Page 1
ANSWERS OF MODEL TEST PAPER 10
FOUNDATION COURSE
PAPER – 1: ACCOUNTING
1. (a) 1. False: The rule of nominal accounts states that all expenses and
losses are recorded on debit side.
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.
No.
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.
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.
618
Page 2
ANSWERS OF MODEL TEST PAPER 10
FOUNDATION COURSE
PAPER – 1: ACCOUNTING
1. (a) 1. False: The rule of nominal accounts states that all expenses and
losses are recorded on debit side.
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.
No.
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.
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.
618
(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)
(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)
2. (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
14,160
619
Page 3
ANSWERS OF MODEL TEST PAPER 10
FOUNDATION COURSE
PAPER – 1: ACCOUNTING
1. (a) 1. False: The rule of nominal accounts states that all expenses and
losses are recorded on debit side.
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.
No.
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.
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.
618
(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)
(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)
2. (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
14,160
619
Bank charges not recorded in cash book 150 (69,310)
Balance as per the Pass Book 2,76,180
Alternatively, the question can also be solved by preparing adjusted cash
book as shown below:
Cash Book (Bank Column)
Particulars Amount
(`)
Particulars Amount
(`)
To Balance b/d
To Amount received from
sale of scrap
To dividends collected by
bank
To cheques recorded with
wrong amount
To cheque directly
deposited not recorded
1,36,800
1,000
18,000
90
1,53,600
By Bank charges
By Mediclaim
By balance c/d
150
14,160
2,95,180
3,09,490 3,09,490
Bank Reconciliation Statement of Mr. Hari as on 31st Dec., 2023
Particulars `
Balance as per the Cash Book (corrected) 2,95,180
Add: Cheques issued but not yet presented
Less: Cheques deposited but not cleared
36,000
(55,000)
Balance as per the Pass Book 2,76,180
(b) In the books of Sejal
Journal Entries
Date Particulars DR.
(in `)
CR.
(in `)
1/1/2023 Harry Dr. 60,000
To Bills payable A/c 60,000
(Being bill of exchange
accepted and sent to Mr.
Harry)
1/1/2023 Bank A/c Dr. 14,000
Discount charges A/c Dr. 1,000
To Harry 15,000
(Being the amount received
from Harry on account of the
bills receivable)
4/4/2023 Bills receivable A/c Dr. 80,000
To Harry 80,000
620
Page 4
ANSWERS OF MODEL TEST PAPER 10
FOUNDATION COURSE
PAPER – 1: ACCOUNTING
1. (a) 1. False: The rule of nominal accounts states that all expenses and
losses are recorded on debit side.
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.
No.
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.
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.
618
(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)
(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)
2. (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
14,160
619
Bank charges not recorded in cash book 150 (69,310)
Balance as per the Pass Book 2,76,180
Alternatively, the question can also be solved by preparing adjusted cash
book as shown below:
Cash Book (Bank Column)
Particulars Amount
(`)
Particulars Amount
(`)
To Balance b/d
To Amount received from
sale of scrap
To dividends collected by
bank
To cheques recorded with
wrong amount
To cheque directly
deposited not recorded
1,36,800
1,000
18,000
90
1,53,600
By Bank charges
By Mediclaim
By balance c/d
150
14,160
2,95,180
3,09,490 3,09,490
Bank Reconciliation Statement of Mr. Hari as on 31st Dec., 2023
Particulars `
Balance as per the Cash Book (corrected) 2,95,180
Add: Cheques issued but not yet presented
Less: Cheques deposited but not cleared
36,000
(55,000)
Balance as per the Pass Book 2,76,180
(b) In the books of Sejal
Journal Entries
Date Particulars DR.
(in `)
CR.
(in `)
1/1/2023 Harry Dr. 60,000
To Bills payable A/c 60,000
(Being bill of exchange
accepted and sent to Mr.
Harry)
1/1/2023 Bank A/c Dr. 14,000
Discount charges A/c Dr. 1,000
To Harry 15,000
(Being the amount received
from Harry on account of the
bills receivable)
4/4/2023 Bills receivable A/c Dr. 80,000
To Harry 80,000
620
(Being the bills accepted by
Harry)
4/4/2023 Bank A/c Dr. 74,600
Discount charges A/c Dr. 5,400
To Bills receivable A/c
(Being Harry acceptance
discounted with bank)
80,000
4/4/2023 Bills payable A/c Dr. 60,000
To Bank A/c
(Being the amount met on the
due date)
60,000
4/4/2023 Harry Dr. 15,000
To Bank A/c 10,950
To Discount A/c
{(5,400/80,000) x 60,000}
4,050
(Being the amount paid and
the discount debited to Harry)
7/7/2023 Harry Dr. 80,000
To Bank A/c 80,000
(Being Harry’s acceptance
discounted with bank
dishonoured due to Harry’s
bankruptcy)
7/7/2023 Bank A/c Dr. 24,000
Bad debts A/c Dr. 36,000
To Harry 60,000
(The amount received from Harry
and the balance being written off as
debt)
Harry ‘s A/c
Particulars ` Particulars `
To Bills Payable A/c
To Bank A/c
To Discount A/c
60,000
10,950
4,050
By Bank A/c
By Discount A/c
By Bills Receivable
14,000
1,000
80,000
To Bank A/c 80,000 By Bank A/c
By Bad Debts
24,000
36,000
1,55,000 1,55,000
621
Page 5
ANSWERS OF MODEL TEST PAPER 10
FOUNDATION COURSE
PAPER – 1: ACCOUNTING
1. (a) 1. False: The rule of nominal accounts states that all expenses and
losses are recorded on debit side.
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.
No.
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.
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.
618
(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)
(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)
2. (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
14,160
619
Bank charges not recorded in cash book 150 (69,310)
Balance as per the Pass Book 2,76,180
Alternatively, the question can also be solved by preparing adjusted cash
book as shown below:
Cash Book (Bank Column)
Particulars Amount
(`)
Particulars Amount
(`)
To Balance b/d
To Amount received from
sale of scrap
To dividends collected by
bank
To cheques recorded with
wrong amount
To cheque directly
deposited not recorded
1,36,800
1,000
18,000
90
1,53,600
By Bank charges
By Mediclaim
By balance c/d
150
14,160
2,95,180
3,09,490 3,09,490
Bank Reconciliation Statement of Mr. Hari as on 31st Dec., 2023
Particulars `
Balance as per the Cash Book (corrected) 2,95,180
Add: Cheques issued but not yet presented
Less: Cheques deposited but not cleared
36,000
(55,000)
Balance as per the Pass Book 2,76,180
(b) In the books of Sejal
Journal Entries
Date Particulars DR.
(in `)
CR.
(in `)
1/1/2023 Harry Dr. 60,000
To Bills payable A/c 60,000
(Being bill of exchange
accepted and sent to Mr.
Harry)
1/1/2023 Bank A/c Dr. 14,000
Discount charges A/c Dr. 1,000
To Harry 15,000
(Being the amount received
from Harry on account of the
bills receivable)
4/4/2023 Bills receivable A/c Dr. 80,000
To Harry 80,000
620
(Being the bills accepted by
Harry)
4/4/2023 Bank A/c Dr. 74,600
Discount charges A/c Dr. 5,400
To Bills receivable A/c
(Being Harry acceptance
discounted with bank)
80,000
4/4/2023 Bills payable A/c Dr. 60,000
To Bank A/c
(Being the amount met on the
due date)
60,000
4/4/2023 Harry Dr. 15,000
To Bank A/c 10,950
To Discount A/c
{(5,400/80,000) x 60,000}
4,050
(Being the amount paid and
the discount debited to Harry)
7/7/2023 Harry Dr. 80,000
To Bank A/c 80,000
(Being Harry’s acceptance
discounted with bank
dishonoured due to Harry’s
bankruptcy)
7/7/2023 Bank A/c Dr. 24,000
Bad debts A/c Dr. 36,000
To Harry 60,000
(The amount received from Harry
and the balance being written off as
debt)
Harry ‘s A/c
Particulars ` Particulars `
To Bills Payable A/c
To Bank A/c
To Discount A/c
60,000
10,950
4,050
By Bank A/c
By Discount A/c
By Bills Receivable
14,000
1,000
80,000
To Bank A/c 80,000 By Bank A/c
By Bad Debts
24,000
36,000
1,55,000 1,55,000
621
3. (a) Trading Account for the year ended 31
st
March, 2024
Particulars Details Amount
`
Particulars Details Amount
`
To opening Stock 4,80,000 By Sales 48,00,000
To Purchases 21,35,000 Less: Returns
Inwards
93,000 47,07,000
Less: Plant and
Machinery
included in
purchases
3,00,000 By Closing
Stock
5,20,000
Less: Returns
Outward
55,000
17,80,000
To wages
To Factory rent
8,000
15,00,000
Add: outstanding 3,000 11,000
To Gross Profit
c/d
14,56,000
52,27,000 52,27,000
Profit and Loss Account for the year ended 31st March, 2024
Particular Amount
`
Particular Amount
`
To Salaries
To Advertisements
To Insurance
1,40,000
60,000
63,000
By Gross profit b/d
By Discount Received
14,56,000
37,000
To General expenses 10,000
To Discount Allowed
To provision for doubtful debts
(W.N.1)
To Provision for discount on
debtors (W.N.2)
65,000
37,000
8,400
To Depreciation (W.N. 3) 93,300
To Net Profit transferred to Capital
a/c
10,16,300
14,93,000 14,93,000
Balance Sheet as at 31st March, 2024
Liabilities Details Amount
`
Assets Details Amount
`
Capital 4,000,00 Plant and Machinery
Add: Additions
5,00,000
3,00,000
Add: Net Profit 10,16,300 Less: Dep. (W.N.3) (80,000) 7,20,000
Less: Drawings (70,000) 13,46,300
Office furniture 26,000
Bills Payable 56,000 Less: Dep. (W.N. 3) (1,300) 24,700
Sundry
Creditors
5,20,000
622
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