CWA ICWA Foundation : Accounting - June2012

CWA ICWA Foundation • Accounting • June 2012

This Paper has 56 answerable questions with 33 answered.

P—2(ACT) Syllabus 2008
Time Allowed : 3 Hours	Full Marks : 100

The figures in the margin on the right side indicate full marks.
SECTION I
Answer Question No. 1 which is compulsory and any two questions from Section I.

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

SECTION I

Answer Question No. 1 which is compulsory and any two
questions from Section I.

(a)

In each of the following one of the alternative is correct, indicate the correct one.

1x10=10

(i)

GAAP stands for

(A)	Generally Adopted Accounting Process
(B)	Generally Accepted Accounting Principle
(C)	Generally Accepted Auditing Procedure
(D)	None of the above

(2)

(ii)

Which of the following errors is an error of principle?

(A)	Rent paid Rs. 6,000, posted as Rs. 600
(B)	Repairs of machinery have been debited to machinery account
(C)	The total of purchases return book has not been posted to the purchases return account
(D)	None of the above

(1)

(iii)

How many days are added as days of grace for calculating the date of maturity of a term bill?

(A)	4 days
(B)	3 days
(C)	2 days
(D)	None of the above

(1)

(iv)

In case of credit sales, special commission payable to the consignee for taking over risk of bad debts is called as

(A)	Over–riding commission
(B)	Ordinary commission
(C)	Del–credre commission
(D)	All of the above

(1)

(v)

Interest paid on loan taken for purchase of asset should be debited to

(A)	Interest A/c
(B)	Asset A/c
(C)	Profit and Loss A/c
(D)	Trading A/c

(1)

(vi)

Identify Personal Account from the following :

(A)	Furniture A/c
(B)	Bank of India A/e
(C)	Rent A/c
(D)	Investment A/c

(1)

(vii)

Which one is correct?

(A)	Asset + Liability = Owner’s Equity
(B)	Asset – Liability = Owner’s Equity
(C)	Owners Equity + Asset = Liability
(D)	None of the above

(1)

(viii)

Which of the following is a deferred revenue expenditure?

(A)	Repairs and maintenance
(B)	Free samples of a new Product
(C)	Office equipment
(D)	Rent paid in advance

(1)

(ix)

Which of the following will appear in the Balance Sheet?

(A)	Wages paid
(B)	Outstanding wages
(C)	Wages deducted for strike
(D)	Wages not due

(1)

(x)

Which of the following is a temporary form of business organization?

(A)	Firm
(B)	Company
(C)	Consignment
(D)	Joint–venture

(1)

(b)

Fill in the blanks:

1x4=4

(i)

Trade Mark is a _____ asset.

(1)

(ii)

Closing stock is valued at cost or net realizable value, whichever is less, is based on ___________ concept.

(1)

(iii)

The ____________discount is never entered in the books of accounts.

(1)

(iv)

The withdrawal of money by the owner of business is called ___________.

(1)

(c)

State with reasons whether the following statements are True or False:

2x8=16

(i)

Accounting policies can be changed from year to year.

(1)

(ii)

Prudence is the concept to anticipate and recognize losses.

(1)

(iii)

Agreement of trial balance would also assure accounting accuracy.

(0)

(iv)

Income received in advance is an asset.

(0)

(v)

Purchase Book records all purchases of goods.

(0)

(vi)

Account sale is the statement sent by the consignor to the consignee.

(0)

(vii)

Temporary shed put up at project site to house material is a capital expenditure.

(0)

(viii)

The debts written off as bad, if recovered subsequently, are credited to debtor’s personal account.

(0)

(a)

journalize the following transactions in the books of a trader:

(i)

1^st March 2012,

paid quarterly interest on borrowed amount of Rs. 20,000 at 12% p.a.

(ii)

10^thMarch 2012,

Goods destroyed by fire for Rs. 6,000, for which there is no insurance coverage.

(iii)

15^thMarch 2012,

Received commission for Rs.5,000.

(iv)

21^st March 2012,

paid transportation charges for machinery of Rs.1,000 and installation charges for Rs. 1,500.

1x4=4

(1)

(b)

Purchases price of a machine Rs. 1,80,000; Freight charges Rs. 30,000; Installation charges Rs. 10,000; Residual value Rs. 16,000; and useful life 5 years. Calculate the depreciation for third year under the straight line method.

(0)

(c)

Goods costing Rs. 6,30,000 were sent out to consignee at a profit of 20 percent on invoice price. Consignee sold 2/3rd goods for Rs. 6,00,000. Consignee was entitled to an ordinary commission of 3 percent on sales at invoice price and over–riding commission of 20 percent of any surplus realized.

Calculate the amount of consignee’s commission and give the journal entry for it in the books of the consignor.

(0)

(a)

Calculate the amount of Salary to be shown in the Income and Expenditure Account for the year ending 31^st March 2011 from the following information:

		Rs.
(i)	Salary paid as per Receipt and Payment Alc	63,000
(ii)	Salary unpaid on 31.3.2010	6,000
(iii)	Salary Prepaid on 31.3.2010	5,000
(iv)	Salary unpaid on 31.3.2011	7,000
(v)	Salary prepaid on 31.3.2011	8,000

(0)

(b)

A company purchased some machineries for Rs.1,00,000 on 1^st April 2007. It charges depreciation@ 10% p.a. on reducing balance method every year. On 30^th September 2011, a part of machinery was sold for Rs. 14,000, the original cost of the machine was Rs. 20,000. Calculate the Profit or Loss on Sale of Machinery

(0)

(c)

Recognize the accounting concept in the following:

(i)	The transactions are recorded at their original cost.

(ii)	The business will run for an indefinite period.

(iii)

Every transaction has two effects to be recorded in the books of accounts.

(iv)	Accounting treatment once decided should be followed period after period.

1x4=4

(1)

(a)

From the following pal1iculars of M/s. Narayan Trading Company, prepare a bank reconciliation statement as on 31.3.2012:

(i)	Bank balance as per cash book as on 31.3.2012 was Rs.9,620/–.
(ii)	A cheque amounting to Rs. 1,270/– issued to supplier on 10^th March 2012, was entered by mistake as a receipt in the cash book.
(iii)	Out of three cheques deposited in bank for Rs. 18,000, only one cheque of Rs. 6,400 was cleared till 31^st March 2012.
(iv)	An amount of Rs.15,000 transferred to current Alc from matured value of a fixed deposit not entered in the cash book.
(v)	A cheque amounting to Rs.10,200 issued to a supplier on 28th March 2012, but not presented till 31.3.2012.
(vi)	Dividend collected by bank for Rs. 750 was wrongly entered as Rs.570 in the cash

(0)

(b)

Match the following:

(i)
(ii)
(iii)
(iv)

AS–17
AS–18
AS–19
AS–20

(A)
(B)
(C)
(D)

Related Party Transaction
Segment Reporting
Earning Per Share
Accounting For Leases

1x4=4

(1)

SECTION II
Answer Question No. 5 which is compulsory and any two questions from Section II.

SECTION II

Answer Question No. 5 which is compulsory and any two
questions from Section II.

(a)

In each of the following, one of the alternatives is Correct. Indicate the correct one:

1x10=10

(i)

Which method of costing is used for determination of costs for printing industry?

(A)	Process Costing
(B)	Operating Costing
(C)	Batch Costing
(d)	Job Costing

(1)

(ii)

Costs are classified into Fixed costs, Variable costs and Semi–variable costs, it is known as

(A)	Functional Classification
(B)	Behavioural Classification
(C)	Element wise Classification
(d)	Classification according to controllability

(1)

(iii)

Prime cost plus factory overheads is known as

(A)	Factory on cost
(B)	Conversion cost
(C)	Factory cost
(d)	Marginal cost

(1)

(iv)

Which of the following document gives quantitative record of material movement to and from stores?

(A)	Bin Card
(B)	Stores Ledger
(C)	Both above (A) and (B)
(d)	None of the above

(1)

(v)

Which of the following pricing methods is suitable in case material suffers loss in weight due to natural or climatic factors?

(A)	FIFO Method
(B)	UFO Method
(C)	Standard Price Method
(d)	Inflated Price Method

(1)

(vi)

Time lost due to power failure is called

(A)	Productive time
(B)	Normal Idle time
(C)	Abnormal Idle time
(d)	Absent time

(1)

(vii)

An important feature of a cost center is that

(A)	It uses only monetary information
(B)	It must be an area of business through which product would pass
(C)	It has clearly defined borders
(d)	It must be one specific location only

(1)

(viii)

Which of the following is not a pre–requisite for successful application of "Just–in–time" (JIT) approach?

(A)	Transportation facilities
(B)	Sufficient Storage Space
(C)	Robust Computerise System
(d)	Trained Workers and Staff

(1)

(ix)

Which of the following cannot be treated as normal idle time?

(A)	Preventive Maintenance
(B)	Training Programme
(C)	Tea, Lunch etc.
(d)	Waiting for Instruction.

(1)

(x)

Re–ordering Level of inventory may be fixed by

(A)	Maximum usage × Maximum Lead time
(B)	Maximum usage × Minimum Lead time
(C)	Minimum usage × Maximum Lead time Average
(d)	Average usage × Maximum Lead time

(1)

(b)

Match the following:

Business		Cost Unit
(i) (ii) (iii) (iv)	Tele–Marketing Power B.P.O. Service Professional Service	(A) (B) (C) (D)	Accounts Handled Chargeble Hours Killowatt Hour Customer Calls made

1x4=4

(1)

(c)

State with reasons whether the following statements are True or False:

2x8=16

(i)

Process costing method is suitable for coal industry.

(0)

(ii)

Carriage outward is the part of production overhead.

(0)

(iii)

LIFO method is considered suitable in time of falling prices.

(0)

(iv)

Normal losses are controllable.

(0)

(v)

Time rate system of wages is useful when the quality of the product is extremely important.

(0)

(vi)

Generally high value and high number of items are classified as "A" category in ABC Analysis technique..

(0)

(vii)

Cost sheet ends with determination of "cost of goods manufactured".

(0)

(viii)

Overheads are common costs that are not specifically related to cost unit.

(0)

(a)

A company sells a single product for Rs. 12 per unit. The variable cost per unit is Rs. 9 and the fixed cost Rs. 2,85,000 per annum. Calculate the margin of safety in rupees, when the sales are Rs.14,40,000 for an accounting year.

(1)

(b)

Calculate average stock holding period for a material, if –
Opening Stock = Rs. 12,000
Purchase during the year = Rs. 53,000
Closing Stock = Rs. 10,000
(Assume 365 days in a year)

(1)

(c)

A firm’s basic labour rate is Rs. 5 per hour and overtime rates are one and half times for working late during the week and double the rate for working on weekends, Following details are given for two jobs:

Hours Recorded	Job A	Job B
Normal Time Overtime during the week Overtime on weekends	620 110 30	310 60 65

Calculate the labour cost chargeable to the jobs, when overtime is worked at the customer's request for early completion.

(0)

(a)

In a year, a company allows 7 holidays and all Sundays as weekly off. It works 8 hours a day from Monday to Friday and 4 hours on Saturday. The machine room works on a 95% capacity and normal maintenance time is assumed to be 10%, The following are the estimated expenses for 50 machines in the year.

Item	Rs.
Foreman’s Salary Lubricant and consumables Power consumed Lighting Depreciation Repairs & Maintenance	7,20,000 77,000 9,00,000 1,20,000 3,75,000 8,60,000
Total	30,52,000

Calculate the Machine Hour Rate.

(0)

(b)

State how the following independent situations will affect Break Even Point?

(i)	Increase in Angle of Incidence;

(ii)	15% increase in selling price and variable cost;

(iii)

Decrease in contribution margin by Rs.3 per unit;

(iv)	Selling price increase by 10%.

1x4=4

(0)

(a)

A factory has two production departments (P₁, P₂) and one service department(S). The following overheads and other information are extracted from the books for the month or December 2011:

Overheads	Amount in Rs.
Rent Repairs Depreciation Lighting Supervision Fire Insurance for stock P.E Contribution Electricity	12,000 7,200 5,400 1,200 18,000 6,000 1,800 10,800

Particulars	P₁	P₂	S
Area occupied in sq. ft. No. of workers Wages (Rs.) Value or Plant (Rs.) Stock value (Rs.) Horse Power of Plant	600 100 60,000 72,000 35,000 600	400 50 60,000 36,000 25,000 400	200 30 60,000 36,000 – 200

You are to required to apportion the overheads among the various departments on a suitable basis.

(0)

(b)

Daily requirement of material ‘X’ is 200 units and price per unit Rs. 60. Ordering cost Rs. 200 per order and inventory carrying cost is 10% on average inventory. Calculate the Economic Order Quantity, if the normal working days in a month are 25.

(1)

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