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MASTER MINDS No.1 for CA/CMA & MEC/CEC

DISCLAIMER: Dear students,


a) Since CA is a professional course it is impossible to predict the questions / problems which may
come in the public examination.
b) We are not saying that it is enough to prepare the list of questions / problems given here. But
compared to other questions / problems, put more focus on the questions / problems listed below
and also questions / problems which are similar to questions / problems listed below.
c) There are chances of getting questions / problems in the model which are similar to questions /
problems listed below…but don’t expect exact questions / problems to repeat in the public
examination.
d) We have done this work based on the 34thedition of IPCC materials.
e) Don’t blame us even if you don’t get any questions from this list in the public exams of IPCC.
f) Even if you get good number of questions / problems from this list in the public examinations then it is
purely accidental.
g) Questions mentioned in this document are based on the following editions of books:
• Study Material (SM) – July 2015 edition
• Study Material for Taxation – Oct 2015 edition
• Practice Manual (PM) – July 2015 edition
• Practice Manual for Taxation – Oct 2015 edition
• RavikanthMiryala text book for Accounting Standards – 3rd edition
• Previous examination questions or problems can be referred in Scanner or similar text book.
h) If you are planning to attempt Group 1 only then atleast prepare the guess questions released by us
and attempt Group 2 also instead of leaving the Group 2 exams completely.
i) One’s May-2016 RTP & MTP are released; we will release Guess Questions from those RTP & MTP
also. So students shall not forget to refer those Questions / Problems also.

IPCC |Guess Questions– May 2016 – Accounts 2


MASTER MINDS No.1 for CA/CMA & MEC/CEC

ACCOUNTS
1. AVERAGE DUE DATE
1) Mr. Black accepted the following bills drawn by Mr. White.
Date of Bill Period Amount (Rs.)
09.03.2010 4 months 4,000
16.03.2010 3 months 5,000
07.04.2010 5 months 6,000
18.05.2010 3 months 5,000
He wants to pay all the bills on a single date. Interest chargeable is @ 18% p.a. and Mr. Black wants to save
Rs.150 on account of interest payment. Find out the date of on which he has to effect the payment to save
interest of Rs.150. Base date to be taken shall be the earliest due date.
2) Mr. Green and Mr. Red had the following mutual dealings and desire to settle their account on the average due
date:
Purchase by Green from Red Amount (Rs.)
th
6 January, 2011 6,000
2nd February, 2011 2,800
31st March, 2011 2,000
Sales by Green to Red:
Sales by Green to Red Amount (Rs.)
6th January, 2011 6,600
9th March, 2011 2,400
20th March 2011 500
You are asked to ascertain the average due date.
3) Rs.10,000 lent by Dass Bros. to Kumar & Sons on 1st January, 2008 is repayable in 5 equal annual installments
commencing on 1st January, 2009. Find the average due date and calculate interest at 5% per annum, which
Dass Bros. will recover from Kumar & Sons.
4) Mr. Yash and Mr. Harsh are partners in a firm. They drawn the following amounts from the firm during the year
ended 31.03.2015:
Date Amount (Rs.) Drawn by
01.05.2014 75,000 Mr. Yash
30.06.2014 20,000 Mr. Yash
14.08.2014 60,000 Mr. Harsh
31.12.2014 50,000 Mr. Harsh
04.03.2015 75,000 Mr. Harsh
31.03.2015 15,000 Mr. Yash
Interest is charged @ 10% p.a. on all drawings. Calculate interest chargeable from each partner by using
Average due date system. (Consider 1st May as base date)
5) Anand purchased goods from Amritha, the average due date for payment in cash is 10.08.2015 and the total
amount due is Rs. 67,500. How much amount should be paid by Anand to Amritha, if total payment is made on
following dates and interest is to be considered at the rate of 12% p.a. (SM,NOV-15)
i) On average due date. iii) On 30 July, 2015.
th

ii) On 25 August, 2015.


th

IPCC |Guess Questions– May 2016 – Accounts 3


MASTER MINDS No.1 for CA/CMA & MEC/CEC

2. ACCOUNT CURRENT
6) Following transaction took place between X and Y during the month of April, 2012.
April Particulars Rs.
1 Amount payable by X to Y 10,000
7 Received acceptance of X to Y for 2 months 5,000
10 Bills receivable (accepted by Y) on 7.2.2012 is honoured on this due date 15,000
12 X sold goods to Y (invoice dated 10.5.2012) 7,500
15 X received cheque form Y dated 15.5.2012 6,000
20 Y sold goods to X (invoice dated 15.5.2012) 1,000
20 X returned goods sold by Y on 15.4.2012 5,000
Bill accepted by Y is dishonoured on this due date
You are required to make out an account current by products method to be rendered by X to Y as on
30.4.2012, taking interest into account @ 10% p.a. (assume 1 year = 365 days).
7) Roshan has a current account with partnership firm. It has debit balance of Rs.75,000 as on 01-07-2012. He
has further deposited the following amounts:
Date Amount (Rs.)
14-07-2012 1, 38,000
18-08-2012 22,000
He withdrew the following amounts:
Date Amount (Rs.)
29-07-2012 97,000
09-09-2012 11,000
Show Roshan's A/c in the ledger of the firm. Interest is to be calculated at 10% on debit balance and 8% on
credit balance. You are required to prepare current account as on 30th September, 2012 by means of product
of balances method.

3. ACCOUNTING FOR BUSINESS ACQUISITION

8) ACS Ltd. was incorporated for taking over the business of B from 1st April, 2012. The following is the Balance
Sheet of B as on 31st March, 2012
Liabilities Rs. Assets Rs.
Capital 1,00,800 Tangible Fixed Assets 2,08,000
Loans 1,20,000 Sundry Debtors 84,000
Creditors 71,200
2,92,000 2,92,000
The company takes over the business with fixed assets and loans on the following terms:
i) The fixed assets should be depreciated at 10%.
ii) The value of goodwill is estimated at Rs.80,000
The company realized Rs.80,000 from sundry debtors as the agent of the Vendor in full settlement and
discharged all the trade creditors by paying Rs.68,000 for a commission of 3% on the amount collected and
2% on the amount paid.
The creditors accepted 10% preference shares of Rs.100 each in discharge of the loans. After realization of
the debts and discharge of the liabilities, the total amount due to the Vendor was settled by payment of
Rs.5,440 in cash and the balance in the share of fully paid equity shares of Rs.10 each.
Required: Show purchase consideration and pass journal entries in the books of the company. Also give the
Balance Sheet of the company after taking over the business of B.

IPCC |Guess Questions– May 2016 – Accounts 4


MASTER MINDS No.1 for CA/CMA & MEC/CEC
4. PROFIT OR LOSS PRIOR TO INCORPORATION
9) A firm which was carrying on business from 1st January, 2007 gets itself incorporated as a company on 1st
May, 2007. The first accounts are drawn up to 30th September, 2007. The gross profit for the period is
Rs.56,000. The general expenses are Rs.14,220; directors’ fees Rs.12,000 p.a.; formation expenses Rs.1,500.
Rent up to 30th June is Rs.1,200 p.a., after which it is increased to Rs.3,000 per annum. Salary of the
manager, who upon incorporation of the company was made a director, is Rs.6,000 p.a. His remuneration
thereafter is included in the above figure of fees to directors.
Give Profit and Loss Account showing pre-and post-incorporation profits. The net sales are Rs.8,20,000 the
monthly average of which for the first four months of 2007 is one half of that of the remaining period the
company earned a uniform profit. Interest and tax may be ignored.
10) Bidyut Limited was incorporated on 1st July, 2012 to acquire from Bijli as and from 1st January, the individual
business carried on by him. The purchase price of the fixed assets and goodwill was agreed to be the sum
equal to 80% of the profits made each year on ascertainment of the sum due.
The following Trial Balance as on 31st Dec., 2012 is presented to you to enable you to prepare a Balance
Sheet as at that date. Also draft a statement of appropriation of profit writing off the preliminary expenses.
Particulars Debit ( Rs.) Credit ( Rs.)
Share Capital – 1,500 equity shares
of Rs.100 each, Rs.80 paid up 1,20,000
Sundry Debtors 82,000
Stock on 31st Dec. 2012 67,000
Cash at bank and on hand 24,000
Directors’ fee 3,000
Preliminary expenses 24,000
Sundry Creditors 32,000
Net Profit for the year after providing for all expenses under
agreement entered into with Bijli. 48,000
2,00,000 2,00,000

11) BRIGHT Ltd. was formed to take over a running business of Mr. BRIGHT with effect from 1st April 20X1. The
company was incorporated in 1st Aug. 20X1 and the certificate of Commencement of business was received
on 1st Oct. 20X1. No entries relating to the transfer of the business were entered in the books which were
continued until 31st March 20X2. Trial Balance was extracted from the books as on 31st March 20X2
Journal
Particulars Dr. ( Rs.) Cr. ( Rs.)
Sales - 9,60,000
Cost of Goods Sold 7,77,000 -
Rent 40,000 -
Salaries 21,000 -
Travelling Expenses 8,400 -
Depreciation 4,800 -
Carriage outward 400 -
Printing & Stationary 2,400 -
Advertisement 8,000 -
Miscellaneous Expenses 12,600 -
Directors’ fees 600 -
Managing Director’s Remuneration 4,100 -
IPCC |Guess Questions– May 2016 – Accounts 5
MASTER MINDS No.1 for CA/CMA & MEC/CEC
Bad debts 1,600 -
Commission & Brokerage to Selling Agents 8,000 -
Audit Fees 3,000 -
Interest on Debentures 1,500 -
Interest paid to Vendors 2,100 -
Selling & Distribution Expenses 12,000 -
Preliminary Expenses 1,500 -
Underwriting Commission 900 -
Fixed Assets 3,65,000 -
Current Assets 43,800 -
BRIGHT’s capital as on 01.04.20X1 - 2,78,000
Current Liabilities - 30,700
Debentures - 50,000
Additional Information:
a) Total Sales for the year arose evenly up to the date of certificate of Commencement where after they
spurted to record an increase of two thirds during the rest of the year.
b) The Company deals in one type of product. The unit cost of goods sold was reduced by 10% since 1st
Aug. 20X1 as compared to the pre-incorporation period.
c) Rent of old office building was increased to the by 20% since 1st Nov. 20X1. It had to occupy additional
space from 1st July 20X1 for which rent was Rs.3,000 p.m.
d) The salaries were Tripled from 1st July 20X1
e) Travelling Expenses include Rs.2,400 towards sales promotion.
f) Depreciation includes Rs.300 for new assets acquired in Aug. 20X1.
g) Purchase consideration was discharged by the company on 30th Sept. 20X1 by issuing 30,000 Equity
Shares of Rs.10 each.
h) One third of the preliminary expenses and underwriting Commission are to be written off.
Required: Prepare the Profit & Loss Account in a Columnary form, showing the allocation of profits between
pre-incorporation and post-incorporation periods indicating the basis of allocation.
12) ABC Ltd. took over a running business with effect from 1st April, 2013. The company was incorporated on 1st
August, 2013. The following summarized Profit and Loss Account has been prepared for the year ended
31.3.2014:

Additional information:
a) Total sales for the year, which amounted to Rs.19,20,000 arose evenly up to the date of 30.9.2013.
Thereafter they spurted to record an increase of two-third during the rest of the year.
IPCC |Guess Questions– May 2016 – Accounts 6
MASTER MINDS No.1 for CA/CMA & MEC/CEC
b) Rent of office building was paid @ Rs.2,000 per month up to September, 2013 and thereafter it was
increased by Rs.400 per month.
c) Travelling expenses include Rs.4,800 towards sales promotion.
d) Depreciation include Rs.600 for assets acquired in the post incorporation period.
e) Purchase consideration was discharged by the company on 30th September, 2013 by issuing equity
shares of Rs.10 each.
Prepare Statement showing calculation of profits and allocation of expenses between pre and post
incorporation periods.
13) SALE Limited was incorporated on 01.08.2014 to take over the business of a partnership firm w.e.f.
01.04.2014. The following is the extract of Profit and Loss Account for the year ended 31.03.2015. (NOV-15)
Particulars Amount (Rs.) Particulars Amount (Rs.)
To Salaries 1,20,000 By Gross Profit 6,00,000
To Rent Rates & Taxes 80,000
To Commission on Sales 21,000
To Depreciation 25,000
To Interest on Debentures 32,000
To Director Fees 12,000
To Advertisement 36,000
To Net Profit for the year 2,74,000
6,00,000 6,00,000
i) SALE Limited initiated an Advertising campaign which resulted increase in monthly average sales by 25%
post incorporation.
ii) The Gross profit ratio post incorporation increased to 30% from 25%.
You are required to apportion the profit for the year between pre-incorporation and post-incorporation, also
explain how pre-incorporation profit is treated in the accounts.
14) The partnership of Surya Agencies decided to convert the partnership into Private Limited Company named
Sohna Company Pvt. Ltd. with effect from 1st January, 2014. The consideration was agreed at Rs.2,34,00,000
based on firm’s Balance Sheet as on 31st December, 2013. However, due to some procedural difficulties, the
company could be incorporated only on 1st April, 2014. Meanwhile, the business was continued on behalf of
the company and the consideration was settled on that day with interest at 12% p.a. The same books of
accounts were continued by the company, which closed its accounts for the first time on 31st March, 2015 and
prepared the following summarized Profit and Loss account.

The company’s only borrowing was a loan of Rs.1,00,00,000 at 12% p.a. to pay the purchase consideration
due to the firm and for working capital requirements. The company was able to double the monthly average
sales of the firm from 1st April, 2014, but the salaries trebled from the date. It had to occupy additional space
from 1st July,2014 for which rent was Rs.60,000 per month.
Prepare a statement showing apportionment of costs and revenue between pre-incorporation and post-
incorporation periods.

IPCC |Guess Questions– May 2016 – Accounts 7


MASTER MINDS No.1 for CA/CMA & MEC/CEC

5. INSURANCE CLAIMS
15) A fire occurred in the premises of Agni on 25-8-2004 when a large part of the stock was destroyed. Salvage
was Rs.15,000. Agni gives you the following information for the period 01-01-04 to 25-8-2004.
 Purchases Rs.85,000.
 Sales Rs.90,000.
 Goods costing Rs.5,000 were taken by Agni for personal use.
 Cost price of stock on 1-1-2004 was Rs.40,000. Over the past few years, Agni has been selling goods at a
consistent gross profit margin of 33.33%.
The insurance policy was for Rs.50,000. It included an average clause. Agni asks you to prepare a statement
of claim to be made to the insurance company.
16) On 30th June, 2004, accidental fire destroyed a major part of the stocks in the godown of Jay Associates.
Stock costing Rs.30,000 could be salvaged but not their stores ledgers. A fire insurance policy was in force
under which the sum insured was Rs.3,50,000. From available records, the following information was
retrieved:
a) Total of sales invoices during the period April-June amounted to Rs.30,20,000. An analysis showed that
goods of the value of Rs.3,00,000 had been returned by the customers before the date of the fire.
b) Opening stock on 1.4.2004 was Rs.2,20,000 including stocks of value of Rs.20,000 being lower of cost
and net value subsequently realised.
c) Purchases between 1.4.2004 and 30.6.2004 were Rs.21,00,000.
d) Normal gross profit rate was 33 1/3% on sales
e) A sum of Rs.30,000 was incurred by way of firefighting expenses on the day of the fire.
Prepare a statement showing the insurance claim recoverable.
17) A trader intends to take a loss of profit policy with indemnity period of 6 months, however he could not decide
the policy amount:
Turnover in last financial year Rs. 4,50,000
Standing charges in last financial year Rs. 90,000
Net profit earned in last year was 10% of turnover and the same trend expected in subsequent year. Increase
in turnover expected 25%.
To achieve additional sales, trader has to incur additional expenditure of Rs.31,250
18) On 1st April, 2011 the stock of Shri Ramesh was destroyed by fire but sufficient records were saved from which
following particulars were ascertained:
Particulars Rs.
Stock atcost-1st January, 2010 73,500
st
Stock at cost-31 December, 2010 79,600
st
Purchases-year ended 31 December, 2010 3,98,000
st
Sales-year ended 31 December, 2010 4,87,000
Purchases 1.1.2011 to 31.3.2011 1,62,000
Sales 1.1.2011 to 31.3.2011 2,31,200
st
In valuing the stock for the Balance Sheet at 31 December, 2010 Rs.2,300 had been written off on certain
stock which was a poor selling line having the cost Rs.6,900. A portion of these goods were sold in March,
2011 at loss of Rs.250 on original cost of Rs.3450. the remainder of this stock was now estimated to be worth
its original cost. Subject to the above exception, gross profit had remained at a uniform rate throughout the
year.
The value of stock salvaged was Rs.5,800. The policy was for Rs.50,000 and was subject to the average clause.
Work out the amount of the claim of loss by fire.
IPCC |Guess Questions– May 2016 – Accounts 8
MASTER MINDS No.1 for CA/CMA & MEC/CEC
19) CCL wants to take up a loss of profit policy. Turnover during the current year is expected to increase by 20%.
The company will avail overdraft facilities from its bank @ 15% interest to boost up the sales. The average
daily overdraft balance will be around Rs.3 lakhs. All other fixed expenses will remain same. The following
further details are also available from the previous year’s account.
Particulars Rs.
Total variable expenses 24,00,000
Fixed expenses:
Salaries 3,30,000
Rent, Rates and Taxes 30,000
Travelling expenses 50,000
Postage, Telegram, Telephone 60,000
Director’s fees 10,000
Audit fees 20,000
Miscellaneous income 70,000
Net profit 4,20,000
Determine the amount of policy to be taken for the current year.
20) Monalisa & Co runs plastic goods shop. Following details are available from quarterly sales tax return filed.

Sales 2009 2010 2011 2012


From 1st January to 31st March 1,80,000 1,70,000 2,05,950 1,62,000
From 1st April to 30th June 1,28,000 1,86,000 1,93,000 2,21,000
From 1st July to 30th September 1,53,000 2,10,000 2,31,000 1,75,000
From 1st October to 31st December 1,59,000 1,47,000 1,90,000 1,48,000
TOTAL 6,20,000 7,13,000 8,19,950 7,06,000

Period Rs.
Sales from 16.09.2011 to 30.09.2011 34,000
Sales from 16.09.2012 to 30.09.2012 Nil
Sales from 16.12.2011 to 31.12.2011 60,000
Sales from 16.12.2012 to 31.12.2012 20,000

A Loss of Profit Policy was taken for Rs.1,00,000. Fire occurred on 15th September 2012. Indemnity Period
was for 3 months. Net Profit was Rs.1,20,000 and Standing charges (all insured) amounted to Rs.43,990 for
year ending 2011. Determine the Insurance Claim.
21) From the following particulars, you are required to calculate the amount of claim for Buildwell Ltd., whose
business premises was partly destroyed by fire:
Sum insured (from 31st December 2013) Rs. 4,00,000
Period of indemnity 12 months
Date of damage 1st January, 2014
Date on which disruption of business ceased 31st October, 2014

IPCC |Guess Questions– May 2016 – Accounts 9


MASTER MINDS No.1 for CA/CMA & MEC/CEC
The subject matter of the policy was gross profit but only net profit and insured standing charges are included.
The books of account revealed:
a) The gross profit for the financial year 2013 was Rs. 3,60,000.
b) The actual turnover for financial year 2013 was Rs. 12,00,000 which was also the turnover in this case.
c) The turnover for the period 1st January to 31st October, in the year preceding the loss, was Rs.
10,00,000.
During dislocation of the position, it was learnt that in November-December 2013, there has been an upward
trend in business done (compared with the figure of the previous years)and it was stated that had the loss not
occurred, the trading results for 2014 would have been better than those of the previous years.
The Insurance company official appointed to assess the loss accepted this view and adjustments were made
to the pre-damaged figures to bring them up to the estimated amounts which would have resulted in 2014.
The pre-damaged figures together with agreed adjustments were:

Rate of Gross Profit 30% (actual for 2013), 32% (adjusted for 2014).
Increased cost of working amounted to Rs. 1,80,000.
There was a clause in the policy relating to savings in insured standard charges during the indemnity period
and this amounted to Rs. 28,000.
Standing Charges not covered by insurance amounted to Rs. 20,000 p.a. The annual Turnover for January
was nil and for the period February to October 2014 Rs. 8,00,000
22) Ramda & Sons had taken out policies (without Average Clause) both against loss of stock and loss of profit,
for Rs.2,10,000 and Rs.3,20,000 respectively. A fire occurred on 1st July, 2011 and as a result of which sales
were seriously affected for a period of 3 months.
Trading and Profit & Loss A/c of Ramda & Sons for the year ended on 31st March, 2011 is given below:

IPCC |Guess Questions– May 2016 – Accounts 10


MASTER MINDS No.1 for CA/CMA & MEC/CEC
a) Sales, Purchases, Wages and Manufacturing Expenses for the period 1.04.2011 to 30.06.2011 were
Rs.3,36,000, Rs.2,14,000, Rs.51,000 and Rs.12,000 respectively.
b) Other Sales figure were as follows Rs.
From 01.04.2010 to 30.06.2010 3,00,000
From 01.07.2010 to 30.09.2010 3,20,000
From 01.07.2011 to 30.09.2011 48,000
c) Due to decrease in the material cost, Gross Profit during 2011-12 was expected to increase by 5% on
sales.
d) Rs.1,98,000 were additionally incurred during the period after fire. The amount of policy included
Rs.1,56,000 for expenses leaving Rs.42,000 uncovered.
Compute the claim for stock, loss of profit and additional expenses
23) A fire occurred in the premises of M/s. Kailash & Co. on 30th September 2013. From the following particulars
relating to the period from 1st April 2013 to 30th September 2013, you are required to ascertain the amount of
claim to be filed with the Insurance Company for the loss of Stock. The company has taken an Insurance
policy for Rs.75,000 which is subject to average clause. The value of goods at Rs.27,000. The average rate of
Gross Profit was 20% throughout the period. (MM-Similar Pr-10, PM,SM)

6. INVESTMENT ACCOUNTS
24) Mr. Brown has made following transactions during the financial year 2011-12:

Date Particulars
Purchased 24,000 12% Bonds of Rs.100 each at Rs.84 cum-interest. Interest is
01.05.2011
Payable on 30th September and 31st March every year.
Purchased 1,50,000 equity shares of Rs.10 each in Alpha Limited for Rs.25 each
15.06.2011
Through a broker, who charged brokerage @ 2%.
Purchased 60,000 equity shares of Rs.10 each in Beeta Limited for Rs.44 each
10.07.2011
Through a broker, who charged brokerage @2%.
14.10.2011 Alpha Limited made a bonus issue of two shares for every three shares held.
31.10.2011 Sold 80,000 shares in Alpha Limited for Rs.22 each.
01.01.2012 Received 15% interim dividend on equity shares of Alpha Limited.
Beeta Limited made a right issue of one equity share for every four shares held at Rs.5
15.01.2012 per share. Mr. Brown exercised his option for 40% of his entitlements and sold the
balance rights in the market at Rs.2.25 per share.
01.03.2012 Sold 15,000 12% Bonds at Rs.90 ex-interest.
15.03.2012 Received 18% interim dividend on equity shares of Beeta Limited.
Interest on 12% Bonds was duly received on due dates.
Prepare separate investment account for 12% Bonds, Equity Shares of Alpha Limited and Equity Shares of Beeta
Limited in the books of Mr. Brown for the year ended on 31st March, 2012.

IPCC |Guess Questions– May 2016 – Accounts 11


MASTER MINDS No.1 for CA/CMA & MEC/CEC
25) Bharat Ltd. Wants to re- classify its investments in accordance with AS-13. Decide on the amount of transfer,
based on the following information
1. A portion of Current Investments purchased for Rs.20 lakhs, to be re-classified as Long Term
Investments, as the company has decided to retain them. The market value as on the date of Balance
sheet was Rs.25 lakhs.
2. Another portion of current investments purchased for Rs.15 lakhs, to be re-classified as long term
investments. The market value of these investments as on the date of balance sheet was Rs.6.5 lakhs.
3. Certain long term investments no longer considered for holding purposes, to be reclassified as current
investments. The original cost of these was Rs.18 lakhs but had been written down to Rs.12 lakhs to
recognize permanent decline, as per AS 13.
26) On 1st April, 2009, XY Ltd. has 15,000 equity shares of ABC Ltd. at a book value of Rs.15 per share (face
value Rs.10 per share). On 1st June, 2009, XY Ltd. acquired 5,000 equity shares of ABC Ltd. for Rs.1,00,000
on cum right basis. ABC Ltd. announced a bonus and right issue.
1. Bonus was declared, at the rate of one equity share for every five shares held, on 1st July 2009.
2. Right shares are to be issued to the existing shareholders on 1st September 2009. The company will issue
one right share for every 6 shares at 20% premium. No dividend was payable on these shares.
3. Dividend for the year ended 31.3.2009 were declared by ABC Ltd. @ 20%, which was received by XY Ltd.
on 31st October 2009. XY Ltd.
i) Took up half the right issue.
ii) Sold the remaining rights for Rs.8 per share.
iii) Sold half of its share holdings on 1st January 2010 at Rs.16.50 per share. Brokerage being 1%.
You are required to prepare Investment account of XY Ltd. for the year ended 31st March 2010 assuming the
shares are being valued at average cost.
27) The following information is presented by Mr. Z, relating to his holding in 9% Central Government Bonds.
Opening balance (face value) Rs.1,20,000, Cost Rs.1,18,000 (Face value of each unit is Rs.100).
1.03.2008 Purchased 200 units, ex-interest at Rs.98.
1.07.2008 Sold 500 units, ex-interest out of original holding at Rs.100.
1.10.2008 Purchased 150 units at Rs.98, cum interest.
1.11.2008 Sold 300 units, ex-interest at Rs.99 out of original holdings.
Interest dates are 30th September and 31st March. Mr. Z closes his books every 31st December. Show the
investment account as it would appear in his books.
28) On 1st January 2014, Singh had 20,000 equity shares in X Ltd. Face value of the shares was Rs. 10 each but
their book value was Rs. 16 per share. On 1st June 2014, Singh purchased 5,000 more equity shares in the
company at a premium of Rs. 4 per share.
On 30th June, 2014, the directors of X Ltd. announced a bonus and rights issue. Bonus was declared at the
rate of one equity share for every five shares held and these shares were received on 2nd August, 2014.
The terms of the rights issue were:
a) Rights shares to be issued to the existing holders on 10th August, 2014.
b) Rights issue would entitle the holders to subscribe to additional equity shares in the Company at the rate of one
share per every three held at Rs. 15 per share-the whole sum Being payable by 30th September, 2014.
c) Existing shareholders were entitled to transfer their rights to outsiders, either wholly or in Part.
d) Singh exercised his option under the issue for 50% of his entitlements and the balance of Rights he sold
to anent for a consideration of Rs. 1.50 per share.
e) Dividends for the year ended 31st March, 2014, at the rate of 15% were declared by the Company and
received by Singh on 20th October, 2014.
f) On 1st November, 2014, Singh sold 20,000 equity shares at a premium of Rs. 3 per share.
The market price of share on 31-12-2014 was Rs. 14. Show the Investment Account as it would Appear in
Singh’s books on 31-12-2014 and the value of shares held on that date.
IPCC |Guess Questions– May 2016 – Accounts 12
MASTER MINDS No.1 for CA/CMA & MEC/CEC
29) Smart Investments made the following investments in the year 2013-14:
12% State Government Bonds having face value Rs. 100 (SM, PM, MAY-14,RTP NOV 15)

30) On 01-04-2011, Mr. T. Shekharan purchased 5,000 equity shares of Rs.100 each in V Ltd. @Rs.120 each
from a broker, who charged 2% brokerage. He incurred 50 paisa perRs.100 as cost of shares transfer stamps.
On 31-01-2012 bonus was declared in the ratio of 1 : 2.Before and after the record date of bonus shares, the
shares were quoted atRs.175 per share and Rs.90 per share respectively. On 31-03-2012, Mr. T. Shekharan
sold bonus shares to a broker, who charged 2% brokerage. Show the Investment Account in the books of T.
Shekharan, who held the shares as Current Assets and closing value of investments shall be made at cost or
market value whichever is lower. (MM-Similar Pr-4,PM)
31) A limited purchased 5,000 equity shares (face value Rs.100 each) of Allianz limited for Rs.105 each on 1st
April, 2014. The shares were quoted cum dividend. On 15th May,2014. Allianz limited declared & paid dividend
of 2% for year ended 31st March,2014. On 30th June,2014 Allianz limited issued bonus shares in ratio of 1:5.
On 1st October,2014 Allianz limited issued right shares in the ratio of 1:12 @45 per share. A limited subscribed
to half of the rights issue and the balance was sold at Rs.5 per right entitlement. The company declared interim
dividend of 1% on 30th November, 2014. Right shares were not entitled to dividend. The company sold 3,000
shares on 31st December, 2014 at 95 per share. The company a ltd. Incurred 2% as brokerage while buying
and selling shares. You are required to prepare Investment Account in books of a ltd.
(SM,NOV 15,MTP OCT 15)

7. SELF BALANCING LEDGERS


32) From the following information, prepare Sales Ledger Adjustment A/c in the General Ledger:
Particulars Amount
On 1.4.2010: Balance in sales ledger (Dr.) 1,41,880
(Cr.) 2,240
On 31.3.2011:
Total sales 7,68,000
Cash sales 40,000
Sales return 10,000
Cash received from debtors 6,24,000
Discount allowed 11,200

IPCC |Guess Questions– May 2016 – Accounts 13


MASTER MINDS No.1 for CA/CMA & MEC/CEC
Cash paid to supplier 4,80,000
Transfer from sales to bought ledger 20,800
Discount received 7,200
B/R received 40,000
Reserve for doubtful debts 9,160
Cash paid to customer 1,840
Bills received dishonoured 6,000
Sales ledger balance (Dr.) 1,83,200
Sales ledger balance (Cr.) 13,720
33) Show rectifying journal entries for the following errors when (a) Sectional Ledgers and (b) Self-balancing
Ledgers are maintained.
1. A credit purchase of Rs.1,000 is entered in Sales Book, the suppliers of goods being Goodluck Co. Ltd.
2. Sales Book is found undercast by Rs.100.
3. Cash Received from a customer Mahendra Rs.1,870 is debited to Mohinder a supplier in Creditors
Ledger. Entry in the Cash Book is correct.
4. A discount of Rs.125 received from a supplier has not been recorded in the Cash Book although the
account of the supplier has been debited with Cash paid as well as discount received.
5. Rs.220, the amount of wages spent on installation of a new machinery has been debited to Wages A/c.
34) M.Govind keeps self-balancing ledgers. Record the following transactions in the General Ledger Adjustment
Account in the Sales Ledger:
Date Particulars
1.4.2010 Received Rs.475 from Mr. X in full settlement. He was allowed a discount of Rs.25.
2.4.2010 Received Rs.2,000 from Mr. Y towards his dues in full.
Goods supplied to Mr. T Rs.700 and received Rs.300 after adjustment of the advance of
3.4.2010
Rs.400.
4.4.2010 Bad debts recovered from Mr. Q Rs.1,000.
Goods sold to the following :
Mr. A Rs.1,000,
5.4.2010
Mr. B Rs.1,500
Mr. C Rs.2,000
15.4.2010 Mr. P paid Rs.750 towards dues. Balance thereafter due was Rs.250.
Amount received from the following :
Mr. A Rs.750
25.4.2010
Mr. B Rs.1,000
Mr. C Rs.2,000
30.4.2010 Advance received from Mr. R for supply Rs.2,000.
35) From the following particulars, prepare the Creditors' Ledger Adjustment Account as would, appear in the
General Ledger of Mr. Sathish for the month of March 2014. (MM-Similar Pr-5, PM)

IPCC |Guess Questions– May 2016 – Accounts 14


MASTER MINDS No.1 for CA/CMA & MEC/CEC

8. AMALGAMATION OF COMPANIES – 1
THEORY:
36) Distinguish between (i) the pooling of interests method and (ii) the purchase method of recording transactions
relating to amalgamation.
PROBLEMS:
37) The financial position of two companies Hari Ltd. and Vayu Ltd. as on 31st march, 2012 was as under
Name of the Companies : Hari Ltd and Vayu Ltd
Balance Sheet as at : 31st march 2012

Notes Hari Ltd Vayu Ltd


Particulars
No. ( Rs.) ( Rs.)
1 2 3 4
EQUITY AND LIABILITIES:
Shareholder’s funds
1 a Share capital 1 11,00,000 4,00,000
b Reserves and Surplus 2 70,000 70,000
Current liabilities
a Trade Payable(sundry creditors) 1,30,000 80,000
2 b Short term provisions 50,000 20,000
(Retirement and gratuity fund)
TOTAL 13,50,000 5,70,000
ASSETS:
Non-current assets
1 a Fixed assets
i Tangible assets 3 8,00,000 2,50,000
ii Intangible assets (Good will) 50,000 25,000
Current Assets
a Inventories (Stock) 2,50,000 1,75,000
b Trade receivables (Debtors) 2,00,000 1,00,000
2
c Cash and cash equivalents 50,000 20,000
(Cash at bank)
TOTAL 13,50,000 5,70,000

Notes to Accounts:

Particulars Hari ( Rs.) Vayu ( Rs.)


1. Shareholder’s funds:
Equity share capital (Rs.10 each) 10,00,000 3,00,000
9% preference share capital (Rs.100 each) 1,00,000 -
10% preference share capital (Rs.100 each) - 1,00,000
2. Reserves and Surplus:
General reserve 70,000 70,000
3. Tangible assets:
Building 3,00,000 1,00,000
Machinery 5,00,000 1,50,000

IPCC |Guess Questions– May 2016 – Accounts 15


MASTER MINDS No.1 for CA/CMA & MEC/CEC
Hari Ltd. absorbs Vayu Ltd. on the following terms:
a) 10% Preference Shareholders are to be paid at 10% premium by issue of 9% Preference Shares of Hari Ltd.
b) Goodwill of Vayu Ltd. is valued at Rs.50,000, Buildings are valued at Rs.1,50,000 and the Machinery at
Rs.1,60,000.
c) Stock to be taken over at 10% less value and Provision for Doubtful Debts to be created @ 7.5%.
d) Equity Shareholders of Vayu Ltd. will be issued Equity Shares @ 5% premium. Prepare necessary Ledger
Accounts to close the books of Vayu Ltd. And
Show the acquisition entries in the books of Hari Ltd. Also draft the Balance Sheet after absorption as at 31st
March, 2012
38) A Ltd. and B Ltd. were amalgamated on and from 1st April, 2012. A new company C Ltd. was formed to take
over the business of the existing companies. The summarized Balance Sheets of A Ltd. and B Ltd. as on 31st
March, 2012 are given below:

(Rs.in lakhs) (Rs.in lakhs)


Liabilities Assets
A Ltd. B Ltd. A Ltd. B Ltd.
Share Capital Fixed Assets
Equity Shares of Rs.100 Land and Building 550 400
each 800 750 Plant & Machinery 350 250
12% Preference shares of Investments 150 50
Rs.100 each 300 200 Current Assets,
Loans & Advances
Reserves and Surplus Stock 350 250
Revaluation Reserve 150 100 Sundry Debtors 250 300
General Reserve 170 150 Bills Receivable 50 50
Investment Allowance Cash and Bank 300 200
Reserve 50 50
Profit and Loss Account 50 30
Secured Loans
10% Debentures
(Rs.100 each) 60 30
Current Liabilities and
Provisions
270 120
Sundry Creditors
150 70
Bills Payable
2,000 1,500 2,000 1,500

Additional Information:
1. 10% Debenture holders of A Ltd. and B Ltd. are discharged by C Ltd. issuing such number of its 15%
Debentures of Rs.100 each so as to maintain the same amount of interest.
2. Preference shareholders of the two companies are issued equivalent number of 15% preference shares of
C Ltd. at a price of Rs.150 per share (face value of Rs.100).
3. C Ltd. will issue 5 equity shares for each equity share of A Ltd. and 4 equity shares for each equity share
of B Ltd. The shares are to be issued @ Rs. 30 each, having a face value of Rs.10 per share.
4. Investment allowance reserve is to be maintained for 4 more years.
Prepare the Balance Sheet of C Ltd. as on 1st April, 2012 after the amalgamation has been carried out on the
basis of Amalgamation in the nature of purchase.

IPCC |Guess Questions– May 2016 – Accounts 16


MASTER MINDS No.1 for CA/CMA & MEC/CEC
39) B Ltd. and C Ltd. were competing companies both of which had incurred losses in recent years. Their
respective balances sheets as on 30th June 2003 were as follows:
Name of the Companies: B Ltd.
Balance Sheet as at: 30th June 2003
Particulars Notes No. Rs.
1 2 3
EQUITY AND LIABILITIES:
Shareholder’s funds
1 a Share capital 1 1,00,000
b Reserves and Surplus 2 (19,420)
Non-current liabilities
2 a Other long term liabilities
Bank overdraft 6,050
Current liabilities
3 a Trade Payable(creditors) 18,560
TOTAL 1,05,190
ASSETS:
Non-current assets
1 a Fixed assets
i Tangible assets 3 44,600
ii Intangible assets 4 2,500
Current Assets
a Inventories (Stock) 42,460
2
b Trade receivables (Debtors) 15,630
TOTAL 1,05,190
Note to accounts:
Particulars Rs.
1. Share capital
10,000 equity shares of Rs.10 each fully paid up 1,00,000
2. Reserves and Surplus
Profit and Loss A/c (19,420)
3. Tangible Assets
Plants 40,000
Furniture & Fittings 4,600
4. Intangible Assets
Patents 2,500
Name of the Companies : C Ltd.
Balance Sheet as at: 30th June 2003
Particulars Notes No. Rs.
1 2 3
EQUITY AND LIABILITIES:
Shareholder’s funds
1 a Share capital 1 60,000
b Reserves and Surplus 2 640
Current liabilities
2 a Trade Payable (Creditors) 8,310
TOTAL 68,950

IPCC |Guess Questions– May 2016 – Accounts 17


MASTER MINDS No.1 for CA/CMA & MEC/CEC
ASSETS:
Non-current assets
1 a Fixed assets
i Tangible assets 3 24,280
ii Intangible assets 4 18,000
Current Assets
a Inventories (Stock) 16,990
2 b Trade receivables (Debtors) 9,550
Cash And Cash Equivalent 130
TOTAL 68,950
Note to Accounts:

Particulars Rs.
1. Share capital
12,000 Equity Shares of Rs.5 each fully paid 60,000
2. Reserves and Surplus
Profit and Loss A/c 640
3. Tangible Assets
Plants 21,000
Furniture & Fittings 3,280
4. Intangible Assets
Good Will 10,000
Patents 8,000
In order to eliminate competition & provide for more economical working as well as to make it possible to
introduce fresh capital, the following arrangements were made and carried into effect:
a) Both companies were to be wound up, a new company A Ltd. being formed to take over both businesses.
b) A Ltd. took over the floating assets of both companies at book value (but not C Ltd's cash) and the fixed
assets at the following valuation.

Particulars B Ltd C Ltd.


Goodwill 1,000 1,000
Patents 500 2,000
Plants 27,000 11,000
Furniture & Fittings 3,000 2,300
31,500 16,300
c) The consideration for the assets of B Ltd. was satisfied by the issue of 1,200 12% preference shares of
Rs.10 each and Rs.64,490 in Rs.10 equity shares of A Ltd. fully paid and the balance in cash and for the
assets of C Ltd. Rs.34,300 in Rs.10 equity shares of A Ltd. and the balance in cash.
d) The liquidator of B Ltd transferred the preference shares to a loan creditor of Rs.12,000 in satisfaction of
his claim. The equity shares were distributed pro-rata among the shareholders of each of the original
companies, the cash being just sufficient to satisfy the creditors of each company and the expenses of
liquidation to be borne by B Ltd. & C Ltd. amounted to Rs.500 and Rs.300 respectively.
e) In order to provide the necessary cash A Ltd. issued 100, 15% debentures of Rs.100 each at a discount of
5% and 1,800, 12% Preference Shares of Rs.10 each at par, these were fully paid up.
You are required to show the necessary opening entries in the books of A Ltd.

IPCC |Guess Questions– May 2016 – Accounts 18


MASTER MINDS No.1 for CA/CMA & MEC/CEC
40) The Balance Sheets 'P' Ltd. & 'Q' Ltd. as on 31.3.2003 were as follows:
Name of the Companies : P Ltd and Q Ltd.
Balance Sheet as at : 31.3.2003 ( Rs. in 000’s)

Notes P Ltd Q Ltd


Particulars
No. ( Rs.) ( Rs.)
1 2 3 4
EQUITY AND LIABILITIES:
Shareholder’s funds
1 a Share capital 1 20,000 4,000
b Reserves and Surplus 2 8,900 320
Current liabilities
2 a Trade Payable (Creditors) 500 210
TOTAL 29,400 4,530
ASSETS
Non-current assets
Fixed assets
1
a (i) Tangible assets 3 21,500 950
(ii) In tangible assets 4 2,000 -
(iii) Non-current investment 1,150 -
Current Assets
a Inventories(stock) 3,500 2,790
b Trade receivables(debtors) 800 620
2
c Cash and cash equivalents (cash at
bank) 450 170
TOTAL 29,400 4,530
Note to Accounts:
Particulars P Ltd ( Rs.) Q Ltd ( Rs.)
1. Share capital
20,00,000 E. shares of Rs.10 each 20,000 -
4,00,000 E. shares of Rs.10 each - 4,000
2. Reserves and Surplus
General Reserve 8,000 -
Profit and Loss A/c 900 320
3. Tangible Assets
Land & Building 6,000 -
Plant & Machinery 15,500 -
Motor vehicles - 600
Furniture - 350
4. In Tangible Assets
Patents 2,000 -
A new Company, 'R Ltd'. was formed to acquire the assets & liabilities of 'P Ltd'. & 'Q Ltd'. The terms of
acquisition of business were as under:
1. 'R Ltd'. to have an authorised capital of Rs.4,50,00,000 divided into 50,000, 13% P. shares of Rs.100
each and 40,00,000 equity shares of Rs.10 each
IPCC |Guess Questions– May 2016 – Accounts 19
MASTER MINDS No.1 for CA/CMA & MEC/CEC
2. Business of 'P Ltd'. Valued at Rs.3,00,00,000; settlement being made by issue of fully paid Equity shares
at Rs.12.
3. Business of 'Q Ltd'. Valued at 48,00,000 to be satisfied by issue of fully-paid shares at Rs.12
4. 'R Ltd'. made a public issue of 30,000 P. shares at par and 3,00,000 E. shares at Rs.12. The issue was
underwritten at the commission allowed by law and was fully subscribed. All obligations were met.
5. 'S Ltd'. who mooted the scheme, was allotted 40,000 equity shares (fully paid) at Rs.12 in consideration of
his services.
You are required to make opening entries in the books 'R Ltd'.
41) Neel Ltd. and Gagan Ltd. amalgamated to form a new company on 1.04.2015. Following is the Draft Balance
Sheet of Neel Ltd. and Gagan Ltd. as at 31.3.2015: (PM)

Following are the additional information:


(i) The authorised capital of the new company will be Rs. 25,00,000 divided into 1,00,000 equity shares of
Rs. 25 each.
(ii) Liabilities of Neel Ltd. includes Rs. 50,000 due to Gagan Ltd. for the purchases made Gagan Ltd. made a
profit of 20% on sale to Neel Ltd.
(iii) Neel Ltd. had purchased goods costing Rs. 10,000 from Gagan Ltd. All these goods are included in the
current asset of Neel Ltd. as at 31st March, 2015.
(iv) The assets of Neel Ltd. and Gagan Ltd. are to be revalued as under:

(v) The purchase consideration is to be discharged as under:


a) Issue 24,000 equity shares of Rs.25 each fully paid up in the proportion of their profitability in the
preceding 2 years.
b) Profits for the preceding 2 years are given below:

c) Issue 12% preference shares of Rs.10 each fully paid up at par to provide income equivalent to 8%
return on net assets in the business as on 31.3.2015 after revaluation of assets of Neel Ltd. and
Gagan Ltd. respectively.
You are required to compute the
i) Equity and preference shares issued to Neel Ltd. and Gagan Ltd.,
ii) Purchase consideration

IPCC |Guess Questions– May 2016 – Accounts 20


MASTER MINDS No.1 for CA/CMA & MEC/CEC
42) The summarised Balance Sheet of Mars Limited as on 31st March, 2015 was as follow: (PM)

On 1st April, 2015, Jupiter Limited agreed to absorb Mars Limited on the following terms and conditions:
1) Jupiter Limited will take over the assets at the following values:

2) Purchase consideration will be settled by Jupiter Ltd. as under:


4,100 fully paid 10% preference shares of Rs.100 will be issued and the balance will be settled by issuing
equity shares of Rs.10 each at Rs.8 paid up.
3) Liquidation expenses are to be reimbursed by Jupiter Ltd. to the extent of Rs.5,000.
4) trade receivables realized Rs.1,50,000. Bills payable were settled for Rs.38,000. Income tax authorities
fixed the taxation liability at Rs.2,22,000 and the same was paid.
5) Trade payables were finally settled with cash remaining after meeting liquidation expenses amounting to
Rs.8,000.
6) Details of trade receivables and trade payables as under:

You are required to:


i) Calculate the number of equity shares and preference shares to be allotted by Jupiter Limited in
discharge of purchase consideration
ii) Prepare the Realisation account, Bank account, Equity shareholders account and Jupiter Limited’s
account in the books of Mars Ltd.

IPCC |Guess Questions– May 2016 – Accounts 21


MASTER MINDS No.1 for CA/CMA & MEC/CEC

9. INTERNAL RECONSTRUCTION – 1
43) S.P. Construction Co. finds itself in financial difficulty. The following is the balance sheet on 31st Dec.2005.
Name of the Company : S.P. Construction Co Ltd
Balance Sheet as at : 31-12-2005
Particulars Notes No. Rs.
1 2 3
Problem 4: Accounting treatment for internal
reconstruction- final settlement of
a EQUITY AND LIABILITIES: 1
1 b Shareholder’s funds 2 2,70,000
Share capital (39,821)
Reserves and Surplus
Non-current liabilities
2
a Long tem borrowings 3 9,6000
Current liabilities
a Trade Payable (Creditors) 96,247
3
b Other Current Liabilities 4 49,513
TOTAL 4,71,939
ASSETS:
Non-current assets
1 a Fixed assets
(i) Tangible assets 5 1,94,000
(ii) Intangible assets- (Good will) 60,000
Current Assets
a Current investments 27,000
(Investments (Quoted) in shares)
2
b Inventories (stock) 1,20,247
c Trade receivables(debtors) 70,692
TOTAL 4,71,939
Note to Accounts:
Particulars Rs.
1. Share capital
20,000 Equity Shares of Rs.10 each fully paid 2,00,000
5% Cum. Pref. Shares of Rs.10 each fully paid 70,000
2. Reserves and Surplus
Profit and Loss A/c (39,821)
3. Long term borrowings
8% Debentures 80,000
Loan from Directors 16,000
4. Other Current Liabilities
Bank Overdraft 36,713
Interest payable on Debentures 12,800
5. Tangible Assets
Land 1,56,000
Building (net) 27,246
Equipment 10,754

The authorized capital of the company is 20,000 Equity Shares of Rs.10 each and 10,000 5% Cumulative
Preference Shares of Rs.10 each.
IPCC |Guess Questions– May 2016 – Accounts 22
MASTER MINDS No.1 for CA/CMA & MEC/CEC
During a meeting of shareholders and Directors, it was decided to carry out a scheme of internal
reconstruction. The following scheme has been agreed:
The equity shareholders are to accept reduction of Rs.7.50 per share and each equity share is to be re-
designated as a share of Rs.2.50 each.
1. The equity shareholders are to subscribe for a new share on the basis of 1 for 1 at a price of Rs.3 per
share.
2. The existing 7,000 preference Shares are to be exchanged for a new issue of 3,500 8% Cumulative
preference shares of Rs.10 each and 14,000 Equity shares of Rs.2.50 each.
3. The Debenture holders are to accept 2,000 Equity Shares of Rs.2.50 each in lieu of interest payable. The
interest rate is to be increased to 9 ½%. Further Rs.9,000 of this 9 1/2% Debentures are to be issued and
taken up by the existing holders at Rs.90 for Rs.100.
4. Rs.6,000 of director’s Loan is to be credited. The balance is to be settled by issue of 1,000 Equity shares
of Rs.2.50 each.
5. Goodwill and the profit and loss account balance are to be written off.
6. The investment in shares is to be sold at current market value of Rs.60,000.
7. The bank overdraft is to be repaid.
8. Rs.46,000 is to be paid to trade creditors now and balance at quarterly intervals.
9. 10% of the debtors are to be written off.
10. The remaining assets were professionally valued and should be included in the books of account as
follows:

Particulars Rs.
Land 90,000
Building 80,000
Equipment 10,000
Stock 50,000
It is expected that due to changed condition and new management operating profit will be earned at the
rate of Rs.50,000 p.a. after depreciation but before interest and tax.
Due to losses brought forward it is unlikely that any tax liability will arise until 2007.
You are required to show the necessary journal entries to affect the reconstruction scheme: Prepare the
balance sheet of the company immediately after the reconstruction.
44) Repair Ltd. is in the hands of a receiver for debenture holders who holds a charge on all assets except
uncalled capital. The following statement shows the position as regards creditors as on 30th June,2015:

A holds the first debentures for Rs. 3,00,000 and second debentures for Rs. 3,00,000. He is alsoan unsecured
creditor for Rs. 90,000. B holds second debentures for Rs. 3,00,000 and is anunsecured trade payables for
Rs. 60,000.

IPCC |Guess Questions– May 2016 – Accounts 23


MASTER MINDS No.1 for CA/CMA & MEC/CEC
The following scheme of reconstruction is proposed:
1. A is to cancel Rs. 2,10,000 of the total debt owing to him, to bring Rs. 30,000 in cash and to take first
debentures (in cancellation of those already issued to him) for Rs. 5,10,000 in satisfaction of all his claims.
2. B is to accept Rs. 90,000 in cash in satisfaction of all claims by him.
3. In full settlement of 75% of the claim, unsecured creditors (other than A and B) agreed toaccept four
shares of Rs. 7.50 each, fully paid against their claim for each share of Rs. 60.The balance of 25% is to
be postponed and to be payable at the end of three years fromthe date of Court’s approval of the scheme.
The nominal share capital is to be increasedaccordingly.
4. Uncalled capital is to be called up in full and Rs. 52.50 per share cancelled, thus makingthe shares of Rs.
7.50 each.
Assuming that the scheme is duly approved by all parties interested and by the Court, givenecessary journal
entries.
45) M/s Platinum Limited has decided to reconstruct the Balance Sheet since it has accumulated huge losses. The
following is the Balance Sheet of the company as on31st March, 2014 before reconstruction: (PM)

Following is the interest of Mr. Shiv and Mr. Ganesh in M/s Platinum Limited:
Mr. Shiv Mr. Ganesh
8% Debentures 3,00,000 1,00,000
12% Debentures 4,00,000 2,00,000
Total 7,00,000 3,00,000
The following scheme of internal reconstruction was framed and implemented, as approved bythe court and
concerned parties:
1) Uncalled capital is to be called up in full and then all the shares to be converted into Equity Shares of
Rs.40 each.
2) The existing shareholders agree to subscribe in cash, fully paid up equity shares of 40each for
Rs.12,50,000.
3) Trade Creditors are given option of either to accept fully paid equity shares of Rs.40 each for the amount
due to them or to accept 70% of the amount due to them in cash in fullsettlement of their claim. Trade
Creditors for Rs.7,50,000 accept equity shares and rest ofthem opted for cash towards full and final
settlement of their claim.
4) Mr. Shiv agrees to cancel debentures amounting to Rs.2,00,000 out of total debentures due to him and
agree to accept 15% Debentures for the balance amount due. He alsoagree to subscribe further 15%
Debentures in cash amounting toRs.1,00,000.
IPCC |Guess Questions– May 2016 – Accounts 24
MASTER MINDS No.1 for CA/CMA & MEC/CEC
5) Mr. Ganesh agrees to cancel debentures amounting to Rs.50,000 out of total debenturesdue to him and
agree to accept 15% Debentures for the balance amount due.
6) Land & Building to be revalued at Rs.51,84,000, Machinery at Rs.7,20,000, Computers at Rs.4,00,000,
Inventories at Rs.3,50,000 and Trade receivables at 10% less to as they are appearing in Balance Sheet
as above.
7) Outstanding Expenses are fully paid in cash.
8) Goodwill and Profit & Loss A/c will be written off and balance, if any, of Capital ReductionA/c will be
adjusted against Capital Reserve.
You are required to pass necessary Journal Entries for all the above transactions and draft the company's
Balance Sheet immediately after the reconstruction.
46) The Balance sheet of M/s Clean Ltd. as on 31st March, 2015 was summarized as follows: (NOV 15)

Liabilities Amount (Rs.) Assets Amount (Rs.)


Share capital: Land and Building 75,00,000
Equity shares of Rs.50 each fully paid up 60,00,000 Plant and Machinery 22,00,000
9% Preference Shares of Rs.10
40,00,000 Trade Investment 16,50,000
each fully paid up
7 % Debentures
23,00,000 Inventories 9,50,000
(Secured by plant and machinery)
8 % Debentures 17,00,000 Trade Receivable 18,00,000
Trade Payable 6,00,000 Cash and Bank:
Provision for Tax 75,000 Balances 3,60,000
Profit & Loss A/c 2,15,000
1,46,75,000 1,46,75,000
The Board of Directors of the company decided upon the following scheme of reconstruction duly approved by
all concerned parties:
a) The equity shareholders agreed to receive in lieu of their present holding of 1,20,000 shares of Rs.50
each as under:
i) New fully paid equity shares of Rs.10 each equal to 2/3rd of their holding
ii) 9% preference shares of Rs..8 each to the extent of 25% of the above new equity share equal.
iii) Rs.2,80,000, 10% debentures of Rs.80 each.
b) The preference shareholders agreed that their Rs.10 shares should be reduced to Rs.8 by cancellation of
Rs.2 per share. They also agreed to subscribe for two new equity shares of Rs.10 each for every five
preference shares held.
c) The taxation liability of the company is settled at Rs.66,000 and the same is paid immediately.
d) One of the trade creditors of the company to whom the company owes Rs.1,00,000 decides to forgo 30%
of his claim. He is allotted equity shares of Rs.10 each in full satisfaction of his balance claim.
e) Other trade creditors of Rs.5,00,000 are given option of their to accept fully paid 9% preference shares of
Rs.8 each for the amount due to them or to accept 80% of the amount due to them in cash in full
settlement of their claim. Trade creditors for Rs.3,50,000 accepted preference shares option and rest of
them opted for cash towards full settlement of their claim.
f) Company’s contractual commitments amounting to Rs.6,50,000 have been settled by paying 4% penalty
of contract value.

IPCC |Guess Questions– May 2016 – Accounts 25


MASTER MINDS No.1 for CA/CMA & MEC/CEC
g) Debenture holders having charge on plant and machinery accepted plant and machinery in full settlement
of their dues.
h) The rate of interest on 8% debentures is increased to 10%. The debenture holders surrender their existing
debenture of Rs.50 each and agreed to accept 10% debenture of Rs.80 each for every two debentures
held by them.
i) The land and building to be depreciated by 5%.
j) The debit balance of profit and loss account is to be eliminated.
k) 1/4th of trade receivables and 1/5th of inventory to the written off.
Pass Journal entries and prepare Balance Sheet after completion of the reconstruction scheme in the books of
M/s Clean Ltd. as per Schedule – III to the Companies Act, 2013.

10. FINANCIAL STATEMENTS OF NOT FOR PROFIT ORGANISATION


47) The following are the Receipts & Payments A/c of the Sports Club in respect of the year ended 31st March,
2004, Prepare Income & Expenditure A/c and Balance Sheet.

Receipts Rs. Payments Rs.


To Balance of cash on 1.4.2003 10,250 By Salaries 20,800
To Subscriptions: By Stationery 4,000
2002-2003 450 By Rates 6,000
2003-2004 21,100 By Telephone 1,000
2004-2005 750 22,300 By Investments 12,500
To Profit on sports meet 15,500 By Sundry expenses 9,250
To Income from investments 10,000 By Balance of cash on 31.3.04 4,500
58,050 58,050
The following additional information is provided to you:
a. There are 450 members each paying annual subscriptions of Rs.50; Rs.500 was in arrears for 2002-2003
as on 1st April, 2003.
b. On 31st March 2004 the rates were prepaid to 30.6.2004, the charge paid every year being Rs.6,000.
c. There was outstanding telephone bill for Rs.350 on 31st March, 2004.
d. Outstanding sundry expenses as on 31st March, 2003 totaled Rs.700.
e. Stock of stationery on 31st March, 2003 was Rs.500; on 31st March, 2004 it was Rs.900.
f. On 31st March, 2003; building stood in the books at Rs.1,00,000 and it was subject to depreciation at 5%
per annum.
g. Investments on 31st March, 2003 stood at Rs.2,00,000.
On 31st March, 2004 income accrued on investments purchased during the year is Rs. 375.
48) The following is the Receipts and Payments Account of Lion Club for the year ended 31st March, 2012.
Receipts Amount Payments Amount
Opening balance: Salaries 1,20,000
Cash 10,000 Creditors 15,20,000
Bank 3,850 Printing and stationary 70,000
Subscription received 2,02,750 Postage 40,000
Entrance donation 1,00,000 Telephones and telex 52,000
Interest received 58,000 Repairs and maintenance 48,000
Sale of assets 8,000 Glass and table linen 12,000
IPCC |Guess Questions– May 2016 – Accounts 26
MASTER MINDS No.1 for CA/CMA & MEC/CEC
Miscellaneous income 9,000 Crockery and cutlery 14,000
Receipts at Garden upkeep 8,000
Coffee room 10,70,000 Membership fees 4,000
Wines and spirits 5,10,000 Insurance 5,000
Swimming pool 80,000 Electricity 28,000
Tennis court 1,02,000 Closing balance:
Cash 8,000
Bank 2,24,600
21,53,600 21,53,600
The assets and liabilities as on 1.4.2011 were as follows:
Particulars Amount
Fixed assets (net) 5,00,000
Stock 3,80,000
Investment in 12% Government securities 5,00,000
Outstanding subscription 12,000
Prepaid insurance 1,000
Sundry creditors 1,12,000
Subscription received in advance 15,000
Entrance donation received pending membership 1,00,000
Gratuity fund 1,50,000
The following adjustments are to be made while drawing up the accounts:
a) Subscription received in advance as on 31st March, 2012 was Rs.18,000.
b) Outstanding subscription as on 31st March, 2012 was Rs.7,000.
c) Outstanding expenses are salaries Rs.8,000 and electricity Rs.15,000.
d) 50% of the entrance donation was to be capitalized. There was no pending membership as on 31st March,
2012.
e) The cost of assets sold net as on 1.4.2011 was Rs.10,000.
f) Depreciation is to be provided at the rate of 10% on assets.
g) A sum of Rs.20,000 received in October 2011 as entrance donation from an applicant was to be refunded
as he has not fulfilled the requisite membership qualifications. The refund was made on 3.6.2012.
h) Purchases made during the year amounted Rs.15,00,000.
i) The value of closing stock was Rs.2,10,000.
j) The club as a matter of policy, charges off to income and expenditure account all purchases made on
account of crockery, cutlery, glass and linen in the year of purchase.
You are required to prepare an Income and Expenditure Account for the year ended 31st March, 2012 and the
Balance Sheet as on 31st March, 2012 along with necessary workings.
49) A doctor, after retiring from govt. service, started private practice on 1st April, 2010 with Rs.20,000 of his own
and Rs.30,000 borrowed at an interest of 15% per annum on the security of his life policies. His accounts for
the year were kept on a cash basis and the following is his summarized cash account:
Particulars Rs. Particulars Rs.
Own capital 20,000 Medicines purchased 24,500
Loan 30,000 Surgical equipments 25,000
Prescription fees 52,500 Motor car 32,000

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
Gifts from patients 13,500 Motor car expenses 12,000
Visiting fees 25,000 Wages and salaries 10,500
Fees from lectures 2,400 Rent of clinic 6,000
Pension received 30,000 General charges 4,900
Household expenses 18,000
Household furniture 2,500
Expenses on daughter’s marriage 21,500
Interest on loan 4,500
Balance at bank 11,000
Cash in hand 1,000
1,73,400 1,73,400
You are required to prepare his capital account and income and expenditure account for the year ended 31st
March, 2011 and balance sheet as on that date. One-third of the motorcar expense may be treated as
applicable to the private use of car and Rs.3,000 of the wages and salaries are in respect of domestic
servants.
The stock of machines in hand on 31st March, 2011 was valued at Rs.9,500.
50) From the following Income and Expenditure Account and the Balance Sheet of a club, prepare its Receipts
and Payments Account and Subscription Account for the year ended 31st March, 2015:
Income & Expenditure Account for the year 2014-15

The following adjustments have been made in the above accounts:


1) Upkeep of ground Rs. 600 and Printing Rs. 240 relating to 2013-2014 were paid in 2014-15.
2) One-half of entrance fee has been capitalised by transfer to General Fund.
3) Subscription outstanding in 2013-14 was Rs. 800 and for 2014-15 Rs. 700.
4) Subscription received in advance in 2013-14 was Rs. 200 and in 2014-15 for 2015-16 Rs. 100.

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
51) From the following Trial Balance of Education Society as on 31st Dec., 2014; prepare an Income &
Expenditure Account and a Balance Sheet:

52) From the following Income & Expenditure A/c of Premium Sports Club for the year ended 31st March, 2012,
you are required to prepare Receipts & Payment A/c for the year ended 31st March, 2012 and Balance Sheet
as on that date: (PM)

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MASTER MINDS No.1 for CA/CMA & MEC/CEC

a) Some of Fixed Assets were purchased on 01.10.2011 and depreciation is to be charged @ 5% p.a.
b) Sports Material worth Rs.72,000 was purchased on credit during the year.
c) The Club became member of State Table Tennis Association on 01.01.2012 when it paidfee up to
31.12.2012.
d) 50% of Entrance Fee is to be capitalized.
e) Interest on 8% Government Bonds was received for two quarters only.
f) A Fixed Deposit of Rs.80,000 was made on 31st March, 2012.
53) The following information relates to Country Sports Club for the year ended 31.3.2014. You are required to
prepare the Receipts and Payments Account for the year ended 31.3.2014 and Balance Sheet as on that date.
(PM)

.
Additional information:
a)

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
b) During the year the club purchased sports material of Rs.1,80,000, out of which 75% was credit purchase.
c) 25% of the entrance fees is to be capitalized.
d) As per the Club's policy any excess of expense for prizes distributed over prize fund income is to be
charged to Income and Expenditure A/c and vice versa:-prize fund income earned during the year
Rs.36,000prizes distributed during the year Rs.40,000
e) Interest on Government bond is received half yearly on 30th June and 31st December each year.
11. ACCOUNTING FOR INCOMPLETE RECORDS
54) Mr. Anup runs a wholesale business where in all purchases and sales are made on credit. He furnishes the
following closing balances:
Particulars 31.12.2009 31.12.2010
Sundry debtors 70,000 92,000
Bills receivable 15,000 6,000
Bills payable 12,000 14,000
Sundry creditors 40,000 56,000
Stock 1,10,000 1,90,000
Bank 90,000 87,000
Cash 5,200 5,300
Summary of cash transactions during 2009-2010:
1. Deposited in to bank after payment of shop expenses @ Rs.600 p.m., wages @ Rs.9,200 p.m. and
personal expenses @ Rs.1,400 p.m. Rs.7,62,750.
2. Withdrawals Rs.1,21,000
3. Cash payment to suppliers Rs.77,200 for supplies and Rs.25,000 for furniture
4. Cheques collected from customers but dishonoured Rs.5,700
5. Bills accepted by customers Rs.40,000
6. Bills endorsed Rs.10,000
7. Bills discounted (gross) Rs.20,000, discount Rs.750
8. Bills matured and duly collected Rs.16,000
9. Bills accepted Rs.24,000
10. Paid suppliers by cheque Rs.3,20,000
11. Received Rs.20,000 on maturity of one LIC policy of the proprietor by cheque
12. Rent received Rs.14,000 by cheque
13. A building was purchased on 30.11.2010 for opening a branch for Rs.3,50,000 and some expenses were
incurred details of which are not maintained
14. Electricity and telephone bills paid by cash Rs.18,700, due Rs.2,200
Other transactions:
1. Claim against the firm for damage Rs.1,55,000 is under legal dispute. Legal expenses Rs.17,000. The
firm anticipates defeat in the suit
2. Goods returned to suppliers Rs.4,200
3. Goods returned by customers Rs.1,200
4. Discount offered by suppliers Rs.2,700
5. Discount offered to customers Rs.2,400
6. The business is carried on at the premises owned by the proprietor. 50% of the ground floor space is used for
business and remaining 50% is let out for an annual rent of Rs.20,000.
Prepare Trading and Profit & Loss A/c of Mr. Anup for the year ended 31.12.2010 and Balance Sheet as on
that date.
IPCC |Guess Questions– May 2016 – Accounts 31
MASTER MINDS No.1 for CA/CMA & MEC/CEC
55) The following is the Balance Sheet of Sanjay, a small trader as on 31.3.2002:
Figures in Rs.'000
Liabilities Rs. Assets Rs.
Capital 200 Fixed Assets 145
Creditors . 50 Stock 40
Debtors 50
Cash in Hand 5
Cash at Bank 10
250 250
A fire destroyed the accounting records as well as the closing cash of the trader on 31.3.2003. However, the
following information was available:
a) Debtors and creditors on 31.3.2003 showed an increase of 20% as compared to 31.3.2002
b) Credit Period: Debtors - 1 month Creditors - 2 months. All purchases were for credit only. Cash sales
constituted 20% of total sales.
c) Stock was maintained at the same level throughout the year.
d) Current ratio as on 31.3.2003 was exactly 2.
e) Total expenses excluding depreciation of 10% for the year amounted to Rs.2,50,000.
f) Bank and cash transactions:
 Payment to creditors included Rs.50,000 by cash.
 Receipts from debtors included Rs.5,90,000 by way of cheques.
 Cash deposited into the bank Rs.1,20,000
 Personal drawings from bank Rs.50,000
 Fixed assets purchased and paid by cheques Rs.2,25,000.
For your exercise, assume cash destroyed by fire is written off in the Profit & Loss A/c.
You are required to prepare
a) The Trading and Profit & Loss A/c of Sanjay for the year ended 31.3.2003 and
b) A Balance Sheet on that date.
56) A and B are in partnership having profit sharing ratio 2: 1. The following information is available about their
assets and liabilities:
31.3.2010 31.3.2011
Particulars
Rs. Rs.
Furniture 1,20,000 -
Advances 70,000 50,000
Creditors 32,000 30,000
Debtors 40,000 45,000
Stock 60,000 74,750
Loan 80,000 -
Cash at Bank 50,000 1,40,000
The partners are entitled to salary @ Rs.2,000 p.m. They contributed proportionate capital. Interest is paid @
6% on capital and charged @ 10% on drawings.
Drawings of A and B
A B
Date
Rs. Rs.
April 30 2,000 -
May 31 - 2,000

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
June 30 4,000 -
Sept. 30 - 6,000
Dec. 31 2,000 -
Feb. 28 - 8,000
th rd
On 30 June, they took C as 1/3 partner who contributed Rs.75,000. C is entitled to share of 9 months profit.
The new profit ratio becomes 1:1:1. A withdrew his proportionate share. Depreciate furniture @ 10% p.a., new
purchases Rs.10,000 may be depreciated for 1/4th of a year.
Current account as on 31.3.2010: A Rs.5,000 (Cr.), B Rs.2,000 (Dr.)
Prepare Statement of Profit, Current Accounts of partners and Statement of Affairs as on 31.3.2011.
57) The income tax officer, assuming the income of Shri Moti for the financial year 2009-2010 and 2010-2011 feels
that Shri Moti has not disclosed the full income. He gives you the following particulars of assets and liabilities
of Shri Moti on 1st April 2009 and 1st April, 2011.
1.4.2009 Assets Cash in hand 25,000
Stock 56,000
Sundry debtors 41,500
Land and building 1,98,000
Wife’s jewellery 75,000
Liabilities Owing to Moti’s brother 40,000
Sundry creditors 35,000
1.4.2011 Assets Cash in hand 16,000
Stock 91,500
Sundry debtors 52,500
Land and building 1,90,000
Motor car 1,25,000
Wife’s jewellery 1,25,000
Loan to Moti’s brother 20,000
Liabilities Sundry creditors 55,000
During the two years the domestic expenditure was Rs.4,000 p.m. The declared income of the financial years
were Rs.1,05,000 for 2009-2010 and Rs.1,23,000 for 2010-2011 respectively.
State whether the income-tax officer’s contention is correct. Explain by giving your workings
58) ‘A’ and ‘B’ are in partnership sharing profits and losses equally. They keep their books by single entry system.
The following balances are available from their books as on 31.3.2010 and 31.3.2011.

Particulars 31.3.2010 ( Rs.) 31.3.2011 ( Rs.)


Building 1,50,000 1,50,000
Equipments 2,40,000 2,72,000
Furniture 25,000 25,000
Debtors ? 1,00,000
Creditors 65,000 ?
Stock ? 70,000
Bank loan 45,000 35,000
Cash 60,000 ?
The transactions during the year ended 31.3.2011 were the following:
Particulars Rs.
Collection from debtors 3,80,000
Payment to creditors 2,50,000

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
Cash purchases 65,000
Expenses paid 40,000
Drawings by ‘A’ 30,000
On 1.4.2010 an equipment of book value Rs.20,000 was sold for Rs.15,000. On 1.10.2010, some equipments
were purchased.
Cash sales amounted to 10% of sales
Credit sales amounted to Rs.4,50,000
Credit purchases were 80% of total purchases
The firm sells goods at cost plus 25%
Discount allowed Rs.5,500 during the year
Discount earned Rs.4,800 during the year
Outstanding expenses Rs.3,000 as on 31.3.2011
Capital of ‘A’ as on 31.3.2010 was Rs.15,000 more than the capital of ‘B’, equipments and furniture to be
depreciated at 10% p.a. and building @ 2% p.a.
You are required to prepare:
i. Trading and Profit and Loss Account for the year ended 31.3.2011 and
ii. The Balance Sheet as on that date.
59) Ms. Rashmi furnishes you with the following information relating to her business: (MM-Similar Pr-5)

(b) Receipts and payments during 2014:


Collections from debtors, after allowing discount of Rs. 3,000 amounted to Rs. 1,17,000.
Collections on discounting of bills of exchange, after deduction of discount of Rs. 250 by the bank, totaled
to Rs. 12,250.
Creditors of Rs. 80,000 were paid Rs. 78,400 in full settlement of their dues.
Payment for freight inwards Rs. 6,000.
Amount withdrawn for personal use Rs. 14,000.
Payment for office furniture Rs. 2,000.
Investment carrying annual interest of 4% were purchased at Rs. 192 (face value Rs. 200) on 1st July,
2014 and payment made there for.
Expenses including salaries paid Rs. 29,000.
Miscellaneous receipts Rs. 1,000.
(c) Bills of exchange drawn on and accepted by customers during the year amounted to Rs. 20,000. Of these,
bills of exchange of Rs. 4,000 were endorsed in favour of creditors. An endorsed bill of exchange of Rs.
800 was dishonoured.
(d) Goods costing Rs. 1,800 were used as advertising materials.
(e) Goods are invariably sold to show a gross profit of 33-1/3% on sales.
(f) Difference in cash book, if any, is to be treated as further drawing or introduction of capital by Ms. Rashmi.
(g) Provide at 2.5% for doubtful debts on closing debtors.
Rashmi asks you to prepare trading and profit and loss account for the year ended 31st December, 2014
and the balance sheet as on that date.
IPCC |Guess Questions– May 2016 – Accounts 34
MASTER MINDS No.1 for CA/CMA & MEC/CEC
60) The following is the Balance Sheet of Sri Agni Dev as on 31st March, 2010: (PM)

Riots occurred and fire broke out on the evening of 31st March, 2011, destroying the books of account and
Furniture. The cashier was grievously hurt and the cash available in the cash box was stolen.
The trader gives you the following information:
a) Sales are effected as 25% for cash and the balance on credit. His total sales for the year ended 31st
March, 2011 were 20% higher than the previous year. All the sales and purchases of goods were evenly
spread throughout the year (as also in the last year).
b) Terms of credit
Debtors 2 Months
Creditors 1 Month
c) Stock level was maintained at Rs.33,000 all throughout the year.
d) A steady Gross Profit rate of 25% on the turnover was maintained throughout. Creditors are paid by
cheque only, except for cash purchase of Rs.50,000.
e) His private records and the Bank Pass-book disclosed the following transactions for the year.
i) Miscellaneous Business expenses Rs.1,57,500 (including Rs.5,000 paid by cheque and
Rs.7,500 was outstanding as on 31st March, 2011)
ii) Repairs Rs.3,500 (paid by cash)
iii) Addition to Machinery Rs.60,000 (paid by cheque)
iv) Private drawings Rs.30,000 (paid by cash)
v) Travelling expenses Rs.18,000 (paid by cash)
vi) Introduction of additional capital by depositing in to the Bank Rs.5,000
f) Collection from debtors were all through cheques.
g) Depreciation on Machinery is to be provided @ 15% on the Closing Book Value.
h) The Cash stolen is to be charged to the Profit and Loss Account.
i) Loss of furniture is to be adjusted from the Capital Account.
Prepare Trading, Profit and Loss Account for the year ended 31st March, 2011 and a Balance Sheet as on that
date. Make appropriate assumptions whenever necessary. All workings should form part of your answer.

12. HIRE PURCHASE AND INSTALLMENTS SALES TRANSACTIONS


THEORY:
61) What are the differences between Hire Purchase and Installment System? (PM,SM,NOV-14)
PROBLEM:
62) X Ltd. had purchased machinery on hire purchase system from Y Ltd. The terms are that X Ltd would pay
Rs.20,000 down on signing of the agreement and 4 annual installments of Rs.11,000 each commencing from
the beginning of the next year. X Ltd. charged depreciation @ 10% p.a. on cost under diminishing balance
system. Y Ltd. charged interest at the rate of 10% p.a. in their hire purchase contract. Prepare Machinery A/c
and Y Ltd. A/c for 5 years in the books of X Ltd.
IPCC |Guess Questions– May 2016 – Accounts 35
MASTER MINDS No.1 for CA/CMA & MEC/CEC
63) MC purchased machinery from K & Co on Hire Purchase system on 1-1-2001. The cash price of the machine
was Rs.1,00,000. Rs.20,000 to be paid at the time of taking delivery and balance by four annual installments of
Rs.20,000 plus interest at 5% on the yearly balances (5% p.a.)MC failed to pay the installment due on 31-12-
2002. K & Co. took possession of the machinery and valued the same in his books after charging depreciation
@ 10% p.a. on reducing balance method. In 2003 K & Co. incurred Rs.1,000 for reconditioning and resold the
machinery for Rs.90,000. Show the ledger accounts in the books of K & Co.
64) X Transport Ltd. purchased from Delhi Motors 3 Tempos costing Rs.50,000 each on the hire purchase system
on 1-1-2010. Payment was to be made Rs.30,000 down and the remainder in 3 equal annual installments
payable on 31-12-2010, 31-12-2011 and 31-12-2012 together with interest @ 9%. X Transport Ltd. write off
depreciation at the rate of 20% on the diminishing balance. It paid the installment due at the end of the first
year i.e. 31-12-2010 but could not pay the next on 31-12-2011. Delhi Motors agreed to leave one Tempo with
the purchaser on 1-1-2012 adjusting the value of the other 2 Tempos against the amount due on 31-12-2011.
The Tempos were valued on the basis of 30% depreciation annually. Show the necessary accounts in the
books of X Transport Ltd. for the years 2010, 2011 and 2012.
65) M/s Delhi Electronics sells colour TVs, on hire purchase basis. Cost per set is Rs.14,000, Cash sale price
Rs.15,500 and hire purchase sale price is Rs.16,800 for 12 monthly installments payable by 10th of every
month. However, the buyer has to make cash down Rs.1,800 at the time of purchase.
Hire Purchase transactions (No. of sets) in 2010 - Jan. 10, Feb. 12, March 10, April 12, May 10, June 10, July
10, August 15, Sept. 11, Oct. 20, Nov. 20, Dec. 10.
Let us suppose all installments are duly collected. Show necessary Journal Entries.
66) On January 1, 2010 HP M/s acquired a Pick-up Van on hire purchase from FM M/s. The terms of the contract
were as follows:
a) The cash price of the van was Rs. 1,00,000.
b) Rs. 40,000 were to be paid on signing of the contract.
c) The balance was to be paid in annual installments of Rs. 20,000 plus interest.
d) Interest chargeable on the outstanding balance was 6% p.a.
e) Depreciation at 10% p.a. is to be written-off using the straight-line method.
You are required to:
a) Give Journal Entries and show the relevant accounts in the books of HP M/s from January 1,2010 to
December 31, 2012; and
b) Show the relevant items in the Balance Sheet of the purchaser as on December 31, 2010 to2012.

13. PARTNERSHIP ACCOUNTS-I


67) Manish, Jatin and Paresh were partners sharing Profits/ Losses in the ratio of Manish 40 percent, Jatin 35
percent, and Paresh 25 percent. The draft Balance Sheet of the partnership as on 31st December, 2011 was
as follows :
Liabilities Amount Assets Amount
Sundry Creditors 30,000 Cash in hand and at Bank 67,000
Bills payable 8,000 Stock 42,000
Loan from Jatin 30,000 Sundry Debtors 34,000
Current Accounts: Less: Provision for
Manish 12,000 Doubtful Debts (6,000) 28,000
Jatin 8,000 Plant and Machinery
Paresh 6,000 26,000 (at cost) 80,000
Capital Accounts: Less: Depreciation (28,000) 52,000
Manish 90,000 Premises (at cost) 75,000
Jatin 50,000
Paresh 30,000 1,70,000
2,64,000 2,64,000
IPCC |Guess Questions– May 2016 – Accounts 36
MASTER MINDS No.1 for CA/CMA & MEC/CEC
Jatin retired on 31st December, 2011. Manish and Paresh continued in partnership sharing Profits/ Losses in
the ratio of Manish 60 percent and Paresh 40 percent. 50 percent of Jatin’s
Loan was repaid on 1.1.2012 and it was agreed that of the amount then remaining due to him a sum of
Rs.80,000 should remain as loan to partnership and the balance to be carried forward as ordinary trading
liability. The following adjustments were agreed to be made to the above mentioned Balance Sheet:
i) Rs.10,000 should be written off from the premises.
ii) Plant and Machinery was revalued at Rs.58,000.
iii) Provision for doubtful debts to be increased by Rs.1,200
iv) Rs.5,000 due to creditors for expenses had been omitted from the books of account.
v) Rs.4,000 to be written off on stocks.
vi) Provide Rs.1,200 for professional charges in connection with revaluation.
As per the deed of partnership, in the event of the retirement of a partner, goodwill was to be valued at an
amount equal to one year’s purchase of the average profits of the preceding three years on the date of
retirement. Before determining the said average profits a notional amount of Rs.80,000 should be charged for
remuneration to partners. The necessary profits before charging such remuneration were:
Year ending 30.12.2009 Rs.1,44,000
Year ending 31.12.2010 Rs.1,68,000
Year ending 31.12.2011 Rs.1,88,200 (As per draft accounts)
It was agreed that, for the purpose of valuing goodwill, the amount of profit for the year 2011 be recomputed
after charging the loss on revaluation in respect of premises and stock, the unprovided expenses (except
professional expenses) and increase in the provision for doubtful debts. The continuing partners decided to
eliminate goodwill account from their books.
You are required to prepare:
i) Revaluation Account:
ii) Capital Accounts (merging current accounts therein):
iii) Jatin’s Accounts showing balance due to him; and
iv) Balance Sheet of Manish and Paresh as at 1st January, 2012.

68) Pathak, Quereshi and Ranjeet were partners sharing profits in the ratio of 7:5:3 respectively. On 31st March,
2013 Quereshi retired when the firm's Balance Sheet was as follows:
Liabilities Amount Assets Amount
Capital Accounts : Land and Building 10,00,000
Pathak 8,50,000 Plant and Machinery 4,65,000
Quereshi 6,20,000 Furniture, Fixture & Fittings 2,30,100
Ranjeet 3,70,000 Stock 1,82,200
General Reserve 2,25,000 Trade Debtors 2,00,000
Trade Creditors 1,13,000 Less : Provision
for Bad Debts (6,000) 1,94,000
Cash at Bank 1,06,700
21,78,000 21,78,000
It was agreed that:
i) Land & Building be appreciated by 20%.
ii) Plant & Machinery be depreciated by 10%.
iii) Provision for Bad Debts be made equal to 4% of Trade Debtors.
iv) Outstanding repairs bill amounting to Rs.1,500 be recorded in the books of account.

IPCC |Guess Questions– May 2016 – Accounts 37


MASTER MINDS No.1 for CA/CMA & MEC/CEC
v) Goodwill of the firm be valued at Rs.3,00,000 and Quereshi's capital account be credited with his share of
goodwill without raising goodwill account.
vi) Half of the amount due to Quereshi be immediately paid to him by means of a cheque and the balance be
treated as a loan bearing interest @ 12% per annum.
After Quereshi's retirement, Pathak and Ranjeet admitted Swamy as a new partner with effect from 1st April,
2013. Pathak, Ranjeet and Swamy agreed to share profits in the ratio of 2:1:1 respectively. Swamy brought
patents valued at Rs.20,000 and Rs.3,80,000 in cash including payment for his share of goodwill as valued by
the old firm. The entire amount of Rs.4,00,000 was credited to Swamy's Capital Account. Adjustments were
made in the capital accounts for Swamy's share of goodwill.
You are required to:
a) Pass journal entries for all the above transactions without any narration, and
b) Prepare the capital account of all the partners.
69) The following is the B/S of A, B & C as on 31.12.96, sharing profits in the ratio 4: 3: 1.

Liabilities Rs. Assets Rs.


Capital A/cs Property & Assets 2,28,000
A 1,00,000 Joint Survivorship 32,000
B 70,000 Bank 50,000
C 20,000 1,90,000
Creditors 1,20,000
3,10,000 3,10,000
On 1.1.97, D was admitted as a partner, entitling him to 1/5th share of the profit. D paid Rs.30,000 on A/c of
capital and also Rs.20,000 as his share of Goodwill (the latter sum to remain in the business.) On 30.6.97, A
died. The joint survivorship policy realised Rs.50,000. The share of the deceased partner in the goodwill of the
firm was determined at Rs.36,000. The P&L A/c for the period ending 30.6.97 disclosed a profit of Rs.45,000.
The surviving partners carried on the business, profit-sharing ratio remains unchanged. Net profit for the period
from 1.7.97 to 31.12.97 amounted to Rs.33,000.
Drawings of the partners were: A B C D
For 6 months up to 30.6.1997 (Rs.) 13,000 10,000 4,000 7,500
For 6 months up to 31.12.1997 (Rs.) Nil 8,000 5,000 7,000

A sum of Rs.50,000 was advanced by B as loan to facilitate payment in full on 1.12.97 of the deceased
partner’s share. Show the Partners’ Capital A/cs& draft the B/S as on 31.12.97. The Balances of ‘Property and
Assets, and ‘Creditors’ as on 31.12.1997 were Rs.2,37,000 and Rs.1,17,000 respectively.
70) P, Q, R are three doctors who are running a Polyclinic. Their capital on 31st March, 2009 was Rs.1,00,000
each. They agreed to admit X, Y and Z as partners w.e.f. 1st April 2009. The terms for sharing profits & losses
were as follows:
a) 70% of the visiting fee is to go to the specialist concerned.
b) 50% of the chamber fee will be payable to the individual specialist.
c) 40% of operation fee and fee for pathological reports, X-rays and ECG will accrue in favour of the doctor
concerned.
d) Balance of profit or loss is shared equally.
e) All the partners are entitled for 6% interest on capital employed.
They further agreed that:
i) X, Y and Z brought in Rs.20,000 each as goodwill. Goodwill is shared by the existing partners equally.
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MASTER MINDS No.1 for CA/CMA & MEC/CEC
ii) X, Y and Z brought in Rs.50,000 each as capital. Each of the original partners also contributed Rs.50,000
by way of capital.
Rs. The receipts for the year after admission of new partners were:
Fees for reports,
Name of Visiting Chambers
Particulars operation etc.
Doctors Fees ( Rs.) Fees ( Rs.)
( Rs.)
P General Physician 1,50,000 2,00,000 -
Q Gynecologist 25,000 1,75,000 1,00,000
R Cardiologist - 1,00,000 75,000
X Child Specialist 1,00,000 1,50,000 -
Y Pathologist - - 1,00,000
Z Radiologist - 40,000 2,00,000
Total 2,75,000 6,65,000 4,75,000
Expenses for the year were as follows:
Particulars Rs.
Medicines, injections and other consumables 1,00,000
Printing and stationery 5,000
Telephone expenses 5,000
Rent 42,000
Power and light 10,000
Nurses salary 20,000
Attendants wages 20,000
Total 2,02,000
Depreciation:
X-Ray machines 15,000
ECG equipments 5,000
Furniture 5,000
Surgical equipments 5,000
Total Depreciation 30,000
You are requested to:
i) Pass necessary journal entries on admission of partners.
ii) Prepare the Profit and Loss Account of the polyclinic for the year ended 31st March, 2010.
Prepare capital accounts of all the partners at the end of the financial year 2009-10. Also show the distribution
of profit among partners.
71) Glad and happy, who make up their accounts to 30 September in each year, carried on business in
partnership under the firm name of Feelings.
Their partnership agreement provided:
1) Profits and losses should be shared Glad - two-third and Happy - one-third.
2) Interest on capital accounts should be allowed at the rate of 6% per annum but no interest should be
allowed or charged on current accounts.
3) On the retirement or admission of a partner:
i) If the change takes place during any accounting year, such partner’s share of profits or losses for the
period up to retirement or from admission is to be arrived at by apportionment on a time basis except
where otherwise agreed.
ii) No account for goodwill is to be maintained in the firm’s books, any adjusting entries for transactions
between the partners being made in their capital accounts.
iii) Any balance due to an outgoing partner is to carry interest at 8% per annum from the date of his
retirement to the date of payment.

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
Glad retired from the firm on 31st March 2012 and, on the same day, Happy took into partnership Joy, an
employee of the firm. It was agreed that the terms of the previous partnership agreement should apply in all
respects except that, as from the date, profits or losses are to be shared: Happy - three-fifth, Joy - two-fifth.
The trial balance extracted from the books of the firm as on 30th September 2012 was as follows:
Particulars Rs. Rs.
Capital Accounts – 30th September 2011
Glad - 8,000
Happy - 6,000
Current Accounts – 30th September 2011
Glad - 2,400
Happy - 1,600
Joy – Cash introduced 31st March, 2012 - 3,000
Plant and machinery at cost 14,000 -
Plant and machinery: Provision for depreciation -30th Sept., 2011 - 2,800
Motor vehicles at cost 6,200 -
Motor vehicles: provision for depreciation – 30th September 2011 - 3,400
Purchases 62,000 -
Stock – 30th September 2011 12,400 -
Wages 14,600 -
Salaries 10,800 -
Debtors 4,600 -
Sales - 96,000
Trade expenses 1,600 -
Creditors - 6,200
Rent and rates 1,400 -
Bad debts 600 -
Balance at bank 1,200 -
You are given the following further information:
1) The value of the firm’s goodwill as on 31st March 2012 was agreed to be Rs.12,000.
2) On 31st March, 2012, Joy had paid Glad Rs.5,000 on account of the balance due to him on retirement. But
no entry had been made in the books in respect of this payment. The balance due to Glad after taking into
account this payment remained unpaid as on 30th September, 2012.
3) Glad on retirement had taken over one of the firm’s motor vehicles and it was agreed that he should be
charged for it at its written down value on the date of his retirement. The vehicle had cost Rs.1,400 and up
to 30th September, 2011 depreciation of Rs.625 had been provided on it.
4) The stock as on 30th September 2012 was valued at Rs.14,200.
5) Partners’ drawings which are included in salaries were as follows:
Glad Rs.1,800; Happy Rs.2,400; Joy Rs.900.
6) Salaries also included Rs.1,200 paid to Joy prior to his being admitted as a partner and which is to be
charged against the half-year profits of the firm.
7) Professional charges of Rs.250 included in trade expenses are specifically attributable to the second half
of the year.
8) The whole of the charge of Rs.600 for bad debts related to the period upto 31st March, 2012.
9) A bad debts provision specifically, attributable to the second half of the year of 5% of the total debtors is to
be made as on 30th September 2012.
10) As on 30th September 2012, rent paid in advance amounted to Rs.400 and trade expenses accrued
amounted to Rs.180.
11) Provision is to be made for depreciation on plant and machinery and on motor vehicles at the rates of 10%
and 25% per annum respectively, calculated on cost.
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MASTER MINDS No.1 for CA/CMA & MEC/CEC
You are required to prepare:
a) The Trading and profit and loss account for the year ended 30th September 2012.
b) Partner’s capital and current accounts for the year ended 30th September 2012; and
c) The balance sheet as on that date.

72) Ram, Rahim and Robert are partners, sharing Profits and Losses in the ratio of 5:3:2. It was decided that
Robert would retire on 31.3.2011 and in his place Richard would be admitted as a partner with new profit
sharing ratio between Ram, Rahim and Richard at 3:2:1.
Balance Sheet of Ram, Rahim and Robert as at 31.3.2011:
Liabilities Amount Assets Amount
Capital Accounts: Cash in hand 20,000
Ram 1,00,000 Cash in Bank 1,00,000
Rahim 1,50,000 Sundry Debtors 5,00,000
Robert 2,00,000 Stock in Trade 2,00,000
General Reserve 2,00,000 Plant & Machinery 3,00,000
Sundry Creditors 8,00,000 Land & Building 5,30,000
Loan from Richard 2,00,000
16,50,000 16,50,000
Retirement of Robert and admission of Richard is on the following terms:
a) Plant & Machinery to be depreciated by Rs.30,000.
b) Land and Building to be valued at Rs.6,00,000.
c) Stock to be valued at 95% of book value.
d) Provision for doubtful debts @ 10% to be provided on debtors.
e) General Reserve to be apportioned amongst Ram, Rahim and Robert.
f) The firm’s goodwill to be valued at 2 years purchase of the average profits of the last 3 years. The
relevant figures are:
Year ended 31.3.2008 − Profit Rs.50,000
Year ended 31.3.2009 − Profit Rs.60,000
Year ended 31.3.2010 − Profit Rs.55,000
g) Out of the amount due to Robert Rs.2,00,000 would be retained as loan by the firm and the balance will be
settled immediately.
h) Richard’s capital should be equal to 50% of the combined capital of Ram and Rahim.
Prepare:
a) Capital accounts of the partners; and
b) Balance Sheet of the reconstituted firm.
73) Lee and Lawson are in equal partnership. They agreed to take Hicks as one-fourth partner. For this it was
decided to find out the value of goodwill. M/s Lee and Lawson earned profits during 2011-2014 as follows:(SM)

On 31.12.2014 capital employed in M/s Lee and Lawson was Rs. 5,00,000. Rate of normal profitis 20%.
Find out the value of goodwill following various methods.

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
74) A, B and C were partners of a firm sharing profits and losses in the ratio of 3 : 4 : 3. The Balance Sheet of the
firm, as at 31st March, 2010 was as under:

Partner C died on 30th September, 2010. It was agreed between the surviving partners andthe legal
representatives of C that:
(i) Goodwill of the firm will be valued at Rs.60,000.
(ii) Fixed Assets will be written down by Rs.20,000.
(iii) In lieu of profits, C should be paid at the rate of 25% per annum on his capital as on31st March, 2010.
The profits for the year ended 31st March, 2011, after charging depreciation of Rs.10,000(depreciation upto
30th September was agreed to be Rs.6,000) were Rs.48,000.
Partners’ Drawings Accounts showed balances as under :
A Rs.18,000 (drawn evenly over the year)
B Rs.24,000 (drawn evenly over the year)
C (up-to-date of death) Rs.20,000
On the basis of the above figures, please indicate the entitlement of the legal heirs of C as on31st March, 2011
75) Ms. Naina, Ms. Radha and Ms. Khushi were partners in a firm sharing profits and losses in the ratio of 4 : 3 : 2.
Balance Sheet of the firm as on 31.03.2014 was as follows: (NOV 15)
Liabilities Amount (Rs.) Assets Amount (Rs.)
Capital Accounts: Plant and Machinery 4,26,000
Naina 3,00,000 Stock 1,85,800
Radha 2,25,000 Debtors 1,30,500
Khushi 1,50,000 Bank Balance 92,700
Current Accounts:
Naina 25,000
Radha 12,500
Khushi 18,750
Creditors 1,03,750
8,35,000 8,35,000
st
On 1 April 2014,. Ms. Naina retired. On her retirement goodwill is valued at 1,80,000. Ms. Radha and Ms.
Khushi do not wish to raise Goodwill account in the books.
Ms. Naina drew her balance of current account on 2nd April, 2014 and it is agreed to pay balance of her capital
account over-a period of two years by half yearly installments with interest at 10% per annum.
On 1st Oct: 2014 Ms. Asmita (Daughter of Radha) admitted as a partner. Ms. Radha surrendered one third of
her share of profit and loss in favour of Asmita and also transferred one third of her capital to Ms. Asmita. Ms.
Asmita was manager in the firm with annual salary of Rs.16,000, prior to admission as a partner.
The other bank transactions during financial year 2014-15 were as follows :
i) Payment to creditors Rs.7,75,000
ii) Received from debtors Rs.11,25,000

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
iii) Expenses paid Rs.11,250
iv) Asmita's salary paid Rs.8,000
v) Partners Drawing:
Ms. Radha Rs.50,000
Ms. Khushi Rs.41,250
Ms. Asmita Rs.11,250
vi) First intallment with interest paid to Ms. Naina on 1st Oct., 2014.
vii) Plant & Machinery sold at Rs.9,000 on 3rd April, 2014 (Cost Rs.10,000 & Book value Rs.7,000)
viii) Balances as on 31st March, 2015 Debtors Rs1,50,000 Creditors for purchases Rs.1,25.000,
Creditors for expenses Rs.10,000 and Stock Rs.1,71,250
ix) Depreciation is to be written off on Plant &Machinery Rs.30,350:
x) Second installment with interest paid to Ms. Naina on 1st April, 2015.
You are required to prepare:
a) Ms. Naina's loan account, d) Bank Account and
b) Partners' capital account, e) Balance Sheet as on 31st March, 2015 in
c) Partners current account, the books of the firm.

15. CASH FLOW STATEMENTS


THEORY:
76) Explain Classification of activities (with two examples) as suggested in AS 3, to be used for preparing a cash
flow statements.
PROBLEMS:
77) The following data were provided by the accounting records of Ryan Ltd. at year-end, March 31, 2013:
Income Statement
Particulars Amount Amount
Sales 6,98,000
Cost of Goods Sold (5,20,000)
Gross Margin 1,78,000
Operating Expenses
(including Depreciation Expense of Rs.37,000) (1,47,000)
31,000
Other Income / (Expenses)
Interest Expense paid (23,000)
Interest Income received 6,000
Gain on Sale of Investments 12,000
Loss on Sale of Plant (3,000) (8,000)
23,000
Income tax (7,000)
16,000
Comparative Balance Sheets:
31st March 31st March
Particulars
2013 2012
Assets:
Plant Assets 7,15,000 5,05,000
Less: Accumulated Depreciation (1,03,000) (68,000)
6,12,000 4,37,000

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
Investments (Long term) 1,15,000 1,27,000
Current Assets:
Inventory 1,44,000 1,10,000
Accounts receivable 47,000 55,000
Cash 46,000 15,000
Prepaid expenses 1,000 5,000
9,65,000 7,49,000
Liabilities:
Share Capital 4,65,000 3,15,000
Reserves and surplus 1,40,000 1,32,000
Bonds 2,95,000 2,45,000
Current liabilities:
Accounts payable 50,000 43,000
Accrued liabilities 12,000 9,000
Income taxes payable 3,000 5,000
9,65,000 7,49,000
Analysis of selected accounts and transactions during 2012-13
1. Purchased investments for Rs.78,000.
2. Sold investments for Rs.1,02,000. These investments cost Rs.90,000.
3. Purchased plant assets for Rs.1,20,000.
4. Sold plant assets that cost Rs.10,000 with accumulated depreciation of Rs.2,000 for Rs.5,000.
5. Issued Rs.1,00,000 of bonds at face value in an exchange for plant assets on 31st March, 2013.
6. Repaid Rs.50,000 of bonds at face value at maturity.
7. Issued 15,000 shares of Rs.10 each.
8. Paid cash dividends Rs.8,000.
Prepare Cash Flow Statement as per AS-3 (Revised), using indirect method.
78) The following figures have been extracted from the Books of X limited for the year ended on 31.3.2004. You
are required to prepare a cash flow statement.
1. Net profit before taking into account Income Tax and Income from law suits but after taking into Account
the following items was Rs.20 lakhs:
a) Depreciation on Fixed Assets Rs.5 lakhs.
b) Discount on issue of Debentures written off Rs.30,000.
c) Interest on Debentures paid Rs.3,50,000.
d) Books value of investments Rs.3 lakhs (Sale of Investments for Rs.3,20,000).
e)Interest received on investments Rs.60,000.
2. Compensation received Rs.90,000 by the company in a suit filed.
3. Income tax paid during the year Rs.10,50,000.
4. 15,000, 10% preference shares of Rs.100 each were redeemed on 31.3.2004 at a premium of 5%. Further
the company issued 50,000 equity shares of Rs.10 each at premium of 20% on 2.4.2003. Dividend on
preference shares were paid at the time of redemption.
5. Dividends paid for the year 2002-2003 Rs.5 lakhs and Interim dividend paid Rs.3 lakhs for the year 2003-04.
6. Land was purchased on 2.4.2003 for Rs.2,40,000 for which the company issued 20,000 equity shares of
Rs.10 each at a premium of 20% to the land owner as consideration.

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
7. Current assets and Current liabilities in the beginning and at the end of the years were as detailed below:
Particulars 31.3.03 31.3.04
Stock 12,00,000 13,18,000
Sundry Debtors 2,08,000 2,13,100
Cash in hand 1,96,000 35,000
Bills receivable 50,000 40,000
Bills payable 45,000 40,000
Sundry Creditors 1,66,000 1,71,300
Outstanding expenses 75,000 81,800
st
79) Raj Ltd. gives you the following information for the year ended 31 March, 2011:
1. Sales for the year Rs.48,00,000. The Company sold goods for cash only.
2. Cost of goods sold was 75% of sales.
3. Closing inventory was higher than opening inventory by Rs.50,000.
a. Trade creditors on 31.3.2011 exceed the outstanding on 31.3.2010 by Rs.1,00,000.
b. Tax paid during the year amounts to Rs.1,50,000.
c. Amounts paid to Trade creditors during the year Rs.35,50,000.
d. Administrative and Selling expenses paid Rs.3,60,000.
e. One new machinery was acquired in December, 2010 for Rs.6,00,000.
f. Dividend paid during the year Rs.1,20,000.
g. Cash in hand and at Bank on 31.3.2011 Rs.70,000.
h. Cash in hand and at Bank on 1.4.2010 Rs.50,000.
Prepare Cash Flow Statement for the year ended 31.3.2011 as per the prescribed Accounting standard.
80) The following summary cash account has been extracted from the company’s accounting records:

Prepare Cash Flow Statement of this company Hills Ltd. for the year ended 31st March, 2015in accordance
with AS-3 (Revised). (SM)
The company does not have any cash equivalents.
81) Prepare Cash flow for Gamma Ltd., for the year ending 31.3.2014 from the following information:
a) Sales for the year amounted to Rs. 135 crores out of which 60% was cash sales.
b) Purchases for the year amounted to Rs. 55 crores out of which credit purchase was 80%.
c) Administrative and selling expenses amounted to Rs. 18 crores and salary paid amounted to Rs. 22
crores.
d) The Company redeemed debentures of Rs. 20 crores at a premium of 10%. Debentureholders were
issued equity shares of Rs. 15 crores towards redemption and the balance was paid in cash. Debenture
interest paid during the year was Rs. 1.5 crores.

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
e) Dividend paid during the year amounted to Rs. 11.7 crores(including Dividend distribution tax) was also
paid.
f) Investment costing Rs. 12 crores were sold at a profit of Rs. 2.4 crores.
g) Rs. 8 crores was paid towards income tax during the year.
h) A new plant costing Rs. 21 crores was purchased in part exchange of an old plant. The book value of the
old plant was Rs. 12 crores but the vendor took over the old plant at a value of Rs. 10 crores only. The
balance was paid in cash to the vendor.
i) The following balances are also provided: (SM)
Rs.in crores 1.4.2013 Rs.in crores 31.3.2014
Debtors 45 50
Creditors 21 23
Bank 6
82) The following figures have been extracted from the books of X Limited for the year ended on31.3.2015. You
are required to prepare a cash flow statement.
i) Net profit before taking into account income tax and income from law suits but after taking into account the
following items was Rs.20 lakhs:
a. Depreciation on Fixed Assets Rs.5 lakhs.
b. Discount on issue of Debentures written off Rs.30,000.
c. Interest on Debentures paid Rs.3,50,000.
d. Book value of investments Rs.3 lakhs (Sale of Investments for Rs.3,20,000).
e. Interest received on investments Rs.60,000.
f. Compensation received Rs.90,000 by the company in a suit filed.
ii) Income tax paid during the year Rs.10,50,000.
iii) 15,000, 10% preference shares of Rs.100 each were redeemed on 31.3.2015 at a premium of5%. Further
the company issued 50,000 equity shares of Rs.10 each at a premium of 20% on2.4.2014. Dividend on
preference shares were paid at the time of redemption.
iv) Dividend paid for the year 2013-2014 Rs.5 lakhs and interim dividend paid Rs.3 lakhs forthe year 2014-
2015.
v) Land was purchased on 2.4.2014 for Rs.2,40,000 for which the company issued 20,000equity shares of
Rs.10 each at a premium of 20% to the land owner as consideration.
vi) Current assets and current liabilities in the beginning and at the end of the years were asdetailed below:

83) Prepare cash flow statement of M/s MNT Ltd. for the year ended 31st March, 2015. with the help of the
following information: (PM)
i) Company sold goods for cash only
ii) Gross Profit Ratio was 30% for the year, gross profit amounts to Rs.3,82,500.
iii) Opening inventory was lesser than closing inventory by Rs.35,000.
iv) Wages paid during the year Rs.4,92,500
v) Office and selling expenses paid during the year Rs.75,000

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
vi) Dividend paid during the year Rs.30,000 (including dividend distribution tax).
vii) Bank loan repaid during the year Rs.2,15,000 (included interest Rs.15,000)
viii) Trade payable on 31st March, 2014 exceed the balance on 31st March, 2015 by Rs.25,000.
ix) Amount paid to trade payables during the year Rs.4,60,000.
x) Tax paid during the year amounts to Rs.65,000 (Provision for taxation as on 31.03.2015 Rs.45,000)
xi) Investments of Rs.7,00,000 sold during the year at a profit of Rs.20,000.
xii) Depreciation on fixed assets amounts to Rs.85,000
xiii) Plant and Machinery purchased on 15th November, 2014 for Rs.2,50,000.
xiv) Cash and Cash Equivalents on 31st March, 2014 Rs.2,00,000
xv) Cash and Cash Equivalents on 31st March, Rs.6,07,500

15. ACCOUNTING FOR BONUS SHARES


84) The following is the summarised Balance Sheet of Bumbum Limited as at 31st March, 2012:

Particulars Rs.
Sources of funds
Authorized capital 5,00,000
50,000 Equity shares of Rs.10 each 10,00,000
10,000 Preference shares of Rs.100 each 15,00,000

Issued, subscribed and paid up


30,000 Equity shares of Rs.10 each 3,00,000
5,000, 8%Redeemable Preference shares of Rs.100 each 5,00,000

Reserves & Surplus


Securities Premium 6,00,000
General Reserve 6,50,000
Profit & Loss A/c 40,000

2,500, 9% Debentures of Rs.100 each 2,50,000


Sundry Creditors 1,70,000
25,10,000
Application of funds:
Fixed Assets (Net) 7,80,000
Investments (Market value Rs.5,80,000) 4,90,000
Deferred Tax Assets 3,40,000
Sundry Debtors 6,20,000
Cash & Bank balance 2,80,000
25,10,000
In Annual General Meeting held on 20th June, 2012 the company passed the following Resolutions:
a) To split equity share of Rs.10 each into 5 equity shares of Rs.2 each from 1st July, 12.
b) To redeem 8% preference shares at a premium of 5%.
c) To redeem 9% Debentures by making offer to debenture holders to convert their holdings into equity
shares at Rs.10 per share or accept cash on redemption.

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
d) To issue fully paid bonus shares in the ratio of one equity share for every 3 sharesheld on record date.
On 10th July, 2012 investments were sold for Rs.5,55,000 and preference shares were Redeemed. 40% of
Debenture holders exercised their option to accept cash and their claims were settled on 1st August, 2012.The
Company fixed 5th September, 2012 as record date and bonus issue was concluded by 12th September, 2012.
You are requested to journalize the above transactions including cash transactions and Prepare Balance
Sheet as at 30th September, 2012. All working notes should form part of your answer.
85) Following is the extract from the Balance Sheet of M/s. Yahoo Ltd. as at 31st March, 2012:
Particulars Rs.
Authorized capital:
50,000, 10% Preference shares of Rs.10 each 5,00,000
2,00,000 Equity shares of Rs.10 each 20,00,000
Issued and subscribed capital:
40,000, 10% Preference shares of Rs.10 each fully paid 4,00,000
1,80,000, Equity shares of Rs.10 each, of which Rs.7.50 paid up 13,50,000
Reserves and Surplus:
General reserve 2,40,000
Capital reserve 1,50,000
Securities premium 50,000
Profit and loss account 3,00,000
On 1st April, 2012, the company has made a final call @ Rs.2.50 each on 1,80,000 equity shares. The call
money was received by 30th April, 2012. There after the company decided to capitalize its reserves by issuing
bonus shares at the rate of one share for every three shares held. Securities premium of Rs.50,000 includes a
premium of Rs.20,000 for shares issued to vendor for purchase of a special machinery. Capital reserve
includes Rs.60,000 being profit on exchange of plant and machinery.
Show necessary Journal Entries in the books of the company and prepare the extract of the Balance Sheet
after bonus issue. Necessary assumption, if any, should form part of your answer.

16. COMPANY FINAL ACCOUNTS


86) The balance sheet of XYZ Ltd. as at 31st December, 2013 inter alia includes the following:
Rs.
50,000 8% Preference shares of Rs.100 each Rs. 70 paid up 35,00,000
1,00,000 Equity shares of Rs.100 each fully paid up 1,00,00,000
Securities premium 5,00,000
Capital redemption reserve 20,00,000
General reserve 50,00,000
Under the terms of their issue, the preference shares are redeemable on March 31, 2014 at a Premium of 5%.
In order to finance the redemption, the company makes a right issue of 50,000 equity shares of Rs.100 each at
Rs.20 being payable on application, Rs.35 (including Rs.10 premium)on allotment and the balance on May 1,
2014. The issue was fully subscribed and allotment made on May 1, 2014. The monies due on allotment were
received by March 30, 2014. The preference shares were redeemed after fulfilling the necessary conditions of
Section 55 of the Companies Act, 2013. The company decided to make the minimum utilization of general
reserve.
You are asked to pass the necessary journal entries and show the relevant extracts from the Balance Sheet as
on March 31, 2014 with the corresponding figures as on 31st December, 2013.

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
87) The Articles of Association of S Ltd. Provide the following:
1. That 20% of the net profit of each year shall be transferred to reserve fund.
2. That an amount equal to 10% of equity dividend shall be set aside for staff bonus.
3. That the balance available for distribution shall be applied:
a) In paying 14% on cumulative preference shares.
b) In paying 20% dividend on equity shares.
c) One-third of the balance available as additional dividend on preference shares and 2/3 as additional
equity dividend.
A further condition was imposed by the articles viz. that the balance carried forward shall be equal to 12%
on preference shares after making provisions a), b) and c) mentioned above. The company has issued
13,000, 14% cumulative participating preference shares of Rs.100 each fully paid and 70,000 equity
shares of Rs.10 each fully paid up.
The profit for the year ended 31st March, 2008 was Rs.10,00,000 and balance brought from previous year
Rs.80,000. Provide Rs. 31,200 for depreciation and Rs.80,000 for taxation before making other
appropriations. Prepare Profit and Loss Account.
88) The following is statement of profit and loss of Mundra Ltd., the year ended 31st march, 2011.
Name of the Company : Mundra Ltd
Profit and Loss Statement for the year ended: 31st March, 2011
Particulars Note no Rs.
Revenue from operations 40,25,365
Other Income 1 2,73,925
Total Revenue 42,99,290
I Expenses:
Employee benefits expense 2 3,52,100
Finance costs 3 31,240
Depreciation and amortization expenses 4 5,22,543
Other expenses 5 890572
Total Expenses 17,96,455
Profit in the current year before tax (I-II) 25,02,835
II
(-) Provision for tax (1242500)
Profit in the current year after tax 12,60,335
Add last year profit 5,72,350
Less transfer to reserves (4,00,000)
Less investment allowance reserve (12,500)
Profit transfer to balance sheet 14,20,185
Note to Accounts:
Particulars Rs.
1. Other Income:
(a) Subsidies received from Govt. 2,32,560
(b) Interest on Investments 15,643
(c) Transfer fee 722
(d) Profit on sale of Machinery:
Amount realized 55,000
Written down value 30,000 25,000
TOTAL 2,73,925
2. Employee benefits Expense:
(a) Director fee 66,750
(b) Managerial remuneration 2,85,350
TOTAL 3,52,100
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MASTER MINDS No.1 for CA/CMA & MEC/CEC
3. Finance Costs:
(a) Interest on debentures 31,240
4. Depreciation and amortization expenses 5,22,543

5. Other Expenses:
(a) Donation to charitable funds 25,500
(b) Compensation for breach of contract 42,530
(c) Administration & selling 8,22,542
TOTAL 8,90,572
Additional Information:
1. Original Cost of the machinery sold was Rs.40,000
2. Depreciation on fixed assets as per the Companies Act, 2013 was Rs.5,75,345.
You are required to comment on the managerial remuneration in the following situation:
a) There is only one whole time director;
b) There are two whole time directors.
c) There are two whole time directors, a part time director and a manager.
89) BHARAT Ltd. provides you the following information:

Year Dividend Paid up capital


2001-2002 9% Rs.1,00,000
2002-2003 8% Rs.1,00,000
2003-2004 10% Rs.1,00,000
2004-2005 7% Rs.1,00,000
2005-2006 6% Rs.1,00,000
Equity share capital Rs. 1,00,000
Reserve as on 01.04.2006 Rs.50,000
Loss after charging depreciation for the year 2006-2007 Rs.6,000
Depreciation for year 2006-2007 Rs.6,000
Required: X Ltd. desires to declare divided for the loss year 2006-2007. Can it do so? If yes, at what rate, it
may declare dividend?
90) You are required to prepare a Profit and Loss Account and Balance Sheet from the following Trial Balance
extracted from the books of the international Hotels Ltd., on 31st March, 2012.
Particulars Debit Credit
Authorized Capital divided into 5,000 6% Preference Shares of Rs.100
each and 10,000 equity shares of Rs.100 each 15,00,000
Subscribed Capital –
5,000 6% Preference Shares of Rs.100 each 5,00,000
Equity Capital 8,05,000
Purchases – Wines, Cigarettes, Cigars etc 45,800
Foodstuffs 36,200
Wages and Salaries 28,300
Rent, Rates and Taxes 8,900
Laundry 750

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
Sales – Wines, Cigarettes, Cigars, etc. 68,400
- Food 57,600
Coal and Firewood 3,290
Carriage and Cooliage 810
Sundry Expenses 5,840
Advertising 8,360
Repairs 4,250
Rent of Rooms 48,000
Billiard 5,700
Miscellaneous Receipts 2,800
Discount received 3,300
Transfer fees 700
Freehold Land and Building 8,50,000
Furniture and Fittings 86,300
Stock on hand, 1st April, 2011:
Wines, Cigarettes, Cigars etc. 12,800
Foodstuffs 5,260
Cash in hand 2,200
Cash with Bankers 76,380
Preliminary and formation expenses 8,000
2,000 Debentures of Rs.100 each (6%) 2,00,000
Profit and Loss Account 41,500
Sundry Creditors 42,000
Sundry Debtors 19,260
Investments 2,72,300
Goodwill at cost 5,00,000
General Reserve 2,00,000
19,75,000 19,75,000
Wages and Salaries Outstanding 1,280
Stock on 31st March, 2012:
Wines Cigarettes and Cigars, etc. 22,500
Foodstuffs 16,400
Depreciation:
Furniture and Fittings @ 5% p.a.: Land & Buildings @ 2% p.a.
The equity capital on 1st April, 2011 stood at Rs.7,20,000 that is 6,000 shares fully paid and 2,000 shares
Rs.60 paid. The directors made a call of Rs.40 per share on 1st October 2011. A shareholders could not pay
the call on 100 shares and his shares were then forfeited and reissued @ Rs.90 per share as fully paid. The
directors propose a dividend of 8% on equity shares, transferring any amount that may be required from
General Reserve. Ignore Taxation.

17. ACCOUNTING IN COMPUTERIZED ENVIRONMENT


91) Explain the factors to be considered before selecting the pre-packaged accounting software? Or market is full
of readymade accounting soft wares. What factors will you consider to choose one of the for your enterprises?
92) What are the advantages and disadvantages of an prepackage accounting software?

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
93) What is Enterprise Resource Planning (ERP) software? What are the factors which you will take into
consideration while choosing an ERP software?
94) What are spread sheets? What are the advantages and disadvantages of spread sheets?
95) What are the disadvantages of using an Enterprise Resource planning package?

ACCOUNTING STANDARDS
AS-1
96)

97)

98) In the books of M/s Prashant Ltd., closing inventory as on 31.03.2015 amounts to Rs.1,63,000 (on the basis of
FIFO method).
The company decides to change from FIFO method to weighted average method for ascertaining the cost of
inventory from the year 2014-15. On the basis of weighted average method, closing inventory as on 31.03.2015
amounts to Rs.1,47,000. Realizable value of the inventory as on 31.03.2015 amounts to Rs.1,95,000. Discuss
disclosure requirement of change in accounting policy as per AS-1. (NOV 15)
AS-2
99)

100)

101)

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
102)

AS-3
103)

AS-6
104)

105)

106) On 01.04.2010 a machine was acquired at Rs.4,00,000. The machine was expected to have a useful life of 10
years. The residual value was estimated at 10% of the original cost. At the end of the 3rd year, an attachment
was made to the machine at a cost of Rs.1,80,000 to enhance its capacity. The attachment was expected to
have a useful life of 10 years and zero terminal value. During the same time the original machine was revalued
upwards by Rs.90,000 and remaining useful life was reassessed at 9 years and residual value was
reassessed at nil.
Find depreciation for the year, If
(i) Attachment retains its separate identity.
(ii) Attachment becomes integral part of the machine.

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
107) A machinery with a useful life of 6 years was purchased on 1st April, 2012 for Rs.1,50,000. Depreciation was
provided on straight line method for first three years considering a residual value of 10% of cost.
In the beginning of fourth year the company reassessed the remaining useful life of the machinery at 4 years
and residual value was estimated at 5% of original cost.
The accountant recalculated the revised depreciation historically and charged the difference to profit and loss
account. You are required to comment on the treatment by accountant and calculate the depreciation to be
charged for the fourth year. (NOV 15)
AS-7
108)

109)

110)

AS-9
111)

112)

113)

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MASTER MINDS No.1 for CA/CMA & MEC/CEC
114) M/s. Umang Ltd. sold goods through its agent. As per terms of sales, consideration is payable within one
month. In the event of delay in payment, interest is chargeable @ 12% p.a. from the agent. The company has
not realized interest from the agent in the past. For the year ended 31st March, 2015 interest due from agent
(because of delay in payment) amounts to Rs.1,72,000. The accountant of M/s Umang Ltd. booked
Rs.1,72,000 as interest income in the year ended 31st March, 2015. Discuss the contention of the accountant
with reference to Accounting Standard - 9.
AS-10
115)

116)

117)

118)

119)

IPCC |Guess Questions– May 2016 – Accounts 55


MASTER MINDS No.1 for CA/CMA & MEC/CEC
120) Briefly explain the treatment of following items as per relevant accounting standards:
i) The accountant of Star Limited valued the Goodwill of the company at Rs. 50 lakhs and showed the same
as Fixed Asset in Balance Sheet. The corresponding credit was given to Reserves.
ii) An expense of Rs,5 crores was incurred on a Machine towards its Repairs and Maintenance. The
accountant wants to capitalized the same considering the significance of amount spent.
iii) A plant was ready for commercial production on 01.04.2014 but could commence actual production only
on 01.06.2014. The company incurred Rs.50 lakhs as administrative expenditure during the period of
which 20% was allocable to the plant. The accountant added Rs.10 lakhs to cost of plant. (NOV 15)
AS-13
121)

122)

AS-14
123)

124)

NOTE: All the Questions are from MM Material 34th edition unless otherwise specified

THE END

IPCC |Guess Questions– May 2016 – Accounts 56