Sample Paper Series- I | Business Laws for CA Foundation PDF Download

 Page 1


 
1 
Test Series: March, 2019 
MOCK TEST PAPER 
FOUNDATION COURSE 
PAPER 2A: BUSINESS LAWS  
Question No. 1  is compulsory. 
Answer any four questions from the remaining five questions. Wherever necessary, suitable assumptions 
should be made and disclosed by way of note forming part of the answer. 
Working Notes should form part of the answer. 
     Total Marks: 60 
QUESTIONS 
1. (a)  Shambhu Dayal started “self service” system in his shop. Smt. Prakash entered the shop, took a 
basket and after taking articles of her choice into the basket reached the cashier for payments. 
The cashier refuses to accept the price. Can Shambhu Dayal be compelled to sell the said articles 
to Smt. Prakash? Decide as per the provisions of the Indian Contract Act, 1872. (4 Marks) 
(b) Mr. X had purchased some goods from M/s ABC Limited on credit. A credit period of one month 
was allowed to Mr. X. Before the due date Mr. X went to the company and wanted to repay the 
amount due from him. He found only Mr. Z there, who was the factory supervisor of the company. 
Mr. Z told Mr. X that the accountant and the cashier were on leave, he is in-charge of receiving 
money and he may pay the amount to him. Mr. Z issued a money receipt under his signature. After 
two months M/s ABC Limited issued a notice to Mr. X for non-payment of the dues within the 
stipulated period. Mr. X informed the company that he had already cleared the dues and he is no 
more responsible for the same. He also contended that Mr. Z is an employee of the company  whom 
he had made the payment and being an outsider, he trusted the words of Mr. Z as duty distribution 
is a job of the internal management of the company.  
 Analyse the situation and decide whether Mr. X is free from his liability.  (4 Marks) 
(c) Explain the term “Delivery and its forms” under the Sale of Goods Act, 1930.  (4 Marks) 
2. (a)  “An anticipatory breach of contract is a breach of contract occurring before the time fixed for 
performance has arrived ”. Discuss stating also the effect of anticipatory breach on contracts.  
 (7 Marks) 
(b)  Differentiate between the Limited Liability Partnership (LLP) and Limited Liability Company. 
 (5 Marks) 
3. (a)  “Though a minor cannot be a partner in a firm, he can nonetheless be admitted to the benefits of 
partnership.” 
(i) Referring to the provisions of the Indian Partnership Act, 1932, state the rights which can be 
enjoyed by a minor partner.  
(ii) State the liabilities of a minor partner both: 
1. Before attaining majority and  
2. After attaining majority. 
 
© The Institute of Chartered Accountants of India
Page 2


 
1 
Test Series: March, 2019 
MOCK TEST PAPER 
FOUNDATION COURSE 
PAPER 2A: BUSINESS LAWS  
Question No. 1  is compulsory. 
Answer any four questions from the remaining five questions. Wherever necessary, suitable assumptions 
should be made and disclosed by way of note forming part of the answer. 
Working Notes should form part of the answer. 
     Total Marks: 60 
QUESTIONS 
1. (a)  Shambhu Dayal started “self service” system in his shop. Smt. Prakash entered the shop, took a 
basket and after taking articles of her choice into the basket reached the cashier for payments. 
The cashier refuses to accept the price. Can Shambhu Dayal be compelled to sell the said articles 
to Smt. Prakash? Decide as per the provisions of the Indian Contract Act, 1872. (4 Marks) 
(b) Mr. X had purchased some goods from M/s ABC Limited on credit. A credit period of one month 
was allowed to Mr. X. Before the due date Mr. X went to the company and wanted to repay the 
amount due from him. He found only Mr. Z there, who was the factory supervisor of the company. 
Mr. Z told Mr. X that the accountant and the cashier were on leave, he is in-charge of receiving 
money and he may pay the amount to him. Mr. Z issued a money receipt under his signature. After 
two months M/s ABC Limited issued a notice to Mr. X for non-payment of the dues within the 
stipulated period. Mr. X informed the company that he had already cleared the dues and he is no 
more responsible for the same. He also contended that Mr. Z is an employee of the company  whom 
he had made the payment and being an outsider, he trusted the words of Mr. Z as duty distribution 
is a job of the internal management of the company.  
 Analyse the situation and decide whether Mr. X is free from his liability.  (4 Marks) 
(c) Explain the term “Delivery and its forms” under the Sale of Goods Act, 1930.  (4 Marks) 
2. (a)  “An anticipatory breach of contract is a breach of contract occurring before the time fixed for 
performance has arrived ”. Discuss stating also the effect of anticipatory breach on contracts.  
 (7 Marks) 
(b)  Differentiate between the Limited Liability Partnership (LLP) and Limited Liability Company. 
 (5 Marks) 
3. (a)  “Though a minor cannot be a partner in a firm, he can nonetheless be admitted to the benefits of 
partnership.” 
(i) Referring to the provisions of the Indian Partnership Act, 1932, state the rights which can be 
enjoyed by a minor partner.  
(ii) State the liabilities of a minor partner both: 
1. Before attaining majority and  
2. After attaining majority. 
 
© The Institute of Chartered Accountants of India
 
2 
(b) Mr. X and Mr. Y entered into a contract on 1
st
 August, 2018, by which Mr. X had to supply 50 tons 
of sugar to Mr. Y at a certain price strictly within a period of 10 days of the contract. Mr. Y also paid 
an amount of Rs. 50,000 towards advance as per the terms of the above contract. The mode of 
transportation available between their places is roadway only. Severe flood came on 2
nd
 August, 
2018 and the only road connecting their places was damaged and could not be repaired within 
fifteen days. Mr. X offered to supply sugar on 20
th
 August, 2018 for which Mr. Y did not agree. On 
1
st
 September, 2018, Mr. X claimed compensation of Rs. 10,000 from Mr. Y for refusing to accept 
the supply of sugar, which was not there within the purview of the contract. On the other hand, Mr. 
Y claimed for refund of Rs. 50,000, which he had paid as advance in terms of the contract. Analyse 
the above situation in terms of the provisions of the Indian Contract Act, 1872 and decide on Y’s 
contention.  (6 Marks) 
4. (a)  What do you understand by the term “unpaid seller” under the Sale of Goods Act, 1930?  When 
can an unpaid seller exercise the right of stoppage of goods in transit? (6 Marks) 
(b)  A, B, and C are partners of a partnership firm ABC & Co. The firm is a dealer in office furniture. A 
was in charge of purchase and sale, B was in charge of maintenance of accounts of the firm and 
C was in charge of handling all legal matters. Recently through an agreement among them, it was 
decided that A will be in charge of maintenance of accounts and B will be in charge of purchase 
and sale. Being ignorant about such agreement, M, a supplier supplied some furniture to A, who 
ultimately sold them to a third party. Referring to the provisions of the Partnership Act, 1932, advise 
whether M can recover money from the firm. 
What will be your advice in case M was having knowledge about the agreement?  (6 Marks) 
5. (a)  Mr. Samuel agreed to purchase 100 bales of cotton from Mr. Varun, out of his large stock and sent 
his men to take delivery of the goods. They could pack only 60 bales. Later on, there was an 
accidental fire and the entire stock was destroyed including 60 bales that were already packed. 
Referring to the provisions of the Sale of Goods Act, 1930 explain as to who will bear the loss and 
to what extent?  (6 Marks) 
(b)  F, an assessee, was a wealthy man earning huge income by way of dividend and interest. He 
formed three Private Companies and agreed with each to hold a bloc of investment as an agent for 
them. The dividend and interest income received by the companies was handed back to F as a 
pretended loan. This way, F divided his income into three parts in a bid to reduce his tax liability. 
Decide, for what purpose the three companies were established? Whether the legal personality of 
all the three companies may be disregarded. (6 Marks) 
6. (a)  Define consideration. State the characteristics of a valid consideration.  (5 Marks)  
(b)  When does dissolution of a partnership firm take place under the provisions of the Indian 
Partnership Act, 1932?  Explain.    (4 Marks) 
(c)  Flora Fauna Limited was registered as a public company. There are 230 members in the company 
as noted below: 
(a) Directors and their relatives 190 
(b) Employees 15 
(c) Ex-Employees (Shares were allotted when they were employees 10 
(d) 5 couples holding shares jointly in the name of husband and wife (5*2)  10 
(e) Others 5 
 The Board of Directors of the company propose to convert it into a private company. Also advise 
whether reduction in the number of members is necessary.  (3 Marks) 
© The Institute of Chartered Accountants of India
Page 3


 
1 
Test Series: March, 2019 
MOCK TEST PAPER 
FOUNDATION COURSE 
PAPER 2A: BUSINESS LAWS  
Question No. 1  is compulsory. 
Answer any four questions from the remaining five questions. Wherever necessary, suitable assumptions 
should be made and disclosed by way of note forming part of the answer. 
Working Notes should form part of the answer. 
     Total Marks: 60 
QUESTIONS 
1. (a)  Shambhu Dayal started “self service” system in his shop. Smt. Prakash entered the shop, took a 
basket and after taking articles of her choice into the basket reached the cashier for payments. 
The cashier refuses to accept the price. Can Shambhu Dayal be compelled to sell the said articles 
to Smt. Prakash? Decide as per the provisions of the Indian Contract Act, 1872. (4 Marks) 
(b) Mr. X had purchased some goods from M/s ABC Limited on credit. A credit period of one month 
was allowed to Mr. X. Before the due date Mr. X went to the company and wanted to repay the 
amount due from him. He found only Mr. Z there, who was the factory supervisor of the company. 
Mr. Z told Mr. X that the accountant and the cashier were on leave, he is in-charge of receiving 
money and he may pay the amount to him. Mr. Z issued a money receipt under his signature. After 
two months M/s ABC Limited issued a notice to Mr. X for non-payment of the dues within the 
stipulated period. Mr. X informed the company that he had already cleared the dues and he is no 
more responsible for the same. He also contended that Mr. Z is an employee of the company  whom 
he had made the payment and being an outsider, he trusted the words of Mr. Z as duty distribution 
is a job of the internal management of the company.  
 Analyse the situation and decide whether Mr. X is free from his liability.  (4 Marks) 
(c) Explain the term “Delivery and its forms” under the Sale of Goods Act, 1930.  (4 Marks) 
2. (a)  “An anticipatory breach of contract is a breach of contract occurring before the time fixed for 
performance has arrived ”. Discuss stating also the effect of anticipatory breach on contracts.  
 (7 Marks) 
(b)  Differentiate between the Limited Liability Partnership (LLP) and Limited Liability Company. 
 (5 Marks) 
3. (a)  “Though a minor cannot be a partner in a firm, he can nonetheless be admitted to the benefits of 
partnership.” 
(i) Referring to the provisions of the Indian Partnership Act, 1932, state the rights which can be 
enjoyed by a minor partner.  
(ii) State the liabilities of a minor partner both: 
1. Before attaining majority and  
2. After attaining majority. 
 
© The Institute of Chartered Accountants of India
 
2 
(b) Mr. X and Mr. Y entered into a contract on 1
st
 August, 2018, by which Mr. X had to supply 50 tons 
of sugar to Mr. Y at a certain price strictly within a period of 10 days of the contract. Mr. Y also paid 
an amount of Rs. 50,000 towards advance as per the terms of the above contract. The mode of 
transportation available between their places is roadway only. Severe flood came on 2
nd
 August, 
2018 and the only road connecting their places was damaged and could not be repaired within 
fifteen days. Mr. X offered to supply sugar on 20
th
 August, 2018 for which Mr. Y did not agree. On 
1
st
 September, 2018, Mr. X claimed compensation of Rs. 10,000 from Mr. Y for refusing to accept 
the supply of sugar, which was not there within the purview of the contract. On the other hand, Mr. 
Y claimed for refund of Rs. 50,000, which he had paid as advance in terms of the contract. Analyse 
the above situation in terms of the provisions of the Indian Contract Act, 1872 and decide on Y’s 
contention.  (6 Marks) 
4. (a)  What do you understand by the term “unpaid seller” under the Sale of Goods Act, 1930?  When 
can an unpaid seller exercise the right of stoppage of goods in transit? (6 Marks) 
(b)  A, B, and C are partners of a partnership firm ABC & Co. The firm is a dealer in office furniture. A 
was in charge of purchase and sale, B was in charge of maintenance of accounts of the firm and 
C was in charge of handling all legal matters. Recently through an agreement among them, it was 
decided that A will be in charge of maintenance of accounts and B will be in charge of purchase 
and sale. Being ignorant about such agreement, M, a supplier supplied some furniture to A, who 
ultimately sold them to a third party. Referring to the provisions of the Partnership Act, 1932, advise 
whether M can recover money from the firm. 
What will be your advice in case M was having knowledge about the agreement?  (6 Marks) 
5. (a)  Mr. Samuel agreed to purchase 100 bales of cotton from Mr. Varun, out of his large stock and sent 
his men to take delivery of the goods. They could pack only 60 bales. Later on, there was an 
accidental fire and the entire stock was destroyed including 60 bales that were already packed. 
Referring to the provisions of the Sale of Goods Act, 1930 explain as to who will bear the loss and 
to what extent?  (6 Marks) 
(b)  F, an assessee, was a wealthy man earning huge income by way of dividend and interest. He 
formed three Private Companies and agreed with each to hold a bloc of investment as an agent for 
them. The dividend and interest income received by the companies was handed back to F as a 
pretended loan. This way, F divided his income into three parts in a bid to reduce his tax liability. 
Decide, for what purpose the three companies were established? Whether the legal personality of 
all the three companies may be disregarded. (6 Marks) 
6. (a)  Define consideration. State the characteristics of a valid consideration.  (5 Marks)  
(b)  When does dissolution of a partnership firm take place under the provisions of the Indian 
Partnership Act, 1932?  Explain.    (4 Marks) 
(c)  Flora Fauna Limited was registered as a public company. There are 230 members in the company 
as noted below: 
(a) Directors and their relatives 190 
(b) Employees 15 
(c) Ex-Employees (Shares were allotted when they were employees 10 
(d) 5 couples holding shares jointly in the name of husband and wife (5*2)  10 
(e) Others 5 
 The Board of Directors of the company propose to convert it into a private company. Also advise 
whether reduction in the number of members is necessary.  (3 Marks) 
© The Institute of Chartered Accountants of India
1 
Test Series: March, 2019 
FOUNDATION COURSE 
MOCK TEST PAPER 1 
PAPER 2: SECTION-B: BUSINESS CORRESPONDENCE AND REPORTING 
The Question Paper comprises of 5 questions of 10 marks each.  
Question No. 1 is compulsory.  Out of questions 2 to 5, attempt any three. 
Max Marks: 40 
1. (a)  Read the passage carefully and answer the questions that follow:
The window offered a view of the house opposite. The two families did not speak to each other 
because of a property dispute. One day, Ruchira's textbooks lay untouched as the young girl's 
gaze was on the happenings in the house opposite. There were two new faces in the neighboring 
household – that of an elderly widow and a girl aged sixteen. Sometimes the elderly lady would sit 
by the window, doing the young girl's hair. On other days she was absent. 
The new young neighbour's daily routine could be seen through the window – she cleaned the rice 
paddy; split nuts, put the cushions in the sun to air them. In the afternoons, while the men were all 
at world some of the women slept and others played cards. The girl sat on the terrace and read. 
Sometimes she wrote. One day there was hindrance. She was writing when the elderly woman 
snatched the unfinished letter from her hands. Thereafter the girl was not to be seen on the terrace. 
Sometimes during the day sounds came from the house indicating that a massive argument was 
going on inside. 
A few days passed. One evening Ruchira noticed the girl standing on the terrace in tears. The 
evening prayer was in progress. As she did daily, the girl bowed several times in prayer. Then she 
went downstairs. That night Ruchira wrote a letter. She went out and posted it that very instant. 
But as she lay in bed that night, she prayed fervently that her offer of friendship wouldn't reach its 
destination. Ruchira then left for Madhupur and returned when it was time for college to start. She 
found the house opposite in darkness, locked. They had left. When she stepped into her room she 
found the desk piled with letters – one had a local stamp on it with her name and address in 
unfamiliar handwriting. She quickly read it. They continued to write to each other for the next twenty 
years. 
(i) Why did Ruchira write a letter to her new neighbour?
(a) She wanted to offer her, her help.
(b) She wanted to be friends with her.
(c) To apologize for her family's behaviour towards her family
(d) To encourage her to continue learning to read and write.
(1 Mark) 
(ii) Which of the following is TRUE in the context of the passage?
(a) The young girl was very devout and prayed everyday.
(b) Only two letters were exchanged between the two girls.
(c) The new young neighbour was a servant.
(d) The afternoon was a time to relax for everyone.
(1 Mark)(iii) 
(iii)    How did the new young neighbour spend her days? 
(a) She was busy writing letters to Ruchira
(b) She used to daydream about her past experiences.
(c) She would attend to the needs of the widow.
© The Institute of Chartered Accountants of India
Page 4


 
1 
Test Series: March, 2019 
MOCK TEST PAPER 
FOUNDATION COURSE 
PAPER 2A: BUSINESS LAWS  
Question No. 1  is compulsory. 
Answer any four questions from the remaining five questions. Wherever necessary, suitable assumptions 
should be made and disclosed by way of note forming part of the answer. 
Working Notes should form part of the answer. 
     Total Marks: 60 
QUESTIONS 
1. (a)  Shambhu Dayal started “self service” system in his shop. Smt. Prakash entered the shop, took a 
basket and after taking articles of her choice into the basket reached the cashier for payments. 
The cashier refuses to accept the price. Can Shambhu Dayal be compelled to sell the said articles 
to Smt. Prakash? Decide as per the provisions of the Indian Contract Act, 1872. (4 Marks) 
(b) Mr. X had purchased some goods from M/s ABC Limited on credit. A credit period of one month 
was allowed to Mr. X. Before the due date Mr. X went to the company and wanted to repay the 
amount due from him. He found only Mr. Z there, who was the factory supervisor of the company. 
Mr. Z told Mr. X that the accountant and the cashier were on leave, he is in-charge of receiving 
money and he may pay the amount to him. Mr. Z issued a money receipt under his signature. After 
two months M/s ABC Limited issued a notice to Mr. X for non-payment of the dues within the 
stipulated period. Mr. X informed the company that he had already cleared the dues and he is no 
more responsible for the same. He also contended that Mr. Z is an employee of the company  whom 
he had made the payment and being an outsider, he trusted the words of Mr. Z as duty distribution 
is a job of the internal management of the company.  
 Analyse the situation and decide whether Mr. X is free from his liability.  (4 Marks) 
(c) Explain the term “Delivery and its forms” under the Sale of Goods Act, 1930.  (4 Marks) 
2. (a)  “An anticipatory breach of contract is a breach of contract occurring before the time fixed for 
performance has arrived ”. Discuss stating also the effect of anticipatory breach on contracts.  
 (7 Marks) 
(b)  Differentiate between the Limited Liability Partnership (LLP) and Limited Liability Company. 
 (5 Marks) 
3. (a)  “Though a minor cannot be a partner in a firm, he can nonetheless be admitted to the benefits of 
partnership.” 
(i) Referring to the provisions of the Indian Partnership Act, 1932, state the rights which can be 
enjoyed by a minor partner.  
(ii) State the liabilities of a minor partner both: 
1. Before attaining majority and  
2. After attaining majority. 
 
© The Institute of Chartered Accountants of India
 
2 
(b) Mr. X and Mr. Y entered into a contract on 1
st
 August, 2018, by which Mr. X had to supply 50 tons 
of sugar to Mr. Y at a certain price strictly within a period of 10 days of the contract. Mr. Y also paid 
an amount of Rs. 50,000 towards advance as per the terms of the above contract. The mode of 
transportation available between their places is roadway only. Severe flood came on 2
nd
 August, 
2018 and the only road connecting their places was damaged and could not be repaired within 
fifteen days. Mr. X offered to supply sugar on 20
th
 August, 2018 for which Mr. Y did not agree. On 
1
st
 September, 2018, Mr. X claimed compensation of Rs. 10,000 from Mr. Y for refusing to accept 
the supply of sugar, which was not there within the purview of the contract. On the other hand, Mr. 
Y claimed for refund of Rs. 50,000, which he had paid as advance in terms of the contract. Analyse 
the above situation in terms of the provisions of the Indian Contract Act, 1872 and decide on Y’s 
contention.  (6 Marks) 
4. (a)  What do you understand by the term “unpaid seller” under the Sale of Goods Act, 1930?  When 
can an unpaid seller exercise the right of stoppage of goods in transit? (6 Marks) 
(b)  A, B, and C are partners of a partnership firm ABC & Co. The firm is a dealer in office furniture. A 
was in charge of purchase and sale, B was in charge of maintenance of accounts of the firm and 
C was in charge of handling all legal matters. Recently through an agreement among them, it was 
decided that A will be in charge of maintenance of accounts and B will be in charge of purchase 
and sale. Being ignorant about such agreement, M, a supplier supplied some furniture to A, who 
ultimately sold them to a third party. Referring to the provisions of the Partnership Act, 1932, advise 
whether M can recover money from the firm. 
What will be your advice in case M was having knowledge about the agreement?  (6 Marks) 
5. (a)  Mr. Samuel agreed to purchase 100 bales of cotton from Mr. Varun, out of his large stock and sent 
his men to take delivery of the goods. They could pack only 60 bales. Later on, there was an 
accidental fire and the entire stock was destroyed including 60 bales that were already packed. 
Referring to the provisions of the Sale of Goods Act, 1930 explain as to who will bear the loss and 
to what extent?  (6 Marks) 
(b)  F, an assessee, was a wealthy man earning huge income by way of dividend and interest. He 
formed three Private Companies and agreed with each to hold a bloc of investment as an agent for 
them. The dividend and interest income received by the companies was handed back to F as a 
pretended loan. This way, F divided his income into three parts in a bid to reduce his tax liability. 
Decide, for what purpose the three companies were established? Whether the legal personality of 
all the three companies may be disregarded. (6 Marks) 
6. (a)  Define consideration. State the characteristics of a valid consideration.  (5 Marks)  
(b)  When does dissolution of a partnership firm take place under the provisions of the Indian 
Partnership Act, 1932?  Explain.    (4 Marks) 
(c)  Flora Fauna Limited was registered as a public company. There are 230 members in the company 
as noted below: 
(a) Directors and their relatives 190 
(b) Employees 15 
(c) Ex-Employees (Shares were allotted when they were employees 10 
(d) 5 couples holding shares jointly in the name of husband and wife (5*2)  10 
(e) Others 5 
 The Board of Directors of the company propose to convert it into a private company. Also advise 
whether reduction in the number of members is necessary.  (3 Marks) 
© The Institute of Chartered Accountants of India
1 
Test Series: March, 2019 
FOUNDATION COURSE 
MOCK TEST PAPER 1 
PAPER 2: SECTION-B: BUSINESS CORRESPONDENCE AND REPORTING 
The Question Paper comprises of 5 questions of 10 marks each.  
Question No. 1 is compulsory.  Out of questions 2 to 5, attempt any three. 
Max Marks: 40 
1. (a)  Read the passage carefully and answer the questions that follow:
The window offered a view of the house opposite. The two families did not speak to each other 
because of a property dispute. One day, Ruchira's textbooks lay untouched as the young girl's 
gaze was on the happenings in the house opposite. There were two new faces in the neighboring 
household – that of an elderly widow and a girl aged sixteen. Sometimes the elderly lady would sit 
by the window, doing the young girl's hair. On other days she was absent. 
The new young neighbour's daily routine could be seen through the window – she cleaned the rice 
paddy; split nuts, put the cushions in the sun to air them. In the afternoons, while the men were all 
at world some of the women slept and others played cards. The girl sat on the terrace and read. 
Sometimes she wrote. One day there was hindrance. She was writing when the elderly woman 
snatched the unfinished letter from her hands. Thereafter the girl was not to be seen on the terrace. 
Sometimes during the day sounds came from the house indicating that a massive argument was 
going on inside. 
A few days passed. One evening Ruchira noticed the girl standing on the terrace in tears. The 
evening prayer was in progress. As she did daily, the girl bowed several times in prayer. Then she 
went downstairs. That night Ruchira wrote a letter. She went out and posted it that very instant. 
But as she lay in bed that night, she prayed fervently that her offer of friendship wouldn't reach its 
destination. Ruchira then left for Madhupur and returned when it was time for college to start. She 
found the house opposite in darkness, locked. They had left. When she stepped into her room she 
found the desk piled with letters – one had a local stamp on it with her name and address in 
unfamiliar handwriting. She quickly read it. They continued to write to each other for the next twenty 
years. 
(i) Why did Ruchira write a letter to her new neighbour?
(a) She wanted to offer her, her help.
(b) She wanted to be friends with her.
(c) To apologize for her family's behaviour towards her family
(d) To encourage her to continue learning to read and write.
(1 Mark) 
(ii) Which of the following is TRUE in the context of the passage?
(a) The young girl was very devout and prayed everyday.
(b) Only two letters were exchanged between the two girls.
(c) The new young neighbour was a servant.
(d) The afternoon was a time to relax for everyone.
(1 Mark)(iii) 
(iii)    How did the new young neighbour spend her days? 
(a) She was busy writing letters to Ruchira
(b) She used to daydream about her past experiences.
(c) She would attend to the needs of the widow.
© The Institute of Chartered Accountants of India
2 
(d) She spent her time learning to read and write. (1 Mark) 
(iv)  Why was the young neighbour prevented from sitting on the terrace? 
(a) She used to while away her time instead of working 
(b) The old woman could no longer keep an eye on her. 
(c) She had not finished writing the letter she was asked to. 
(d) She had been writing a letter which she wasn't supposed to. (1 Mark) 
(v)  What was the major argument in the house about? 
(a) There were too many people living there, which resulted in arguments.  
(b) The young girl was insisting on attending college. 
(c) The young girl had been wasting her time instead of working.  
(d) The old woman did not guard the young girl closely. (1 Mark) 
(b)  Read the passage given below. 
(i) Make notes, using headings, sub-headings, and abbreviations wherever necessary. (3 Marks) 
(ii) Write summary.  (2 Marks) 
(iii) A tax is a financial charge or levy imposed by a state or its functional equivalent upon a taxpayer 
and the failure to pay such a levy is punishable by law. Taxes are imposed by a number of 
administrative divisions. Taxes are direct or indirect in nature and are required to be reimbursed 
in money or its labour equivalent. 
Finances obtained through the imposition of taxation have been used by countries and their 
functional equivalents conventionally to carry out a number of functions. Some of these 
include protection of property, expenditures on war, economic infrastructure, the enforcement 
of law and public order, public works, subsidies, social engineering, and the very operation of 
the government itself. Governments utilise taxes for the funding of welfare and public services. 
These services include education systems, pensions for the elderly, health care system s, 
unemployment rehabilitation and benefits, and public transportation. Energy, water and waste 
management systems are also common public utilities. A portion of taxes is used alleviate the 
state’s debt and the interest this debt accrues. 
The important features of a modern economy are perceived by the efficient, fair and stable 
financial markets whose contribution is vital and significant for the overall financial system . 
The manners in which nations raise taxes are as varied as the amounts they raise. The tax 
patterns of a country are formulated on a number of factors as its inherent economic structure, 
its history, and to a significant extent on the tax structures of its neighbouring countries. 
Choice plays an important part, as different countries may attach different levels of importance 
to commonly established characteristics of a superior tax system such as fairness, required 
economic effects and collection costs that it entails. 
The level of the per capita income is a powerful determinant of the nature of taxation a country 
will adopt, the higher the level of the per capita income, the more a country relies on direct 
taxes, particularly those on personal income. Consumption taxes although they rise more 
slowly tend to become relatively important in developed countries. These differentiations in 
tax structures reflect the basic differences between high and low income countries. Low-
income countries it is observed tend to raise additional revenues at the border, as a few 
collection points require control. For this reason, they rely heavily on excise taxes on tobacco, 
alcohol and so on. In contrast, direct taxes (and VAT) require a more effective tax 
administration coupled with sophisticated taxpayers, these conditions are prevalent in 
developed countries. 
© The Institute of Chartered Accountants of India
Page 5


 
1 
Test Series: March, 2019 
MOCK TEST PAPER 
FOUNDATION COURSE 
PAPER 2A: BUSINESS LAWS  
Question No. 1  is compulsory. 
Answer any four questions from the remaining five questions. Wherever necessary, suitable assumptions 
should be made and disclosed by way of note forming part of the answer. 
Working Notes should form part of the answer. 
     Total Marks: 60 
QUESTIONS 
1. (a)  Shambhu Dayal started “self service” system in his shop. Smt. Prakash entered the shop, took a 
basket and after taking articles of her choice into the basket reached the cashier for payments. 
The cashier refuses to accept the price. Can Shambhu Dayal be compelled to sell the said articles 
to Smt. Prakash? Decide as per the provisions of the Indian Contract Act, 1872. (4 Marks) 
(b) Mr. X had purchased some goods from M/s ABC Limited on credit. A credit period of one month 
was allowed to Mr. X. Before the due date Mr. X went to the company and wanted to repay the 
amount due from him. He found only Mr. Z there, who was the factory supervisor of the company. 
Mr. Z told Mr. X that the accountant and the cashier were on leave, he is in-charge of receiving 
money and he may pay the amount to him. Mr. Z issued a money receipt under his signature. After 
two months M/s ABC Limited issued a notice to Mr. X for non-payment of the dues within the 
stipulated period. Mr. X informed the company that he had already cleared the dues and he is no 
more responsible for the same. He also contended that Mr. Z is an employee of the company  whom 
he had made the payment and being an outsider, he trusted the words of Mr. Z as duty distribution 
is a job of the internal management of the company.  
 Analyse the situation and decide whether Mr. X is free from his liability.  (4 Marks) 
(c) Explain the term “Delivery and its forms” under the Sale of Goods Act, 1930.  (4 Marks) 
2. (a)  “An anticipatory breach of contract is a breach of contract occurring before the time fixed for 
performance has arrived ”. Discuss stating also the effect of anticipatory breach on contracts.  
 (7 Marks) 
(b)  Differentiate between the Limited Liability Partnership (LLP) and Limited Liability Company. 
 (5 Marks) 
3. (a)  “Though a minor cannot be a partner in a firm, he can nonetheless be admitted to the benefits of 
partnership.” 
(i) Referring to the provisions of the Indian Partnership Act, 1932, state the rights which can be 
enjoyed by a minor partner.  
(ii) State the liabilities of a minor partner both: 
1. Before attaining majority and  
2. After attaining majority. 
 
© The Institute of Chartered Accountants of India
 
2 
(b) Mr. X and Mr. Y entered into a contract on 1
st
 August, 2018, by which Mr. X had to supply 50 tons 
of sugar to Mr. Y at a certain price strictly within a period of 10 days of the contract. Mr. Y also paid 
an amount of Rs. 50,000 towards advance as per the terms of the above contract. The mode of 
transportation available between their places is roadway only. Severe flood came on 2
nd
 August, 
2018 and the only road connecting their places was damaged and could not be repaired within 
fifteen days. Mr. X offered to supply sugar on 20
th
 August, 2018 for which Mr. Y did not agree. On 
1
st
 September, 2018, Mr. X claimed compensation of Rs. 10,000 from Mr. Y for refusing to accept 
the supply of sugar, which was not there within the purview of the contract. On the other hand, Mr. 
Y claimed for refund of Rs. 50,000, which he had paid as advance in terms of the contract. Analyse 
the above situation in terms of the provisions of the Indian Contract Act, 1872 and decide on Y’s 
contention.  (6 Marks) 
4. (a)  What do you understand by the term “unpaid seller” under the Sale of Goods Act, 1930?  When 
can an unpaid seller exercise the right of stoppage of goods in transit? (6 Marks) 
(b)  A, B, and C are partners of a partnership firm ABC & Co. The firm is a dealer in office furniture. A 
was in charge of purchase and sale, B was in charge of maintenance of accounts of the firm and 
C was in charge of handling all legal matters. Recently through an agreement among them, it was 
decided that A will be in charge of maintenance of accounts and B will be in charge of purchase 
and sale. Being ignorant about such agreement, M, a supplier supplied some furniture to A, who 
ultimately sold them to a third party. Referring to the provisions of the Partnership Act, 1932, advise 
whether M can recover money from the firm. 
What will be your advice in case M was having knowledge about the agreement?  (6 Marks) 
5. (a)  Mr. Samuel agreed to purchase 100 bales of cotton from Mr. Varun, out of his large stock and sent 
his men to take delivery of the goods. They could pack only 60 bales. Later on, there was an 
accidental fire and the entire stock was destroyed including 60 bales that were already packed. 
Referring to the provisions of the Sale of Goods Act, 1930 explain as to who will bear the loss and 
to what extent?  (6 Marks) 
(b)  F, an assessee, was a wealthy man earning huge income by way of dividend and interest. He 
formed three Private Companies and agreed with each to hold a bloc of investment as an agent for 
them. The dividend and interest income received by the companies was handed back to F as a 
pretended loan. This way, F divided his income into three parts in a bid to reduce his tax liability. 
Decide, for what purpose the three companies were established? Whether the legal personality of 
all the three companies may be disregarded. (6 Marks) 
6. (a)  Define consideration. State the characteristics of a valid consideration.  (5 Marks)  
(b)  When does dissolution of a partnership firm take place under the provisions of the Indian 
Partnership Act, 1932?  Explain.    (4 Marks) 
(c)  Flora Fauna Limited was registered as a public company. There are 230 members in the company 
as noted below: 
(a) Directors and their relatives 190 
(b) Employees 15 
(c) Ex-Employees (Shares were allotted when they were employees 10 
(d) 5 couples holding shares jointly in the name of husband and wife (5*2)  10 
(e) Others 5 
 The Board of Directors of the company propose to convert it into a private company. Also advise 
whether reduction in the number of members is necessary.  (3 Marks) 
© The Institute of Chartered Accountants of India
1 
Test Series: March, 2019 
FOUNDATION COURSE 
MOCK TEST PAPER 1 
PAPER 2: SECTION-B: BUSINESS CORRESPONDENCE AND REPORTING 
The Question Paper comprises of 5 questions of 10 marks each.  
Question No. 1 is compulsory.  Out of questions 2 to 5, attempt any three. 
Max Marks: 40 
1. (a)  Read the passage carefully and answer the questions that follow:
The window offered a view of the house opposite. The two families did not speak to each other 
because of a property dispute. One day, Ruchira's textbooks lay untouched as the young girl's 
gaze was on the happenings in the house opposite. There were two new faces in the neighboring 
household – that of an elderly widow and a girl aged sixteen. Sometimes the elderly lady would sit 
by the window, doing the young girl's hair. On other days she was absent. 
The new young neighbour's daily routine could be seen through the window – she cleaned the rice 
paddy; split nuts, put the cushions in the sun to air them. In the afternoons, while the men were all 
at world some of the women slept and others played cards. The girl sat on the terrace and read. 
Sometimes she wrote. One day there was hindrance. She was writing when the elderly woman 
snatched the unfinished letter from her hands. Thereafter the girl was not to be seen on the terrace. 
Sometimes during the day sounds came from the house indicating that a massive argument was 
going on inside. 
A few days passed. One evening Ruchira noticed the girl standing on the terrace in tears. The 
evening prayer was in progress. As she did daily, the girl bowed several times in prayer. Then she 
went downstairs. That night Ruchira wrote a letter. She went out and posted it that very instant. 
But as she lay in bed that night, she prayed fervently that her offer of friendship wouldn't reach its 
destination. Ruchira then left for Madhupur and returned when it was time for college to start. She 
found the house opposite in darkness, locked. They had left. When she stepped into her room she 
found the desk piled with letters – one had a local stamp on it with her name and address in 
unfamiliar handwriting. She quickly read it. They continued to write to each other for the next twenty 
years. 
(i) Why did Ruchira write a letter to her new neighbour?
(a) She wanted to offer her, her help.
(b) She wanted to be friends with her.
(c) To apologize for her family's behaviour towards her family
(d) To encourage her to continue learning to read and write.
(1 Mark) 
(ii) Which of the following is TRUE in the context of the passage?
(a) The young girl was very devout and prayed everyday.
(b) Only two letters were exchanged between the two girls.
(c) The new young neighbour was a servant.
(d) The afternoon was a time to relax for everyone.
(1 Mark)(iii) 
(iii)    How did the new young neighbour spend her days? 
(a) She was busy writing letters to Ruchira
(b) She used to daydream about her past experiences.
(c) She would attend to the needs of the widow.
© The Institute of Chartered Accountants of India
2 
(d) She spent her time learning to read and write. (1 Mark) 
(iv)  Why was the young neighbour prevented from sitting on the terrace? 
(a) She used to while away her time instead of working 
(b) The old woman could no longer keep an eye on her. 
(c) She had not finished writing the letter she was asked to. 
(d) She had been writing a letter which she wasn't supposed to. (1 Mark) 
(v)  What was the major argument in the house about? 
(a) There were too many people living there, which resulted in arguments.  
(b) The young girl was insisting on attending college. 
(c) The young girl had been wasting her time instead of working.  
(d) The old woman did not guard the young girl closely. (1 Mark) 
(b)  Read the passage given below. 
(i) Make notes, using headings, sub-headings, and abbreviations wherever necessary. (3 Marks) 
(ii) Write summary.  (2 Marks) 
(iii) A tax is a financial charge or levy imposed by a state or its functional equivalent upon a taxpayer 
and the failure to pay such a levy is punishable by law. Taxes are imposed by a number of 
administrative divisions. Taxes are direct or indirect in nature and are required to be reimbursed 
in money or its labour equivalent. 
Finances obtained through the imposition of taxation have been used by countries and their 
functional equivalents conventionally to carry out a number of functions. Some of these 
include protection of property, expenditures on war, economic infrastructure, the enforcement 
of law and public order, public works, subsidies, social engineering, and the very operation of 
the government itself. Governments utilise taxes for the funding of welfare and public services. 
These services include education systems, pensions for the elderly, health care system s, 
unemployment rehabilitation and benefits, and public transportation. Energy, water and waste 
management systems are also common public utilities. A portion of taxes is used alleviate the 
state’s debt and the interest this debt accrues. 
The important features of a modern economy are perceived by the efficient, fair and stable 
financial markets whose contribution is vital and significant for the overall financial system . 
The manners in which nations raise taxes are as varied as the amounts they raise. The tax 
patterns of a country are formulated on a number of factors as its inherent economic structure, 
its history, and to a significant extent on the tax structures of its neighbouring countries. 
Choice plays an important part, as different countries may attach different levels of importance 
to commonly established characteristics of a superior tax system such as fairness, required 
economic effects and collection costs that it entails. 
The level of the per capita income is a powerful determinant of the nature of taxation a country 
will adopt, the higher the level of the per capita income, the more a country relies on direct 
taxes, particularly those on personal income. Consumption taxes although they rise more 
slowly tend to become relatively important in developed countries. These differentiations in 
tax structures reflect the basic differences between high and low income countries. Low-
income countries it is observed tend to raise additional revenues at the border, as a few 
collection points require control. For this reason, they rely heavily on excise taxes on tobacco, 
alcohol and so on. In contrast, direct taxes (and VAT) require a more effective tax 
administration coupled with sophisticated taxpayers, these conditions are prevalent in 
developed countries. 
© The Institute of Chartered Accountants of India
 
2. (a)   What do you mean by completeness in effective communication?  (1 Mark) 
 (b) (i)  Choose the word which best expresses the meaning of the given word. 
       Embezzle 
(a) Shine (b)  Steal (c)  Busy    (d)  Shocked  (1 Mark) 
(ii)  Select a suitable antonym for the word given in question.  
Applaud 
(a) Organize  (b)   Compose (c)  About (d) Condemn  (1 Mark) 
(iii) Change the following sentences into passive voice. 
You should write an apology letter.  (1 Mark)  
(iv Change the following sentences to indirect speech. 
Uncle said, ‘I am unwell’  (1 Mark) 
(c)  Write a précis and give appropriate title to the passage given below. 
After years of questioning the potential health hazards of second hand cigarette smoke, a growing 
number of scientists and health officials are becoming persuaded that the dangers are real, broader 
than once believed and parallel those of direct smoke. 
It has long been established that smoking harms the health of those who do the smoking. Now new 
epidemiological studies and reviews are strengthening the evidence that it also harms the health 
of other people nearby who inhale the toxic fumes generated by the smoker, particularly from the 
burning end of the cigarette. Such indirect, or second hand, smoking causes death not only by lung 
cancer, but even more by heart attack, the studies show. The studies on passive smoking, as it is 
often called, also strengthen the link between parental smoking and respiratory damage in children. 
What has swayed many scientists is a remarkable consistency in findings from different types of 
studies in several countries with improved methods over those used in the first such studies a few 
years ago. The new findings confirm and advance two landmark reports in 1986 from the Surgeon 
General, who concluded that passive smoking caused lung cancer, and from the National Research 
Council, which said passive smoking is associated with lung cancer. 
''The links between passive smoking and health problems are now as solid as any finding in 
epidemiology,'' said, an expert in the epidemiology of smoking at the University of California at San 
Diego. (5 Marks) 
3. (a)  Explain briefly cultural barriers in communication.   (1 Mark) 
 (b) (i)  Choose the word which best expresses the meaning of the given word. 
Divulge 
(a) Dig into (b) Varied  (c) Reveal (d) Deep        (1 Mark) 
(ii) Choose the appropriate  antonym (opposite) for the word  
Cumbersome 
(a) Manageable (b) Clumsy (c)  Quantitative (d)  Moderate       (1 Mark) 
(iii) Change the following sentences into passive voice 
Anita finished the work very soon.  (1 Mark) 
 
(iv) Change the following sentence to indirect speech. 
“Don't try this at home," the stuntman told the audience.  (1 Mark) 
© The Institute of Chartered Accountants of India