Advanced Accounting (Group I) Model Test Paper - 7 (Answers) | Model Test Papers for CA Intermediate PDF Download

 Page 1


ANSWERS OF MODEL TEST PAPER 7 
INTERMEDIATE COURSE: GROUP – I 
PAPER – 1 : ADVANCED ACCOUNTING  
1. (i)  (a)
(ii) (b)
(iii) (c)
(iv) (b)
2. (i) (c)
(ii) (c)
(iii) (c)
(iv) (c)
3. (a)  (ii)
(b) (ii)
(c) (iii)
(d) (iv)
4. (ii)
5. (iii)
6. (b)
PART II – Descriptive Questions (70 Marks) 
1. (a) (i)  As per AS 4‘Contingencies and Events Occurring After the Balance
Sheet Date’, disclosure should be made in the report of the 
approving authority of those events occurring after the balance 
sheet date that represent material changes and commitments 
affecting the financial position of the enterprise, the investment of 
` 40 lakhs in April, 2024 in the acquisition of another company 
should be disclosed in the report of the Board of Directors to enable 
users of financial statements to make proper evaluations and 
decisions. 
(ii) As per AS 4, adjustment to assets and liabilities are required for
events occurring after the balance sheet date that provide
additional information materially affecting the determination of the
amounts relating to conditions existing at the Balance Sheet date.
A debtor for ` 2,50,000 suffered heavy loss due to earthquake in
371
Page 2


ANSWERS OF MODEL TEST PAPER 7 
INTERMEDIATE COURSE: GROUP – I 
PAPER – 1 : ADVANCED ACCOUNTING  
1. (i)  (a)
(ii) (b)
(iii) (c)
(iv) (b)
2. (i) (c)
(ii) (c)
(iii) (c)
(iv) (c)
3. (a)  (ii)
(b) (ii)
(c) (iii)
(d) (iv)
4. (ii)
5. (iii)
6. (b)
PART II – Descriptive Questions (70 Marks) 
1. (a) (i)  As per AS 4‘Contingencies and Events Occurring After the Balance
Sheet Date’, disclosure should be made in the report of the 
approving authority of those events occurring after the balance 
sheet date that represent material changes and commitments 
affecting the financial position of the enterprise, the investment of 
` 40 lakhs in April, 2024 in the acquisition of another company 
should be disclosed in the report of the Board of Directors to enable 
users of financial statements to make proper evaluations and 
decisions. 
(ii) As per AS 4, adjustment to assets and liabilities are required for
events occurring after the balance sheet date that provide
additional information materially affecting the determination of the
amounts relating to conditions existing at the Balance Sheet date.
A debtor for ` 2,50,000 suffered heavy loss due to earthquake in
371
the second week of March, 2024 which was not covered by 
insurance. This information with its implications was already known 
to the company. The fact that he became bankrupt in May, 2024 
(after the balance sheet date) is only an additional information 
related to the existing condition on the balance sheet date. 
Accordingly, full provision for bad debts amounting ` 2,50,000 
should be made, to cover the loss arising due to the insolvency of 
a debtor, in the final accounts for the year ended 31
st
 March 2024. 
(iii) As per AS 4, adjustments to assets and liabilities are required for
events occurring after the balance sheet date that provide
additional information materially affecting the determination of the
amounts relating to conditions existing at the balance sheet date.
In the given case, since Hari Ltd. was sued by a competitor for
infringement of a trademark during the year 2023-24 for which the
provision was also made by it, the decision of the Court on 26
th
May, 2024, for payment of the penalty will constitute as an adjusting
event because it is an event occurred before approval of the
financial statements. Therefore, Hari Ltd. should adjust the
provision upward by ` 4 lakhs to reflect the award decreed by the
Court to be paid by them to its competitor.
(iv) As the embezzlement of cash comes to the notice of company
management only after approval of financial statements by board
of directors of the company, then the treatment will be done as per
the provisions of AS 5 “Net Profit or Loss for the Period, Prior Period
Items and Changes in Accounting Policies” and the same will not
be adjusted in the financial statements for the year ended 31
st
March, 2024. This being an extra-ordinary item should be disclosed
in the statement of profit and loss as a part of loss for the year
ending March, 2025, in a manner, that its impact on current profit
or loss can be perceived.
(v) Collection of cheques after balance sheet date is not an adjusting
event even if the cheques bear the date of 31
st
 March. Recognition
of cheques in hand is therefore not consistent with requirements of
AS 4. Moreover, the collection of cheques after balance sheet date
does not represent any material change or commitments affecting
financial position of the enterprise and no disclosure of such
collections in the Directors’ Report is necessary.
(b) As per AS 26 ‘Intangible Assets’
(i) Carrying value of intangible asset as on 31.03.2023
At the end of financial year, on 31
st
 March 2023, the production
process will be recognized (i.e. carrying amount) as an intangible
asset at a cost of ` 30 (98-68) lacs (expenditure incurred since the
date the recognition criteria were met, i.e., from 1
st
 January, 2023).
372
Page 3


ANSWERS OF MODEL TEST PAPER 7 
INTERMEDIATE COURSE: GROUP – I 
PAPER – 1 : ADVANCED ACCOUNTING  
1. (i)  (a)
(ii) (b)
(iii) (c)
(iv) (b)
2. (i) (c)
(ii) (c)
(iii) (c)
(iv) (c)
3. (a)  (ii)
(b) (ii)
(c) (iii)
(d) (iv)
4. (ii)
5. (iii)
6. (b)
PART II – Descriptive Questions (70 Marks) 
1. (a) (i)  As per AS 4‘Contingencies and Events Occurring After the Balance
Sheet Date’, disclosure should be made in the report of the 
approving authority of those events occurring after the balance 
sheet date that represent material changes and commitments 
affecting the financial position of the enterprise, the investment of 
` 40 lakhs in April, 2024 in the acquisition of another company 
should be disclosed in the report of the Board of Directors to enable 
users of financial statements to make proper evaluations and 
decisions. 
(ii) As per AS 4, adjustment to assets and liabilities are required for
events occurring after the balance sheet date that provide
additional information materially affecting the determination of the
amounts relating to conditions existing at the Balance Sheet date.
A debtor for ` 2,50,000 suffered heavy loss due to earthquake in
371
the second week of March, 2024 which was not covered by 
insurance. This information with its implications was already known 
to the company. The fact that he became bankrupt in May, 2024 
(after the balance sheet date) is only an additional information 
related to the existing condition on the balance sheet date. 
Accordingly, full provision for bad debts amounting ` 2,50,000 
should be made, to cover the loss arising due to the insolvency of 
a debtor, in the final accounts for the year ended 31
st
 March 2024. 
(iii) As per AS 4, adjustments to assets and liabilities are required for
events occurring after the balance sheet date that provide
additional information materially affecting the determination of the
amounts relating to conditions existing at the balance sheet date.
In the given case, since Hari Ltd. was sued by a competitor for
infringement of a trademark during the year 2023-24 for which the
provision was also made by it, the decision of the Court on 26
th
May, 2024, for payment of the penalty will constitute as an adjusting
event because it is an event occurred before approval of the
financial statements. Therefore, Hari Ltd. should adjust the
provision upward by ` 4 lakhs to reflect the award decreed by the
Court to be paid by them to its competitor.
(iv) As the embezzlement of cash comes to the notice of company
management only after approval of financial statements by board
of directors of the company, then the treatment will be done as per
the provisions of AS 5 “Net Profit or Loss for the Period, Prior Period
Items and Changes in Accounting Policies” and the same will not
be adjusted in the financial statements for the year ended 31
st
March, 2024. This being an extra-ordinary item should be disclosed
in the statement of profit and loss as a part of loss for the year
ending March, 2025, in a manner, that its impact on current profit
or loss can be perceived.
(v) Collection of cheques after balance sheet date is not an adjusting
event even if the cheques bear the date of 31
st
 March. Recognition
of cheques in hand is therefore not consistent with requirements of
AS 4. Moreover, the collection of cheques after balance sheet date
does not represent any material change or commitments affecting
financial position of the enterprise and no disclosure of such
collections in the Directors’ Report is necessary.
(b) As per AS 26 ‘Intangible Assets’
(i) Carrying value of intangible asset as on 31.03.2023
At the end of financial year, on 31
st
 March 2023, the production
process will be recognized (i.e. carrying amount) as an intangible
asset at a cost of ` 30 (98-68) lacs (expenditure incurred since the
date the recognition criteria were met, i.e., from 1
st
 January, 2023).
372
(ii) Expenditure to be charged to Profit and Loss account for the
year ended 31.03.2024
(` in lacs) 
Carrying Amount as on 31.03.2023 30 
Expenditure during 2023–2024  72 
Book Value 102 
Recoverable Amount  (52) 
Impairment loss 50 
` 50 lakhs to be charged to Profit and loss account for the year 
ending 31.03.2024. 
(iii) Carrying value of intangible asset as on 31.03.2024
(` in lacs) 
Book Value 102 
Less: Impairment loss  (50) 
Carrying amount as on 31.03.2024   52 
2. (a) Cost of Control 
Sr. 
No. 
Particulars Computation `
A] Cost of Investments Given 70,00,000 
Less: Dividend out of 
Pre Acquisition 
Dividend 
(3.5 Lacs × `10 (FV) × 
20%) 
(No of Shares = 70 
Lacs/20= 3.5 Lacs) 
(7,00,000) 
Subtotal A 63,00,000 
B] Share in Net Assets 
of Zed Ltd. 
(1,38,50,000 × 70%) 96,95,000 
C] Goodwill / (Capital 
Reserve) 
(A – B) 33,95,000 
W.N. 1 : Calculation of Net Assets 
Sr. 
No. 
Particulars `
A] 
- 
- 
- 
- 
Assets 
Property, Plant & Equipment (120+20%) 1,44,00,000 
Investment (55 – 10%) 49,50,000 
Current Assets 70,00,000 
Loans & Advances 15,00,000 
Subtotal A 2,78,50,000 
B] 
- 
Liabilities 
15% Debentures 90,00,000 
373
Page 4


ANSWERS OF MODEL TEST PAPER 7 
INTERMEDIATE COURSE: GROUP – I 
PAPER – 1 : ADVANCED ACCOUNTING  
1. (i)  (a)
(ii) (b)
(iii) (c)
(iv) (b)
2. (i) (c)
(ii) (c)
(iii) (c)
(iv) (c)
3. (a)  (ii)
(b) (ii)
(c) (iii)
(d) (iv)
4. (ii)
5. (iii)
6. (b)
PART II – Descriptive Questions (70 Marks) 
1. (a) (i)  As per AS 4‘Contingencies and Events Occurring After the Balance
Sheet Date’, disclosure should be made in the report of the 
approving authority of those events occurring after the balance 
sheet date that represent material changes and commitments 
affecting the financial position of the enterprise, the investment of 
` 40 lakhs in April, 2024 in the acquisition of another company 
should be disclosed in the report of the Board of Directors to enable 
users of financial statements to make proper evaluations and 
decisions. 
(ii) As per AS 4, adjustment to assets and liabilities are required for
events occurring after the balance sheet date that provide
additional information materially affecting the determination of the
amounts relating to conditions existing at the Balance Sheet date.
A debtor for ` 2,50,000 suffered heavy loss due to earthquake in
371
the second week of March, 2024 which was not covered by 
insurance. This information with its implications was already known 
to the company. The fact that he became bankrupt in May, 2024 
(after the balance sheet date) is only an additional information 
related to the existing condition on the balance sheet date. 
Accordingly, full provision for bad debts amounting ` 2,50,000 
should be made, to cover the loss arising due to the insolvency of 
a debtor, in the final accounts for the year ended 31
st
 March 2024. 
(iii) As per AS 4, adjustments to assets and liabilities are required for
events occurring after the balance sheet date that provide
additional information materially affecting the determination of the
amounts relating to conditions existing at the balance sheet date.
In the given case, since Hari Ltd. was sued by a competitor for
infringement of a trademark during the year 2023-24 for which the
provision was also made by it, the decision of the Court on 26
th
May, 2024, for payment of the penalty will constitute as an adjusting
event because it is an event occurred before approval of the
financial statements. Therefore, Hari Ltd. should adjust the
provision upward by ` 4 lakhs to reflect the award decreed by the
Court to be paid by them to its competitor.
(iv) As the embezzlement of cash comes to the notice of company
management only after approval of financial statements by board
of directors of the company, then the treatment will be done as per
the provisions of AS 5 “Net Profit or Loss for the Period, Prior Period
Items and Changes in Accounting Policies” and the same will not
be adjusted in the financial statements for the year ended 31
st
March, 2024. This being an extra-ordinary item should be disclosed
in the statement of profit and loss as a part of loss for the year
ending March, 2025, in a manner, that its impact on current profit
or loss can be perceived.
(v) Collection of cheques after balance sheet date is not an adjusting
event even if the cheques bear the date of 31
st
 March. Recognition
of cheques in hand is therefore not consistent with requirements of
AS 4. Moreover, the collection of cheques after balance sheet date
does not represent any material change or commitments affecting
financial position of the enterprise and no disclosure of such
collections in the Directors’ Report is necessary.
(b) As per AS 26 ‘Intangible Assets’
(i) Carrying value of intangible asset as on 31.03.2023
At the end of financial year, on 31
st
 March 2023, the production
process will be recognized (i.e. carrying amount) as an intangible
asset at a cost of ` 30 (98-68) lacs (expenditure incurred since the
date the recognition criteria were met, i.e., from 1
st
 January, 2023).
372
(ii) Expenditure to be charged to Profit and Loss account for the
year ended 31.03.2024
(` in lacs) 
Carrying Amount as on 31.03.2023 30 
Expenditure during 2023–2024  72 
Book Value 102 
Recoverable Amount  (52) 
Impairment loss 50 
` 50 lakhs to be charged to Profit and loss account for the year 
ending 31.03.2024. 
(iii) Carrying value of intangible asset as on 31.03.2024
(` in lacs) 
Book Value 102 
Less: Impairment loss  (50) 
Carrying amount as on 31.03.2024   52 
2. (a) Cost of Control 
Sr. 
No. 
Particulars Computation `
A] Cost of Investments Given 70,00,000 
Less: Dividend out of 
Pre Acquisition 
Dividend 
(3.5 Lacs × `10 (FV) × 
20%) 
(No of Shares = 70 
Lacs/20= 3.5 Lacs) 
(7,00,000) 
Subtotal A 63,00,000 
B] Share in Net Assets 
of Zed Ltd. 
(1,38,50,000 × 70%) 96,95,000 
C] Goodwill / (Capital 
Reserve) 
(A – B) 33,95,000 
W.N. 1 : Calculation of Net Assets 
Sr. 
No. 
Particulars `
A] 
- 
- 
- 
- 
Assets 
Property, Plant & Equipment (120+20%) 1,44,00,000 
Investment (55 – 10%) 49,50,000 
Current Assets 70,00,000 
Loans & Advances 15,00,000 
Subtotal A 2,78,50,000 
B] 
- 
Liabilities 
15% Debentures 90,00,000 
373
- 
Current Liabilities 50,00,000 
Subtotal B 1,40,00,000 
C] Net Assets (A – B) 1,38,50,000 
W.N. 2 : No of shares acquired 
= 
Cost of investment 
Purchase price share 
= 
70,00,000
` 20 shares 
 = `3,50,000 shares 
Revalued net assets of Zed Ltd. as on 31.03.2024 
Particulars ` in lakhs ` in lakhs 
Property Plant & Equipment [120 × 120%] 144.0 
Investments [55 × 90%] 49.5 
Current Assets 70.0 
Loans & Advances 15.0 
Total Assets after revaluation 278.5 
Less: 15% Debentures 90.0 
  Current Liabilities 50.0 (140.0) 
Equity / Net Worth 138.50 
Exe Ltd.’s share of net assets (70% of 
138.50) 
96.95 
Exe Ltd.’s cost of acquisition of shares of 
Zed Ltd. 
(`70 lakhs – 7 lakhs*) 
63.00 
Capital Reserve 33.95 
*Total Cost of 70% Equity of Zed Ltd. `70 lakhs 
Purchase Price of each share `20 
Number of shares purchases(70 lakhs/20) 3.50 lakhs 
Dividend @ 20% i.e. `2/share `7 lakhs 
Since, dividend received is for pre-acquisition period, it has been 
reduced from the cost of investment in the subsidiary company. 
(b) Minority Interest = Equity attributable to minorities
Equity is the residual interest in the assets of an enterprise after
deducting all its liabilities i.e. in this case, it should be equal to Share
Capital + Profit & Loss A/c
A = Share capital on 1.1.2024
B = Profit & loss account balance on 1.1.2024
C = Share capital on 31.12.2024
374
Page 5


ANSWERS OF MODEL TEST PAPER 7 
INTERMEDIATE COURSE: GROUP – I 
PAPER – 1 : ADVANCED ACCOUNTING  
1. (i)  (a)
(ii) (b)
(iii) (c)
(iv) (b)
2. (i) (c)
(ii) (c)
(iii) (c)
(iv) (c)
3. (a)  (ii)
(b) (ii)
(c) (iii)
(d) (iv)
4. (ii)
5. (iii)
6. (b)
PART II – Descriptive Questions (70 Marks) 
1. (a) (i)  As per AS 4‘Contingencies and Events Occurring After the Balance
Sheet Date’, disclosure should be made in the report of the 
approving authority of those events occurring after the balance 
sheet date that represent material changes and commitments 
affecting the financial position of the enterprise, the investment of 
` 40 lakhs in April, 2024 in the acquisition of another company 
should be disclosed in the report of the Board of Directors to enable 
users of financial statements to make proper evaluations and 
decisions. 
(ii) As per AS 4, adjustment to assets and liabilities are required for
events occurring after the balance sheet date that provide
additional information materially affecting the determination of the
amounts relating to conditions existing at the Balance Sheet date.
A debtor for ` 2,50,000 suffered heavy loss due to earthquake in
371
the second week of March, 2024 which was not covered by 
insurance. This information with its implications was already known 
to the company. The fact that he became bankrupt in May, 2024 
(after the balance sheet date) is only an additional information 
related to the existing condition on the balance sheet date. 
Accordingly, full provision for bad debts amounting ` 2,50,000 
should be made, to cover the loss arising due to the insolvency of 
a debtor, in the final accounts for the year ended 31
st
 March 2024. 
(iii) As per AS 4, adjustments to assets and liabilities are required for
events occurring after the balance sheet date that provide
additional information materially affecting the determination of the
amounts relating to conditions existing at the balance sheet date.
In the given case, since Hari Ltd. was sued by a competitor for
infringement of a trademark during the year 2023-24 for which the
provision was also made by it, the decision of the Court on 26
th
May, 2024, for payment of the penalty will constitute as an adjusting
event because it is an event occurred before approval of the
financial statements. Therefore, Hari Ltd. should adjust the
provision upward by ` 4 lakhs to reflect the award decreed by the
Court to be paid by them to its competitor.
(iv) As the embezzlement of cash comes to the notice of company
management only after approval of financial statements by board
of directors of the company, then the treatment will be done as per
the provisions of AS 5 “Net Profit or Loss for the Period, Prior Period
Items and Changes in Accounting Policies” and the same will not
be adjusted in the financial statements for the year ended 31
st
March, 2024. This being an extra-ordinary item should be disclosed
in the statement of profit and loss as a part of loss for the year
ending March, 2025, in a manner, that its impact on current profit
or loss can be perceived.
(v) Collection of cheques after balance sheet date is not an adjusting
event even if the cheques bear the date of 31
st
 March. Recognition
of cheques in hand is therefore not consistent with requirements of
AS 4. Moreover, the collection of cheques after balance sheet date
does not represent any material change or commitments affecting
financial position of the enterprise and no disclosure of such
collections in the Directors’ Report is necessary.
(b) As per AS 26 ‘Intangible Assets’
(i) Carrying value of intangible asset as on 31.03.2023
At the end of financial year, on 31
st
 March 2023, the production
process will be recognized (i.e. carrying amount) as an intangible
asset at a cost of ` 30 (98-68) lacs (expenditure incurred since the
date the recognition criteria were met, i.e., from 1
st
 January, 2023).
372
(ii) Expenditure to be charged to Profit and Loss account for the
year ended 31.03.2024
(` in lacs) 
Carrying Amount as on 31.03.2023 30 
Expenditure during 2023–2024  72 
Book Value 102 
Recoverable Amount  (52) 
Impairment loss 50 
` 50 lakhs to be charged to Profit and loss account for the year 
ending 31.03.2024. 
(iii) Carrying value of intangible asset as on 31.03.2024
(` in lacs) 
Book Value 102 
Less: Impairment loss  (50) 
Carrying amount as on 31.03.2024   52 
2. (a) Cost of Control 
Sr. 
No. 
Particulars Computation `
A] Cost of Investments Given 70,00,000 
Less: Dividend out of 
Pre Acquisition 
Dividend 
(3.5 Lacs × `10 (FV) × 
20%) 
(No of Shares = 70 
Lacs/20= 3.5 Lacs) 
(7,00,000) 
Subtotal A 63,00,000 
B] Share in Net Assets 
of Zed Ltd. 
(1,38,50,000 × 70%) 96,95,000 
C] Goodwill / (Capital 
Reserve) 
(A – B) 33,95,000 
W.N. 1 : Calculation of Net Assets 
Sr. 
No. 
Particulars `
A] 
- 
- 
- 
- 
Assets 
Property, Plant & Equipment (120+20%) 1,44,00,000 
Investment (55 – 10%) 49,50,000 
Current Assets 70,00,000 
Loans & Advances 15,00,000 
Subtotal A 2,78,50,000 
B] 
- 
Liabilities 
15% Debentures 90,00,000 
373
- 
Current Liabilities 50,00,000 
Subtotal B 1,40,00,000 
C] Net Assets (A – B) 1,38,50,000 
W.N. 2 : No of shares acquired 
= 
Cost of investment 
Purchase price share 
= 
70,00,000
` 20 shares 
 = `3,50,000 shares 
Revalued net assets of Zed Ltd. as on 31.03.2024 
Particulars ` in lakhs ` in lakhs 
Property Plant & Equipment [120 × 120%] 144.0 
Investments [55 × 90%] 49.5 
Current Assets 70.0 
Loans & Advances 15.0 
Total Assets after revaluation 278.5 
Less: 15% Debentures 90.0 
  Current Liabilities 50.0 (140.0) 
Equity / Net Worth 138.50 
Exe Ltd.’s share of net assets (70% of 
138.50) 
96.95 
Exe Ltd.’s cost of acquisition of shares of 
Zed Ltd. 
(`70 lakhs – 7 lakhs*) 
63.00 
Capital Reserve 33.95 
*Total Cost of 70% Equity of Zed Ltd. `70 lakhs 
Purchase Price of each share `20 
Number of shares purchases(70 lakhs/20) 3.50 lakhs 
Dividend @ 20% i.e. `2/share `7 lakhs 
Since, dividend received is for pre-acquisition period, it has been 
reduced from the cost of investment in the subsidiary company. 
(b) Minority Interest = Equity attributable to minorities
Equity is the residual interest in the assets of an enterprise after
deducting all its liabilities i.e. in this case, it should be equal to Share
Capital + Profit & Loss A/c
A = Share capital on 1.1.2024
B = Profit & loss account balance on 1.1.2024
C = Share capital on 31.12.2024
374
D = Profit & loss account balance on 31.12.2024 
Minority % 
Shares 
Owned 
Minority 
interest as at 
the date of 
acquisition 
Minority 
interest as at 
the date of 
consolidation 
[E] [E] x [A + B] ` [E] X [C + D] ` 
Case i [100-85] 15% 29,250 30,750 
Case ii [100-70] 30% 51,000 39,000 
Case iii [100-65] 35% 10,500 10,500 
Case iv [100-90] 10% 6,500 8,500 
Case v [100-100] NIL NIL NIL 
3. (a)  (i)  As per AS 9 “Revenue Recognition”, in case of goods sold on
approval basis, revenue should not be recognized until the goods 
have been formally accepted by the buyer or the buyer has done 
an act adopting the transaction or the time period for rejection has 
elapsed or where no time has been fixed, a reasonable time has 
elapsed. Therefore, revenue should be recognized for the total 
sales amounting ` 5,00,000 as the time period for rejecting the 
goods had expired.       
(ii) The sale is complete but delivery has been postponed at buyer’s
request. The entity should recognize the entire sale of ` 2,40,000
for the year ended 31
st
 March.
(iii) Sale/repurchase agreements i.e. where seller concurrently agrees
to repurchase the same goods at a later date, such transactions
that are in substance a financing agreement, the resulting cash
inflow is not revenue as defined and should not be recognized as
revenue. Hence no revenue to be recognized in the given case.
(iv) Revenue arising from the use by others of enterprise resources
yielding interest and royalty should be recognized when no
significant uncertainty as to measurability or collectability exists.
The interest should be recognized on time proportion basis taking
into account the amount outstanding and rate applicable. The
royalty should be recognized on accrual basis in accordance with
the terms of relevant agreement.
(v) 40% goods lying unsold with consignee should be treated as
closing inventory and sales should be recognized for ` 2,40,000
(60% of ` 4,00,000). In case of consignment sale revenue should
not be recognized until the goods are sold to a third party.
(b) 
Journal Entries 
` in 
lacs 
Dr. Cr. 
375