Mock Test: Principles and Practice of Accounting(Paper-1) - May 2023 | 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 
Question No. 1 is compulsory. 
Attempt 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 Maximum Marks: 100 
1. (a)  State with reasons, whether the following statements are true or false: 
(i)  The concepts of conservatism when applied to the Balance Sheet results in understatement 
of assets.  
(ii)  Amount spent for the construction of temporary huts, which were necessary for construction 
of the Cinema House and were demolished when the Cinema House was ready, is capital 
expenditure. 
(iii)  Current Account and Account Current are one and the same. 
(iv) In case the due date of a bill falls after the date of closing the account, the interest from the 
date of closing to such due date is known as Red-Ink interest. 
(v) On death of a partner, the firm gets surrender value of the joint life policy .  
(vi) Company A is incurring huge losses, the Board of Directors are of the opinion that incase of 
losses, there is no need to pay interest on debenture holders. 
(6 Statements x 2 Marks = 12 Marks) 
(b) Explain the objective of “Accounting Standards” in brief. (4 Marks) 
(c) From the following transactions, prepare the Purchases Returns Book of Sampat & Co., a furniture 
dealer and post them to ledger : 
Date Debit 
Note No. 
Particulars 
04.01.2023 501 Returned to Duggal Furniture’s, Jaipur – 5 Tables @ ` 5,000. 
09.01.2023  Chopra Furniture’s, Kota – accepted the return of Centre Tables 
(which were purchased for cash) – 5 Centre Tables @ ` 4,400. 
16.01.2023 502 Returned to Khanna Furniture’s, Bangalore –5 Dining Table @  
` 4,500. 
30.01.2023  Returned one Printer (being defective) @ ` 10,000 to B & Co. 
 (4 Marks) 
2. (a) Mangalam group had Property, Plant and Machinery with a book value of ` 1,00,00,000/- on 31st 
December, 2022. The balance in Revaluation Surplus on that date was ` 10,00,000/-. As part of 
regular practice of revaluing the assets on yearly basis, ano ther valuation was carried out on 31st 
December, 2022. Evaluate the impact of Revaluation, if the fair market value as a result of 
Revaluation done on 31st December, 2022 was (a) ` 1,05,00,000/- and (b)  85,00,000/-.You are 
required to explain with reason the accounting treatment with Journal Entries. 
© The Institute of Chartered Accountants of India
Page 2


1 
 
MOCK TEST PAPER 1 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
Question No. 1 is compulsory. 
Attempt 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 Maximum Marks: 100 
1. (a)  State with reasons, whether the following statements are true or false: 
(i)  The concepts of conservatism when applied to the Balance Sheet results in understatement 
of assets.  
(ii)  Amount spent for the construction of temporary huts, which were necessary for construction 
of the Cinema House and were demolished when the Cinema House was ready, is capital 
expenditure. 
(iii)  Current Account and Account Current are one and the same. 
(iv) In case the due date of a bill falls after the date of closing the account, the interest from the 
date of closing to such due date is known as Red-Ink interest. 
(v) On death of a partner, the firm gets surrender value of the joint life policy .  
(vi) Company A is incurring huge losses, the Board of Directors are of the opinion that incase of 
losses, there is no need to pay interest on debenture holders. 
(6 Statements x 2 Marks = 12 Marks) 
(b) Explain the objective of “Accounting Standards” in brief. (4 Marks) 
(c) From the following transactions, prepare the Purchases Returns Book of Sampat & Co., a furniture 
dealer and post them to ledger : 
Date Debit 
Note No. 
Particulars 
04.01.2023 501 Returned to Duggal Furniture’s, Jaipur – 5 Tables @ ` 5,000. 
09.01.2023  Chopra Furniture’s, Kota – accepted the return of Centre Tables 
(which were purchased for cash) – 5 Centre Tables @ ` 4,400. 
16.01.2023 502 Returned to Khanna Furniture’s, Bangalore –5 Dining Table @  
` 4,500. 
30.01.2023  Returned one Printer (being defective) @ ` 10,000 to B & Co. 
 (4 Marks) 
2. (a) Mangalam group had Property, Plant and Machinery with a book value of ` 1,00,00,000/- on 31st 
December, 2022. The balance in Revaluation Surplus on that date was ` 10,00,000/-. As part of 
regular practice of revaluing the assets on yearly basis, ano ther valuation was carried out on 31st 
December, 2022. Evaluate the impact of Revaluation, if the fair market value as a result of 
Revaluation done on 31st December, 2022 was (a) ` 1,05,00,000/- and (b)  85,00,000/-.You are 
required to explain with reason the accounting treatment with Journal Entries. 
© The Institute of Chartered Accountants of India
2 
(b)   Prepare a Bank Reconciliation statement for Krishna Traders as on 31
st
 March,2023.  
 The cash book of Krishna Traders shows a debit balance of ` 8,24,400 at bank as on  
31
st
 March,2023, but you find that it does not agree with the balance as per Pass Book. After 
checking you find the following:    
1.  On 12th March, 2023 the payment side of the Cash Book was under cast by ` 24,000/- 
2.  A cheque of  ` 1,70,000  issued on 20th March, 2023 was not taken in the bank column. 
3.  On 22nd March, 2023 the debit balance of ` 37,000 as on the previous day, was brought 
forwards as credit balance. 
4.  Out of the total cheques amounting to ` 84,000 issued in, the last week of March, 2023, 
cheques aggregating ` 57,000 were encashed in March, 2023. 
5.   Dividends of ` 70,000 collected by the Bank and Fire insurance premium of ` 40,000 paid by 
it were not recorded in the cash book. 
6.  One cheque issued to a Creditor of ` 2,58,000 was recorded twice in the Cash book. 
7.  A debtor Mr. A has deposited the Cheque for ` 64,000 into the bank directly in the month of 
March, 2023 without intimating to Krishna Traders and the same cheque was dishonored by 
the bank due to insufficient funds in the month of March itself. 
8.  A cheque from customer for ` 10,000 was deposited in bank on 28th March,2023 but was 
dishonored and advice received from bank on 3rd April, 2023. 
9. Bank paid credit card bill of ` 5,000 which is not recorded in cash book. 
10. Bank wrongly credited cheque of ` 50,000 of other customer in our account. 
11.  Bank credited cheque of ` 4,000 in savings account of proprietor of Krishna Traders instead 
of crediting cheque in current account of Krishna Traders. 
12. ` 1,000 discount received wrongly entered in bank column in cash book. 
13.  Bank debited charges ` 400 on 25
th
 March for which no intimation received till 31
st
 March. 
 (5 + 15 = 20 Marks) 
3. (a)  Kamal of Gwalior consigned 15,000 kgs of Sugar at ` 30 per kg to his agent Vimal at Delhi. He 
spent ` 5 per kg as freight and insurance for sending the Sugar at Delhi. On the way 100 kgs. of 
sugar was lost due to the leakage (which is to be treated as normal loss) and 400 kgs. of sugar 
was destroyed in transit. ` 9,000 was paid to consignor directly by the Insurance company as 
Insurance claim. Vimal sold 7,500 kgs. at ` 60 per kg. He spent ` 33,000 on advertisement and 
recurring expenses. 
You are required to calculate: 
(i) The amount of abnormal loss 
(ii) Value of stock at the end and 
(iii) Prepare Consignment account showing profit or loss on consignment, if Vimal is entitled to 
5% commission on sales. 
(b) Mr. Aryan owed ` 4,000 on 1st January, 2023 to Mr. Abram. The following transactions took place 
between them.  It is agreed between the parties that interest @ 10% p.a. is to be calculated on all 
transactions. 
 ` 
15 January, 2023 Mr. Abram sold goods to Mr. Aryan 2,230 
29 January, 2023 Mr. Abram bought goods from Mr. Aryan  1,200 
© The Institute of Chartered Accountants of India
Page 3


1 
 
MOCK TEST PAPER 1 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
Question No. 1 is compulsory. 
Attempt 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 Maximum Marks: 100 
1. (a)  State with reasons, whether the following statements are true or false: 
(i)  The concepts of conservatism when applied to the Balance Sheet results in understatement 
of assets.  
(ii)  Amount spent for the construction of temporary huts, which were necessary for construction 
of the Cinema House and were demolished when the Cinema House was ready, is capital 
expenditure. 
(iii)  Current Account and Account Current are one and the same. 
(iv) In case the due date of a bill falls after the date of closing the account, the interest from the 
date of closing to such due date is known as Red-Ink interest. 
(v) On death of a partner, the firm gets surrender value of the joint life policy .  
(vi) Company A is incurring huge losses, the Board of Directors are of the opinion that incase of 
losses, there is no need to pay interest on debenture holders. 
(6 Statements x 2 Marks = 12 Marks) 
(b) Explain the objective of “Accounting Standards” in brief. (4 Marks) 
(c) From the following transactions, prepare the Purchases Returns Book of Sampat & Co., a furniture 
dealer and post them to ledger : 
Date Debit 
Note No. 
Particulars 
04.01.2023 501 Returned to Duggal Furniture’s, Jaipur – 5 Tables @ ` 5,000. 
09.01.2023  Chopra Furniture’s, Kota – accepted the return of Centre Tables 
(which were purchased for cash) – 5 Centre Tables @ ` 4,400. 
16.01.2023 502 Returned to Khanna Furniture’s, Bangalore –5 Dining Table @  
` 4,500. 
30.01.2023  Returned one Printer (being defective) @ ` 10,000 to B & Co. 
 (4 Marks) 
2. (a) Mangalam group had Property, Plant and Machinery with a book value of ` 1,00,00,000/- on 31st 
December, 2022. The balance in Revaluation Surplus on that date was ` 10,00,000/-. As part of 
regular practice of revaluing the assets on yearly basis, ano ther valuation was carried out on 31st 
December, 2022. Evaluate the impact of Revaluation, if the fair market value as a result of 
Revaluation done on 31st December, 2022 was (a) ` 1,05,00,000/- and (b)  85,00,000/-.You are 
required to explain with reason the accounting treatment with Journal Entries. 
© The Institute of Chartered Accountants of India
2 
(b)   Prepare a Bank Reconciliation statement for Krishna Traders as on 31
st
 March,2023.  
 The cash book of Krishna Traders shows a debit balance of ` 8,24,400 at bank as on  
31
st
 March,2023, but you find that it does not agree with the balance as per Pass Book. After 
checking you find the following:    
1.  On 12th March, 2023 the payment side of the Cash Book was under cast by ` 24,000/- 
2.  A cheque of  ` 1,70,000  issued on 20th March, 2023 was not taken in the bank column. 
3.  On 22nd March, 2023 the debit balance of ` 37,000 as on the previous day, was brought 
forwards as credit balance. 
4.  Out of the total cheques amounting to ` 84,000 issued in, the last week of March, 2023, 
cheques aggregating ` 57,000 were encashed in March, 2023. 
5.   Dividends of ` 70,000 collected by the Bank and Fire insurance premium of ` 40,000 paid by 
it were not recorded in the cash book. 
6.  One cheque issued to a Creditor of ` 2,58,000 was recorded twice in the Cash book. 
7.  A debtor Mr. A has deposited the Cheque for ` 64,000 into the bank directly in the month of 
March, 2023 without intimating to Krishna Traders and the same cheque was dishonored by 
the bank due to insufficient funds in the month of March itself. 
8.  A cheque from customer for ` 10,000 was deposited in bank on 28th March,2023 but was 
dishonored and advice received from bank on 3rd April, 2023. 
9. Bank paid credit card bill of ` 5,000 which is not recorded in cash book. 
10. Bank wrongly credited cheque of ` 50,000 of other customer in our account. 
11.  Bank credited cheque of ` 4,000 in savings account of proprietor of Krishna Traders instead 
of crediting cheque in current account of Krishna Traders. 
12. ` 1,000 discount received wrongly entered in bank column in cash book. 
13.  Bank debited charges ` 400 on 25
th
 March for which no intimation received till 31
st
 March. 
 (5 + 15 = 20 Marks) 
3. (a)  Kamal of Gwalior consigned 15,000 kgs of Sugar at ` 30 per kg to his agent Vimal at Delhi. He 
spent ` 5 per kg as freight and insurance for sending the Sugar at Delhi. On the way 100 kgs. of 
sugar was lost due to the leakage (which is to be treated as normal loss) and 400 kgs. of sugar 
was destroyed in transit. ` 9,000 was paid to consignor directly by the Insurance company as 
Insurance claim. Vimal sold 7,500 kgs. at ` 60 per kg. He spent ` 33,000 on advertisement and 
recurring expenses. 
You are required to calculate: 
(i) The amount of abnormal loss 
(ii) Value of stock at the end and 
(iii) Prepare Consignment account showing profit or loss on consignment, if Vimal is entitled to 
5% commission on sales. 
(b) Mr. Aryan owed ` 4,000 on 1st January, 2023 to Mr. Abram. The following transactions took place 
between them.  It is agreed between the parties that interest @ 10% p.a. is to be calculated on all 
transactions. 
 ` 
15 January, 2023 Mr. Abram sold goods to Mr. Aryan 2,230 
29 January, 2023 Mr. Abram bought goods from Mr. Aryan  1,200 
© The Institute of Chartered Accountants of India
3 
10 February, 2023 Mr. Aryan paid cash to Mr. Abram 1,000 
13 March, 2023 Mr. Aryan accepted a bill drawn by Mr. Abram for one 
month 
2,000 
 They agree to settle their complete accounts by one single payment on 15th March, 2023.   
Prepare Mr. Aryan in Account Current with Mr. Abram and ascertain the amount to be paid.  Ignore 
days of grace. 
(c)  Mr. Gupta 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. Gupta records sale or return transactions as ordinary sales. You are required to pass the 
necessary Journal Entries in the books of Mr. Gupta assuming that the accounting year closes on 
31
st
 Dec. 2022. Considered that the transaction values are at involve price (including profit margin). 
 (10 + 5 + 5 = 20 Marks) 
4. (a)  Planting & Associates. is a partnership firm with partners Seed, Plant and Flower, sharing profits 
and losses in the ratio of 10:6:4. The balance sheet of the firm as at 31st March, 20 23 is as under: 
Liabilities  ` Assets ` 
Capitals:   Land 30,000 
 Seed 2,40,000  Buildings 6,00,000 
 Plant 60,000  Machinery 3,90,000 
 Flower 90,000 3,90,000 Furniture 1,29,000 
Reserves     Investments 36,000 
(un-appropriated profit)  60,000 Inventories 3,90,000 
Long Term Debt  9,00,000 Trade receivables 4,17,000 
Bank Overdraft  1,32,000    
Trade payables  5,10,000    
  19,92,000  19,92,000 
It was mutually agreed that Plant will retire from partnership and in his place Leaf will be admitted 
as a partner with effect from 1
st
 April, 2023. For this purpose, the following adjustments are to be 
made: 
(a) Goodwill is to be valued at `3 lakh but the same will not appear as an asset in the books of 
the reconstituted firm. 
(b) Buildings and Machinery are to be depreciated by 5% and 20% respectively. Investments are 
to be taken over by the retiring partner at `45,000. Provision of 20% is to be made on Trade 
receivables to cover doubtful debts. 
(c) In the reconstituted firm, the total capital will be ` 6 lakhs which will be contributed by Seed 
Flower and Leaf in their new profit sharing ratio, which is 2:2:1. 
(i) The surplus funds, if any, will be used for repaying bank overdraft. 
(ii) The amount due to retiring partner shall be transferred to his loan account.  
© The Institute of Chartered Accountants of India
Page 4


1 
 
MOCK TEST PAPER 1 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
Question No. 1 is compulsory. 
Attempt 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 Maximum Marks: 100 
1. (a)  State with reasons, whether the following statements are true or false: 
(i)  The concepts of conservatism when applied to the Balance Sheet results in understatement 
of assets.  
(ii)  Amount spent for the construction of temporary huts, which were necessary for construction 
of the Cinema House and were demolished when the Cinema House was ready, is capital 
expenditure. 
(iii)  Current Account and Account Current are one and the same. 
(iv) In case the due date of a bill falls after the date of closing the account, the interest from the 
date of closing to such due date is known as Red-Ink interest. 
(v) On death of a partner, the firm gets surrender value of the joint life policy .  
(vi) Company A is incurring huge losses, the Board of Directors are of the opinion that incase of 
losses, there is no need to pay interest on debenture holders. 
(6 Statements x 2 Marks = 12 Marks) 
(b) Explain the objective of “Accounting Standards” in brief. (4 Marks) 
(c) From the following transactions, prepare the Purchases Returns Book of Sampat & Co., a furniture 
dealer and post them to ledger : 
Date Debit 
Note No. 
Particulars 
04.01.2023 501 Returned to Duggal Furniture’s, Jaipur – 5 Tables @ ` 5,000. 
09.01.2023  Chopra Furniture’s, Kota – accepted the return of Centre Tables 
(which were purchased for cash) – 5 Centre Tables @ ` 4,400. 
16.01.2023 502 Returned to Khanna Furniture’s, Bangalore –5 Dining Table @  
` 4,500. 
30.01.2023  Returned one Printer (being defective) @ ` 10,000 to B & Co. 
 (4 Marks) 
2. (a) Mangalam group had Property, Plant and Machinery with a book value of ` 1,00,00,000/- on 31st 
December, 2022. The balance in Revaluation Surplus on that date was ` 10,00,000/-. As part of 
regular practice of revaluing the assets on yearly basis, ano ther valuation was carried out on 31st 
December, 2022. Evaluate the impact of Revaluation, if the fair market value as a result of 
Revaluation done on 31st December, 2022 was (a) ` 1,05,00,000/- and (b)  85,00,000/-.You are 
required to explain with reason the accounting treatment with Journal Entries. 
© The Institute of Chartered Accountants of India
2 
(b)   Prepare a Bank Reconciliation statement for Krishna Traders as on 31
st
 March,2023.  
 The cash book of Krishna Traders shows a debit balance of ` 8,24,400 at bank as on  
31
st
 March,2023, but you find that it does not agree with the balance as per Pass Book. After 
checking you find the following:    
1.  On 12th March, 2023 the payment side of the Cash Book was under cast by ` 24,000/- 
2.  A cheque of  ` 1,70,000  issued on 20th March, 2023 was not taken in the bank column. 
3.  On 22nd March, 2023 the debit balance of ` 37,000 as on the previous day, was brought 
forwards as credit balance. 
4.  Out of the total cheques amounting to ` 84,000 issued in, the last week of March, 2023, 
cheques aggregating ` 57,000 were encashed in March, 2023. 
5.   Dividends of ` 70,000 collected by the Bank and Fire insurance premium of ` 40,000 paid by 
it were not recorded in the cash book. 
6.  One cheque issued to a Creditor of ` 2,58,000 was recorded twice in the Cash book. 
7.  A debtor Mr. A has deposited the Cheque for ` 64,000 into the bank directly in the month of 
March, 2023 without intimating to Krishna Traders and the same cheque was dishonored by 
the bank due to insufficient funds in the month of March itself. 
8.  A cheque from customer for ` 10,000 was deposited in bank on 28th March,2023 but was 
dishonored and advice received from bank on 3rd April, 2023. 
9. Bank paid credit card bill of ` 5,000 which is not recorded in cash book. 
10. Bank wrongly credited cheque of ` 50,000 of other customer in our account. 
11.  Bank credited cheque of ` 4,000 in savings account of proprietor of Krishna Traders instead 
of crediting cheque in current account of Krishna Traders. 
12. ` 1,000 discount received wrongly entered in bank column in cash book. 
13.  Bank debited charges ` 400 on 25
th
 March for which no intimation received till 31
st
 March. 
 (5 + 15 = 20 Marks) 
3. (a)  Kamal of Gwalior consigned 15,000 kgs of Sugar at ` 30 per kg to his agent Vimal at Delhi. He 
spent ` 5 per kg as freight and insurance for sending the Sugar at Delhi. On the way 100 kgs. of 
sugar was lost due to the leakage (which is to be treated as normal loss) and 400 kgs. of sugar 
was destroyed in transit. ` 9,000 was paid to consignor directly by the Insurance company as 
Insurance claim. Vimal sold 7,500 kgs. at ` 60 per kg. He spent ` 33,000 on advertisement and 
recurring expenses. 
You are required to calculate: 
(i) The amount of abnormal loss 
(ii) Value of stock at the end and 
(iii) Prepare Consignment account showing profit or loss on consignment, if Vimal is entitled to 
5% commission on sales. 
(b) Mr. Aryan owed ` 4,000 on 1st January, 2023 to Mr. Abram. The following transactions took place 
between them.  It is agreed between the parties that interest @ 10% p.a. is to be calculated on all 
transactions. 
 ` 
15 January, 2023 Mr. Abram sold goods to Mr. Aryan 2,230 
29 January, 2023 Mr. Abram bought goods from Mr. Aryan  1,200 
© The Institute of Chartered Accountants of India
3 
10 February, 2023 Mr. Aryan paid cash to Mr. Abram 1,000 
13 March, 2023 Mr. Aryan accepted a bill drawn by Mr. Abram for one 
month 
2,000 
 They agree to settle their complete accounts by one single payment on 15th March, 2023.   
Prepare Mr. Aryan in Account Current with Mr. Abram and ascertain the amount to be paid.  Ignore 
days of grace. 
(c)  Mr. Gupta 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. Gupta records sale or return transactions as ordinary sales. You are required to pass the 
necessary Journal Entries in the books of Mr. Gupta assuming that the accounting year closes on 
31
st
 Dec. 2022. Considered that the transaction values are at involve price (including profit margin). 
 (10 + 5 + 5 = 20 Marks) 
4. (a)  Planting & Associates. is a partnership firm with partners Seed, Plant and Flower, sharing profits 
and losses in the ratio of 10:6:4. The balance sheet of the firm as at 31st March, 20 23 is as under: 
Liabilities  ` Assets ` 
Capitals:   Land 30,000 
 Seed 2,40,000  Buildings 6,00,000 
 Plant 60,000  Machinery 3,90,000 
 Flower 90,000 3,90,000 Furniture 1,29,000 
Reserves     Investments 36,000 
(un-appropriated profit)  60,000 Inventories 3,90,000 
Long Term Debt  9,00,000 Trade receivables 4,17,000 
Bank Overdraft  1,32,000    
Trade payables  5,10,000    
  19,92,000  19,92,000 
It was mutually agreed that Plant will retire from partnership and in his place Leaf will be admitted 
as a partner with effect from 1
st
 April, 2023. For this purpose, the following adjustments are to be 
made: 
(a) Goodwill is to be valued at `3 lakh but the same will not appear as an asset in the books of 
the reconstituted firm. 
(b) Buildings and Machinery are to be depreciated by 5% and 20% respectively. Investments are 
to be taken over by the retiring partner at `45,000. Provision of 20% is to be made on Trade 
receivables to cover doubtful debts. 
(c) In the reconstituted firm, the total capital will be ` 6 lakhs which will be contributed by Seed 
Flower and Leaf in their new profit sharing ratio, which is 2:2:1. 
(i) The surplus funds, if any, will be used for repaying bank overdraft. 
(ii) The amount due to retiring partner shall be transferred to his loan account.  
© The Institute of Chartered Accountants of India
4 
You are required to prepare  
(a) Revaluation account; 
(b) Partners’ capital accounts; and   
(c) Bank account;         
(b)  The following are the balances as at 31
st
  March, 2023 extracted from the books of Mr. Shyam. 
 `  ` 
Plant and Machinery 39,100 Bad debts recovered 900 
Furniture and Fittings 20,500 Salaries 45,100 
Bank Overdraft 1,60,000 Salaries payable 4,900 
Capital Account 1,30,000 Prepaid rent 600 
Drawings 16,000 Rent 8,600 
Purchases 3,20,000 Carriage inward 2,250 
Opening Stock 64,500 Carriage outward 2,700 
Wages 24,330 Sales 4,30,600 
Provision for doubtful debts 6,400 Advertisement Expenses  6,700 
Provision for Discount on  Printing and Stationery 2,500 
debtors 2,750 Cash in hand 2,900 
Sundry Debtors 2,40,000 Cash at bank 6,250 
Sundry Creditors 95,000 Office Expenses 20,320 
Bad debts 2,200 Interest paid on loan 6,000 
 Additional Information: 
1. Purchases include sales return of `5,150 and sales include purchases return of ` 3,450.  
2. Goods withdrawn by Mr. Shyam for own consumption ` 7,000 included in purchases. 
3. Create a provision for doubtful debts @ 5% and provision for discount on debtors @ 2.5%. 
4. Free samples distributed for publicity costing ` 1,650. 
5. Wages paid in the month of April for installation of plant and machinery amounting to ` 900 
were included in wages account. 
6. Bank overdraft is secured against hypothecation of stock.  Bank overdraft outstanding as on 
31.3.2023 has been considered as 80% of real value of stock (deducting 20% as margin) and 
after adjusting the marginal value 80% of the same has been allowed to draw as an overdraft. 
7. Depreciation is to be provided on plant and machinery @ 15% p.a. and on furniture and fittings 
@ 10% p.a. 
  Prepare a Trading and Profit and Loss Account for the year ended 31
st
 March, 2023 and a Balance 
Sheet as on that date.  Also show the rectification entries.  (8 + 12 = 20 Marks) 
5. (a) Roxy Library Society showed the following position on 31
st
 March, 2022: 
Balance Sheet as on 31
st
 March, 2022 
Liabilities `   Assets `   
Capital fund 31,72,000 Electrical fittings 6,00,000 
Expenses payable 28,000 Furniture 2,00,000 
© The Institute of Chartered Accountants of India
Page 5


1 
 
MOCK TEST PAPER 1 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF ACCOUNTING 
Question No. 1 is compulsory. 
Attempt 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 Maximum Marks: 100 
1. (a)  State with reasons, whether the following statements are true or false: 
(i)  The concepts of conservatism when applied to the Balance Sheet results in understatement 
of assets.  
(ii)  Amount spent for the construction of temporary huts, which were necessary for construction 
of the Cinema House and were demolished when the Cinema House was ready, is capital 
expenditure. 
(iii)  Current Account and Account Current are one and the same. 
(iv) In case the due date of a bill falls after the date of closing the account, the interest from the 
date of closing to such due date is known as Red-Ink interest. 
(v) On death of a partner, the firm gets surrender value of the joint life policy .  
(vi) Company A is incurring huge losses, the Board of Directors are of the opinion that incase of 
losses, there is no need to pay interest on debenture holders. 
(6 Statements x 2 Marks = 12 Marks) 
(b) Explain the objective of “Accounting Standards” in brief. (4 Marks) 
(c) From the following transactions, prepare the Purchases Returns Book of Sampat & Co., a furniture 
dealer and post them to ledger : 
Date Debit 
Note No. 
Particulars 
04.01.2023 501 Returned to Duggal Furniture’s, Jaipur – 5 Tables @ ` 5,000. 
09.01.2023  Chopra Furniture’s, Kota – accepted the return of Centre Tables 
(which were purchased for cash) – 5 Centre Tables @ ` 4,400. 
16.01.2023 502 Returned to Khanna Furniture’s, Bangalore –5 Dining Table @  
` 4,500. 
30.01.2023  Returned one Printer (being defective) @ ` 10,000 to B & Co. 
 (4 Marks) 
2. (a) Mangalam group had Property, Plant and Machinery with a book value of ` 1,00,00,000/- on 31st 
December, 2022. The balance in Revaluation Surplus on that date was ` 10,00,000/-. As part of 
regular practice of revaluing the assets on yearly basis, ano ther valuation was carried out on 31st 
December, 2022. Evaluate the impact of Revaluation, if the fair market value as a result of 
Revaluation done on 31st December, 2022 was (a) ` 1,05,00,000/- and (b)  85,00,000/-.You are 
required to explain with reason the accounting treatment with Journal Entries. 
© The Institute of Chartered Accountants of India
2 
(b)   Prepare a Bank Reconciliation statement for Krishna Traders as on 31
st
 March,2023.  
 The cash book of Krishna Traders shows a debit balance of ` 8,24,400 at bank as on  
31
st
 March,2023, but you find that it does not agree with the balance as per Pass Book. After 
checking you find the following:    
1.  On 12th March, 2023 the payment side of the Cash Book was under cast by ` 24,000/- 
2.  A cheque of  ` 1,70,000  issued on 20th March, 2023 was not taken in the bank column. 
3.  On 22nd March, 2023 the debit balance of ` 37,000 as on the previous day, was brought 
forwards as credit balance. 
4.  Out of the total cheques amounting to ` 84,000 issued in, the last week of March, 2023, 
cheques aggregating ` 57,000 were encashed in March, 2023. 
5.   Dividends of ` 70,000 collected by the Bank and Fire insurance premium of ` 40,000 paid by 
it were not recorded in the cash book. 
6.  One cheque issued to a Creditor of ` 2,58,000 was recorded twice in the Cash book. 
7.  A debtor Mr. A has deposited the Cheque for ` 64,000 into the bank directly in the month of 
March, 2023 without intimating to Krishna Traders and the same cheque was dishonored by 
the bank due to insufficient funds in the month of March itself. 
8.  A cheque from customer for ` 10,000 was deposited in bank on 28th March,2023 but was 
dishonored and advice received from bank on 3rd April, 2023. 
9. Bank paid credit card bill of ` 5,000 which is not recorded in cash book. 
10. Bank wrongly credited cheque of ` 50,000 of other customer in our account. 
11.  Bank credited cheque of ` 4,000 in savings account of proprietor of Krishna Traders instead 
of crediting cheque in current account of Krishna Traders. 
12. ` 1,000 discount received wrongly entered in bank column in cash book. 
13.  Bank debited charges ` 400 on 25
th
 March for which no intimation received till 31
st
 March. 
 (5 + 15 = 20 Marks) 
3. (a)  Kamal of Gwalior consigned 15,000 kgs of Sugar at ` 30 per kg to his agent Vimal at Delhi. He 
spent ` 5 per kg as freight and insurance for sending the Sugar at Delhi. On the way 100 kgs. of 
sugar was lost due to the leakage (which is to be treated as normal loss) and 400 kgs. of sugar 
was destroyed in transit. ` 9,000 was paid to consignor directly by the Insurance company as 
Insurance claim. Vimal sold 7,500 kgs. at ` 60 per kg. He spent ` 33,000 on advertisement and 
recurring expenses. 
You are required to calculate: 
(i) The amount of abnormal loss 
(ii) Value of stock at the end and 
(iii) Prepare Consignment account showing profit or loss on consignment, if Vimal is entitled to 
5% commission on sales. 
(b) Mr. Aryan owed ` 4,000 on 1st January, 2023 to Mr. Abram. The following transactions took place 
between them.  It is agreed between the parties that interest @ 10% p.a. is to be calculated on all 
transactions. 
 ` 
15 January, 2023 Mr. Abram sold goods to Mr. Aryan 2,230 
29 January, 2023 Mr. Abram bought goods from Mr. Aryan  1,200 
© The Institute of Chartered Accountants of India
3 
10 February, 2023 Mr. Aryan paid cash to Mr. Abram 1,000 
13 March, 2023 Mr. Aryan accepted a bill drawn by Mr. Abram for one 
month 
2,000 
 They agree to settle their complete accounts by one single payment on 15th March, 2023.   
Prepare Mr. Aryan in Account Current with Mr. Abram and ascertain the amount to be paid.  Ignore 
days of grace. 
(c)  Mr. Gupta 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. Gupta records sale or return transactions as ordinary sales. You are required to pass the 
necessary Journal Entries in the books of Mr. Gupta assuming that the accounting year closes on 
31
st
 Dec. 2022. Considered that the transaction values are at involve price (including profit margin). 
 (10 + 5 + 5 = 20 Marks) 
4. (a)  Planting & Associates. is a partnership firm with partners Seed, Plant and Flower, sharing profits 
and losses in the ratio of 10:6:4. The balance sheet of the firm as at 31st March, 20 23 is as under: 
Liabilities  ` Assets ` 
Capitals:   Land 30,000 
 Seed 2,40,000  Buildings 6,00,000 
 Plant 60,000  Machinery 3,90,000 
 Flower 90,000 3,90,000 Furniture 1,29,000 
Reserves     Investments 36,000 
(un-appropriated profit)  60,000 Inventories 3,90,000 
Long Term Debt  9,00,000 Trade receivables 4,17,000 
Bank Overdraft  1,32,000    
Trade payables  5,10,000    
  19,92,000  19,92,000 
It was mutually agreed that Plant will retire from partnership and in his place Leaf will be admitted 
as a partner with effect from 1
st
 April, 2023. For this purpose, the following adjustments are to be 
made: 
(a) Goodwill is to be valued at `3 lakh but the same will not appear as an asset in the books of 
the reconstituted firm. 
(b) Buildings and Machinery are to be depreciated by 5% and 20% respectively. Investments are 
to be taken over by the retiring partner at `45,000. Provision of 20% is to be made on Trade 
receivables to cover doubtful debts. 
(c) In the reconstituted firm, the total capital will be ` 6 lakhs which will be contributed by Seed 
Flower and Leaf in their new profit sharing ratio, which is 2:2:1. 
(i) The surplus funds, if any, will be used for repaying bank overdraft. 
(ii) The amount due to retiring partner shall be transferred to his loan account.  
© The Institute of Chartered Accountants of India
4 
You are required to prepare  
(a) Revaluation account; 
(b) Partners’ capital accounts; and   
(c) Bank account;         
(b)  The following are the balances as at 31
st
  March, 2023 extracted from the books of Mr. Shyam. 
 `  ` 
Plant and Machinery 39,100 Bad debts recovered 900 
Furniture and Fittings 20,500 Salaries 45,100 
Bank Overdraft 1,60,000 Salaries payable 4,900 
Capital Account 1,30,000 Prepaid rent 600 
Drawings 16,000 Rent 8,600 
Purchases 3,20,000 Carriage inward 2,250 
Opening Stock 64,500 Carriage outward 2,700 
Wages 24,330 Sales 4,30,600 
Provision for doubtful debts 6,400 Advertisement Expenses  6,700 
Provision for Discount on  Printing and Stationery 2,500 
debtors 2,750 Cash in hand 2,900 
Sundry Debtors 2,40,000 Cash at bank 6,250 
Sundry Creditors 95,000 Office Expenses 20,320 
Bad debts 2,200 Interest paid on loan 6,000 
 Additional Information: 
1. Purchases include sales return of `5,150 and sales include purchases return of ` 3,450.  
2. Goods withdrawn by Mr. Shyam for own consumption ` 7,000 included in purchases. 
3. Create a provision for doubtful debts @ 5% and provision for discount on debtors @ 2.5%. 
4. Free samples distributed for publicity costing ` 1,650. 
5. Wages paid in the month of April for installation of plant and machinery amounting to ` 900 
were included in wages account. 
6. Bank overdraft is secured against hypothecation of stock.  Bank overdraft outstanding as on 
31.3.2023 has been considered as 80% of real value of stock (deducting 20% as margin) and 
after adjusting the marginal value 80% of the same has been allowed to draw as an overdraft. 
7. Depreciation is to be provided on plant and machinery @ 15% p.a. and on furniture and fittings 
@ 10% p.a. 
  Prepare a Trading and Profit and Loss Account for the year ended 31
st
 March, 2023 and a Balance 
Sheet as on that date.  Also show the rectification entries.  (8 + 12 = 20 Marks) 
5. (a) Roxy Library Society showed the following position on 31
st
 March, 2022: 
Balance Sheet as on 31
st
 March, 2022 
Liabilities `   Assets `   
Capital fund 31,72,000 Electrical fittings 6,00,000 
Expenses payable 28,000 Furniture 2,00,000 
© The Institute of Chartered Accountants of India
5 
  Books 16,00,000 
  Investment in securities 6,00,000 
  Cash at bank 1,00,000 
   Cash in hand    1,00,000 
 32,00,000  32,00,000 
The receipts and payment account for the year ended on 31
st
 March, 2023 is given below: 
 `    `   
To Balance b/d  By Electric charges 28,800 
Cash at bank      1,00,000  By Postage and stationary 20,000 
Cash in hand      1,00,000 2,00,000 By Telephone charges 20,000 
To Entrance fee 1,20,000 By Books purchased 2,40,000 
To Membership subscription 8,00,000 By Outstanding expenses paid 28,000 
To Sale proceeds of old papers  6,000 By Rent  3,52,000 
To Hire of lecture hall 80,000 By Investment in securities 1,60,000 
To Interest on securities 32,000 By Salaries 2,64,000 
  By Balance c/d  
  Cash at bank 80,000 
   Cash in hand      45,200 
 12,38,000  
12,38,000 
 You are required to prepare Income and Expenditure account for the year ended 31
st
 March, 2023 
after making the following adjustments: 
 Membership subscription included ` 40,000 received in advance. 
 Provide for outstanding rent ` 16,000 and salaries ` 12,000. 
 Books to be depreciated @ 10% including additions.  Electrical fittings and furniture ar e also to be 
depreciated at the same rate. 
 75% of the entrance fees is to be capitalized. 
 Interest on securities is to be calculated @ 5% p.a. including purchases made on 1.10.20 22 for  
` 1,60,000. 
(b)   A trader prepared his accounts on 31st March, each year.  Due to some unavoidable reasons, no 
stock taking could be possible till 15
th
 April, 2023 on which date the total cost of goods in his 
godown came to ` 50,000.  The following facts were established between 31
st
 March and  
15
th
 April, 2023. 
(i) Sales ` 41,000 (including cash sales ` 10,000) 
(ii) Purchases ` 5,034 (including cash purchases ` 1,990) 
(iii)   Sales Return ` 1,000. 
© The Institute of Chartered Accountants of India