Mock Test: Principles and Practice of Accounting(Paper-1) - Dec 2022 | Mock Tests & Past Year Papers for CA Foundation PDF Download

 Page 1


1 
 
MOCK TEST PAPER 1 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF 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. 
Time Allowed: 3 Hours Maximum Marks: 100 
1. (a)  State with reasons, whether the following statements are true or false: 
(i)  If the effect of errors committed cancel out, the errors will be called compensating errors and 
the trial balance will disagree. 
(ii)  Accrual concept implies accounting on cash basis.  
(iii)  Consignment account is of the nature of real account.  
(iv) In case the due date of a bill falls after the date of closing the account, the interest from the 
date of closing to such due date is known as Red-Ink interest. 
(v) When there is no partnership deed prevails, the interest on loan of a partner to be paid @ 6%.  
(vi) When shares are forfeited, the share capital account is debited with called up capital of shares 
forfeited and the share forfeiture account is credited with Calls in arrear of shares forfeited.  
(6 Statements x 2 Marks = 12 Marks) 
(b) “Change in accounting policy may have a material effect on the items of financial statements.” 
Explain the statement with the help of an example. (4 Marks) 
(c) Classify the following errors under the three categories – Errors of Omission, Errors of Commission 
and Errors of Principle. 
(i) Credit sale wrongly passed through the Purchase Book.  
(ii) Machinery sold on credit to Mohan recorded in Journal Proper but omitted to be posted.  
(iii) Purchase from M not recorded in subsidiary books. 
(iv) Goods worth ` 1,520 purchased on credit from Ram recorded in the Purchase Book as  
` 1,250. 
(v) Sale of furniture credited to Sales Account. (4 Marks) 
2. (a) The Plant and Machinery Account of a Factory shed showed a balance of `21,15,250 on 1
st
April, 2020. 
Its accounts were made up on 31
st
 March every year and depreciation is written off @ 10% p.a. under 
the Diminishing Balance Method. 
On 1
st
July, 2020 a new machinery was acquired at a cost of `4,35,000 and installation charges 
incurred in erecting the machine works out to `9,800 on the same date. On 1st July,2020, a 
machine which had cost `4,16,200 on 1
st
 April 2017, having become obsolete, was sold off for 
`90,000. Another machine which had cost `2,38,000 on 1
st
April, 2018 was scrapped on the same 
date and it realized nothing. On 1
st
 September,2020, a new machinery was purchased for 
`2,50,000. 
Page 2


1 
 
MOCK TEST PAPER 1 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF 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. 
Time Allowed: 3 Hours Maximum Marks: 100 
1. (a)  State with reasons, whether the following statements are true or false: 
(i)  If the effect of errors committed cancel out, the errors will be called compensating errors and 
the trial balance will disagree. 
(ii)  Accrual concept implies accounting on cash basis.  
(iii)  Consignment account is of the nature of real account.  
(iv) In case the due date of a bill falls after the date of closing the account, the interest from the 
date of closing to such due date is known as Red-Ink interest. 
(v) When there is no partnership deed prevails, the interest on loan of a partner to be paid @ 6%.  
(vi) When shares are forfeited, the share capital account is debited with called up capital of shares 
forfeited and the share forfeiture account is credited with Calls in arrear of shares forfeited.  
(6 Statements x 2 Marks = 12 Marks) 
(b) “Change in accounting policy may have a material effect on the items of financial statements.” 
Explain the statement with the help of an example. (4 Marks) 
(c) Classify the following errors under the three categories – Errors of Omission, Errors of Commission 
and Errors of Principle. 
(i) Credit sale wrongly passed through the Purchase Book.  
(ii) Machinery sold on credit to Mohan recorded in Journal Proper but omitted to be posted.  
(iii) Purchase from M not recorded in subsidiary books. 
(iv) Goods worth ` 1,520 purchased on credit from Ram recorded in the Purchase Book as  
` 1,250. 
(v) Sale of furniture credited to Sales Account. (4 Marks) 
2. (a) The Plant and Machinery Account of a Factory shed showed a balance of `21,15,250 on 1
st
April, 2020. 
Its accounts were made up on 31
st
 March every year and depreciation is written off @ 10% p.a. under 
the Diminishing Balance Method. 
On 1
st
July, 2020 a new machinery was acquired at a cost of `4,35,000 and installation charges 
incurred in erecting the machine works out to `9,800 on the same date. On 1st July,2020, a 
machine which had cost `4,16,200 on 1
st
 April 2017, having become obsolete, was sold off for 
`90,000. Another machine which had cost `2,38,000 on 1
st
April, 2018 was scrapped on the same 
date and it realized nothing. On 1
st
 September,2020, a new machinery was purchased for 
`2,50,000. 
2 
 Write a plant and machinery account for the accounting year 2020-21, allowing the same rate of 
depreciation as in the past, calculating depreciation to the nearest multiple of a Rupee.  
(b)  Prepare the Bank Reconciliation Statement of M/s. Singh Brothers on 30
th
 June 2022 from the 
particulars given below: 
(i) The Bank Pass Book had a debit balance of ` 75,000 on 30th June, 2022. 
(ii)  A cheque worth ` 1,200 directly deposited into Bank by customer but no entry was made in 
the Cash Book. 
(iii)  Out of cheques issued worth ` 1,02,000, cheques amounting to ` 60,000 only were presented 
for payment till 30
th
 June, 2022. 
(iv) A cheque for ` 12,000 received and entered in the Cash Book but it was not sent to the Bank. 
(v)  Cheques worth ` 60,000 had been sent to Bank for collection but the collection was reported 
by the Bank as under. 
(1)  Cheques collected before 30th June, 2022, ` 42,000 
(2) Cheques collected on 10th July, 2022, ` 12,000 
(3) Cheques collected on 12th July, 2022, ` 6,000. 
(vi) The Bank made a direct payment of ` 1,800 which was not recorded in the Cash Book. 
(vii) Interest on Overdraft charged by the bank ` 4,800 was not recorded in the Cash Book. 
(viii)  Bank charges worth ` 240 have been entered twice in the cash book whereas Insurance 
charges for ` 210 directly paid by Bank was not at all entered in the Cash Book. 
(ix)  The credit side of bank column of Cash Book was under cast by ` 6,000. 
(x) A bill for ` 3000(discounted with bank in May, 2022) dishonored on 30
th
 June ,2022 and noting 
charges of Rs 100 paid by bank. (10 + 10 = 20 Marks) 
3. (a)  Hari of Bangalore consigns 2,000 cases of goods costing ` 1,000 each to Om of Hyderabad. Hari 
pays the following expenses in connection with consignment: 
  ` 
Carriage 20,000 
Freight 60,000 
Loading charges 20,000 
Om sells 1,400 cases at ` 1,400 per case and incurs the following expenses: 
Clearing charges 17,000 
Warehousing and storage 34,000 
Packing and selling expenses 12,000 
It is found that 100 cases have been lost in transit and 200 cases are still in transit. 
Om is entitled to a commission of 10% on gross sales.  You are required to prepare the 
Consignment Account and Om’s Account in the books of Hari.  
(b) From the following details calculate the average due date:         
Date of Bill Amount (`) Usance of Bill 
28
th
 January, 2021 10,000 1 month 
20
th
 March, 2021 8,000 2 months 
Page 3


1 
 
MOCK TEST PAPER 1 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF 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. 
Time Allowed: 3 Hours Maximum Marks: 100 
1. (a)  State with reasons, whether the following statements are true or false: 
(i)  If the effect of errors committed cancel out, the errors will be called compensating errors and 
the trial balance will disagree. 
(ii)  Accrual concept implies accounting on cash basis.  
(iii)  Consignment account is of the nature of real account.  
(iv) In case the due date of a bill falls after the date of closing the account, the interest from the 
date of closing to such due date is known as Red-Ink interest. 
(v) When there is no partnership deed prevails, the interest on loan of a partner to be paid @ 6%.  
(vi) When shares are forfeited, the share capital account is debited with called up capital of shares 
forfeited and the share forfeiture account is credited with Calls in arrear of shares forfeited.  
(6 Statements x 2 Marks = 12 Marks) 
(b) “Change in accounting policy may have a material effect on the items of financial statements.” 
Explain the statement with the help of an example. (4 Marks) 
(c) Classify the following errors under the three categories – Errors of Omission, Errors of Commission 
and Errors of Principle. 
(i) Credit sale wrongly passed through the Purchase Book.  
(ii) Machinery sold on credit to Mohan recorded in Journal Proper but omitted to be posted.  
(iii) Purchase from M not recorded in subsidiary books. 
(iv) Goods worth ` 1,520 purchased on credit from Ram recorded in the Purchase Book as  
` 1,250. 
(v) Sale of furniture credited to Sales Account. (4 Marks) 
2. (a) The Plant and Machinery Account of a Factory shed showed a balance of `21,15,250 on 1
st
April, 2020. 
Its accounts were made up on 31
st
 March every year and depreciation is written off @ 10% p.a. under 
the Diminishing Balance Method. 
On 1
st
July, 2020 a new machinery was acquired at a cost of `4,35,000 and installation charges 
incurred in erecting the machine works out to `9,800 on the same date. On 1st July,2020, a 
machine which had cost `4,16,200 on 1
st
 April 2017, having become obsolete, was sold off for 
`90,000. Another machine which had cost `2,38,000 on 1
st
April, 2018 was scrapped on the same 
date and it realized nothing. On 1
st
 September,2020, a new machinery was purchased for 
`2,50,000. 
2 
 Write a plant and machinery account for the accounting year 2020-21, allowing the same rate of 
depreciation as in the past, calculating depreciation to the nearest multiple of a Rupee.  
(b)  Prepare the Bank Reconciliation Statement of M/s. Singh Brothers on 30
th
 June 2022 from the 
particulars given below: 
(i) The Bank Pass Book had a debit balance of ` 75,000 on 30th June, 2022. 
(ii)  A cheque worth ` 1,200 directly deposited into Bank by customer but no entry was made in 
the Cash Book. 
(iii)  Out of cheques issued worth ` 1,02,000, cheques amounting to ` 60,000 only were presented 
for payment till 30
th
 June, 2022. 
(iv) A cheque for ` 12,000 received and entered in the Cash Book but it was not sent to the Bank. 
(v)  Cheques worth ` 60,000 had been sent to Bank for collection but the collection was reported 
by the Bank as under. 
(1)  Cheques collected before 30th June, 2022, ` 42,000 
(2) Cheques collected on 10th July, 2022, ` 12,000 
(3) Cheques collected on 12th July, 2022, ` 6,000. 
(vi) The Bank made a direct payment of ` 1,800 which was not recorded in the Cash Book. 
(vii) Interest on Overdraft charged by the bank ` 4,800 was not recorded in the Cash Book. 
(viii)  Bank charges worth ` 240 have been entered twice in the cash book whereas Insurance 
charges for ` 210 directly paid by Bank was not at all entered in the Cash Book. 
(ix)  The credit side of bank column of Cash Book was under cast by ` 6,000. 
(x) A bill for ` 3000(discounted with bank in May, 2022) dishonored on 30
th
 June ,2022 and noting 
charges of Rs 100 paid by bank. (10 + 10 = 20 Marks) 
3. (a)  Hari of Bangalore consigns 2,000 cases of goods costing ` 1,000 each to Om of Hyderabad. Hari 
pays the following expenses in connection with consignment: 
  ` 
Carriage 20,000 
Freight 60,000 
Loading charges 20,000 
Om sells 1,400 cases at ` 1,400 per case and incurs the following expenses: 
Clearing charges 17,000 
Warehousing and storage 34,000 
Packing and selling expenses 12,000 
It is found that 100 cases have been lost in transit and 200 cases are still in transit. 
Om is entitled to a commission of 10% on gross sales.  You are required to prepare the 
Consignment Account and Om’s Account in the books of Hari.  
(b) From the following details calculate the average due date:         
Date of Bill Amount (`) Usance of Bill 
28
th
 January, 2021 10,000 1 month 
20
th
 March, 2021 8,000 2 months 
3 
12
th
 July, 2021 14,000 1 month 
10
th
 August, 2021 12,000 2 months 
(c)   On 1
st
 January, 2022, P’s account in Q’s ledger showed a debit balance of ` 5,000.  The following 
transactions took place between Q and P during the quarter ended 31
st
 March, 2022: 
2022 
  
` 
Jan. 11 Q sold goods to P 6,000 
Jan. 24 Q received a promissory note from P due after 3 months  5,000 
Feb. 01 P sold goods to Q 10,000 
Feb. 04 Q sold goods to P 8,200 
Feb. 07 P returned goods to Q 1,000 
March 01 P sold goods to Q 5,600 
March 18 Q sold goods to P 9,200 
March 23 P sold goods to Q 4,000 
 Accounts were settled on 31
st
 March, 2022 by means of a cheque.  Prepare an Account Current to 
be submitted by Q to P as on 31
st
 March, 2022, taking interest into account @ 10% per annum.  
Calculate interest to the nearest multiple of a rupee.  (10 + 5 + 5 = 20 Marks) 
4. (a)  The Balance Sheet of Sam, Saif and Sameer as at 31.12.2021 stood as follows: 
Liabilities  Amount 
(`) 
Assets  Amount 
(`) 
Capital:   Land & Buildings  74,000 
    Sam 60,000  Investments  10,000 
    Saif 40,000  Advertisement 
suspense 
 37,800 
    Sameer 40,000 1,40,000 Life Policy (at 
surrender value):  
  
Creditors  25,800     Sam  2,500 
General Reserve  8,000     Saif  2,500 
Investment Fluctuation 
Reserve 
  
2,400 
    Sameer  
Stock 
 1,000 
20,000 
   Debtors 20,000  
   Less: Provision for  
         doubtful debts 
 
 (1,600) 
 
18,400 
    Cash & bank balance    10,000 
  1,76,200   1,76,200 
Sameer died on 31
st
 March, 2022, due to this reason the following adjustments were agreed upon: 
(i) Land and Buildings to be appreciated by 50%. 
(ii) Investment to be valued at 6% less than the cost. 
(iii) All debtors (except 20% which are considered as doubtful) were good. 
(vi) Stock to be reduced to 94%. 
Page 4


1 
 
MOCK TEST PAPER 1 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF 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. 
Time Allowed: 3 Hours Maximum Marks: 100 
1. (a)  State with reasons, whether the following statements are true or false: 
(i)  If the effect of errors committed cancel out, the errors will be called compensating errors and 
the trial balance will disagree. 
(ii)  Accrual concept implies accounting on cash basis.  
(iii)  Consignment account is of the nature of real account.  
(iv) In case the due date of a bill falls after the date of closing the account, the interest from the 
date of closing to such due date is known as Red-Ink interest. 
(v) When there is no partnership deed prevails, the interest on loan of a partner to be paid @ 6%.  
(vi) When shares are forfeited, the share capital account is debited with called up capital of shares 
forfeited and the share forfeiture account is credited with Calls in arrear of shares forfeited.  
(6 Statements x 2 Marks = 12 Marks) 
(b) “Change in accounting policy may have a material effect on the items of financial statements.” 
Explain the statement with the help of an example. (4 Marks) 
(c) Classify the following errors under the three categories – Errors of Omission, Errors of Commission 
and Errors of Principle. 
(i) Credit sale wrongly passed through the Purchase Book.  
(ii) Machinery sold on credit to Mohan recorded in Journal Proper but omitted to be posted.  
(iii) Purchase from M not recorded in subsidiary books. 
(iv) Goods worth ` 1,520 purchased on credit from Ram recorded in the Purchase Book as  
` 1,250. 
(v) Sale of furniture credited to Sales Account. (4 Marks) 
2. (a) The Plant and Machinery Account of a Factory shed showed a balance of `21,15,250 on 1
st
April, 2020. 
Its accounts were made up on 31
st
 March every year and depreciation is written off @ 10% p.a. under 
the Diminishing Balance Method. 
On 1
st
July, 2020 a new machinery was acquired at a cost of `4,35,000 and installation charges 
incurred in erecting the machine works out to `9,800 on the same date. On 1st July,2020, a 
machine which had cost `4,16,200 on 1
st
 April 2017, having become obsolete, was sold off for 
`90,000. Another machine which had cost `2,38,000 on 1
st
April, 2018 was scrapped on the same 
date and it realized nothing. On 1
st
 September,2020, a new machinery was purchased for 
`2,50,000. 
2 
 Write a plant and machinery account for the accounting year 2020-21, allowing the same rate of 
depreciation as in the past, calculating depreciation to the nearest multiple of a Rupee.  
(b)  Prepare the Bank Reconciliation Statement of M/s. Singh Brothers on 30
th
 June 2022 from the 
particulars given below: 
(i) The Bank Pass Book had a debit balance of ` 75,000 on 30th June, 2022. 
(ii)  A cheque worth ` 1,200 directly deposited into Bank by customer but no entry was made in 
the Cash Book. 
(iii)  Out of cheques issued worth ` 1,02,000, cheques amounting to ` 60,000 only were presented 
for payment till 30
th
 June, 2022. 
(iv) A cheque for ` 12,000 received and entered in the Cash Book but it was not sent to the Bank. 
(v)  Cheques worth ` 60,000 had been sent to Bank for collection but the collection was reported 
by the Bank as under. 
(1)  Cheques collected before 30th June, 2022, ` 42,000 
(2) Cheques collected on 10th July, 2022, ` 12,000 
(3) Cheques collected on 12th July, 2022, ` 6,000. 
(vi) The Bank made a direct payment of ` 1,800 which was not recorded in the Cash Book. 
(vii) Interest on Overdraft charged by the bank ` 4,800 was not recorded in the Cash Book. 
(viii)  Bank charges worth ` 240 have been entered twice in the cash book whereas Insurance 
charges for ` 210 directly paid by Bank was not at all entered in the Cash Book. 
(ix)  The credit side of bank column of Cash Book was under cast by ` 6,000. 
(x) A bill for ` 3000(discounted with bank in May, 2022) dishonored on 30
th
 June ,2022 and noting 
charges of Rs 100 paid by bank. (10 + 10 = 20 Marks) 
3. (a)  Hari of Bangalore consigns 2,000 cases of goods costing ` 1,000 each to Om of Hyderabad. Hari 
pays the following expenses in connection with consignment: 
  ` 
Carriage 20,000 
Freight 60,000 
Loading charges 20,000 
Om sells 1,400 cases at ` 1,400 per case and incurs the following expenses: 
Clearing charges 17,000 
Warehousing and storage 34,000 
Packing and selling expenses 12,000 
It is found that 100 cases have been lost in transit and 200 cases are still in transit. 
Om is entitled to a commission of 10% on gross sales.  You are required to prepare the 
Consignment Account and Om’s Account in the books of Hari.  
(b) From the following details calculate the average due date:         
Date of Bill Amount (`) Usance of Bill 
28
th
 January, 2021 10,000 1 month 
20
th
 March, 2021 8,000 2 months 
3 
12
th
 July, 2021 14,000 1 month 
10
th
 August, 2021 12,000 2 months 
(c)   On 1
st
 January, 2022, P’s account in Q’s ledger showed a debit balance of ` 5,000.  The following 
transactions took place between Q and P during the quarter ended 31
st
 March, 2022: 
2022 
  
` 
Jan. 11 Q sold goods to P 6,000 
Jan. 24 Q received a promissory note from P due after 3 months  5,000 
Feb. 01 P sold goods to Q 10,000 
Feb. 04 Q sold goods to P 8,200 
Feb. 07 P returned goods to Q 1,000 
March 01 P sold goods to Q 5,600 
March 18 Q sold goods to P 9,200 
March 23 P sold goods to Q 4,000 
 Accounts were settled on 31
st
 March, 2022 by means of a cheque.  Prepare an Account Current to 
be submitted by Q to P as on 31
st
 March, 2022, taking interest into account @ 10% per annum.  
Calculate interest to the nearest multiple of a rupee.  (10 + 5 + 5 = 20 Marks) 
4. (a)  The Balance Sheet of Sam, Saif and Sameer as at 31.12.2021 stood as follows: 
Liabilities  Amount 
(`) 
Assets  Amount 
(`) 
Capital:   Land & Buildings  74,000 
    Sam 60,000  Investments  10,000 
    Saif 40,000  Advertisement 
suspense 
 37,800 
    Sameer 40,000 1,40,000 Life Policy (at 
surrender value):  
  
Creditors  25,800     Sam  2,500 
General Reserve  8,000     Saif  2,500 
Investment Fluctuation 
Reserve 
  
2,400 
    Sameer  
Stock 
 1,000 
20,000 
   Debtors 20,000  
   Less: Provision for  
         doubtful debts 
 
 (1,600) 
 
18,400 
    Cash & bank balance    10,000 
  1,76,200   1,76,200 
Sameer died on 31
st
 March, 2022, due to this reason the following adjustments were agreed upon: 
(i) Land and Buildings to be appreciated by 50%. 
(ii) Investment to be valued at 6% less than the cost. 
(iii) All debtors (except 20% which are considered as doubtful) were good. 
(vi) Stock to be reduced to 94%. 
4 
(v) Goodwill to be valued at 1 year’s purchase of the average profits of the past five years. 
(vi) Sameer’s share of profit to the date of death be calculated on the basis of average profits of 
the three completed years immediately preceding the year of death. 
The profits of the last five years are as follows: 
Year ` 
2017 23,000 
2018 28,000 
2019 18,000 
2020 16,000 
2021   20,000 
 1,05,000 
 The life policies have been shown at their surrender values representing 10% of the sum assured 
in each case.  The annual premium of `1,000 is payable every year on 1
st
 August.  
 You are required to pass necessary Journal Entries in the books of account of the reconstituted 
firm.  
(b)   Following particulars are extracted from the books of Mr. Purav for the year ended  
31
st
 March, 2022. 
Particulars Amount Particulars Amount 
 Debit Balances:   `  Credit Balances: ` 
Cash in hand 15,000 Capital  1,60,000 
Purchase 1,20,000 Bank overdraft 20,000 
Sales return 10,000 Sales 90,000 
Salaries  25,000 Purchase return 20,000 
Tax and Insurance  5,000 Provision for Bad debts 10,000 
Bad debts  5,000 Creditors 20,000 
Debtors 50,000 Commission 5,000 
Investments  40,000 Bills payable 25,000 
Opening stock  14,000     
Drawings  20,000     
Furniture 16,000     
Bills receivables 30,000     
  3,50,000   3,50,000 
Other information : 
(i)  Closing stock was valued at ` 45,000. 
(ii) Salary of ` 1,000, and Tax of ` 2,000 are outstanding whereas insurance ` 500 is prepaid. 
(iii) Interest accrued on investment is ` 2,100.  Interest on overdraft is unpaid ` 3000. 
(iv) Provision for bad debts is to be kept at ` 15,000. 
(v) Depreciation on furniture is to be charged @ 10%. 
You are required to prepare the final accounts after making above adjustments. 
(10 + 10 = 20 Marks) 
Page 5


1 
 
MOCK TEST PAPER 1 
FOUNDATION COURSE 
PAPER – 1: PRINCIPLES AND PRACTICE OF 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. 
Time Allowed: 3 Hours Maximum Marks: 100 
1. (a)  State with reasons, whether the following statements are true or false: 
(i)  If the effect of errors committed cancel out, the errors will be called compensating errors and 
the trial balance will disagree. 
(ii)  Accrual concept implies accounting on cash basis.  
(iii)  Consignment account is of the nature of real account.  
(iv) In case the due date of a bill falls after the date of closing the account, the interest from the 
date of closing to such due date is known as Red-Ink interest. 
(v) When there is no partnership deed prevails, the interest on loan of a partner to be paid @ 6%.  
(vi) When shares are forfeited, the share capital account is debited with called up capital of shares 
forfeited and the share forfeiture account is credited with Calls in arrear of shares forfeited.  
(6 Statements x 2 Marks = 12 Marks) 
(b) “Change in accounting policy may have a material effect on the items of financial statements.” 
Explain the statement with the help of an example. (4 Marks) 
(c) Classify the following errors under the three categories – Errors of Omission, Errors of Commission 
and Errors of Principle. 
(i) Credit sale wrongly passed through the Purchase Book.  
(ii) Machinery sold on credit to Mohan recorded in Journal Proper but omitted to be posted.  
(iii) Purchase from M not recorded in subsidiary books. 
(iv) Goods worth ` 1,520 purchased on credit from Ram recorded in the Purchase Book as  
` 1,250. 
(v) Sale of furniture credited to Sales Account. (4 Marks) 
2. (a) The Plant and Machinery Account of a Factory shed showed a balance of `21,15,250 on 1
st
April, 2020. 
Its accounts were made up on 31
st
 March every year and depreciation is written off @ 10% p.a. under 
the Diminishing Balance Method. 
On 1
st
July, 2020 a new machinery was acquired at a cost of `4,35,000 and installation charges 
incurred in erecting the machine works out to `9,800 on the same date. On 1st July,2020, a 
machine which had cost `4,16,200 on 1
st
 April 2017, having become obsolete, was sold off for 
`90,000. Another machine which had cost `2,38,000 on 1
st
April, 2018 was scrapped on the same 
date and it realized nothing. On 1
st
 September,2020, a new machinery was purchased for 
`2,50,000. 
2 
 Write a plant and machinery account for the accounting year 2020-21, allowing the same rate of 
depreciation as in the past, calculating depreciation to the nearest multiple of a Rupee.  
(b)  Prepare the Bank Reconciliation Statement of M/s. Singh Brothers on 30
th
 June 2022 from the 
particulars given below: 
(i) The Bank Pass Book had a debit balance of ` 75,000 on 30th June, 2022. 
(ii)  A cheque worth ` 1,200 directly deposited into Bank by customer but no entry was made in 
the Cash Book. 
(iii)  Out of cheques issued worth ` 1,02,000, cheques amounting to ` 60,000 only were presented 
for payment till 30
th
 June, 2022. 
(iv) A cheque for ` 12,000 received and entered in the Cash Book but it was not sent to the Bank. 
(v)  Cheques worth ` 60,000 had been sent to Bank for collection but the collection was reported 
by the Bank as under. 
(1)  Cheques collected before 30th June, 2022, ` 42,000 
(2) Cheques collected on 10th July, 2022, ` 12,000 
(3) Cheques collected on 12th July, 2022, ` 6,000. 
(vi) The Bank made a direct payment of ` 1,800 which was not recorded in the Cash Book. 
(vii) Interest on Overdraft charged by the bank ` 4,800 was not recorded in the Cash Book. 
(viii)  Bank charges worth ` 240 have been entered twice in the cash book whereas Insurance 
charges for ` 210 directly paid by Bank was not at all entered in the Cash Book. 
(ix)  The credit side of bank column of Cash Book was under cast by ` 6,000. 
(x) A bill for ` 3000(discounted with bank in May, 2022) dishonored on 30
th
 June ,2022 and noting 
charges of Rs 100 paid by bank. (10 + 10 = 20 Marks) 
3. (a)  Hari of Bangalore consigns 2,000 cases of goods costing ` 1,000 each to Om of Hyderabad. Hari 
pays the following expenses in connection with consignment: 
  ` 
Carriage 20,000 
Freight 60,000 
Loading charges 20,000 
Om sells 1,400 cases at ` 1,400 per case and incurs the following expenses: 
Clearing charges 17,000 
Warehousing and storage 34,000 
Packing and selling expenses 12,000 
It is found that 100 cases have been lost in transit and 200 cases are still in transit. 
Om is entitled to a commission of 10% on gross sales.  You are required to prepare the 
Consignment Account and Om’s Account in the books of Hari.  
(b) From the following details calculate the average due date:         
Date of Bill Amount (`) Usance of Bill 
28
th
 January, 2021 10,000 1 month 
20
th
 March, 2021 8,000 2 months 
3 
12
th
 July, 2021 14,000 1 month 
10
th
 August, 2021 12,000 2 months 
(c)   On 1
st
 January, 2022, P’s account in Q’s ledger showed a debit balance of ` 5,000.  The following 
transactions took place between Q and P during the quarter ended 31
st
 March, 2022: 
2022 
  
` 
Jan. 11 Q sold goods to P 6,000 
Jan. 24 Q received a promissory note from P due after 3 months  5,000 
Feb. 01 P sold goods to Q 10,000 
Feb. 04 Q sold goods to P 8,200 
Feb. 07 P returned goods to Q 1,000 
March 01 P sold goods to Q 5,600 
March 18 Q sold goods to P 9,200 
March 23 P sold goods to Q 4,000 
 Accounts were settled on 31
st
 March, 2022 by means of a cheque.  Prepare an Account Current to 
be submitted by Q to P as on 31
st
 March, 2022, taking interest into account @ 10% per annum.  
Calculate interest to the nearest multiple of a rupee.  (10 + 5 + 5 = 20 Marks) 
4. (a)  The Balance Sheet of Sam, Saif and Sameer as at 31.12.2021 stood as follows: 
Liabilities  Amount 
(`) 
Assets  Amount 
(`) 
Capital:   Land & Buildings  74,000 
    Sam 60,000  Investments  10,000 
    Saif 40,000  Advertisement 
suspense 
 37,800 
    Sameer 40,000 1,40,000 Life Policy (at 
surrender value):  
  
Creditors  25,800     Sam  2,500 
General Reserve  8,000     Saif  2,500 
Investment Fluctuation 
Reserve 
  
2,400 
    Sameer  
Stock 
 1,000 
20,000 
   Debtors 20,000  
   Less: Provision for  
         doubtful debts 
 
 (1,600) 
 
18,400 
    Cash & bank balance    10,000 
  1,76,200   1,76,200 
Sameer died on 31
st
 March, 2022, due to this reason the following adjustments were agreed upon: 
(i) Land and Buildings to be appreciated by 50%. 
(ii) Investment to be valued at 6% less than the cost. 
(iii) All debtors (except 20% which are considered as doubtful) were good. 
(vi) Stock to be reduced to 94%. 
4 
(v) Goodwill to be valued at 1 year’s purchase of the average profits of the past five years. 
(vi) Sameer’s share of profit to the date of death be calculated on the basis of average profits of 
the three completed years immediately preceding the year of death. 
The profits of the last five years are as follows: 
Year ` 
2017 23,000 
2018 28,000 
2019 18,000 
2020 16,000 
2021   20,000 
 1,05,000 
 The life policies have been shown at their surrender values representing 10% of the sum assured 
in each case.  The annual premium of `1,000 is payable every year on 1
st
 August.  
 You are required to pass necessary Journal Entries in the books of account of the reconstituted 
firm.  
(b)   Following particulars are extracted from the books of Mr. Purav for the year ended  
31
st
 March, 2022. 
Particulars Amount Particulars Amount 
 Debit Balances:   `  Credit Balances: ` 
Cash in hand 15,000 Capital  1,60,000 
Purchase 1,20,000 Bank overdraft 20,000 
Sales return 10,000 Sales 90,000 
Salaries  25,000 Purchase return 20,000 
Tax and Insurance  5,000 Provision for Bad debts 10,000 
Bad debts  5,000 Creditors 20,000 
Debtors 50,000 Commission 5,000 
Investments  40,000 Bills payable 25,000 
Opening stock  14,000     
Drawings  20,000     
Furniture 16,000     
Bills receivables 30,000     
  3,50,000   3,50,000 
Other information : 
(i)  Closing stock was valued at ` 45,000. 
(ii) Salary of ` 1,000, and Tax of ` 2,000 are outstanding whereas insurance ` 500 is prepaid. 
(iii) Interest accrued on investment is ` 2,100.  Interest on overdraft is unpaid ` 3000. 
(iv) Provision for bad debts is to be kept at ` 15,000. 
(v) Depreciation on furniture is to be charged @ 10%. 
You are required to prepare the final accounts after making above adjustments. 
(10 + 10 = 20 Marks) 
5 
5. (a) Ankit Sports club gives the following Receipts and Payments account for the year ended March 31,2022: 
Receipts and Payments Account 
Receipts ` Payments ` 
To Opening cash and bank 
        balances 
52,000 By Salaries 1,50,000 
To Subscription 3,48,000 By Rent and taxes 54,000 
To Donations 1,00,000 By Electricity charges 6,000 
To Interest on investments  12,000 By Sports goods 20,000 
To Sundry receipts 3,000 By Library books 1,00,000 
  By Newspapers and 
periodicals 
10,800 
  By Miscellaneous expenses  54,000 
  By Closing cash and bank 
balances 
1,20,200 
 5,15,000  5,15,000 
 
 As on 31.3.2021 (`) As on 31.3.2022 (`) 
Liabilities   
Outstanding expense:   
Salaries 10,000 20,000 
Newspapers and periodicals 4,000 5,000 
Rent and taxes 6,000 6,000 
Electricity charges 8,000 10,000 
Assets   
Library Books 1,00,000 - 
Sports goods 80,000 - 
Furniture and fixtures 1,00,000 - 
Subscription receivable 50,000 1,20,000 
Investment government securities 5,00,000 - 
Accrued interest 6,000 6,000 
 Provide depreciation on Furniture and fixtures @ 10% , Sports goods @ 20%, Library books @ 
10%. Provide full depreciation on additions. 
 Donations are to be capitalised. 
 You are required to prepare Club's opening Balance Sheet as on 1.4.2021, Income and expenditure 
Account for the year ended on 31.3.2022 and Balance sheet as on that date. 
(b) Following information is provided for M/s. Diana fiber for the year ended 31
st
 March, 2022: 
` 
 Opening Inventory     1,00,000 
 Purchases      6,72,000