CWA ICWA Inter Group I : Financial Accounting - December 2008

CWA ICWA Inter - Group I • Financial Accounting • December 2008

This Paper has 25 answerable questions with 3 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 from the rest.
Marks

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

(a)

Distinguish between shares and stock.

(0)

(b)

Match the following items shown below:

I
II
III

Cash Reserve
Clear Profit
Escalation clause

I
II
III

Electric Supply Co.
Construction Company
Banking Company

(1)

(c)

Choose the correct answer:
The amortization of amount of software commences from the date when it is

(i)
(ii)
(iii)

Available for use
Put to use
Developed upto 75%.

(0)

(d)

Match the following

I
II
III
IV

AS — 1
AS — 3
AS — 4
AS — 10

I
II
III
IV

Contingencies and events occurring after the Balance Sheet date
Accounting for Fixed Assets
Disclosure of Accounting policies
Cash flow statement.

(1)

(e)

What is meant by Reversionary Bonus?

(0)

(f)

A non–profit organisation has furnished the following data in connection with finalisation of accounts for the year ended 31st March 2008:

	Rs.
Membership subscriptions received as per books Subscription in arrear for 2007–08 Contribution to indoor games section included in item no. one above Advance receipt of subscriptions (for 2008–09) Subscription outstanding for 2006–07 now received	57,000 1,400 2,000 480 3,000

The amount of subscription to be taken as income for 2007–08 is

Rs. 57,000

Rs. 51,520

Rs. 55,000

Rs. 52,920

Select the correct one.

(1)

(g)

A & B are two partners of a firm sharing the profits & losses in the ratio of 7/12 and 5/12 respectively. On 1st April 2008 they take C as a partner giving him 1/6 share. A & B agreed further to share the future profits in the ratio of 13/24 and 7/24 respectively. C, in addition to his capital, brings in Rs. 96,000 as his goodwill for 1/6 share. The goodwill amount is to be shared between A & B.
The share of goodwill amount of A & B respectively will be:

A:	Rs. 24,000 and Rs. 72,000
B:	Rs. 72,000 and Rs. 24,000
C:	Rs. 56,000 and Rs. 40,000
D:	Rs. 52,000 and Rs. 44,000

Choose the correct one.

(0)

(h)

Choose the correct answer:
Under the hire–purchase system the buyer becomes the owner of goods:

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

Immediately after the delivery of goods
Immediately after the down payments
Immediately after the first installment is paid
Immediately after the payment of last installment.

(0)

(a)

From the following information relating to ND Ltd, prepare a Balance Sheet as on 31.12.2007.

Current Ratio — 2
Fixed Assets/shareholders’ net worth — .60
Reserve & Surplus/share capital — .25
Average Debt collection period — 2 months
G.P. Ratio — 25%
Cost of sales/closing stock — 9 times
Net working Capital — Rs. 4,00,000
Liquid Ratio — 1.5

(0)

(b)

Mention any five purposes for which share premium account can be utilised.

(0)

(a)

Kanpur Electric Supply Company rebuild and reequipped one of their plant at a cost of Rs. 80,00,000. The old plant thus, superceded, cost of Rs. 30,00,000. The capacity of new plant is thrice of the old plant. Rs. 1,00,000 realised from sale of old materials. Four old motors valued at Rs. 2,00,000 salvaged from old plant, were used in the construction. The cost of labour and material was respectively 20% and 25% lower than now.
The proportion of labour to material in the plant then and now in 2 : 1. Show the journal entries for recording the above transactions if accounts are maintained under double entry system.

(0)

(b)

Mention any five areas in which different accounting policies may be adopted by different enterprises.

(0)

(a)

Suchandra, Ashmita and Kasturi were running partnership business sharing Profit and Losses in 2 : 2 : 1 ratio.
Their Balance Sheet as on 31.03.2008 stood as following:

(Rs. in 000’s)
Liabilities	Rs.	Rs.	Assets	Rs.	Rs.
Fixed Capital: Suchandra Ashmita Kasturi Current Account: Suchandra Kasturi Unsecured Loan Current Liabilities	690.00 460.00 230.00 138.00 92.00	1,380.00 230.00 230.00 345.00 2,185.00	Fixed Assets Investment Current Assets: Stock Debtors Cash at Bank	230.00 632.50 287.50	920.00 115.00 1,150.00 2,185.00

On 1.4.2008, they agreed to form new company Tata (P) Ltd. with Ashmita and Kasturi each taking up 460 eq. share of Rs. 10 each, which shall take over the firm as going concern including Goodwill, but excluding cash and bank balance.
The following are also agreed upon:

(a)	Goodwill will be valued at 3 years purchase of super profit.
(b)	The actual profit for the purpose of Goodwill valuation will be Rs. 4,60,000.
(c)	The normal rate of return will be 18% p.a. on Fixed Capital.
(d)	All other assets and liabilities will be taken at Book value.
(e)	Ashmita and Kasturi are to acquire interest in the new company at the ratio 3 : 2.
(f)	The purchase consideration will be payable partly in shares of Rs. 10 each and partly in cash. Payment in cash being to meet the requirement to discharge Suchandra, who has agreed to retire.
(g)	Realisation expenses amounted to Rs. 1,17,300.

You are required to close the books of the firm by passing necessary journal entries.

(0)

(b)

Write short notes on treatment of abnormal losses in Branch Account.

(0)

(a)

Following balances have been extracted from the books of an electricity company at the end of 2007:

	(Figures in ’000)
Share Capital Reserve fund (investment in 4.5% Govt. securities at par) Contingencies reserve investment in 5% State Loan 8% debentures Loan from State Electricity Board Development Reserve Fixed Assets Depreciation reserve on fixed assets Consumer deposit Amount contributed by consumer for fixed assets Intangible assets Tariffs and dividend control reserve Current Assets (monthly average)	1,00,00 50,00 10,00 20,00 40,00 10,00 2,00,00 50,00 55,00 1,00 5,00 5,00 20,00

The company earns a profit of Rs. 8,50,000 (after tax) in 2007. Show how the profit is to be dealt with by the company, assuming bank rate is 5%.

(0)

(b)

Distinguish between Statutory Reserve and Cash Reserve in respect of Banking Companies.

(0)

(a)

The income and expenditure account of an association for the year ended 31st March 2008 is as under:

		Rs.		Rs.
To	Salaries Printing and Stationery Telephone Postage General expenses Interest and bank charges Adult fees Annual dinner expenses Depreciation Surplus Total	1,20,000 6,000 1,500 500 12,000 5,500 2,500 25,000 7,000 30,000 2,10,000	By Subscription Entrance fee Contribution for dinner	1,70,000 4,000 36,000 2,10,000

The aforesaid income and expenditure account has been prepared after the following adjustments:

Subscription outstanding as on 31st March 2007
Subscription outstanding on 31st March 2008
Subscription received in advance as on 31st March 2007
Subscription received in advance as on 31st March 2008
Salaries outstanding as on 31st March 2007
Salaries outstanding as on 31st March 2008
Audit fees for 2006–2007 paid during 2007–2008
Audit fee for 2007–2008 not paid
The building owned by the association since 1990 costs
Equipment as on 31st March, 2007 valued at
At the end of the year after depreciation of Rs. 7,000, equipment amounted to
In 2006–2007, the association raised a bank loan of which is still not paid
Cash in hand as on 31st March 2008

16,000
18,000
13,000
8,400
6,000
8,000
2,000
2,500
1,90,000
52,000
63,000
30,000
28,500

You are required to prepare Receipts and Payments Account of the association for the year ended 31st March 2008 and the Balance Sheet as at that date.

(0)

(b)

Distinguish between ‘Receipts and Payments Account’ and ‘Income and Expenditure Account’.

(0)

(a)

The summarized balance sheet of A Co. Ltd. as on 30th June 2008 is as under:
Share Capital:

10% redeemable preference shares of Rs. 100 each
Equity shares of Rs. 10 each
12% Debentures
Revenue reserves
Total
Represented by Net assets

10,00,000
15,00,000
7,00,000
40,00,000
72,00,000
72,00,000

The redeemable preference shares were due for redemption on 31st August 2008 and were redeemed and duly paid off. The company is permitted to redeem the debentures at any time at a premium of 10% and did so on 30th September 2008.

The company was in a reasonably liquid position but to assist in providing funds for redemption of the redeemable preference shares, a rights issue of equity shares was made. 20000 equity shares were issued for cash at a premium of Rs. 20 per share, Rs. 12.50 payable on application on 15th July 2008 and the balance on allotment on 31st July 2008. All cash due was received on the due dates.
During the three months ended 30th September 2008, the company traded at a profit of Rs. 2,50,000.
Required:

(i)	Pass journal entries (including cash transactions) showing the relevant entries in respect of the above.
(ii)	Prepare summarized balance sheet of the company as on 30th September 2008.

(0)

(b)

State the prerequisites to be complied with by a company for issue of shares at a discount.

(0)

Write notes on:

3x5

(a)

Re–insurance;

(0)

(b)

Double Accounting system;

(0)

(c)

Bonus shares;

(0)

(d)

Segment reporting;

(0)

(e)

Materiality concept.

(0)

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