CA Foundation January 2025 Suggested Answers Paper 1 Accounting

FOR CA FOUNDATION EXAM PREPARATION

CA Foundation 2025
Suggested Answers ·
Paper 1 Accounting
EXAM YEAR TYPE SUBJECT

CA Foundation 2025 Suggested Answers Paper 1 Accounting
DATE

January 2025

Notes · Sample Papers · Previous Year Papers · Mock Tests

m
m .co
c. o

e m
em l a s
s a g

PAPER – 1: ACCOUNTING
m
o m Question No. 1 is compulsory. c. o
.c e m
e m l a s
s
Attempt any four questions from the remaining five questions.

la a g
g
Wherever necessary, suitable assumptions should be made and disclosed by way

a 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 True or False:
(i) Matching concept is based on accrual concept.
(ii) Customers of business should not be considered as users of accounts

m
c. o
prepared by business. They are not interested in knowing the
performance of the business.
(iii) Under inflationary conditions,m
s e FIFO will not show lowest value of cost of
goods sold.
g l a
a
(iv) For redemption of preference shares, proceeds from fresh issue of equity
shares and debentures can be utilized.
(v) Book keeping and accounting are not synonymous terms; they are
different from each other.
(vi) A ledger is also known as the principal books of accounts.
(6 x 2 =12 Marks)

m
co
(b) Explain four main functions of accounting. (4 Marks)

m .
c. o m
(c) From the following transactions, prepare the Sales Return Book of Kay & Co.,

em se
a readymade garments dealer:

s g la
la Return received from Aar Store 30aShirts @ ` 300/- and
Date Particulars

ag 06/12/2024
15 trousers @ ` 500/- each
Less: Trade discount @8%.

m .
.co s e m
e m l a
l a s ag
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 1 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

12/12/2024 Modern tailors returned 10 frocks (which were sold for
cash) @ ` 200/- each.
16/12/2024 Return received from Tulip Store -12 T-shirts @ ` 100 –
each.
Less: Trade discount @10%.

(4 Marks)
Answer
(a) 1. True: Matching concept is based on accrual concept as it considers the
occurrence of expenses and income and do not concentrate on actual
inflow or outflow of cash.
2. False: Customers are concerned with the stability and profitability of
the enterprise because their functioning is dependent on the supply of
goods. Hence customers of business are users of accounts prepared by
business.
3. False: Under inflationary conditions, LIFO and weighted average will
not show lowest value of cost of goods sold.
4. False: The redemption of preference shares can be done either from
the proceeds of fresh issue of shares or by capitalisation of
undistributed profit or combination of both. But the proceeds from
issue of debentures cannot be utilised for the purpose of redemption
of preference shares.
5. True: Book-keeping and accounting are different from each other.
Book-keeping is the recording phase while accounting is concerned
with summarizing phase of an accounting system. Book keeping
provides necessary data for accounting and accounting starts where
book keeping ends.
6. True: Since it classifies all the amounts related to a particular account
and then it is used as the base for preparing the trial balance, a ledger
is also known as principal books of accounts.
(b) The main functions of accounting are as follows:
(a) Measurement: Accounting measures past performance of the
business entity and depicts its current financial position.

2

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 2 of 38

m
m .co
c. o

e m
em l a s
s a g
SUGGESTED ANSWER ACCOUNTING

(b) Forecasting: Accounting helps in forecasting future performance and
financial position of the enterprise using past data and analyzing
trends.
m
m c. o
c. o
(c) Decision-making: Accounting provides relevant information to the

e m
s
users of accounts to aid rational decision-making.
m
eachieved l a
s g
(d) Comparison & Evaluation: Accounting assesses performance

g la accounting policies and contingent liabilities which play an importanta
in relation to targets and discloses information regarding

a role in predicting, comparing and evaluating the financial results.
(e) Control: Accounting also identifies weaknesses of the operational
system and provides feedback regarding effectiveness of measures
adopted to check such weaknesses.
(f) Government Regulation and Taxation: Accounting provides
necessary information to the government to exercise control on the

m
entity as well as in collection of tax revenues.
(c)
c. o
In the books of Kay & Co.

s em Book
Returns Inward

g la
a
Date Particulars Details Amount
2024 (`)
Dec 6 Aar Store
30 shirt @ 300/- each 9000
15 Trousers @ 500/- each 7,500 16,500
Less: Trade Discount 8% (1,320) 15,180
Dec 16 Tulip Store

m
12 t-shirt @ 100/- each 1,200

m
Less: Trade Discount 10%
c o
. 16,260
1,080 (120)

c. o Total

s
m
e included in
em a
s return inward book as the sales were made in cash. gl
Note: Returns of goods sold from modern tailors will not be

gla a
a Questions 2
(a) A firm purchased a second-hand machinery on April 1, 2021 for ` 15,00,000
subsequent to which ` 2,00,000 were spent on its repairs and installation. On

3

m .
.co s e m
e m l a
l a s ag
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 3 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

October 1, 2021 another machinery was purchased for ` 9,00,000 and cost
of installing the machine in a new plant is ` 20,000. The firm also shifted the
machinery purchased on April 1, 2021 to the new plant and incurred freight
of ` 10,000. They adopted a policy of charging depreciation @ 12% per
annum on diminishing balance method.
On April 1, 2023 it was decided to change the method and rate of
depreciation to straight line basis. On this date, the remaining useful life was
assessed as 5 years for both the machines purchased with no scrap value.
On October 1, 2023 the first machine become outdated and sold for
` 2,50,000. On the same date, another machinery was purchased for
` 8,50,000. The estimated useful life of the machine is 10 years and residual
value is ` 30,000.
You are required to prepare the machinery account for the year ending
March 31, 2024. (10 Marks)
(b) From the following information, prepare a Bank Reconciliation Statement as
on June 30, 2024 for M/s XYZ Limited:
(i) The Bank column of Cash Book was overdrawn to the extent of ` 24,768.
(ii) Bank charges amounting to ` 350 had not been entered in the Cash
Book.
(iii) Cheque amounting to ` 88,678 issued before June 30, 2024 but not yet
presented to Bank.
(iv) One payment of ` 4,590 was recorded in the Cash Book as if there is no
bank column.
(v) The company paid ` 15,500 to a creditor and received a cash discount
@ 2%. The cashier erroneously entered the gross amount in the bank
column of the Cash Book.
(vi) A debit of ` 5,700 appeared in the Bank Statement for an unpaid cheque,
which had been returned marked out of date'. The cheque had been
re-dated by the customer and paid into the Bank again on July 8, 2024.
(vii) Cheques deposited in bank but not yet cleared amount to ` 45,789.
(viii) Dividends of ` 1,980 collected by the Bank was not recorded in the Cash
Book.

4

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 4 of 38

m
m .co
c. o

e m
em l a s
s a g
SUGGESTED ANSWER ACCOUNTING

(ix) Amount of ` 2,340 wrongly credited by bank to company account for
which no details are available.

m
c. o
(x) On June 25, 2024 the credit side of bank column of the Cash Book was
m
co
overcast by `6,789. (10 Marks)

. em
Answer
em l a s
(a)
l a s Machinery Account
ag
ag Date Particulars Amount Date
(` )
Particulars Amount
(` )

2023 2023
April 1 To Bal b/d- Oct. 1 By Depreciation- on 1,31,648
Machine 1 13,16,480 machinery 1 sold
Machine 2 7,61,024 20,77,504 Oct. 1 By Bank – machinery 1 2,50,000
Oct. 1 To Bank A/c (Machine 3) 8,50,000 Oct. 1 sold
By Profit & Loss– Loss on

m
9,34,832

co
2024 Sale of machinery (WN. 1)

. Mar. 31

em
By Depreciation

l a s (WN. 2)

a g Machine 2
Machine 3
1,52,205
41,000 1,93,205
Mar. 31 By bal c/d
14,17,819

29,27,504 29,27,504

Working Note 1:
Calculation of depreciation and Profit/loss on sale:

m
Machine 1 Machine 2 Total

m c. o
purchased on purchased on

c. o se
m (`)
April 1,2021 Oct 1, 2021

em la
(`) (`)

las Cost of Purchase 15,00,000
a g
9,00,000

ag 2,00,000 20,000
Total Cost 17,00,000 9,20,000
Less: Depreciation @ 12%

5

m .
.co s e m
e m l a
l a s a g
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 5 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

Machine 1 (12 months) (2,04,000)
Machine 2 (6 months) (55,200) 2,59,200
W.D.V. on 31-3-2022 14,96,000 8,64,800
Less: Depreciation @ 12% (1,79,520) (1,03,776) 2,83,296
W.D.V. on 31-3-2023 13,16,480 7,61,024
Less: Depreciation on SLM (1,31,648) (1,52,205) 2,83,853
Basis (WN. 2)
11,84,832 6,08,819
Less: Sale proceeds on (2,50,000)
1-10-2023
Loss on sale of machinery 9,34,832

Working Note 2:
Calculation of Depreciation on the basis of Straight-line method with effect
from April 1,2023
1. Machine 1 (purchased on 1st April,2021) = 17,00,000 - 2,04,000
- 1,79,520 = 13,16,480 / 5 = 2,63,296 / 2 =` 1,31,648
2. Machine 2 (purchased on 1st Oct,2021) = 9,20,000 – 55,200 – 1,03,776
= 7,61,024 / 5 = ` 1,52,20 5
8,50,000 – 30,000
3. Machine 3 (purchased on 1st Oct,2023) = = 82,000 /
10
2 = ` 41,000
Note: Freight incurred on Machinery purchased on 1st April,2021 is to be
excluded from the cost of machinery since this cost is incurred only for
shifting the machinery to the new plant and does not increase the
operating capacity of the machinery.
(b) Bank Reconciliation Statement of M/s XYZ Limited as on
30th June, 2024

Particulars Details Amount
` `
Balance as per the Cash Book (Cr.) 24,768

6

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 6 of 38

m
m .co
c. o

e m
em l a s
s a g
SUGGESTED ANSWER ACCOUNTING

Add: Bank charges not entered in 350
the cash book

m
c. o
Cheques issued but not recorded in cash 4,590
m
co
book

. em
m
Cheques deposited but not cleared
e Cheque returned out of date in pass book
45,789

l a s
la s 5,700 56,429
ag
ag Less: Cheque issued but not presented to Bank (88,678)
81,197

Discount received wrongly entered in the (310)
bank column of cash book
Dividend collected by bank not recorded in (1,980)
cash book
Amount wrongly credited by Bank (2,340)

m
Credit side of the bank column overcast (6,789) (1,00,097)
Balance as per the Pass Book (credit)
c. o (18,900)
mclosed on 30 June, then adjusted cash
Alternatively, if the books are to ebe
s
book will be prepared. In thatacase the solution will be as given below:
th

l
agBook (Bank Column)
Cash

Particulars Amount Particulars Amount
(`) (`)
To discount 310 By balance b/d 24,768
To dividends 1,980 By bank charges not 350
To credit side of the entered in cash book

m
bank column By payment recorded in 4,590

m
overcast 6,789
.c
the cash column of casho
c. o To balance c/d 26,329 book
s em
em la
By cheque returned out

las of date
a g 5,700

ag 35,408 35,408

7

m .
.co s e m
e m l a
l a s a g
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 7 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

Bank Reconciliation Statement

Particulars Amount (`)
Balance as per the Cash Book (Cr.) (corrected) 26,329
Add: Cheque deposited but not cleared 45,789
Less: Cheques issued not yet presented (88,678)
Amount wrongly credited by bank (2,340)
Balance as per Pass Book (Credit) (18,900)

Alternative solution –
Alternatively, in point (v) of the question, if it is assumed that the amount paid
` 15,500 is a net amount. then the discount will be ` 316 {(i.e. (15,500/98 %) x
2%) and accordingly the solution will be:
Bank Reconciliation Statement of M/s XYZ Limited as on June 30, 2024

Particulars Amount Amount
(`) (`)
Balance as per Cash Book (Cr.) 24768
Add: Bank Charges not entered in cash book 350
Cheques issued but not entered in cash
book 4,590
Cheque returned out of date entered in Pass
Book 5,700
Cheque deposited but not cleared 45,789 56,429
81,197
Less: Cheque issued but not presented to bank (88,678)
Discount received wrongly entered in bank (316)
column of cash book
Dividend collected by Bank not recorded in (1,980)
cash book
Amount wrongly credited by Bank (2,340)
Credit side of the bank column overcast (6,789) (1,00,103)
Balance as per Pass Book (Cr.) (18,906)

8

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 8 of 38

m
m .co
c. o

e m
em l a s
s a g
SUGGESTED ANSWER ACCOUNTING

Alternatively, if the books are to be closed on 30th June, then adjusted cash
book will be prepared. In that case the solution will be as given below:

m
c. o
Cash Book (Bank Column only)

o m m
Date
c
. Discount
Particulars (`) Date Particulars (`)
s e
m
e To Dividends
June-30 To 316 June-30 By Balance b/d 24,768
l a
a s
l To credit side of
1,980 By bank charges 350
ag
a g the bank column
6,789 not entered in
cash book
overcast By payment 4,590
recorded in the
To Balance c/d cash column of
26,323
cash book
By cheque
returned out of

om
date 5,700

. c35,408 35,408

s em as on June 30, 2024
la
Bank Reconciliation Statement

Particulars
a g Amount (`)
Balance as per Cash Book (Cr) 26,323
Add: Cheque deposited but not cleared 45,789
72,112
Less: Cheque issued but not presented (88,678)
Amount wrongly credited by Bank (2,340)
Balance as per Pass Book (Cr.) (18,906)

o m
c
Questions 3
m . of Mr.
c. o (a) From m
e year ended
the following schedule of balances extracted from the books
Piyush, prepare Trading and Profit and Loss Account for sthe
em l aafter making the
las a
31 March, 2024 and the Balance Sheet as on that date
st
g
ag necessary adjustments:

Particulars Dr. (`) Cr. (`)
Capital Account 8,85,000

9

m .
.co s e m
e m l a
l a s a g
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 9 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

Stock on 1.4.2023 3,86,000
Cash in hand 18,500
Cash in Bank 73,500
Investment (at 9%) as on 1.4.2023 50,000
Deposits (at 10%) as on 1.4.2023 3,00,000
Drawings 78,000
Purchases 24,95,000
Sales 29,86,000
Return Inwards 1,10,000
Return outwards 1,38,000
Carriage inwards 1,26,000
Rent 66,000
Salaries 1,15,000
Sundry Debtors 2,35,000
Sunday Creditors 1,37,500
Bank Loan (at 12%) as on 1.10.2023 2,00,000
Furniture as on 1.4.2023 25,000
Interest paid 12,500
Interest received 28,500
Advertisement 40,300
Printing & Stationery 32,200
Electricity Charges 57,700
Discount allowed 55,200
Discount received 24,600
Bad debts 18,500
General expenses 36,800
Motor Car Expenses 8,500
Insurance Premium 30,000
Travelling Expenses 21,800

10

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 10 of 38

m
m .co
c. o

e m
em l a s
s a g
SUGGESTED ANSWER ACCOUNTING

Postage & Courier 8,100
43,99,600 43,99,600
m
Adjustments:
m c. o
(i)
.co
The value of stock as on 31st March, 2024 is ` 7,65,000. This includes
s em
e m l a
s
goods returned by customers on 31st March, 2024 to the value of

l a ` 25,000 for which no entry has been passed in the books.
a g
ag (ii) Purchases include one furniture item purchased on 1 January, 2024 for
` 10,000. Depreciation @ 10% p.a. is to be provided on furniture.
st

(iii) One months' rent is outstanding and ` 12,000 is payable towards salary.
(iv) Interest paid includes ` 9,000 paid against Bank loan and Interest
received pertains to Investments and Deposits.
(v) Provide for interest payable on Bank Loan and interest receivable on
investments and deposits.
m
c. o
(vi) Make provision for doubtful debts at 5% on the balance under sundry

em` 18,000 paid towards proprietor's life
debtors.

la s
(vii) Insurance premium includes
insurance policy.
a g (15 Marks)
(b) X and Y are partners sharing profits and losses in the ratio of their effective
capital. As on 1st April, 2023, they had ` 2,80,000 and ` 1,60,000 respectively
in their Capital Accounts.
X introduced a further capital of ` 20,000 on 1stJune, 2023 and another
` 15,000 on 1st October 2023. On 31st January 2024, X withdrew ` 25,000.
On 1stAugust, 2023 Y introduced further capital of ` 30,000.

m
c. o
During the Financial year 2023-24, the partners drew the following amounts
m
c. o
in anticipation of profit:

emper month
em la s
X drew ` 5,000 at the beginning of each quarter and Y drew` 1,500

las at the end of each month beginning from April, 2023
As per partnership agreement, the profits were to be a
g
ag shared in capital ratio.
The interest on Capital @ 12% p.a. is allowable and interest on drawings
@ 10% p.a. is chargeable.

11

m .
.co s e m
e m l a
l a s a g
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 11 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

You are required to calculate (i) Profit-sharing ratio; (ii) Interest on capital;
and (iii) interest on drawings. (5 Marks)
Answer
(a) In the books of Mr. Piyush
Trading and Profit & Loss Account for the year ended
31st March,2024
Particulars Amount Amount Particulars Amount Amount
(`) (`) (`) (`)
To Opening stock 3,86,000 By Sales 29,86,000
To Purchases 24,95,000 Less: Returns (135,000) 28,51,000
Less: Transfer to (10,000) By closing stock 7,65,000
furniture A/c
24,85,000
Less: Returns (1,38,000) 23,47,000
To Carriage inwards 1,26,000
To Gross profit c/d 7,57,000
36,16,000 36,16,000
To Salaries 1,15,000 By Gross profit 7,57,000
b/d
Add: Outstanding 12,000 1,27,000 By Interest 34,500
By Discount 24,600
To Rent 66,000 received
Add: Outstanding 6,000 72,000
To Advertisement 40,300
To Printing & 32,200
stationery 57,700
To Electricity charges
To Interest (` 12,500 + 15,500
3000)
To Discount allowed 55,200
To Bad Debts 18,500
Add: Provision for 10,500 29,000
Doubtful Debts

12

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 12 of 38

m
m .co
c. o

e m
em l a s
s ag
SUGGESTED ANSWER ACCOUNTING

To General expenses 36,800
To Motor Car 8,500

m
c. o
expenses

om
To Insurance premium 30,000

c.Travelling em
s
Less: Drawings 18,000 12,000
To
e m 21,800
l a
a s ag
TolPostage & courier
expenses

g
aTo Depreciation on
8,100
2,750
furniture (WN 4)
To Capital A/c (Net 2,97,250
profit transferred)
8,16,100 8,16,100

Balance Sheet as at 31st March,2024

c om
Liabilities Amount Amount Assets Amoun Amount
(`)
.
(`) t (`) (`)
Capital account:
s em Furniture 25,000
Balance on 1st 8,85,000

g l a Additions during 10,000

a
April,2023 the year
Add: Net profit 2,97,250 35,000
11,82,250 Less: Depreciation (2,750) 32,250
Less: Drawings (78,000) 9% Investments 50,000
Less: Insurance (18,000) 10,86,250
premium
12% Bank Loan 2,00,000 10% Deposits 3,00,000
Interest accrued 3,000 Interest accrued on 6,000

m
co
on bank loan investment &

m .
(W.N.2) deposits (W N. 3)

c. o se
m
Sundry creditors 1,37,500 Stock in trade 7,65,000

em la
Outstanding Rent 6,000 Sundry debtors 1,99,500

las (W N. 1)

a g
g
Outstanding 12,000 Cash in hand 18,500

a Salary
Cash at Bank 73,500
14,44,750 14,44,750

13

m .
.co s e m
e m l a
l a s a g
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 13 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

Working Notes:

1. Calculation of sundry debtors at the end Amount (`)
Sundry debtors as per trial balance 2,35,000
Less: Sales returns not recorded (25,000)
Adjusted balance of sundry debtors 2,10,000
Provision for doubtful debts @ 5% (10,500)
1,99,500
2. Interest Payable on bank loan:
Annual interest @12% for 6 months on ` 2,00,000 12,000
Less: Interest paid (9,000)
Unpaid interest 3,000
3. Interest accrued on investments and deposits:
Annual interest on investments @ 9% 4,500
Annual interest on deposits @ 10% 30,000
34,500
Less: Interest received on investments and deposits (28,500)
Accrued interest 6,000

4. Depreciation on Furniture:
Depreciation @ 10% p.a. on Opening Balance ` 25000 2,500
On new purchase of ` 10,000 for 3 months (Jan to March ) 250
Depreciation to be charged 2,750
(b) (a) Calculation of Effective Capital
X Amount Y Amount
` 2,80,000 invested ` 1,60,000 invested for 4
for 2 months i.e., months i.e.,
` 5,60,000 invested 5,60,000 ` 6,40,000 invested for 1 6,40,000
for 1 month month
` 3,00,000 invested ` 1,90,000 invested for 8
for 4 months i.e., months, i.e.,

14

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 14 of 38

m
m .co
c. o

e m
em l a s
s a g
SUGGESTED ANSWER ACCOUNTING

` 12,00,000 invested 12,00,000 ` 15,20,000 invested for 15,20,000
for 1 month. 1 month

m
c. o
21,60,000

o m
` 3,15,000 invested
m
.c
for 4 months i.e.,
s e
m` 12,60,000
e for 1 month. l a
s
invested 12,60,000

g a
l ` 2,90,000 invested ag
a for 2 months, i.e.,
` 5,80,000 invested 5,80,000
for 1 month.
36,00,000

Effective capital is in the ratio 36,00,000: 21,60,000 therefore profit-
sharing ratio i.e. 5:3.
(b) Calculation of Interest on Capital
o m
X = ` 36,00,000 x 12/100 xm
c
. Y = ` 21,60,000 x 12/100 x 1/12
s e 1/12
= ` 36,000
l a = ` 21,600

agon Drawings
(c) Calculation of Interest

X = ` 5,000 x4x 10/100 x 7.5/12 Y = ` 1,500x12 x 10/100 x 5.5/12
= ` 1,250 = ` 825

Questions 4
(a) A, B and C are partners sharing profits & losses in the ratio of 3:2:1.

m
The following is the Balance Sheet of their firm M/s ABC Trading Corporation

m
as on 31 March, 2024:
c. o
c. o Balance Sheet as on 31stMarch, 2024
m
se Amount
s em Liabilities Amount Assets
g la
gla (` )
a (` )

a Capital Accounts: Land & Building 2,40,000
A 2,80,000 Machinery 1,50,000
B 1,90,000 Furniture & Fixtures 1,05,000

15

m .
.co s e m
e m l a
l a s a g
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 15 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

C 1,50,000 Trade Receivables 1,55,200
General Reserve 1,35,000 Less: Provision for
Trade Payables 97,400 Doubtful debts 5,700 1,49,500
Stock 85,600
Joint Life Policy 90,000
Cash & Bank 32,300
8,52,400 8,52,400

C died on 30th June, 2024. As per Partnership deed the following arrangement
was to be put into effect:
i. Goodwill of firm was to be valued at 2 years' purchase of average profit
of four years to 31 March preceding the death of partner. The profits
were as under:
31stMarch, 2021 ` 1,14,000
31stMarch, 2022 ` 1,22,000
31stMarch, 2023 ` 1,19,000
31stMarch, 2024 ` 1,25,000
Goodwill Account will not be opened in the books of accounts and C was
to be credited with his share. The new profit-sharing ratio of A and B will
be 5:3.
ii. Profit till the date of death to be ascertained on the basis of average
profit of previous four years and share of C was to be credited to his
capital account.
iii. Assets were to be revalued: Land & Building was appreciated by 15%,
Machinery to be depreciated by 5%, Furniture & Fixtures to be revalued
at ` 1,00,000 and the value of Stock to be taken at ` 90,000.
iv. Provision for doubtful debts to be increased by ` 1,800.
v. A sum of ` 2,40,000 was received from insurance company against Joint
Life Policy.
vi. Amount due to C was paid to the executors.

16

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 16 of 38

m
m .co
c. o

e m
em l a s
s a g
SUGGESTED ANSWER ACCOUNTING

You are required to prepare Revaluation Account, Partners Capital Accounts
and Balance Sheet as on 30thJune, 2024, along with necessary workings.

m
c. o
(15 Marks)

m
co m
(b) Following are the details of Assets and Liabilities of Mr. Sarthak for the year

m .
ended 31st March, 2023 and 31 March, 2024:
s e
s e l a
a ag
31st March,2023
l
31st March,2023(`)

ag Assets:
(` )

Building 2,00,000 ?
Furniture 75,000 ?
Inventory 1,05,000 1,95,000
Sundry Debtors 68,000 94,000
Cash at Bank 72,500 86,800
m 2,400
c. o
Cash in hand 3,800

em 1,50,000
Liabilities:
Loans
l a s 1,25,000
Sundry Creditors
a g 58,400 79,500

It was decided to depreciate Building by 5% p.a. and Furniture by 10% p.a.
On 1st June, 2023 an additional capital of ` 40,000 was brought in the
business. Proprietor has withdrawn @ ` 2,500 p.m. for meeting the family
expenses.
Prepare Statement of Affairs as on 31stMarch, 2023 and 31stMarch, 2024. Find
the profit or loss earned by Mr. Sarthak for the year ended 31stMarch, 2024.

m
co
(5 Marks)
m Answer .
c. o (a) se
m
em la
Revaluation Account

l as Particulars Amount Particulars
a g Amount

ag
(`) (`)
To Machinery A/c 7,500 By Land and Building 36,000
A/c
To Furniture and Fixtures 5,000 By Stock 4,400

17

m .
.co s e m
e m l a
l a s a g
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 17 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

To Provision for doubtful 1,800
debt
To Capital A/c (Revaluation 26,100
Profit)
A = 26,100 x 3/6 = 13,050
B= 26,100 x 2/6= 8,700
C = 26,100x 1/6= 4,350
40,400 40,400

Partners’ Capital Accounts
Particulars A (`) B (`) C (`) Particulars A (`) B (`) C (`)
To Bank A/c- 2,46,850 By Balance 2,80,000 1,90,000 1,50,000
C’s Executor’s b/d
To C’s Capital 30,000 10,000 – By General 67,500 45,000 22,500
A/c reserve
To Balance c/d 4,05,550 2,83,700 By A and B’s – – 40,000
Capital A/c
By 13,050 8,700 4,350
Revaluation
A/c
By Joint Life 75,000 50,000 25,000
Policy (WN.
3)
By Profit and 5,000
Loss
suspense A/c
(WN. 1)
4,35,550 2,93,700 2,46,850 4,35,550 2,93,700 2,46,850

Balance Sheet of M/s ABC as at 30th June,2024
Liabilities Amoun Assets Amount
t (`) (`)
Capital Land and Building 2,76,000
accounts:
A 4,05,550 Machinery 1,42,500
B 2,83,700 Stock 90,000
Furniture & fixtures 1,00,000
Trade payables 97,400 Trade Receivables 1,55,200

18

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 18 of 38

m
m .co
c. o

e m
em l a s
s a g
SUGGESTED ANSWER ACCOUNTING

Less: Prov. for Doubtful Debt 7,500 1,47,700
Cash & bank (WN 2) 25,450

m
c. o
Profit and Loss Suspense A/c 5,000

o m m
c
7,86,650 7,86,650

m . Note: s e
1. seCalculation of goodwill and C’s share of profit
a
Working

gl
g la (a) Average of last three year’s profits and losses a
a Profit/(loss)
(`)
Year ended on
31.3.2021 1,14,000
31.3.2022 1,22,000
31.3.2023 1,19,000

m
31.3.2024 1,25,000

. c o 4,80,000

s em
Average profit (4,80,000/4)
(b) Goodwill at 2 years’apurchase
1,20,000

l
` 1,20,000 x 2a=g` 2,40,000
Goodwill calculated at the time of death of
partner C ` 2,40,000
C’s Share in Goodwill (` 2,40,000/6 = ` 40,000)
(c) C’s share of profits from the period 1.4.2024 to
30.06.2024
` 1,20,000 x 3/12 x 1/6 = ` 5,000
m
m
Calculation of Gaining Ratio
.co
c. o Partner Old Share New Share mGain
se 6
s em A
g la
la
3 5

g
6 8
a 48

a B 2
6
3
8
2
48
C 1 – –
6

19

m .
.co s e m
e m l a
l a s a g
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 19 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

Adjusting entry:
A’s Capital Account Dr. 30,000
B’s Capital Account Dr. 10,000
To C’s Capital Account 40,000
(Adjustment for goodwill on the death of C on
the basis of gaining ratio)

2. Bank A/c

Particulars Amount Particulars Amount
(`) (`)
To Balance B/d 32,300 By C’s executors A/c 2,46,850
To Bank 2,40,000 By Balance c/d (bal 25,450
fig)
2,72,300 2,72,300

Alternatively, the balance of Bank A/c can also be ascertained in statement
form.
3. The Joint life policy is calculated on the basis of surrender value
method- where in the amount shown in the balance sheet shall be
deducted from the JLP proceeds received from insurance co, on the
death of a partner. Hence the calculations will be ` 2,40,000- 90,000
(Balance Sheet value) = ` 1,50,000 (divided in profit sharing ratio
between the partners.)
Alternatively, Joint life policy can also be routed through revaluation
Account. In that case the solution shall be as follows:
Revaluation Account
Particulars Amount Particulars Amount
(`) (`)
To Machinery A/c 7,500 By Land and Building A/c 36,000
To Furniture and Fixtures 5,000 By Stock 4,400
By Joint Life Policy 1,50,000
(WN. 3)
To Provision for doubtful 1,800
debt

20

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 20 of 38

m
m .co
c. o

e m
em l a s
s a g
SUGGESTED ANSWER ACCOUNTING

To Capital A/c 1,76,100
(Revaluation Profit)

m
A = 1,76,100 x 3/6

m c. o
= 88,050

.co m
B = 1,76,100 x 2/6

m
= 58,700
s e
s e l a
ag
C = 1,76,100 x 1/6

l a = 29,350

ag 1,90,400 1,90,400

Partners’ Capital Accounts
Particulars A (`) B (`) C (`) Particulars A (`) B (`) C (`)
To Bank A/c- C’s 2,46,850 By Balance b/d 2,80,000 1,90,000 1,50,000
Executor’s
To C’s Capital 30,000 10,000 – By General 67,500 45,000 22,500
A/c reserve

om
To Balance c/d 4,05,550 2,83,700 By A and B’s – – 40,000

. c
Capital A/c

em
By Revaluation 88,050 58,700 29,350

l a s A/c

g
By Profit and 5,000

a Loss Suspense
A/c (WN.1)
4,35,550 2,93,700 2,46,850 4,35,550 2,93,700 2,46,850

Balance Sheet of M/s ABC as at 30th June,2024
Liabilities Amount Assets Amount
(`) (`)
Capital accounts: Land and Building 2,76,000
A 4,05,550 Machinery
o m 1,42,500

m c
.1,00,000
c. o
B 2,83,700 Stock 90,000

em
s
Furniture & fixtures

em a 1,47,700
Less: Prov. for Doubtful Debt l7,500
Trade payables 97,400 Trade Receivables 1,55,200

las a g
ag Cash & bank (WN 2)
Profit and Loss Suspense A/c
25,450
5,000
7,86,650 7,86,650

21

m .
.co s e m
e m l a
l a s a g
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 21 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

Working Note:
1. Calculation of goodwill and C’s share of profit

(a) Average of last three year’s profits and losses Profit/(loss) (`)
Year ended on
31.3.2021 1,14,000
31.3.2022 1,22,000
31.3.2023 1,19,000
31.3.2024 1,25,000
4,80,000
Average profit (4,80,000/4) 1,20,000
(b) Goodwill at 2 years’ purchase
` 1,20,000 x 2 = ` 2,40,000
Goodwill calculated at the time of death of
partner C ` 2,40,000
C’s Share in Goodwill (` 2,40,000/6 =
` 40,000)
(c) C’s share of profits from the period 1.4.2024
to 30.06.2024
` 1,20,000 x 3/12 x 1/6 = ` 5,000

Calculation of Gaining Ratio

Partner Old Share New Share Gain
A 3 5 6
6 8 48
B 2 3 2
6 8 48
C 1 – –
6
Adjusting entry:
A’s Capital Account Dr. 30,000
B’s Capital Account Dr. 10,000

22

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 22 of 38

m
m .co
c. o

em
em l a s
s a g
SUGGESTED ANSWER ACCOUNTING

To C’s Capital Account 40,000
(Adjustment for goodwill on the death of C on
m
c. o
the basis of gaining ratio)

m
2.
c. o Bank A/c
s em
s em
Particulars Amount Particulars Amount
g l a
la (`) (`)
a
ag To Balance B/d 32,300 By C’s executors A/c 2,46,850
To Bank 2,40,000 By Balance c/d (bal. fig) 25,450
2,72,300 2,72,300

Alternatively, the balance of Bank A/c can also be ascertained in statement
form.
3. Joint Life Policy A/c

m
c. o
Particulars Amount Particulars Amount

em By Bank A/c
(`) (`)
To Balance b/d
la s
90,000 2,40,000
To Revaluation A/c
g1,50,000
a 2,40,000 2,40,000

(b) Mr. Sarthak
Statement of Affairs as on 31-03-2023 & 31-03-2024
Liabilities Amount Amount Assets Amount Amount
31-03-2023 31-03-2024 31-03-2023 31-03-2024
(`) (`) (`) (`)

m
co
Capital (Bal. Fig.) 3,14,500 4,32,600 Building 2,00,000 1,90,000

m .
c. o m
Loans 1,50,000 1,25,000 Furniture 75,000 67,500

em se
Sundry creditors 58,400 79,500 Inventory 1,05,000 1,95,000

s gla
Sundry debtors 68,000 94,000

gla Cash at bank
a 72,500 86,800

a 5,22,900 6,37,100
Cash in hand 2,400
5,22,900
3,800
6,37,100

23

m .
.co s e m
e m l a
l a s a g
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 23 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

Determination of profit by applying the method of the capital
comparison
Amount (`)
Capital Balance as on 31-03-2024 4,32,600
Less: Fresh capital introduced (40,000)
3,92,600
Add: Drawings (` 2500 × 12) 30,000
4,22,600
Less: Capital Balance as on 31-03-2023 (3,14,500)
Profit for the year ended 31st March,2024 1,08,100

Alternatively capital account can also be prepared as follows:
Particulars Amount (`) Particulars Amount
(`)
To Drawings 30,000 By Balance b/d 3,14,500
To Balance c/d 4,32,600 By Additional capital 40,000
By Net Profit (Bal Fig) 1,08,100
4,62,600 4,62,600

Questions 5
(a) From the following income and expenditure account of a Club for the year
ending 31stMarch, 2024, you are required to prepare receipt and payment
account for the year ending 31stMarch, 2024 and Balance Sheet as on
1st April, 2023.
Income and Expenditure Account
For the year ending 31st March, 2024

Expenditure Amount Income Amount
` `
To Lawn Maintenance 42,000 By subscription 1,05,000
To General Expenses 13,000 By Admission fees 12,000
To Stationery 1,500 By Sports material (Sale of 2,400
(depreciation) second-hand material)

24

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 24 of 38

m
m .co
c. o

e m
em l a s
s a g
SUGGESTED ANSWER ACCOUNTING

To Depreciation on 22,000 By Entertainment 14,000
Sport material

m
c. o
To Honorarium 10,400
m
co m
To Excess of income 44,500

m .
over Expenditure
s e
s e l a
a ag
1,33,400 1,33,400
l
ag Additional Information:

Particulars 1st April,2023 31st March,2024
Cash at bank 60,000 -
Stock of sports material 30,000 -
Tournament fund (after deducting 6,000
tournament expenses of ` 14,000)

om 10,000
Donations for club building 1,40,000
Subscription due
. c 15,000
Stationery stock
s em 4,000 -

g l a
a
Stationery was depreciated by 25% and Sports material by 50%.
(10 Marks)
(b) Attempt any ONE of the two sub-parts i.e. either (i) or (ii) :
(i) Mr. A accepts two bills of exchange on June 1, 2024 for ` 1,50,000 and
` 60,000 drawn on him by Mr. B. The bill of exchange for ` 1,50,000 is
for two months while the bill of exchange for ` 60,000 is for three
months. Mr. B got the first bill discounted with the bank for ` 1,49,000
on June 3, 2024. On August 2, 2024 Mr. A requested Mr. B to cancel both
m
m the bills and drew a new bill on him with the combined amount of both
.co
c. o the bills along with interest @ 12% per annum for a period of two
se
m
em la
months. Before the due date of the renewed bill on September 3, 2024,

las a g
Mr. A becomes insolvent and only 40 paise in a rupee could be recovered

ag from his estate.
You are required to give the journal entries in the books of Mr. B.
(5 Marks)

25

m .
.co s e m
e m l a
l a s a g
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 25 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

OR
(i) The following details are available of raw material of a manufacturing
unit:

1-5-2024 Opening Inventory 100 units @ ` 15 per unit
2-5-2024 Purchases 300 units @ ` 18 per unit
5-5-2024 Issued for consumption 250 units
16-5-2024 Purchases 500 units @ ` 21 per unit
21-5-2024 Issued for consumption 100 units
25-5-2024 Issued for consumption 450 units

The manufacturer also incurred the following expenses:
• Freight of ` 300 and unloading charges of ` 150 at the time of every
purchase respectively.
• Warehouse rent of ` 2,000 per month.
• Administrative Expenses of ` 1,500 per month.
You are required to find out the value of inventory as on May 31, 2024
if the company follows:
(a) Weighted Average method for inventory valuation.
(b) First in First Out method for inventory valuation. (5 Marks)
(c) A company had issued 20,000, 8% partly convertible debentures of
` 100 each on April 1, 2023. The debentures are due for redemption on
June 1, 2024. The terms of issue of debentures provided that 30% of the
debentures will be converted into equity shares (Nominal Value
` 10) at a price of 20 per share and remaining will be redeemable at a
premium of 5%.
(i) Calculate the number of equity shares to be allotted to the
debenture holders at the time of conversion.
(ii) Give the necessary journal entries related to the conversion and
redemption of debentures assuming that the company has created
the Debenture Redemption Reserve and also invested required

26

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 26 of 38

m
m .co
c. o

e m
em l a s
s a g
SUGGESTED ANSWER ACCOUNTING

amount for redemption of debentures at the time of issue.
Debenture Redemption Reserve Investment are sold at par value.

m
c. o
(5 Marks)

o m m
c
(a) Receipts. and Payments Account of Club for the year ended
Answer

m s e
31seMarch, 2024
g l a
la Receipts a
st

a g Amount
(`)
Payments Amount
(`)
To Balance b/d 60,000 By Lawn 42,000
maintenance
To Subscriptions as per 1,05,000 By General Expenses 13,000
Income &
Expenditure
Account

o m
c
Add: Outstanding 10,000 By Honorarium 10,400
for 2022-23
.
Less:
s em
Outstanding (15,000) 1,00,000 By Tournament 14,000
for 2023-24

g l a Expenses
To Admission Fees
a 12,000 By Sports
(W.N.2)
material 14,000

To Entertainment 14,000 By Stationary (W.N.1) 2,000
To Donation for 1,40,000 By By balance c/d 2,53,000
Building (bal. fig)
To Tournament Income 20,000
(6,000 + 14,000)

m
To Sale of sports 2,400

c. o
material (Refer
m
c. o m
Note)

em
3,48,400

la se 3,48,400
las a g
ag

27

m .
.co s e m
e m l a
l a s a g
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 27 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

Balance Sheet of Club as at 1st April, 2023

Liabilities Amount Assets Amount
(`) (`)
Capital Fund (balancing 1,04,000 Sports Material 30,000
figure)
Stationary stock 4,000
Subscriptions 10,000
Outstanding
Cash at bank 60,000
1,04,000 1,04,000

Working Notes:
1. Calculation of Stationary
Stationary Account
Particulars Amount Particulars Amount
(`) (`)
To Balance b/d 4,000 By Depreciation 1,500
To Cash 2,000* By Balance c/d (bal. fig.) 4,500
6,000 6,000
* Total Stationary during the year = ` 1,500 / 25% = ` 6,000. Since
stationary worth ` 4,000 is the opening stock, stationary of ` 2,000
(6,000 - 4,000) would be considered as purchased during the year.
2. Calculation of Sports material
Sports Material Account
Particulars Amount Particulars Amount
(`) (`)
To Balance b/d 30,000 By Bank (Sales of 2,400
Second hand sports
material)
To Income and 2,400 By Depreciation 22,000
Expenditure A/c (Gain
on sale of Second-
hand material)

28

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 28 of 38

m
m .co
c. o

e m
em l a s
s a g
SUGGESTED ANSWER ACCOUNTING

To Cash 14,000** By Balance c/d (bal 22,000
fig)

m
c. o
46,400 46,400

m
co m
**Total Sports Material during the year = ` 22,000 / 50% = ` 44,000.

m .
Since Sports Material worth ` 30,000 is the opening stock, Sports
s e
s e l a
ag
Material of ` 14,000 (44,000-30,000) would be considered as purchased

g a
lNote: during the year.

a
The Income and Expenditure account shows the gain of second-hand sports
material for ` 2,400. In the absence of any further information, it is assumed
that written down value of second-hand sports material is Nil, and it is not
appearing in the opening balance of the Stock of the Sports Material as on
1st April, 2023.
(b) (i) Journal Entries in the books of Mr. B
m
Date Particulars
. co Amount Amount

em
2024 (`) (`)
Bills receivable (No.s1) A/c
la 2) A/c
1st June Dr. 1,50,000

a g
Bills receivable (No. Dr. 60,000
To Mr. A’s A/c 2,10,000
(Being drawing of bills receivable
No. 1 due for maturity on
4.8.2024 and bills receivable No.
2 due for maturity on 4.9.2024)
3rd June Bank A/c Dr. 1,49,000

m
Discount A/c Dr. 1,000

m
To Bills receivable (No.1) A/c
.co1,50,000

c. o (Being 1st bill discounted from

se
m
em la
bank)

las 2nd August Mr. A’s A/c Dr.
a g
2,10,000

ag To Bank A/c
To Bills receivable (No.2) A/c
1,50,000
60,000
(Being the reversal entry for
cancellation of both the bills)

29

m .
.co s e m
e m l a
l a s a g
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 29 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

2nd August Bills receivable (No. 3) A/c Dr. 2,14,200
To Interest A/c 4,200
To Mr. A’s A/c 2,10,000
(Being the bill of exchange no. 3
drawn together with interest at
12 %p.a. in lieu of the original
acceptance of Mr. A)
3rd Sep* Bank A/c Dr. 85,680
Bad Debts A/c Dr. 1,28,520
To Bills Receivable (No. 3) 2,14,200
A/c
(Being the amount received from
official assignee of Mr. A at 40
paise per rupee against
dishonoured bill)

Alternatively, two separate entries can also be passed in place of entry
pertaining to 3rd September.
3rd Sep. Mr. A’s A/c Dr. 2,14,200
To Bills receivable (No. 3) A/c 2,14,200
(Being the amount due from Mr. A
on dishonour of his acceptance on
presentation on the due date)
3rd Sep. Bank A/c Dr. 85,680
Bad Debts A/c Dr. 1,28,520
To Mr. A’s A/c 2,14,200
(Being the amount received from
official assignee of Mr. A at 40
paise per rupee against
dishonoured bill)

30

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 30 of 38

m
m .co
c. o

e m
em l a s
s a g
SUGGESTED ANSWER ACCOUNTING

Or
(ii) (a) Weighted Average basis
m
m c. o
Calculation of the value of Inventory as on 31-5-2024

.co
Receipts Issues Balance
s em
e m l a
s ag
Date Units Rate Amount Units Rate Amount Units Rate Amount

l a
ag
(` ) (` )

1-5-24 Balance 100 15 1,500

2-5-24 300 19.5 5,850 400 18.375 7,350

5-5-24 250 18.375 4593.75 150 18.375 2756.25

16-5-24 500 21.9 10,950 650 21.09 13,708.5
21-5-24 100 21.09 2,109 550 21.09 11,599.5

25-5-24 450 21.09 9,490.5 100 21.09 2,109

Therefore, the value of Inventory is as follows:
m
. co
Value as per Weighted Method as on 31-5-2024: 100 units @ ` 21.09
= ` 2,109
s em
(b) First-in-First out basis
g l a
a
Calculation of the value of Inventory as on 31-5-2024
Receipts Issues Balance
Date Units Rate Amount Units Rate Amount Units Rate Amount
(` ) (` )
1-5-24 Balance 100 15 1,500
2-5-24 300 19.5 5,850 100 15 1,500

m
300 19.5 5,850

m .co
5-5-24 100 15 ,500

c. o m
150 19.5 2,925 150 19.5 2,925

em
16-5-24 500 21.9 10,950

la
150
se
19.5 2,925

las a g
500 21.9 10,950

g
21-5-24 100 19.5 1,950 50 19.5 975

a 500 21.9 10,950
25-5-24 50 19.5 975
400 21.9 8,760 100 21.9 2,190

31

m .
.co s e m
e m l a
l a s a g
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 31 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

Therefore, the value of Inventory as on 31-5-2024 will be as follows:
Value of Inventory as per FIFO Method: 100 units @ ` 21.9 = ` 2,190
Working Note:
(i) Per unit cost of raw material purchased on May 2,2024
= 300 x 18 + 300 + 150 = ` 19.5
300
(ii) Per unit cost of raw material purchased on May 16,2024
= 500 x 21 + 300 + 150 = ` 21.9
500
Note:
(a) Freight and unloading charges are directly attributable cost and are
necessary to bring the inventory into present location and condition
hence are included in the cost of inventory.
(b) Warehouse rent are indirectly attributable expenses and are not
considered as cost of inventory.
(c) Administrative expenses are indirectly attributable expenses and do
not usually add any specific value to inventories and hence excluded
from the cost of inventory.
(c)

Particulars Number of
debentures
Number of convertible Debenture issued 20,000
Converted into equity shares 30%
Number of debentures to be converted (30% of 6,000
20,000)
Value per Debenture ` 100
Equity shares of ` 10 each issued on conversion
[` 6,000 x 100/ ` 20] 30,000 shares

32

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 32 of 38

m
m .co
c. o

e m
em l a s
s a g
SUGGESTED ANSWER ACCOUNTING

Journal Entries

Date Particulars Amount Amount
m
c. o
(`) Dr. (`) Cr.

o m m
.c
1-6-24 8% Debentures Dr. 20,00,000

mPremium s e
e Debentures a
on Redemption of Dr. 70,000
s l
l a ag
ag
To Debenture holders A/c 20,70,000
(Being amount payable to debenture
holders on redemption)
*Debenture holders A/c Dr. 6,00,000
To Equity Share Capital 3,00,000
To Securities Premium 3,00,000
(Being 30,000 equity shares issued
m
co
on conversion)

.
em
*Debenture holders A/c Dr. 14,70,000
To Bank A/c
l a sto debenture 14,70,000

ag
(Being amount paid
holders)
Profit and Loss A/c Dr. 70,000
To Premium on redemption of 70,000
Debentures
(Being premium on redemption of
debentures transferred to Profit and
Loss A/c)

m
Debenture Redemption Reserve A/c Dr. 1,40,000 om
c.1,40,000
c. o To General Reserve
se
m
em la
(Being DRR transferred to General

las g
Dr. a
Reserve)

ag Bank A/c
To DRR Investment A/c
2,10,000
2,10,000
(Being DRR Investment realised)

33

m .
.co s e m
e m l a
l a s a g
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 33 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

*Alternatively, a combined entry can also be passed for the entries marked
in ”* ”. In that case, the entry will be -

Debenture holders A/c Dr. 20,70,000
To Bank A/c 14,70,000
To Equity Share Capital 3,00,000
To Securities Premium 3,00,000
(Being amount paid to debenture holders
on redemption and 30,000 equity shares
issued on conversion)

Note:
In case of partly convertible debentures, DRR shall be created in respect of
non-convertible portion of debenture issue. Amount of DRR created at the
time of issue is 10% of `14,00,000 = `1,40,000
Amount of DRR investment should be 15% of 14,00,000 = ` 2,10,000
Questions 6
(a) Arpit Ltd., with an authorized capital of *` 20,00,000 divided into Equity
shares of ` 10 each, on 1stJune, 2023, invited applications for issuing 3,00,000
Equity shares at a premium of ` 5 per share. The amount was payable as
follows:

On Application ` 2 per share
On Allotment (1st July, 2023) ` 7(including premium) per share
On First call (1st Nov,2023) ` 3 per share
On Final call (1st Jan,2024) ` 3 per share

All the shares were applied for and allotted. Mr. Naresh who held 20,000
shares paid the whole of the amount due on calls along with allotment
money. The final call was fully paid except a shareholder having 5,000 shares
who paid his due amount on 1st March, 2024 i.e. after 2 months along with
interest on calls in arrears @ 10% р.а. Company also paid interest
@ 12% p.a. on calls in advance to Mr. Naresh on 1st Jan., 2024.

34

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 34 of 38

m
m .co
c. o

e m
em l a s
s a g
SUGGESTED ANSWER ACCOUNTING

Give journal entries with narrations to record all these transactions in the
books of Arpit Ltd. (15 Marks)

m
c. o
PS*: Please read authorized capital ` 20,00,000 as authorized capital

m
co
20,00,000

. em
e m
(b) What are the advantages of Double Entry System? (5 Marks)

l a s
Answer
l a s ag
a(a)g In the books of Arpit Ltd
Journal Entries
Date Particulars L.F. Debit Credit
Amount Amount
(`) (`)
1-6-23 Bank A/c Dr. 6,00,000

m
To Equity Share 6,00,000
Application A/c
c
.ono
(Money received
m
applications for 3,00,000eshares
l a s
ag A/c Dr.
@ ` 2 per share)
1-7-23 Equity Share Application 6,00,000
To Equity Share Capital A/c 6,00,000
(Transfer of application money
on 3,00,000 shares to share
capital)
1-7-23
Equity Share Allotment A/c Dr. 21,00,000

m
To Equity Share Capital A/c 6,00,000

m .co
c. o
To Securities Premium 15,00,000

m
em se
(Amount due on the allotment

s
of 3,00,000 shares @ ` 2 per
g la
la a
share and securities premium

ag 1-7-23
of ` 5 per share)
Bank A/c Dr. 22,20,000
To Equity Share Allotment 21,00,000

35

m .
.co s e m
e m l a
l a s a g
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 35 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

A/c
To Calls in Advance 1,20,000
(Allotment money received
along with calls in advance on
20,000 shares)
1-11-23 Equity Share First Call A/c Dr. 9,00,000
To Equity Share Capital A/c 9,00,000
(Being first call due on 3,00,000
shares at ` 3 per share)
1-11-23 Bank A/c Dr. 8,40,000
Calls in Advance A/c Dr. 60,000
To Equity Share First Call 9,00,000
A/c
(Being first call money received
on 2,80,000 shares and calls in
advance on 20,000 shares at ` 3
per share adjusted)
1-1-24* Equity Share Final Call A/c Dr. 9,00,000
To Equity Share Capital A/c 9,00,000
(Being final call made due on
3,00,000 shares at ` 3 each)
1-1-24 Bank A/c Dr. 8,25,000
Calls in Advance A/c Dr. 60,000
Calls in Arrears A/c Dr. 15,000
To Equity Share Final Call 9,00,000
A/c
(Being final call received for
2,75,000 shares and calls in
advance for 20,000 shares
adjusted)

36

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 36 of 38

m
m .co
c. o

e m
em l a s
s a g
SUGGESTED ANSWER ACCOUNTING

1-1-24 Interest on Calls in Advance A/c Dr. 6,000
To Shareholders A/c 6,000
m
m c. o
(Being interest made due on

co m
calls in advance at the rate of

m . 12% p.a.)
s e
s e l a
a ag
1-1-24 Shareholders A/c Dr. 6,000

l
ag
To Bank A/c 6,000
(Being payment of interest
made to shareholder)
1-3-24 Shareholders A/c Dr. 250
To Interest on Calls in 250
Arrears A/c
(Being interest on calls in

m
arrears made due at the rate of
10%)
c o
. Dr.
1-3-24** Bank A/c
e m
To Calls in ArrearssA/c
15,250

l a 15,000

ag A/c
To Shareholders 250
(Being money received from
shareholder for calls in arrears
and interest thereupon)

Calculation of Interest on Calls in Advance & Calls in Arrears:
Interest on Calls in Advance

m
First Call from 1st July, 2023 to 1st Nov, 2023

m
= ` 60,000 x 12% x 4 / 12
.c o = ` 2,400

c. o Final Call from 1 July 2023 to 1 , Jan 2024
st st

s
m
e = ` 3,600
em la
= ` 60,000 x 12% x 6 / 12

las Total
a g ` 6,000

ag Interest on Calls in Arrears from 1 Jan,2024 to 1 March,2024 ` 15,000 x
st st

10% x 2 / 12 = ` 250

37

m .
.co s e m
e m l a
l a s a g
ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 37 of 38

SUGGESTED ANSWER FOUNDATION EXAMINATION: JANUARY 2025

Alternatively, the following entries can also be passed for entries pertaining
to money received from shareholders from call in arrears and calls in
advance and interest thereupon.
Amount (in `)
* 1/1/2024 Bank A/c Dr. 8,25,000
Calls in advance A/c Dr 60,000
To Equity Share Final Call A/c 8,85,000
(Receipt of final call for 1,75,000
shares and call-in advance for
20,000 shares adjusted)
** 1/3/2024 Bank A/c Dr. 15,250
To Equity Share Final Call A/c 15,000
To Shareholders A/c 250
(Being money received from
shareholders for calls-in-arrear
and interest thereupon)

(b) According to double entry system, every transaction has two-fold aspects,
debit and credit and both the aspects are to be recorded in the book of
accounts.
The advantages of double entry system are as follows:
(i) By the use of this system the accuracy of the accounting work can be
established, through the device of the trial balance.
(ii) The profit earned or loss incurred during a period can be ascertained
together with details.
(iii) The financial position of the entity or the institution concerned can be
ascertained at the end of each period, through preparation of the
financial statements.
(iv) The system permits accounts to be kept in as much details as necessary
and, therefore provides significant information for the purpose of
control and reporting.
(v) Result of one year may be compared with those of previous years and
reasons for the change may be ascertained.

38

For more Question Papers, Sample Papers, Notes & Syllabus visit Page 38 of 38