Principles and Practice of Accounting (Paper-1) - December 2023 | Mock Tests & Past Year Papers for CA Foundation PDF Download

 Page 1


PAPER – 1: PRINCIPLES & PRACTICE OF ACCOUNTING 
QUESTIONS  
True and False  
1. State with reasons, whether the following statements are true or false: 
(i) Goods worth ` 600 taken by the proprietor for personal use should be credited to 
Capital Account. 
(ii) M/s Raj Yog & Co. runs a cafe. They renovated. some of the old cabins. Because 
of this renovation some space was made free and number of cabins was 
increased from 25 to 28. The total expenditure incurred was ` 50,000 and was 
treated as a revenue expenditure.  
(iii) If the amount is posted in the wrong account or it is written on the wrong side of the 
account, it is called error of principle. 
(iv) Depreciation is a non-cash expense and does not result in any cash outflow. 
(v) There are two ways of preparing an account current.  
(vi) The additional commission paid to the consignee who agrees to bear the loss on 
account of bad debts is called overriding commission. 
(vii) A Partnership firm cannot own any Assets.  
(viii)  Goodwill is intangible asset therefore it cannot be valued. 
(ix) Fees received for Life Membership is a revenue receipt as it is of recurring nature. 
(x)  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 calls in 
arrear of shares forfeited.  
Theoretical Framework 
2. (a) Distinguish between money measurement concept and matching concept. 
(b) Differentiate between provision and contingent liability   
Journal Entries 
3. (a) M/s Puneet & Co. find the following errors in their books of account before 
preparation of Trial Balance.  You are required to pass necessary journal entries: 
(i) A purchase of ` 5,600 from M/s Ajeet & Co. was recorded in the accounts of 
M/s Amit & Co. as ` 6,500.  Day Book entry has also been passed incorrectly. 
(ii) A sale of ` 9,800 to M/s Bantu Bros. was recorded in M/s Bindu & Co.’s 
account as ` 8,900.  Day Book entry has also been incorrectly passed. 
Page 2


PAPER – 1: PRINCIPLES & PRACTICE OF ACCOUNTING 
QUESTIONS  
True and False  
1. State with reasons, whether the following statements are true or false: 
(i) Goods worth ` 600 taken by the proprietor for personal use should be credited to 
Capital Account. 
(ii) M/s Raj Yog & Co. runs a cafe. They renovated. some of the old cabins. Because 
of this renovation some space was made free and number of cabins was 
increased from 25 to 28. The total expenditure incurred was ` 50,000 and was 
treated as a revenue expenditure.  
(iii) If the amount is posted in the wrong account or it is written on the wrong side of the 
account, it is called error of principle. 
(iv) Depreciation is a non-cash expense and does not result in any cash outflow. 
(v) There are two ways of preparing an account current.  
(vi) The additional commission paid to the consignee who agrees to bear the loss on 
account of bad debts is called overriding commission. 
(vii) A Partnership firm cannot own any Assets.  
(viii)  Goodwill is intangible asset therefore it cannot be valued. 
(ix) Fees received for Life Membership is a revenue receipt as it is of recurring nature. 
(x)  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 calls in 
arrear of shares forfeited.  
Theoretical Framework 
2. (a) Distinguish between money measurement concept and matching concept. 
(b) Differentiate between provision and contingent liability   
Journal Entries 
3. (a) M/s Puneet & Co. find the following errors in their books of account before 
preparation of Trial Balance.  You are required to pass necessary journal entries: 
(i) A purchase of ` 5,600 from M/s Ajeet & Co. was recorded in the accounts of 
M/s Amit & Co. as ` 6,500.  Day Book entry has also been passed incorrectly. 
(ii) A sale of ` 9,800 to M/s Bantu Bros. was recorded in M/s Bindu & Co.’s 
account as ` 8,900.  Day Book entry has also been incorrectly passed. 
2 FOUNDATION EXAMINATION: DECEMBER, 2023 
(iii) Discount allowed ` 560 (as per Cash Book) has been posted to Commission 
Account.  But the Cash Book total should be ` 650, because  discount allowed 
of ` 90 to M/s Sapna Bros. has been omitted. 
(iv) A cheque of ` 9,700 drawn by M/s Bantu Bros. has been dishonoured, but 
wrongly debited to M/s Bhakt & Co. 
Should the Trial Balance tally without rectification of errors? 
Capital or Revenue Receipt or Expenditure 
(b) Classify the following expenditures as capital or revenue receipt or capital or 
revenue expenditure: 
(i) Traveling expenses of the chief executive officer for trips abroad for purchase 
of capital assets. 
(ii) Amount spent on making a few more exists in a Cinema Hall to comply with 
Government orders. 
(iii) Insurance claim received on account of inventory damaged by fire. 
(iv) Amount paid for removal of stock to a new site. 
(v) Cost of repairs on second-hand car purchased to bring it into working 
condition. 
Cash Book  
4. (a) Prepare a Triple Column Cash Book from the following transactions and bring down 
the balance for the start of next month: 
2022   ` 
Sep. 1 Cash in hand 18,000 
 1 Cash at bank 72,000 
 2 Paid into bank 6,000 
 5 Bought furniture and issued cheque 9,000 
 8 Purchased goods for cash 3,000 
 12 Received cash from Mohan  5,880 
  Discount allowed to him 120 
 14 Cash sales 30,000 
 16 Paid to Amar by cheque 8,700 
  Discount received  300 
 19 Paid into Bank 3,000 
 23 Withdrawn from Bank for Private expenses 3,600 
Page 3


PAPER – 1: PRINCIPLES & PRACTICE OF ACCOUNTING 
QUESTIONS  
True and False  
1. State with reasons, whether the following statements are true or false: 
(i) Goods worth ` 600 taken by the proprietor for personal use should be credited to 
Capital Account. 
(ii) M/s Raj Yog & Co. runs a cafe. They renovated. some of the old cabins. Because 
of this renovation some space was made free and number of cabins was 
increased from 25 to 28. The total expenditure incurred was ` 50,000 and was 
treated as a revenue expenditure.  
(iii) If the amount is posted in the wrong account or it is written on the wrong side of the 
account, it is called error of principle. 
(iv) Depreciation is a non-cash expense and does not result in any cash outflow. 
(v) There are two ways of preparing an account current.  
(vi) The additional commission paid to the consignee who agrees to bear the loss on 
account of bad debts is called overriding commission. 
(vii) A Partnership firm cannot own any Assets.  
(viii)  Goodwill is intangible asset therefore it cannot be valued. 
(ix) Fees received for Life Membership is a revenue receipt as it is of recurring nature. 
(x)  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 calls in 
arrear of shares forfeited.  
Theoretical Framework 
2. (a) Distinguish between money measurement concept and matching concept. 
(b) Differentiate between provision and contingent liability   
Journal Entries 
3. (a) M/s Puneet & Co. find the following errors in their books of account before 
preparation of Trial Balance.  You are required to pass necessary journal entries: 
(i) A purchase of ` 5,600 from M/s Ajeet & Co. was recorded in the accounts of 
M/s Amit & Co. as ` 6,500.  Day Book entry has also been passed incorrectly. 
(ii) A sale of ` 9,800 to M/s Bantu Bros. was recorded in M/s Bindu & Co.’s 
account as ` 8,900.  Day Book entry has also been incorrectly passed. 
2 FOUNDATION EXAMINATION: DECEMBER, 2023 
(iii) Discount allowed ` 560 (as per Cash Book) has been posted to Commission 
Account.  But the Cash Book total should be ` 650, because  discount allowed 
of ` 90 to M/s Sapna Bros. has been omitted. 
(iv) A cheque of ` 9,700 drawn by M/s Bantu Bros. has been dishonoured, but 
wrongly debited to M/s Bhakt & Co. 
Should the Trial Balance tally without rectification of errors? 
Capital or Revenue Receipt or Expenditure 
(b) Classify the following expenditures as capital or revenue receipt or capital or 
revenue expenditure: 
(i) Traveling expenses of the chief executive officer for trips abroad for purchase 
of capital assets. 
(ii) Amount spent on making a few more exists in a Cinema Hall to comply with 
Government orders. 
(iii) Insurance claim received on account of inventory damaged by fire. 
(iv) Amount paid for removal of stock to a new site. 
(v) Cost of repairs on second-hand car purchased to bring it into working 
condition. 
Cash Book  
4. (a) Prepare a Triple Column Cash Book from the following transactions and bring down 
the balance for the start of next month: 
2022   ` 
Sep. 1 Cash in hand 18,000 
 1 Cash at bank 72,000 
 2 Paid into bank 6,000 
 5 Bought furniture and issued cheque 9,000 
 8 Purchased goods for cash 3,000 
 12 Received cash from Mohan  5,880 
  Discount allowed to him 120 
 14 Cash sales 30,000 
 16 Paid to Amar by cheque 8,700 
  Discount received  300 
 19 Paid into Bank 3,000 
 23 Withdrawn from Bank for Private expenses 3,600 
 PAPER – 1 : PRINCIPLES AND PRACTICE OF ACCOUNTING 3 
 24 Received cheque from Parul 8,580 
  Allowed him discount  120 
 26 Deposited Parul’s cheque into Bank   
 28 Withdrew cash from Bank for Office use 12,000 
 30 Paid rent by cheque 4,800 
Rectification of Errors  
(b) Write out the Journal Entries to rectify the following errors, using a Suspense 
Account. 
(1) Goods of the value of `15,000 returned by Mr. X were entered in the Sales 
Day Book and posted therefrom to the credit of his account; 
(2) An amount of `22,500 entered in the Sales Returns Book, has been posted to 
the debit of Mr. Shiv, who returned the goods; 
(3) A sale of `60,000 made to Mr. Amit was correctly entered in the Sales Day 
Book but wrongly posted to the debit of Mr. Sumit as ` 6,000; 
(4) Bad Debts aggregating `45,000 were written off during the year in the Sales 
ledger but were not adjusted in the General Ledger; and  
(5) The total of “Discount Allowed” column in the Cash Book for the month of 
October, 2022 amounting to `37,500 was not posted. 
Bank Reconciliation Statement 
5. On 30th September, 2022, the bank account of Vikrant, according to the bank column of 
the Cash- Book, was overdrawn to the extent of ` 8,124. On the same date the bank 
statement showed a debit balance of ` 41,516 in favour of Vikrant. An examination of the 
Cash Book and Bank Statement reveals the following: 
1.  A cheque for ` 26,28,000 deposited on 29th September, 2022 was credited by the 
bank only on 3rd October, 2022 
2. A payment by cheque for ` 32,000 has been entered twice in the Cash Book. 
3. On 29th September, 2022, the bank credited an amount of ` 2,34,800 received from 
a customer of Vikrant, but the advice was not received by Vikrant until 1st October, 
2022. 
4. Bank charges amounting to ` 1,160 had not been entered in the Cash Book. 
5. On 6th September, 2022, the bank credited ` 40,000 to Vikrant in error. 
6. A bill of exchange for ` 2,80,000 was discounted by Vikrant with his bank. This bill 
was dishonoured on 28th September, 2022 but no entry had been made in the 
books of Vikrant. 
Page 4


PAPER – 1: PRINCIPLES & PRACTICE OF ACCOUNTING 
QUESTIONS  
True and False  
1. State with reasons, whether the following statements are true or false: 
(i) Goods worth ` 600 taken by the proprietor for personal use should be credited to 
Capital Account. 
(ii) M/s Raj Yog & Co. runs a cafe. They renovated. some of the old cabins. Because 
of this renovation some space was made free and number of cabins was 
increased from 25 to 28. The total expenditure incurred was ` 50,000 and was 
treated as a revenue expenditure.  
(iii) If the amount is posted in the wrong account or it is written on the wrong side of the 
account, it is called error of principle. 
(iv) Depreciation is a non-cash expense and does not result in any cash outflow. 
(v) There are two ways of preparing an account current.  
(vi) The additional commission paid to the consignee who agrees to bear the loss on 
account of bad debts is called overriding commission. 
(vii) A Partnership firm cannot own any Assets.  
(viii)  Goodwill is intangible asset therefore it cannot be valued. 
(ix) Fees received for Life Membership is a revenue receipt as it is of recurring nature. 
(x)  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 calls in 
arrear of shares forfeited.  
Theoretical Framework 
2. (a) Distinguish between money measurement concept and matching concept. 
(b) Differentiate between provision and contingent liability   
Journal Entries 
3. (a) M/s Puneet & Co. find the following errors in their books of account before 
preparation of Trial Balance.  You are required to pass necessary journal entries: 
(i) A purchase of ` 5,600 from M/s Ajeet & Co. was recorded in the accounts of 
M/s Amit & Co. as ` 6,500.  Day Book entry has also been passed incorrectly. 
(ii) A sale of ` 9,800 to M/s Bantu Bros. was recorded in M/s Bindu & Co.’s 
account as ` 8,900.  Day Book entry has also been incorrectly passed. 
2 FOUNDATION EXAMINATION: DECEMBER, 2023 
(iii) Discount allowed ` 560 (as per Cash Book) has been posted to Commission 
Account.  But the Cash Book total should be ` 650, because  discount allowed 
of ` 90 to M/s Sapna Bros. has been omitted. 
(iv) A cheque of ` 9,700 drawn by M/s Bantu Bros. has been dishonoured, but 
wrongly debited to M/s Bhakt & Co. 
Should the Trial Balance tally without rectification of errors? 
Capital or Revenue Receipt or Expenditure 
(b) Classify the following expenditures as capital or revenue receipt or capital or 
revenue expenditure: 
(i) Traveling expenses of the chief executive officer for trips abroad for purchase 
of capital assets. 
(ii) Amount spent on making a few more exists in a Cinema Hall to comply with 
Government orders. 
(iii) Insurance claim received on account of inventory damaged by fire. 
(iv) Amount paid for removal of stock to a new site. 
(v) Cost of repairs on second-hand car purchased to bring it into working 
condition. 
Cash Book  
4. (a) Prepare a Triple Column Cash Book from the following transactions and bring down 
the balance for the start of next month: 
2022   ` 
Sep. 1 Cash in hand 18,000 
 1 Cash at bank 72,000 
 2 Paid into bank 6,000 
 5 Bought furniture and issued cheque 9,000 
 8 Purchased goods for cash 3,000 
 12 Received cash from Mohan  5,880 
  Discount allowed to him 120 
 14 Cash sales 30,000 
 16 Paid to Amar by cheque 8,700 
  Discount received  300 
 19 Paid into Bank 3,000 
 23 Withdrawn from Bank for Private expenses 3,600 
 PAPER – 1 : PRINCIPLES AND PRACTICE OF ACCOUNTING 3 
 24 Received cheque from Parul 8,580 
  Allowed him discount  120 
 26 Deposited Parul’s cheque into Bank   
 28 Withdrew cash from Bank for Office use 12,000 
 30 Paid rent by cheque 4,800 
Rectification of Errors  
(b) Write out the Journal Entries to rectify the following errors, using a Suspense 
Account. 
(1) Goods of the value of `15,000 returned by Mr. X were entered in the Sales 
Day Book and posted therefrom to the credit of his account; 
(2) An amount of `22,500 entered in the Sales Returns Book, has been posted to 
the debit of Mr. Shiv, who returned the goods; 
(3) A sale of `60,000 made to Mr. Amit was correctly entered in the Sales Day 
Book but wrongly posted to the debit of Mr. Sumit as ` 6,000; 
(4) Bad Debts aggregating `45,000 were written off during the year in the Sales 
ledger but were not adjusted in the General Ledger; and  
(5) The total of “Discount Allowed” column in the Cash Book for the month of 
October, 2022 amounting to `37,500 was not posted. 
Bank Reconciliation Statement 
5. On 30th September, 2022, the bank account of Vikrant, according to the bank column of 
the Cash- Book, was overdrawn to the extent of ` 8,124. On the same date the bank 
statement showed a debit balance of ` 41,516 in favour of Vikrant. An examination of the 
Cash Book and Bank Statement reveals the following: 
1.  A cheque for ` 26,28,000 deposited on 29th September, 2022 was credited by the 
bank only on 3rd October, 2022 
2. A payment by cheque for ` 32,000 has been entered twice in the Cash Book. 
3. On 29th September, 2022, the bank credited an amount of ` 2,34,800 received from 
a customer of Vikrant, but the advice was not received by Vikrant until 1st October, 
2022. 
4. Bank charges amounting to ` 1,160 had not been entered in the Cash Book. 
5. On 6th September, 2022, the bank credited ` 40,000 to Vikrant in error. 
6. A bill of exchange for ` 2,80,000 was discounted by Vikrant with his bank. This bill 
was dishonoured on 28th September, 2022 but no entry had been made in the 
books of Vikrant. 
4 FOUNDATION EXAMINATION: DECEMBER, 2023 
7. Cheques issued upto 30th September, 2022 but not presented for payment upto 
that date totalled ` 26,52,000. 
 You are required: 
(a) to show the appropriate rectifications required in the Cash Book of Vikrant, to arrive 
at the correct balance on 30th September, 2022 and 
(b) to prepare a bank reconciliation statement as on that date. 
Valuation of Inventories 
6. Stock taking of ABC Stores for the year ended 31
st
 March, 2023 was completed by 10
th
 
April, 2023, the valuation of which showed a stock figure of ` 3,35,000 at cost as on the 
completion date.  After the end of the accounting year and till the date of completion of 
stock taking, sales for the next year were made for ` 13,750, profit margin being 33.33 
percent on cost.  Purchases for the next year included in the stock amounted to ` 18,000 
at cost less trade discount 10 percent.  During this period, goods were added to stock of 
the mark-up price of ` 600 in respect of sales returns.  After stock taking it was found 
that there were certain very old slow moving items costing ` 2,250 which should be taken 
at ` 1,050 to ensure disposal to an interested customer.  Due to heavy floods, certain 
goods costing ` 3,100 were received from the supplier beyond the delivery date of 
customer.  As a result, the customer refused to take delivery and net realizable value of 
the goods was estimated to be ` 2,500 on 31
st
 March, 2023.   
You are required to calculate the value of stock for inclusion in the final accounts for the 
year ended 31
st
 March, 2023. Closing stock is valued by ABC Stores on generally 
accepted accounting principles. 
Concept and Accounting of Depreciation  
7. A Firm purchased an old Machinery for ` 37,000 on 1
st
 January, 2019 and spent ` 3,000 
on its overhauling.  On 1
st
 July 2020, another machine was purchased for ` 10,000.  On 
1
st
 July 2021, the machinery which was purchased on 1st January 2019, was sold for  
` 28,000 and the same day a new machinery costing ` 25,000 was purchased.  On  
1
st
 July, 2022, the machine which was purchased on 1
st
 July, 2020 was sold for ` 2,000. 
 Depreciation is charged @ 10% per annum on straight line method.  The firm changed 
the method and adopted diminishing balance method with effect from 1
st
 January, 2020 
and the rate was increased to 15% per annum. The books are closed on 31
st
 December 
every year. 
 Prepare Machinery account for four years from 1
st
 January, 2019. 
Bills of Exchange 
8. Mr. Y accepted a bill for ` 40,000 drawn on him by Mr. X on 1
st
 August, 2022 for 3 
months.  This was for the amount which Y owed to X.  On the same date Mr. A got the 
bill discounted at his bank for ` 39,200. 
Page 5


PAPER – 1: PRINCIPLES & PRACTICE OF ACCOUNTING 
QUESTIONS  
True and False  
1. State with reasons, whether the following statements are true or false: 
(i) Goods worth ` 600 taken by the proprietor for personal use should be credited to 
Capital Account. 
(ii) M/s Raj Yog & Co. runs a cafe. They renovated. some of the old cabins. Because 
of this renovation some space was made free and number of cabins was 
increased from 25 to 28. The total expenditure incurred was ` 50,000 and was 
treated as a revenue expenditure.  
(iii) If the amount is posted in the wrong account or it is written on the wrong side of the 
account, it is called error of principle. 
(iv) Depreciation is a non-cash expense and does not result in any cash outflow. 
(v) There are two ways of preparing an account current.  
(vi) The additional commission paid to the consignee who agrees to bear the loss on 
account of bad debts is called overriding commission. 
(vii) A Partnership firm cannot own any Assets.  
(viii)  Goodwill is intangible asset therefore it cannot be valued. 
(ix) Fees received for Life Membership is a revenue receipt as it is of recurring nature. 
(x)  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 calls in 
arrear of shares forfeited.  
Theoretical Framework 
2. (a) Distinguish between money measurement concept and matching concept. 
(b) Differentiate between provision and contingent liability   
Journal Entries 
3. (a) M/s Puneet & Co. find the following errors in their books of account before 
preparation of Trial Balance.  You are required to pass necessary journal entries: 
(i) A purchase of ` 5,600 from M/s Ajeet & Co. was recorded in the accounts of 
M/s Amit & Co. as ` 6,500.  Day Book entry has also been passed incorrectly. 
(ii) A sale of ` 9,800 to M/s Bantu Bros. was recorded in M/s Bindu & Co.’s 
account as ` 8,900.  Day Book entry has also been incorrectly passed. 
2 FOUNDATION EXAMINATION: DECEMBER, 2023 
(iii) Discount allowed ` 560 (as per Cash Book) has been posted to Commission 
Account.  But the Cash Book total should be ` 650, because  discount allowed 
of ` 90 to M/s Sapna Bros. has been omitted. 
(iv) A cheque of ` 9,700 drawn by M/s Bantu Bros. has been dishonoured, but 
wrongly debited to M/s Bhakt & Co. 
Should the Trial Balance tally without rectification of errors? 
Capital or Revenue Receipt or Expenditure 
(b) Classify the following expenditures as capital or revenue receipt or capital or 
revenue expenditure: 
(i) Traveling expenses of the chief executive officer for trips abroad for purchase 
of capital assets. 
(ii) Amount spent on making a few more exists in a Cinema Hall to comply with 
Government orders. 
(iii) Insurance claim received on account of inventory damaged by fire. 
(iv) Amount paid for removal of stock to a new site. 
(v) Cost of repairs on second-hand car purchased to bring it into working 
condition. 
Cash Book  
4. (a) Prepare a Triple Column Cash Book from the following transactions and bring down 
the balance for the start of next month: 
2022   ` 
Sep. 1 Cash in hand 18,000 
 1 Cash at bank 72,000 
 2 Paid into bank 6,000 
 5 Bought furniture and issued cheque 9,000 
 8 Purchased goods for cash 3,000 
 12 Received cash from Mohan  5,880 
  Discount allowed to him 120 
 14 Cash sales 30,000 
 16 Paid to Amar by cheque 8,700 
  Discount received  300 
 19 Paid into Bank 3,000 
 23 Withdrawn from Bank for Private expenses 3,600 
 PAPER – 1 : PRINCIPLES AND PRACTICE OF ACCOUNTING 3 
 24 Received cheque from Parul 8,580 
  Allowed him discount  120 
 26 Deposited Parul’s cheque into Bank   
 28 Withdrew cash from Bank for Office use 12,000 
 30 Paid rent by cheque 4,800 
Rectification of Errors  
(b) Write out the Journal Entries to rectify the following errors, using a Suspense 
Account. 
(1) Goods of the value of `15,000 returned by Mr. X were entered in the Sales 
Day Book and posted therefrom to the credit of his account; 
(2) An amount of `22,500 entered in the Sales Returns Book, has been posted to 
the debit of Mr. Shiv, who returned the goods; 
(3) A sale of `60,000 made to Mr. Amit was correctly entered in the Sales Day 
Book but wrongly posted to the debit of Mr. Sumit as ` 6,000; 
(4) Bad Debts aggregating `45,000 were written off during the year in the Sales 
ledger but were not adjusted in the General Ledger; and  
(5) The total of “Discount Allowed” column in the Cash Book for the month of 
October, 2022 amounting to `37,500 was not posted. 
Bank Reconciliation Statement 
5. On 30th September, 2022, the bank account of Vikrant, according to the bank column of 
the Cash- Book, was overdrawn to the extent of ` 8,124. On the same date the bank 
statement showed a debit balance of ` 41,516 in favour of Vikrant. An examination of the 
Cash Book and Bank Statement reveals the following: 
1.  A cheque for ` 26,28,000 deposited on 29th September, 2022 was credited by the 
bank only on 3rd October, 2022 
2. A payment by cheque for ` 32,000 has been entered twice in the Cash Book. 
3. On 29th September, 2022, the bank credited an amount of ` 2,34,800 received from 
a customer of Vikrant, but the advice was not received by Vikrant until 1st October, 
2022. 
4. Bank charges amounting to ` 1,160 had not been entered in the Cash Book. 
5. On 6th September, 2022, the bank credited ` 40,000 to Vikrant in error. 
6. A bill of exchange for ` 2,80,000 was discounted by Vikrant with his bank. This bill 
was dishonoured on 28th September, 2022 but no entry had been made in the 
books of Vikrant. 
4 FOUNDATION EXAMINATION: DECEMBER, 2023 
7. Cheques issued upto 30th September, 2022 but not presented for payment upto 
that date totalled ` 26,52,000. 
 You are required: 
(a) to show the appropriate rectifications required in the Cash Book of Vikrant, to arrive 
at the correct balance on 30th September, 2022 and 
(b) to prepare a bank reconciliation statement as on that date. 
Valuation of Inventories 
6. Stock taking of ABC Stores for the year ended 31
st
 March, 2023 was completed by 10
th
 
April, 2023, the valuation of which showed a stock figure of ` 3,35,000 at cost as on the 
completion date.  After the end of the accounting year and till the date of completion of 
stock taking, sales for the next year were made for ` 13,750, profit margin being 33.33 
percent on cost.  Purchases for the next year included in the stock amounted to ` 18,000 
at cost less trade discount 10 percent.  During this period, goods were added to stock of 
the mark-up price of ` 600 in respect of sales returns.  After stock taking it was found 
that there were certain very old slow moving items costing ` 2,250 which should be taken 
at ` 1,050 to ensure disposal to an interested customer.  Due to heavy floods, certain 
goods costing ` 3,100 were received from the supplier beyond the delivery date of 
customer.  As a result, the customer refused to take delivery and net realizable value of 
the goods was estimated to be ` 2,500 on 31
st
 March, 2023.   
You are required to calculate the value of stock for inclusion in the final accounts for the 
year ended 31
st
 March, 2023. Closing stock is valued by ABC Stores on generally 
accepted accounting principles. 
Concept and Accounting of Depreciation  
7. A Firm purchased an old Machinery for ` 37,000 on 1
st
 January, 2019 and spent ` 3,000 
on its overhauling.  On 1
st
 July 2020, another machine was purchased for ` 10,000.  On 
1
st
 July 2021, the machinery which was purchased on 1st January 2019, was sold for  
` 28,000 and the same day a new machinery costing ` 25,000 was purchased.  On  
1
st
 July, 2022, the machine which was purchased on 1
st
 July, 2020 was sold for ` 2,000. 
 Depreciation is charged @ 10% per annum on straight line method.  The firm changed 
the method and adopted diminishing balance method with effect from 1
st
 January, 2020 
and the rate was increased to 15% per annum. The books are closed on 31
st
 December 
every year. 
 Prepare Machinery account for four years from 1
st
 January, 2019. 
Bills of Exchange 
8. Mr. Y accepted a bill for ` 40,000 drawn on him by Mr. X on 1
st
 August, 2022 for 3 
months.  This was for the amount which Y owed to X.  On the same date Mr. A got the 
bill discounted at his bank for ` 39,200. 
 PAPER – 1 : PRINCIPLES AND PRACTICE OF ACCOUNTING 5 
On the due date, Y approached X for renewal of the bill.  Mr. X agreed on condition that 
` 8,000 be paid immediately along with interest on the remaining amount at 12% p.a. for 
3 months and that for the remaining balance Y should accept a new bill for 3 months.  
These arrangements were carried through.  On 31
st
 December, 2022, Y became 
insolvent and his estate paid 40%. 
 You are required to prepare Journal Entries in the books of Mr. X 
Consignment 
9.  Rajesh of Noida consigned to Mahesh of Pushkar, goods to be sold at invoice price 
which represents 125% of cost. Mahesh is entitled to a commission of 10% on sales at 
invoice price and 25% of any excess realised over invoice price. The expenses on freight 
and insurance incurred by Rajesh were ` 15,000. The account sales received by Rajesh 
shows that Mahesh has effected sales amounting to ` 1,50,000 in respect of 75% of the 
consignment. His selling expenses to be reimbursed were ` 12,000. 10% of consignment 
goods of the value of ` 18,750 were destroyed in fire at the Pushkar godown. Mahesh 
remitted the balance in favour of Rajesh.  
 You are required to prepare consignment account in the books of Rajesh along with the 
necessary calculations. 
Sales of goods on approval or return basis  
10. Mr. Kamal sends goods to his customers on Sale or Return. The following transactions 
took place during the month of December 2022. 
December 2
nd
 - Sent goods to customers on sale or return basis at cost plus 25% -  
`2,40,000  
 December 10
th
 - Goods returned by customers ` 1,05,000  
 December 17
th
 - Received letters from customers for approval ` 1,05,000  
 December 23
rd
 - Goods with customers awaiting approval ` 45,000  
 Mr. Kamal records sale or return transactions as ordinary sales. You are required to pass 
the necessary Journal Entries in the books of Mr. Kamal assuming that the accounting 
year closes on 31
st
 Dec. 2022. 
Average Due Date  
11. Two Traders Amit and Sumit buy goods from one another, each allowing the others, one 
month's credit.  At the end of 3 months the accounts rendered are as follows: 
 Goods sold by Amit to Sumit 
(`) 
 Goods sold by Sumit to Amit 
(`) 
April,18 12,000 April, 23 10,600 
May, 15 14,000 May, 24 10,000 
June, 16 16,000