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

 Page 1


SUGGESTED ANSWER JUNE 2024 
FOUNDATION EXAMINATION
Page 2


SUGGESTED ANSWER JUNE 2024 
FOUNDATION EXAMINATION
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 Ture or False:
(i) If Closing Stock appears in the Trial Balance then it does not enter in
Trading Account. It is shown only in the Balance Sheet.
(ii) If the amount is posted in the wrong account or it is written on the wrong
side of the account, it is called error of principle.
(iii) Accounting Standards can override the statute.
(iv) Promissory Note is different from Bill of Exchange because the amount
is paid by maker in case of former and by the acceptor in the later.
(v) All errors are rectified by means of journal entries.
(vi) Revaluation Account is also known as Profit and Loss Adjustment
Account.  (6 x 2 = 12 Marks)
(b) (i)  Define accounting policy. What are the conditions under which a company
can change its accounting policy? 
(ii) Explain the following:
(1) Cash Basis of Accounting
(2) Going Concern concept (2 x 2 = 4 Marks) 
(c) Pass journal entries for the following transactions in the books of Mr. Kapil:
(i) Purchased goods from Sonu for ` 1,50,000 at a trade discount of 10%
plus CGST and SGST@ 6% each.
Page 3


SUGGESTED ANSWER JUNE 2024 
FOUNDATION EXAMINATION
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 Ture or False:
(i) If Closing Stock appears in the Trial Balance then it does not enter in
Trading Account. It is shown only in the Balance Sheet.
(ii) If the amount is posted in the wrong account or it is written on the wrong
side of the account, it is called error of principle.
(iii) Accounting Standards can override the statute.
(iv) Promissory Note is different from Bill of Exchange because the amount
is paid by maker in case of former and by the acceptor in the later.
(v) All errors are rectified by means of journal entries.
(vi) Revaluation Account is also known as Profit and Loss Adjustment
Account.  (6 x 2 = 12 Marks)
(b) (i)  Define accounting policy. What are the conditions under which a company
can change its accounting policy? 
(ii) Explain the following:
(1) Cash Basis of Accounting
(2) Going Concern concept (2 x 2 = 4 Marks) 
(c) Pass journal entries for the following transactions in the books of Mr. Kapil:
(i) Purchased goods from Sonu for ` 1,50,000 at a trade discount of 10%
plus CGST and SGST@ 6% each.
 FOUNDATION EXAMINATION: JUNE 2024 
 
 
SUGGESTED ANSWER 
2 
(ii)  Sold goods to Mohit for ` 50,000 and charged CGST and SGST @ 5% 
each. Out of the amount due 40% is received by cheque immediately. 
(iii)  Goods costing ` 25,000 withdrawn for personal use. Such Goods were 
purchased by paying CGST and SGST @ 6% each. 
(iv)  Machinery purchased from M/s Bright Industries for ` 2,00,000 plus 
CGST and SGST @ 9% each. Paid ` 1,00,000 immediately by cheque and 
balance to be paid after two months. (4 x 1 = 4 Marks)  
Answer  
(a) (i) True: If closing stock appears in the trial balance then it is not entered in 
the trading account but it is shown only in the balance sheet because it 
has already been adjusted to purchase account. 
(ii) False: If the amount is posted in the wrong account or it is written on 
the wrong side of the account, it is called error of commission and not 
error of Principle. 
(iii) False: Accounting standards cannot override the statute. The standards 
are required to be framed within the ambit of prevailing statutes. 
(iv) True: In case of the promissory note, it is generally the maker who 
makes the payment, but in case of the bill of exchange, the person 
accepting the bill shall be liable to make the payment to the holder of 
the bill.                               
(v) False: Errors not affecting the trial balance can be rectified by passing 
a rectification journal entry. While other errors that affect one account 
of trial balance cannot be rectified by passing journal entries.  Totaling 
errors cannot be rectified by passing journal entries 
(vi) True: Revaluation is also called as profit and loss adjustment account. 
It is used to record the gain/loss arising from the revaluation of assets 
and liabilities of a firm at the time of reconstitution. 
(b) (i) Accounting Policy: 
(a)  Accounting Policies refer to specific accounting principles and 
methods of applying these principles adopted by the enterprise in 
the preparation and presentation of financial statements; and  
(b) Policies are based on various accounting concepts, principles, and 
conventions. 
Page 4


SUGGESTED ANSWER JUNE 2024 
FOUNDATION EXAMINATION
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 Ture or False:
(i) If Closing Stock appears in the Trial Balance then it does not enter in
Trading Account. It is shown only in the Balance Sheet.
(ii) If the amount is posted in the wrong account or it is written on the wrong
side of the account, it is called error of principle.
(iii) Accounting Standards can override the statute.
(iv) Promissory Note is different from Bill of Exchange because the amount
is paid by maker in case of former and by the acceptor in the later.
(v) All errors are rectified by means of journal entries.
(vi) Revaluation Account is also known as Profit and Loss Adjustment
Account.  (6 x 2 = 12 Marks)
(b) (i)  Define accounting policy. What are the conditions under which a company
can change its accounting policy? 
(ii) Explain the following:
(1) Cash Basis of Accounting
(2) Going Concern concept (2 x 2 = 4 Marks) 
(c) Pass journal entries for the following transactions in the books of Mr. Kapil:
(i) Purchased goods from Sonu for ` 1,50,000 at a trade discount of 10%
plus CGST and SGST@ 6% each.
 FOUNDATION EXAMINATION: JUNE 2024 
 
 
SUGGESTED ANSWER 
2 
(ii)  Sold goods to Mohit for ` 50,000 and charged CGST and SGST @ 5% 
each. Out of the amount due 40% is received by cheque immediately. 
(iii)  Goods costing ` 25,000 withdrawn for personal use. Such Goods were 
purchased by paying CGST and SGST @ 6% each. 
(iv)  Machinery purchased from M/s Bright Industries for ` 2,00,000 plus 
CGST and SGST @ 9% each. Paid ` 1,00,000 immediately by cheque and 
balance to be paid after two months. (4 x 1 = 4 Marks)  
Answer  
(a) (i) True: If closing stock appears in the trial balance then it is not entered in 
the trading account but it is shown only in the balance sheet because it 
has already been adjusted to purchase account. 
(ii) False: If the amount is posted in the wrong account or it is written on 
the wrong side of the account, it is called error of commission and not 
error of Principle. 
(iii) False: Accounting standards cannot override the statute. The standards 
are required to be framed within the ambit of prevailing statutes. 
(iv) True: In case of the promissory note, it is generally the maker who 
makes the payment, but in case of the bill of exchange, the person 
accepting the bill shall be liable to make the payment to the holder of 
the bill.                               
(v) False: Errors not affecting the trial balance can be rectified by passing 
a rectification journal entry. While other errors that affect one account 
of trial balance cannot be rectified by passing journal entries.  Totaling 
errors cannot be rectified by passing journal entries 
(vi) True: Revaluation is also called as profit and loss adjustment account. 
It is used to record the gain/loss arising from the revaluation of assets 
and liabilities of a firm at the time of reconstitution. 
(b) (i) Accounting Policy: 
(a)  Accounting Policies refer to specific accounting principles and 
methods of applying these principles adopted by the enterprise in 
the preparation and presentation of financial statements; and  
(b) Policies are based on various accounting concepts, principles, and 
conventions. 
 ACCOUNTING 
 
SUGGESTED ANSWER 
3 
Conditions under which change takes place: 
A change in accounting policies shall be made in the following conditions: 
(a) It is required by some statute or for compliance with an Accounting 
Standard 
(b) Change would result in more appropriate presentation of financial 
statement  
 (ii) (i) Cash Basis of Accounting is the method of recording financial 
transactions, by which revenues and expenditure and assets and 
liabilities are reflected in the accounts in the period in which the 
receipts or payments are actually effected/made. 
(ii) Going Concern concept states that the financial statements are 
normally prepared on the assumption that an enterprise is a going 
concern and will continue in operation for the foreseeable future. 
Hence, it is assumed that the enterprise has neither the intention 
nor the need to liquidate or curtail materially the scale of its 
operations; if such an intention or need exists, the financial 
statements may have to be prepared on a different basis and, if so, 
the basis used needs to be disclosed. 
 The valuation of assets of a business entity is dependent on this 
assumption. Traditionally, accountants follow historical cost in 
majority of the cases. 
(c)      Journal entries in the books of Mr. Kapil 
  
S 
No. 
Particulars L.F. Amount  
Dr. (
`
) 
Amount 
Cr. (
`
) 
(i) Purchases A/c      Dr.  1,35,000  
 Input CGST A/c    Dr.    8,100  
 Input SGST A/c     Dr.    8,100  
   To Sonu’s A/c    1,51,200 
 (Being goods purchased from 
Sonu, CGST and SGST payable @ 
6% each) 
   
Page 5


SUGGESTED ANSWER JUNE 2024 
FOUNDATION EXAMINATION
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 Ture or False:
(i) If Closing Stock appears in the Trial Balance then it does not enter in
Trading Account. It is shown only in the Balance Sheet.
(ii) If the amount is posted in the wrong account or it is written on the wrong
side of the account, it is called error of principle.
(iii) Accounting Standards can override the statute.
(iv) Promissory Note is different from Bill of Exchange because the amount
is paid by maker in case of former and by the acceptor in the later.
(v) All errors are rectified by means of journal entries.
(vi) Revaluation Account is also known as Profit and Loss Adjustment
Account.  (6 x 2 = 12 Marks)
(b) (i)  Define accounting policy. What are the conditions under which a company
can change its accounting policy? 
(ii) Explain the following:
(1) Cash Basis of Accounting
(2) Going Concern concept (2 x 2 = 4 Marks) 
(c) Pass journal entries for the following transactions in the books of Mr. Kapil:
(i) Purchased goods from Sonu for ` 1,50,000 at a trade discount of 10%
plus CGST and SGST@ 6% each.
 FOUNDATION EXAMINATION: JUNE 2024 
 
 
SUGGESTED ANSWER 
2 
(ii)  Sold goods to Mohit for ` 50,000 and charged CGST and SGST @ 5% 
each. Out of the amount due 40% is received by cheque immediately. 
(iii)  Goods costing ` 25,000 withdrawn for personal use. Such Goods were 
purchased by paying CGST and SGST @ 6% each. 
(iv)  Machinery purchased from M/s Bright Industries for ` 2,00,000 plus 
CGST and SGST @ 9% each. Paid ` 1,00,000 immediately by cheque and 
balance to be paid after two months. (4 x 1 = 4 Marks)  
Answer  
(a) (i) True: If closing stock appears in the trial balance then it is not entered in 
the trading account but it is shown only in the balance sheet because it 
has already been adjusted to purchase account. 
(ii) False: If the amount is posted in the wrong account or it is written on 
the wrong side of the account, it is called error of commission and not 
error of Principle. 
(iii) False: Accounting standards cannot override the statute. The standards 
are required to be framed within the ambit of prevailing statutes. 
(iv) True: In case of the promissory note, it is generally the maker who 
makes the payment, but in case of the bill of exchange, the person 
accepting the bill shall be liable to make the payment to the holder of 
the bill.                               
(v) False: Errors not affecting the trial balance can be rectified by passing 
a rectification journal entry. While other errors that affect one account 
of trial balance cannot be rectified by passing journal entries.  Totaling 
errors cannot be rectified by passing journal entries 
(vi) True: Revaluation is also called as profit and loss adjustment account. 
It is used to record the gain/loss arising from the revaluation of assets 
and liabilities of a firm at the time of reconstitution. 
(b) (i) Accounting Policy: 
(a)  Accounting Policies refer to specific accounting principles and 
methods of applying these principles adopted by the enterprise in 
the preparation and presentation of financial statements; and  
(b) Policies are based on various accounting concepts, principles, and 
conventions. 
 ACCOUNTING 
 
SUGGESTED ANSWER 
3 
Conditions under which change takes place: 
A change in accounting policies shall be made in the following conditions: 
(a) It is required by some statute or for compliance with an Accounting 
Standard 
(b) Change would result in more appropriate presentation of financial 
statement  
 (ii) (i) Cash Basis of Accounting is the method of recording financial 
transactions, by which revenues and expenditure and assets and 
liabilities are reflected in the accounts in the period in which the 
receipts or payments are actually effected/made. 
(ii) Going Concern concept states that the financial statements are 
normally prepared on the assumption that an enterprise is a going 
concern and will continue in operation for the foreseeable future. 
Hence, it is assumed that the enterprise has neither the intention 
nor the need to liquidate or curtail materially the scale of its 
operations; if such an intention or need exists, the financial 
statements may have to be prepared on a different basis and, if so, 
the basis used needs to be disclosed. 
 The valuation of assets of a business entity is dependent on this 
assumption. Traditionally, accountants follow historical cost in 
majority of the cases. 
(c)      Journal entries in the books of Mr. Kapil 
  
S 
No. 
Particulars L.F. Amount  
Dr. (
`
) 
Amount 
Cr. (
`
) 
(i) Purchases A/c      Dr.  1,35,000  
 Input CGST A/c    Dr.    8,100  
 Input SGST A/c     Dr.    8,100  
   To Sonu’s A/c    1,51,200 
 (Being goods purchased from 
Sonu, CGST and SGST payable @ 
6% each) 
   
 FOUNDATION EXAMINATION: JUNE 2024 
 
 
SUGGESTED ANSWER 
4 
Question 2 
(a) The Trial Balance of Mr. Sarvesh Kumar as on 31
st
 March,2024 did not tally 
and the difference was posted to Suspense Account. On a scrutiny of the 
books; the following errors were detected: 
(i) The total of Sales Returns Book for January 2024 has been casted short 
by ` 1,000.  
(ii) Bank A/c       Dr.   22,000  
 Mohit’s A/c      Dr.  33,000  
     To Sales A/c   50,000 
    To Output CGST A/c 
   To Output SGST A/c 
     2,500 
2,500 
 (Being goods sold to Mohit, 
charged CGST and SGST @ 5% 
each and received 40% in cash) 
   
(iii) Drawings A/c     Dr.  28,000  
      To Purchase A/c   25,000 
      To Input CGST A/c    1,500 
      To Input SGST A/c    1,500 
 (Being goods withdrawn for 
personal use and input CGST and 
input SGST debited at the time of 
purchase reversed)  
   
(iv) Machinery A/c    Dr.  2,00,000  
 Input CGST A/c    Dr.      18,000  
 Input SGST A/c    Dr.      18,000  
    To Bank A/c   1,00,000 
    To Bright Industries    1,36,000 
 (Being machinery purchased and 
paid 
`
 1,00,000 immediately, CGST 
and SGST @ 9% each)