CA Foundation September 2024 Suggested Answers Paper 1 Accounting

FOR CA FOUNDATION EXAM PREPARATION

CA Foundation 2024
Suggested Answers ·
Paper 1 Accounting
EXAM YEAR TYPE SUBJECT

CA Foundation 2024 Suggested Answers Paper 1 Accounting
DATE

September 2024

Notes · Sample Papers · Previous Year Papers · Mock Tests

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

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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) Nominal Accounts are balanced at the end of the Accounting Year.
(ii) Overhaul Expenses of a second-hand machinery purchased are Revenue

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Expenditure.

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(iii) Valuation of inventory at cost or net realizable value is based on

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Principle of Conservatism.

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(iv) A Promissory Note can be made payable to the Bearer.
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(v) The Receipts and payment account for a non-profit organization follows
the accrual concept of accounting.
(vi) Legal heirs of a deceased partner are entitled to his capital account
balance only. (6 x 2=12 Marks)
(b) Differentiate between Book-keeping and Accounting. (4 Marks)
(c) Pass the necessary journal entries to rectify the following errors, using a

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Suspense Account:

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(i) Goods of the value of ` 500 returned by Mr. A were entered in the Sales

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Day Book and posted there from to the credit of his account;

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(ii) ` 250 entered in the Sales Returns Book, has been posted to the debit of

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Mr. R, who returned the goods; a
a (iii) A sale of ` 700 made to Mr. Q was correctly entered in the Sales Day
Book but wrongly posted to the debit of Mr. S as ` 70;

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SUGGESTED ANSWER FOUNDATION EXAMINATION: SEPTEMBER 2024

(iv) The total of "Discount allowed" Column in the Cash Book for September
amounting to ` 350 was not posted. (4 Marks)
Answer
(a) 1. False: Nominal Accounts are not balanced. The balances at the end are
transferred to Trading/ Profit & Loss A/c.
2. False: Overhaul expenses are incurred to put second-hand machinery
in working condition to derive endurable long-term advantage. So, it
should be capitalized.
3. True: The conservatism concept states that one shall not account for
anticipated profits but shall provide all prospective losses. Valuing
inventory at cost or net realisable value whichever is less, therefore is
based on principle of conservatism.
4. False: A promissory note should not be made payable to the bearer.
The payee must be to a certain person.
5. False: It depicts the cash system of accounting rather than the accrual
system, as the cash receipts and payments pertaining to any year are
entered in the Receipts and payments account. The principle of accrual
is not followed with regard to the receipts and payments account of a
non-profit organization.
6. False: Legal heirs of a deceased partner are entitled to all the dues of
deceased partner.
(b) The difference between Book keeping and Accounting are as follows:

S.N. Book-keeping Accounting
1. It is a process concerned It is a process concerned with
with recording of summarising of the recorded
transactions. transactions.
2. It constitutes as a base for It is considered as a language of
accounting. the business.
3. Financial statements do not Financial statements are prepared
form part of this process. in this process on the basis of
book-keeping records.

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SUGGESTED ANSWER ACCOUNTING

4. Managerial decisions Management takes decisions on
cannot be taken with the the basis of these records.

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help of these records.

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5. There is no sub-field of It has several sub-fields like
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book keeping. financial accounting,

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management accounting etc.

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a business cannot be is ascertained on the basis of the
ascertained through book- accounting reports.
keeping records.

(c) Journal

Particulars L.F. Dr. Cr.
` `

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(1) Sales A/c Dr. 500
Sales Returns A/c
. c o 500

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(Being the value asof goods
To Suspense A/c 1,000

l posted
returned by Mr. Agwrongly
a
to Sales and omission of debit to
Sales Returns Account, now
rectified)
(2) Suspense A/c Dr. 500
To Mr. R 500
(Being wrong debit to Mr. R for
goods returned by him, now
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m rectified)
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c. o (3) Mr. Q Dr.
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700

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To Mr. S 70

gla To Suspense A/c 630
a (Being omission of debit to Mr. Q
and wrong credit to Mr. S for sale
of ` 700, now rectified)

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SUGGESTED ANSWER FOUNDATION EXAMINATION: SEPTEMBER 2024

(4) Discount A/c Dr. 350
To Suspense A/c 350
(Being the total of Discount
allowed during September not
posted from the Cash Book; error
now rectified)

Question 2
(a) The cash book of Hari showed a debit balance of ` 1,36,800 as on 31.12.2023
which was in disagreement with balance as per pass book. Following
discrepancies were noticed:
(i) Dividend of ` 18,000 was deposited in the bank of which Hari had no
information
(ii) Cheque was issued to Suresh of ` 14,780 on 18.12.2023 which was
recorded in cash book as ` 14,870.
(iii) Cheques totalling of ` 55,000 were deposited into bank on 30.12.2023
which were not cleared until 31.12.2023.
(iv) Mediclaim premium of ` 14,160 was paid as per the standing instruction
of Hari which was not recorded in cash book.
(v) Goods amounting ` 1,60,000 were sold to Ajay in November 2023. He
deposited cheque on 15.12.2023 after deducting 4% cash discount. This
entry was missed while preparing cash book.
(vi) Bank charges for issue of cheque book ` 150 was skipped while preparing
cash book.
(vii) Hari received a UPI of ` 1,000 on 29.12.2023 for sale of scrap which was
not entered in cash book.
(viii)Cheques amounting to ` 1,80,000 were issued during the month but
cheques of ` 1,44,000 were only presented during the month for
payment.
Prepare Bank Reconciliation Statement on 31.12.2023 and ascertain balance
as per pass-book. (10 Marks)
(b) Harry draws a bill on Sejal for ` 60,000 on 01.01.2023 for 3 months. Sejal
accepts the bill and sends it back to Harry to get it discounted for ` 56,000.

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Harry remits 1/4th amount to Sejal. On the due date, Harry was unable to
remit his share to Sejal, rather accepts a bill of ` 80,000 for a period of 3
months. This bill was discounted by Sejal for ` 74,600. Sejal after making the
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payment of first bill sent 3/4thof the amount remaining to Harry. On maturity
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of the bill, Harry became bankrupt and his estate paying 40 paise in the
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rupee.
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Give journal entries in the books of Sejal. Also prepare ledger account of
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aAnswer
Harry. All workings should form part of the answer. (10 Marks)

(a) Bank Reconciliation Statement of Mr. Hari as on 31st Dec., 2023

Particulars Details Amount
` `
Balance as per the Cash Book 1,36,800

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Add: Cheques issued but not presented for 36,000
payment
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. by bank
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e Cash Book
Dividends directly collected 18,000

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but not yet entered in the
l wrong amount
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Cheque recorded with
in the Cash Book
90

Cheque directly deposited but not 1,53,600
recorded in the cash book
Amount received from slae of scrap not 1,000 2,08,690
recorded in cash book
3,45,490

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Less: Cheques deposited but not cleared till 55,000

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31st dec
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c. o Mediclaim paid by the bank directly
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em a (69,310)
l150
not yet recorded in the Cash Book 14,160

las Bank charges not recorded in cash
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ag book
Balance as per the Pass Book 2,76,180

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SUGGESTED ANSWER FOUNDATION EXAMINATION: SEPTEMBER 2024

Alternatively, the question can also be solved by preparing adjusted cash
book. In that case the solution will be:
Cash Book (Bank Column)

Particulars Amount Particulars Amount
(` ) (` )
To Balance b/d 1,36,800 By Bank charges 150
To Amount received from 1,000 By Mediclaim 14,160
sale of scrap By balance c/d 2,95,180
To dividends collected by 18,000
bank
To cheques recorded 90
with wrong amount
To cheque directly
1,53,600
deposited not
recorded
3,09,490 3,09,490

Bank Reconciliation Statement of Mr. Hari as on 31st Dec., 2023

Particulars `
Balance as per the Cash Book (corrected) 2,95,180
Add: Cheques issued but not yet presented 36,000
Less: Cheques deposited but not cleared (55,000)
Balance as per the Pass Book 2,76,180

(b) In the books of Sejal
Journal Entries

Date Particulars DR. CR.
(in `) (in `)
1/1/2023 Harry Dr. 60,000
To Bills payable A/c 60,000
(Being bill of exchange
accepted and sent to Mr. Harry)

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1/1/2023 Bank A/c Dr. 14,000
Discount charges A/c Dr. 1,000
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To Harry 15,000
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em from Harry on account of the l a
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la4/4/2023 Bills receivable A/c
bills receivable)
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Dr. 80,000
To Harry 80,000
(Being the bills accepted by
Harry)
4/4/2023 Bank A/c Dr. 74,600
Discount charges A/c Dr. 5,400
To Bills receivable A/c 80,000

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(Being Harry acceptance
discounted with bank)
4/4/2023 Bills payable A/c m
To Bank A/cas
e Dr. 60,000

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60,000
(Being theaamount
due date)
4/4/2023 Harry Dr. 15,000
To Bank A/c 10,950
To Discount A/c 4,050
{(5,400/80,000) x 60,000}

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(Being the amount paid and the

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80,000 .
discount debited to Harry)

c. o 7/7/2023 Harry Dr.
s em 80,000
s em To Bank A/c
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gla (Being Harry’s acceptance
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a discounted with bank
dishonoured due to Harry’s
bankruptcy)

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SUGGESTED ANSWER FOUNDATION EXAMINATION: SEPTEMBER 2024

7/7/2023 Bank A/c Dr. 24,000
Bad debts A/c Dr. 36,000
To Harry 60,000
(The amount received from Harry and
the balance being written off as debt)

Harry ‘s A/c

Particulars ` Particulars `
To Bills Payable A/c 60,000 By Bank A/c 14,000
To Bank A/c 10,950 By Discount A/c 1,000
To Discount A/c 4,050 By Bills Receivable 80,000
To Bank A/c 80,000 By Bank A/c 24,000
By Bad Debts 36,000
1,55,000 1,55,000

Question 3
(a) The following Trial Balance is the Trial Balance of a Proprietor as on
March 31 2024. Prepare Trading and Profit & Loss Account for the year
ending March 31st 2024 and a Balance Sheet as at that date.

Particulars Amount Particulars Amount
(` ) (` )
Plant and Machinery 5,00,000 Capital 4,00,000
Office Furniture 26,000 Sundry Creditors 5,20,000
Opening Stock 4,80,000 Sales 48,00,000
Motor Van 1,20,000 Bills Payable 56,000
Sundry Debtors 4,57,000 Provision for Doubtful 25,000
Debts
Cash in hand 4,000 Return Outwards 55,000
Cash at Bank 65,000 Discount Received 37,000
Wages 15,00,000
Salaries 1,40,000

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Purchases 21,35,000
Bills Receivable 72,000
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Return Inwards 93,000

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Drawings 70,000

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e Rent
Advertisements 60,000
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Factory 8,000
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a General Expenses 63,000
10,000
Bad debts 25,000
Discount allowed 65,000
58,93,000 58,93,000

Additional Information to be considered:
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Closing Stock on March 31st 2024 is ` 5,20,000.
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. was purchased for ` 3,00,000 but
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(ii) During the year, Plant and Machinery

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it was debited to Purchase Account.
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(iii) 3 months factory rent isldue but not paid ` 3,000.
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(iv) Provide depreciationaat 5% per annum on furniture and 10% on plant
and machinery and motor van.
(v) Further bad debts ` 7,000.
(vi) Provision for doubtful debts to be increased to ` 30,000 at year- end.
(vii) Provision for discount on Debtors to be made at 2%. (10 Marks)

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(b) The following is the Balance Sheet of Krish and Bala, sharing profit and loss

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in the ratio 3: 2
c.Amount
c. o Liabilities Amount Assets
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s em (`)
g la
gla Capital Accounts: Land & Buildings
a 28,000

a Krish 25,000
Bala 15,000 40,000
General Reserve 30,000 Plant & Machinery 15,000

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SUGGESTED ANSWER FOUNDATION EXAMINATION: SEPTEMBER 2024

Workmen’s Stock 10,000
Compensation
Reserve 10,000
Creditors 10,000 Debtors 25,000
Employee’s Less: Provision for
Provident Fund 8,000 Doubtful debts 4,000 21,000
Bank 20,000
Advertisement
Expenditure 4,000
98,000 98,000

On admission of Sobha for 1/6th share in the profits, it was decided that:
(1) Value of land and buildings to be increased by ` 5,000.
(2) Value of stock to be increased by ` 3,500.
(3) Provision of doubtful debts to be increased by ` 1,500.
(4) Liabilities of workmen's compensation reserve was determined to be
` 8,000.
(5) Sobha was to bring in cash of ` 25,000 as her capital.
(6) Sobha brought in her share of goodwill ` 12,000 in cash.
Prepare the Revaluation Account, the Capital Account and the Balance Sheet
of the new firm. (10 Marks)
Answer
(a) Trading Account for the year ended 31st March, 2024
Particulars Details Amount Particulars Details Amount
` `
To opening Stock 4,80,000 By Sales 48,00,000
To Purchases 21,35,000 Less: Returns 93,000 47,07,000
Inwards
Less: Plant and 3,00,000 By Closing Stock 5,20,000
Machinery

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included in
purchases

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Less: Returns 55,000

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Outward 17,80,000

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To wages 15,00,000

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eoutstanding l a
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To Factory rent 8,000

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Add: 3,000 11,000
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c/d
Profit 14,56,000

52,27,000 52,27,000

Profit and Loss Account for the year ended 31st March, 2024
Particular Amount Particular Amount
` `

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To Salaries 1,40,000 By Gross profit b/d 14,56,000

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To Advertisements 60,000 By Discount Received

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To Insurance 63,000 37,000
To General expenses

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10,000
To Discount Allowed
To provision for doubtful debts a g 37,000
(W.N.1)
To Provision for discount on 8,400
debtors (W.N.2)
To Depreciation (W.N. 3) 93,300
To Net Profit transferred to 10,16,300
Capital a/c

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14,93,000 14,93,000

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Balance Sheet as at 31st March, 2024

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Liabilities Details Amount Assets Details

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Add: Additions 3,00,000
Add: Net Profit 10,16,300 Less: Dep. (W.N.3) (80,000) 7,20,000
Less: Drawings (70,000) 13,46,300

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SUGGESTED ANSWER FOUNDATION EXAMINATION: SEPTEMBER 2024

Office furniture 26,000
Bills Payable 56,000 Less: Dep. (W.N. 3) (1,300) 24,700
Sundry Creditors 5,20,000
Outstanding 3,000 Motor Vans 1,20,000
Factory rent
Less: Dep. (W.N. 3) (12,000) 1,08,000
Bills receivables 72,000
Stock in Trade 5,20,000
Sundry Debtors 4,57,000
Less: Further Bad (7,000)
debts
Less: Provision for (30,000)
doubtful debts
Less: Provision for (8,400) 4,11,600
discount on debtors
(W.N. 2)
Cash at hand 4,000
Cash in bank 65,000
19,25,300 19,25,300

Working Notes :
(1) Provision for Bad and Doubtful Debts Account

Particulars ` Particulars `
To Bad-debts (as 25,000 By Balance b/d (as per 25,000
per Trial Balance) Trial Balance)
To Sundry debtors By P&L A/c (Balancing 37,000
(further bad-debts) 7,000 figure)
To Balance c/d i.e.
provision required
at year end 30,000
62,000 62,000

(2) Provision for discount on debtors

Debtors as per Trial Balance `4,57,000

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Less: Further bad-debts (7,000)
Less: New provision for Doubtful Debts (30,000)
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Debtors before provision for discount 4,20,000
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Provision for discount on debtors @2% ` 8,400
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(3) Depreciation
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g la Plant and Machinery @ 10% on 8,00,000 (5,00,000 + 80,000 ag
a 3,00,000*)
Motor Van @ 10% on 1,20,000 12,000
Office Furniture @ 5% on 26,000 1,300
Total ` 93,300
*Purchase of a plant and machinery during the year for ` 3,00,000
which was wrongly debited to purchase now added to Plant and

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Machinery.
(b)
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Revaluation A/c
Liabilities
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s 1,500 By Land and Building 5,000
Assets
a
`
To Provision for DoubtfullDebts
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To Profit on revaluation By stock 3,500
Krish 4,200
Bala 2,800 7,000

8,500 8,500

Partners’ Capital A/c
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Particulars Krish Bala Sobha Particulars Krish
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Bala Sobha

c. o To Krish and 12,000 By balance b/d

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25,000 15,000

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Bala’s capital A/c–

las To Advertisement By Bank-
a g 37,000

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expenses 2,400 1,600 (Capital + GW)

a By Sobha‘s Capital
A/c
7,200 4,800

To Balance c/d 53,200 33,800 25,000 By General Reserve 18,000 12,000

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SUGGESTED ANSWER FOUNDATION EXAMINATION: SEPTEMBER 2024

By Workman comp. 1,200 800
Reserve
By Revaluation A/c 4,200 2,800

55,600 35,400 37,000 55,600 35,400 37,000

Balance Sheet of the Firm (after admission of Sobha)

Liabilities ` Assets `
Capital Accounts: Land and Building 33,000
Krish 53,200 Plant & Machinery 15, 000
Bala 33,800 Stock 13,500
Sobha 25,000 1,12,000 Debtors 25,000
Employees provident fund 8,000 Less: Provision for
workman compensation 8,000 Doubtful
Reserve Debts 5,500 19,500
Creditors 10,000 Bank (W.N.2) 57,000
1,38,000 1,38,000

Working Note:
(1) Calculation of Sacrificing ratio

Partner Old Share New Share Difference
Krish 3/5 – 3/6 = 3/30
Bala 2/5 – 2/6 = 2/30
Sobha – 1/6

(2) Bank A/c

Particulars ` Particulars `
To balance b/d 20,000 By Balance c/d 57,000
To Sobha’s capital A/c 37,000
57,000 57,000

It may be noted that Advertisement expenses are not permitted to be
deferred. It must be written off when incurred, as they do not result in

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acquisition or creation of an intangible or recognizable asset. That is why it
is routed through partner’s capital account.

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Question 4
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(a) X, Y and Z were in a firm sharing profit and loss as 3: 2: 1. Their Balance

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Sheet on 31st March, 2024 was as follows:
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Liabilities Amount Assets Amount

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a X’s Capital
(`)
78,000 Goodwill
(`)
12,000
X’s Capital 42,000 Patents 30,000
Z’s Capital 31,000 Machinery 60,000
Investment Investment (Market value 25,000
` 27,600)
Fluctuation Fund 6,000 Stock 30,650

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Workmen’s

em Less: Provision for
Compensation 12,000 Debtors 50,000
Trade Creditors
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31,000
Employee’s Provident
Found
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a 12,000 Cash at Bank
46,000
8,350

TOTAL 2,12,000 TOTAL 2,12,000

Z retired on the above date on the following terms:
(1) Goodwill of the firm was valued at ` 60,000.
(2) Value of patents was to be reduced by 20% and that of machinery to
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m 90%.
c. o
c. o (3) Provision for doubtful debts was to be raised to 10%.
s em
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(4) Liability on account of Provident fund was only ` 6,000.

g a of ` 6,000 is to be
a
(5) Liability for workmen compensation to the extent
created.
(6) Z took over the investment at market value.

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SUGGESTED ANSWER FOUNDATION EXAMINATION: SEPTEMBER 2024

(7) Amount due to Z is to be settled on the following basis- 50% on
retirement, 50% of the balance within one year and the balance by a bill
of exchange (without interest) at 3 months.
You are required the following:
(i) Show entries for the treatment of goodwill,
(ii) Prepare Revaluation Account,
(iii) Partner Capital Account, &
(iv) Balance Sheet. (10 Marks)
(b) From the following Receipts and Payments Account of Delhi Club, prepare
Income & Expenditure Account for the year ended 31.12.2023 and its Balance
Sheet as on that date.

Receipts Amount Payments Amount
(`) (`)
Cash in hand (Opening) 8,100 Salary 3,000
Cash in Bank (Opening) 15,000 Repair Expenses 500
Donations 7,000 Purchase of furniture 7,000
Subscriptions 10,000 Miscellaneous 500
Expenses
Entrance fees 1,500 Purchase of 6,000
Investments
Interest on Investments 100 Insurance Premium 300
Interest received from 400 Billiards Table 10,000
Bank
Sale of Old Newspaper 250 Paper, Ink, etc. 250
Sale of Drama Tickets 1,250 Drama Expenses 500
Cash in hand 4,500
(Closing)
Cash in Bank 11,050
(Closing)
43,600 43,600

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Information:
(1) Subscriptions in Arrear for 2023` 1,200, subscription in advance for 2024
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` 550.
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(2) Insurance Premium outstanding ` 80, Miscellaneous Expenses prepaid

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` 90.

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a
l(4) Entrance fee are to be treated as Revenue Income. ag
(3) 50% of Donation is to be capitalized.

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a (5) 8% Interest has accrued on Investments for 5 months.
(6) Billiards Table costing ` 30,000 were purchased during the last year and
` 20,000 were paid for it. (10 Marks)
Answer
(a) (i) Entries for the treatment of goodwill

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Total goodwill of firm is ` 60,000

em 6,000
Z’s share (1/6 x ` 60,000) =` 10,000
(a) X’s Capital A/c
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la Dr. 4,000
Dr.

ag Dr.
Y’s Capital A/c
Z’s Capital A/c 2,000
To Goodwill A/c 12,000
(Being existing goodwill written off)
(b) X’s Capital A/c Dr. 6,000
Y’s Capital A/c Dr. 4,000

m
To Z’s Capital A/c 10,000

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(Being Z’s share of goodwill credited to him and debited to gaining
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se
partners in gaining ratio)

s em (ii)
g la
gla a
a
` `
To Patents A/c 6,000 By employee provident 6,000
fund A/c
To Machinery A/c 6,000 By Investments A/c 2,600

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SUGGESTED ANSWER FOUNDATION EXAMINATION: SEPTEMBER 2024

To Provision for Bad 1,000 By Revaluation Loss 10,400
Debts A/c Partners’ Capital A/cs –
To workmen’s 6,000 X 5,200
compensation* Y 3,467
Z 1,733
19,000 19,000

(iii) Partners’ Capital Account
X ( `) Y (`) Z (`) X ( `) Y (`) Z (`)
To Goodwill 6,000 4,000 2,000 By Balance b/d 78,000 42,000 31,000
To Revaluation A/c 5,200 3,467 1,733 By Investment 3,000 2,000 1,000
To Investments 27,600 Fluctuation
Fund
To Z’s Capital A/c 6,000 4,000 By X’s Capital A/c 6,000
To Bank A/c 5,334 By Y’s Capital A/c 4,000
To Z’s Loan A/c 2,667
To Bills Payable A/c 2,666
To Balance c/d 63,800 32,533
81,000 44,000 42,000 81,000 44,000 42,000

(iv) Balance Sheet as on 1stApril, 2024
Liabilities ` ` Assets ` `
Capital accounts: Patent 24,000
X 63,800 Machinery 54,000
Y 32,533 96,333 Closing stock 30,650
Z’s loan account 2,666 Sundry debtors 50,000
Trade creditors 31,000 Less: Provision for (5,000) 45,000
Bills payable 2,667 bad debts
Workman Cash and bank 3,016
compensation 18,000 balances
Employee 6,000
Provident Fund
1,56,666 1,56,666

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Working Notes:
1. Gaining ratio of existing partners:
m
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X 3/5-3/6=3/30
c. o
c. o
Y 2/5-2/6=2/30
s e m
s em that Workmen’s Compensation is treated as liability.
*It is assumed
g l a
a
(b) l(a)
g Delhi Club a
a Income and Expenditure Account for the year ending
31st December,2023
Expenditure ` Income `
To Salary 3,000 By Subscription (W.N. -ii) 10,650
To Repairs expenses 500 By Donations (50%) 3,500
To Miscellaneous 410 By Interest on investments*

m fees
expenses (100 + 200)
o
300
To Insurance premium
. c
380 By Entrance
250 m
1,500
To Paper, Ink etc
s e Bank
By Interest received from 400

a
l By Sale of old newspaper
To Excess of Income overg12,810
expenditure a 250

By Sale of drama tickets 1,250
Less: expenses 500 750
17,350 17,350

(b) Balance Sheet of Delhi Club as at 31st December, 2023

m
Liabilities ` Assets `

m
Capital Fund: Furniture
c. o7,000
c. o Opening balance 43,100 Investment

s em 6,000
em la
(W.N.1)

las Add: Excess of 12,810 Billiards table**
a g 30,000

ag income. over exp
Add: Donations 3,500 59,410 Cash in hand 4,500
Insurance Premium 80 Cash at Bank 11,050
payable 90

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SUGGESTED ANSWER FOUNDATION EXAMINATION: SEPTEMBER 2024

Subscription 550 Prepaid Expenses-
received in Misc exp 1,200
advance for 2024 Subscription
Receivable 200
Interest accrued on
investments*
60,040 60,040

Working Notes:
1. Calculation of capital fund
Balance Sheet of Delhi Club as at 31st December, 2022
Liabilities ` Assets `
Capital Fund (Balancing 43,100 Billiards table 30,000
figure)
Creditors for Billiard table 10,000 Cash in hand 8,100
Cash at Bank 15,000
53,100 53,100

2. Calculation of amount of subscription shown in Income and
expenditure account
`
Subscription received in cash during 2023 10,000
Add: Outstanding of 2023 1,200
11,200
Less: Advance of 2024 (550)
10,650

Alternatively, this working of calculation of amount of subscription can also
be presented in the form of ledger A/c.
* It may be interpreted that investments have been purchased during the
year i.e. 5 months prior to the reporting date. Accordingly, total amount of
interest accrued on such investment shall be ` 200 for the calendar year
2023. Out of which ` 100 has been received and remaining ` 100 (200-100)
is yet to be received (accrued). In that case, Interest on Investments in

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income and expenditure account shall be ` 200 and Accrued Interest in
Balance Sheet under asset side shall be ` 100.

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**Since in receipt and payment account ` 10,000 has been shown as
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payment for Billiard table, it can also be assumed that this amount is

. em
s
utilised for fresh purchase of billiard table. In that case, the amount of

e m l a
s
Billiard Table at assets side in Balance sheet will be ` 40,000 and unpaid

l a ag
amounts of billiard table shown at the liabilities side of balance sheet shall
g
aQuestion 5
be ` 10,000.

(a) Physical verification of stock in a business was done on 23rd June, 2023. The
value of the stock was ` 4,80,000. The following transactions took place
between 23rd June, 2023 and 30th June, 2023:
(i) Out of the goods sent on consignment, goods at cost worth ` 24,000 were
unsold.

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(ii) Purchase of ` 40,000 were made out of which goods worth ` 16,000 were

eminclude goods worth ` 32,000 sent on
delivered on 5th July, 2023
(iii) Sales were ` 1,36,000 which
s
a were returned before 30 June 2023, but
approval. Half of these lgoods
g
th

a regarding the remaining goods.
no information is available
(iv) Goods are sold at cost plus 25%. However, Goods costing ` 24,000 had
been sold for ` 12,000.
Determine the value of stock on 30th June, 2023. (5 Marks)
(b) Attempt any ONE of the two sub-parts i.e. either (i) or (ii):
(i) PQR associates bought a computer set on 01.04.2020 for ` 2,00,000 and

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charged depreciation @ 20% p.a. on diminishing balance method. They

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made further additions as follows:
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em se
Date Amount

s g la
la
01.04.2021 ` 1,50,000

g a
a
01.04.2023 ` 1,00,000
On 01.04.2023 it was decided to change the method to straight line basis
and charge depreciation assuming the expected life of all the computers

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SUGGESTED ANSWER FOUNDATION EXAMINATION: SEPTEMBER 2024

to be 8 years from 01.04.2023. Prepare Computers A/c for year ending
31.03.2024.
OR
(ii) Following information relates to Mr. Prem who maintains his books
under single entry system. He is not able to ascertain the amount of bad
debts incurred by him and seeks your help.
Debtors as on 01.04.2023 ` 6,50,000
Debtors as on 31.03.2024 ` 8,50,000
Sale for Financial Year 2023-2024 is 16,00,000 out of which 80% is on
credit.
Payment received during the year is ` 7,50,000 out of which cheques of
` 18,000 were dishonored. Bills of exchange accepted by customers
` 2,90,000
Discount allowed is 1% of the credit sale. (5 Marks)
(c) XYZ Ltd. an unlisted company issued 6000, 12% debentures of ` 100 each at
a discount of 5% on 01.04.2021. Interest is payable annually on
31st March every year. The debentures are redeemable at premium of 10% in
3 equal annual installments beginning from 31.03.2022. The company
invested in specified securities for the redemption of debentures. Entire loss
on issue to be booked in the 1st year. You are required to pass journal entries
for all the 3 years. (10 Marks)
Answer
(a) Statement of Valuation of Stock on 30th June, 2023
`
Value of stock as on 23rd June, 2023 4,80,000
Add: Unsold stock out of the goods sent on 24,000
consignment
Purchases during the period from 24,000
23rd June, 2023 to 30th June, 2023
Goods in transit on 30th June, 2023 16,000

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Cost of goods sent on approval basis (80% 12,800 76,800
of ` 16,000)

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5,56,800
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co m
Less: Cost of sales during the period from 23rd

m .
June, 2023 to 30th June, 2023 Sales
s e
a
1,20,000

s e l
ag
(` 1,36,000 - ` 16,000)

g a
l Gross profit
Less: 9,600 1,10,400
a Value of stock as on 30th June, 2023 4,46,400

Working Notes:

1. Calculation of normal sales:
Actual sales 1,36,000
Less: Abnormal sales 12,000
Return of goods sent on approval 16,000 (28,000)
m
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1,08,000

em
2. Calculation of gross profit:

Less: Loss on sale l
s
ofa particular (abnormal)
Gross profit or normal sales 20/100 x ` 1,08,000 21,600

goods (` 24,000-`a g
12,000)
(12,000)

Gross profit 9,600
Alternatively, the value of stock as on 30th June,2023 can also be calculated
using trading Account. In that case the solution will be
Trading Account for the period from 23rd June to 30th June

Particulars ` Particulars `

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To Opening Stock 4,80,000 By Sales including 1,20,000
m
c. o By Closing stock easm 3,93,600
abnormal sales

em
To Purchase 40,000
l a s
las Less: Goods In 16,000
ag
24,000 on June 30 (b/f)

g
transit
a To Gross Profit 9,600
(W.N.)
5,13,600 5,13,600

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SUGGESTED ANSWER FOUNDATION EXAMINATION: SEPTEMBER 2024

Statement of valuation of stock on 30th June 2023

Particulars ` `
Value of stock as per Trading Account 3,93,600
Add: Unsold stock out of the Goods sent on
consignment 24,000
Goods in Transit 16,000
12,800 52,800
Cost of goods sent on approval basis
(80% of 16000)
Value of stock as on 30th June 2023 4,46,400

Working Notes:

1. Calculation of normal sales:
Actual sales 1,36,000
Less: Abnormal sales 12,000
Return of goods sent on approval 16,000 (28,000)
1,08,000
2. Calculation of gross profit:
Gross profit or normal sales 20/100 x 21,600
` 1,08,000
Less: Loss on sale of particular (abnormal) 12,000
goods (` 24,000-` 12,000)
Gross profit 9,600

(b) (i) Either
Calculation of Depreciation
Purchased Purchased Total Total
on Jan. 1, on Jan. 1, WDV Depreciation
2020 (`) 2021 (`) (` )
1-4-20 Cost 2,00,000
Depreciation (40,000) 40,000
Written Down Value 1,60,000 1,60,000
(WDV)

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1-4-21 Cost - 1,50,000
Depreciation (32,000) (30,000) 62,000

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1-4-22 Written Down Value 1,28,000 1,20,000 2,48,000

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(WDV)

.
Depreciation (25,600) (24,000) 49,600
em
m
e l a s
s
1-4-23 Written Down Value 1,02,400 96,000 1,98,400

l a ag
(WDV)

g
a Date Computers Account
Particulars Amount Date Particulars Amount
` `
1-4-23 To Balance b/d 1,98,400 31-3-24 By Depreciation 37,300
1-4-23 To Bank (24,800+12,500)
1,00,000
31-3-24 By Balance c/d 2,61,100

om
2,98,400 2,98,400

. c
em
1-4-24 To Balance b/d 2,61,100

(ii) Or
l a s
g
a Amount Particulars
Debtors Account

Particulars Amount
To Balance b/d 6,50,000 By Bank A/c 7,32,000
To Credit Sales 12,80,000 By Discount allowed 12,800
By Bills Receivable 2,90,000
By Bad Debts (Bal fig) 45,200
By Balance c/d 8,50,000
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19,30,000 19,30,000
m .
c. o (c) In the Books of XYZ Ltd.
se
m
s em Journal Entries
g la
gla a (`) (`)
a 1-4-21 Bank A/c Dr. 5,70,000
Loss on Issue of Debentures A/c* 90,000
(W.N. 1) Dr.

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SUGGESTED ANSWER FOUNDATION EXAMINATION: SEPTEMBER 2024

To 12% Debentures A/c 6,00,000
To Premium on Redemption of 60,000
Debentures A/c
(For issue of debentures at discount
and redeemable at premium)
1-4-21 Profit and Loss A/c Dr. 60,000
To Debenture Redemption 60,000
Reserve A/c
(Being Debenture Redemption
Reserve (DRR) created at 10%)
1-4-21 Debenture Redemption Reserve 30,000
Investment Dr.
To Bank A/c 30,000
(Being DRR Investment created at
15%)
31-3-22 Profit & Loss A/c Dr. 90,000
To Loss on issue of debentures 90,000
(Being entire loss on issue of
debentures written off)
31-3-22 Debenture Interest A/c** Dr. 72,000
To Bank A/c 72,000
(Being interest to debentures holder
paid)
31-3-22 Debenture Redemption Reserve 20,000
(DRR) Dr.
To General Reserve 20,000
(For DRR transferred to General
reserve)
31-3-22 Bank A/c Dr. 30,000
To Debenture Redemption 30,000
Reserve Investment

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(Being encashment of Debenture
Redemption Reserve Investment for

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redemption of debentures)

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31-3-22 12% Debentures ** Dr. 2,00,000

em
em debentures A/c
redemption of

l a s
s ag
Dr. 20,000

l a
ag
To Bank A/c 2,20,000
(Being amount of redemption of
2000 debentures paid to debentures
holders)
01-04-22 Debenture Redemption Reserve 30,000
Investment Dr.
To Bank A/c 30,000

m
(Being DRR Investment created at
15%)
31-03-23 Debenture Interest A/c . c o
To Bank A/c se
m Dr. 48,000

lato debentures holder
48,000

a g
(Being interest
paid)
31-03-23 Debenture Redemption Reserve 20,000
(DRR) Dr.
To General Reserve 20,000
(For DRR transferred to General
reserve)

m
c. o30,000
31-03-23 Bank A/c Dr. 30,000

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c. o m
To Debenture Redemption

se
Reserve Investment

s em (Being encashment of Debenture
g la
gla Redemption Reserve Investment for
a
a redemption of debentures)
31-03-23 12% Debentures A/c Dr. 2,00,000

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SUGGESTED ANSWER FOUNDATION EXAMINATION: SEPTEMBER 2024

Premium on redemption of
debentures A/c Dr. 20,000
To Bank A/c 2,20,000
(Being amount of redemption of
debentures paid to debenture
holders)
01-04-23 Debenture Redemption Reserve 30,000
Investment Dr.
To Bank A/c 30,000
(Being DRR Investment created at
15%)
31-03-24 Debenture Interest A/c Dr. 24,000
To Bank A/c 24,000
(Being interest to debentures holder
paid)
31-03-24 Debenture Redemption Reserve 20,000
(DRR) Dr.
To General Reserve 20,000
(For DRR transferred to General
reserve)
31-03-24 Bank A/c Dr. 30,000
To Debenture Redemption 30,000
Reserve Investment
(being encashment of Debenture
Redemption Reserve Investment for
redemption of debentures)
31-03-24 12% Debentures A/c Dr. 2,00,000
Premium on redemption of
debentures A/c Dr. 20,000
To Bank A/c 2,20,000
(Being final redemption of
remaining 2000 debentures paid)

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Working Note:
1. Discount /Loss on issue of debentures
m
m
Discount on Issue of debentures= 6,000 x 100 x 5% = ` 30,000
c. o
.co
Premium on redemption of debentures = 6,000 x 100 x 10%
s em
m
eTotal loss on issue of debentures = ` 30,000 + ` 60,000 = ` 90,000 g
= 60,000
l a
a s
l*Alternatively, discount on issue and premium on redemption ofa
g
a debentures can also be shown separately. In that case, the entry will be
Bank A/c Dr. 5,70,000
Discount on Issue of Debentures A/c (W.N.1) Dr. 30,000
Loss on Issue of Debentures A/c (W.N.2) Dr. 60,000
To 12% Debentures A/c 6,00,000

om
To Premium on Redemption of Debentures
60,000
c
A/c
.
em
(For issue of debentures at discount and
redeemable at premium)
l a s
a g
** The entries for interest on Debentures and Redemption of debentures
can also be routed through debentures holders a/c.
In addition to above, the following entry every year to transfer debenture
interest and Premium on redemption of Debentures A/c to Profit and Loss
A/c can also be passed

Profit and Loss A/c Dr.
To Debenture Interest A/c

o m
m .c
To Premium on Redemption of Debentures A/c

c. o Question 6 s
m
e of ` 2 per
em l a premium)
s g
(a) P Limited issued 6,00,000 equity shares of ` 10 each at a premium

gla share, payable as ` 3 on application, ` 5 on
a
allotment (including

a and the balance in two calls of equal amount. Applications were received for
8,00,000 shares and pro-rata allotment was made to all the applicants. The
excess application money was adjusted towards allotment. Harish to whom
1600 shares were allotted failed to pay both calls and his shares were

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SUGGESTED ANSWER FOUNDATION EXAMINATION: SEPTEMBER 2024

subsequently forfeited after second call. You are required to pass journal
entries in the books of P Limited and prepare bank account. (15 Marks)
(b) Differentiate between Periodic Inventory System and Perpetual Inventory
System. (5 Marks)
Answer
(a)

Particulars Debit (`) Credit (`)
Bank A/c Dr. 24,00,000
To Equity Share Application A/c 24,00,000
(Being application money received for
8,00,000 shares @ ` 3 per share)
Equity Share Application A/c Dr. 24,00,000
To Equity Share Allotment A/c 6,00,000
To Equity Share Capital A/c 18,00,000
(Being excess application money adjusted
against allotment and application money
transferred to share capital on 6,00,000
shares at ` 3 each)
Equity Share Allotment A/c Dr. 30,00,000
To Equity Share Capital A/c 18,00,000
To Securities Premium A/c 12,00,000
(Being allotment money due, ` 5 per share
including ` 3 towards share capital and ` 2
towards premium)
Bank A/c Dr. 24,00,000
To Equity Share Allotment A/c 24,00,000
(Being allotment money received after
adjusting excess application money)

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SUGGESTED ANSWER ACCOUNTING

Equity Share First Call A/c Dr. 12,00,000

m
To Equity Share Capital A/c 12,00,000

m
(Being first call money due @ ` 2 per share)
c. o
.
Bank A/cco Dr. 11,96,800
s em
m
e in arrear l a
s
la To Equity Share First Call A/c
Calls Dr. 3,200
ag
ag
12,00,000
(Being first call money received, except on
1600 shares)
Or
Bank A/c Dr. 11,96,800
To Equity Share First Call A/c 11,96,800

m
(Being first call money received, except on
1600 shares)
c o
. Dr. 12,00,000
Equity Share Final Call A/c
e m
To Equity Share Capital s
l a A/c 12,00,000

agdue @ ` 2 per share)
(Being final call money
Bank A/c Dr. 11,96,800
Calls in arrear Dr. 3,200
To Equity Share Final Call A/c 12,00,000
(Being first call money received, except on
1600 shares)
Or
o m
m .c
c. o m
Bank A/c Dr. 11,96,800

s e 11,96,800
em la
To Equity Share Final Call A/c

las a g
g
(Being first call money received, except on

a 1600 shares)
Equity Share Capital A/c Dr. 16,000
To Call in Arrear 6,400

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SUGGESTED ANSWER FOUNDATION EXAMINATION: SEPTEMBER 2024

To Share Forfeiture A/c 9,600
(Being forfeiture of 1600 shares of Harish for
non-payment of calls money)
Or
Equity Share Capital A/c Dr. 16,000
To Equity Share First Call A/c 3,200
To Equity Share Final Call A/c 3,200
To Share Forfeiture A/c 9,600
(Being forfeiture of 1600 shares of Harish for
non-payment of calls money)

Bank Account
Particulars Debit (`) Credit (`)
To Equity Share Application A/c 24,00,000 By Balance c/d 71,93,600
To Equity Share Allotment A/c 24,00,000
To Equity Share First Call A/c 11,96,800
To Equity Share Second Call A/c 11,96,800
Total 71,93,600 71,93,600
(b) The difference between Periodic Inventory System and Perpetual Inventory
System are as follows:

S. Periodic Inventory System Perpetual Inventory System
No.
1. This system is based on physical It is based on book records.
verification.
2. This system provides It provides continuous
information about inventory information about inventory
and cost of goods sold at a and cost of sales.
particular date.
3. This system determines It directly determines cost of
inventory and takes cost of goods sold and computes
goods sold as residual figure. inventory as balancing figure.

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4. Cost of goods sold includes loss Closing inventory includes loss
of goods as goods not in of goods as all unsold goods are

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inventory are assumed to be assumed to be in Inventory.

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sold.

. em
5.
em
Under this method, inventory Inventory control can be

l a s
s ag
control is not possible. exercised under this system.

l a
ag
6. This system is simple and less It is costlier method.
expensive.
7. Periodic system requires closure Inventory can be determined
of business for counting of without affecting the operations
inventory. of the business.

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s em
g l a
a

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c. o se
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s em g la
gla a
a

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