Revision Test Paper- May 2019 | Mock Tests & Past Year Papers for CA Foundation PDF Download

 Page 1


 
 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
QUESTIONS  
True and false 
1. State with reasons, whether the following statements are true or false: 
(i) The results and position disclosed by final accounts are not exact. 
(ii) The rationale behind the opening of a suspense account is to tally the trial balance. 
(iii) Reducing balance method of depreciation is followed to have a uniform charge for 
depreciation and repairs and maintenance together. 
(iv) Accounting can be viewed as an information system which has its input processing 
methods and output. 
(v) The value of human resources is generally shown as assets in the Balance Sheet. 
(vi) The financial statement must disclose all the relevant and reliable information in 
accordance with the Full Disclosure Principle. 
(vii) The debit notes issued are used to prepare Sales Return Book. 
(viii) In Account Current, Red Ink Interest is treated as negative interest. 
(ix) A Tallied trial balance means that the books of accounts have been prepared as per 
accepted accounting principles. 
Theoretical Framework 
2. (a) Define Accounting Policies in brief. Identify few areas wherein different accounting 
policies are frequently encountered. 
(b) Discuss the limitations which must be kept in mind while evaluating the Financial 
Statements. 
Journal Entries 
3. (a) M/s Suman & Co. find the following errors in their books of account before 
preparation of Trial Balance.  You are required to pass necessary journal entries: 
(i) A purchase of ` 5,600 from M/s Minu & Co. was recorded in the acc ounts of 
M/s Mintu & Co. as ` 6,500.  Day Book entry has also been passed incorrectly. 
(ii) A sale of ` 9,800 to M/s Bantu Bros. was recorded in M/s Bindu & Co.’s 
account as ` 8,900.  Day Book entry has also been incorrectly passed. 
(iii) Discount allowed ` 560 (as per Cash Book) has been posted to Commission 
Account.  But the Cash Book total should be ` 650, because  discount allowed 
of of ` 90 to M/s Bantu Bros. has been omitted. 
© The Institute of Chartered Accountants of India
Page 2


 
 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
QUESTIONS  
True and false 
1. State with reasons, whether the following statements are true or false: 
(i) The results and position disclosed by final accounts are not exact. 
(ii) The rationale behind the opening of a suspense account is to tally the trial balance. 
(iii) Reducing balance method of depreciation is followed to have a uniform charge for 
depreciation and repairs and maintenance together. 
(iv) Accounting can be viewed as an information system which has its input processing 
methods and output. 
(v) The value of human resources is generally shown as assets in the Balance Sheet. 
(vi) The financial statement must disclose all the relevant and reliable information in 
accordance with the Full Disclosure Principle. 
(vii) The debit notes issued are used to prepare Sales Return Book. 
(viii) In Account Current, Red Ink Interest is treated as negative interest. 
(ix) A Tallied trial balance means that the books of accounts have been prepared as per 
accepted accounting principles. 
Theoretical Framework 
2. (a) Define Accounting Policies in brief. Identify few areas wherein different accounting 
policies are frequently encountered. 
(b) Discuss the limitations which must be kept in mind while evaluating the Financial 
Statements. 
Journal Entries 
3. (a) M/s Suman & Co. find the following errors in their books of account before 
preparation of Trial Balance.  You are required to pass necessary journal entries: 
(i) A purchase of ` 5,600 from M/s Minu & Co. was recorded in the acc ounts of 
M/s Mintu & Co. as ` 6,500.  Day Book entry has also been passed incorrectly. 
(ii) A sale of ` 9,800 to M/s Bantu Bros. was recorded in M/s Bindu & Co.’s 
account as ` 8,900.  Day Book entry has also been incorrectly passed. 
(iii) Discount allowed ` 560 (as per Cash Book) has been posted to Commission 
Account.  But the Cash Book total should be ` 650, because  discount allowed 
of of ` 90 to M/s Bantu Bros. has been omitted. 
© The Institute of Chartered Accountants of India
2 FOUNDATION EXAMINATION: MAY, 2019 
 
(iv) A cheque of ` 9,700 drawn by M/s Bantu Bros. has been dishonoured, but 
wrongly debited to M/s Bhakt & Co. 
Should the Trial Balance tally without rectification of errors? 
Capital or revenue expenditure 
(b) Classify the following expenditures and receipts as capital or revenue: 
(i) ` 10,000 spent as import duty on machinery purchased. 
(ii) Amount received from debtors during the year. 
(iii) Cost of testing whether the equipment is functioning properly.  
(iv) Insurance claim received on account of a machinery damaged by fire. 
Cash book 
4. (a) From the following transactions, prepare the Purchases Returns Book of Alpha & 
Co., a saree dealer and post them to ledger : 
Date Debit 
Note No. 
Particulars 
04.01.2018 101 Returned to Goyal Mills, Surat – 5 polyester sarees 
@ ` 100. 
09.01.2018  Garg Mills, Kota – accepted the return of sarees 
(which were purchased for cash) – 5 Kota sarees @ 
` 40. 
16.01.2018 102 Returned to Mittal Mills, Bangalore –5 silk sarees @ 
` 260. 
30.01.2018  Returned one typewriter (being defective) @  
` 3,500 to B & Co. 
Rectification of errors 
(b) Write out the Journal Entries to rectify the following errors, using a Suspense 
Account. 
(1) Goods of the value of `10,000 returned by Mr. Sharma were entered in the 
Sales Day Book and posted therefrom to the credit of his account; 
(2) An amount of `15,000 entered in the Sales Returns Book, has been posted to 
the debit of Mr. Philip, who returned the goods; 
(3) A sale of `20,000 made to Mr. Ghanshyam was correctly entered in the Sales 
Day Book but wrongly posted to the debit of Mr. Radheshyam as `2,000; 
(4) Bad Debts aggregating `45,000 were written off during the year in the Sales 
ledger but were not adjusted in the General Ledger; and  
© The Institute of Chartered Accountants of India
Page 3


 
 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
QUESTIONS  
True and false 
1. State with reasons, whether the following statements are true or false: 
(i) The results and position disclosed by final accounts are not exact. 
(ii) The rationale behind the opening of a suspense account is to tally the trial balance. 
(iii) Reducing balance method of depreciation is followed to have a uniform charge for 
depreciation and repairs and maintenance together. 
(iv) Accounting can be viewed as an information system which has its input processing 
methods and output. 
(v) The value of human resources is generally shown as assets in the Balance Sheet. 
(vi) The financial statement must disclose all the relevant and reliable information in 
accordance with the Full Disclosure Principle. 
(vii) The debit notes issued are used to prepare Sales Return Book. 
(viii) In Account Current, Red Ink Interest is treated as negative interest. 
(ix) A Tallied trial balance means that the books of accounts have been prepared as per 
accepted accounting principles. 
Theoretical Framework 
2. (a) Define Accounting Policies in brief. Identify few areas wherein different accounting 
policies are frequently encountered. 
(b) Discuss the limitations which must be kept in mind while evaluating the Financial 
Statements. 
Journal Entries 
3. (a) M/s Suman & Co. find the following errors in their books of account before 
preparation of Trial Balance.  You are required to pass necessary journal entries: 
(i) A purchase of ` 5,600 from M/s Minu & Co. was recorded in the acc ounts of 
M/s Mintu & Co. as ` 6,500.  Day Book entry has also been passed incorrectly. 
(ii) A sale of ` 9,800 to M/s Bantu Bros. was recorded in M/s Bindu & Co.’s 
account as ` 8,900.  Day Book entry has also been incorrectly passed. 
(iii) Discount allowed ` 560 (as per Cash Book) has been posted to Commission 
Account.  But the Cash Book total should be ` 650, because  discount allowed 
of of ` 90 to M/s Bantu Bros. has been omitted. 
© The Institute of Chartered Accountants of India
2 FOUNDATION EXAMINATION: MAY, 2019 
 
(iv) A cheque of ` 9,700 drawn by M/s Bantu Bros. has been dishonoured, but 
wrongly debited to M/s Bhakt & Co. 
Should the Trial Balance tally without rectification of errors? 
Capital or revenue expenditure 
(b) Classify the following expenditures and receipts as capital or revenue: 
(i) ` 10,000 spent as import duty on machinery purchased. 
(ii) Amount received from debtors during the year. 
(iii) Cost of testing whether the equipment is functioning properly.  
(iv) Insurance claim received on account of a machinery damaged by fire. 
Cash book 
4. (a) From the following transactions, prepare the Purchases Returns Book of Alpha & 
Co., a saree dealer and post them to ledger : 
Date Debit 
Note No. 
Particulars 
04.01.2018 101 Returned to Goyal Mills, Surat – 5 polyester sarees 
@ ` 100. 
09.01.2018  Garg Mills, Kota – accepted the return of sarees 
(which were purchased for cash) – 5 Kota sarees @ 
` 40. 
16.01.2018 102 Returned to Mittal Mills, Bangalore –5 silk sarees @ 
` 260. 
30.01.2018  Returned one typewriter (being defective) @  
` 3,500 to B & Co. 
Rectification of errors 
(b) Write out the Journal Entries to rectify the following errors, using a Suspense 
Account. 
(1) Goods of the value of `10,000 returned by Mr. Sharma were entered in the 
Sales Day Book and posted therefrom to the credit of his account; 
(2) An amount of `15,000 entered in the Sales Returns Book, has been posted to 
the debit of Mr. Philip, who returned the goods; 
(3) A sale of `20,000 made to Mr. Ghanshyam was correctly entered in the Sales 
Day Book but wrongly posted to the debit of Mr. Radheshyam as `2,000; 
(4) Bad Debts aggregating `45,000 were written off during the year in the Sales 
ledger but were not adjusted in the General Ledger; and  
© The Institute of Chartered Accountants of India
 PAPER-1 : PRINCIPLES AND PRACTICE OF ACCOUNTING  3 
 
(5) The total of “Discount Allowed” column in the Cash Book for the month of 
September, 2018 amounting to `25,000 was not posted. 
Bank Reconciliation Statement 
5. On 30th November, 2018, the Cash Book of Mr. Hari showed an overdrawn position of  
` 4,480 although his Bank Statement showed only ` 3,200 overdrawn.  An examination 
of the two records showed the following errors: 
(i) The debit side of the Cash Book was undercast by ` 400. 
(ii) A cheque for ` 1,600 in favour of Y suppliers Ltd. was omitted by the bank from the 
statement, the cheque was debited to another customer’s Account.  
(iii) A cheque for ` 172 drawn for payment of telephone bill was recorded in the Cash 
Book as ` 127 but was shown correctly in the Bank Statement. 
(iv) A cheque for ` 425 from Mr. Pal paid into bank was dishonoured and shown as 
such on the Bank Statement, although no entry relating to the dishonoured cheque 
was made in the Cash Book. 
(v) The Bank had debited a cheque for ` 150 to Mr. Hari’s Account by mistake, it 
should have been debited by them to Mr. Kar’s Account. 
(vi) A dividend of ` 100 was collected by the bank but not entered in the Cash Book. 
(vii) Cheques totalling ` 1,300 drawn on November was not presented for payment. 
(viii) Cheque for ` 1,200 deposited on 30th November was not credited by the Bank. 
(ix) Interest amounting to ` 300 was debited by the Bank but yet to be entered in the 
Cash Book. 
You are required to prepare a Bank Reconciliation Statement on 30
th
 November, 2018. 
Inventories 
6. A trader prepared his accounts on 31st March, each year.  Due to some unavoidable 
reasons, no stock taking could be possible till 15
th
 April, 2018 on which date the total cost 
of goods in his godown came to ` 50,000.  The following facts were established between 
31st March and 15
th
 April, 2018. 
(i)  Sales ` 41,000 (including cash sales ` 10,000) 
(ii)  Purchases ` 5,034 (including cash purchases ` 1,990) 
(iii)   Sales Return ` 1,000. 
(iv) On 15th March, goods of the sale value of ` 10,000 were sent on sale or return 
basis to a customer, the period of approval being four weeks.  He returned 40% of 
the goods on 10th April, approving the rest; the customer was billed on 16th April. 
© The Institute of Chartered Accountants of India
Page 4


 
 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
QUESTIONS  
True and false 
1. State with reasons, whether the following statements are true or false: 
(i) The results and position disclosed by final accounts are not exact. 
(ii) The rationale behind the opening of a suspense account is to tally the trial balance. 
(iii) Reducing balance method of depreciation is followed to have a uniform charge for 
depreciation and repairs and maintenance together. 
(iv) Accounting can be viewed as an information system which has its input processing 
methods and output. 
(v) The value of human resources is generally shown as assets in the Balance Sheet. 
(vi) The financial statement must disclose all the relevant and reliable information in 
accordance with the Full Disclosure Principle. 
(vii) The debit notes issued are used to prepare Sales Return Book. 
(viii) In Account Current, Red Ink Interest is treated as negative interest. 
(ix) A Tallied trial balance means that the books of accounts have been prepared as per 
accepted accounting principles. 
Theoretical Framework 
2. (a) Define Accounting Policies in brief. Identify few areas wherein different accounting 
policies are frequently encountered. 
(b) Discuss the limitations which must be kept in mind while evaluating the Financial 
Statements. 
Journal Entries 
3. (a) M/s Suman & Co. find the following errors in their books of account before 
preparation of Trial Balance.  You are required to pass necessary journal entries: 
(i) A purchase of ` 5,600 from M/s Minu & Co. was recorded in the acc ounts of 
M/s Mintu & Co. as ` 6,500.  Day Book entry has also been passed incorrectly. 
(ii) A sale of ` 9,800 to M/s Bantu Bros. was recorded in M/s Bindu & Co.’s 
account as ` 8,900.  Day Book entry has also been incorrectly passed. 
(iii) Discount allowed ` 560 (as per Cash Book) has been posted to Commission 
Account.  But the Cash Book total should be ` 650, because  discount allowed 
of of ` 90 to M/s Bantu Bros. has been omitted. 
© The Institute of Chartered Accountants of India
2 FOUNDATION EXAMINATION: MAY, 2019 
 
(iv) A cheque of ` 9,700 drawn by M/s Bantu Bros. has been dishonoured, but 
wrongly debited to M/s Bhakt & Co. 
Should the Trial Balance tally without rectification of errors? 
Capital or revenue expenditure 
(b) Classify the following expenditures and receipts as capital or revenue: 
(i) ` 10,000 spent as import duty on machinery purchased. 
(ii) Amount received from debtors during the year. 
(iii) Cost of testing whether the equipment is functioning properly.  
(iv) Insurance claim received on account of a machinery damaged by fire. 
Cash book 
4. (a) From the following transactions, prepare the Purchases Returns Book of Alpha & 
Co., a saree dealer and post them to ledger : 
Date Debit 
Note No. 
Particulars 
04.01.2018 101 Returned to Goyal Mills, Surat – 5 polyester sarees 
@ ` 100. 
09.01.2018  Garg Mills, Kota – accepted the return of sarees 
(which were purchased for cash) – 5 Kota sarees @ 
` 40. 
16.01.2018 102 Returned to Mittal Mills, Bangalore –5 silk sarees @ 
` 260. 
30.01.2018  Returned one typewriter (being defective) @  
` 3,500 to B & Co. 
Rectification of errors 
(b) Write out the Journal Entries to rectify the following errors, using a Suspense 
Account. 
(1) Goods of the value of `10,000 returned by Mr. Sharma were entered in the 
Sales Day Book and posted therefrom to the credit of his account; 
(2) An amount of `15,000 entered in the Sales Returns Book, has been posted to 
the debit of Mr. Philip, who returned the goods; 
(3) A sale of `20,000 made to Mr. Ghanshyam was correctly entered in the Sales 
Day Book but wrongly posted to the debit of Mr. Radheshyam as `2,000; 
(4) Bad Debts aggregating `45,000 were written off during the year in the Sales 
ledger but were not adjusted in the General Ledger; and  
© The Institute of Chartered Accountants of India
 PAPER-1 : PRINCIPLES AND PRACTICE OF ACCOUNTING  3 
 
(5) The total of “Discount Allowed” column in the Cash Book for the month of 
September, 2018 amounting to `25,000 was not posted. 
Bank Reconciliation Statement 
5. On 30th November, 2018, the Cash Book of Mr. Hari showed an overdrawn position of  
` 4,480 although his Bank Statement showed only ` 3,200 overdrawn.  An examination 
of the two records showed the following errors: 
(i) The debit side of the Cash Book was undercast by ` 400. 
(ii) A cheque for ` 1,600 in favour of Y suppliers Ltd. was omitted by the bank from the 
statement, the cheque was debited to another customer’s Account.  
(iii) A cheque for ` 172 drawn for payment of telephone bill was recorded in the Cash 
Book as ` 127 but was shown correctly in the Bank Statement. 
(iv) A cheque for ` 425 from Mr. Pal paid into bank was dishonoured and shown as 
such on the Bank Statement, although no entry relating to the dishonoured cheque 
was made in the Cash Book. 
(v) The Bank had debited a cheque for ` 150 to Mr. Hari’s Account by mistake, it 
should have been debited by them to Mr. Kar’s Account. 
(vi) A dividend of ` 100 was collected by the bank but not entered in the Cash Book. 
(vii) Cheques totalling ` 1,300 drawn on November was not presented for payment. 
(viii) Cheque for ` 1,200 deposited on 30th November was not credited by the Bank. 
(ix) Interest amounting to ` 300 was debited by the Bank but yet to be entered in the 
Cash Book. 
You are required to prepare a Bank Reconciliation Statement on 30
th
 November, 2018. 
Inventories 
6. A trader prepared his accounts on 31st March, each year.  Due to some unavoidable 
reasons, no stock taking could be possible till 15
th
 April, 2018 on which date the total cost 
of goods in his godown came to ` 50,000.  The following facts were established between 
31st March and 15
th
 April, 2018. 
(i)  Sales ` 41,000 (including cash sales ` 10,000) 
(ii)  Purchases ` 5,034 (including cash purchases ` 1,990) 
(iii)   Sales Return ` 1,000. 
(iv) On 15th March, goods of the sale value of ` 10,000 were sent on sale or return 
basis to a customer, the period of approval being four weeks.  He returned 40% of 
the goods on 10th April, approving the rest; the customer was billed on 16th April. 
© The Institute of Chartered Accountants of India
4 FOUNDATION EXAMINATION: MAY, 2019 
 
(v) The trader had also received goods costing ` 8,000 in March, for sale on 
consignment basis; 20% of the goods had been sold by 31st March, and another 
50% by the 15th April.  These sales are not included in above sales. 
  Goods are sold by the trader at a profit of 20% on sales. 
 You are required to ascertain the value of Inventory as on 31st March, 2018. 
Concept and Accounting of Depreciation 
7. A lease is purchased on 1st April, 2014 for 4 years at a cost of ` 2,00,000. It is proposed 
to depreciate the lease by the annuity method charging 5 percent interest. A reference to 
the annuity table shows that to depreciate ` 1 by annuity method over 4 years charging 
5% interest, one must write off a sum of ` 0.282012 [To write off ` 2,00,000 one has to 
write off every year ` 5,6402.40 i.e. 0.282012 × 2,00,000].  
You are required to show the Lease Account for four years (2014-15 to 2017-18) and 
also the relevant entries posted to the profit and loss account.  
Bill of Exchange 
8. Rita owed `1,00,000 to Siriman. On 1st October, 2018, Rita accepted a bill drawn by 
Siriman for the amount at 3 months. Siriman got the bill discounted with his bank for 
`99,000 on 3rd October, 2018. Before the due date, Rita approached Siriman for renewal 
of the bill. Siriman agreed on the conditions that `50,000 be paid immediately together 
with interest on the remaining amount at 12% per annum for 3 months and for the 
balance, Rita should accept a new bill at three months. These arrangements were carried 
out. But afterwards, Rita became insolvent and 40% of the amount could be recovered 
from his estate. 
Pass journal entries (with narration) in the books of Siriman. 
Consignment 
9. (a) Mr. Green of New Delhi purchased, 10,000 pieces of sarees at ` 100 per saree. Out 
of these 6,000 sarees were sent on consignment to Mr. White of Calcutta at the 
selling price of ` 120 per saree. The consignor paid ` 3,000 for packing and freight. 
Mr. White sold 5,000 sarees at ` 125 per saree and incurred ` 1,000 for selling 
expenses and remitted ` 5,00,000 to New Delhi on account. Mr. White is entitled to 
a commission of 5% on total sales plus a further commission at 20% of surplus price 
realized over invoice price.  
 You are required to prepare Consignment Account in the books of Mr. Green and 
Mr. Green’s account in the books of agent Mr. White. 
Joint venture 
(b) A and B entered into a joint venture agreement to share the profits and losses in the 
ratio of 2:1. A supplied goods worth ` 60,000 to B incurring expenses amounting to 
© The Institute of Chartered Accountants of India
Page 5


 
 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
QUESTIONS  
True and false 
1. State with reasons, whether the following statements are true or false: 
(i) The results and position disclosed by final accounts are not exact. 
(ii) The rationale behind the opening of a suspense account is to tally the trial balance. 
(iii) Reducing balance method of depreciation is followed to have a uniform charge for 
depreciation and repairs and maintenance together. 
(iv) Accounting can be viewed as an information system which has its input processing 
methods and output. 
(v) The value of human resources is generally shown as assets in the Balance Sheet. 
(vi) The financial statement must disclose all the relevant and reliable information in 
accordance with the Full Disclosure Principle. 
(vii) The debit notes issued are used to prepare Sales Return Book. 
(viii) In Account Current, Red Ink Interest is treated as negative interest. 
(ix) A Tallied trial balance means that the books of accounts have been prepared as per 
accepted accounting principles. 
Theoretical Framework 
2. (a) Define Accounting Policies in brief. Identify few areas wherein different accounting 
policies are frequently encountered. 
(b) Discuss the limitations which must be kept in mind while evaluating the Financial 
Statements. 
Journal Entries 
3. (a) M/s Suman & Co. find the following errors in their books of account before 
preparation of Trial Balance.  You are required to pass necessary journal entries: 
(i) A purchase of ` 5,600 from M/s Minu & Co. was recorded in the acc ounts of 
M/s Mintu & Co. as ` 6,500.  Day Book entry has also been passed incorrectly. 
(ii) A sale of ` 9,800 to M/s Bantu Bros. was recorded in M/s Bindu & Co.’s 
account as ` 8,900.  Day Book entry has also been incorrectly passed. 
(iii) Discount allowed ` 560 (as per Cash Book) has been posted to Commission 
Account.  But the Cash Book total should be ` 650, because  discount allowed 
of of ` 90 to M/s Bantu Bros. has been omitted. 
© The Institute of Chartered Accountants of India
2 FOUNDATION EXAMINATION: MAY, 2019 
 
(iv) A cheque of ` 9,700 drawn by M/s Bantu Bros. has been dishonoured, but 
wrongly debited to M/s Bhakt & Co. 
Should the Trial Balance tally without rectification of errors? 
Capital or revenue expenditure 
(b) Classify the following expenditures and receipts as capital or revenue: 
(i) ` 10,000 spent as import duty on machinery purchased. 
(ii) Amount received from debtors during the year. 
(iii) Cost of testing whether the equipment is functioning properly.  
(iv) Insurance claim received on account of a machinery damaged by fire. 
Cash book 
4. (a) From the following transactions, prepare the Purchases Returns Book of Alpha & 
Co., a saree dealer and post them to ledger : 
Date Debit 
Note No. 
Particulars 
04.01.2018 101 Returned to Goyal Mills, Surat – 5 polyester sarees 
@ ` 100. 
09.01.2018  Garg Mills, Kota – accepted the return of sarees 
(which were purchased for cash) – 5 Kota sarees @ 
` 40. 
16.01.2018 102 Returned to Mittal Mills, Bangalore –5 silk sarees @ 
` 260. 
30.01.2018  Returned one typewriter (being defective) @  
` 3,500 to B & Co. 
Rectification of errors 
(b) Write out the Journal Entries to rectify the following errors, using a Suspense 
Account. 
(1) Goods of the value of `10,000 returned by Mr. Sharma were entered in the 
Sales Day Book and posted therefrom to the credit of his account; 
(2) An amount of `15,000 entered in the Sales Returns Book, has been posted to 
the debit of Mr. Philip, who returned the goods; 
(3) A sale of `20,000 made to Mr. Ghanshyam was correctly entered in the Sales 
Day Book but wrongly posted to the debit of Mr. Radheshyam as `2,000; 
(4) Bad Debts aggregating `45,000 were written off during the year in the Sales 
ledger but were not adjusted in the General Ledger; and  
© The Institute of Chartered Accountants of India
 PAPER-1 : PRINCIPLES AND PRACTICE OF ACCOUNTING  3 
 
(5) The total of “Discount Allowed” column in the Cash Book for the month of 
September, 2018 amounting to `25,000 was not posted. 
Bank Reconciliation Statement 
5. On 30th November, 2018, the Cash Book of Mr. Hari showed an overdrawn position of  
` 4,480 although his Bank Statement showed only ` 3,200 overdrawn.  An examination 
of the two records showed the following errors: 
(i) The debit side of the Cash Book was undercast by ` 400. 
(ii) A cheque for ` 1,600 in favour of Y suppliers Ltd. was omitted by the bank from the 
statement, the cheque was debited to another customer’s Account.  
(iii) A cheque for ` 172 drawn for payment of telephone bill was recorded in the Cash 
Book as ` 127 but was shown correctly in the Bank Statement. 
(iv) A cheque for ` 425 from Mr. Pal paid into bank was dishonoured and shown as 
such on the Bank Statement, although no entry relating to the dishonoured cheque 
was made in the Cash Book. 
(v) The Bank had debited a cheque for ` 150 to Mr. Hari’s Account by mistake, it 
should have been debited by them to Mr. Kar’s Account. 
(vi) A dividend of ` 100 was collected by the bank but not entered in the Cash Book. 
(vii) Cheques totalling ` 1,300 drawn on November was not presented for payment. 
(viii) Cheque for ` 1,200 deposited on 30th November was not credited by the Bank. 
(ix) Interest amounting to ` 300 was debited by the Bank but yet to be entered in the 
Cash Book. 
You are required to prepare a Bank Reconciliation Statement on 30
th
 November, 2018. 
Inventories 
6. A trader prepared his accounts on 31st March, each year.  Due to some unavoidable 
reasons, no stock taking could be possible till 15
th
 April, 2018 on which date the total cost 
of goods in his godown came to ` 50,000.  The following facts were established between 
31st March and 15
th
 April, 2018. 
(i)  Sales ` 41,000 (including cash sales ` 10,000) 
(ii)  Purchases ` 5,034 (including cash purchases ` 1,990) 
(iii)   Sales Return ` 1,000. 
(iv) On 15th March, goods of the sale value of ` 10,000 were sent on sale or return 
basis to a customer, the period of approval being four weeks.  He returned 40% of 
the goods on 10th April, approving the rest; the customer was billed on 16th April. 
© The Institute of Chartered Accountants of India
4 FOUNDATION EXAMINATION: MAY, 2019 
 
(v) The trader had also received goods costing ` 8,000 in March, for sale on 
consignment basis; 20% of the goods had been sold by 31st March, and another 
50% by the 15th April.  These sales are not included in above sales. 
  Goods are sold by the trader at a profit of 20% on sales. 
 You are required to ascertain the value of Inventory as on 31st March, 2018. 
Concept and Accounting of Depreciation 
7. A lease is purchased on 1st April, 2014 for 4 years at a cost of ` 2,00,000. It is proposed 
to depreciate the lease by the annuity method charging 5 percent interest. A reference to 
the annuity table shows that to depreciate ` 1 by annuity method over 4 years charging 
5% interest, one must write off a sum of ` 0.282012 [To write off ` 2,00,000 one has to 
write off every year ` 5,6402.40 i.e. 0.282012 × 2,00,000].  
You are required to show the Lease Account for four years (2014-15 to 2017-18) and 
also the relevant entries posted to the profit and loss account.  
Bill of Exchange 
8. Rita owed `1,00,000 to Siriman. On 1st October, 2018, Rita accepted a bill drawn by 
Siriman for the amount at 3 months. Siriman got the bill discounted with his bank for 
`99,000 on 3rd October, 2018. Before the due date, Rita approached Siriman for renewal 
of the bill. Siriman agreed on the conditions that `50,000 be paid immediately together 
with interest on the remaining amount at 12% per annum for 3 months and for the 
balance, Rita should accept a new bill at three months. These arrangements were carried 
out. But afterwards, Rita became insolvent and 40% of the amount could be recovered 
from his estate. 
Pass journal entries (with narration) in the books of Siriman. 
Consignment 
9. (a) Mr. Green of New Delhi purchased, 10,000 pieces of sarees at ` 100 per saree. Out 
of these 6,000 sarees were sent on consignment to Mr. White of Calcutta at the 
selling price of ` 120 per saree. The consignor paid ` 3,000 for packing and freight. 
Mr. White sold 5,000 sarees at ` 125 per saree and incurred ` 1,000 for selling 
expenses and remitted ` 5,00,000 to New Delhi on account. Mr. White is entitled to 
a commission of 5% on total sales plus a further commission at 20% of surplus price 
realized over invoice price.  
 You are required to prepare Consignment Account in the books of Mr. Green and 
Mr. Green’s account in the books of agent Mr. White. 
Joint venture 
(b) A and B entered into a joint venture agreement to share the profits and losses in the 
ratio of 2:1. A supplied goods worth ` 60,000 to B incurring expenses amounting to 
© The Institute of Chartered Accountants of India
 PAPER-1 : PRINCIPLES AND PRACTICE OF ACCOUNTING  5 
 
` 2,000 for freight and insurance. During transit goods costing ` 5,000 became 
damaged and a sum of ` 3,000 was recovered from the insurance company. B 
reported that 90% of the remaining goods were sold at a profit of 30% of their 
original cost. Towards the end of the venture, a fire occurred and as a result the 
balance stock lying unsold with B was damaged. The goods were not insured and B 
agreed to compensate A by paying in cash 80% of the aggregate of the original cost 
of such goods plus proportionate expenses incurred by A. Apart from the joint 
venture share of profit, B was also entitled under the agreement to a commission of 
5% of net profits of joint venture after charging such commission. Selling expenses 
incurred by B totaled ` 1,000. B had earlier remitted an advance of ` 10,000. B duly 
paid the balance due to A by Draft.  
 You are required to prepare in A’s books : 
(i) Joint Venture Account. 
(ii) B’s Account  
Sale of Goods on Approval or Return Basis 
10. (a) On 31
st
 December, 2018 goods sold at a sale price of ` 3,000 were lying with 
customer, Ritu to whom these goods were sold on ‘sale or return basis’ were 
recorded as actual sales. Since no consent has been received from Ritu, you are 
required to pass adjustment entries presuming goods were sent on approval at a 
profit of cost plus 20%. Present market price is 10% less than the cost price. 
Royalty 
(b) Write short notes on: 
Minimum Rent. 
Recoupment of short-workings. 
Average Due Date 
11. (a) Ram purchases goods on credit.  His due dates for payments were as under: 
Transaction Date ` Due Date 
March 5 300 April 08 
April 15 200 May 18 
May 10 275 June 13 
June 5 400 July 10 
 Calculate Average due date. 
 
 
© The Institute of Chartered Accountants of India