Professional Documents
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(a) Both (I) and (IV) above (b) Both (II) and (III) above
(c) (I), (II) and (III) above (d) (II), (III), (IV) and (V) above
(e) (I), (II), (III) and (IV) above.
(1 mark)
< Answ
34. The excess price received over the par value of shares should be credited to
(a) Calls-in-advance account (b) Share capital account
(c) Reserve capital account (d) Share premium account
(e) Share allotment account.
(1 mark)
< Answ
35. The claims against the company not acknowledged as debts are shown as
(a) Current liabilities (b) Loans and advances
(c) Notes to balance sheet (d) Directors’ report
(e) No separate disclosure is required.
(1 mark)
< Answ
36. The amount of any transaction incorrectly recorded, either wholly or partly, is
(1 mark)
< Answ
46. While finalizing the accounts of M/s. Novelty India for the year ended March 31, 2004, the following
errors were noticed:
Salaries overstated Rs.15,000
Repairs understated Rs. 7,000
Income from investments understated Rs. 7,000
The impact of the above errors on the net profit is
(a) Overstatement of Rs.22,000 (b) Understatement of Rs.22,000
(c) Understatement of Rs.15,000 (d) Understatement of Rs. 7,000
(e) Overstatement of Rs. 7,000.
(1 mark)
< Answ
47. As on March 31, 2004, the favourable balance of Mr.Prahlad as per bank pass book is Rs.20,000. The
pass book balance did not agree with the balance as per cash book. On scrutiny, the following omissions
and commissions were noticed:
• A cheque for Rs.4,000 issued to Mr.Pramod has not been presented for payment till
date.
• Mr.Jeevan, a tenant, directly deposited into the bank account an amount of Rs.10,000
towards rent and the same is not accounted in the cash book.
• A cheque for Rs.15,000 deposited in the bank is not yet realized.
• The interest on debentures for this year, directly collected by the bank, amounted to
Rs.10,000 and the same is not accounted in the cash book.
The bank balance as per cash book is
(a) Debit balance of Rs.11,000 (b) Credit balance of Rs.11,000
(c) Credit balance of Rs.20,000 (d) Debit balance of Rs. 40,000
(e) Debit balance of Rs.19,000.
(2 marks)
< Answ
48. Consider the following information pertaining to Xylofone Ltd.:
On April 01, 2003, the Provision for bad debts account showed a credit balance of Rs.30,000. As on
March 31, 2004, the status of the following debtors is
• Mr. A had become insolvent and only 40 paise in a rupee is expected to be
realized out of his estate in full settlement. He owed a total amount of Rs.20,000
• Mr. B who owes an amount of Rs.10,000 became bankrupt and it was understood
that no amount will be recovered from him.
• Mr. C has agreed to pay Rs.3,000 as final settlement against his due of Rs.10,000
and the balance is irrecoverable.
If the company decided to maintain the provision at Rs.35,000 as on March 31, 2004, the amount to be
debited to Profit and loss account for the year ending March 31, 2004, after considering the above, is
(a) Rs. 34,000 (b) Rs. 29,000 (c) Rs. 26,000 (d) Rs. 35,000 (e) Rs.
64,000.
(2 marks)
< Answ
49. On April 01, 2002, Ray Ltd. purchased furniture for Rs.60,000. The book value of the furniture on
March 31, 2004 is Rs.43,350. If the company charges depreciation on furniture under written down
value method, the rate of depreciation is
(a) 35% (b) 30% (c) 25% (d) 20% (e)
15%.
(1 mark)
< Answ
50. M/s.Pie Company, a dealer in herbal creams records its stock under First-in-First-out method, so as to
minimize accumulation of outdated stock. The opening stock as on
March 01, 2004 is 150 units at the rate of Rs.20 per unit. The purchases and sales made during the
month are:
Purchases:
Date No. of units Cost price per unit
04-03-2004 200 Rs.25
14-03-2004 100 Rs.22
21-03-2004 300 Rs.30
26-03-2004 150 Rs.40
Sales:
Date No. of units
03-03-2004 100
10-03-2004 150
15-03-2004 100
25-03-2004 200
28-03-2004 200
Closing stock of the company as on March 31, 2004 is
(a) Rs.1,500 (b) Rs.6,000 (c) Rs.3,000 (d) Rs.4,500 (e)
Rs.7,500.
(2 marks)
Consider the following data pertaining to Mr. Krishnan for the year ended March 31, 2004, and answer
Question No.s 51 and 52
Trial Balance as on March 31, 2004
Particulars Rs.
Cash Sales 6,80,000
Credit Sales 1,20,000
Bad debts written off 2,000
Issue of shares for cash 5,00,000
Purchase of fixed assets for cash 4,00,000
Depreciation 40,000
Amount received from bank by way of short-term loan 1,00,000
Short-term loan repaid during the year 25,000
Manufacturing and administrative expenses paid 3,50,000
Cash Purchases 1,50,000
Credit purchases 2,90,000
Amount deposited in bank 2,00,000
The balance of cash as on March 31, 2004 is
(a) Rs.1,15,000 (b) Rs.1,55,000 (c) Rs.1,13,000 (d) Rs.2,75,000 (e) Rs.2,33,000.
(2 marks)
< Answ
55. Consider the following data pertaining to Dhamaka Ltd.:
The company has issued 10,000 shares of Rs.100 each at a premium of Rs.15. M/s Underwriters &
Brokers have taken 100 percent underwriting at a percentage of maximum allowable commission under
the Companies Act, 1956. The applications were received for 10,000 shares and allotment was made in
full.
The commission payable to M/s Underwriters & Brokers is
(a) Rs.10,000 (b) Rs.57,500 (c) Rs.50,000 (d) Rs.25,000 (e)
Rs.28,750.
(2 marks)
< Answ
56. In the books of Pyramid Ltd. goods worth Rs.7,850 returned by Mr. Prakash were entered in the returns
inward day book. Therefrom, the inexperienced accountant posted the amount to the debit of
Mr.Prakash account.
At the time of preparation of trial balance, the difference in books was placed to suspense account. The
entry to be passed to rectify the mistake is
Rs. Rs.
(a) Returns inward account Dr. 7,850
To Suspense account 7,850
(b) Returns inward account Dr. 7,850
To Prakash account 7,850
(c) Suspense account 15,700
Dr.
To Prakash account 15,700
(d) Returns inward account Dr. 15,700
To Prakash account 15,700
(e) Prakash account Dr. 15,700
To Suspense account 15,700.
(2 marks)
< Answ
57. On March 31, 2004, the bank column of cash book of Sree Ltd. showed an overdraft balance of
Rs.3,400 and this balance did not agree with the balance as per bank pass book. On verification, the
following facts were noticed:
i. An outstation cheque for Rs.6,300 deposited in the bank on March 28, 2004 was not collected by
the bank till March 31, 2004.
ii. Bank charges amounting to Rs.120 and interest charges amounting to Rs.790 were not recorded in the cash
book.
iii. Cheques issued amounting to Rs.5,650 were not presented for payment as on March 31,
2004.
iv. Interest on investment of Rs.5,200 collected by the banker appeared only in the bank
statement.
The bank balance as per pass book as on March 31, 2004 was
(a) Rs. 2,060 (debit) (c) Rs.10,160 (debit)
(b) Rs. 2,060 (credit) (d) Rs. 240 (credit) (e) Rs. 240 (debit).
(2 marks)
< Answ
58. Consider the following particulars pertaining to the sole proprietor business of Mr. Katyal:
Particulars Rs.
Sales 5,65,000
Carriage inward 28,000
Other expenses 31,000
Fixed assets 10,90,000
Sundry debtors 1,25,000
Sundry creditors 95,000
Cash and bank 65,000
Capital 9,00,000
On verification, it was noticed that the difference in trial balance is on account of omission of
purchases. If the value of stock as on March 31, 2004 was Rs. 50,000, the gross profit for the year 2003-
2004 was
(a) Rs.3,66,000 (b) Rs.3,94,000 (c) Rs.3,48,000 (d) Rs.2,08,000 (e)
Rs.6,15,000.
(2 marks)
< Answ
60. The total of debit side of trial balance of M&M Company is Rs.2,45,000 and that of the credit side is
excess by Rs.2,68,900. Subsequently the following mistakes are discovered.
(2 marks)
< Answ
61. M/s.Saketha Enterprises introduced the imprest system of petty cash book, the amount of imprest being
Rs.1,000. The petty cash transactions during the month of March 2004 are as under:
Particulars Amount
(Rs.)
Stamps 145
Conveyance 186
Repairs 228
Stationery 154
Other office expenses 93
The amount of cash received on April 01, 2004 to make up the imprest balance is
(a) Rs.578 (b) Rs.194 (c) Rs.806 (d) Rs.422 (e)
Rs.1,000.
(1 mark)
< Answ
62. Brijesh Ltd. issued 10,000 equity shares of Rs.100 each at a premium of Rs.20 payable as follows:
On application Rs.30
On allotment Rs.50 (inclusive of premium)
On first call Rs.20
On final call Rs.20
Applications were received for 10,500 shares. The company rejected the excess applications for 500
shares and the balance were allotted in full. The company forfeited 500 shares of
Mrs. Mithili for non-payment of first call of Rs.20 per share after making the second call. On forfeiture,
the Share Capital account will be
(a) Debited by Rs.60,000 (b) Credited by Rs.10,000
(c) Debited by Rs.50,000 (d) Credited by Rs.50,000
(e) Debited by Rs.35,000.
(2 marks)
< Answ
63. Consider the following data pertaining to Jagriti Ltd. as on March 31, 2004:
The amount of provision for discount on sundry debtors to be created for the period ended
March 31, 2004 is
Rs.
Authorised Capital 10,00,000
Issued and Called-up capital 8,00,000
Calls-in-arrear 10,000
Calls-in-advance 20,000
Securities Premium 80,000
If the profit for the year 2003-04 is Rs.2,25,000, the minimum amount of profits that will have to be
compulsorily transferred to general reserve is
(a) Rs.16,875 (b) Rs.11,250 (c) Rs.22,500 (d) Rs.1,52,000 (e)
Rs.1,50,100.
(2 marks)
< Answ
72. Consider the following profits pertaining to Vennela Ltd. for the last 3 years:
Year Rs.
1 3,30,000
2 4,20,000
3 4,80,000
The weighted average profit of the company is
43,350
2
= 1– 60, 000
= 1 – 0.85 = 15%.
50. Answer : (b) < TOP
>
Reason :
Particulars Units
Total
750
Purchases
Opening stock 150
900
Less Sales 750
Closing stock 150
Since FIFO method of valuation is followed, the stock in hand will be that purchased on the latest date.
i.e 26-03-2004.
Hence closing stock = 150 Units × Rs.40 per Unit
= Rs.6,000
51. Answer : (a) < TOP
>
Reason : Trading account and Profit and loss account for the year ended March 31, 2003.
Dr. Cr.
Particulars Rs. Particulars Rs.
To Opening stock 30,000 By Sales 5,10,000
Less: Returns
To Purchases 4,50,000 10,000 5,00,000
inward
Less: Returns
15,000 4,35,000
outward
To Salaries and wages 10,000
To Rent paid 5,000
To Insurance 4,000
To freight inward 5,500
To Manager’s commission 500 By Net loss 4,500
To depreciation 12,550
To provision for bad debts 1,750
To bad debts 200
5,04,500 5,04,500
52. Answer: (b)
Reason:
Balance sheet of Krishnan as on March 31st, 2004
Liabilities Rs. Rs. Assets Rs. Rs.
Capital 2,00,000 Fixex assets 1,25,500
Less net loss 4,500 Less 12,550
depreciation
1,95,500 1,12,950
Sundry 45,500 Land 60,000
creditors
Sundry 35,000
debtors
Less 1,750
provision
33,250
Prepaid 1,000
insurance
Closing stock 10,000
Cash in hand 23,800
2,41,000 2,41,000
53. Answer : (b) < TOP
>
Reason :
Particulars Rs.
Original cost of furniture 5,000
Less Depreciation at the rate of
20%
Year – 1 1,000
4,000
Year – 2 800
3,200
Year – 3 640
2,560
Year – 4 512
Residual Value 2,048
Useful life – 4 years
54. Answer : (b) < TOP
>
Reason :
Particulars Rs.
Cash Sales 6,80,000
Issue of shares 5,00,000
Amount received from bank by way of 1,00,000
short-term loan
12,80,000
Less: Purchase of fixed assets 4,00,000
Short tem loan repaid 25,000
Payment towards expenses 3,50,000
Cash purchases 1,50,000
Amount deposited in bank 2,00,000
Cash balance as on March 31, 2004 1,55,000
55. Answer : (b) < TOP
>
Reason : Maximum underwriting commission Permissible under the companies Act, 1956 is 5% of issue price of
shares.
= 10,000 shares x Rs.115 X 5% = Rs.57,500.
56. Answer : (c) < TOP
>
Reason : The correct entry which must have been recorded is
Returns inward account Dr. Rs.7,850
To Prakash account Rs.7,850
Whereas, Prakash’s account is debited with Rs.7,850. Hence the rectification entry is
Suspense account Dr. Rs.15,700
To Prakash account Rs.15,700
57. Answer : (d) < TOP
>
Reason :
Particulars Rs. Rs.
Overdraft balance as per bank column of cash book 3,400
Add:
Cheques deposited not yet collected 6,300
Bank and interest charges not recorded in cash book 910
7,210
Less: 10,610
Cheques issued not yet presented for payment 5,650
Interest directly collected by bank 5,200 10,850
Credit balance as per pass book 240
58. Answer : (d) < TOP
>
Reason : According to the basic accounting equation, assets = liabilities + owners equity.
Hence owners equity = assets – liabilities.
Capital = Rs.2,45,000 + Rs.1,85,000 + Rs.95,000 + Rs.80,000 – (Rs.1,20,000 + Rs.40,000)
= Rs.6,05,000 – Rs.1,60,000 = Rs.4,45,000
Profit for the year 2003-2004 = Capital as on March 31, 2004 – Capital as on April 01, 2003
= Rs.4,45,000 – Rs.3,40,000 = Rs.1,05,000
Alternatively,
Liabilities Rs. Assets Rs.
Capital 4,45,000 Fixed Assets 2,45,000
(balancing figure)
Loan from bank 1,20,000 Inventory 1,85,000
Sundry Creditors 40,000 Sundry Debtors 95,000
Cash & Bank 80,000
6,05,000 6,05,000
Profit for the year 2003-2004 = Capital as on March 31, 2004 – Capital as on April 01, 2003
= Rs.4,45,000 – Rs.3,40,000 = Rs.1,05,000
59. Answer : (a) < TOP
>
Reason : Trial balance as on March 31, 2004
Dr. Cr.
Particulars
Amount (Rs) Amount (Rs)
Sales 5,65,000
Purchases (balancing figure) 2,21,000
Carriage inward 28,000
Other expenses 31,000
Fixed assets 10,90,000
Sundry debtors 1,25,000
Sundry creditors 95,000
Cash and bank 65,000
Capital 9,00,000
15,60,000 15,60,000
Trading account for the year ended March 31, 2004
Particulars Rs. Particulars Rs.
To Purchases 2,21,000 By Sales 5,65,000
To Carriage inward 28,000 By Closing stock 50,000
To Gross profit 3,66,000
6,15,000 6,15,000
60. Answer : (b) < TOP
>
Reason :
Particulars Rs.
Total of debit side of trial balance 2,45,000
Add: Advertisement expenses 15,000
Less: Opening stock (excess taken) 100
Total of trial balance (Debit side) 2,59,900
Particulars Rs.
Total of credit side of trial balance 2,68,900
Add: Interest on investments (less taken) 6,000
2,74,900
Less: Advertisement expenses (wrongly taken) 15,000
Total of trial balance (credit side) 2,59,900
61. Answer : (c) < TOP
>
Reason :
Amount Amount
Particulars
(Rs.) (Rs.)
Petty cash 1,000
Less: Stamps 145
Conveyance 186
Repairs 228
Stationery 154
Other office 93 806
expenses
194
Amount reimbursed 806
1,000
62. Answer : (c) < TOP
>
Reason : Since share money is called in full, the share capital account will be debited with Rs.50,000
i.e. No. of shares x Face value of share
= 500 x Rs.100 = 50,000.
63. Answer : (b) < TOP
>
Reason :
Dr. Trading and profit and loss account for the year ended March 31, 2004 Cr.
Particulars Rs. Particulars Rs.
To Opening stock 90,000 By Sales 6,35,000
To Purchases 4,56,000 By closing stock 75,000
To Gross profit 1,64,000
7,10,000 7,10,000
To Salaries 86,000 By Gross profit 1,64,000
To other expenses 73,000 By Net loss 70,000
To Depreciation 75,000
2,34,000 2,34,000
Balance sheet as on March 31, 2004
Liabilities Rs. Assets Rs.
Share capital 6,00,000 Fixed assets 4,25,000
Sundry creditors 32,000 Sundry debtors 45,000
Short tem loan 36,000 Closing stock 75,000
Cash and bank 53,000
Net loss 70,000
6,68,000 6,68,000
64. Answer : (a) < TOP
>
Reason : Costs that improve the revenue earning capability of an asset should be capatilised as part of the cost of
the asset (for example, Rs.40,000 paid for additional component for increasing the earning capacity).
However, costs that maintain the revenue earning capability (such as the maintenance charges and the
replacement parts) should be treated as revenue expenses and they are to be charged to the Profit and
Loss Account. The correct figure for depreciation calculation is therefore, as under:
Particulars Rs. Rs.
Cost less discount 4,70,000
Delivery charges 10,000
Erection charges 20,000
Customs duty 40,000 5,40,000
65. Answer : (a) < TOP
>
Reason :
Trial Balance of John Vicky as at March 31, 2004
Debt Balance Credit Balance
Sl.No Heads of Account
(Rs.) (Rs.)
1. Capital (1st April, 2002) 89,000
2. Drawings 10,000
3. Stock (1stApril, 2002) 37,000
4. Purchases 2,31,250
5. Sales 3,94,000
6. Motor Vehicles 14,500
7. Cash in Hand 1,350
8. Sundry Creditors 49,760
9. Sundry Debtors 139,700
10. Bank Overdraft 9,000
11. Administrative expenses 76,360
12. Office Equipment 35,000
13. Carriage Outward 2,310
14. Returns Inward 2,050
15. Provision for Bad Debts 4,250
16. Returns Outward 3,160
17. Discount Allowed 2,800
18. Discount Received 3,150
TOTAL 5,52,320 5,52,320
66. Answer : (d) < TOP
>
Rs.4,38,000 + Rs.4,62,000 + 4,50,000
Reason : Average profit = 3
Rs.13,50,000
= 3 = Rs.4,50,000
Average profit Rs.4,50,000
Normal rate of return on capital employed 12% on Rs.4,20,000
Rs.35,00,000
Super profit Rs. 30,000
67. Answer : (a) < TOP
>
Reason : Debtors as per trail balance Rs.40,600
Less: Bad debts written-off Rs. 600
Rs.40,000
Less: Provision for bad debts@ 5% Rs. 2,000
Rs.38,000
2
× Rs.38, 000 = Rs.760
Provision for discount on sundry debtors will be 100
68. Answer : (c) < TOP
>
Reason : Valuation of closing stock under Weighted Average Method
Purchases Issues Balance
Date Mar. 2004 Value Value Value
Quantity Rate Quantity Rate Quantity Rate
(Rs.) (Rs.) (Rs.)
1 Opening 1,000 20 20,000
Stock
10 500 23 11,500 1,500 21 31,500
15 750 21 15,750 750 21 15,750
20 1,000 26.25 26,250 1,750 24 42,000
31 750 24 18,000 1,000 24 24,000
Value of closing stock 1,000 24,000
69. Answer : (c) < TOP
>
Reason : Whenever trade discount is given, the same will not be separately disclosed and the sales will be shown
at net figure. However, cash discount should be taken to discount account. Hence cash account should be
debited with actual cash received (Rs.850), discount account should be debited with cash discount
allowed (Rs.50) and sales should be credited with catalogue price less trade discount (i.e Rs.900).
Cash a/c Dr. Rs.850
Discount a/c Dr. Rs. 50
To Sales a/c Rs. 900
70. Answer : (a) < TOP
>
Reason : Book value of the machinery = Rs.5,00,000
Value of machinery on revaluation = 20% above book value
Profit on revaluation = 20% of Rs.5,00,000
= Rs.1,00,000
Share of H. Ltd. = 80% of Rs.1,00,000
= Rs.80,000 (Capital profit)
If the value of assets of the subsidiary company are revalued at the time of acquisition of shares, profit
or loss on such revaluation is treated as capital profit or capital loss and is divided among minority
shareholders and holding company according to their share.
There is no revenue profit in the instant problem.
71. Answer : (a) < TOP
>
Reason : If the proposed dividend exceeds 15% but less than 20%, the minimum percentage of current profits that
will have to be transferred is 7.5% of current profits.
Rs.2,25,000 x 7.5% = Rs.16,875.
72. Answer : (b) < TOP
>
Reason :
Weighted average profit
Year 1 Rs.3,30,000 × 1 Rs. 3,30,000
Year 2 Rs.4,20,000 × 2 Rs. 8,40,000
Year 3 Rs.4,80,000 × 3 Rs.14,40,000
6 Rs.26,10,000
∴ Weighted average profit = Rs.26,10,000 ÷ 6 = Rs.4,35,000
The alternative amounts of (a), (c), (d) and (e) are not correct.
73. Answer : (d) < TOP
>
Current assets other than inventories 3 + 5
= = 2.5.
Reason : Quick ratio = Current liabilities 3.2
Hence, option (d) is the correct choice.
< TOP OF THE DOCUMENT >