CWA ICWA Foundation : Financial Accounting Fundamentals - June 2006

CWA ICWA Foundation • Financial Accounting Fundamentals • June 2006

This Paper has 25 answerable questions with 0 answered.

C–2(FAF) Revised Syllabus
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 from the rest.
Marks

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

Marks

(a)

In each of the following one of them is correct. Indicate the correct answer:

2x5=10

(i)

An agent to whom goods are sent for sale on a commission basis is called a

(a)	Consignor
(b)	Consignee
(c)	Broker

(0)

(ii)

Noting charges are paid by

(a)	The acceptor
(b)	The payee
(c)	The drawee

(0)

(iii)

Wages paid on Installations of new machinery should be debited to

(a)	Wages account
(b)	Cash account
(c)	Machinery account.

(0)

(iv)

Sinking fund account for replacement of assets is adjusted by transferring to

(a)	Assets account
(b)	General reserve
(c)	Profit and loss account.

(0)

(v)

Favourable bank balance means

(a)	Debit balance in the cash book
(b)	Debit balance in the pass book
(c)	Credit balance in the cash book.

(0)

(b)

State with reasons whether the following statements are true or false:

2x5=10

(i)

According to the decision of Garner vs. Murray insolvent partners capital deficiency is to be borne by solvent partners according to profit sharing ratio.

(0)

(ii)

Deferred expenditure is to be written off in the year in which the expenses are incurred.

(0)

(iii)

Preference share dividend carrying fixed rate of dividend is to be paid before payment of income tax.

(0)

(iv)

In case of non–profit making organization excess of income over expenditure known as surplus.

(0)

(v)

Error of omission will not effect trial balance.

(0)

(c)

Fill in the blanks:

2x5=10

(i)

The posting from purchases book is made to the debit of _________ and to the credit of _________ accounts.

(0)

(ii)

Delcredre commission is paid by consignor to _________ and underwriting commission paid to _________

(0)

(iii)

Difference between asset and liabilities is _________
Difference between current asset and current liabilities is _________

(0)

(iv)

In joint venture under separate set of books, accounts maintained are ventures account, _________ account, _________ account.

(0)

(v)

In final accounts, depreciation amount is shown in _________ and written down value of the asset (after depreciation) is shown in _________

(0)

Ms. Mythily who maintained books under single entry method approaches you with the following details. You are requested to prepare Statement of affairs as on 31.03.2006 and Profit and Loss A/c for the year ended 31.03.2006.
Details furnished by Ms. Mythily:

1.	List of Balances
	Particulars	31.03.2005 Rs.	31.03.2006 Rs.
	Cash Saving Bank A/c with ICICI Debtors Advance Received Creditors Advance paid Building (Depreciate @ 5%) Car (Depreciate @ 20%) Computer (Depreciate @ 60%)	1,500.00 2,000.00 42,000.00 – 89,000.00 – 400,000.00 358,000.00 70,000.00	8,500.00 10,000.00 85,000.00 15,000.00 2,500.00 50,000.00 ? ? ?
2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.	Credit sale during the year Cash sale during the year Credit purchases during the year Amount received from debtors was deposited in Bank Details of cash expenses Salary Vehicle expenses Repairs and Maintenance Details of expenses through cheque payment Godown rent Telephone Electricity Drawing In cash From Bank Discount allowed Discount received Creditors were paid by cheque Advance was paid by cheque and amount received towards advance as deposited in Bank Cash purchases during the year		1,095,000.00 1,250,000.00 820,000.00 48,000.00 18,000.00 3,000.00 60,000.00 15,000.00 9,000.00 40,000.00 ? 250.00 550.00 ?

(0)

SMS Recreation Club provides you with the following details and requests you to prepare

(1) Income and Expenditure A/c for the year ended 31.03.2006 &
(2) Balance Sheet as on 31.03.2006.
Details submitted:

1.	Receipts and Payments A/c for the year ended 31.03.2006.
		Receipts	Amount Rs.	Amount Rs.
	Cash on Hand b/d Bank Balance – SBI b/d Subscription 2003-2004 2004-2005 2005-2006 2006-2007 Hall Rent Chair Hire Charges Parking Charges Sale of Scrap Other Income		11,000.00 5,500.00 110,000.00 16,500.00	490.00 42,000.00 143,000.00 200,000.00 12,000.00 11,000.00 720.00 10,000.00 419,210.00
		Payments	Amount Rs.	Amount Rs.
	Books Computer (Depreciate @ 60%) Electricity Telephone Salary Party expenses Gift to Children Repairs and maintenance FD Cash on Hand c/d Bank Balance–SBI c/d			12,000.00 42,000.00 13,500.00 12,500.00 24,000.00 90,000.00 55,000.00 8,500.00 150,000.00 2,550.00 9,160.00 419,210.00
2.	List of balance		31.03.2005	31.03.2006
	Car (Depreciate @n 20%) Sports items Building (Depreciate @ 10%) Furniture (Depreciate @ 15%) Crockery (Depreciate @ 15%) Salary o/s Creditors		52,000.00 58,000.00 300,000.00 160,000.00 56,000.00 4,000.00 5,000.00	? 49,000.00 ? ? ? ? 10,000.00

3.	Club has 220 members and Rs. 550/- was collected as yearly subscription.
4.	There was no payment to creditors during the year and the increase in creditors is due to purchase of some sports items.
5.	Club has an accountant who was paid Rs. 2,000/- per month up to Jan ’06 and there was an increment of Rs. 500/- from Feb ’06.
6.	FD made on 31.03.2006.

(0)

Mr. Balaji tallies his trial balance placing the difference in the Suspense A/c. But he finds the following mistakes and needs your help in correcting trial balance. With the data given below you are asked to prepare
(a) Profit and Loss Adjustment A/c for the year ended 31.03.2006
(b) Corrected Trial Balance as on 31.03.2006.

Profit before the following correction—Rs. 22,950/-

Purchase of goods from Gayathri recorded as Rs. 5,900/- instead of Rs. 9,500/-

Payment to Padma posted to Priya's A/c—Rs. 22,200/-

Electricity bill of residence posted to Electricity expenses A/c—Rs. 18,000/-

Cash Balance as on 31.03.2006 recorded as Rs. 90,000/- instead of Rs. 9,000/-

Cash sale Rs. 45,000/- not recorded at all.

Salary to Pappu debited to his personal A/c

Depreciation on Car provided at 15% instead of 20%.

Credit card expenses of Balaji debited to interest A/c — Rs. 15,000/-

10.

Loan from Yamini shown as cash sale—Rs. 12,500/-

11.

Trial Balance as on 31.03.2006
Particulars	Debit Amount Rs.	Credit Amount Rs.
Profit and Loss A/c Gayathri Padma Priya Cash Pappu Car Suspense Capital	3,600.00 22,200.00 90,000.00 24,000.00 42,500.00	22,950.00 22,200.00 81,000.00 56,150.00
	182,300.00	182,300.00

(0)

A of Agra sent on consignment goods valued Rs. 1,00,000 to B of Bhagalpur on 1st March, 2005. He incurred an expenditure of Rs. 12,000 on Freight and Insurance. A’s accounting year closes on 31st December. B was entitled to a commission of 5% on gross sales plus a delcredere commission of 3 per cent. B took delivery of the consignment by incurring expenses of Rs. 3,000 for goods consigned.

On 31.12.2005, B informed on phone that he had sold all the goods for Rs. 1,50,000 by incurring selling expenses of Rs. 2,000. He further informed that only Rs. 1,48,000 had been realised and rest was considered irrecoverable, and would be sending the cheque in a day or so for the amount due along with the accounts sale.

On 5.1.2006, A received the cheque for the amount due from B and incurred bank charges of Rs. 260 for collecting the cheque. The amount was credited by the Bank on 9.1.2006.

Write up the Consignment account finding out the profit/loss on the consignment, B’s a/c, Provision for Expenses a/c and Bank account in the books for the consignor, recording the transactions up to the receipt and collection of the cheque.

(0)

Given below is the Balance Sheet of Shamasri Ltd. as on 31.03.2005:

Liabilities	Amount Rs.	Amount Rs.
12% Preference shares 5,000 shares of Rs. 100 each Less Call in arrear on 100 shares General Reserve Security Premium Current Liabilities	500,000.00 2,000.00	498,000.00 750,000.00 50,000.00 250,000.00 1,548,000.00
Assets
Fixed assets Investments Bank Cash Other Current Assets		800,000.00 50,000.00 225,000.00 1,800.00 471,200.00 1,548,000.00

Preference shares were due for redemption on 31^st July 2005 at a premium of 10%. 50 shareholders paid the amount due on their shares and the balance shares on which call amount was not paid were forfeited. The forfeited shares were reissued and on receiving 80% of the face value were considered fully paid. 4,000 Equity shares were issued at par face value being Rs. 100/-
On the due date Preference shares were duly redeemed and amount due settled.
Pass necessary Journal entries and prepare Balance Sheet after redemption.

(0)

Sa and Re were equal partners of M/s. Sabda Swara. Given below is the Balance Sheet of M/s. Sabha Swara as on 31.03.2006. On the same date Ga was admitted as a partner.

Balance Sheet as on 31.03.2006
Liabilities	Amount Rs.	Amount Rs.
Capital Sa Re Current Liabilities	355,000.00 355,000.00	710,000.00 295,000.00 1,005,000.00
Assets
Fixed assets Bank Sundry Debtors Advances		600,000.00 22,500.00 250,000.00 132,500.00 1,005,000.00

Ga was admitted on the following terms:

1.
2.
3.
4.
5.
6.
7.
8.

Ga to bring Rs. 4,00,000/- towards capital and Rs. 2,00,000/- for 1/3 rd share of profit
Partners to shares profit or loss equity.
Not to show Goodwill in the Books after admission
To revalue Plant at Rs. 6,55,000/-
To provide 10% for Doubtful Debts
To write 10% of the advances
To show the assets at revalued rate in the Balance Sheet.
Each partner to have Rs. 5,00,000/- as balance in Capital A/c. The difference to be adjusted by bringing the short fall or by withdrawing the excess.

Pass necessary Journal entries and prepare Revaluation A/c and Balance Sheet after admission in the Books of M/s. Sabda Sawara.

(0)

Write short notes on the following:

4+4+3+3

(i)

Goodwill;

(0)

(ii)

Accommodation Bill;

(0)

(iii)

Proforma Invoice;