Accounting Model Test Paper - 1 (Answers) | Mock Tests & Past Year Papers for CA Foundation PDF Download

 Page 1


ANSWERS OF MODEL TEST PAPER 1
FOUNDATION COURSE 
PAPER – 1: ACCOUNTING 
1. (a) (i) False: Accounting Standards for non-corporate entities in India are 
issued by the Institute of Chartered Accountants of India (ICAI). 
(ii) True : Subsidy received from the government for working capital by 
a manufacturing concern is a revenue receipt because it has no 
effect on improvement of future capability of business in revenue 
generation.
(iii) True : In the early periods of useful life of a fixed assets, repairs 
and maintenance expenses are relatively low because the asset is 
new. Whereas in later periods, as the asset become old, repairs 
and maintenance expenses increase continuously.  Under written 
down value method, depreciation charged is high in the initial 
period and reduces continuously in the later periods. Thus, 
depreciation and repair and maintenance expenses become more 
or less uniform throughout the useful life of the asset.
(iv) True : Discount at the time of retirement of a bill is a gain for the 
drawee and loss for the drawer.
(v) False: Surviving partners may continue to carry on the business in 
case of partnership.
(vi) False: Receipts and payments account is a classified summary of 
cash receipts and payments over a certain period together with 
cash and bank balances at the beginning and close of the period.
(b) Limitations which must be kept in mind while evaluating the Financial
Statements are as follows:
• The factors which may be relevant in assessing the worth of the
enterprise don’t find place in the accounts as they cannot be
measured in terms of money.
• Balance Sheet shows the position of the business on the day of its
preparation and not on the future date while the users of the
accounts are interested in knowing the position of the business in
the near future and also in long run and not for the past date.
• Accounting ignores changes in some money factors like inflation
etc.
• There are occasions when accounting principles conflict with each
other.
• Certain accounting estimates depend on the sheer personal
judgement of the accountant.
• Different accounting policies for the treatment of same item adds to
the probability of manipulations.
485
Page 2


ANSWERS OF MODEL TEST PAPER 1
FOUNDATION COURSE 
PAPER – 1: ACCOUNTING 
1. (a) (i) False: Accounting Standards for non-corporate entities in India are 
issued by the Institute of Chartered Accountants of India (ICAI). 
(ii) True : Subsidy received from the government for working capital by 
a manufacturing concern is a revenue receipt because it has no 
effect on improvement of future capability of business in revenue 
generation.
(iii) True : In the early periods of useful life of a fixed assets, repairs 
and maintenance expenses are relatively low because the asset is 
new. Whereas in later periods, as the asset become old, repairs 
and maintenance expenses increase continuously.  Under written 
down value method, depreciation charged is high in the initial 
period and reduces continuously in the later periods. Thus, 
depreciation and repair and maintenance expenses become more 
or less uniform throughout the useful life of the asset.
(iv) True : Discount at the time of retirement of a bill is a gain for the 
drawee and loss for the drawer.
(v) False: Surviving partners may continue to carry on the business in 
case of partnership.
(vi) False: Receipts and payments account is a classified summary of 
cash receipts and payments over a certain period together with 
cash and bank balances at the beginning and close of the period.
(b) Limitations which must be kept in mind while evaluating the Financial
Statements are as follows:
• The factors which may be relevant in assessing the worth of the
enterprise don’t find place in the accounts as they cannot be
measured in terms of money.
• Balance Sheet shows the position of the business on the day of its
preparation and not on the future date while the users of the
accounts are interested in knowing the position of the business in
the near future and also in long run and not for the past date.
• Accounting ignores changes in some money factors like inflation
etc.
• There are occasions when accounting principles conflict with each
other.
• Certain accounting estimates depend on the sheer personal
judgement of the accountant.
• Different accounting policies for the treatment of same item adds to
the probability of manipulations.
485
(c) Calculation of depreciation for the year ended 31.3.24
Machine Machine Machine Depreciation 
on sold 
machine 
I 
(28,54,000 - 
2,16,000) 
II 
Purchased 
on 1
st 
July 
III 
Purchased 
on 1
st
 Nov 
IV 
` ` ` ` 
Book value as 
on 1
st
 April, 
2023 
26,38,000 4,80,000 5,60,000 2,16,000 
Depreciation 
@15% 
3,95,700 (for 
full year) 
54,000 
(for 9 
months) 
35,000 
(for 5 
months) 
8,100 
(for 3 
months) 
Total depreciation (I + II + III + IV)    ` 4,92,800 
2. (a)
Particulars L.F. Dr. 
` 
Cr. 
` 
(i) Suspense Account Dr. 936 
To Profit and Loss Adjustment 
 A/c 
936 
(Correction of error by which 
Purchase Account was over 
debited last year) 
(ii) Profit & Loss Adjustment A/c Dr. 180 
Customer’s Account Dr. 1,104 
 To Suspense Account 1,284 
(Correction of the entry by which 
(a) Sales A/c was over credited by
` 180 (b) customer was credited
by `642 instead of being debited
by ` 462)
(iii) Suspense Account Dr. 600 
To Profit & Loss Adjustment A/c 600 
(Correction of error by which 
Returns Inward Account was 
debited by ` 300 instead of 
Returns Outwards Account being 
credited by ` 300) 
(iv) Suspense Account Dr. 1,790 
To Geet Account 895 
To Meet Account 895 
486
Page 3


ANSWERS OF MODEL TEST PAPER 1
FOUNDATION COURSE 
PAPER – 1: ACCOUNTING 
1. (a) (i) False: Accounting Standards for non-corporate entities in India are 
issued by the Institute of Chartered Accountants of India (ICAI). 
(ii) True : Subsidy received from the government for working capital by 
a manufacturing concern is a revenue receipt because it has no 
effect on improvement of future capability of business in revenue 
generation.
(iii) True : In the early periods of useful life of a fixed assets, repairs 
and maintenance expenses are relatively low because the asset is 
new. Whereas in later periods, as the asset become old, repairs 
and maintenance expenses increase continuously.  Under written 
down value method, depreciation charged is high in the initial 
period and reduces continuously in the later periods. Thus, 
depreciation and repair and maintenance expenses become more 
or less uniform throughout the useful life of the asset.
(iv) True : Discount at the time of retirement of a bill is a gain for the 
drawee and loss for the drawer.
(v) False: Surviving partners may continue to carry on the business in 
case of partnership.
(vi) False: Receipts and payments account is a classified summary of 
cash receipts and payments over a certain period together with 
cash and bank balances at the beginning and close of the period.
(b) Limitations which must be kept in mind while evaluating the Financial
Statements are as follows:
• The factors which may be relevant in assessing the worth of the
enterprise don’t find place in the accounts as they cannot be
measured in terms of money.
• Balance Sheet shows the position of the business on the day of its
preparation and not on the future date while the users of the
accounts are interested in knowing the position of the business in
the near future and also in long run and not for the past date.
• Accounting ignores changes in some money factors like inflation
etc.
• There are occasions when accounting principles conflict with each
other.
• Certain accounting estimates depend on the sheer personal
judgement of the accountant.
• Different accounting policies for the treatment of same item adds to
the probability of manipulations.
485
(c) Calculation of depreciation for the year ended 31.3.24
Machine Machine Machine Depreciation 
on sold 
machine 
I 
(28,54,000 - 
2,16,000) 
II 
Purchased 
on 1
st 
July 
III 
Purchased 
on 1
st
 Nov 
IV 
` ` ` ` 
Book value as 
on 1
st
 April, 
2023 
26,38,000 4,80,000 5,60,000 2,16,000 
Depreciation 
@15% 
3,95,700 (for 
full year) 
54,000 
(for 9 
months) 
35,000 
(for 5 
months) 
8,100 
(for 3 
months) 
Total depreciation (I + II + III + IV)    ` 4,92,800 
2. (a)
Particulars L.F. Dr. 
` 
Cr. 
` 
(i) Suspense Account Dr. 936 
To Profit and Loss Adjustment 
 A/c 
936 
(Correction of error by which 
Purchase Account was over 
debited last year) 
(ii) Profit & Loss Adjustment A/c Dr. 180 
Customer’s Account Dr. 1,104 
 To Suspense Account 1,284 
(Correction of the entry by which 
(a) Sales A/c was over credited by
` 180 (b) customer was credited
by `642 instead of being debited
by ` 462)
(iii) Suspense Account Dr. 600 
To Profit & Loss Adjustment A/c 600 
(Correction of error by which 
Returns Inward Account was 
debited by ` 300 instead of 
Returns Outwards Account being 
credited by ` 300) 
(iv) Suspense Account Dr. 1,790 
To Geet Account 895 
To Meet Account 895 
486
(Removal or wrong debit to Meet 
and giving credit to Geet from 
whom cash was received) 
(v) Customer’s Account Dr. 1,400 
To Profit & Loss Adjustment A/c 1,400 
(Rectification of the error arising 
from non-preparation of invoice for 
goods delivered) 
(vi) Profit & Loss Adjustment A/c Dr. 1600 
 To Customer’s Account 1,600 
(The Customer’s A/c credited with 
goods not yet purchased by him) 
(vii) Inventory A/c 
 To Profit & Loss Adjustment A/c 
(Cost of goods debited to 
inventory and credited to Profit & 
Loss Adjustment A/c) 
Dr. 1280 
1280 
(viii) Trade receivable/ Manas’s 
Account 
To Suspense Account 
Dr. 500 
500 
(`500 due by Manas not taken into 
trial balance, now rectified) 
(ix) Deep’s account/Trade receivable Dr. 6,000 
To Profit & Loss Adjustment A/c 6,000 
(Sales to Deep omitted, now 
rectified) 
(x) Profit & Loss Adjustment A/c Dr. 8,436 
To Bhatt’s Capital Account 8,436 
(Transfer of the Profit & Loss 
Adjustment A/c balance to the 
Capital Account) 
(b) Bank Reconciliation Statement as on 31
st
 March, 2024
Particulars `  
Bank balance (Debit i.e. overdraft) as per Bank Pass book 1,34,300 
(i) No adjustment required as there would be no difference
on 31.3.24
(ii) Add: No entry in Cash book for interest collection by
Bank
11,200 
(iii) Less: Amount debited in cash book for pending cheques
in collection but not credited in Pass Book
(30,000) 
487
Page 4


ANSWERS OF MODEL TEST PAPER 1
FOUNDATION COURSE 
PAPER – 1: ACCOUNTING 
1. (a) (i) False: Accounting Standards for non-corporate entities in India are 
issued by the Institute of Chartered Accountants of India (ICAI). 
(ii) True : Subsidy received from the government for working capital by 
a manufacturing concern is a revenue receipt because it has no 
effect on improvement of future capability of business in revenue 
generation.
(iii) True : In the early periods of useful life of a fixed assets, repairs 
and maintenance expenses are relatively low because the asset is 
new. Whereas in later periods, as the asset become old, repairs 
and maintenance expenses increase continuously.  Under written 
down value method, depreciation charged is high in the initial 
period and reduces continuously in the later periods. Thus, 
depreciation and repair and maintenance expenses become more 
or less uniform throughout the useful life of the asset.
(iv) True : Discount at the time of retirement of a bill is a gain for the 
drawee and loss for the drawer.
(v) False: Surviving partners may continue to carry on the business in 
case of partnership.
(vi) False: Receipts and payments account is a classified summary of 
cash receipts and payments over a certain period together with 
cash and bank balances at the beginning and close of the period.
(b) Limitations which must be kept in mind while evaluating the Financial
Statements are as follows:
• The factors which may be relevant in assessing the worth of the
enterprise don’t find place in the accounts as they cannot be
measured in terms of money.
• Balance Sheet shows the position of the business on the day of its
preparation and not on the future date while the users of the
accounts are interested in knowing the position of the business in
the near future and also in long run and not for the past date.
• Accounting ignores changes in some money factors like inflation
etc.
• There are occasions when accounting principles conflict with each
other.
• Certain accounting estimates depend on the sheer personal
judgement of the accountant.
• Different accounting policies for the treatment of same item adds to
the probability of manipulations.
485
(c) Calculation of depreciation for the year ended 31.3.24
Machine Machine Machine Depreciation 
on sold 
machine 
I 
(28,54,000 - 
2,16,000) 
II 
Purchased 
on 1
st 
July 
III 
Purchased 
on 1
st
 Nov 
IV 
` ` ` ` 
Book value as 
on 1
st
 April, 
2023 
26,38,000 4,80,000 5,60,000 2,16,000 
Depreciation 
@15% 
3,95,700 (for 
full year) 
54,000 
(for 9 
months) 
35,000 
(for 5 
months) 
8,100 
(for 3 
months) 
Total depreciation (I + II + III + IV)    ` 4,92,800 
2. (a)
Particulars L.F. Dr. 
` 
Cr. 
` 
(i) Suspense Account Dr. 936 
To Profit and Loss Adjustment 
 A/c 
936 
(Correction of error by which 
Purchase Account was over 
debited last year) 
(ii) Profit & Loss Adjustment A/c Dr. 180 
Customer’s Account Dr. 1,104 
 To Suspense Account 1,284 
(Correction of the entry by which 
(a) Sales A/c was over credited by
` 180 (b) customer was credited
by `642 instead of being debited
by ` 462)
(iii) Suspense Account Dr. 600 
To Profit & Loss Adjustment A/c 600 
(Correction of error by which 
Returns Inward Account was 
debited by ` 300 instead of 
Returns Outwards Account being 
credited by ` 300) 
(iv) Suspense Account Dr. 1,790 
To Geet Account 895 
To Meet Account 895 
486
(Removal or wrong debit to Meet 
and giving credit to Geet from 
whom cash was received) 
(v) Customer’s Account Dr. 1,400 
To Profit & Loss Adjustment A/c 1,400 
(Rectification of the error arising 
from non-preparation of invoice for 
goods delivered) 
(vi) Profit & Loss Adjustment A/c Dr. 1600 
 To Customer’s Account 1,600 
(The Customer’s A/c credited with 
goods not yet purchased by him) 
(vii) Inventory A/c 
 To Profit & Loss Adjustment A/c 
(Cost of goods debited to 
inventory and credited to Profit & 
Loss Adjustment A/c) 
Dr. 1280 
1280 
(viii) Trade receivable/ Manas’s 
Account 
To Suspense Account 
Dr. 500 
500 
(`500 due by Manas not taken into 
trial balance, now rectified) 
(ix) Deep’s account/Trade receivable Dr. 6,000 
To Profit & Loss Adjustment A/c 6,000 
(Sales to Deep omitted, now 
rectified) 
(x) Profit & Loss Adjustment A/c Dr. 8,436 
To Bhatt’s Capital Account 8,436 
(Transfer of the Profit & Loss 
Adjustment A/c balance to the 
Capital Account) 
(b) Bank Reconciliation Statement as on 31
st
 March, 2024
Particulars `  
Bank balance (Debit i.e. overdraft) as per Bank Pass book 1,34,300 
(i) No adjustment required as there would be no difference
on 31.3.24
(ii) Add: No entry in Cash book for interest collection by
Bank
11,200 
(iii) Less: Amount debited in cash book for pending cheques
in collection but not credited in Pass Book
(30,000) 
487
(iv) Add: Cheque credited in cash book but not debited in
pass book
10,000 
(v) Add: Reversal of wrong Credit
Less: Reversal of wrong debit
2,000 
(1,200) 
(vi) Less: Cheque of ` 1,000 entered in cash book but
omitted to be banked
(4,000) 
(vii) Less: Discounted dishonored but no entry in Cash book (20,800) 
(viii) Add: Rebate on bill retired not entered in cash book 700 
(viii) Add: Cheques deposited in bank not yet recorded in
cash book
9,600 
Balance (Cr. i.e. overdraft) as per Cash book 1,11,800 
Note: A cheque of ` 4,320 credited in Pass Book on 28
th
 March, 2024 
and later debited in Pass Book on 1
st
 April, 2024 has no effect on Bank 
Reconciliation statement as at 31
st
 March, 2024. 
3. (a) Trading and Profit and Loss Account 
for the year ended 31
st
 December, 2023 
Amount Amount 
`  `  
To Opening stock 50,000 By Sales 
(` 2,60,000 ? 125/ 100) 
3,25,000 
To Purchases 
(balancing figure) 
2,72,500 By Closing stock 62,500 
To Gross profit c/d 
(` 2,60,000 ? 25/ 
100) 
   65,000 _______ 
3,87,500 3,87,500 
To Expenses 49,250 By Gross profit b/d 65,000 
To Loss on sale of 
fixed assets 
750 
To Depreciation on 
fixed assets 
(W.N.1) 
1,000 
To Net profit 14,000 ______ 
65,000 65,000 
Balance Sheet as on 31st December, 2023 
Amount Amount 
Liabilities `  Assets `  
Capital (W.N. 5) 1,69,000 Fixed assets 9,000 
Add: Additional capital 5,000 Debtors (W.N. 3) 87,500 
488
Page 5


ANSWERS OF MODEL TEST PAPER 1
FOUNDATION COURSE 
PAPER – 1: ACCOUNTING 
1. (a) (i) False: Accounting Standards for non-corporate entities in India are 
issued by the Institute of Chartered Accountants of India (ICAI). 
(ii) True : Subsidy received from the government for working capital by 
a manufacturing concern is a revenue receipt because it has no 
effect on improvement of future capability of business in revenue 
generation.
(iii) True : In the early periods of useful life of a fixed assets, repairs 
and maintenance expenses are relatively low because the asset is 
new. Whereas in later periods, as the asset become old, repairs 
and maintenance expenses increase continuously.  Under written 
down value method, depreciation charged is high in the initial 
period and reduces continuously in the later periods. Thus, 
depreciation and repair and maintenance expenses become more 
or less uniform throughout the useful life of the asset.
(iv) True : Discount at the time of retirement of a bill is a gain for the 
drawee and loss for the drawer.
(v) False: Surviving partners may continue to carry on the business in 
case of partnership.
(vi) False: Receipts and payments account is a classified summary of 
cash receipts and payments over a certain period together with 
cash and bank balances at the beginning and close of the period.
(b) Limitations which must be kept in mind while evaluating the Financial
Statements are as follows:
• The factors which may be relevant in assessing the worth of the
enterprise don’t find place in the accounts as they cannot be
measured in terms of money.
• Balance Sheet shows the position of the business on the day of its
preparation and not on the future date while the users of the
accounts are interested in knowing the position of the business in
the near future and also in long run and not for the past date.
• Accounting ignores changes in some money factors like inflation
etc.
• There are occasions when accounting principles conflict with each
other.
• Certain accounting estimates depend on the sheer personal
judgement of the accountant.
• Different accounting policies for the treatment of same item adds to
the probability of manipulations.
485
(c) Calculation of depreciation for the year ended 31.3.24
Machine Machine Machine Depreciation 
on sold 
machine 
I 
(28,54,000 - 
2,16,000) 
II 
Purchased 
on 1
st 
July 
III 
Purchased 
on 1
st
 Nov 
IV 
` ` ` ` 
Book value as 
on 1
st
 April, 
2023 
26,38,000 4,80,000 5,60,000 2,16,000 
Depreciation 
@15% 
3,95,700 (for 
full year) 
54,000 
(for 9 
months) 
35,000 
(for 5 
months) 
8,100 
(for 3 
months) 
Total depreciation (I + II + III + IV)    ` 4,92,800 
2. (a)
Particulars L.F. Dr. 
` 
Cr. 
` 
(i) Suspense Account Dr. 936 
To Profit and Loss Adjustment 
 A/c 
936 
(Correction of error by which 
Purchase Account was over 
debited last year) 
(ii) Profit & Loss Adjustment A/c Dr. 180 
Customer’s Account Dr. 1,104 
 To Suspense Account 1,284 
(Correction of the entry by which 
(a) Sales A/c was over credited by
` 180 (b) customer was credited
by `642 instead of being debited
by ` 462)
(iii) Suspense Account Dr. 600 
To Profit & Loss Adjustment A/c 600 
(Correction of error by which 
Returns Inward Account was 
debited by ` 300 instead of 
Returns Outwards Account being 
credited by ` 300) 
(iv) Suspense Account Dr. 1,790 
To Geet Account 895 
To Meet Account 895 
486
(Removal or wrong debit to Meet 
and giving credit to Geet from 
whom cash was received) 
(v) Customer’s Account Dr. 1,400 
To Profit & Loss Adjustment A/c 1,400 
(Rectification of the error arising 
from non-preparation of invoice for 
goods delivered) 
(vi) Profit & Loss Adjustment A/c Dr. 1600 
 To Customer’s Account 1,600 
(The Customer’s A/c credited with 
goods not yet purchased by him) 
(vii) Inventory A/c 
 To Profit & Loss Adjustment A/c 
(Cost of goods debited to 
inventory and credited to Profit & 
Loss Adjustment A/c) 
Dr. 1280 
1280 
(viii) Trade receivable/ Manas’s 
Account 
To Suspense Account 
Dr. 500 
500 
(`500 due by Manas not taken into 
trial balance, now rectified) 
(ix) Deep’s account/Trade receivable Dr. 6,000 
To Profit & Loss Adjustment A/c 6,000 
(Sales to Deep omitted, now 
rectified) 
(x) Profit & Loss Adjustment A/c Dr. 8,436 
To Bhatt’s Capital Account 8,436 
(Transfer of the Profit & Loss 
Adjustment A/c balance to the 
Capital Account) 
(b) Bank Reconciliation Statement as on 31
st
 March, 2024
Particulars `  
Bank balance (Debit i.e. overdraft) as per Bank Pass book 1,34,300 
(i) No adjustment required as there would be no difference
on 31.3.24
(ii) Add: No entry in Cash book for interest collection by
Bank
11,200 
(iii) Less: Amount debited in cash book for pending cheques
in collection but not credited in Pass Book
(30,000) 
487
(iv) Add: Cheque credited in cash book but not debited in
pass book
10,000 
(v) Add: Reversal of wrong Credit
Less: Reversal of wrong debit
2,000 
(1,200) 
(vi) Less: Cheque of ` 1,000 entered in cash book but
omitted to be banked
(4,000) 
(vii) Less: Discounted dishonored but no entry in Cash book (20,800) 
(viii) Add: Rebate on bill retired not entered in cash book 700 
(viii) Add: Cheques deposited in bank not yet recorded in
cash book
9,600 
Balance (Cr. i.e. overdraft) as per Cash book 1,11,800 
Note: A cheque of ` 4,320 credited in Pass Book on 28
th
 March, 2024 
and later debited in Pass Book on 1
st
 April, 2024 has no effect on Bank 
Reconciliation statement as at 31
st
 March, 2024. 
3. (a) Trading and Profit and Loss Account 
for the year ended 31
st
 December, 2023 
Amount Amount 
`  `  
To Opening stock 50,000 By Sales 
(` 2,60,000 ? 125/ 100) 
3,25,000 
To Purchases 
(balancing figure) 
2,72,500 By Closing stock 62,500 
To Gross profit c/d 
(` 2,60,000 ? 25/ 
100) 
   65,000 _______ 
3,87,500 3,87,500 
To Expenses 49,250 By Gross profit b/d 65,000 
To Loss on sale of 
fixed assets 
750 
To Depreciation on 
fixed assets 
(W.N.1) 
1,000 
To Net profit 14,000 ______ 
65,000 65,000 
Balance Sheet as on 31st December, 2023 
Amount Amount 
Liabilities `  Assets `  
Capital (W.N. 5) 1,69,000 Fixed assets 9,000 
Add: Additional capital 5,000 Debtors (W.N. 3) 87,500 
488
 Net profit    14,000 Stock 62,500 
1,88,000 Bank balance 50,000 
Less: Drawings (25,000) 1,63,000 
Creditors    46,000 _______ 
2,09,000 2,09,000 
Working Notes: 
1. Fixed assets account 
`  `  
To Balance b/d 7,500 By Bank (sale) 1,750 
To Bank 5,000 By Loss on sale of fixed 
asset (2,500-1,750) 
750 
By Depreciation (balancing 
figure) 
1,000 
_____ By Balance c/d   9,000 
12,500 12,500 
2. Bank account 
`  `  
To Balance b/d 
(balancing figure) 
62,500 By Creditors 2,80,000 
To Debtors 3,40,000 By Expenses 49,250 
To Capital 5,000 By Drawings 25,000 
To Sale of fixed assets 1,750 By Fixed assets 5,000 
_______ By Balance c/d    50,000 
4,09,250 4,09,250 
3. Debtors account 
`  `  
To Balance b/d 1,02,500 By Bank 3,40,000 
To Sales 
(` 2,60,000 
100
125
?
) 
3,25,000 
_______ 
By Balance c/d 
(balancing figure) 87,500 
_______ 
4,27,500 4,27,500 
4. Creditors account 
` ` 
To Bank 2,80,000 By Balance b/d (balancing 
figure) 
53,500 
To Balance 
c/d 
   46,000 By Purchases (from 
trading account) 
2,72,500 
3,26,000 3,26,000 
489