Mock Test: Principles and Practice of Accounting(Paper-1) Answers - Dec 2022 | Mock Tests & Past Year Papers for CA Foundation PDF Download

 Page 1


1 
 
MOCK TEST PAPER 1 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING  
SUGGESTED ANSWERS/HINTS 
1. (a) (i) False: If the effect of errors committed cancel out, the errors will be called compensating 
errors and the trial balance will agree. 
(ii) False: Accrual concept implies accounting on ‘due’ or ‘accrual’ basis. Accrual basis of 
accounting involves recognition of revenues and costs as and when they accrue irrespective 
of actual receipts or payments.  
(iii)  False: Consignment account is a nominal account. 
(iv) True: In case the due date of a bill falls after the date of closing the account, then no interest 
is allowed for that. However, interest from the date of closing to such due date is written in 
“Red-Ink” in the appropriate side of the ‘Account current’. This interest is called Red -Ink 
Interest. 
(v) True: When there is no partnership deed then the provisions of the Indian Partnership Act are 
to be applied for settling the dispute.  Interest on loan is payable @ 6% p.a. as per Indian 
Partnership Act. 
(vi) False: When shares are forfeited, the share capital account is debited with called up capital 
of shares forfeited and the share forfeiture account is credited with amount received on shares 
forfeited. 
(b) Change in accounting policy may have a material effect on the items of financial statements. For 
example, if cost formula used for inventory valuation is changed from weighted average to FIFO, 
or if interest is capitalized which was earlier not in practice, or if proportionate amount of interest 
is changed to inventory which was earlier not the practice, all these may increase or decrease the 
net profit. Unless the effect of such change in accounting policy is quantified, the financial 
statements may not help the users of accounts. Therefore, it is necessary to quantify the effect of 
change on financial statement items like assets, liabilities, profit/loss.  
 The examples in this regard may be given as follows:  
 Omega Enterprises revised its accounting policy relating to valuation of inventories to include 
applicable production overheads. 
(c)  (i)   Error of Commission.  
(ii) Error of Omission.  
(iii) Error of Omission. 
(iv) Error of Commission. 
  (v) Error of Principle. 
2. (a) Plant and Machinery Account  
Date  
(2020-21) 
Particulars Amount 
(`) 
Date 
(2020-21) 
Particulars Amount 
(`) 
Apr-01 To Balance b/d 21,15,250 Jul -01 By Bank (Sales) 90,000 
Page 2


1 
 
MOCK TEST PAPER 1 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING  
SUGGESTED ANSWERS/HINTS 
1. (a) (i) False: If the effect of errors committed cancel out, the errors will be called compensating 
errors and the trial balance will agree. 
(ii) False: Accrual concept implies accounting on ‘due’ or ‘accrual’ basis. Accrual basis of 
accounting involves recognition of revenues and costs as and when they accrue irrespective 
of actual receipts or payments.  
(iii)  False: Consignment account is a nominal account. 
(iv) True: In case the due date of a bill falls after the date of closing the account, then no interest 
is allowed for that. However, interest from the date of closing to such due date is written in 
“Red-Ink” in the appropriate side of the ‘Account current’. This interest is called Red -Ink 
Interest. 
(v) True: When there is no partnership deed then the provisions of the Indian Partnership Act are 
to be applied for settling the dispute.  Interest on loan is payable @ 6% p.a. as per Indian 
Partnership Act. 
(vi) False: When shares are forfeited, the share capital account is debited with called up capital 
of shares forfeited and the share forfeiture account is credited with amount received on shares 
forfeited. 
(b) Change in accounting policy may have a material effect on the items of financial statements. For 
example, if cost formula used for inventory valuation is changed from weighted average to FIFO, 
or if interest is capitalized which was earlier not in practice, or if proportionate amount of interest 
is changed to inventory which was earlier not the practice, all these may increase or decrease the 
net profit. Unless the effect of such change in accounting policy is quantified, the financial 
statements may not help the users of accounts. Therefore, it is necessary to quantify the effect of 
change on financial statement items like assets, liabilities, profit/loss.  
 The examples in this regard may be given as follows:  
 Omega Enterprises revised its accounting policy relating to valuation of inventories to include 
applicable production overheads. 
(c)  (i)   Error of Commission.  
(ii) Error of Omission.  
(iii) Error of Omission. 
(iv) Error of Commission. 
  (v) Error of Principle. 
2. (a) Plant and Machinery Account  
Date  
(2020-21) 
Particulars Amount 
(`) 
Date 
(2020-21) 
Particulars Amount 
(`) 
Apr-01 To Balance b/d 21,15,250 Jul -01 By Bank (Sales) 90,000 
2 
Jul -01 To Bank 
(4,35,000 + 9800) 
4,44,800  By Deprecation (on 
machine sold)  
7,585 
Sep -01 To Bank 2,50,000  By Loss on sale 2,05,825 
    By Depreciation on 
Scrapped machine  
 4,820 
    By loss on scrapping 
the machine 
1,87,960 
   Mar-31 By Deprecation  2,09,849 
   Mar-31 By Balance c/d 21,04,011 
  28,10,050   28,10,050 
Working Notes: 
1. Calculation of loss on sale of machine 
Cost on 1-4-2017 4,16,200 
Less: Depreciation @ 10% on ` 4,16,200 (41,620) 
W.D.V. on 31.3.2018 3,74,580 
Less: Depreciation @10% on ` 3,74,580 (37,458) 
W.D.V. on 31.3.2019 3,37,122 
Less: Depreciation @10% on ` 3,37,122 (33,712) 
W.D.V on 31.3.2020 3,03,410 
Less: Depreciation @ 10% on ` 3,03,410 for 3 months  (7,585) 
 2,95,825 
Less: Sale proceeds on 1-7-2020 (90,000) 
Loss on sale of machine 2,05,825 
2. Calculation of loss on scrapped machine 
Cost on 1-4-2018 2,38,000 
Less: Depreciation @10% (23,800) 
W.D.V. on 31.3.2019 2,14,200 
Less: Depreciation @10% (21,420) 
W.D.V. on 31.3.2020 1,92,780 
Less: Depreciation @ 10% for 3 months (4,820) 
Loss on scrapping the machine 1,87,960 
3. Calculation of Depreciation  
Balance of Machinery A/c on 1.4.2020 21,15,250 
Less: W.D.V. of Machinery Sold (3,03,410) 
Less: W.D.V of Machinery Scrapped  (1,92,780) 
W.D.V of other Machinery on 1.4.2020 16,19,060 
Depreciation @10% on ` 16,19,060 for 12 Months 1,61,906 
Depreciation @10% on ` 4,44,800 for 9 Months 33,360 
Page 3


1 
 
MOCK TEST PAPER 1 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING  
SUGGESTED ANSWERS/HINTS 
1. (a) (i) False: If the effect of errors committed cancel out, the errors will be called compensating 
errors and the trial balance will agree. 
(ii) False: Accrual concept implies accounting on ‘due’ or ‘accrual’ basis. Accrual basis of 
accounting involves recognition of revenues and costs as and when they accrue irrespective 
of actual receipts or payments.  
(iii)  False: Consignment account is a nominal account. 
(iv) True: In case the due date of a bill falls after the date of closing the account, then no interest 
is allowed for that. However, interest from the date of closing to such due date is written in 
“Red-Ink” in the appropriate side of the ‘Account current’. This interest is called Red -Ink 
Interest. 
(v) True: When there is no partnership deed then the provisions of the Indian Partnership Act are 
to be applied for settling the dispute.  Interest on loan is payable @ 6% p.a. as per Indian 
Partnership Act. 
(vi) False: When shares are forfeited, the share capital account is debited with called up capital 
of shares forfeited and the share forfeiture account is credited with amount received on shares 
forfeited. 
(b) Change in accounting policy may have a material effect on the items of financial statements. For 
example, if cost formula used for inventory valuation is changed from weighted average to FIFO, 
or if interest is capitalized which was earlier not in practice, or if proportionate amount of interest 
is changed to inventory which was earlier not the practice, all these may increase or decrease the 
net profit. Unless the effect of such change in accounting policy is quantified, the financial 
statements may not help the users of accounts. Therefore, it is necessary to quantify the effect of 
change on financial statement items like assets, liabilities, profit/loss.  
 The examples in this regard may be given as follows:  
 Omega Enterprises revised its accounting policy relating to valuation of inventories to include 
applicable production overheads. 
(c)  (i)   Error of Commission.  
(ii) Error of Omission.  
(iii) Error of Omission. 
(iv) Error of Commission. 
  (v) Error of Principle. 
2. (a) Plant and Machinery Account  
Date  
(2020-21) 
Particulars Amount 
(`) 
Date 
(2020-21) 
Particulars Amount 
(`) 
Apr-01 To Balance b/d 21,15,250 Jul -01 By Bank (Sales) 90,000 
2 
Jul -01 To Bank 
(4,35,000 + 9800) 
4,44,800  By Deprecation (on 
machine sold)  
7,585 
Sep -01 To Bank 2,50,000  By Loss on sale 2,05,825 
    By Depreciation on 
Scrapped machine  
 4,820 
    By loss on scrapping 
the machine 
1,87,960 
   Mar-31 By Deprecation  2,09,849 
   Mar-31 By Balance c/d 21,04,011 
  28,10,050   28,10,050 
Working Notes: 
1. Calculation of loss on sale of machine 
Cost on 1-4-2017 4,16,200 
Less: Depreciation @ 10% on ` 4,16,200 (41,620) 
W.D.V. on 31.3.2018 3,74,580 
Less: Depreciation @10% on ` 3,74,580 (37,458) 
W.D.V. on 31.3.2019 3,37,122 
Less: Depreciation @10% on ` 3,37,122 (33,712) 
W.D.V on 31.3.2020 3,03,410 
Less: Depreciation @ 10% on ` 3,03,410 for 3 months  (7,585) 
 2,95,825 
Less: Sale proceeds on 1-7-2020 (90,000) 
Loss on sale of machine 2,05,825 
2. Calculation of loss on scrapped machine 
Cost on 1-4-2018 2,38,000 
Less: Depreciation @10% (23,800) 
W.D.V. on 31.3.2019 2,14,200 
Less: Depreciation @10% (21,420) 
W.D.V. on 31.3.2020 1,92,780 
Less: Depreciation @ 10% for 3 months (4,820) 
Loss on scrapping the machine 1,87,960 
3. Calculation of Depreciation  
Balance of Machinery A/c on 1.4.2020 21,15,250 
Less: W.D.V. of Machinery Sold (3,03,410) 
Less: W.D.V of Machinery Scrapped  (1,92,780) 
W.D.V of other Machinery on 1.4.2020 16,19,060 
Depreciation @10% on ` 16,19,060 for 12 Months 1,61,906 
Depreciation @10% on ` 4,44,800 for 9 Months 33,360 
3 
Depreciation @10% on ` 2,50,000 for 7 Months 14,583 
Total Depreciation to be charged on 31.3.2021 2,09,849 
(b)    Bank Reconciliation Statement as on 30
th
 June 2022 
 Particulars Amount Amount 
 Overdraft as per Pass Book (Dr. Balance)  75,000 
Add: Cheques deposited into the Bank by Customer but not 
entered in Cash Book  
Cheques issued but not presented ` (1,02,000-60,000) 
1,200 
 
42,000 
 
 Bank charges written twice in Cash Book 240    43,440 
   1,18,440 
Less: Cheques received, recorded in cash Book but not sent to the 
Bank 
12,000  
 Cheques sent to the Bank but not collected 18,000  
 Direct payment made by the bank not recorded in the Cash 
book 
1,800  
 Interest on Overdraft charged by Bank  4,800  
 Insurance charges not entered in Cash Book 210  
 Credit side of bank column of Cash Book was undercast 6,000  
 Discounted bill dishonored & noting charges Paid (WN) 3,100 45,910 
 Overdraft as per Cash Book  72,530 
 Working Note: Bill amount of ` 3,100 were debited by bank. However, it is not been recorded in 
the Cash Book. So to arrive at the cash balance, ` 3,100 was added. 
3. (a)       In the books of Hari 
Consignment to Om of Hyderabad Account  
Particulars `  Particulars  `  
To Goods sent on  By Om (Sales)  19,60,000  
Consignment 20,00,000  By Loss in Transit 100 cases 
     @ ` 1,050 each 
 
1,05,000  
To Bank (Expenses)  1,00,000  By Consignment Inventories   
To Om (Expenses) 63,000       In hand 300 @ ` 1,060 each 3,18,000   
To Om (Commission)  1,96,000       In transit 200 @ ` 1,050 each 2,10,000  5,28,000  
To Profit on Consignment to 
     Profit & Loss A/c 
2,34,000     
 25,93,000    25,93,000  
Om’s Account 
Particulars `  Particulars `  
To Consignment A/c 19,60,000 By Consignment A/c  
  (Expenses) 63,000 
  By Consignment A/c  - 
Page 4


1 
 
MOCK TEST PAPER 1 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING  
SUGGESTED ANSWERS/HINTS 
1. (a) (i) False: If the effect of errors committed cancel out, the errors will be called compensating 
errors and the trial balance will agree. 
(ii) False: Accrual concept implies accounting on ‘due’ or ‘accrual’ basis. Accrual basis of 
accounting involves recognition of revenues and costs as and when they accrue irrespective 
of actual receipts or payments.  
(iii)  False: Consignment account is a nominal account. 
(iv) True: In case the due date of a bill falls after the date of closing the account, then no interest 
is allowed for that. However, interest from the date of closing to such due date is written in 
“Red-Ink” in the appropriate side of the ‘Account current’. This interest is called Red -Ink 
Interest. 
(v) True: When there is no partnership deed then the provisions of the Indian Partnership Act are 
to be applied for settling the dispute.  Interest on loan is payable @ 6% p.a. as per Indian 
Partnership Act. 
(vi) False: When shares are forfeited, the share capital account is debited with called up capital 
of shares forfeited and the share forfeiture account is credited with amount received on shares 
forfeited. 
(b) Change in accounting policy may have a material effect on the items of financial statements. For 
example, if cost formula used for inventory valuation is changed from weighted average to FIFO, 
or if interest is capitalized which was earlier not in practice, or if proportionate amount of interest 
is changed to inventory which was earlier not the practice, all these may increase or decrease the 
net profit. Unless the effect of such change in accounting policy is quantified, the financial 
statements may not help the users of accounts. Therefore, it is necessary to quantify the effect of 
change on financial statement items like assets, liabilities, profit/loss.  
 The examples in this regard may be given as follows:  
 Omega Enterprises revised its accounting policy relating to valuation of inventories to include 
applicable production overheads. 
(c)  (i)   Error of Commission.  
(ii) Error of Omission.  
(iii) Error of Omission. 
(iv) Error of Commission. 
  (v) Error of Principle. 
2. (a) Plant and Machinery Account  
Date  
(2020-21) 
Particulars Amount 
(`) 
Date 
(2020-21) 
Particulars Amount 
(`) 
Apr-01 To Balance b/d 21,15,250 Jul -01 By Bank (Sales) 90,000 
2 
Jul -01 To Bank 
(4,35,000 + 9800) 
4,44,800  By Deprecation (on 
machine sold)  
7,585 
Sep -01 To Bank 2,50,000  By Loss on sale 2,05,825 
    By Depreciation on 
Scrapped machine  
 4,820 
    By loss on scrapping 
the machine 
1,87,960 
   Mar-31 By Deprecation  2,09,849 
   Mar-31 By Balance c/d 21,04,011 
  28,10,050   28,10,050 
Working Notes: 
1. Calculation of loss on sale of machine 
Cost on 1-4-2017 4,16,200 
Less: Depreciation @ 10% on ` 4,16,200 (41,620) 
W.D.V. on 31.3.2018 3,74,580 
Less: Depreciation @10% on ` 3,74,580 (37,458) 
W.D.V. on 31.3.2019 3,37,122 
Less: Depreciation @10% on ` 3,37,122 (33,712) 
W.D.V on 31.3.2020 3,03,410 
Less: Depreciation @ 10% on ` 3,03,410 for 3 months  (7,585) 
 2,95,825 
Less: Sale proceeds on 1-7-2020 (90,000) 
Loss on sale of machine 2,05,825 
2. Calculation of loss on scrapped machine 
Cost on 1-4-2018 2,38,000 
Less: Depreciation @10% (23,800) 
W.D.V. on 31.3.2019 2,14,200 
Less: Depreciation @10% (21,420) 
W.D.V. on 31.3.2020 1,92,780 
Less: Depreciation @ 10% for 3 months (4,820) 
Loss on scrapping the machine 1,87,960 
3. Calculation of Depreciation  
Balance of Machinery A/c on 1.4.2020 21,15,250 
Less: W.D.V. of Machinery Sold (3,03,410) 
Less: W.D.V of Machinery Scrapped  (1,92,780) 
W.D.V of other Machinery on 1.4.2020 16,19,060 
Depreciation @10% on ` 16,19,060 for 12 Months 1,61,906 
Depreciation @10% on ` 4,44,800 for 9 Months 33,360 
3 
Depreciation @10% on ` 2,50,000 for 7 Months 14,583 
Total Depreciation to be charged on 31.3.2021 2,09,849 
(b)    Bank Reconciliation Statement as on 30
th
 June 2022 
 Particulars Amount Amount 
 Overdraft as per Pass Book (Dr. Balance)  75,000 
Add: Cheques deposited into the Bank by Customer but not 
entered in Cash Book  
Cheques issued but not presented ` (1,02,000-60,000) 
1,200 
 
42,000 
 
 Bank charges written twice in Cash Book 240    43,440 
   1,18,440 
Less: Cheques received, recorded in cash Book but not sent to the 
Bank 
12,000  
 Cheques sent to the Bank but not collected 18,000  
 Direct payment made by the bank not recorded in the Cash 
book 
1,800  
 Interest on Overdraft charged by Bank  4,800  
 Insurance charges not entered in Cash Book 210  
 Credit side of bank column of Cash Book was undercast 6,000  
 Discounted bill dishonored & noting charges Paid (WN) 3,100 45,910 
 Overdraft as per Cash Book  72,530 
 Working Note: Bill amount of ` 3,100 were debited by bank. However, it is not been recorded in 
the Cash Book. So to arrive at the cash balance, ` 3,100 was added. 
3. (a)       In the books of Hari 
Consignment to Om of Hyderabad Account  
Particulars `  Particulars  `  
To Goods sent on  By Om (Sales)  19,60,000  
Consignment 20,00,000  By Loss in Transit 100 cases 
     @ ` 1,050 each 
 
1,05,000  
To Bank (Expenses)  1,00,000  By Consignment Inventories   
To Om (Expenses) 63,000       In hand 300 @ ` 1,060 each 3,18,000   
To Om (Commission)  1,96,000       In transit 200 @ ` 1,050 each 2,10,000  5,28,000  
To Profit on Consignment to 
     Profit & Loss A/c 
2,34,000     
 25,93,000    25,93,000  
Om’s Account 
Particulars `  Particulars `  
To Consignment A/c 19,60,000 By Consignment A/c  
  (Expenses) 63,000 
  By Consignment A/c  - 
4 
  (Commission) 1,96,000 
   By Balance c/d 17,01,000 
 19,60,000    19,60,000 
Working Notes: 
(i) Consignor’s expenses on 2,000 cases amounts to ` 1,00,000; it comes to ` 50 per case. The 
cost of cases lost will be computed at ` 1,050 per case. 
(ii) Om has incurred ` 17,000 on clearing 1,700 cases, i.e., ` 10 per case; while valuing closing 
inventories with the agent ` 10 per case has been added to cases in hand with the agent. 
(iii)  It has been assumed that balance of ` 17,01,000 is not yet paid. 
(b)      Calculation of Average Due Date 
(Taking 3
rd
 March, 2021 as base date) 
Date of bill 2021 Term Due date 
2021 
Amount  
 
 
(`) 
No. of days from the 
base date i.e.  
3
rd
 March,2021 
(`) 
Product  
 
 
(`) 
28
th
 January 1 month 3
rd
 March 10,000 0 0 
20
th
 March 2 months 23
rd
 May 8,000 81 6,48,000 
12
th
 July 1month 14
th
 Aug. 14,000 164 22,96,000 
10
th
 August 2 months 13
th
 Oct. 12,000 224 26,88,000 
   44,000  56,32,000 
 Average due date = Base date + Days equal to   
Sum of Products
Sum of Amounts
 
   = 3
rd
 March, 2021 + 
56 ,32 , 000
44 , 0 0 0
  
=  3
rd
 March, 2021 + 128 days = 9
th
 July, 2021 
Working Note: Bill dated 12
th
 July, 2021 has the maturity period of one month, due date (after 
adding 3 days of grace) falls on 15
th
 August, 2021.  15
th
 August being public holiday, due date 
would be preceding date i.e. 14
th
 August, 2021. 
(c)          In the books of Q 
P in Account Current with Q 
(Interest to 31
st
 March, 2022 @ 10% p.a) 
Date Particulars  Amount Days Product Date Particulars Amount Days Product  
2022  `  ` 2022  `  ` 
Jan.1 To Balance 
b/d 
5,000 90 4,50,000 Jan.24 By Promissiory Note 
(due date 27
th
 April) 
5,000 (27) (1,35,000) 
Jan. 11 To Sales 6,000 79 4,74,000 Feb. 1 By Purchases 10,000 58 5,80,000 
Feb. 4 To Sales 8,200 55 4,51,000 Feb. 7 By Sales Return 1,000 52 52,000 
Mar. 18 To Sales 9,200 13 1,19,600 Mar. 1 By Purchases 5,600 30 1,68,000 
Mar. 31 To Interest 219   Mar. 23 By Purchases 4,000 8 32,000 
     Mar. 31 By Balance of 
Products 
  7,97,600 
     Mar. 31 By Bank 3,019   
  28,619  14,94,600   28,619  14,94,600 
Page 5


1 
 
MOCK TEST PAPER 1 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING  
SUGGESTED ANSWERS/HINTS 
1. (a) (i) False: If the effect of errors committed cancel out, the errors will be called compensating 
errors and the trial balance will agree. 
(ii) False: Accrual concept implies accounting on ‘due’ or ‘accrual’ basis. Accrual basis of 
accounting involves recognition of revenues and costs as and when they accrue irrespective 
of actual receipts or payments.  
(iii)  False: Consignment account is a nominal account. 
(iv) True: In case the due date of a bill falls after the date of closing the account, then no interest 
is allowed for that. However, interest from the date of closing to such due date is written in 
“Red-Ink” in the appropriate side of the ‘Account current’. This interest is called Red -Ink 
Interest. 
(v) True: When there is no partnership deed then the provisions of the Indian Partnership Act are 
to be applied for settling the dispute.  Interest on loan is payable @ 6% p.a. as per Indian 
Partnership Act. 
(vi) False: When shares are forfeited, the share capital account is debited with called up capital 
of shares forfeited and the share forfeiture account is credited with amount received on shares 
forfeited. 
(b) Change in accounting policy may have a material effect on the items of financial statements. For 
example, if cost formula used for inventory valuation is changed from weighted average to FIFO, 
or if interest is capitalized which was earlier not in practice, or if proportionate amount of interest 
is changed to inventory which was earlier not the practice, all these may increase or decrease the 
net profit. Unless the effect of such change in accounting policy is quantified, the financial 
statements may not help the users of accounts. Therefore, it is necessary to quantify the effect of 
change on financial statement items like assets, liabilities, profit/loss.  
 The examples in this regard may be given as follows:  
 Omega Enterprises revised its accounting policy relating to valuation of inventories to include 
applicable production overheads. 
(c)  (i)   Error of Commission.  
(ii) Error of Omission.  
(iii) Error of Omission. 
(iv) Error of Commission. 
  (v) Error of Principle. 
2. (a) Plant and Machinery Account  
Date  
(2020-21) 
Particulars Amount 
(`) 
Date 
(2020-21) 
Particulars Amount 
(`) 
Apr-01 To Balance b/d 21,15,250 Jul -01 By Bank (Sales) 90,000 
2 
Jul -01 To Bank 
(4,35,000 + 9800) 
4,44,800  By Deprecation (on 
machine sold)  
7,585 
Sep -01 To Bank 2,50,000  By Loss on sale 2,05,825 
    By Depreciation on 
Scrapped machine  
 4,820 
    By loss on scrapping 
the machine 
1,87,960 
   Mar-31 By Deprecation  2,09,849 
   Mar-31 By Balance c/d 21,04,011 
  28,10,050   28,10,050 
Working Notes: 
1. Calculation of loss on sale of machine 
Cost on 1-4-2017 4,16,200 
Less: Depreciation @ 10% on ` 4,16,200 (41,620) 
W.D.V. on 31.3.2018 3,74,580 
Less: Depreciation @10% on ` 3,74,580 (37,458) 
W.D.V. on 31.3.2019 3,37,122 
Less: Depreciation @10% on ` 3,37,122 (33,712) 
W.D.V on 31.3.2020 3,03,410 
Less: Depreciation @ 10% on ` 3,03,410 for 3 months  (7,585) 
 2,95,825 
Less: Sale proceeds on 1-7-2020 (90,000) 
Loss on sale of machine 2,05,825 
2. Calculation of loss on scrapped machine 
Cost on 1-4-2018 2,38,000 
Less: Depreciation @10% (23,800) 
W.D.V. on 31.3.2019 2,14,200 
Less: Depreciation @10% (21,420) 
W.D.V. on 31.3.2020 1,92,780 
Less: Depreciation @ 10% for 3 months (4,820) 
Loss on scrapping the machine 1,87,960 
3. Calculation of Depreciation  
Balance of Machinery A/c on 1.4.2020 21,15,250 
Less: W.D.V. of Machinery Sold (3,03,410) 
Less: W.D.V of Machinery Scrapped  (1,92,780) 
W.D.V of other Machinery on 1.4.2020 16,19,060 
Depreciation @10% on ` 16,19,060 for 12 Months 1,61,906 
Depreciation @10% on ` 4,44,800 for 9 Months 33,360 
3 
Depreciation @10% on ` 2,50,000 for 7 Months 14,583 
Total Depreciation to be charged on 31.3.2021 2,09,849 
(b)    Bank Reconciliation Statement as on 30
th
 June 2022 
 Particulars Amount Amount 
 Overdraft as per Pass Book (Dr. Balance)  75,000 
Add: Cheques deposited into the Bank by Customer but not 
entered in Cash Book  
Cheques issued but not presented ` (1,02,000-60,000) 
1,200 
 
42,000 
 
 Bank charges written twice in Cash Book 240    43,440 
   1,18,440 
Less: Cheques received, recorded in cash Book but not sent to the 
Bank 
12,000  
 Cheques sent to the Bank but not collected 18,000  
 Direct payment made by the bank not recorded in the Cash 
book 
1,800  
 Interest on Overdraft charged by Bank  4,800  
 Insurance charges not entered in Cash Book 210  
 Credit side of bank column of Cash Book was undercast 6,000  
 Discounted bill dishonored & noting charges Paid (WN) 3,100 45,910 
 Overdraft as per Cash Book  72,530 
 Working Note: Bill amount of ` 3,100 were debited by bank. However, it is not been recorded in 
the Cash Book. So to arrive at the cash balance, ` 3,100 was added. 
3. (a)       In the books of Hari 
Consignment to Om of Hyderabad Account  
Particulars `  Particulars  `  
To Goods sent on  By Om (Sales)  19,60,000  
Consignment 20,00,000  By Loss in Transit 100 cases 
     @ ` 1,050 each 
 
1,05,000  
To Bank (Expenses)  1,00,000  By Consignment Inventories   
To Om (Expenses) 63,000       In hand 300 @ ` 1,060 each 3,18,000   
To Om (Commission)  1,96,000       In transit 200 @ ` 1,050 each 2,10,000  5,28,000  
To Profit on Consignment to 
     Profit & Loss A/c 
2,34,000     
 25,93,000    25,93,000  
Om’s Account 
Particulars `  Particulars `  
To Consignment A/c 19,60,000 By Consignment A/c  
  (Expenses) 63,000 
  By Consignment A/c  - 
4 
  (Commission) 1,96,000 
   By Balance c/d 17,01,000 
 19,60,000    19,60,000 
Working Notes: 
(i) Consignor’s expenses on 2,000 cases amounts to ` 1,00,000; it comes to ` 50 per case. The 
cost of cases lost will be computed at ` 1,050 per case. 
(ii) Om has incurred ` 17,000 on clearing 1,700 cases, i.e., ` 10 per case; while valuing closing 
inventories with the agent ` 10 per case has been added to cases in hand with the agent. 
(iii)  It has been assumed that balance of ` 17,01,000 is not yet paid. 
(b)      Calculation of Average Due Date 
(Taking 3
rd
 March, 2021 as base date) 
Date of bill 2021 Term Due date 
2021 
Amount  
 
 
(`) 
No. of days from the 
base date i.e.  
3
rd
 March,2021 
(`) 
Product  
 
 
(`) 
28
th
 January 1 month 3
rd
 March 10,000 0 0 
20
th
 March 2 months 23
rd
 May 8,000 81 6,48,000 
12
th
 July 1month 14
th
 Aug. 14,000 164 22,96,000 
10
th
 August 2 months 13
th
 Oct. 12,000 224 26,88,000 
   44,000  56,32,000 
 Average due date = Base date + Days equal to   
Sum of Products
Sum of Amounts
 
   = 3
rd
 March, 2021 + 
56 ,32 , 000
44 , 0 0 0
  
=  3
rd
 March, 2021 + 128 days = 9
th
 July, 2021 
Working Note: Bill dated 12
th
 July, 2021 has the maturity period of one month, due date (after 
adding 3 days of grace) falls on 15
th
 August, 2021.  15
th
 August being public holiday, due date 
would be preceding date i.e. 14
th
 August, 2021. 
(c)          In the books of Q 
P in Account Current with Q 
(Interest to 31
st
 March, 2022 @ 10% p.a) 
Date Particulars  Amount Days Product Date Particulars Amount Days Product  
2022  `  ` 2022  `  ` 
Jan.1 To Balance 
b/d 
5,000 90 4,50,000 Jan.24 By Promissiory Note 
(due date 27
th
 April) 
5,000 (27) (1,35,000) 
Jan. 11 To Sales 6,000 79 4,74,000 Feb. 1 By Purchases 10,000 58 5,80,000 
Feb. 4 To Sales 8,200 55 4,51,000 Feb. 7 By Sales Return 1,000 52 52,000 
Mar. 18 To Sales 9,200 13 1,19,600 Mar. 1 By Purchases 5,600 30 1,68,000 
Mar. 31 To Interest 219   Mar. 23 By Purchases 4,000 8 32,000 
     Mar. 31 By Balance of 
Products 
  7,97,600 
     Mar. 31 By Bank 3,019   
  28,619  14,94,600   28,619  14,94,600 
5 
  Working Note: 
 Calculation of interest: 
Interest = 
7,97,600 10
365 100
? = ` 219 (approx.)  
4 (a)        Journal Entries 
Particulars  Amount Amount 
1. Insurance Company’s A/c Dr. 10,000  
  To Life Policy A/c   10,000 
 (Being the policy on the life of Sameer matured on his death)    
2. Life Policy A/c Dr. 9,000  
  To Sam’s Capital A/c   3,000 
  To Saif’s Capital A/c   3,000 
  To Sameer’s Capital A/c   3,000 
 (Being the transfer of balance in life policy account to all 
partners’ capital accounts) 
   
3. Sam’s Capital A/c Dr. 12,600  
 Saif’s Capital A/c Dr. 12,600  
 Sameer’s Capital A/c Dr. 12,600  
  To Advertisement suspense A/c   37,800 
 (Being Advertisement suspense standing in the books written off 
fully) 
   
4. Land & Buildings A/c Dr. 37,000  
  To Revaluation A/c   37,000 
 (Being an increase in the value of assets recorded)    
5.  Investment Fluctuation Reserve A/c Dr. 600  
  To Investment A/c    600 
 (Being reduction in the cost of investment adjusted through 
Investment Fluctuation Reserve) 
   
6. Revaluation A/c Dr. 3,600  
  To Stock A/c    1,200 
  To Provision for Doubtful Debts A/c   2,400 
 (Being the fall in value of assets recorded)    
7. Sam’s Capital A/c Dr. 3,500  
 Saif’s Capital A/c Dr. 3,500  
  To Sameer’s Capital A/c   7,000 
 (Being the share of Sameer’s revalued goodwill adjusted through 
capital accounts of the remaining partners) 
   
8.  Profit & Loss Suspense A/c Dr. 1,500