

Capital fund 7,93,000 Electrical fittings 1,50,000

Add: Entrance fees 22,500 Less: Depreciation (15,000) 1,35,000

8,15,500 Furniture 50,000

Less: Excess of (16,700) 7,98,800 Less: Depreciation (5,000) 45,000

expenditure over
income

Outstanding Books 4,60,000

expenses:

Rent 4,000 Less Depreciation (46,000) 4,14,000

Salaries 3,000 7,000 Investment:

Membership 10,000 Securities 1,90,000

subscription in
Accrued interest 500 1,90,500
advance

CATESTSERIES.ORG
 Cash at bank 20,000

Cash in hand 11,300

8,15,800 8,15,800

Working Notes:

1. Depreciation

Electrical fittings 10% of ₹ 1,50,000 15,000

Furniture 10% of ₹ 50,000 5,000

Books 10% of ₹ 4,60,000 46,000

2. Interest on Securities

Interest @ 5% p.a. on ₹ 1,50,000 for full year 7,500

Interest @ 5% p.a. on ₹ 40,000 for half year 1,000 8,500

Less: Received (8,000)

Receivable 500

(15 Marks)

(b) Following factors are taken into consideration for calculation of depreciation.

1. Cost of asset including expenses for installation, commissioning, trial run etc.- Cost of a
depreciable asset represents its money outlay or its equivalent in connection with its
acquisition, installation and commissioning as well as for additions to or improvement
thereof for the purpose of increase in efficiency.

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2. Estimated useful life of the asset - Useful Life’ is either (i) the period over which a
depreciable asset is expected to be used by the enterprise or (ii) the number of production
or similar units expected to be obtained from the use of the asset by the enterprise.
Determination of the useful life is a matter of estimation and is normally based on various
factors including experience with similar type of assets. Several other factors like estimated
working hours, production capacity, repairs and renewals, etc. are also taken into
consideration on demanding situation.

3. Estimated scrap value (if any) is calculated at the end of useful life of the asset. If such
value is considered as insignificant, it is normally regarded as nil. On the other hand, if the
residual value is likely to be significant, it is estimated at the time of acquisition/installation,
or at the time of subsequent revaluation of asset.

(5 Marks)

CATESTSERIES.ORG