Sample Paper Series- I, Solution | Mock Tests & Past Year Papers for CA Foundation PDF Download

 Page 1


1 
Test Series: March, 2019 
FOUNDATION COURSE 
MOCK TEST PAPER  
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
ANSWERS 
1. (a) (i) False- When shares are forfeited, the share capital account is debited with called up capital 
of shares forfeited and the share forfeiture account is credited with amount received on shares 
forfeited.  
(ii) False- Accrual concept implies accounting on ‘due’ or ‘accrual’ basis. Accrual basis of 
accounting involves recognition of revenues and costs as and when they accrue irrespective 
of actual receipts or payments. 
(iii)  False - Finished goods are normally valued at cost or net realizable value whichever is lower. 
(iv)  True - Discount at the time of retirement of a bill is a gain for the drawee and loss for the 
drawer. 
(v)  False - According to Partnership Act, in the absence of any agreement to the contrary profits 
and losses are to be shared equally among partners. 
(vi)  False- Receipts and payments account is a classified summary of cash receipts and 
payments over a certain period together with cash and bank balances at the beginning and 
close of the period. 
(b) Cash and mercantile system: Cash system of accounting is a system by which a transaction is 
recognized only if cash is received or paid. In cash system of accounting, entries are made only 
when cash is received or paid, no entry being made when a payment or receipt is merely due. Cash 
system is normally followed by professionals, educational institutions or non-profit making 
organizations. 
 On the other hand, mercantile system of accounting is a system of classifying and summarizing 
trandsactions into assets, liabilities, equity (owner’s fund), costs, revenues and recording thereof. 
A transaction is recognized when either a liability is created/ impaired and an asset is created 
/impaired. A record is made on the basis of amounts having become due for payment or receipt 
irrespective of the fact whether payment is made or received actually. 
 Mercantile system of accounting is generally accepted accounting system by business entities 
(c)     Journal Entries in the books of Gamma Bros. 
 Particulars Dr.  Cr.  
  Amount 
(Rs.) 
Amount 
(Rs.) 
    
(i) Salaries A/c 7,500  
  To Purchase A/c  7,500 
 (Being entry made for stock taken by employees)   
(ii) Machinery A/c 8,000  
  To Cash A/c  8,000 
 (Being wages paid for erection of machinery)   
© The Institute of Chartered Accountants of India
Page 2


1 
Test Series: March, 2019 
FOUNDATION COURSE 
MOCK TEST PAPER  
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
ANSWERS 
1. (a) (i) False- When shares are forfeited, the share capital account is debited with called up capital 
of shares forfeited and the share forfeiture account is credited with amount received on shares 
forfeited.  
(ii) False- Accrual concept implies accounting on ‘due’ or ‘accrual’ basis. Accrual basis of 
accounting involves recognition of revenues and costs as and when they accrue irrespective 
of actual receipts or payments. 
(iii)  False - Finished goods are normally valued at cost or net realizable value whichever is lower. 
(iv)  True - Discount at the time of retirement of a bill is a gain for the drawee and loss for the 
drawer. 
(v)  False - According to Partnership Act, in the absence of any agreement to the contrary profits 
and losses are to be shared equally among partners. 
(vi)  False- Receipts and payments account is a classified summary of cash receipts and 
payments over a certain period together with cash and bank balances at the beginning and 
close of the period. 
(b) Cash and mercantile system: Cash system of accounting is a system by which a transaction is 
recognized only if cash is received or paid. In cash system of accounting, entries are made only 
when cash is received or paid, no entry being made when a payment or receipt is merely due. Cash 
system is normally followed by professionals, educational institutions or non-profit making 
organizations. 
 On the other hand, mercantile system of accounting is a system of classifying and summarizing 
trandsactions into assets, liabilities, equity (owner’s fund), costs, revenues and recording thereof. 
A transaction is recognized when either a liability is created/ impaired and an asset is created 
/impaired. A record is made on the basis of amounts having become due for payment or receipt 
irrespective of the fact whether payment is made or received actually. 
 Mercantile system of accounting is generally accepted accounting system by business entities 
(c)     Journal Entries in the books of Gamma Bros. 
 Particulars Dr.  Cr.  
  Amount 
(Rs.) 
Amount 
(Rs.) 
    
(i) Salaries A/c 7,500  
  To Purchase A/c  7,500 
 (Being entry made for stock taken by employees)   
(ii) Machinery A/c 8,000  
  To Cash A/c  8,000 
 (Being wages paid for erection of machinery)   
© The Institute of Chartered Accountants of India
2 
(iii) Drawings A/c 1,700  
  To Petty Cash A/c  1,700 
 (Being the income tax of proprietor paid out of business 
money) 
  
(iv) Purchase A/c 1,800  
  To Cash A/c   1,750 
  To Discount Received A/c  50 
 (Being the goods purchased from Naveen for Rs. 2,000  
@ 10% trade discount and cash discount of Rs. 50) 
  
2. (a)      Profit and Loss Adjustment Account 
 Rs.   Rs.  
To Advertisement (samples) 80,000 By Net profit 8,00,000 
To Sales  2,00,000 By Electric fittings 30,000 
(goods approved in April to  By Samples 80,000 
be taken as April sales)  By Stock (Purchases of March  5,00,000 
To Adjusted net profit 16,80,000               not included in stock)  
  By Sales (goods sold in March 
 wrongly taken as April sales) 
4,00,000 
  
 
By Stock (goods sent on approval basis 
not included in stock) 
1,50,000 
 
 19,60,000  19,60,000 
Calculation of value of inventory on 31
st
 March, 2017 
 Rs.  
Stock on 31
st
 March, 2017 (given) 7,50,000 
Add: Purchases of March, 2017 not included in the stock 5,00,000 
Goods lying with customers on approval basis  1,50,000 
 14,00,000 
(b)       Motor Truck A/c 
Date Particulars Amount Date Particulars Amount 
2016   2016   
Jan-01 To balance b/d 2,92,50,000 Oct-01 By bank A/c 27,00,000 
Oct-01 To Profit & Loss A/c                        
4,50,000  
Oct-01 By Depreciation on lost 
assets 
 
     6,75,000 
(Profit on settlement of 
Truck) 
Oct-01 To Bank A/c 50,00,000 Dec-31 By Depreciation A/c 83,50,000 
    Dec-31 By balance c/d 2,29,75,000 
  3,47,00,000   3,47,00,000 
2017 
 
 2017  
 
Jan-01 To balance b/d 2,29,75,000 Dec-31 By Depreciation A/c 91,00,000 
   Dec-31 By balance c/d 1,38,75,000 
        
  2,29,75,000   2,29,75,000 
 
© The Institute of Chartered Accountants of India
Page 3


1 
Test Series: March, 2019 
FOUNDATION COURSE 
MOCK TEST PAPER  
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
ANSWERS 
1. (a) (i) False- When shares are forfeited, the share capital account is debited with called up capital 
of shares forfeited and the share forfeiture account is credited with amount received on shares 
forfeited.  
(ii) False- Accrual concept implies accounting on ‘due’ or ‘accrual’ basis. Accrual basis of 
accounting involves recognition of revenues and costs as and when they accrue irrespective 
of actual receipts or payments. 
(iii)  False - Finished goods are normally valued at cost or net realizable value whichever is lower. 
(iv)  True - Discount at the time of retirement of a bill is a gain for the drawee and loss for the 
drawer. 
(v)  False - According to Partnership Act, in the absence of any agreement to the contrary profits 
and losses are to be shared equally among partners. 
(vi)  False- Receipts and payments account is a classified summary of cash receipts and 
payments over a certain period together with cash and bank balances at the beginning and 
close of the period. 
(b) Cash and mercantile system: Cash system of accounting is a system by which a transaction is 
recognized only if cash is received or paid. In cash system of accounting, entries are made only 
when cash is received or paid, no entry being made when a payment or receipt is merely due. Cash 
system is normally followed by professionals, educational institutions or non-profit making 
organizations. 
 On the other hand, mercantile system of accounting is a system of classifying and summarizing 
trandsactions into assets, liabilities, equity (owner’s fund), costs, revenues and recording thereof. 
A transaction is recognized when either a liability is created/ impaired and an asset is created 
/impaired. A record is made on the basis of amounts having become due for payment or receipt 
irrespective of the fact whether payment is made or received actually. 
 Mercantile system of accounting is generally accepted accounting system by business entities 
(c)     Journal Entries in the books of Gamma Bros. 
 Particulars Dr.  Cr.  
  Amount 
(Rs.) 
Amount 
(Rs.) 
    
(i) Salaries A/c 7,500  
  To Purchase A/c  7,500 
 (Being entry made for stock taken by employees)   
(ii) Machinery A/c 8,000  
  To Cash A/c  8,000 
 (Being wages paid for erection of machinery)   
© The Institute of Chartered Accountants of India
2 
(iii) Drawings A/c 1,700  
  To Petty Cash A/c  1,700 
 (Being the income tax of proprietor paid out of business 
money) 
  
(iv) Purchase A/c 1,800  
  To Cash A/c   1,750 
  To Discount Received A/c  50 
 (Being the goods purchased from Naveen for Rs. 2,000  
@ 10% trade discount and cash discount of Rs. 50) 
  
2. (a)      Profit and Loss Adjustment Account 
 Rs.   Rs.  
To Advertisement (samples) 80,000 By Net profit 8,00,000 
To Sales  2,00,000 By Electric fittings 30,000 
(goods approved in April to  By Samples 80,000 
be taken as April sales)  By Stock (Purchases of March  5,00,000 
To Adjusted net profit 16,80,000               not included in stock)  
  By Sales (goods sold in March 
 wrongly taken as April sales) 
4,00,000 
  
 
By Stock (goods sent on approval basis 
not included in stock) 
1,50,000 
 
 19,60,000  19,60,000 
Calculation of value of inventory on 31
st
 March, 2017 
 Rs.  
Stock on 31
st
 March, 2017 (given) 7,50,000 
Add: Purchases of March, 2017 not included in the stock 5,00,000 
Goods lying with customers on approval basis  1,50,000 
 14,00,000 
(b)       Motor Truck A/c 
Date Particulars Amount Date Particulars Amount 
2016   2016   
Jan-01 To balance b/d 2,92,50,000 Oct-01 By bank A/c 27,00,000 
Oct-01 To Profit & Loss A/c                        
4,50,000  
Oct-01 By Depreciation on lost 
assets 
 
     6,75,000 
(Profit on settlement of 
Truck) 
Oct-01 To Bank A/c 50,00,000 Dec-31 By Depreciation A/c 83,50,000 
    Dec-31 By balance c/d 2,29,75,000 
  3,47,00,000   3,47,00,000 
2017 
 
 2017  
 
Jan-01 To balance b/d 2,29,75,000 Dec-31 By Depreciation A/c 91,00,000 
   Dec-31 By balance c/d 1,38,75,000 
        
  2,29,75,000   2,29,75,000 
 
© The Institute of Chartered Accountants of India
3 
Working Note: 
1. To find out loss on Profit on settlement of truck  Rs. 
Original cost as on 1.4.2014 45,00,000 
Less: Depreciation for 2014 6,75,000 
 38,25,000 
Less: Depreciation for 2015 9,00,000 
 29,25,000 
Less: Depreciation for 2016 (9 months) 6,75,000 
 22,50,000 
Less: Amount received from Insurance 
company 
27,00,000 
 4,50,000 
3. (a)       In the books of Y 
X in Account Current with Y 
(Interest to 31
st
 March, 2018 @ 10% p.a) 
Date Particulars  Amount Days Product Date Particulars Amount Days Product  
2018  Rs.  Rs. 2018  Rs.  Rs. 
Jan.1 To Balance 
b/d 
5,000 90 4,50,000 Jan.24 By Promissiory 
Note (due date 
27
th
 April) 
5,000 (27) (1,35,000) 
Jan.11 To Sales 6,000 79 4,74,000 Feb. 1 By Purchases 10,000 58 5,80,000 
Feb. 4 To Sales 8,200 55 4,51,000 Feb. 7 By Sales 
Return 
1,000 52 52,000 
Mar.18 To Sales 9,200 13 1,19,600 Mar. 1 By Purchases 5,600 30 1,68,000 
Mar.31 To Interest 219   Mar.23 By Purchases 4,000 8 32,000 
     Mar.31 By Balance of 
Products 
  7,97,600 
     Mar.31 By Bank 3,019   
  28,619  14,94,600   28,619  14,94,600 
  Working Note: 
  Calculation of interest: 
Interest = 
7,97,600 10
365 100
? = Rs. 219 (approx.)  
(b).     Journal Entries in the Books of Mr. A 
Date  Particulars              L.F. Dr.  
Amount Rs. 
Cr.  
Amount Rs. 
2017     
August 1 Bills Receivable A/c            Dr. 10,000  
   To B  10,000 
  (Being the acceptance received from B to settle 
his account) 
  
© The Institute of Chartered Accountants of India
Page 4


1 
Test Series: March, 2019 
FOUNDATION COURSE 
MOCK TEST PAPER  
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
ANSWERS 
1. (a) (i) False- When shares are forfeited, the share capital account is debited with called up capital 
of shares forfeited and the share forfeiture account is credited with amount received on shares 
forfeited.  
(ii) False- Accrual concept implies accounting on ‘due’ or ‘accrual’ basis. Accrual basis of 
accounting involves recognition of revenues and costs as and when they accrue irrespective 
of actual receipts or payments. 
(iii)  False - Finished goods are normally valued at cost or net realizable value whichever is lower. 
(iv)  True - Discount at the time of retirement of a bill is a gain for the drawee and loss for the 
drawer. 
(v)  False - According to Partnership Act, in the absence of any agreement to the contrary profits 
and losses are to be shared equally among partners. 
(vi)  False- Receipts and payments account is a classified summary of cash receipts and 
payments over a certain period together with cash and bank balances at the beginning and 
close of the period. 
(b) Cash and mercantile system: Cash system of accounting is a system by which a transaction is 
recognized only if cash is received or paid. In cash system of accounting, entries are made only 
when cash is received or paid, no entry being made when a payment or receipt is merely due. Cash 
system is normally followed by professionals, educational institutions or non-profit making 
organizations. 
 On the other hand, mercantile system of accounting is a system of classifying and summarizing 
trandsactions into assets, liabilities, equity (owner’s fund), costs, revenues and recording thereof. 
A transaction is recognized when either a liability is created/ impaired and an asset is created 
/impaired. A record is made on the basis of amounts having become due for payment or receipt 
irrespective of the fact whether payment is made or received actually. 
 Mercantile system of accounting is generally accepted accounting system by business entities 
(c)     Journal Entries in the books of Gamma Bros. 
 Particulars Dr.  Cr.  
  Amount 
(Rs.) 
Amount 
(Rs.) 
    
(i) Salaries A/c 7,500  
  To Purchase A/c  7,500 
 (Being entry made for stock taken by employees)   
(ii) Machinery A/c 8,000  
  To Cash A/c  8,000 
 (Being wages paid for erection of machinery)   
© The Institute of Chartered Accountants of India
2 
(iii) Drawings A/c 1,700  
  To Petty Cash A/c  1,700 
 (Being the income tax of proprietor paid out of business 
money) 
  
(iv) Purchase A/c 1,800  
  To Cash A/c   1,750 
  To Discount Received A/c  50 
 (Being the goods purchased from Naveen for Rs. 2,000  
@ 10% trade discount and cash discount of Rs. 50) 
  
2. (a)      Profit and Loss Adjustment Account 
 Rs.   Rs.  
To Advertisement (samples) 80,000 By Net profit 8,00,000 
To Sales  2,00,000 By Electric fittings 30,000 
(goods approved in April to  By Samples 80,000 
be taken as April sales)  By Stock (Purchases of March  5,00,000 
To Adjusted net profit 16,80,000               not included in stock)  
  By Sales (goods sold in March 
 wrongly taken as April sales) 
4,00,000 
  
 
By Stock (goods sent on approval basis 
not included in stock) 
1,50,000 
 
 19,60,000  19,60,000 
Calculation of value of inventory on 31
st
 March, 2017 
 Rs.  
Stock on 31
st
 March, 2017 (given) 7,50,000 
Add: Purchases of March, 2017 not included in the stock 5,00,000 
Goods lying with customers on approval basis  1,50,000 
 14,00,000 
(b)       Motor Truck A/c 
Date Particulars Amount Date Particulars Amount 
2016   2016   
Jan-01 To balance b/d 2,92,50,000 Oct-01 By bank A/c 27,00,000 
Oct-01 To Profit & Loss A/c                        
4,50,000  
Oct-01 By Depreciation on lost 
assets 
 
     6,75,000 
(Profit on settlement of 
Truck) 
Oct-01 To Bank A/c 50,00,000 Dec-31 By Depreciation A/c 83,50,000 
    Dec-31 By balance c/d 2,29,75,000 
  3,47,00,000   3,47,00,000 
2017 
 
 2017  
 
Jan-01 To balance b/d 2,29,75,000 Dec-31 By Depreciation A/c 91,00,000 
   Dec-31 By balance c/d 1,38,75,000 
        
  2,29,75,000   2,29,75,000 
 
© The Institute of Chartered Accountants of India
3 
Working Note: 
1. To find out loss on Profit on settlement of truck  Rs. 
Original cost as on 1.4.2014 45,00,000 
Less: Depreciation for 2014 6,75,000 
 38,25,000 
Less: Depreciation for 2015 9,00,000 
 29,25,000 
Less: Depreciation for 2016 (9 months) 6,75,000 
 22,50,000 
Less: Amount received from Insurance 
company 
27,00,000 
 4,50,000 
3. (a)       In the books of Y 
X in Account Current with Y 
(Interest to 31
st
 March, 2018 @ 10% p.a) 
Date Particulars  Amount Days Product Date Particulars Amount Days Product  
2018  Rs.  Rs. 2018  Rs.  Rs. 
Jan.1 To Balance 
b/d 
5,000 90 4,50,000 Jan.24 By Promissiory 
Note (due date 
27
th
 April) 
5,000 (27) (1,35,000) 
Jan.11 To Sales 6,000 79 4,74,000 Feb. 1 By Purchases 10,000 58 5,80,000 
Feb. 4 To Sales 8,200 55 4,51,000 Feb. 7 By Sales 
Return 
1,000 52 52,000 
Mar.18 To Sales 9,200 13 1,19,600 Mar. 1 By Purchases 5,600 30 1,68,000 
Mar.31 To Interest 219   Mar.23 By Purchases 4,000 8 32,000 
     Mar.31 By Balance of 
Products 
  7,97,600 
     Mar.31 By Bank 3,019   
  28,619  14,94,600   28,619  14,94,600 
  Working Note: 
  Calculation of interest: 
Interest = 
7,97,600 10
365 100
? = Rs. 219 (approx.)  
(b).     Journal Entries in the Books of Mr. A 
Date  Particulars              L.F. Dr.  
Amount Rs. 
Cr.  
Amount Rs. 
2017     
August 1 Bills Receivable A/c            Dr. 10,000  
   To B  10,000 
  (Being the acceptance received from B to settle 
his account) 
  
© The Institute of Chartered Accountants of India
4 
August  1 Bank A/c              Dr. 9,800  
  Discount A/c            Dr. 200  
   To Bills Receivable  10,000 
  (Being the bill discounted for Rs. 9,800 from bank)   
November  4 B                Dr. 10,000  
   To Bank Account  10,000 
  (Being the B’s acceptance is to be renewed)   
November  4 B                Dr. 240  
   To Interest Account  240 
  (Being the interest due from B for 3 months i.e., 
8000x3/12 ? 12%=240) 
  
November 4 Cash A/c              Dr. 2,240  
  Bills Receivable A/c            Dr. 8,000  
   To B  10,240 
  (Being amount and acceptance of new bill 
received from B) 
  
December  31 B A/c              Dr. 8,000  
   To Bills Receivable A/c  8,000 
  (Being B became insolvent)   
December  31 Cash A/c              Dr. 3,200  
  Bad debts A/c             Dr. 4,800  
   To B   8,000 
  (Being the amount received and written off on B’s 
insolvency) 
  
4. (a)       Revaluation Account 
 Rs.  Rs. 
To  Plant & Machinery 
 (1,70,000 x 15%) 
25,500 By  Land & Building A/c 1,52,000  
To  Provision for Bad & Doubtful Debts 
(60,000 x 5%) 
 
3,000 
  
To  Outstanding Repairs to Building 6,000   
To  A’s Capital A/c (5/8) 73,438   
To  B’s Capital A/c (3/8) 44,062   
 1,52,000   1,52,000 
Capital Accounts of Partners 
 A B C  A B C 
To A’s Capital 
A/c 
- - 20,000 By Balance b/d 4,10,000 3,30,000 - 
To B’s Capital 
A/c 
  12,000 By Revaluation A/c 73,438 44,062 - 
To B’s Current 
A/c 
- 68,062  
By Profit & Loss 
A/c 
70,000 42,000 - 
To Balance c/d 6,00,000 3,60,000 2,40,000 By Bank - - 2,72,000 
    By C’s Capital A/c 20,000 12,000 - 
    By A’s Current A/c 26,562 - - 
 6,00,000 4,28,062 2,72,000  6,00,000 4,28,062 2,72,000 
© The Institute of Chartered Accountants of India
Page 5


1 
Test Series: March, 2019 
FOUNDATION COURSE 
MOCK TEST PAPER  
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
ANSWERS 
1. (a) (i) False- When shares are forfeited, the share capital account is debited with called up capital 
of shares forfeited and the share forfeiture account is credited with amount received on shares 
forfeited.  
(ii) False- Accrual concept implies accounting on ‘due’ or ‘accrual’ basis. Accrual basis of 
accounting involves recognition of revenues and costs as and when they accrue irrespective 
of actual receipts or payments. 
(iii)  False - Finished goods are normally valued at cost or net realizable value whichever is lower. 
(iv)  True - Discount at the time of retirement of a bill is a gain for the drawee and loss for the 
drawer. 
(v)  False - According to Partnership Act, in the absence of any agreement to the contrary profits 
and losses are to be shared equally among partners. 
(vi)  False- Receipts and payments account is a classified summary of cash receipts and 
payments over a certain period together with cash and bank balances at the beginning and 
close of the period. 
(b) Cash and mercantile system: Cash system of accounting is a system by which a transaction is 
recognized only if cash is received or paid. In cash system of accounting, entries are made only 
when cash is received or paid, no entry being made when a payment or receipt is merely due. Cash 
system is normally followed by professionals, educational institutions or non-profit making 
organizations. 
 On the other hand, mercantile system of accounting is a system of classifying and summarizing 
trandsactions into assets, liabilities, equity (owner’s fund), costs, revenues and recording thereof. 
A transaction is recognized when either a liability is created/ impaired and an asset is created 
/impaired. A record is made on the basis of amounts having become due for payment or receipt 
irrespective of the fact whether payment is made or received actually. 
 Mercantile system of accounting is generally accepted accounting system by business entities 
(c)     Journal Entries in the books of Gamma Bros. 
 Particulars Dr.  Cr.  
  Amount 
(Rs.) 
Amount 
(Rs.) 
    
(i) Salaries A/c 7,500  
  To Purchase A/c  7,500 
 (Being entry made for stock taken by employees)   
(ii) Machinery A/c 8,000  
  To Cash A/c  8,000 
 (Being wages paid for erection of machinery)   
© The Institute of Chartered Accountants of India
2 
(iii) Drawings A/c 1,700  
  To Petty Cash A/c  1,700 
 (Being the income tax of proprietor paid out of business 
money) 
  
(iv) Purchase A/c 1,800  
  To Cash A/c   1,750 
  To Discount Received A/c  50 
 (Being the goods purchased from Naveen for Rs. 2,000  
@ 10% trade discount and cash discount of Rs. 50) 
  
2. (a)      Profit and Loss Adjustment Account 
 Rs.   Rs.  
To Advertisement (samples) 80,000 By Net profit 8,00,000 
To Sales  2,00,000 By Electric fittings 30,000 
(goods approved in April to  By Samples 80,000 
be taken as April sales)  By Stock (Purchases of March  5,00,000 
To Adjusted net profit 16,80,000               not included in stock)  
  By Sales (goods sold in March 
 wrongly taken as April sales) 
4,00,000 
  
 
By Stock (goods sent on approval basis 
not included in stock) 
1,50,000 
 
 19,60,000  19,60,000 
Calculation of value of inventory on 31
st
 March, 2017 
 Rs.  
Stock on 31
st
 March, 2017 (given) 7,50,000 
Add: Purchases of March, 2017 not included in the stock 5,00,000 
Goods lying with customers on approval basis  1,50,000 
 14,00,000 
(b)       Motor Truck A/c 
Date Particulars Amount Date Particulars Amount 
2016   2016   
Jan-01 To balance b/d 2,92,50,000 Oct-01 By bank A/c 27,00,000 
Oct-01 To Profit & Loss A/c                        
4,50,000  
Oct-01 By Depreciation on lost 
assets 
 
     6,75,000 
(Profit on settlement of 
Truck) 
Oct-01 To Bank A/c 50,00,000 Dec-31 By Depreciation A/c 83,50,000 
    Dec-31 By balance c/d 2,29,75,000 
  3,47,00,000   3,47,00,000 
2017 
 
 2017  
 
Jan-01 To balance b/d 2,29,75,000 Dec-31 By Depreciation A/c 91,00,000 
   Dec-31 By balance c/d 1,38,75,000 
        
  2,29,75,000   2,29,75,000 
 
© The Institute of Chartered Accountants of India
3 
Working Note: 
1. To find out loss on Profit on settlement of truck  Rs. 
Original cost as on 1.4.2014 45,00,000 
Less: Depreciation for 2014 6,75,000 
 38,25,000 
Less: Depreciation for 2015 9,00,000 
 29,25,000 
Less: Depreciation for 2016 (9 months) 6,75,000 
 22,50,000 
Less: Amount received from Insurance 
company 
27,00,000 
 4,50,000 
3. (a)       In the books of Y 
X in Account Current with Y 
(Interest to 31
st
 March, 2018 @ 10% p.a) 
Date Particulars  Amount Days Product Date Particulars Amount Days Product  
2018  Rs.  Rs. 2018  Rs.  Rs. 
Jan.1 To Balance 
b/d 
5,000 90 4,50,000 Jan.24 By Promissiory 
Note (due date 
27
th
 April) 
5,000 (27) (1,35,000) 
Jan.11 To Sales 6,000 79 4,74,000 Feb. 1 By Purchases 10,000 58 5,80,000 
Feb. 4 To Sales 8,200 55 4,51,000 Feb. 7 By Sales 
Return 
1,000 52 52,000 
Mar.18 To Sales 9,200 13 1,19,600 Mar. 1 By Purchases 5,600 30 1,68,000 
Mar.31 To Interest 219   Mar.23 By Purchases 4,000 8 32,000 
     Mar.31 By Balance of 
Products 
  7,97,600 
     Mar.31 By Bank 3,019   
  28,619  14,94,600   28,619  14,94,600 
  Working Note: 
  Calculation of interest: 
Interest = 
7,97,600 10
365 100
? = Rs. 219 (approx.)  
(b).     Journal Entries in the Books of Mr. A 
Date  Particulars              L.F. Dr.  
Amount Rs. 
Cr.  
Amount Rs. 
2017     
August 1 Bills Receivable A/c            Dr. 10,000  
   To B  10,000 
  (Being the acceptance received from B to settle 
his account) 
  
© The Institute of Chartered Accountants of India
4 
August  1 Bank A/c              Dr. 9,800  
  Discount A/c            Dr. 200  
   To Bills Receivable  10,000 
  (Being the bill discounted for Rs. 9,800 from bank)   
November  4 B                Dr. 10,000  
   To Bank Account  10,000 
  (Being the B’s acceptance is to be renewed)   
November  4 B                Dr. 240  
   To Interest Account  240 
  (Being the interest due from B for 3 months i.e., 
8000x3/12 ? 12%=240) 
  
November 4 Cash A/c              Dr. 2,240  
  Bills Receivable A/c            Dr. 8,000  
   To B  10,240 
  (Being amount and acceptance of new bill 
received from B) 
  
December  31 B A/c              Dr. 8,000  
   To Bills Receivable A/c  8,000 
  (Being B became insolvent)   
December  31 Cash A/c              Dr. 3,200  
  Bad debts A/c             Dr. 4,800  
   To B   8,000 
  (Being the amount received and written off on B’s 
insolvency) 
  
4. (a)       Revaluation Account 
 Rs.  Rs. 
To  Plant & Machinery 
 (1,70,000 x 15%) 
25,500 By  Land & Building A/c 1,52,000  
To  Provision for Bad & Doubtful Debts 
(60,000 x 5%) 
 
3,000 
  
To  Outstanding Repairs to Building 6,000   
To  A’s Capital A/c (5/8) 73,438   
To  B’s Capital A/c (3/8) 44,062   
 1,52,000   1,52,000 
Capital Accounts of Partners 
 A B C  A B C 
To A’s Capital 
A/c 
- - 20,000 By Balance b/d 4,10,000 3,30,000 - 
To B’s Capital 
A/c 
  12,000 By Revaluation A/c 73,438 44,062 - 
To B’s Current 
A/c 
- 68,062  
By Profit & Loss 
A/c 
70,000 42,000 - 
To Balance c/d 6,00,000 3,60,000 2,40,000 By Bank - - 2,72,000 
    By C’s Capital A/c 20,000 12,000 - 
    By A’s Current A/c 26,562 - - 
 6,00,000 4,28,062 2,72,000  6,00,000 4,28,062 2,72,000 
© The Institute of Chartered Accountants of India
5 
Calculation of New Profit Sharing Ratio and gaining ratio: 
C’s Share of Profit = 1/5 = 2/10 
Remaining Share = 1 – 1/5 = 4/5 
A’s Share = 5/8 x 4/5 = 20/40 = 5/10 
B’s Share = 3/8 x 4/5 = 12/40 = 3/10 
New Profit sharing Ratio = 5:3:2 
Gaining ratio = 5:3 (same as old profit sharing ratio among old partners) 
Balance sheet of AB & Co. as on 31.3.2018 
Liabilities  Rs.  Assets   
Capital Accounts:   Land & Buildings  5,32,000 
 A 6,00,000  Plant & Machinery 1,70,000  
 B 3,60,000  Less: Depreciation 25,500 1,44,500 
 C 2,40,000 12,00,000 Furniture  1,09,480 
B’s Current A/c  68,062 Stock  1,45,260 
Trade Creditors  54,800 Sundry Debtors 60,000  
Outstanding Repairs to 
Building 
 6,000 Less: Provision 3,000 
57,000 
   Cash at Bank  3,14,060 
    A’s current A/c     26,562 
  13,28,862   13,28,862 
Working Note: 
Required Balance of Capital Accounts 
C’s Capital after writing off Goodwill = 2,72,000 – 32,000 = 2,40,000 
C’s Share of Profit = 1/5 
Thus Capital of the firm shall be = 2,40,000 x 5 = 12,00,000 
A’s Capital = 12,00,000 x 5/10 = 6,00,000 and 
B’s Capital = 12,00,000 x 3/10 = 3,60,000 
(b) (i)  Computation of Income for the year 2016-17: 
 Rs. 
Money received during the year related to 2016-17 5,00,000 
Add: Money received in advance during previous years 1,50,000 
Total income of the year 2016-17 6,50,000 
(ii)        Advance from Customers A/c 
Date Particulars Rs. Date  Particulars Rs. 
 To Sales A/c 
(Advance related to current 
year transferred to sales) 
1,50,000 1.4.2016 By Balance b/d 2,00,000 
© The Institute of Chartered Accountants of India