Revision Test Paper- May 2018 | Mock Tests & Past Year Papers for CA Foundation PDF Download

 Page 1


PAPER – 1: PRINCIPLES & PRACTICE OF ACCOUNTING 
QUESTIONS  
True and False 
1.  State with reasons, whether the following statements are true or false: 
(a)  Accrual concept implies accounting on cash basis. 
(b)  The Sales book is kept to record both cash and credit sales. 
(c)  Bank reconciliation statement is prepared to arrive at the bank balance. 
(d) Finished goods are normally valued at cost or market price whichever is higher. 
(e)  Reducing balance method of depreciation is followed to have a uniform charge for 
depreciation and repairs and maintenance together. 
(f)  Discount at the time of retirement of a bill is a gain for the drawee. 
(g) A withdrawal of cash from the business by the proprietor should be charged to profit 
and loss account as an expense. 
(h)  Partners can share profits or losses in their capital ratio, when there is no 
agreement. 
(i)  Receipts and Payments Account highlights total income and expenditure. 
(j)  Debenture interest is payable after the payment of preference dividend but before 
the payment of equity dividend.  
(k)  Fixed Assets Turnover ratio indicates the firm’s ability of generating sales per rupee 
of long term investment. 
Theoretical Framework 
2. (a) Distinguish between Money measurement concept and matching concept. 
(b) Define revenue receipts and give examples. How are these receipts treated? 
Explain. 
(c)  Change in accounting policy may have a material effect on the items of financial 
statements.” Explain the statement with the help of an example. 
Journal Entries 
3. (a) Prepare Journal Entries for the following transactions in the books of Gamma Bros.  
(i) Employees had taken stock worth ` 10,000 (Cost price ` 7,500) on the eve of 
Deepawali and the same was deducted from their salaries in the subsequent 
month. 
(ii) Wages paid for erection of Machinery ` 8,000. 
© The Institute of Chartered Accountants of India
Page 2


PAPER – 1: PRINCIPLES & PRACTICE OF ACCOUNTING 
QUESTIONS  
True and False 
1.  State with reasons, whether the following statements are true or false: 
(a)  Accrual concept implies accounting on cash basis. 
(b)  The Sales book is kept to record both cash and credit sales. 
(c)  Bank reconciliation statement is prepared to arrive at the bank balance. 
(d) Finished goods are normally valued at cost or market price whichever is higher. 
(e)  Reducing balance method of depreciation is followed to have a uniform charge for 
depreciation and repairs and maintenance together. 
(f)  Discount at the time of retirement of a bill is a gain for the drawee. 
(g) A withdrawal of cash from the business by the proprietor should be charged to profit 
and loss account as an expense. 
(h)  Partners can share profits or losses in their capital ratio, when there is no 
agreement. 
(i)  Receipts and Payments Account highlights total income and expenditure. 
(j)  Debenture interest is payable after the payment of preference dividend but before 
the payment of equity dividend.  
(k)  Fixed Assets Turnover ratio indicates the firm’s ability of generating sales per rupee 
of long term investment. 
Theoretical Framework 
2. (a) Distinguish between Money measurement concept and matching concept. 
(b) Define revenue receipts and give examples. How are these receipts treated? 
Explain. 
(c)  Change in accounting policy may have a material effect on the items of financial 
statements.” Explain the statement with the help of an example. 
Journal Entries 
3. (a) Prepare Journal Entries for the following transactions in the books of Gamma Bros.  
(i) Employees had taken stock worth ` 10,000 (Cost price ` 7,500) on the eve of 
Deepawali and the same was deducted from their salaries in the subsequent 
month. 
(ii) Wages paid for erection of Machinery ` 8,000. 
© The Institute of Chartered Accountants of India
2 FOUNDATION EXAMINATION: MAY, 2018 
(iii) Income tax liability of proprietor ` 1,700 was paid out of petty cash. 
(iv) Purchase of goods from Naveen of the list price of ` 2,000.  He allowed 10% 
trade discount, ` 50 cash discount was also allowed for quick payment. 
Capital or revenue expenditure 
(b) Classify the following expenditures as capital or revenue expenditure: 
(i) Amount spent on making a few more exists in a Cinema Hall to comply with 
Government orders. 
(ii) Travelling expenses of the directors for trips abroad for purchase of capital 
assets. 
(iii) Amount spent to reduce working expenses. 
(iv) Amount paid for removal of stock to a new site. 
(v) Cost of repairs on second-hand car purchased to bring it into working 
condition. 
Cash book 
4. (a) Prepare a Triple Column Cash Book from the following transactions and bring down 
the balance for the start of next month: 
2017   ` 
Nov. 1 Cash in hand 3,000 
 1 Cash at bank 12,000 
 2 Paid into bank 1,000 
 5 Bought furniture and issued cheque 1,500 
 8 Purchased goods for cash 500 
 12 Received cash from Mohan  980 
  Discount allowed to him 20 
 14 Cash sales 5,000 
 16 Paid to Amar by cheque 1,450 
  Discount received  50 
 19 Paid into Bank 500 
 23 Withdrawn from Bank for Private expenses 600 
 24 Received cheque from Parul 1,430 
  Allowed him discount  20 
 26 Deposited Parul’s cheque into Bank  
© The Institute of Chartered Accountants of India
Page 3


PAPER – 1: PRINCIPLES & PRACTICE OF ACCOUNTING 
QUESTIONS  
True and False 
1.  State with reasons, whether the following statements are true or false: 
(a)  Accrual concept implies accounting on cash basis. 
(b)  The Sales book is kept to record both cash and credit sales. 
(c)  Bank reconciliation statement is prepared to arrive at the bank balance. 
(d) Finished goods are normally valued at cost or market price whichever is higher. 
(e)  Reducing balance method of depreciation is followed to have a uniform charge for 
depreciation and repairs and maintenance together. 
(f)  Discount at the time of retirement of a bill is a gain for the drawee. 
(g) A withdrawal of cash from the business by the proprietor should be charged to profit 
and loss account as an expense. 
(h)  Partners can share profits or losses in their capital ratio, when there is no 
agreement. 
(i)  Receipts and Payments Account highlights total income and expenditure. 
(j)  Debenture interest is payable after the payment of preference dividend but before 
the payment of equity dividend.  
(k)  Fixed Assets Turnover ratio indicates the firm’s ability of generating sales per rupee 
of long term investment. 
Theoretical Framework 
2. (a) Distinguish between Money measurement concept and matching concept. 
(b) Define revenue receipts and give examples. How are these receipts treated? 
Explain. 
(c)  Change in accounting policy may have a material effect on the items of financial 
statements.” Explain the statement with the help of an example. 
Journal Entries 
3. (a) Prepare Journal Entries for the following transactions in the books of Gamma Bros.  
(i) Employees had taken stock worth ` 10,000 (Cost price ` 7,500) on the eve of 
Deepawali and the same was deducted from their salaries in the subsequent 
month. 
(ii) Wages paid for erection of Machinery ` 8,000. 
© The Institute of Chartered Accountants of India
2 FOUNDATION EXAMINATION: MAY, 2018 
(iii) Income tax liability of proprietor ` 1,700 was paid out of petty cash. 
(iv) Purchase of goods from Naveen of the list price of ` 2,000.  He allowed 10% 
trade discount, ` 50 cash discount was also allowed for quick payment. 
Capital or revenue expenditure 
(b) Classify the following expenditures as capital or revenue expenditure: 
(i) Amount spent on making a few more exists in a Cinema Hall to comply with 
Government orders. 
(ii) Travelling expenses of the directors for trips abroad for purchase of capital 
assets. 
(iii) Amount spent to reduce working expenses. 
(iv) Amount paid for removal of stock to a new site. 
(v) Cost of repairs on second-hand car purchased to bring it into working 
condition. 
Cash book 
4. (a) Prepare a Triple Column Cash Book from the following transactions and bring down 
the balance for the start of next month: 
2017   ` 
Nov. 1 Cash in hand 3,000 
 1 Cash at bank 12,000 
 2 Paid into bank 1,000 
 5 Bought furniture and issued cheque 1,500 
 8 Purchased goods for cash 500 
 12 Received cash from Mohan  980 
  Discount allowed to him 20 
 14 Cash sales 5,000 
 16 Paid to Amar by cheque 1,450 
  Discount received  50 
 19 Paid into Bank 500 
 23 Withdrawn from Bank for Private expenses 600 
 24 Received cheque from Parul 1,430 
  Allowed him discount  20 
 26 Deposited Parul’s cheque into Bank  
© The Institute of Chartered Accountants of India
 PAPER – 1 : PRINCIPLES AND PRACTICE OF ACCOUNTING 3 
 28 Withdrew cash from Bank for Office use 2,000 
 30 Paid rent by cheque 800 
Rectification of errors 
(b) The following errors were committed by the Accountant of Geete Dye-Chem. 
(i) Credit sale of ` 400 to Trivedi & Co. was posted to the credit of their account. 
(ii) Purchase of ` 420 from Mantri & Co. passed through Sales Day Book as ` 240  
 How would you rectify the errors assuming that : 
(a) they were detected before preparation of Trial Balance. 
(b) they were detected after preparation of Trial Balance but before preparing 
Final Accounts, the difference was taken to Suspense A/c. 
(c) they were detected after preparing Final Accounts. 
Bank Reconciliation Statement 
5. The Cash-book of M/s ABC shows ` 27,570 as the balance at Bank as on 31st March, 
2017. But this does not agree with balance as per the Bank Statement. On scrutiny 
following discrepancies were found: 
(i) Subsidy ` 10,250 received from the government directly by the bank, but not 
advised to the company. 
(ii)  On 15
th
 March, 2017 the payments side of the Cash-book was under cast by ` 350. 
(iii)  On 20
th
 March, 2017 the debit balance of ` 2,156 as on the previous day, was 
brought forward as credit balance in Cash-book. 
(iv)  A customer of the M/s ABC, who received a cash discount of 5% on his account of  
` 2,000, paid to M/s ABC a cheque on 24
th
 March, 2017. The cashier erroneously 
entered the gross amount in the Cash-Book. 
(v)  On 10
th
 March, 2017 a bill for ` 5,700 was discounted from the bank, entered in 
Cash-book, but proceeds credited in Bank Statement amounted to ` 5,500 only. 
(vi)  A cheque issued amounting to ` 1,725 returned marked ‘out of date’. No entry made 
in Cash-book. 
(vii)  Insurance premium ` 756 paid directly by bank under a standing order. No entry 
made in cash-book. 
(viii)  A bill receivable for ` 1,530 discounted for ` 1,500 with the bank had been 
dishonoured on 30
th
 March, 2017, but advice was received on 1
st
 April, 2017. 
(ix)  Bank recorded a Cash deposit of ` 1,550 as ` 1,505. 
Prepare Bank Reconciliation Statement on 31
st
 March, 2017. 
 
© The Institute of Chartered Accountants of India
Page 4


PAPER – 1: PRINCIPLES & PRACTICE OF ACCOUNTING 
QUESTIONS  
True and False 
1.  State with reasons, whether the following statements are true or false: 
(a)  Accrual concept implies accounting on cash basis. 
(b)  The Sales book is kept to record both cash and credit sales. 
(c)  Bank reconciliation statement is prepared to arrive at the bank balance. 
(d) Finished goods are normally valued at cost or market price whichever is higher. 
(e)  Reducing balance method of depreciation is followed to have a uniform charge for 
depreciation and repairs and maintenance together. 
(f)  Discount at the time of retirement of a bill is a gain for the drawee. 
(g) A withdrawal of cash from the business by the proprietor should be charged to profit 
and loss account as an expense. 
(h)  Partners can share profits or losses in their capital ratio, when there is no 
agreement. 
(i)  Receipts and Payments Account highlights total income and expenditure. 
(j)  Debenture interest is payable after the payment of preference dividend but before 
the payment of equity dividend.  
(k)  Fixed Assets Turnover ratio indicates the firm’s ability of generating sales per rupee 
of long term investment. 
Theoretical Framework 
2. (a) Distinguish between Money measurement concept and matching concept. 
(b) Define revenue receipts and give examples. How are these receipts treated? 
Explain. 
(c)  Change in accounting policy may have a material effect on the items of financial 
statements.” Explain the statement with the help of an example. 
Journal Entries 
3. (a) Prepare Journal Entries for the following transactions in the books of Gamma Bros.  
(i) Employees had taken stock worth ` 10,000 (Cost price ` 7,500) on the eve of 
Deepawali and the same was deducted from their salaries in the subsequent 
month. 
(ii) Wages paid for erection of Machinery ` 8,000. 
© The Institute of Chartered Accountants of India
2 FOUNDATION EXAMINATION: MAY, 2018 
(iii) Income tax liability of proprietor ` 1,700 was paid out of petty cash. 
(iv) Purchase of goods from Naveen of the list price of ` 2,000.  He allowed 10% 
trade discount, ` 50 cash discount was also allowed for quick payment. 
Capital or revenue expenditure 
(b) Classify the following expenditures as capital or revenue expenditure: 
(i) Amount spent on making a few more exists in a Cinema Hall to comply with 
Government orders. 
(ii) Travelling expenses of the directors for trips abroad for purchase of capital 
assets. 
(iii) Amount spent to reduce working expenses. 
(iv) Amount paid for removal of stock to a new site. 
(v) Cost of repairs on second-hand car purchased to bring it into working 
condition. 
Cash book 
4. (a) Prepare a Triple Column Cash Book from the following transactions and bring down 
the balance for the start of next month: 
2017   ` 
Nov. 1 Cash in hand 3,000 
 1 Cash at bank 12,000 
 2 Paid into bank 1,000 
 5 Bought furniture and issued cheque 1,500 
 8 Purchased goods for cash 500 
 12 Received cash from Mohan  980 
  Discount allowed to him 20 
 14 Cash sales 5,000 
 16 Paid to Amar by cheque 1,450 
  Discount received  50 
 19 Paid into Bank 500 
 23 Withdrawn from Bank for Private expenses 600 
 24 Received cheque from Parul 1,430 
  Allowed him discount  20 
 26 Deposited Parul’s cheque into Bank  
© The Institute of Chartered Accountants of India
 PAPER – 1 : PRINCIPLES AND PRACTICE OF ACCOUNTING 3 
 28 Withdrew cash from Bank for Office use 2,000 
 30 Paid rent by cheque 800 
Rectification of errors 
(b) The following errors were committed by the Accountant of Geete Dye-Chem. 
(i) Credit sale of ` 400 to Trivedi & Co. was posted to the credit of their account. 
(ii) Purchase of ` 420 from Mantri & Co. passed through Sales Day Book as ` 240  
 How would you rectify the errors assuming that : 
(a) they were detected before preparation of Trial Balance. 
(b) they were detected after preparation of Trial Balance but before preparing 
Final Accounts, the difference was taken to Suspense A/c. 
(c) they were detected after preparing Final Accounts. 
Bank Reconciliation Statement 
5. The Cash-book of M/s ABC shows ` 27,570 as the balance at Bank as on 31st March, 
2017. But this does not agree with balance as per the Bank Statement. On scrutiny 
following discrepancies were found: 
(i) Subsidy ` 10,250 received from the government directly by the bank, but not 
advised to the company. 
(ii)  On 15
th
 March, 2017 the payments side of the Cash-book was under cast by ` 350. 
(iii)  On 20
th
 March, 2017 the debit balance of ` 2,156 as on the previous day, was 
brought forward as credit balance in Cash-book. 
(iv)  A customer of the M/s ABC, who received a cash discount of 5% on his account of  
` 2,000, paid to M/s ABC a cheque on 24
th
 March, 2017. The cashier erroneously 
entered the gross amount in the Cash-Book. 
(v)  On 10
th
 March, 2017 a bill for ` 5,700 was discounted from the bank, entered in 
Cash-book, but proceeds credited in Bank Statement amounted to ` 5,500 only. 
(vi)  A cheque issued amounting to ` 1,725 returned marked ‘out of date’. No entry made 
in Cash-book. 
(vii)  Insurance premium ` 756 paid directly by bank under a standing order. No entry 
made in cash-book. 
(viii)  A bill receivable for ` 1,530 discounted for ` 1,500 with the bank had been 
dishonoured on 30
th
 March, 2017, but advice was received on 1
st
 April, 2017. 
(ix)  Bank recorded a Cash deposit of ` 1,550 as ` 1,505. 
Prepare Bank Reconciliation Statement on 31
st
 March, 2017. 
 
© The Institute of Chartered Accountants of India
4 FOUNDATION EXAMINATION: MAY, 2018 
Inventories 
6. Closing stock is valued by XYZ Stores on generally accepted accounting principles. 
Stock taking for the year ended 31
st
  March, 2017 was completed by 10
th
 April, 2017, the 
valuation of which showed  a stock figure of ` 1,67,500 at cost as on the completion 
date.  After the end of the accounting year and till the date of completion of stock taking, 
sales for the next year were made for ` 6,875, profit margin being 33.33 percent on cost.  
Purchases for the next year included in the stock amounted to ` 9,000 at cost less trade 
discount 10 percent.  During this period, goods were added to stock of the mark up price 
of ` 300 in respect of sales returns.  After stock taking it was found that there were 
certain very old slow moving items costing ` 1,125 which should be taken at ` 525 to 
ensure disposal to an interested customer.  Due to heavy floods, certain goods costing  
` 1,550 were received from the supplier beyond the delivery date of customer.  As a 
result, the customer refused to take delivery and net realizable value of the goods was 
estimated to be ` 1,250 on 31
st
 March, 2017.   
You are required to calculate the value of stock for inclusion in the final accounts for the 
year ended 31
st
 March, 2017. 
Concept and Accounting of Depreciation 
7. The M/s LG Transport purchased 10 trucks at ` 45,00,000 each on 1st April 2014. On 
October 1st, 2016, one of the trucks is involved in an accident and is completely 
destroyed and ` 27,00,000 is received from the insurance in full settlement. On the same 
date, another truck is purchased by the company for the sum of ` 50,00,000. The 
company write off 20% on the original cost per annum. The company observe the 
calendar year as its financial year.  
You are required to prepare the motor truck account for two year ending 31 Dec, 2017. 
Bill of exchange 
8. Mr. B accepted a bill for ` 10,000 drawn on him by Mr. A on 1
st
 August, 2017 for 3 
months.  This was for the amount which B owed to A.  On the same date Mr. A got the 
bill discounted at his bank for ` 9,800. 
On the due date, B approached A for renewal of the bill.  Mr. A agreed on condition that 
` 2,000 be paid immediately along with interest on the remaining amount at 12% p.a. for 
3 months and that for the remaining balance B should accept a new bill for 3 months.  
These arrangements were carried through.  On 31
st
 December, 2017, B became 
insolvent and his estate paid 40%. 
 Prepare Journal Entries in the books of Mr. A 
Consignment 
9. (a) Mr. A of Assam sent on 18th February, 2017 a consignment of 1,000 DVD players 
to B of Bengal costing ` 100 each.  Expenses of ` 1,500 were met by the 
© The Institute of Chartered Accountants of India
Page 5


PAPER – 1: PRINCIPLES & PRACTICE OF ACCOUNTING 
QUESTIONS  
True and False 
1.  State with reasons, whether the following statements are true or false: 
(a)  Accrual concept implies accounting on cash basis. 
(b)  The Sales book is kept to record both cash and credit sales. 
(c)  Bank reconciliation statement is prepared to arrive at the bank balance. 
(d) Finished goods are normally valued at cost or market price whichever is higher. 
(e)  Reducing balance method of depreciation is followed to have a uniform charge for 
depreciation and repairs and maintenance together. 
(f)  Discount at the time of retirement of a bill is a gain for the drawee. 
(g) A withdrawal of cash from the business by the proprietor should be charged to profit 
and loss account as an expense. 
(h)  Partners can share profits or losses in their capital ratio, when there is no 
agreement. 
(i)  Receipts and Payments Account highlights total income and expenditure. 
(j)  Debenture interest is payable after the payment of preference dividend but before 
the payment of equity dividend.  
(k)  Fixed Assets Turnover ratio indicates the firm’s ability of generating sales per rupee 
of long term investment. 
Theoretical Framework 
2. (a) Distinguish between Money measurement concept and matching concept. 
(b) Define revenue receipts and give examples. How are these receipts treated? 
Explain. 
(c)  Change in accounting policy may have a material effect on the items of financial 
statements.” Explain the statement with the help of an example. 
Journal Entries 
3. (a) Prepare Journal Entries for the following transactions in the books of Gamma Bros.  
(i) Employees had taken stock worth ` 10,000 (Cost price ` 7,500) on the eve of 
Deepawali and the same was deducted from their salaries in the subsequent 
month. 
(ii) Wages paid for erection of Machinery ` 8,000. 
© The Institute of Chartered Accountants of India
2 FOUNDATION EXAMINATION: MAY, 2018 
(iii) Income tax liability of proprietor ` 1,700 was paid out of petty cash. 
(iv) Purchase of goods from Naveen of the list price of ` 2,000.  He allowed 10% 
trade discount, ` 50 cash discount was also allowed for quick payment. 
Capital or revenue expenditure 
(b) Classify the following expenditures as capital or revenue expenditure: 
(i) Amount spent on making a few more exists in a Cinema Hall to comply with 
Government orders. 
(ii) Travelling expenses of the directors for trips abroad for purchase of capital 
assets. 
(iii) Amount spent to reduce working expenses. 
(iv) Amount paid for removal of stock to a new site. 
(v) Cost of repairs on second-hand car purchased to bring it into working 
condition. 
Cash book 
4. (a) Prepare a Triple Column Cash Book from the following transactions and bring down 
the balance for the start of next month: 
2017   ` 
Nov. 1 Cash in hand 3,000 
 1 Cash at bank 12,000 
 2 Paid into bank 1,000 
 5 Bought furniture and issued cheque 1,500 
 8 Purchased goods for cash 500 
 12 Received cash from Mohan  980 
  Discount allowed to him 20 
 14 Cash sales 5,000 
 16 Paid to Amar by cheque 1,450 
  Discount received  50 
 19 Paid into Bank 500 
 23 Withdrawn from Bank for Private expenses 600 
 24 Received cheque from Parul 1,430 
  Allowed him discount  20 
 26 Deposited Parul’s cheque into Bank  
© The Institute of Chartered Accountants of India
 PAPER – 1 : PRINCIPLES AND PRACTICE OF ACCOUNTING 3 
 28 Withdrew cash from Bank for Office use 2,000 
 30 Paid rent by cheque 800 
Rectification of errors 
(b) The following errors were committed by the Accountant of Geete Dye-Chem. 
(i) Credit sale of ` 400 to Trivedi & Co. was posted to the credit of their account. 
(ii) Purchase of ` 420 from Mantri & Co. passed through Sales Day Book as ` 240  
 How would you rectify the errors assuming that : 
(a) they were detected before preparation of Trial Balance. 
(b) they were detected after preparation of Trial Balance but before preparing 
Final Accounts, the difference was taken to Suspense A/c. 
(c) they were detected after preparing Final Accounts. 
Bank Reconciliation Statement 
5. The Cash-book of M/s ABC shows ` 27,570 as the balance at Bank as on 31st March, 
2017. But this does not agree with balance as per the Bank Statement. On scrutiny 
following discrepancies were found: 
(i) Subsidy ` 10,250 received from the government directly by the bank, but not 
advised to the company. 
(ii)  On 15
th
 March, 2017 the payments side of the Cash-book was under cast by ` 350. 
(iii)  On 20
th
 March, 2017 the debit balance of ` 2,156 as on the previous day, was 
brought forward as credit balance in Cash-book. 
(iv)  A customer of the M/s ABC, who received a cash discount of 5% on his account of  
` 2,000, paid to M/s ABC a cheque on 24
th
 March, 2017. The cashier erroneously 
entered the gross amount in the Cash-Book. 
(v)  On 10
th
 March, 2017 a bill for ` 5,700 was discounted from the bank, entered in 
Cash-book, but proceeds credited in Bank Statement amounted to ` 5,500 only. 
(vi)  A cheque issued amounting to ` 1,725 returned marked ‘out of date’. No entry made 
in Cash-book. 
(vii)  Insurance premium ` 756 paid directly by bank under a standing order. No entry 
made in cash-book. 
(viii)  A bill receivable for ` 1,530 discounted for ` 1,500 with the bank had been 
dishonoured on 30
th
 March, 2017, but advice was received on 1
st
 April, 2017. 
(ix)  Bank recorded a Cash deposit of ` 1,550 as ` 1,505. 
Prepare Bank Reconciliation Statement on 31
st
 March, 2017. 
 
© The Institute of Chartered Accountants of India
4 FOUNDATION EXAMINATION: MAY, 2018 
Inventories 
6. Closing stock is valued by XYZ Stores on generally accepted accounting principles. 
Stock taking for the year ended 31
st
  March, 2017 was completed by 10
th
 April, 2017, the 
valuation of which showed  a stock figure of ` 1,67,500 at cost as on the completion 
date.  After the end of the accounting year and till the date of completion of stock taking, 
sales for the next year were made for ` 6,875, profit margin being 33.33 percent on cost.  
Purchases for the next year included in the stock amounted to ` 9,000 at cost less trade 
discount 10 percent.  During this period, goods were added to stock of the mark up price 
of ` 300 in respect of sales returns.  After stock taking it was found that there were 
certain very old slow moving items costing ` 1,125 which should be taken at ` 525 to 
ensure disposal to an interested customer.  Due to heavy floods, certain goods costing  
` 1,550 were received from the supplier beyond the delivery date of customer.  As a 
result, the customer refused to take delivery and net realizable value of the goods was 
estimated to be ` 1,250 on 31
st
 March, 2017.   
You are required to calculate the value of stock for inclusion in the final accounts for the 
year ended 31
st
 March, 2017. 
Concept and Accounting of Depreciation 
7. The M/s LG Transport purchased 10 trucks at ` 45,00,000 each on 1st April 2014. On 
October 1st, 2016, one of the trucks is involved in an accident and is completely 
destroyed and ` 27,00,000 is received from the insurance in full settlement. On the same 
date, another truck is purchased by the company for the sum of ` 50,00,000. The 
company write off 20% on the original cost per annum. The company observe the 
calendar year as its financial year.  
You are required to prepare the motor truck account for two year ending 31 Dec, 2017. 
Bill of exchange 
8. Mr. B accepted a bill for ` 10,000 drawn on him by Mr. A on 1
st
 August, 2017 for 3 
months.  This was for the amount which B owed to A.  On the same date Mr. A got the 
bill discounted at his bank for ` 9,800. 
On the due date, B approached A for renewal of the bill.  Mr. A agreed on condition that 
` 2,000 be paid immediately along with interest on the remaining amount at 12% p.a. for 
3 months and that for the remaining balance B should accept a new bill for 3 months.  
These arrangements were carried through.  On 31
st
 December, 2017, B became 
insolvent and his estate paid 40%. 
 Prepare Journal Entries in the books of Mr. A 
Consignment 
9. (a) Mr. A of Assam sent on 18th February, 2017 a consignment of 1,000 DVD players 
to B of Bengal costing ` 100 each.  Expenses of ` 1,500 were met by the 
© The Institute of Chartered Accountants of India
 PAPER – 1 : PRINCIPLES AND PRACTICE OF ACCOUNTING 5 
consignor.  B spent ` 3,000 for clearance and selling expenses were ` 20 per DVD 
player. 
B sold on 15th March, 2017, 600 DVD players @ ` 160 per DVD player and again 
on 20th May, 2017, 300 DVD players @ ` 170 each. 
B is entitled to a commission of ` 25 per DVD player sold plus ¼ of the amount by 
which the gross sale proceeds less total commission thereon exceeded a sum 
calculated @ ` 125 per DVD player sold.  B sent the amount due to A on 30th June, 
2017. 
You are required to prepare the consignment account and B’s account in the books 
of A. 
Sales of goods on approval or return basis 
(b) X supplied goods on sale or return basis to customers, the particulars of which are 
as under: 
Date of dispatch Party’s name Amount ` Remarks 
10.12.2017 M/s ABC Co. 10,000 No information till 31.12.2017 
12.12.2017 M/s DEF Co 15,000 Returned on 16.12.2017 
15.12.2017 M/s GHI Co 12,000 Goods worth ` 2,000 returned on 
20.12.2017 
20.12.2017 M/s DEF Co 16,000 Goods Retained on 24.12.2017 
25.12.2017 M/s ABC Co 11,000 Good Retained on 28.12.2017 
30.12.2017 M/s GHI Co 13,000 No information till 31.12.2017 
Goods are to be returned within 15 days from the dispatch, failing which it will be 
treated as sales. The books of ‘X’ are closed on the 31
st
 December, 2017. 
Prepare the following account in the books of ‘X’. 
Goods on “sales or return, sold and returned day books”. 
Goods on sales or return total account. 
Joint venture 
10. (a) Mr. H and Mr. S entered into a joint venture to buy and sell Computer monitors on 
1st August, 2017. 
On 1.8.2017 H sent a draft for ` 5,00,000 in favour of S and on 5.8.2017 S 
purchased 250 Monitors at a cost of ` 4,000 each.  The monitors were sent to Mr. H 
by Truck under ‘freight to pay’ for ` 8,000 and were cleared by him on 12.08.2017. 
H effected sales in the following manner: 
 
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