CS Executive December 2025 Question Paper Corporate Accounting and Financial Management

FOR CS EXECUTIVE EXAM PREPARATION

CS Executive 2025
Question Paper ·
Corporate
Accounting and
Financial
Management
EXAM YEAR TYPE

CS Executive 2025 Question Paper
SUBJECT DATE

Corporate Accounting and Financial Management December 2025

Notes · Sample Papers · Previous Year Papers · Mock Tests

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NEW SYLLABUS
524
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Roll No. .....................................

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Time allowed : 3 hours
.c Maximum marks : 100
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Total number of questions : 6 Total number of printed pages : 15

NOTE : Answer ALL Questions.

PART—I

1. Vikas Steel & Co. (‘‘The Company’’) is a steel manufacturing company in existence since

the past three decades. The Executive Chairman and Managing Director is Mr. Mohan.
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Mr. Mohan is a Mechanical Engineer and has constructed and operationalized the steel plant.

The steel plant has achieved major successm
s e with the growing economy. Ms. Disha, Mr. Mohan’s

daughter, is an Executive Director atla
ag team and it felt the need to modernize the Company’s
the Company. She oversees the operations of the Company.

A study was done by the Operations

operations. The estimated budget for the modernization efforts is likely to be INR 75 lakh.

The merchant bankers of the Company advise the Company to partially raise capital by issue

of equity shares by way of an Initial Public offering.

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The prospectus of Vikas & Co’s equity issue for 50,000 equity shares of INR 100 each.

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(Issue price INR 120). Payment to be made is as follows :

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On application INR 25

las On allotment
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(Including premium of INR 20) INR 50

First Call INR 20

Final Call INR 25

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Applications were received for 75000 shares. Shares were allotted to the applicants on pro rata

basis.

Kamal who was allotted 500 shares did not pay the allotment money. He also failed to

pay the first call. His shares were forfeited. Amar was holding 200 shares did not pay

the first call. Final call was not made.

The Company had appointed four underwriters. The entire issue was underwritten as follows :

Underwriter % share in underwriting

P 35%

Q 25%

R 20%

S 20%

The underwriting commission is paid @ 1.5%.

Required :

(a) Pass all the journal entries for issue and forfeiture of equity shares with necessary

working notes.

(b) Calculate the underwriting commission for each underwriter.

(c) Pass all the journal entries for payment of underwriting commission.

(10+3+2=15 marks)

2/2025/CAFM Contd. ........

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2. (a)
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The Human Resources team of Rama Ltd. has implemented an Employee Stock Option
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Plan foroeligible employees one year after listing of the Company’s share in stock
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em On April 1, 2022, Options were granted for 20,000 equity shares atgINR l a s
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la 40 when market price was INR 130. The employees exercised their options fora19,000
exchange.

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a shares only between 15th March, 2023 and 31st March, 2023; the remaining options
lapsed. The company closes its books on 3lst March every year.

Show Journal Entries.

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(b) ABC & Co. issued 5,000 debentures of INR 1,000/- each at a premium of 10%,

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balance on first and final call.em
payable INR 200 on application, INR 500 on allotment (including premium) and the

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l were accepted in full, applicants for 1,000 debentures
Applications were received for 7,000 debentures.

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Applications for 4,500 debentures

were allotted 500 debentures and remaining applications were rejected. All money

were duly received.

Pass all the journal entries.

(6 marks)

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(c) Kapoor Ltd. with subscribed capital of INR 7,50,000 consisting of 75,000 Equity

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shares of INR 10 each; called up capital INR 7.50 per share. A bonus of INR

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1,87,500 declared out of General Reserve to be applied in making the existing shares

la fully paid up.
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Pass Journal Entries in the books of Kapoor Ltd.

(4 marks)

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3. (a) Below given is the Balance Sheet of Bharat Chemical Ltd. as on 31st March, 2025.

Balance Sheet of Bharat Chemical Ltd. as on 31st March, 2025

Liabilities : Amount Amount

(INR) (INR)

2,00,000, 14% Preference shares of

INR100 each, fully called 2,00,00,000

Less : Calls in arrears @ INR 20 per share 4,00,000 1,96,00,000

10,00,000 Equity shares of INR 10 each, INR 8

per share called 80,00,000

Less : Calls-in-arrears 20,000

Add : Calls-in-advance 10,000 79,90,000

Securities premium 5,10,000

General reserve 1,50,00,000

10,000, 15% Debentures @ INR 1,000 each,

fully paid 1,00,00,000

Current liabilities and provisions 10,00,000

Total 5,41,00,000

2/2025/CAFM Contd. ........

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Assets :

Fixed.c
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Assets 1,30,00,000

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28,00,000

a Other current assets 2,15,00,000

Cash and bank balances 1,68,00,000

Total 5,41,00,000

On 1st April, 2025, the Board of Directors decided that :

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(i) The fully paid preference shares are to be redeemed at a premium of 4%

on 1st May, 2025 and for .that purpose 6 lakh equity shares of INR 10
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each are to be issued

Considering the information given above, pass the required journal entries in the books

of the company.

(b) Yash Ltd. recently reported the following income Statement :

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Particulars (INR in Crores)

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Sales
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EBIT 130

Interest 40

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EBT 90

Taxes @ 40% 36

EAT (Net Income) 54

Dividend 21.6

Retained Earnings 32.4

This year company is forecasting 25% increase in sales and it expects that its year

end operating cost will be around 70% of sales. It is expected that tax rate, interest

and dividend pay-out ratio will be constant.

Calculate the following :

(i) Projected Net Income

(ii) Expected growth rate in dividend.

(3+2=5 marks)

(c) The following information is given for Kabir Ltd., based on 360 days working in

a year :

• Total revenue from operations INR 40,00,000/-

• Trade receivables as on April 2024 INR 4,15,000/-

• Trade receivables as on March 2025 INR 4,75,000/-

• Cash revenue from operations : 20% of revenues from operations

Calculate :

(i) Trade receivables turnover ratio

(ii) Average credit period.

(3+2=5 marks)

2/2025/CAFM Contd. ........

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Attempt all parts of either Q. No. 4 or Q. No. 4A

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4. (a)
a s Following is the Balance Sheet of XYZ & Co. as on March 31, 2024 :
l Liabilities ag
ag INR in Assets INR in

lakhs lakhs

Equity share capital Machinery 7,200

(Fully paid-up shares

of ` 10 each) 4,800

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Securities Premium 700 Furniture 904

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e 680 Stock
General Reserve 1,860 296

Profit and Loss Account
l a s 2,400

12% Debentures a g 3,000 Debtors 1,040

Sundry Creditors 1,500 Cash at Bank 1,480

Sundry Provisions 780

13,320 13,320

On April 1, 2024, the company announce buyback of 25% of equity share capital

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at INR 13/- per share. For the purpose :

c. o – Investments were sold for INR 300 lakhs
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– Issued 4,00,000 preference shares of INR 100 each at par. Entire amount

is payable at application.

The buyback was completed in due time. Show journal entries for above transactions.

2/2025/CAFM P.T.O.

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(b) On the basis of the following information provided by X Ltd. Prepare a Cash Flow

Statement for the year ended on 31st March 2025 :

(i) X Ltd. sold all the goods for cash only and purchased the goods in credit

from suppliers only.

(ii) The company has made a total purchase of INR 77,00,000.

(iii) The company paid INR 45,00,000 as wages and INR 9,00,000 as office

expenses during the year.

(iv) Balance of Suppliers accounts on 31.03.2024 were higher than the balance

on 31.03.2025 by INR 3,00,000.

(v) Tax paid by the company amounts to INR 8,00,000 while provision for taxation

was INR 7,00,000.

(vi) The company repaid bank loan of INR 17,50,000 which included interest of

INR 1,50,000.

(vii) Dividend paid during the year INR 5,00,000 (including dividend

distribution tax).

(viii) X Ltd. sold investments of INR 60,00,000 at a profit of INR 4,00,000.

(ix) Furniture purchased during the year INR 20,00,000.

(x) Cash and Cash Equivalents as on 31.03.2024 was INR 10,00,000.

(xi) Cash and Cash Equivalents as on 31.03.2025 was INR 49,50,000.

2/2025/CAFM Contd. ........

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(c)
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A Ltd. acquired assets worth INR 1,75,00,000/- from V Ltd. The consideration was
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paid as follows :
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ag – Payment by cheque : INR 55,00,000/-

– Remaining by issue of shares to V Ltd. shares of INR 10/- are issued at

a premium of 20%.

What will be the number of shares to be issued by A Ltd. to V Ltd ?

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Pass all the journal entries.

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OR (Alternate question to Q. No. 4)

4A. (i) What are borrowing costs as per Accounting Standard 16 ? When would borrowing

costs be capitalized ?

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(ii) Distinguish between free cash flow to firm and free cash flow to equity.

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What are the five key features of Schedule III of the Companies .Act, 2013, which
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prescribes the form and disclosures for the Balance Sheet

and Loss ?

(5 marks each)

2/2025/CAFM P.T.O.

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PART—II

5. Tara & Co. (‘‘The Company’’) is a private sector electrical engineering company that is

in existence for the past four decades. Mr. Bhushan is the founder of the company and

is the existing Chairman and Managing Director. Geeta is a finance professional and brings

rich experience to the company. Currently, Geeta is the Chief Financial Officer of the Company.

Tara & Co is engaged in manufacturing, installation and maintenance of low voltage electricity

cables. Their main customer base is Government and private sector electric utilities. The Company

prefers taking short term projects with fast turnaround and payment cycles. Geeta is of the

opinion that a change in strategy is required. The Company should consider bidding for longer

term projects which have potential for earning higher return on invested capital, assured cash

flows and known existing clients.

Four such projects are identified by the marketing team. The Company has the capacity

to undertake all the four projects if they meet the required criteria.

• Cut-off rate of return is 18%

• Period of payback should not exceed 6 years.

2/2025/CAFM Contd. ........

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Key financials are given below :

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Proposal Annual Net Cash Service PVF

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before depreciation)

(INR in crore) (INR in crore) (In Years)

A 300 73 11 6.18

B 850 95 18 19.67

C 925 125 12 7.29

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D 250 38 10 5.23

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e undertaken by the Government of India for smaller
The marketing team of Tara & Co. also have a plan to expand in foreign territories. There

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glselected two projects for application. Both the projects
are a number of goodwill projects being

Nations. The marketing teamahas

are being financed by the Government of India and are identical. However, Geeta feels that

the project that has less risk embedded in cash flows should be selected.

Yearly cash inflow and associated probability are given for the two projects.

Proposal X Proposal Y

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Cash Inflow Probability Cash Inflow Probability

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4,000 as
(INR crores) (INR crores)

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4,000 0.2 0.1

8,000 0.3 8,000 0.4

12,000 0.4 12,000 0.2

16,000 0.1 16,000 0.3

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Initial capital deployment is necessary given that additional projects will be executed in future.
An investment of INR 1,000/- crore is estimated. The initial investment will be financed by
25% equity and 75% debt. The interest cost is 14% per annum. The income tax rate is
15%.
Based on the given facts and circumstances, you are required to :
(a) Rank the proposals A to D according to payback period. Which proposals can be
accepted ?
(b) Rank the proposals A to D according to Present Value Index Method. Which proposals
can be accepted ?
(c) Calculate coefficient of Variation for Proposal X and Proposal Y.
(d) Which proposal is riskier and which proposal should be accepted ?
(5+5+8+2=20 marks)
Attempt all parts of either Q. No. 6 or Q. No. 6A

6. (a) Ganeshan Limited is evaluating a project that has the following cash flow stream associated
with it :
Year 0 1 2 3 4 5 6
Cash –120 –80 20 60 80 100 120
Flow
(INR)
The cost of capital is 15 percent. Calculate the terminal value of cash inflow of the
company.

2/2025/CAFM Contd. ........

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(b)
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ABC & Co. is a contract manufacturer in the textile industry. It manufactures formal
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shirts under licence from brand owners. The installed capacity is 18,000 units. It is
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estimated that the current year sales will be 15,000 units.
a Other details :
Variable cost per unit INR

Raw materials 30/-

Labour cost 10/-
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emINR 4,80,000/-
Other variable costs

Fixed costs are expected tosbe
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a selling price to be quoted for a desired profit of INR
You are required to calculate

4,20,000/-

(c) The following figures relate to the capital structure of ABC & Co.

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Particulars

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EBIT INR 10,00,000

las Debentures INR 30,00,000
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Interest on debentures 10%

Cost of equity 14%

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You are required :

(i) Compute the total market value of ABC & Co.

(ii) Overall cost of capital.

Ignore Taxation and assume Net Income Approach.

(3+2=5 marks)

(d) Calculate Market Value Added of Zinc Ltd., from the following information :

Number of shares issued 1,00,00,000

Number of shares held as treasury stock 5,00,000

Current share price (INR) 40/-

Total Invested Capital + Retained Earnings (INR) 25,57,00,000

Cost of treasury stock (INR) 2,00,00,000

Assume market value of debt equals its book value.

OR (Alternate question to Q. No. 6)

6A. (i) What is the Rule of 69 in the context of the doubling period ? Mention any two

benefits and two limitations of this rule.

(ii) Classify the following risks as systematic and unsystematic :

– Changes in laws/regulations

– A foreign government expropriates the assets of a specific company

2/2025/CAFM Contd. ........

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– Interest rate hikes

c. Ao company is forced to recall one of its products s e m
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–

– Volatility in currency values

– The entry of a new competitor into a market

– A company is found to have prepared fraudulent financial statements

– Tax Reforms

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– A union targets a company for an employee walk out.
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(iii) Discuss the concept of Relative Strength Index.

(iv) What is the Hamada Equation in terms of Capital Structure ?

————— o —————

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2/2025/CAFM P.T.O.

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