Accounting Past Year Answer Key (Paper-1) - September 2024 | Accounting for CA Foundation PDF Download

 Page 1


PAPER – 1: 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. 
Question 1 
(a)  State with reasons, whether the following statements are True or False: 
(i) Nominal Accounts are balanced at the end of the Accounting Year. 
(ii)  Overhaul Expenses of a second-hand machinery purchased are Revenue 
Expenditure. 
(iii)  Valuation of inventory at cost or net realizable value is based on 
Principle of Conservatism. 
(iv)  A Promissory Note can be made payable to the Bearer. 
(v)  The Receipts and payment account for a non-profit organization follows 
the accrual concept of accounting. 
(vi)  Legal heirs of a deceased partner are entitled to his capital account 
balance only. (6 x 2=12 Marks) 
(b)  Differentiate between Book-keeping and Accounting.  (4 Marks) 
(c)  Pass the necessary journal entries to rectify the following errors, using a 
Suspense Account: 
(i)  Goods of the value of ` 500 returned by Mr. A were entered in the Sales 
Day Book and posted there from to the credit of his account; 
(ii)  ` 250 entered in the Sales Returns Book, has been posted to the debit of 
Mr. R, who returned the goods; 
(iii)  A sale of ` 700 made to Mr. Q was correctly entered in the Sales Day 
Book but wrongly posted to the debit of Mr. S as ` 70; 
Page 2


PAPER – 1: 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. 
Question 1 
(a)  State with reasons, whether the following statements are True or False: 
(i) Nominal Accounts are balanced at the end of the Accounting Year. 
(ii)  Overhaul Expenses of a second-hand machinery purchased are Revenue 
Expenditure. 
(iii)  Valuation of inventory at cost or net realizable value is based on 
Principle of Conservatism. 
(iv)  A Promissory Note can be made payable to the Bearer. 
(v)  The Receipts and payment account for a non-profit organization follows 
the accrual concept of accounting. 
(vi)  Legal heirs of a deceased partner are entitled to his capital account 
balance only. (6 x 2=12 Marks) 
(b)  Differentiate between Book-keeping and Accounting.  (4 Marks) 
(c)  Pass the necessary journal entries to rectify the following errors, using a 
Suspense Account: 
(i)  Goods of the value of ` 500 returned by Mr. A were entered in the Sales 
Day Book and posted there from to the credit of his account; 
(ii)  ` 250 entered in the Sales Returns Book, has been posted to the debit of 
Mr. R, who returned the goods; 
(iii)  A sale of ` 700 made to Mr. Q was correctly entered in the Sales Day 
Book but wrongly posted to the debit of Mr. S as ` 70; 
 FOUNDATION EXAMINATION: SEPTEMBER 2024 
 
 
SUGGESTED ANSWER 
2 
(iv)  The total of "Discount allowed" Column in the Cash Book for September 
amounting to ` 350 was not posted.  (4 Marks) 
Answer  
(a) 1. False: Nominal Accounts are not balanced. The balances at the end are 
transferred to Trading/ Profit & Loss A/c. 
2. False: Overhaul expenses are incurred to put second-hand machinery 
in working condition to derive endurable long-term advantage. So, it 
should be capitalized. 
3. True: The conservatism concept states that one shall not account for 
anticipated profits but shall provide all prospective losses. Valuing 
inventory at cost or net realisable value whichever is less, therefore is 
based on principle of conservatism. 
4. False: A promissory note should not be made payable to the bearer. 
The payee must be to a certain person. 
5. False: It depicts the cash system of accounting rather than the accrual 
system, as the cash receipts and payments pertaining to any year are 
entered in the Receipts and payments account. The principle of accrual 
is not followed with regard to the receipts and payments account of a 
non-profit organization. 
6. False: Legal heirs of a deceased partner are entitled to all the dues of 
deceased partner. 
(b) The difference between Book keeping and Accounting are as follows: 
S.N. Book-keeping Accounting 
1. It is a process concerned 
with recording of 
transactions. 
It is a process concerned with 
summarising of the recorded 
transactions. 
2. It constitutes as a base for 
accounting. 
It is considered as a language of 
the business. 
3. Financial statements do not 
form part of this process. 
Financial statements are prepared 
in this process on the basis of 
book-keeping records. 
Page 3


PAPER – 1: 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. 
Question 1 
(a)  State with reasons, whether the following statements are True or False: 
(i) Nominal Accounts are balanced at the end of the Accounting Year. 
(ii)  Overhaul Expenses of a second-hand machinery purchased are Revenue 
Expenditure. 
(iii)  Valuation of inventory at cost or net realizable value is based on 
Principle of Conservatism. 
(iv)  A Promissory Note can be made payable to the Bearer. 
(v)  The Receipts and payment account for a non-profit organization follows 
the accrual concept of accounting. 
(vi)  Legal heirs of a deceased partner are entitled to his capital account 
balance only. (6 x 2=12 Marks) 
(b)  Differentiate between Book-keeping and Accounting.  (4 Marks) 
(c)  Pass the necessary journal entries to rectify the following errors, using a 
Suspense Account: 
(i)  Goods of the value of ` 500 returned by Mr. A were entered in the Sales 
Day Book and posted there from to the credit of his account; 
(ii)  ` 250 entered in the Sales Returns Book, has been posted to the debit of 
Mr. R, who returned the goods; 
(iii)  A sale of ` 700 made to Mr. Q was correctly entered in the Sales Day 
Book but wrongly posted to the debit of Mr. S as ` 70; 
 FOUNDATION EXAMINATION: SEPTEMBER 2024 
 
 
SUGGESTED ANSWER 
2 
(iv)  The total of "Discount allowed" Column in the Cash Book for September 
amounting to ` 350 was not posted.  (4 Marks) 
Answer  
(a) 1. False: Nominal Accounts are not balanced. The balances at the end are 
transferred to Trading/ Profit & Loss A/c. 
2. False: Overhaul expenses are incurred to put second-hand machinery 
in working condition to derive endurable long-term advantage. So, it 
should be capitalized. 
3. True: The conservatism concept states that one shall not account for 
anticipated profits but shall provide all prospective losses. Valuing 
inventory at cost or net realisable value whichever is less, therefore is 
based on principle of conservatism. 
4. False: A promissory note should not be made payable to the bearer. 
The payee must be to a certain person. 
5. False: It depicts the cash system of accounting rather than the accrual 
system, as the cash receipts and payments pertaining to any year are 
entered in the Receipts and payments account. The principle of accrual 
is not followed with regard to the receipts and payments account of a 
non-profit organization. 
6. False: Legal heirs of a deceased partner are entitled to all the dues of 
deceased partner. 
(b) The difference between Book keeping and Accounting are as follows: 
S.N. Book-keeping Accounting 
1. It is a process concerned 
with recording of 
transactions. 
It is a process concerned with 
summarising of the recorded 
transactions. 
2. It constitutes as a base for 
accounting. 
It is considered as a language of 
the business. 
3. Financial statements do not 
form part of this process. 
Financial statements are prepared 
in this process on the basis of 
book-keeping records. 
 ACCOUNTING 
 
SUGGESTED ANSWER 
3 
4. Managerial decisions 
cannot be taken with the 
help of these records. 
Management takes decisions on 
the basis of these records. 
5. There is no sub-field of 
book keeping. 
It has several sub-fields like 
financial accounting, 
management accounting etc. 
6. Financial position of the 
business cannot be 
ascertained through book-
keeping records. 
Financial position of the business 
is ascertained on the basis of the 
accounting reports. 
(c)         Journal 
 Particulars  L.F. Dr. 
`
 
Cr. 
`
 
(1) Sales A/c Dr.  500  
 Sales Returns A/c Dr.  500  
  To Suspense A/c    1,000 
 (Being the value of goods 
returned by Mr. A wrongly posted 
to Sales and omission of debit to 
Sales Returns Account, now 
rectified) 
    
(2) Suspense A/c Dr.  500  
  To Mr. R     500 
 (Being wrong debit to Mr. R for 
goods returned by him, now 
rectified) 
    
(3) Mr. Q  Dr.  700  
  To Mr. S     70 
  To Suspense A/c    630 
 (Being omission of debit to Mr. Q 
and wrong credit to Mr. S for sale 
of 
`
 700, now rectified)  
    
Page 4


PAPER – 1: 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. 
Question 1 
(a)  State with reasons, whether the following statements are True or False: 
(i) Nominal Accounts are balanced at the end of the Accounting Year. 
(ii)  Overhaul Expenses of a second-hand machinery purchased are Revenue 
Expenditure. 
(iii)  Valuation of inventory at cost or net realizable value is based on 
Principle of Conservatism. 
(iv)  A Promissory Note can be made payable to the Bearer. 
(v)  The Receipts and payment account for a non-profit organization follows 
the accrual concept of accounting. 
(vi)  Legal heirs of a deceased partner are entitled to his capital account 
balance only. (6 x 2=12 Marks) 
(b)  Differentiate between Book-keeping and Accounting.  (4 Marks) 
(c)  Pass the necessary journal entries to rectify the following errors, using a 
Suspense Account: 
(i)  Goods of the value of ` 500 returned by Mr. A were entered in the Sales 
Day Book and posted there from to the credit of his account; 
(ii)  ` 250 entered in the Sales Returns Book, has been posted to the debit of 
Mr. R, who returned the goods; 
(iii)  A sale of ` 700 made to Mr. Q was correctly entered in the Sales Day 
Book but wrongly posted to the debit of Mr. S as ` 70; 
 FOUNDATION EXAMINATION: SEPTEMBER 2024 
 
 
SUGGESTED ANSWER 
2 
(iv)  The total of "Discount allowed" Column in the Cash Book for September 
amounting to ` 350 was not posted.  (4 Marks) 
Answer  
(a) 1. False: Nominal Accounts are not balanced. The balances at the end are 
transferred to Trading/ Profit & Loss A/c. 
2. False: Overhaul expenses are incurred to put second-hand machinery 
in working condition to derive endurable long-term advantage. So, it 
should be capitalized. 
3. True: The conservatism concept states that one shall not account for 
anticipated profits but shall provide all prospective losses. Valuing 
inventory at cost or net realisable value whichever is less, therefore is 
based on principle of conservatism. 
4. False: A promissory note should not be made payable to the bearer. 
The payee must be to a certain person. 
5. False: It depicts the cash system of accounting rather than the accrual 
system, as the cash receipts and payments pertaining to any year are 
entered in the Receipts and payments account. The principle of accrual 
is not followed with regard to the receipts and payments account of a 
non-profit organization. 
6. False: Legal heirs of a deceased partner are entitled to all the dues of 
deceased partner. 
(b) The difference between Book keeping and Accounting are as follows: 
S.N. Book-keeping Accounting 
1. It is a process concerned 
with recording of 
transactions. 
It is a process concerned with 
summarising of the recorded 
transactions. 
2. It constitutes as a base for 
accounting. 
It is considered as a language of 
the business. 
3. Financial statements do not 
form part of this process. 
Financial statements are prepared 
in this process on the basis of 
book-keeping records. 
 ACCOUNTING 
 
SUGGESTED ANSWER 
3 
4. Managerial decisions 
cannot be taken with the 
help of these records. 
Management takes decisions on 
the basis of these records. 
5. There is no sub-field of 
book keeping. 
It has several sub-fields like 
financial accounting, 
management accounting etc. 
6. Financial position of the 
business cannot be 
ascertained through book-
keeping records. 
Financial position of the business 
is ascertained on the basis of the 
accounting reports. 
(c)         Journal 
 Particulars  L.F. Dr. 
`
 
Cr. 
`
 
(1) Sales A/c Dr.  500  
 Sales Returns A/c Dr.  500  
  To Suspense A/c    1,000 
 (Being the value of goods 
returned by Mr. A wrongly posted 
to Sales and omission of debit to 
Sales Returns Account, now 
rectified) 
    
(2) Suspense A/c Dr.  500  
  To Mr. R     500 
 (Being wrong debit to Mr. R for 
goods returned by him, now 
rectified) 
    
(3) Mr. Q  Dr.  700  
  To Mr. S     70 
  To Suspense A/c    630 
 (Being omission of debit to Mr. Q 
and wrong credit to Mr. S for sale 
of 
`
 700, now rectified)  
    
 FOUNDATION EXAMINATION: SEPTEMBER 2024 
 
 
SUGGESTED ANSWER 
4 
(4) Discount A/c Dr.  350  
  To Suspense A/c    350 
 (Being the total of Discount 
allowed during September not 
posted from the Cash Book; error 
now rectified) 
    
Question 2 
(a)  The cash book of Hari showed a debit balance of ` 1,36,800 as on 31.12.2023 
which was in disagreement with balance as per pass book. Following 
discrepancies were noticed: 
(i)  Dividend of ` 18,000 was deposited in the bank of which Hari had no 
information 
(ii)  Cheque was issued to Suresh of ` 14,780 on 18.12.2023 which was 
recorded in cash book as ` 14,870. 
(iii) Cheques totalling of ` 55,000 were deposited into bank on 30.12.2023 
which were not cleared until 31.12.2023. 
(iv) Mediclaim premium of ` 14,160 was paid as per the standing instruction 
of Hari which was not recorded in cash book. 
(v) Goods amounting ` 1,60,000 were sold to Ajay in November 2023. He 
deposited cheque on 15.12.2023 after deducting 4% cash discount. This 
entry was missed while preparing cash book. 
(vi) Bank charges for issue of cheque book ` 150 was skipped while preparing 
cash book. 
(vii) Hari received a UPI of ` 1,000 on 29.12.2023 for sale of scrap which was 
not entered in cash book. 
(viii)Cheques amounting to ` 1,80,000 were issued during the month but 
cheques of ` 1,44,000 were only presented during the month for 
payment. 
 Prepare Bank Reconciliation Statement on 31.12.2023 and ascertain balance 
as per pass-book. (10 Marks) 
(b)  Harry draws a bill on Sejal for ` 60,000 on 01.01.2023 for 3 months. Sejal 
accepts the bill and sends it back to Harry to get it discounted for ` 56,000. 
Page 5


PAPER – 1: 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. 
Question 1 
(a)  State with reasons, whether the following statements are True or False: 
(i) Nominal Accounts are balanced at the end of the Accounting Year. 
(ii)  Overhaul Expenses of a second-hand machinery purchased are Revenue 
Expenditure. 
(iii)  Valuation of inventory at cost or net realizable value is based on 
Principle of Conservatism. 
(iv)  A Promissory Note can be made payable to the Bearer. 
(v)  The Receipts and payment account for a non-profit organization follows 
the accrual concept of accounting. 
(vi)  Legal heirs of a deceased partner are entitled to his capital account 
balance only. (6 x 2=12 Marks) 
(b)  Differentiate between Book-keeping and Accounting.  (4 Marks) 
(c)  Pass the necessary journal entries to rectify the following errors, using a 
Suspense Account: 
(i)  Goods of the value of ` 500 returned by Mr. A were entered in the Sales 
Day Book and posted there from to the credit of his account; 
(ii)  ` 250 entered in the Sales Returns Book, has been posted to the debit of 
Mr. R, who returned the goods; 
(iii)  A sale of ` 700 made to Mr. Q was correctly entered in the Sales Day 
Book but wrongly posted to the debit of Mr. S as ` 70; 
 FOUNDATION EXAMINATION: SEPTEMBER 2024 
 
 
SUGGESTED ANSWER 
2 
(iv)  The total of "Discount allowed" Column in the Cash Book for September 
amounting to ` 350 was not posted.  (4 Marks) 
Answer  
(a) 1. False: Nominal Accounts are not balanced. The balances at the end are 
transferred to Trading/ Profit & Loss A/c. 
2. False: Overhaul expenses are incurred to put second-hand machinery 
in working condition to derive endurable long-term advantage. So, it 
should be capitalized. 
3. True: The conservatism concept states that one shall not account for 
anticipated profits but shall provide all prospective losses. Valuing 
inventory at cost or net realisable value whichever is less, therefore is 
based on principle of conservatism. 
4. False: A promissory note should not be made payable to the bearer. 
The payee must be to a certain person. 
5. False: It depicts the cash system of accounting rather than the accrual 
system, as the cash receipts and payments pertaining to any year are 
entered in the Receipts and payments account. The principle of accrual 
is not followed with regard to the receipts and payments account of a 
non-profit organization. 
6. False: Legal heirs of a deceased partner are entitled to all the dues of 
deceased partner. 
(b) The difference between Book keeping and Accounting are as follows: 
S.N. Book-keeping Accounting 
1. It is a process concerned 
with recording of 
transactions. 
It is a process concerned with 
summarising of the recorded 
transactions. 
2. It constitutes as a base for 
accounting. 
It is considered as a language of 
the business. 
3. Financial statements do not 
form part of this process. 
Financial statements are prepared 
in this process on the basis of 
book-keeping records. 
 ACCOUNTING 
 
SUGGESTED ANSWER 
3 
4. Managerial decisions 
cannot be taken with the 
help of these records. 
Management takes decisions on 
the basis of these records. 
5. There is no sub-field of 
book keeping. 
It has several sub-fields like 
financial accounting, 
management accounting etc. 
6. Financial position of the 
business cannot be 
ascertained through book-
keeping records. 
Financial position of the business 
is ascertained on the basis of the 
accounting reports. 
(c)         Journal 
 Particulars  L.F. Dr. 
`
 
Cr. 
`
 
(1) Sales A/c Dr.  500  
 Sales Returns A/c Dr.  500  
  To Suspense A/c    1,000 
 (Being the value of goods 
returned by Mr. A wrongly posted 
to Sales and omission of debit to 
Sales Returns Account, now 
rectified) 
    
(2) Suspense A/c Dr.  500  
  To Mr. R     500 
 (Being wrong debit to Mr. R for 
goods returned by him, now 
rectified) 
    
(3) Mr. Q  Dr.  700  
  To Mr. S     70 
  To Suspense A/c    630 
 (Being omission of debit to Mr. Q 
and wrong credit to Mr. S for sale 
of 
`
 700, now rectified)  
    
 FOUNDATION EXAMINATION: SEPTEMBER 2024 
 
 
SUGGESTED ANSWER 
4 
(4) Discount A/c Dr.  350  
  To Suspense A/c    350 
 (Being the total of Discount 
allowed during September not 
posted from the Cash Book; error 
now rectified) 
    
Question 2 
(a)  The cash book of Hari showed a debit balance of ` 1,36,800 as on 31.12.2023 
which was in disagreement with balance as per pass book. Following 
discrepancies were noticed: 
(i)  Dividend of ` 18,000 was deposited in the bank of which Hari had no 
information 
(ii)  Cheque was issued to Suresh of ` 14,780 on 18.12.2023 which was 
recorded in cash book as ` 14,870. 
(iii) Cheques totalling of ` 55,000 were deposited into bank on 30.12.2023 
which were not cleared until 31.12.2023. 
(iv) Mediclaim premium of ` 14,160 was paid as per the standing instruction 
of Hari which was not recorded in cash book. 
(v) Goods amounting ` 1,60,000 were sold to Ajay in November 2023. He 
deposited cheque on 15.12.2023 after deducting 4% cash discount. This 
entry was missed while preparing cash book. 
(vi) Bank charges for issue of cheque book ` 150 was skipped while preparing 
cash book. 
(vii) Hari received a UPI of ` 1,000 on 29.12.2023 for sale of scrap which was 
not entered in cash book. 
(viii)Cheques amounting to ` 1,80,000 were issued during the month but 
cheques of ` 1,44,000 were only presented during the month for 
payment. 
 Prepare Bank Reconciliation Statement on 31.12.2023 and ascertain balance 
as per pass-book. (10 Marks) 
(b)  Harry draws a bill on Sejal for ` 60,000 on 01.01.2023 for 3 months. Sejal 
accepts the bill and sends it back to Harry to get it discounted for ` 56,000. 
 ACCOUNTING 
 
SUGGESTED ANSWER 
5 
Harry remits 1/4
th
 amount to Sejal. On the due date, Harry was unable to 
remit his share to Sejal, rather accepts a bill of ` 80,000 for a period of 3 
months. This bill was discounted by Sejal for ` 74,600. Sejal after making the 
payment of first bill sent 3/4
th
of the amount remaining to Harry. On maturity 
of the bill, Harry became bankrupt and his estate paying 40 paise in the 
rupee. 
 Give journal entries in the books of Sejal. Also prepare ledger account of 
Harry. All workings should form part of the answer. (10 Marks) 
Answer  
(a) Bank Reconciliation Statement of Mr. Hari as on 31st Dec., 2023 
Particulars Details 
`
  
Amount  
`
  
Balance as per the Cash Book  1,36,800 
Add:  Cheques issued but not presented for 
payment 
36,000  
 Dividends directly collected by bank 
but not yet entered in the Cash Book 
18,000  
 Cheque recorded with wrong amount 
in the Cash Book 
90  
 Cheque directly deposited but not 
recorded in the cash book 
        Amount received from slae of scrap not 
recorded in cash book 
1,53,600 
 
1,000 
 
 
2,08,690 
  3,45,490 
Less: Cheques deposited but not cleared till 
31
st
 dec 
55,000  
 Mediclaim paid by the bank directly 
not yet recorded in the Cash Book 
 Bank charges not recorded in cash 
book 
 
14,160 
150 
 
 
(69,310) 
 Balance as per the Pass Book  2,76,180