Mock Test: Principles and Practice of Accounting(Paper-1) - Series-II(May 2022) | Business and Commercial Knowledge (Old Scheme) - CA Foundation PDF Download

 Page 1


1 
Test Series: May, 2022 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
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. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) State with reasons whether the following statements are True or False: 
(i) Expenses in connection with obtaining a license for running the Cinema Hall is Revenue 
Expenditure.  
(ii) If the effect of errors committed cancel out, the errors will be called compensating errors and 
the trial balance will disagree. 
(iii) Stock at the end, if appears in the Trial Balance, is taken only to the Balance Sheet.  
(iv)  Consignment account is of the nature of real account. 
(v)  Partners can share profits or losses in their capital ratio, when there is no agreement. 
(vi)  Since company has existence independent of its members, it continues to be in existence 
despite the death, insolvency or change of members. 
(6 Statements x 2 Marks = 12 Marks)  
(b) Explain Cash and Mercantile system of accounting.  (4 Marks) 
(c) Give journal entries (narrations not required) to rectify the following:  
(i)  Purchase of Furniture on credit from Samay for ` 4,300 posted to Vipin account as ` 3,400.  
(ii)  A Sales Return of ` 15,000 to Palash was not entered in the financial accounts though it was 
duly taken in the stock book.  
(iii)  Investments were sold for ` 75,000 at a profit of ` 15,000 and passed through Sales account. 
(iv)  An amount of ` 37,000 withdrawn by the proprietor (Sukhdeep) for his personal use has been 
debited to Trade Expenses account. (4 Marks) 
2. (a) M/s Sam, Profit and loss account showed a net profit of ` 24,00,000, after considering the closing 
stock of ` 22,50,000 on 31
st
 March, 2022. Subsequently the following information was obtained 
from scrutiny of the books: 
(i) Purchases for the year included ` 90,000 paid for new electric fittings for the shop. 
(ii) M/s Sam gave away goods valued at ` 2,40,000 as free samples for which no entry was made 
in the books of accounts. 
(iii) Invoices for goods amounting to ` 15,00,000 have been entered on 27
th
 March, 2022, but the 
goods were not included in stock. 
(iv) In March, 2022 goods of ` 12,00,000 sold and delivered were taken in the sales for  
April, 2022. 
Page 2


1 
Test Series: May, 2022 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
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. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) State with reasons whether the following statements are True or False: 
(i) Expenses in connection with obtaining a license for running the Cinema Hall is Revenue 
Expenditure.  
(ii) If the effect of errors committed cancel out, the errors will be called compensating errors and 
the trial balance will disagree. 
(iii) Stock at the end, if appears in the Trial Balance, is taken only to the Balance Sheet.  
(iv)  Consignment account is of the nature of real account. 
(v)  Partners can share profits or losses in their capital ratio, when there is no agreement. 
(vi)  Since company has existence independent of its members, it continues to be in existence 
despite the death, insolvency or change of members. 
(6 Statements x 2 Marks = 12 Marks)  
(b) Explain Cash and Mercantile system of accounting.  (4 Marks) 
(c) Give journal entries (narrations not required) to rectify the following:  
(i)  Purchase of Furniture on credit from Samay for ` 4,300 posted to Vipin account as ` 3,400.  
(ii)  A Sales Return of ` 15,000 to Palash was not entered in the financial accounts though it was 
duly taken in the stock book.  
(iii)  Investments were sold for ` 75,000 at a profit of ` 15,000 and passed through Sales account. 
(iv)  An amount of ` 37,000 withdrawn by the proprietor (Sukhdeep) for his personal use has been 
debited to Trade Expenses account. (4 Marks) 
2. (a) M/s Sam, Profit and loss account showed a net profit of ` 24,00,000, after considering the closing 
stock of ` 22,50,000 on 31
st
 March, 2022. Subsequently the following information was obtained 
from scrutiny of the books: 
(i) Purchases for the year included ` 90,000 paid for new electric fittings for the shop. 
(ii) M/s Sam gave away goods valued at ` 2,40,000 as free samples for which no entry was made 
in the books of accounts. 
(iii) Invoices for goods amounting to ` 15,00,000 have been entered on 27
th
 March, 2022, but the 
goods were not included in stock. 
(iv) In March, 2022 goods of ` 12,00,000 sold and delivered were taken in the sales for  
April, 2022. 
2 
(v) Goods costing ` 4,50,000 were sent on sale or return in March, 2022 at a margin of profit of 
33-1/3% on cost. Though approval was given in April, 2022 these were taken as sales for 
March, 2022. 
 You are required to determine the adjusted net profit for the year ended on 31.3.2022 and calculate 
the value of stock on 31
st
 March, 2022.  
(b) S & Co. purchased a machine for `1,00,000 on 1.1.2019 Another machine costing `1,50,000 was 
purchased on 1.7.2020. On 31.12.2021 the machine purchased on 1.1.2019 was sold for `50,000. 
The company provides depreciation at 15% on Written Down Value Method. The company closes 
its accounts on 31st December every year. Prepare – (i) Machinery Account, (ii) Machinery 
Disposal Account and (iii) Provision for Depreciation Account.   (10 +10 = 20 Marks) 
3. (a)  Ramesh had the following bills receivable and bills payable against Ravi. 
Date Bills 
Receivable 
Tenure Date Bills Payable Tenure 
1
st
 June 10,200 3 month 29
th
 May 7,500 2 month 
5
th
 June 8,700 3 month 3
rd
 June 10,200 3 month 
9
th
 June 17,400 1 month 9
th
 June 17,100 1 month 
12
th
 June 5,100 2 month    
20
th
 June 5,700 3 month    
 15
th
 August was a public holiday. However, 6
th
 September, was also declared as sudden holiday. 
 Calculate the average due date, when the payment can be received or made without any loss of 
interest to either party. 
(b)   Attempt any one of the following two sub-parts i.e. Either (i) or (ii). 
(i) From the following particulars prepare an account current, as sent by Mr. AB to Mr. XY as on 
31
st
 October, 2021 by means of product method charging interest @ 5% p.a. 
Date 
Particulars (`) 
1
st
 July 
Balance due from XY 1,500 
20
th
 August 
Sold goods to XY 2,500 
28
th
 August 
Goods returned by XY 400 
25
th
 September 
XY paid by cheque 1,600 
20
th
 October 
Received cash form XY 1,000 
(ii) Ms. Sangeeta sends out goods on approval to few customers and includes the same in the 
Sales Account. On 31.03.2022, the Trade Receivables balance stood at ` 1,50,000 which 
included `13,000 goods sent on approval against which no intimation was received during 
the year. These goods were sent out at 30% over and above cost price and were sent to - 
 Ms. Mansi ` 7,800 and Ms. Divya ` 5,200. 
 Ms. Mansi sent intimation of acceptance on 25
th
 April, 2022 and Ms. Divya returned the goods 
on 15
th
 April, 2022. 
 Make the adjustment entries and show how these items will appear in the Balance Sheet as 
on 31
st
 March, 2022. Show also the entries to be made during April, 2022. Value of Closing 
Inventories as on 31
st
 March, 2022 was ` 1,00,000.  
 
Page 3


1 
Test Series: May, 2022 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
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. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) State with reasons whether the following statements are True or False: 
(i) Expenses in connection with obtaining a license for running the Cinema Hall is Revenue 
Expenditure.  
(ii) If the effect of errors committed cancel out, the errors will be called compensating errors and 
the trial balance will disagree. 
(iii) Stock at the end, if appears in the Trial Balance, is taken only to the Balance Sheet.  
(iv)  Consignment account is of the nature of real account. 
(v)  Partners can share profits or losses in their capital ratio, when there is no agreement. 
(vi)  Since company has existence independent of its members, it continues to be in existence 
despite the death, insolvency or change of members. 
(6 Statements x 2 Marks = 12 Marks)  
(b) Explain Cash and Mercantile system of accounting.  (4 Marks) 
(c) Give journal entries (narrations not required) to rectify the following:  
(i)  Purchase of Furniture on credit from Samay for ` 4,300 posted to Vipin account as ` 3,400.  
(ii)  A Sales Return of ` 15,000 to Palash was not entered in the financial accounts though it was 
duly taken in the stock book.  
(iii)  Investments were sold for ` 75,000 at a profit of ` 15,000 and passed through Sales account. 
(iv)  An amount of ` 37,000 withdrawn by the proprietor (Sukhdeep) for his personal use has been 
debited to Trade Expenses account. (4 Marks) 
2. (a) M/s Sam, Profit and loss account showed a net profit of ` 24,00,000, after considering the closing 
stock of ` 22,50,000 on 31
st
 March, 2022. Subsequently the following information was obtained 
from scrutiny of the books: 
(i) Purchases for the year included ` 90,000 paid for new electric fittings for the shop. 
(ii) M/s Sam gave away goods valued at ` 2,40,000 as free samples for which no entry was made 
in the books of accounts. 
(iii) Invoices for goods amounting to ` 15,00,000 have been entered on 27
th
 March, 2022, but the 
goods were not included in stock. 
(iv) In March, 2022 goods of ` 12,00,000 sold and delivered were taken in the sales for  
April, 2022. 
2 
(v) Goods costing ` 4,50,000 were sent on sale or return in March, 2022 at a margin of profit of 
33-1/3% on cost. Though approval was given in April, 2022 these were taken as sales for 
March, 2022. 
 You are required to determine the adjusted net profit for the year ended on 31.3.2022 and calculate 
the value of stock on 31
st
 March, 2022.  
(b) S & Co. purchased a machine for `1,00,000 on 1.1.2019 Another machine costing `1,50,000 was 
purchased on 1.7.2020. On 31.12.2021 the machine purchased on 1.1.2019 was sold for `50,000. 
The company provides depreciation at 15% on Written Down Value Method. The company closes 
its accounts on 31st December every year. Prepare – (i) Machinery Account, (ii) Machinery 
Disposal Account and (iii) Provision for Depreciation Account.   (10 +10 = 20 Marks) 
3. (a)  Ramesh had the following bills receivable and bills payable against Ravi. 
Date Bills 
Receivable 
Tenure Date Bills Payable Tenure 
1
st
 June 10,200 3 month 29
th
 May 7,500 2 month 
5
th
 June 8,700 3 month 3
rd
 June 10,200 3 month 
9
th
 June 17,400 1 month 9
th
 June 17,100 1 month 
12
th
 June 5,100 2 month    
20
th
 June 5,700 3 month    
 15
th
 August was a public holiday. However, 6
th
 September, was also declared as sudden holiday. 
 Calculate the average due date, when the payment can be received or made without any loss of 
interest to either party. 
(b)   Attempt any one of the following two sub-parts i.e. Either (i) or (ii). 
(i) From the following particulars prepare an account current, as sent by Mr. AB to Mr. XY as on 
31
st
 October, 2021 by means of product method charging interest @ 5% p.a. 
Date 
Particulars (`) 
1
st
 July 
Balance due from XY 1,500 
20
th
 August 
Sold goods to XY 2,500 
28
th
 August 
Goods returned by XY 400 
25
th
 September 
XY paid by cheque 1,600 
20
th
 October 
Received cash form XY 1,000 
(ii) Ms. Sangeeta sends out goods on approval to few customers and includes the same in the 
Sales Account. On 31.03.2022, the Trade Receivables balance stood at ` 1,50,000 which 
included `13,000 goods sent on approval against which no intimation was received during 
the year. These goods were sent out at 30% over and above cost price and were sent to - 
 Ms. Mansi ` 7,800 and Ms. Divya ` 5,200. 
 Ms. Mansi sent intimation of acceptance on 25
th
 April, 2022 and Ms. Divya returned the goods 
on 15
th
 April, 2022. 
 Make the adjustment entries and show how these items will appear in the Balance Sheet as 
on 31
st
 March, 2022. Show also the entries to be made during April, 2022. Value of Closing 
Inventories as on 31
st
 March, 2022 was ` 1,00,000.  
 
3 
(c) Ravi draws a bill for `45,000 on Rishi on 15
th
 April, 2021 for 3 months, which is returned by Rishi 
to Ravi after accepting the same. Ravi gets it discounted with the bank for ` 44,100 on 18
th
 April, 
2021 and remits one-third amount to Rishi. On the due date Ravi fails to remit the amount due to 
Rishi, but he accepts bill of ` 52,500 for 3 months, which Rishi discounts for `51,300 and remits 
` 8,475 to Ravi. Before the maturity of the renewed bill Ravi becomes insolvent and only 50% was 
realized from his estate on 31
st
 October,2021. 
 Pass necessary Journal entries for the above transactions in the books of Ravi. 
  (5 + 5 + 10 = 20 Marks) 
4. (a) Venus and Mercury are partners in a firm, sharing Profits and Losses in the ratio of 3 : 2.  The 
Balance Sheet of Mercury and Venus as on 31.3.2022 was as follow: 
Liabilities Amount ` Assets  Amount 
` 
Sundry Creditors 51,600 Building  1,04,000 
Bill Payable 16,400 Furniture  23,200 
Bank Overdraft 36,000 Stock-in-Trade  85,600 
Capital Account:   Debtors 1,40,000   
Mercury     1,76,000   Less: Provision       800 1,39,200 
Venus     1,44,000 3,20,000 Investment  10,000 
   Cash  62,000 
 4,24,000   4,24,000 
 ‘Mars’ was admitted to the firm on the above date on the following terms: 
(i) He is admitted for 1/6th share in future profits and to introduce a Capital of ` 1,00,000. 
(ii) The new profit sharing ratio of Venus, Mercury and Mars will be 3 : 2 : 1 respectively. 
(iii) ‘Mars’ is unable to bring in cash for his share of goodwill, partners therefore, decide to raise 
goodwill account in the books of the firm.  They further decide to calculate goodwill on the 
basis of ‘Mars’s share in the profits and the capital contribution made by him to the firm. 
(iv) Furniture is to be written down by ` 3,480 and Stock to be depreciated by 5%.  A provision is 
required for Debtors @ 5% for Bad Debts.  A provision would also be made for outstanding 
wages for `6,240.  The value of Buildings having appreciated be brought upto ` 1,16,800.  
The value of investment is increased by ` 1,800. 
(v) It is found that the creditors included a sum of ` 5,600, which is not to be paid off. 
 Prepare the following: 
(i) Revaluation Account. 
(ii) Partners’ Capital Accounts.  
(iii) Balance Sheet of New Partnership firm after admission of ‘Mars’. 
(b)  Ms. Nidhi is engaged in business of selling magazines. Several of her customers pay money in 
advance for subscribing his magazines. Information related to year ended 31st March 2022 has 
been given below: 
Page 4


1 
Test Series: May, 2022 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
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. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) State with reasons whether the following statements are True or False: 
(i) Expenses in connection with obtaining a license for running the Cinema Hall is Revenue 
Expenditure.  
(ii) If the effect of errors committed cancel out, the errors will be called compensating errors and 
the trial balance will disagree. 
(iii) Stock at the end, if appears in the Trial Balance, is taken only to the Balance Sheet.  
(iv)  Consignment account is of the nature of real account. 
(v)  Partners can share profits or losses in their capital ratio, when there is no agreement. 
(vi)  Since company has existence independent of its members, it continues to be in existence 
despite the death, insolvency or change of members. 
(6 Statements x 2 Marks = 12 Marks)  
(b) Explain Cash and Mercantile system of accounting.  (4 Marks) 
(c) Give journal entries (narrations not required) to rectify the following:  
(i)  Purchase of Furniture on credit from Samay for ` 4,300 posted to Vipin account as ` 3,400.  
(ii)  A Sales Return of ` 15,000 to Palash was not entered in the financial accounts though it was 
duly taken in the stock book.  
(iii)  Investments were sold for ` 75,000 at a profit of ` 15,000 and passed through Sales account. 
(iv)  An amount of ` 37,000 withdrawn by the proprietor (Sukhdeep) for his personal use has been 
debited to Trade Expenses account. (4 Marks) 
2. (a) M/s Sam, Profit and loss account showed a net profit of ` 24,00,000, after considering the closing 
stock of ` 22,50,000 on 31
st
 March, 2022. Subsequently the following information was obtained 
from scrutiny of the books: 
(i) Purchases for the year included ` 90,000 paid for new electric fittings for the shop. 
(ii) M/s Sam gave away goods valued at ` 2,40,000 as free samples for which no entry was made 
in the books of accounts. 
(iii) Invoices for goods amounting to ` 15,00,000 have been entered on 27
th
 March, 2022, but the 
goods were not included in stock. 
(iv) In March, 2022 goods of ` 12,00,000 sold and delivered were taken in the sales for  
April, 2022. 
2 
(v) Goods costing ` 4,50,000 were sent on sale or return in March, 2022 at a margin of profit of 
33-1/3% on cost. Though approval was given in April, 2022 these were taken as sales for 
March, 2022. 
 You are required to determine the adjusted net profit for the year ended on 31.3.2022 and calculate 
the value of stock on 31
st
 March, 2022.  
(b) S & Co. purchased a machine for `1,00,000 on 1.1.2019 Another machine costing `1,50,000 was 
purchased on 1.7.2020. On 31.12.2021 the machine purchased on 1.1.2019 was sold for `50,000. 
The company provides depreciation at 15% on Written Down Value Method. The company closes 
its accounts on 31st December every year. Prepare – (i) Machinery Account, (ii) Machinery 
Disposal Account and (iii) Provision for Depreciation Account.   (10 +10 = 20 Marks) 
3. (a)  Ramesh had the following bills receivable and bills payable against Ravi. 
Date Bills 
Receivable 
Tenure Date Bills Payable Tenure 
1
st
 June 10,200 3 month 29
th
 May 7,500 2 month 
5
th
 June 8,700 3 month 3
rd
 June 10,200 3 month 
9
th
 June 17,400 1 month 9
th
 June 17,100 1 month 
12
th
 June 5,100 2 month    
20
th
 June 5,700 3 month    
 15
th
 August was a public holiday. However, 6
th
 September, was also declared as sudden holiday. 
 Calculate the average due date, when the payment can be received or made without any loss of 
interest to either party. 
(b)   Attempt any one of the following two sub-parts i.e. Either (i) or (ii). 
(i) From the following particulars prepare an account current, as sent by Mr. AB to Mr. XY as on 
31
st
 October, 2021 by means of product method charging interest @ 5% p.a. 
Date 
Particulars (`) 
1
st
 July 
Balance due from XY 1,500 
20
th
 August 
Sold goods to XY 2,500 
28
th
 August 
Goods returned by XY 400 
25
th
 September 
XY paid by cheque 1,600 
20
th
 October 
Received cash form XY 1,000 
(ii) Ms. Sangeeta sends out goods on approval to few customers and includes the same in the 
Sales Account. On 31.03.2022, the Trade Receivables balance stood at ` 1,50,000 which 
included `13,000 goods sent on approval against which no intimation was received during 
the year. These goods were sent out at 30% over and above cost price and were sent to - 
 Ms. Mansi ` 7,800 and Ms. Divya ` 5,200. 
 Ms. Mansi sent intimation of acceptance on 25
th
 April, 2022 and Ms. Divya returned the goods 
on 15
th
 April, 2022. 
 Make the adjustment entries and show how these items will appear in the Balance Sheet as 
on 31
st
 March, 2022. Show also the entries to be made during April, 2022. Value of Closing 
Inventories as on 31
st
 March, 2022 was ` 1,00,000.  
 
3 
(c) Ravi draws a bill for `45,000 on Rishi on 15
th
 April, 2021 for 3 months, which is returned by Rishi 
to Ravi after accepting the same. Ravi gets it discounted with the bank for ` 44,100 on 18
th
 April, 
2021 and remits one-third amount to Rishi. On the due date Ravi fails to remit the amount due to 
Rishi, but he accepts bill of ` 52,500 for 3 months, which Rishi discounts for `51,300 and remits 
` 8,475 to Ravi. Before the maturity of the renewed bill Ravi becomes insolvent and only 50% was 
realized from his estate on 31
st
 October,2021. 
 Pass necessary Journal entries for the above transactions in the books of Ravi. 
  (5 + 5 + 10 = 20 Marks) 
4. (a) Venus and Mercury are partners in a firm, sharing Profits and Losses in the ratio of 3 : 2.  The 
Balance Sheet of Mercury and Venus as on 31.3.2022 was as follow: 
Liabilities Amount ` Assets  Amount 
` 
Sundry Creditors 51,600 Building  1,04,000 
Bill Payable 16,400 Furniture  23,200 
Bank Overdraft 36,000 Stock-in-Trade  85,600 
Capital Account:   Debtors 1,40,000   
Mercury     1,76,000   Less: Provision       800 1,39,200 
Venus     1,44,000 3,20,000 Investment  10,000 
   Cash  62,000 
 4,24,000   4,24,000 
 ‘Mars’ was admitted to the firm on the above date on the following terms: 
(i) He is admitted for 1/6th share in future profits and to introduce a Capital of ` 1,00,000. 
(ii) The new profit sharing ratio of Venus, Mercury and Mars will be 3 : 2 : 1 respectively. 
(iii) ‘Mars’ is unable to bring in cash for his share of goodwill, partners therefore, decide to raise 
goodwill account in the books of the firm.  They further decide to calculate goodwill on the 
basis of ‘Mars’s share in the profits and the capital contribution made by him to the firm. 
(iv) Furniture is to be written down by ` 3,480 and Stock to be depreciated by 5%.  A provision is 
required for Debtors @ 5% for Bad Debts.  A provision would also be made for outstanding 
wages for `6,240.  The value of Buildings having appreciated be brought upto ` 1,16,800.  
The value of investment is increased by ` 1,800. 
(v) It is found that the creditors included a sum of ` 5,600, which is not to be paid off. 
 Prepare the following: 
(i) Revaluation Account. 
(ii) Partners’ Capital Accounts.  
(iii) Balance Sheet of New Partnership firm after admission of ‘Mars’. 
(b)  Ms. Nidhi is engaged in business of selling magazines. Several of her customers pay money in 
advance for subscribing his magazines. Information related to year ended 31st March 2022 has 
been given below: 
4 
 On 1.4.2021 he had a balance of `6,00,000 advance from customers of which `4,50,000 is related 
to year 2020-21 while remaining pertains to year  2021-22. During the year 2020-21 she made 
cash sales of ` 15,00,000. You are required to compute: 
(i)  Total income for the year 2020-21. 
(ii)  Total money received during the year if the closing balance in Advance from customers 
Account is ` 5,10,000. (15 + 5 = 20 Marks) 
5. (a) New State Society showed the following position on 31
st
 March, 2021: 
Balance Sheet as on 31
st
 March, 2021 
Liabilities `   Assets `   
Capital fund 15,86,000 Electrical fittings 3,00,000 
Expenses payable 14,000 Furniture 1,00,000 
  Books 8,00,000 
  Investment in securities 3,00,000 
  Cash at bank 50,000 
   Cash in hand    50,000 
 16,00,000  16,00,000 
The receipts and payment account for the year ended on 31
st
 March, 2022 is given below: 
 `    `   
To Balance b/d  By Electric charges 14,400 
Cash at bank      50,000  By Postage and stationary 10,000 
Cash in hand      50,000 1,00,000 By Telephone charges 10,000 
To Entrance fee 60,000 By Books purchased 1,20,000 
To Membership subscription 4,00,000 By Outstanding expenses paid 14,000 
To Sale proceeds of old papers  3,000 By Rent  1,76,000 
To Hire of lecture hall 40,000 By Investment in securities 80,000 
To Interest on securities. 16,000 By Salaries 1,32,000 
   By Balance c/d   
   Cash at bank 40,000 
    Cash in hand 22,600 
 6,19,000  6,19,000 
 You are required to prepare Income and Expenditure account for the year ended 31
st
 March, 2022 
after making the following adjustments: 
 Membership subscription included ` 20,000 received in advance. 
 Provide for outstanding rent ` 8,000 and salaries ` 6,000. 
 Books to be depreciated @ 10% including additions.  Electrical fittings and furniture are also to be 
depreciated at the same rate. 
 75% of the entrance fees is to be capitalized. 
Page 5


1 
Test Series: May, 2022 
MOCK TEST PAPER 2 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
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. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) State with reasons whether the following statements are True or False: 
(i) Expenses in connection with obtaining a license for running the Cinema Hall is Revenue 
Expenditure.  
(ii) If the effect of errors committed cancel out, the errors will be called compensating errors and 
the trial balance will disagree. 
(iii) Stock at the end, if appears in the Trial Balance, is taken only to the Balance Sheet.  
(iv)  Consignment account is of the nature of real account. 
(v)  Partners can share profits or losses in their capital ratio, when there is no agreement. 
(vi)  Since company has existence independent of its members, it continues to be in existence 
despite the death, insolvency or change of members. 
(6 Statements x 2 Marks = 12 Marks)  
(b) Explain Cash and Mercantile system of accounting.  (4 Marks) 
(c) Give journal entries (narrations not required) to rectify the following:  
(i)  Purchase of Furniture on credit from Samay for ` 4,300 posted to Vipin account as ` 3,400.  
(ii)  A Sales Return of ` 15,000 to Palash was not entered in the financial accounts though it was 
duly taken in the stock book.  
(iii)  Investments were sold for ` 75,000 at a profit of ` 15,000 and passed through Sales account. 
(iv)  An amount of ` 37,000 withdrawn by the proprietor (Sukhdeep) for his personal use has been 
debited to Trade Expenses account. (4 Marks) 
2. (a) M/s Sam, Profit and loss account showed a net profit of ` 24,00,000, after considering the closing 
stock of ` 22,50,000 on 31
st
 March, 2022. Subsequently the following information was obtained 
from scrutiny of the books: 
(i) Purchases for the year included ` 90,000 paid for new electric fittings for the shop. 
(ii) M/s Sam gave away goods valued at ` 2,40,000 as free samples for which no entry was made 
in the books of accounts. 
(iii) Invoices for goods amounting to ` 15,00,000 have been entered on 27
th
 March, 2022, but the 
goods were not included in stock. 
(iv) In March, 2022 goods of ` 12,00,000 sold and delivered were taken in the sales for  
April, 2022. 
2 
(v) Goods costing ` 4,50,000 were sent on sale or return in March, 2022 at a margin of profit of 
33-1/3% on cost. Though approval was given in April, 2022 these were taken as sales for 
March, 2022. 
 You are required to determine the adjusted net profit for the year ended on 31.3.2022 and calculate 
the value of stock on 31
st
 March, 2022.  
(b) S & Co. purchased a machine for `1,00,000 on 1.1.2019 Another machine costing `1,50,000 was 
purchased on 1.7.2020. On 31.12.2021 the machine purchased on 1.1.2019 was sold for `50,000. 
The company provides depreciation at 15% on Written Down Value Method. The company closes 
its accounts on 31st December every year. Prepare – (i) Machinery Account, (ii) Machinery 
Disposal Account and (iii) Provision for Depreciation Account.   (10 +10 = 20 Marks) 
3. (a)  Ramesh had the following bills receivable and bills payable against Ravi. 
Date Bills 
Receivable 
Tenure Date Bills Payable Tenure 
1
st
 June 10,200 3 month 29
th
 May 7,500 2 month 
5
th
 June 8,700 3 month 3
rd
 June 10,200 3 month 
9
th
 June 17,400 1 month 9
th
 June 17,100 1 month 
12
th
 June 5,100 2 month    
20
th
 June 5,700 3 month    
 15
th
 August was a public holiday. However, 6
th
 September, was also declared as sudden holiday. 
 Calculate the average due date, when the payment can be received or made without any loss of 
interest to either party. 
(b)   Attempt any one of the following two sub-parts i.e. Either (i) or (ii). 
(i) From the following particulars prepare an account current, as sent by Mr. AB to Mr. XY as on 
31
st
 October, 2021 by means of product method charging interest @ 5% p.a. 
Date 
Particulars (`) 
1
st
 July 
Balance due from XY 1,500 
20
th
 August 
Sold goods to XY 2,500 
28
th
 August 
Goods returned by XY 400 
25
th
 September 
XY paid by cheque 1,600 
20
th
 October 
Received cash form XY 1,000 
(ii) Ms. Sangeeta sends out goods on approval to few customers and includes the same in the 
Sales Account. On 31.03.2022, the Trade Receivables balance stood at ` 1,50,000 which 
included `13,000 goods sent on approval against which no intimation was received during 
the year. These goods were sent out at 30% over and above cost price and were sent to - 
 Ms. Mansi ` 7,800 and Ms. Divya ` 5,200. 
 Ms. Mansi sent intimation of acceptance on 25
th
 April, 2022 and Ms. Divya returned the goods 
on 15
th
 April, 2022. 
 Make the adjustment entries and show how these items will appear in the Balance Sheet as 
on 31
st
 March, 2022. Show also the entries to be made during April, 2022. Value of Closing 
Inventories as on 31
st
 March, 2022 was ` 1,00,000.  
 
3 
(c) Ravi draws a bill for `45,000 on Rishi on 15
th
 April, 2021 for 3 months, which is returned by Rishi 
to Ravi after accepting the same. Ravi gets it discounted with the bank for ` 44,100 on 18
th
 April, 
2021 and remits one-third amount to Rishi. On the due date Ravi fails to remit the amount due to 
Rishi, but he accepts bill of ` 52,500 for 3 months, which Rishi discounts for `51,300 and remits 
` 8,475 to Ravi. Before the maturity of the renewed bill Ravi becomes insolvent and only 50% was 
realized from his estate on 31
st
 October,2021. 
 Pass necessary Journal entries for the above transactions in the books of Ravi. 
  (5 + 5 + 10 = 20 Marks) 
4. (a) Venus and Mercury are partners in a firm, sharing Profits and Losses in the ratio of 3 : 2.  The 
Balance Sheet of Mercury and Venus as on 31.3.2022 was as follow: 
Liabilities Amount ` Assets  Amount 
` 
Sundry Creditors 51,600 Building  1,04,000 
Bill Payable 16,400 Furniture  23,200 
Bank Overdraft 36,000 Stock-in-Trade  85,600 
Capital Account:   Debtors 1,40,000   
Mercury     1,76,000   Less: Provision       800 1,39,200 
Venus     1,44,000 3,20,000 Investment  10,000 
   Cash  62,000 
 4,24,000   4,24,000 
 ‘Mars’ was admitted to the firm on the above date on the following terms: 
(i) He is admitted for 1/6th share in future profits and to introduce a Capital of ` 1,00,000. 
(ii) The new profit sharing ratio of Venus, Mercury and Mars will be 3 : 2 : 1 respectively. 
(iii) ‘Mars’ is unable to bring in cash for his share of goodwill, partners therefore, decide to raise 
goodwill account in the books of the firm.  They further decide to calculate goodwill on the 
basis of ‘Mars’s share in the profits and the capital contribution made by him to the firm. 
(iv) Furniture is to be written down by ` 3,480 and Stock to be depreciated by 5%.  A provision is 
required for Debtors @ 5% for Bad Debts.  A provision would also be made for outstanding 
wages for `6,240.  The value of Buildings having appreciated be brought upto ` 1,16,800.  
The value of investment is increased by ` 1,800. 
(v) It is found that the creditors included a sum of ` 5,600, which is not to be paid off. 
 Prepare the following: 
(i) Revaluation Account. 
(ii) Partners’ Capital Accounts.  
(iii) Balance Sheet of New Partnership firm after admission of ‘Mars’. 
(b)  Ms. Nidhi is engaged in business of selling magazines. Several of her customers pay money in 
advance for subscribing his magazines. Information related to year ended 31st March 2022 has 
been given below: 
4 
 On 1.4.2021 he had a balance of `6,00,000 advance from customers of which `4,50,000 is related 
to year 2020-21 while remaining pertains to year  2021-22. During the year 2020-21 she made 
cash sales of ` 15,00,000. You are required to compute: 
(i)  Total income for the year 2020-21. 
(ii)  Total money received during the year if the closing balance in Advance from customers 
Account is ` 5,10,000. (15 + 5 = 20 Marks) 
5. (a) New State Society showed the following position on 31
st
 March, 2021: 
Balance Sheet as on 31
st
 March, 2021 
Liabilities `   Assets `   
Capital fund 15,86,000 Electrical fittings 3,00,000 
Expenses payable 14,000 Furniture 1,00,000 
  Books 8,00,000 
  Investment in securities 3,00,000 
  Cash at bank 50,000 
   Cash in hand    50,000 
 16,00,000  16,00,000 
The receipts and payment account for the year ended on 31
st
 March, 2022 is given below: 
 `    `   
To Balance b/d  By Electric charges 14,400 
Cash at bank      50,000  By Postage and stationary 10,000 
Cash in hand      50,000 1,00,000 By Telephone charges 10,000 
To Entrance fee 60,000 By Books purchased 1,20,000 
To Membership subscription 4,00,000 By Outstanding expenses paid 14,000 
To Sale proceeds of old papers  3,000 By Rent  1,76,000 
To Hire of lecture hall 40,000 By Investment in securities 80,000 
To Interest on securities. 16,000 By Salaries 1,32,000 
   By Balance c/d   
   Cash at bank 40,000 
    Cash in hand 22,600 
 6,19,000  6,19,000 
 You are required to prepare Income and Expenditure account for the year ended 31
st
 March, 2022 
after making the following adjustments: 
 Membership subscription included ` 20,000 received in advance. 
 Provide for outstanding rent ` 8,000 and salaries ` 6,000. 
 Books to be depreciated @ 10% including additions.  Electrical fittings and furniture are also to be 
depreciated at the same rate. 
 75% of the entrance fees is to be capitalized. 
5 
 Interest on securities is to be calculated @ 5% p.a. including purchases made on 1.10.20 21 for  
` 80,000. 
(b)  Zavier & Co.  employs a team of 9 workers who were paid ` 1,20,000 per month each in the year 
ending 31
st
 December, 2020. At the start of 2021, the company raised salaries by 10% to  
` 1,32,000 per month each. 
 On 1 July, 2021 the company hired 2 trainees at salary of ` 63,000 per month each. The work force 
are paid salary on the first working day of every month, one month in arrears, so that the employees 
receive their salary for January on the first working day of February, etc. 
 You are required to calculate: 
(i)  Amount of salaries which would be charged to the profit and loss account for the year ended 
31
st
 December, 2021. 
(ii)  Amount actually paid as salaries during 2021.  
(iii)   Outstanding salaries as on 31
st
 December, 2021.             (15 + 5 = 20 Marks) 
6. (a) Hari Om Ltd. registered with an authorised equity capital of ` 16,00,000 divided into 8,000 shares 
of ` 100 each, issued for subscription of 4,000 shares payable at ` 25 per share on application,  
` 30 per share on allotment, ` 20 per share on first call and the balance as and when required. 
Application money on 4,000 shares was duly received and allotment was made to them. The 
allotment amount was received in full, but when the first call was made, two shareholders failed to 
pay the amount on 400 shares each held by them and another shareholder with 400 shares, paid 
the entire amount on his shares. The company did not make any other call. Give the necessary 
journal entries in the books of the company to record these transactions.  
(b) Sampati Ltd. issued 300 lakh 8% debentures of `100 each at a discount of 6%, redeemable at a 
premium of 5% after 3 years payable as : ` 50 on application and ` 44 on allotment.  
 You are required to prepare the necessary journal entries for issue of debentures.  
(c) From the following particulars, prepare a Bank Reconciliation Statement for Adam Ltd. As on 
31.3.2022 
(1) Balance as per cash book is ` 6,00,000. 
(2) Cheques issued but not presented in the bank amounts to ` 3,40,000. 
(3) Bank charges amounts to ` 1,500. 
(4) Interest credited by bank amounts to ` 7,500. 
OR 
(c) Explain in brief objective and advantages of setting Accounting Standards. 
(10 + 5 + 5 = 20 Marks)