CWA ICWA Inter - Group I : Financial Accounting - June2012

CWA ICWA Inter - Group I • Financial Accounting • June 2012

This Paper has 41 answerable questions with 7 answered.

I—P5(FAC) Syllabus 2008
Time Allowed : 3 Hours	Full Marks : 100

The figures in the margin on the right side indicate full marks
Answer Question No. 1 which is compulsory and any five questions from the rest.

The figures in the margin on the right side indicate full marks

Answer Question No. 1 which is compulsory and any five questions from the rest.

(a)

From the four alternative answers given against each of the following cases, indicate the correct answer:

1x10=10

(i)

Which of the following items is shown in the Income and Expenditure Account?

(A)	Only items of capital nature
(B)	Only items of revenue nature which are received during the year
(C)	Only items of revenue nature pertaining to the period of accounts
(D)	Both the items of capital and revenue nature

(1)

(ii)

A heavy revenue expenditure, which helps to generate revenue over more than one accounting year is termed as

(A)	Preliminary Expenditure
(B)	Revenue Expenditure
(C)	Prepaid Expenditure
(D)	Deferred Revenue Expenditure

(1)

(iii)

During the year Rs. 96,000 was Debited as salary in the Income Expenditure Account. There was outstanding on Salary Account at the beginning and at the end of the year were Rs. 12,000 and Rs.15,000 respectively. The amount of salary paid shown in Receipt and Payments Account would be

(A)	Rs. 84,000
(B)	Rs. 81,000
(C)	Rs. 93,000
(D)	None of the above

(1)

(iv)

Bank Reconciliation Statement is

(A)	Ledger Account
(B)	Part of Cash Book
(C)	A separate statement
(D)	A sub–division of Journal

(0)

(v)

A firm employs Rs. 2,00,000 as Capital and the normal rate of return is 10%. If the firm makes an average profit on 30,000 per year, the value of Goodwill by considering it as the purchase of 3 years super profit will be :

(A)	Rs.25,000
(B)	Rs.20,000
(C)	Rs.30,000
(D)	None of the above

(0)

(vi)

The capital of a Company comprises of equity shares of Rs. 10 each amounting to Rs.10 lakhs and 10% Preference Shares of Rs.2 lakhs. Profit after tax for the year is Rs.4 lakhs, Dividend declared is @ 25% and current market price of Equity Share is Rs.80 each. The Price–earning ratio is

(A)	20 times
(B)	21.5 times
(C)	22.1 times
(D)	None of the above

(0)

(vii)

Goods are sent to the Branch at cost plus 25%. The loading on invoice price is

(A)	20%
(B)	25%
(C)	30%
(D)	None of the above

(1)

(viii)

Dual concept in accounting results in the following equation:

(A)	Capital + Liability = Assets
(B)	Revenue = Expenses
(C)	Capital + Profit = Assets
(D)	Total Assets = Total Liability

(1)

(ix)

Under which of the following heads is claims against a Company not acknowledged as debts shown?

(A)	Unsecured Loan
(B)	Current Liability
(C)	Current Assets
(D)	Contingent Liability

(1)

(x)

Which of the following will be the highest amount?

(A)	Paid–up Capital
(B)	Authorised Capital
(C)	Subscribed Capital
(D)	Reserve Capital

(1)

(b)

State whether the following statements are TRUE (T) or FALSE (F):

1x5=5

(i)

Excess of hire-purchase price over cash price is known as penalty imposed on hire purchaser by the vendor.

(0)

(ii)

Every Banking Company incorporated in India is required to transfer at least 20% of its profit to Reserve Fund.

(0)

(iii)

One of the objectives achieved by providing depreciation is saving cash resources for future replacement of assets.

(0)

(iv)

As per concept of conservatism, the Accountant should provide for all possible losses but should not anticipate profit.

(0)

(v)

Wages incurred by departmental workers of a factory in installing a new machinery is a revenue expenditure.

(0)

(c)

Fill in the blanks in the following sentences by using the more appropriate word(s) from the alternatives shown in bracket:

1x5=5

(i)

When there is no agreement among the partners, the profit or loss of the firm will be shared in their __________ (capital ratio/equally).

(0)

(ii)

In Hire Purchase transaction the right to sell or transfer of the goods remains with _________________ (Seller/ Hirer).

(0)

(iii)

As per the going concern concept, the enterprise should continue to exist ____________(in the foreseeable future/for limited period of time).

(0)

(iv)

Inauguration expenses on opening of a new Branch of an existing business will be ___________(capital/revenue) expenditure.

(0)

(v)

Trial Balance would not disclose __________________(error of omission /ommission of posting).

(0)

(d)

Match the following:

(i)	AS–3	(A)	Accounting for Government grants
(ii)	AS–20	(B)	Segmental Reporting
(iii)	Gamer Vs Murray Rule	(C)	Cash Flow Statement
(iv)	AS–17	(D)	Dissolution of Partnership
(v)	AS–12	(E)	Earning per Share
		(F)	No matching statements found

1x5=5

(0)

(a)

You are provided with the following information for AD Vita Ltd. for the year:

(i)

(ii)
(iii)

Net Profit before provision for income tax and
Managerial remuneration, but after Depreciation
Depreciation provided in the Books
Depreciation allowable under Schedule XIV

Rs.
Rs.
Rs.

13,87,600
4,15,000
3,09,000

You are required to claculate the Managerial remuneration

(i)
(ii)
(iii)

when there is only one whole–time Directors;
when there are two whole–time Directors;
when there are two whole–time Directors and one Manager

(0)

(b)

X’s accounting year ends on 30.06.2011 but actual stock was not taken till 08.07.2011 on which date it is valued at Rs.29,700. The following additional information is available:

(i)	Sales are entered in the sales book on the date of dispatch and returns inward entered in the credit note register on the day goods are received back.
(ii)	Purchases are entered in the purchase book on the day invoices are received.
(iii)	Sales from 01.07.2011 to 08.07.2011 are Rs. 34,400.
(iv)	Purchases invoiced from 01.07.2011 to 08.07.2011 are Rs.2,640, out of which goods of Rs. 240 was not received up to 08.07.2011.
(v)	Invoices for goods purchased upto 30.06.2011 were of Rs. 2,000 of which goods worth Rs. 1,400 were received between 01.07.2011 to 08.07.2011.
(vi)	Rate of G.P. 33.33% on cost.

Find out the value of stock on 30.06.2011.

(0)

(c)

Briefly describe the two types of accounting methods of Amalgamations as per AS–14.

(0)

(a)

Kailash took a mine on lease from Jagdish for five years at a royalty of Rs. 20 per tonne subject to a minimum rent of Rs. 80,000 per annum. Minimum rent paid in excess of actual royalties is recoverable throughout during the next three years succeeding the year in respect of which excess was paid. In the event of a strike, the minimum rent will be reduced proportionately in relation to time lost. The first year in respect of which the minimum rent was payable expired on 31^st March, 2008. The excess paid in respect of the first year was Rs. 80,000 and in respect of the second year RS. 50,000. In the third year the actual royalties amounted to Rs. 1,15,000, in the fourth year Rs.50,000 (in consequence of strike which lasted for 146 days) and in the fifth year Rs.1,60,000 only.
Prepare the Royalty Account, Short workings Account and Jagdish’s Account in the Ledger of Kailash.

(0)

(b)

Classify the following accounts into Personal, Real and Nominal accounts:

(i)

Patent Rights a/c (ii) Drawing a/c (iii) Purchases a/c (iv) Prepaid Insurance a/c (v) Donation a/c (vi) Bank Overdraft a/c.

(0)

(c)

Calculate Stock Turnover Ratio in the following cases:

(i)

Opening Stock Rs.87,000; Closing Stock Rs.93,000; Sales Rs.9,60,000; Gross Profit @ 33⅓% on cost.

(ii)

Credits Sales Rs. 15,00,000; Cash Sales @ 25% of Credit Sales; Gross Profit @ 25% on cost; Opening Stock Rs. 2,50,000; Closing Stock Rs.7,50,000.

2+2=4

(0)

(a)

X and Yare partners in a firm sharing profit/loss in the ratio 5:3. They admit their Manager Z in the firm for l/4th share in profit, which would be not less than the remuneration received by him as Manager. As Manager, Z is entitled for a salary of Rs. 32,000 per quarter and a commission of 10% on the net profit after charging such salary and commission. If the profit of the firm for the year ended 31^st March, 2012 amounted to Rs.4,80,000, show the distribution of firm’s profit among the partners.

(0)

(b)

Oxford Library Society showed the following position on 31^st March, 2011:

Balance Sheet as on 31^st March, 2011
Liabilities	Rs.	Assets	Rs.
Capital fund Expenses payable	7,93,000 7,000	Electrical fittings Furniture Books Investments in securities Cash at bank Cash in hand	1,50,000 50,000 4,00,000 1,50,000 25,000 25,000
	8,00,000		8,00,000

The Receipts and Payment Account for the year ended on 31^st March,2012 is given below:

Receipts	Rs.	Payments	Rs.
To Balance bid Cash at bank25,000 Cash in hand25,000 To Entrance fees To Membership subscription To sale proceeds of old papers To hire of Lecture Hall To interest on securities	50,000 30,000 2,00,000 1,500 20,000 8,000	By Electric charges By Postage and stationery By Telephone charges By Books purchased (April, 2011) By Outstanding expenses paid By Rent By Investment in securities By Salaries By Balance cld Cash at bank Cash in hand	7,200 5,000 5,000 60,000 7,000 88,000 40,000 66,000 20,000 11,300
	3,09,500		3,09,500

You are required to prepare Income and Expenditure Account for the year ended 31^st March, 2012 and a Balance Sheet as at 31^st March, 2012 after making the followng adjustments:
Membership subscription included Rs. 10,000 received in advance.
Provide for outstanding rent Rs.4,000 and salaries Rs.3,000.
Books to be depreciated @ 10% including additions. Electrical fittings and furniture are also to be depreciated at the same rate.
75% of the entrance fees is to be capitalized.
Interest on securities is to be calculated @ Rs. 5% p.a. including purchases made on 01.10.2011 for Rs.40,000.

(0)

(a)

Ram, Rahim and Robert are partners of the firm ABC & Co–sharing protits and losses in the ratio of 5 : 3 : 2.
The Balance Sheet of the firm as on 01.4.2012 is given below:

Liabilities	Rs.	Assets	Rs.
Partners Capital: Ram Rahim Robert General Reserve Loan Sundry Creditors	3,00,000 2,50,000 2,00,000 1,05,000 95,000 1,00,000	Goodwill Machinery Furniture Stock Debtors Cash & Bank	50,000 4,55,000 10,000 2,00,000 3,00,000 35,000
	10,50,000		10,50,000

Partners of tirm decided to dissolve the firm. The firm decided to settle the loan creditors directly. Ram took over goodwill for Rs. 75,000. Rahim took over machinery and furniture at 90% of book value and sundry creditors at book value.

Robert took over stock at 95% of book value and debtors at 90% of the book value. Partners have to pay cash if the assets taken over had exceeded the amounts due to them.

Prepare	(i)	Realisation Account;
	(ii)	Partners Capital Account; and
	(iii)	Cash Account of the firm to show the dissolution proceedings.

(0)

(b)

You are provided with the following figures from the Financial Reports and Balance Sheet of Narhari Co. Ltd. as at 31^st March, 2012:

	Rs.
Stock Sundry Debtors Investments Cash and Bank Balances Fixed Assets Sundry Creditors Bank Overdraft Current Year Taxation	30,000 8,000 4,000 8,000 36,000 10,000 3,000 2,000

You are required to calculate
(i) Current Ratio; (ii) Quick Ratio and also give your comments.

(0)

(a)

Purchases made by a business concern having three departments were: P–1,500 units; Q–3,000 units and R–3,600 units at a total cost of Rs. 6,00,000. The sales made were P–1,530 units at the rate of Rs. 160 per unit; Q–2,880 units at the rate of Rs. 180 per unit and R–3,744 units at the rate of Rs.200 per unit. The closing stocks were: P–150 units; Q–240 units and R–9 units.

Prepare Departmental Trading Account assuming that the rate of gross profit on sales is the same in each case.

(0)

(b)

Show what journal entries would be passed by the Jaipur Head Office to record the following transactions in their Books on 31^st March, 2012, the closing date:

(i)	A remittance of Rs. 35,000 made by Sikar Branch to Head Office on 29^thMarch, 2012 and received by the Head Office on 5^th April, 2012.
(ii)	Goods of Rs. 63,000 sent by the Head Office to the Bikaner Branch on 28^th March, 2012 and received by the later on 4^th April, 2012.
(iii)	Sikar Branch paid Rs. 30,000 as salary to a visiting Head Office Official.

(0)

(c)

What are the various steps followed in analysis through accounting ratios?

(0)

(a)

Ashok Ltd. furnishes you with the following Balance Sheet as at 31^st March, 2012:

	(Rs. in crores)
Sources of Funds
Share Capital:
Authorised		100
Issued:
12% redeemable preference shares of Rs. 100 each fully paid	75
Equity shares of Rs. 10 each fully paid	25	100
Reserves and surplus:
Capital reserve	15
Securities Premium	25
Revenue reserves	269	300
		400
Application of Funds
Fixed Assets : cost	100
Less: Provision for depreciation	(100)	Nil
Investments at cost (Market value Rs. 400 cr.)	100
Current Assets	340
Less: Current Liabilities	(40)	300
		400

The company redeemed preference shares on 1^st April, 2012. It also bought back 50 lakh equity shares of Rs.10 each at Rs. 50 per share. The payments for the above were made out of the huge bank balances, which appeared as a part of current assets.
You are required to

(i)	Pass Journal entries to record the above;
(ii)	Prepare Balance Sheet as at 01.04.2012.

(0)

(b)

The Life Insurance Fund of Bharat Life Insurance Co. Ltd. was Rs. 50 lakhs on 31.03.2012. Its acturial valuation on 31.03.2012 disclosed a net liability of Rs. 42,50 lakhs. An interim bonus of Rs. 80,000 was paid to the policy holders during previous two years. It is now proposes to carry forward Rs. 150,000 and to divide the balance between policy holders and the shareholders.
Show the (a) Valuation Balance Sheet; (b) Net profit for the two-year period; and (c) Distribution of profits.

(0)

Write short notes on any three:

3x5=15

(a)

Surrender value of policy;

(0)

(b)

Accounting for construction contract (AS–7);

(0)

(c)

Objectives of Financial Statements;

(0)

(d)

Liquidity norms of Banking Companies;

(0)

(e)

Profit prior to Incorporation.

(0)

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