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Page 1
1
MOCK TEST PAPER 1
FOUNDATION COURSE
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING
SUGGESTED ANSWERS/HINTS
1. (a) (i) False: Such wages being related to capital Asset should be debited to the machinery account.
(ii) True: Since the temporary huts were necessary for the construction, their cost should be
added to the cost of the cinema hall and thus capitalised.
(iii) False: The additional commission to the consignee who agrees to bear the loss on account
of bad debts is called del credere commission.
(iv) False: Due date may be the due date of the first transaction or the due date of the last
transaction or any other due date between the first and the last but preferably earlier due date
may be taken.
(v) False: The business of the partnership firm can be carried on by all the partners or by any
one of them acting for all.
(vi) False: Debenture interest is payable before the payment of any dividend on shares.
(b) The practice of accountancy has crossed its usual domain of preparation of financial statements,
interpretation of such statements and audit thereof. Chartered Accountants are presently taking
active role in company laws and other corporate legislation matters, in taxation laws matters (both
direct and indirect) and in general management problems.
Some of the services rendered by chartered accountants to the society are briefly mentioned
hereunder:
(i) Maintenance of books of accounts;
(ii) Statutory audit;
(iii) Internal Audit;
(iv) Taxation;
(v) Management accounting and consultancy services;
(vi) Financial advice and financial investigations etc.
Other services like secretarial work, share registration work, company formation receiverships,
arbitrations etc.
(c) Using the Accounting Equation:
Assets = Capital + Liabilities
(i) 37,50,000
(ii) 6,75,000
(iii) 2,25,000
(iv) 1,79,40,000
Page 2
1
MOCK TEST PAPER 1
FOUNDATION COURSE
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING
SUGGESTED ANSWERS/HINTS
1. (a) (i) False: Such wages being related to capital Asset should be debited to the machinery account.
(ii) True: Since the temporary huts were necessary for the construction, their cost should be
added to the cost of the cinema hall and thus capitalised.
(iii) False: The additional commission to the consignee who agrees to bear the loss on account
of bad debts is called del credere commission.
(iv) False: Due date may be the due date of the first transaction or the due date of the last
transaction or any other due date between the first and the last but preferably earlier due date
may be taken.
(v) False: The business of the partnership firm can be carried on by all the partners or by any
one of them acting for all.
(vi) False: Debenture interest is payable before the payment of any dividend on shares.
(b) The practice of accountancy has crossed its usual domain of preparation of financial statements,
interpretation of such statements and audit thereof. Chartered Accountants are presently taking
active role in company laws and other corporate legislation matters, in taxation laws matters (both
direct and indirect) and in general management problems.
Some of the services rendered by chartered accountants to the society are briefly mentioned
hereunder:
(i) Maintenance of books of accounts;
(ii) Statutory audit;
(iii) Internal Audit;
(iv) Taxation;
(v) Management accounting and consultancy services;
(vi) Financial advice and financial investigations etc.
Other services like secretarial work, share registration work, company formation receiverships,
arbitrations etc.
(c) Using the Accounting Equation:
Assets = Capital + Liabilities
(i) 37,50,000
(ii) 6,75,000
(iii) 2,25,000
(iv) 1,79,40,000
2
2. (a) Quarry Lease Account
Dr. Cr.
Date Particulars Amount ` Date Particulars Amount `
2019 2019
Jan. To Bank A/c 6,00,00,000 Dec. 31 By Depreciation A/c 6,00,000
[(12,000/12,00,000) ×
` 6,00,00,000]
Dec. 31 By Balance c/d
5,94,00,000
6,00,00,000 6,00,00,000
2020 2020
Jan. 1 To Balance b/d 5,94,00,000 Dec. 31 By Depreciation A/c 30,00,000
Dec. 31 By Balance c/d 5,64,00,000
5,94,00,000 5,94,00,000
2021 2021
Jan. 1 To Balance b/d 5,64,00,000 Dec. 31 By Depreciation A/c 45,00,000
Dec. 31 By Balance c/d 5,19,00,000
5,64,00,000 5,64,00,000
Depreciation Account
Dr. Cr.
`
`
2019 2019
Dec. 31 To Quarry lease A/c 6,00,000 Dec. 31 By Profit & Loss A/c 6,00,000
6,00,000 6,00,000
2020 2020
Dec. 31 To Quarry lease A/c 30,00,000 Dec. 31 By Profit & Loss A/c 30,00,000
30,00,000 30,00,000
2021 2021
Dec. 31 To Quarry lease A/c 45,00,000 Dec. 31 By Profit & Loss A/c 45,00,000
45,00,000 45,00,000
(b)
Balance as per Cash Book
(1,97,400)
Add : Cheques issued but not presented for payment
14,800
Crossed Cheque issued to Abdul not presented for
payment
3,000
Amounts collected by Bank on our behalf but
not entered in the Cash Book
Dividend 600
Insurance claim 3,200
3,800
Page 3
1
MOCK TEST PAPER 1
FOUNDATION COURSE
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING
SUGGESTED ANSWERS/HINTS
1. (a) (i) False: Such wages being related to capital Asset should be debited to the machinery account.
(ii) True: Since the temporary huts were necessary for the construction, their cost should be
added to the cost of the cinema hall and thus capitalised.
(iii) False: The additional commission to the consignee who agrees to bear the loss on account
of bad debts is called del credere commission.
(iv) False: Due date may be the due date of the first transaction or the due date of the last
transaction or any other due date between the first and the last but preferably earlier due date
may be taken.
(v) False: The business of the partnership firm can be carried on by all the partners or by any
one of them acting for all.
(vi) False: Debenture interest is payable before the payment of any dividend on shares.
(b) The practice of accountancy has crossed its usual domain of preparation of financial statements,
interpretation of such statements and audit thereof. Chartered Accountants are presently taking
active role in company laws and other corporate legislation matters, in taxation laws matters (both
direct and indirect) and in general management problems.
Some of the services rendered by chartered accountants to the society are briefly mentioned
hereunder:
(i) Maintenance of books of accounts;
(ii) Statutory audit;
(iii) Internal Audit;
(iv) Taxation;
(v) Management accounting and consultancy services;
(vi) Financial advice and financial investigations etc.
Other services like secretarial work, share registration work, company formation receiverships,
arbitrations etc.
(c) Using the Accounting Equation:
Assets = Capital + Liabilities
(i) 37,50,000
(ii) 6,75,000
(iii) 2,25,000
(iv) 1,79,40,000
2
2. (a) Quarry Lease Account
Dr. Cr.
Date Particulars Amount ` Date Particulars Amount `
2019 2019
Jan. To Bank A/c 6,00,00,000 Dec. 31 By Depreciation A/c 6,00,000
[(12,000/12,00,000) ×
` 6,00,00,000]
Dec. 31 By Balance c/d
5,94,00,000
6,00,00,000 6,00,00,000
2020 2020
Jan. 1 To Balance b/d 5,94,00,000 Dec. 31 By Depreciation A/c 30,00,000
Dec. 31 By Balance c/d 5,64,00,000
5,94,00,000 5,94,00,000
2021 2021
Jan. 1 To Balance b/d 5,64,00,000 Dec. 31 By Depreciation A/c 45,00,000
Dec. 31 By Balance c/d 5,19,00,000
5,64,00,000 5,64,00,000
Depreciation Account
Dr. Cr.
`
`
2019 2019
Dec. 31 To Quarry lease A/c 6,00,000 Dec. 31 By Profit & Loss A/c 6,00,000
6,00,000 6,00,000
2020 2020
Dec. 31 To Quarry lease A/c 30,00,000 Dec. 31 By Profit & Loss A/c 30,00,000
30,00,000 30,00,000
2021 2021
Dec. 31 To Quarry lease A/c 45,00,000 Dec. 31 By Profit & Loss A/c 45,00,000
45,00,000 45,00,000
(b)
Balance as per Cash Book
(1,97,400)
Add : Cheques issued but not presented for payment
14,800
Crossed Cheque issued to Abdul not presented for
payment
3,000
Amounts collected by Bank on our behalf but
not entered in the Cash Book
Dividend 600
Insurance claim 3,200
3,800
3
(-) Bank Commission 400 3,400
Amount paid in A/c No. 2 credited by the
Bank wrongly to this A/c
2,000 23,200
(1,74,200)
Less : Cheques deposited in the bank but no cleared
6,200
(` 5,200 + ` 1,000)
Payments made by Bank on our behalf but not
entered in the Cash Book
Interest 1,280
Premium 640
Second call 2,400 4,320
Cheques issued against A/c No. 2 but wrongly
debited by the Bank to this A/c
1,200 (11,720)
Overdraft as per Pass Book
1,85,920
3. (a) In the Books of Nishant
Consignment Account
` `
To Goods sent on consignment A/c
(15,000 kg x ` 30)
4,50,000 By Consignee’s A/c-Sales
(7,500 kg x ` 60)
4,50,000
To Cash A/c
(Expenses 15,000 kg x ` 5)
75,000 By Abnormal Loss A/c (WN-1)
By Insurance claim
5,000
9,000
To Consignee’s A/c:
Advertisement & Recurring
expenses
33,000
By Consignment Stock A/c (WN-2) 2,46,690
Commission @ 5% on `4,50,000 22,500
To Profit and loss A/c 1,30,190
(Profit on Consignment) _______ _______
7,10,690 7,10,690
Working Notes:
1. Abnormal Loss:
Cost of goods lost: 400 kg
Total cost (400 x ` 30) 12,000
Add: expenses incurred by the consignor @ `5 per kg 2,000
Gross Amount of abnormal loss 14,000
Less: Insurance claim (9,000)
Net abnormal loss 5,000
Page 4
1
MOCK TEST PAPER 1
FOUNDATION COURSE
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING
SUGGESTED ANSWERS/HINTS
1. (a) (i) False: Such wages being related to capital Asset should be debited to the machinery account.
(ii) True: Since the temporary huts were necessary for the construction, their cost should be
added to the cost of the cinema hall and thus capitalised.
(iii) False: The additional commission to the consignee who agrees to bear the loss on account
of bad debts is called del credere commission.
(iv) False: Due date may be the due date of the first transaction or the due date of the last
transaction or any other due date between the first and the last but preferably earlier due date
may be taken.
(v) False: The business of the partnership firm can be carried on by all the partners or by any
one of them acting for all.
(vi) False: Debenture interest is payable before the payment of any dividend on shares.
(b) The practice of accountancy has crossed its usual domain of preparation of financial statements,
interpretation of such statements and audit thereof. Chartered Accountants are presently taking
active role in company laws and other corporate legislation matters, in taxation laws matters (both
direct and indirect) and in general management problems.
Some of the services rendered by chartered accountants to the society are briefly mentioned
hereunder:
(i) Maintenance of books of accounts;
(ii) Statutory audit;
(iii) Internal Audit;
(iv) Taxation;
(v) Management accounting and consultancy services;
(vi) Financial advice and financial investigations etc.
Other services like secretarial work, share registration work, company formation receiverships,
arbitrations etc.
(c) Using the Accounting Equation:
Assets = Capital + Liabilities
(i) 37,50,000
(ii) 6,75,000
(iii) 2,25,000
(iv) 1,79,40,000
2
2. (a) Quarry Lease Account
Dr. Cr.
Date Particulars Amount ` Date Particulars Amount `
2019 2019
Jan. To Bank A/c 6,00,00,000 Dec. 31 By Depreciation A/c 6,00,000
[(12,000/12,00,000) ×
` 6,00,00,000]
Dec. 31 By Balance c/d
5,94,00,000
6,00,00,000 6,00,00,000
2020 2020
Jan. 1 To Balance b/d 5,94,00,000 Dec. 31 By Depreciation A/c 30,00,000
Dec. 31 By Balance c/d 5,64,00,000
5,94,00,000 5,94,00,000
2021 2021
Jan. 1 To Balance b/d 5,64,00,000 Dec. 31 By Depreciation A/c 45,00,000
Dec. 31 By Balance c/d 5,19,00,000
5,64,00,000 5,64,00,000
Depreciation Account
Dr. Cr.
`
`
2019 2019
Dec. 31 To Quarry lease A/c 6,00,000 Dec. 31 By Profit & Loss A/c 6,00,000
6,00,000 6,00,000
2020 2020
Dec. 31 To Quarry lease A/c 30,00,000 Dec. 31 By Profit & Loss A/c 30,00,000
30,00,000 30,00,000
2021 2021
Dec. 31 To Quarry lease A/c 45,00,000 Dec. 31 By Profit & Loss A/c 45,00,000
45,00,000 45,00,000
(b)
Balance as per Cash Book
(1,97,400)
Add : Cheques issued but not presented for payment
14,800
Crossed Cheque issued to Abdul not presented for
payment
3,000
Amounts collected by Bank on our behalf but
not entered in the Cash Book
Dividend 600
Insurance claim 3,200
3,800
3
(-) Bank Commission 400 3,400
Amount paid in A/c No. 2 credited by the
Bank wrongly to this A/c
2,000 23,200
(1,74,200)
Less : Cheques deposited in the bank but no cleared
6,200
(` 5,200 + ` 1,000)
Payments made by Bank on our behalf but not
entered in the Cash Book
Interest 1,280
Premium 640
Second call 2,400 4,320
Cheques issued against A/c No. 2 but wrongly
debited by the Bank to this A/c
1,200 (11,720)
Overdraft as per Pass Book
1,85,920
3. (a) In the Books of Nishant
Consignment Account
` `
To Goods sent on consignment A/c
(15,000 kg x ` 30)
4,50,000 By Consignee’s A/c-Sales
(7,500 kg x ` 60)
4,50,000
To Cash A/c
(Expenses 15,000 kg x ` 5)
75,000 By Abnormal Loss A/c (WN-1)
By Insurance claim
5,000
9,000
To Consignee’s A/c:
Advertisement & Recurring
expenses
33,000
By Consignment Stock A/c (WN-2) 2,46,690
Commission @ 5% on `4,50,000 22,500
To Profit and loss A/c 1,30,190
(Profit on Consignment) _______ _______
7,10,690 7,10,690
Working Notes:
1. Abnormal Loss:
Cost of goods lost: 400 kg
Total cost (400 x ` 30) 12,000
Add: expenses incurred by the consignor @ `5 per kg 2,000
Gross Amount of abnormal loss 14,000
Less: Insurance claim (9,000)
Net abnormal loss 5,000
4
2. Valuation of Inventories
Quantity (Kgs) Amount (`)
Total Cost (15,000 kg x `30) 15,000 4,50,000
Add: Expenses incurred by the consignor 75,000
Less: Value of Abnormal Loss – 400 kgs (WN 1) (400) (14,000)
14,600 5,11,000
Less: Normal Loss (100)
14,500 5,11,000
Less: Quantity of Sugar sold (7,500)
Quantity of Closing Stock 7,000
Value of 7,000 kgs – (5,11,000/14,500) x 7,000 2,46,690
(b) In the books of Deepti
Aditi in Account Current with Deepti
(Interest to 31
st
March, 2021 @ 10% p.a)
Date Particulars Amount Days Product Date Particulars Amount Days Product
2021 ` ` 2021 ` `
Jan.1 To Balance
b/d
7,500 90 6,75,000 Jan.24 By Promissor
Varun Note (due
date 27
th
April)
7,500 (27) (2,02,500)
Jan. 11 To Sales 9,000 79 7,11,000 Feb. 1 By Purchases 15,000 58 8,70,000
Feb. 4 To Sales 12,300 55 6,76,500 Feb. 7 By Sales Return 1,500 52 78,000
Mar. 18 To Sales 13,800 13 1,79,400 Mar. 1 By Purchases 8,400 30 2,52,000
Mar. 31 To Interest 328 Mar.
23
By Purchases 6,000 8 48,000
Mar.
31
By Balance of
Products
11,96,400
Mar.
31
By Bank 4,528
42,928 22,41,900 42,928 22,41,900
Working Note:
Calculation of interest:
Interest =
11,96,400
365
×
10
100
= ` 328 (approx.)
(c) In the books of Mr. Somnath
Journal Entries
Date Particulars L.F. Dr.
(in `)
Cr.
(in `)
2021
Dec. 12 Trade receivables A/c Dr. 1,60,000
To Sales A/c 1,60,000
(Being the goods sent to customers on sale or
return basis)
Page 5
1
MOCK TEST PAPER 1
FOUNDATION COURSE
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING
SUGGESTED ANSWERS/HINTS
1. (a) (i) False: Such wages being related to capital Asset should be debited to the machinery account.
(ii) True: Since the temporary huts were necessary for the construction, their cost should be
added to the cost of the cinema hall and thus capitalised.
(iii) False: The additional commission to the consignee who agrees to bear the loss on account
of bad debts is called del credere commission.
(iv) False: Due date may be the due date of the first transaction or the due date of the last
transaction or any other due date between the first and the last but preferably earlier due date
may be taken.
(v) False: The business of the partnership firm can be carried on by all the partners or by any
one of them acting for all.
(vi) False: Debenture interest is payable before the payment of any dividend on shares.
(b) The practice of accountancy has crossed its usual domain of preparation of financial statements,
interpretation of such statements and audit thereof. Chartered Accountants are presently taking
active role in company laws and other corporate legislation matters, in taxation laws matters (both
direct and indirect) and in general management problems.
Some of the services rendered by chartered accountants to the society are briefly mentioned
hereunder:
(i) Maintenance of books of accounts;
(ii) Statutory audit;
(iii) Internal Audit;
(iv) Taxation;
(v) Management accounting and consultancy services;
(vi) Financial advice and financial investigations etc.
Other services like secretarial work, share registration work, company formation receiverships,
arbitrations etc.
(c) Using the Accounting Equation:
Assets = Capital + Liabilities
(i) 37,50,000
(ii) 6,75,000
(iii) 2,25,000
(iv) 1,79,40,000
2
2. (a) Quarry Lease Account
Dr. Cr.
Date Particulars Amount ` Date Particulars Amount `
2019 2019
Jan. To Bank A/c 6,00,00,000 Dec. 31 By Depreciation A/c 6,00,000
[(12,000/12,00,000) ×
` 6,00,00,000]
Dec. 31 By Balance c/d
5,94,00,000
6,00,00,000 6,00,00,000
2020 2020
Jan. 1 To Balance b/d 5,94,00,000 Dec. 31 By Depreciation A/c 30,00,000
Dec. 31 By Balance c/d 5,64,00,000
5,94,00,000 5,94,00,000
2021 2021
Jan. 1 To Balance b/d 5,64,00,000 Dec. 31 By Depreciation A/c 45,00,000
Dec. 31 By Balance c/d 5,19,00,000
5,64,00,000 5,64,00,000
Depreciation Account
Dr. Cr.
`
`
2019 2019
Dec. 31 To Quarry lease A/c 6,00,000 Dec. 31 By Profit & Loss A/c 6,00,000
6,00,000 6,00,000
2020 2020
Dec. 31 To Quarry lease A/c 30,00,000 Dec. 31 By Profit & Loss A/c 30,00,000
30,00,000 30,00,000
2021 2021
Dec. 31 To Quarry lease A/c 45,00,000 Dec. 31 By Profit & Loss A/c 45,00,000
45,00,000 45,00,000
(b)
Balance as per Cash Book
(1,97,400)
Add : Cheques issued but not presented for payment
14,800
Crossed Cheque issued to Abdul not presented for
payment
3,000
Amounts collected by Bank on our behalf but
not entered in the Cash Book
Dividend 600
Insurance claim 3,200
3,800
3
(-) Bank Commission 400 3,400
Amount paid in A/c No. 2 credited by the
Bank wrongly to this A/c
2,000 23,200
(1,74,200)
Less : Cheques deposited in the bank but no cleared
6,200
(` 5,200 + ` 1,000)
Payments made by Bank on our behalf but not
entered in the Cash Book
Interest 1,280
Premium 640
Second call 2,400 4,320
Cheques issued against A/c No. 2 but wrongly
debited by the Bank to this A/c
1,200 (11,720)
Overdraft as per Pass Book
1,85,920
3. (a) In the Books of Nishant
Consignment Account
` `
To Goods sent on consignment A/c
(15,000 kg x ` 30)
4,50,000 By Consignee’s A/c-Sales
(7,500 kg x ` 60)
4,50,000
To Cash A/c
(Expenses 15,000 kg x ` 5)
75,000 By Abnormal Loss A/c (WN-1)
By Insurance claim
5,000
9,000
To Consignee’s A/c:
Advertisement & Recurring
expenses
33,000
By Consignment Stock A/c (WN-2) 2,46,690
Commission @ 5% on `4,50,000 22,500
To Profit and loss A/c 1,30,190
(Profit on Consignment) _______ _______
7,10,690 7,10,690
Working Notes:
1. Abnormal Loss:
Cost of goods lost: 400 kg
Total cost (400 x ` 30) 12,000
Add: expenses incurred by the consignor @ `5 per kg 2,000
Gross Amount of abnormal loss 14,000
Less: Insurance claim (9,000)
Net abnormal loss 5,000
4
2. Valuation of Inventories
Quantity (Kgs) Amount (`)
Total Cost (15,000 kg x `30) 15,000 4,50,000
Add: Expenses incurred by the consignor 75,000
Less: Value of Abnormal Loss – 400 kgs (WN 1) (400) (14,000)
14,600 5,11,000
Less: Normal Loss (100)
14,500 5,11,000
Less: Quantity of Sugar sold (7,500)
Quantity of Closing Stock 7,000
Value of 7,000 kgs – (5,11,000/14,500) x 7,000 2,46,690
(b) In the books of Deepti
Aditi in Account Current with Deepti
(Interest to 31
st
March, 2021 @ 10% p.a)
Date Particulars Amount Days Product Date Particulars Amount Days Product
2021 ` ` 2021 ` `
Jan.1 To Balance
b/d
7,500 90 6,75,000 Jan.24 By Promissor
Varun Note (due
date 27
th
April)
7,500 (27) (2,02,500)
Jan. 11 To Sales 9,000 79 7,11,000 Feb. 1 By Purchases 15,000 58 8,70,000
Feb. 4 To Sales 12,300 55 6,76,500 Feb. 7 By Sales Return 1,500 52 78,000
Mar. 18 To Sales 13,800 13 1,79,400 Mar. 1 By Purchases 8,400 30 2,52,000
Mar. 31 To Interest 328 Mar.
23
By Purchases 6,000 8 48,000
Mar.
31
By Balance of
Products
11,96,400
Mar.
31
By Bank 4,528
42,928 22,41,900 42,928 22,41,900
Working Note:
Calculation of interest:
Interest =
11,96,400
365
×
10
100
= ` 328 (approx.)
(c) In the books of Mr. Somnath
Journal Entries
Date Particulars L.F. Dr.
(in `)
Cr.
(in `)
2021
Dec. 12 Trade receivables A/c Dr. 1,60,000
To Sales A/c 1,60,000
(Being the goods sent to customers on sale or
return basis)
5
Dec. 20 Return Inward A/c Dr. 70,000
To Trade receivables A/c 70,000
(Being the goods returned by customers to
whom goods were sent on sale or return
basis)
Dec. 27 Sales A/c Dr. 30,000
To Trade receivables A/c 30,000
(Being the cancellation of original entry of sale
in respect of goods on sale or return basis)
Dec. 31 Inventories with customers on Sale or Return
A/c
Dr. 24,000
To Trading A/c (Note 2) 24,000
(Being the adjustment for cost of goods lying
with customers awaiting approval)
Working Note:
(1) No entry is required for receiving letter of approval from customer.
(2) Cost of goods with customers = ` 30,000 x 100/125 = ` 24,000
4. (a) In the books of M/s Amal, Kamal and Tamal
Journal Entries
Date Particulars Dr. (`) Cr.(`)
2022
January 1
Fixed assets A/c
To Revaluation A/c
(Revaluation of fixed assets)
Dr. 1,02,000
1,02,000
Revaluation A/c
To Stock A/c
To Provision for doubtful debts A/c
(Reduction in the value of stock and provision @
5% on sundry debtors created for doubtful debts)
Dr. 22,000
16,000
6,000
Kamal’s capital A/c
Tamal’s capital A/c
To Amal’s capital A/c
(Adjustment for goodwill and joint life policy
(W.N.1))
Dr.
Dr.
21,000
42,000
63,000
Revaluation A/c
To Amal’s capital A/c
To Kamal’s capital A/c
To Tamal’s capital A/c
(Transfer of profit on revaluation)
Dr. 80,000
40,000
25,000
15,000
General reserve A/c
To Amal’s capital A/c
To Kamal’s capital A/c
To Tamal’s capital A/c
(Transfer of general reserve)
Dr. 1,60,000
80,000
50,000
30,000
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FAQs on Mock Test: Principles and Practice of Accounting(Paper-1) Answers - May 2022 - Mock Tests & Past Year Papers for CA Foundation
| 1. What are the basic principles of accounting? |  |
Ans. The basic principles of accounting include the principles of entity, money measurement, going concern, cost, dual aspect, accounting period, and matching. These principles provide a framework for recording, analyzing, and reporting financial transactions and help ensure consistency and accuracy in financial reporting.
| 2. What is the difference between cash accounting and accrual accounting? | |
Ans. Cash accounting records revenues and expenses when cash is received or paid. It focuses on actual cash flow. On the other hand, accrual accounting records revenues and expenses when they are earned or incurred, regardless of cash flow. It provides a more accurate picture of a company's financial position by matching revenues with expenses in the same accounting period.
| 3. How are assets, liabilities, and equity related in accounting? | |
Ans. Assets, liabilities, and equity are the three main components of the accounting equation, which states that assets equal liabilities plus equity. Assets are what a company owns, such as cash, inventory, or property. Liabilities are what a company owes, such as loans or accounts payable. Equity represents the owner's claim on the assets and is calculated as assets minus liabilities.
| 4. What is the purpose of financial statements in accounting? | |
Ans. The purpose of financial statements in accounting is to provide information about a company's financial performance and position. The main financial statements include the income statement, balance sheet, and cash flow statement. These statements help stakeholders, such as investors, creditors, and management, to assess the company's profitability, liquidity, and overall financial health.
| 5. How does the matching principle apply to accounting? | |
Ans. The matching principle states that expenses should be matched with the revenues they helped generate in the same accounting period. This principle ensures that the financial statements accurately reflect the profitability of a company. For example, if a company sells a product in one accounting period but incurs the related expenses in the next period, the matching principle requires the expenses to be recorded in the same period as the revenue.
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