CA Foundation May 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

May 2025

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) Trade discount is recorded in the discount column in triple column cash
book.

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(ii) Money measurement concept means transactions are to be recorded at
a uniform-monetary units.
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(iii) If a society (Non-profit organization)

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profit / loss from the trading shall be transferred to Income and
Expenditure Account at
(iv) Partners in a partnership firm will share the profits of business according
to their capital contribution in the absence of any agreement.
(v) LLP should have two designated partners who are resident in India.
(vi) A Non-Profit Organization registered under Section 8 of Companies Act,
2013 can distribute its surplus among its members. (6 x 2 = 12 Marks)

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(b) Explain the following:

m (ii) What is the difference between liability and contingent liability?
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(i) What are the objectives of accounting standards?

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a (4 Marks)
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a year. Due to some
ag (c) A trader prepared his final accounts on 31 March, each st

unavoidable reasons, no inventory taking could be possible till 15 April,2025 th

on which date total cost of goods in his store came to ` 1,50,000.
The following facts were established between 31st March and 15th April, 2025:

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SUGGESTED ANSWER FOUNDATION EXAMINATION: MAY 2025

Sales (Credit) ` 70,000
Sales (Cash) ` 25,000
Purchases (Cash) ` 15,000
Purchases (Credit) ` 25,000
On 25th March, goods of the sale value of ` 30,000 were sent on sale or return
basis to a customer, the period of approval being four weeks. He returned
25% of the goods on 12th April, approving the rest; the customer was billed
on
25th April.
The trader had also received goods costing ` 10,000 in March, for sale on
consignment basis. 50% of the goods had been sold by 31st March and
another 25% by 15th April. These sales are not included in above sales.
Goods are sold by the trader at a profit of 20% on sales.
You are required to ascertain the value of inventory as on 31st March, 2025.
(4 Marks)
Answer
(a) i. False: Discount column of cash book records the cash discount. Further,
Trade discount is not shown in the Cash book/books of accounts.
ii. True: As per Money measurement concept, only those transactions,
which can be measured in terms of money are recorded. Additionally,
monetary units used should also be uniform. For example, - Rupee,
dollars etc.
iii. True: Where in case of the trading activities, the profit /loss from such
activity to be transferred to the Income and expenditure account in
case of consolidated accounts.
iv. False: In absence of Partnership agreement, Profits and losses are to
be shared equally among partners.
v. False: As per Section 7 of the LLP Act, every limited liability partnership
should have at least two designated partners who are individuals and
at least one of them should be a resident in India.

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SUGGESTED ANSWER ACCOUNTING

vi. False: A Non-profit organization s registered under section 8 of the
Companies Act, 2013 can’t distribute surplus to its members. The
surplus must be credited to General fund for furtherance of its
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charitable objectives.
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(b) (i) Accounting Standards standardise diverse accounting policies with an
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e(i) eliminate the non-comparability of financial statements and g l a
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objective to:

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a (ii) provide a set of standard accounting policies, valuation norms and
thereby improving the reliability of financial statements; and

disclosure requirements.
(ii) A liability is defined as the present financial obligation of an enterprise,
which arises from past events. The settlement of a liability results in an
outflow from the enterprises of resources embodying economic
benefits.

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On the other hand, in the case of contingent liability, either outflow of

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resources to settle the obligation is not probable or the amount

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expected to be paid to settle the liability cannot be measured with

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sufficient reliability. For example- claims against the enterprise not
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acknowledged as debts, guarantees given in respect of third parties,
liability in respect of bills discounted and statutory liabilities under
dispute etc. In addition to present obligations that are recognized as
liabilities in the balance sheet, enterprises are also required to disclose
contingent liability in their balance sheets by way of notes.
(c) Statement of Valuation of Inventory (Stock) on 31st March, 2025

Particulars ` Amount (`)

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Value of stock as on 15th April, 2025 1,50,000

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Add: Cost of sales during the period from
31st March, 2025 to 15th April, 2025:
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Sales

gla Less: Gross profit (20% of ` 95,000) (19,000) 76,000
a Add: Cost of goods sent on approval basis
(80% of ` 22,500) 18,000
2,44,000

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SUGGESTED ANSWER FOUNDATION EXAMINATION: MAY 2025

Less: Purchases during the period from
31st March, 2025 to 15th April, 2025
(15,000 + 25,000) (40,000)
Less: Unsold stock out of goods received
on consignment basis (25% of
` 10,000) (2,500) (42,500)
2,01,500

Question 2
(a) Following errors were found in the books of XYZ. Give necessary entries to
correct them:

(i) A purchase of goods from R amounting to ` 10,000 has been wrongly
entered through the sales book.
(ii) Furniture purchased for office use amounting to ` 25,000 has been
entered in the purchase day book.
(iii) Minor repairs to the Furniture Account amounting to ` 1,500 were
debited to Furniture Account.
(iv) Wages amounting to ` 3,000 paid to workmen for making Office
Furniture has been charged to wages account.
(v) Tuition Fees of proprietor’s son ` 25,000 has been debited to Audit fees
A/c.
(vi) An amount of ` 10,000 due from Mohan which had been written off as
bad debt in the previous year was unexpectedly recovered and has been
posted to the personal account of Mohan.
(vii) Goods (Cost being ` 7,000 and sales price being ` 10,000) distributed as
free samples among prospective customers were not recorded anywhere.

(viii) Goods amounting to ` 1,000 returned by a customer, G & Co. were
entered in the Sales Day Book and posted there from to the credit of his
account.

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SUGGESTED ANSWER ACCOUNTING

(ix) A bill of Exchange (received from SS & Co.) for ` 10,000 had been
returned by the bank as dishonoured and had been credited to the bank

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and debited to bills receivable account.

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(x) A Bills Receivable for ` 2,500 was passed through Bills Payable Book. The

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Bill was given by Jack. (10 Marks)

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(b) Prepare the Bank Reconciliation Statement of M/s. XYZ Brothers on
a
ag (i) The Bank Pass Book had a debit balance of ` 62,500 on 31 March, 2025.
31st March, 2025 from the particulars given below:
st

(ii) A cheque worth ` 1,000 directly deposited into Bank by customer but no
entry was made in the Cash Book.
(iii) Out of cheques issued worth ` 85,000. Cheques amounting to ` 50,000
only were presented for payment till 31st March, 2025.

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(iv) A cheque for ` 10,000 received and entered in the Cash Book but in was
not sent to the Bank.

s embeen sent to Bank for collection but the
a the Bank as under.
(v) Cheques worth ` 50,000 had
collection was reported lby
(1) Cheques collected
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a before 31 March,2025, ` 35,000.
st

(2) Cheques collected on 10th April, 2025 ` 10,000.
(3) Cheques collected on 12th April, 2025 ` 5,000.
(vi) The Bank made a direct payment of ` 1,500 which was not recorded in
the Cash Book.

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(vii) Interest on Overdraft charges by the bank ` 4,000 was not recorded in

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the Cash Book.
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(viii)Bank charges worth ` 200 have been entered twice in theebook
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Insurance charges for ` 175 directly paid by Bank wasanot at all entered
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in the Cash Book.
a (ix) The credit side of bank column of Cash Book was under cast by ` 5,000.
(10 Marks)

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SUGGESTED ANSWER FOUNDATION EXAMINATION: MAY 2025

Answer
(a) In the books of XYZ
Journal
Particulars L.F. Dr. Cr.
` `
(i) Purchases A/c Dr. 10,000
Sales A/c Dr. 10,000
To R 20,000
(Purchases from R wrongly entered in Sales
Book now rectified)
(ii) Furniture A/c Dr. 25,000
To Purchases A/c 25,000
(Furniture purchased was wrongly debited to
purchases daybook now rectified)
(iii) Repairs A/c Dr. 1,500
To Furniture A/c 1,500
(Minor repairs to the furniture wrongly
debited to furniture now rectified)
(iv) Furniture A/c Dr. 3,000
To Wages A/c 3,000
(Wages paid for making furniture wrongly
charged to wages now rectified)
(v) Drawings A/c Dr. 25,000
To Audit Fees A/c 25,000
(Tuition fees of proprietor’s son wrongly
debited to Audit fees A/c now rectified)
(vi) Mohan A/c Dr. 10,000
To Bad Debts Recovered A/c 10,000
(Bad debts recovered had been wrongly
posted to Personal A/c now rectified)
(vii) Advertisement Expenses/Free Sample A/c Dr. 7,000
To Purchases A/c 7,000

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SUGGESTED ANSWER ACCOUNTING

(Goods distributed as free samples were not
recorded anywhere now rectified)

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(viii) Returns Inwards / Sales Return A/c Dr. 1,000

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c. Too Suspense A/c
Sales A/c Dr. 1,000

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2,000
m(Goods returned wrongly posted to sales book
e now rectified) l a
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l (ix) SS & Co A/c ag
ag Dr. 10,000
To Bills Receivable A/c 10,000
(Bills of Exchange dishonoured and had
credited to bank and debited to Bills
receivable a/c now rectified)
(x) Bills Receivable A/c Dr. 2,500
Bills Payable A/c Dr. 2,500

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To Jack A/c 5,000

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(Bills receivable wrongly passed through Bills

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payable now rectified)

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(b) Bank Reconciliation Statement as on 31st March, 2025

Particulars a Amount Amount
` `
Balance as per bank statement Dr (Overdraft) 62,500
Add: Cheques deposited directly by Customer 1,000
Cheques issued but not presented for 35,000
payment (` 85,000 - ` 50,000)

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Bank Charges entered twice in Cash Book 200 36,200

m c. 98,700
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Less: Cheques received but not sent to Bank (10,000)

las Cheques collected on 10 and 12 Aprilth

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(15,000) th

ag (` 10,000+` 5,000)
Insurance charges paid by bank (175)
Direct Payment made by bank (1,500)

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SUGGESTED ANSWER FOUNDATION EXAMINATION: MAY 2025

Interest on bank overdraft not entered in
the cash book (4,000)
Credit side of the Cash Book undercast (5,000) (35,675)
Overdraft as per cash book Cr./(Overdraft) 63,025

Alternatively, Bank reconciliation statement can also be prepared
Bank Reconciliation Statement as on 31st March, 2025

Particulars Amount Amount
` `
Overdraft Balance as per bank statement (62,500)
Less: Cheques deposited directly by Customer (1,000)
Cheques issued but not presented for (35,000)
payment (` 85,000-`50,000)
Bank Charges entered twice in Cash Book (200) (36,200)
(98,700)
Add: Cheques received but not sent to Bank 10,000
Cheques collected on 10 th
and 12 th
April
(` 10,000+` 5,000) 15,000
Insurance charges paid by bank 175
Direct Payment made by bank 1,500
Interest on bank overdraft not entered in
the cash book 4,000
Credit side of the Cash Book undercast 5,000 35,675
Overdraft as per cash book (Overdraft) (63,025)

The Bank Reconciliation statement can also be prepared using plus and
minus method.

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SUGGESTED ANSWER ACCOUNTING

Question 3
(a) The Receipts and Payments Account of ABC Club for the year ended March
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31, 2025 was as follows: (Figures are in ‘000)

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Receipts Amount Payments Amount

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e in hand a
` `

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Cash 150 Ground man’s Fee 1,125

g l Balance at Bank as per
a Pass Book:
Moving Machine 2,250
Ground Rent 375
- Deposit Account 3,345 Cost of Teas 375
- Current Account 900 Fares 600
Bank Interest 45 Printing & Office Expenses 420
Donations and Subscriptions 3,900 Repairs to Equipment 750
Receipts from teas 450 Honorarium to Secretary

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. Balance at Bank as per
Contribution to fares 150 and Treasurer of 2024 600
Sale of Equipment
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e Pass Book:
120
Net proceeds of Variety
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Entertainment
a g 1,170 - Deposit Account 4,635
Donation for forthcoming - Current Account 225
Tournament 1,500 - Cash in hand 375
Total 11,730 Total 11,730

You are given the following additional information:
(Figures are in ‘000)

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Particulars April 1, 2024 March
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` 31,2025`

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Subscription due 225
la se
las Amount due for printing, etc.
a
150
g 120

ag Cheques unpresented being payment
for repairs 450 390

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SUGGESTED ANSWER FOUNDATION EXAMINATION: MAY 2025

Estimated value of machinery and 1,200 2,625
equipment
Interest not yet entered in the Pass book 30
Bonus to Ground man outstanding 450

For the year ended March 31, 2025, the honorarium to the Secretary and
Treasurer are to be increased by a total of ` 3,00,000.
Prepare the Income and Expenditure Account and Balance Sheet for the
period ending March 31, 2025. (12 Marks)
(b) A, B and C are partners sharing profits and losses in the ratio of 2: 2:1.
Their Balance Sheet as on 31st March, 2024 is as follows:
Liabilities Amount Assets Amount
` `
Trade Creditors 19,275 Land and Building 37,500
Outstanding Liabilities 2,250 Furniture 9,750
General Reserve 9,750 Closing Stock 17,625
Capital: Sundry Debtors 8,250
A 18,000 Cash and Bank balance 1,650
B 18,000
C 7,500 43,500
Total 74,775 Total 74,775

The partners have agreed to take D as a partner w.e.f. 1st April, 2024 on the
following terms:
(i) D shall bring ` 7,500 towards his capital and required sum of goodwill.
(ii) The value of stock should be increased by ` 3,750.
(iii) Provision for bad and doubtful debts should be provided at 10% of the
debtors.
(iv) Furniture should be depreciated by 10%.
(v) The value of Land and Buildings should be enhanced by 20%.
(vi) The value of the goodwill is fixed at ` 22,500.

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(vii) General Reserve will be transferred to the Partners’ Capital Accounts.
(viii)The new profit -sharing ratio of A, B, C and D shall be 5:5: 3:2.
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(ix) The outstanding liabilities include ` 1,500 due to R has been paid by A.

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You are .required to prepare:
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Necessary entry was not made in the books.

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(1) Revaluation A/c.
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a (2) Capital Accounts of the Partners.
(3) Balance sheet as at 1st of April, 2024. (8 Marks)
Answer
(a) Income and Expenditure Account of ABC Club
for the year ending 31st March, 2025
(all figures in thousand)
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Expenditure
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Amount Income Amount
`
m By Donations and
e1,125
`
To Ground’s man fee
l a s 375 Subscription:
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To Rent of Ground
To Fares’ Expenses
Less: Contribution
a(150)
600 As per Receipt and 3,900
450 Payment A/c
To Printing & Office Add: Outstanding as 150
Expenses on 31st March,2025
(420 +120-150) 390
Less: Outstanding as
225 3,825
on 1st April,2024
To Repairs 690 By Receipts from teas 450
(750 +390 - 450)
m75
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To Depreciation on Less: expenses 375

c. o By Proceeds of Variety em
Machinery

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Opening balance and 1,200

l a s 1,170

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2,250 Entertainment

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Add: Purchases
By Interest (` 45 a
ag Less: Closing Balance (2,625)
825
+` 30) 75

Less: Sale (120) 705

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SUGGESTED ANSWER FOUNDATION EXAMINATION: MAY 2025

To Honorarium to
Sect. & Treasurer
(600 + 300) 900
To Bonus to
Groundsman 450
To Excess of Income
over Expenditure 60
5,145 5,145

Balance Sheet of ABC Club as on 31st March, 2025

Liabilities Amount Assets Amount
` `

Capital Fund Opening (WN 1) 4,620 Machinery & 2,625
Add: Surplus for the year 60 4,680 Equipment’s

Tournament Fund (Donation) 1,500 Interest Due 30

Outstanding Expenses: Subscription Due 150

Groundsman Bonus 450 Cash in hand 375

Printing 120 Cash with Bank in 4,635
Honorarium 900 Deposit A/c

Bank Overdraft 165
(` 390 – ` 225)

7,815 7,815

Working Note 1:
Balance Sheet of ABC Club as on 1st April, 2024
Liabilities Amount Assets Amount
` `
Capital Fund (Balancing Figure) 4,620 Machinery 1,200
Outstanding Expenses: Subscription Due 225
Honorarium 600 Cash in hand 150
Printing & Stationery 150 Cash with Bank in Deposit A/c 3,345

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Cash with Bank in Current A/c 450
5,370 5,370
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(b)
m Revaluation Account
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Amount 2024 Amount
a
2024 Particulars Particulars

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` `

g l April 1 To Provision for 825 April 1 By Stock 3,750
a bad and
doubtful debts

To Furniture and 975 By Land and 7,500
fittings Building

To Capital A/c’s:

(Profit on
revaluation
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Transferred in
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the ratio of
2:2:1)

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A
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a 3,780
3,780

B

C 1,890 9,450

11,250 11,250

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a

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Particulars A (`) B (`) C (`) D (`) Particulars A (`) B (`) C (`) D (`)

To A’s 1,500 By Balance b/d 18,000 18,000 7,500 –
Capital A/c
SUGGESTED ANSWER

To B’s 1,500 By General Reserve 3,900 3,900 1,950
Capital A/c

To Balance 28,680 27,180 11,340 7,500 By Cash – – – 10,500
c/d

©The Institute of Chartered Accountants of India
By D’s Capital A/c 1,500 1,500 – –

By Outstanding 1,500 – –
Liabilities
Partners’ Capital Accounts

By Revaluation A/c 3,780 3,780 1,890 –

28,680 27,180 11,340 10,500 28,680 27,180 11,340 10,500

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FOUNDATION EXAMINATION: MAY 2025

Page 14 of 33

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SUGGESTED ANSWER ACCOUNTING

Balance Sheet of M/s. A, B, C and D as at April 1, 2024 (after Admission
of D)

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Liabilities Amount Assets
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Amount

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(`) (`)

.
Trade payables
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19,275 Land and Buildings 37,500
s e
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(Trade Creditors)
l a
ag
Add: Appreciation 7,500 45,000

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ag Liabilities
Outstanding 750 Furniture 9,750
Less: Depreciation (975) 8,775
Capital Accounts Closing Stock 17,625
of Partners: Add: Revaluation 3,750 21,375
Mr. A 28,680 Trade Debtors 8,250
Mr. B 27,180 Less: Provisions (825) 7,425
Mr. C 11,340 Cash in hand and 12,150

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Mr. D 7,500 74,700 Bank Balance
94,725
. co 94,725

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a
Working Note:

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(a) Calculation of sacrificing ratio

Partners New share Old share (Sacrifice) Gain
A 5 2 1
−
15 5 15
B 5 2 1
−
15 5 15
C 3 1 No gain No loss —

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D 2 2

c. o m
15

em (b) D’s Share of Goodwill = ` 22,500 ×
2
= ` 3,000
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15

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Sacrifice by Mr. A and Mr. B = ` 1,500 each
a

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SUGGESTED ANSWER FOUNDATION EXAMINATION: MAY 2025

(c) Cash and Bank Balance:

Particulars Amount
Balance as on 31.03.2024 1,650
Add: Capital introduced by D 7,500
Add: Goodwill introduced by D 3,000
Balance as on 01.04.2024 12,150

Question 4
(a) Amal, Bimal & Kamal were in partnership sharing profits in the proportion
of 3: 2: 1. The balance sheet of the firm as on 31st March,2024 was as under:

Liabilities ` Assets `
Capital accounts: Building 3,00,000
Amal 4,00,000 Fixtures 1,25,000
Bimal 3,30,000 Office Equipment 1,00,000
Kamal 1,80,000 Inventories 2,25,000
Trade Payables 1,20,000 Trade Receivables 1,90,000
Cash & Bank 90,000
10,30,000 10,30,000

Amal had been suffering from ill-health and gave notice that he wished to
retire. An agreement was, therefore, entered into as on 31st March, 2024, the
terms of which were as follows:
(i) The profit and loss account for the year ended 31st March, 2024 which
showed a net profit of ` 1,50,000 was to be re-opened. Bimal was to be
credited with ` 30,000 as bonus, in consideration of the extra work which
had devolved upon him during the year. The profit-sharing ratio was to
be revised to enable partners to share profits / losses equally w.e.f. 1st
Apirl, 2023.
(ii) Goodwill was to be valued at three years’ purchase of the average profits
of the preceding four years. The following were the amounts of profit for
the past four years:

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SUGGESTED ANSWER ACCOUNTING

Year Profit
2020-21 1,15,000
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2021-22 1,25,000

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2022-23 1,40,000
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(iii) Fixtures were revalued at ` 1,00,000. Building was to be appreciated by
10%. Inventories were to be written down by ` 25,000. A provision of
2.5% was to be made for doubtful debts and the remaining assets were
to be taken at their book values.
Bimal and Kamal agreed, as between themselves, to continue the
business, sharing profits in the ratio of 3: 2. The amount due to Amal is
to be transferred to his loan account to be settled later.
You are required to prepare:

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(1) Revaluation Account
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(2) Partners’ Capital Accounts. (10 Marks)

l a s1 April, 2024 was as follows:
agAmount Particulars
(b) The balance sheet of ABC as on st

Particulars Amount
(` ) (` )
Sundry Creditors 8,12,500 Furniture and Fixtures 8,12,500
Expenses Payable 93,750 Vehicle 3,43,750
Capital 27,50,000 Trade Receivable 13,75,000

m
Cash at Bank 5,93,750

m Inventories
c. o5,31,250

c. o 36,56,250
se
m36,56,250
s em g la
la a
During 2024-25, his Profit and Loss Account revealed a net profit of

ag ` 8,37,500. This was after allowing for the following:
(i) Commission paid to selling agent ` 81,250

(ii) Discount received from creditors ` 93,750

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SUGGESTED ANSWER FOUNDATION EXAMINATION: MAY 2025

(iii) Purchased a vehicle of ` 62,500 on 31st March,2025
(iv) Depreciation on Furniture and Fixtures @ 10% and on Vehicle @20%.
(v) A provision for doubtful debts @ 3% of the trade receivables as at
31st March, 2025, but while preparing the Profit and Loss Account he had
forgotten to provide for

(1) Prepaid expenses ` 18,750 and
(2) Outstanding commission ` 43,750.
His current assets and liabilities on 31st March,2025 were: Inventories
` 8,12,500. Trade Receivables ` 16,25,000 (before provision for doubtful
debts), Cash at Bank ` 6,87,500 and Trade Payables ` 1,82,500. During the
year he introduced further capital of ` 3,75,000 into the business.
You are required to prepare the balance sheet as at March 31, 2025.
(10 Marks)
Answer
(a) Revaluation Account

Particulars Amount Particulars Amount
(` ) (` )

To Fixtures A/c 25,000 By Building A/c 30,000

To Inventories A/c 25,000 By Loss to Partners:

To Provision for 4,750 Amal’s Capital A/c 8,250

Doubtful Debts A/c Bimal’s Capital A/c 8,250

Kamal’s Capital A/c 8,250 24,750

54,750 54,750

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Particulars Amal Bimal Kamal Particulars Amal Bimal Kamal
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©The Institute of Chartered
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(`) (`) (`) (`) (`) (`)

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To Profit and Loss By Balance b/d 4,00,000 3,30,000 1,80,000

m
Adjustment A/c 75,000 50,000 25,000 By Profit and Loss

a
SUGGESTED ANSWER

g l
To Revaluation Loss 8,250 8,250 8,250 Adjustment A/c – 30,000 –

a s
To Amal (WN 2) – 1,00,000 25,000 By Profit & Loss adj. 40,000 40,000 40,000

e Accountants of India
em
To Amal’s Loan A/c 4,81,750 By Bimal (WN 2) 1,00,000

. co
To Balance c/d – 2,41,750 1,61,750 By Kamal (WN 2) 25,000

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5,65,000 4,00,000 2,20,000 5,65,000 4,00,000 2,20,000
a

Partners’ Capital Accounts
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ACCOUNTING

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SUGGESTED ANSWER FOUNDATION EXAMINATION: MAY 2025

Working Note:
1. Calculation of Goodwill
Calculation of Profit through simple average method since profit of the
previous years has no trend.

Year Profit
2020-21 1,15,000
2021-22 1,25,000
2022-23 1,40,000
2023-24 1,20,000
5,00,000

Average profit (5,00,000/4) = 1,25,000
Goodwill (3 years purchase) = 3 X 1,25,000 = ` 3,75,000
2. Calculation for adjustment of Amount of Goodwill

Partners Old Share New Share Gain /(loss)
Amal 𝟏𝟏 – 𝟏𝟏
𝟑𝟑
(𝟑𝟑)
Bimal 𝟏𝟏 3 𝟒𝟒
𝟑𝟑 5 𝟏𝟏𝟏𝟏
Kamal 𝟏𝟏 2 𝟏𝟏
𝟑𝟑 5 𝟏𝟏𝟏𝟏

Amal’s share = 1/3rd of 3,75,000 = `1,25,000
Amal's share of goodwill distributed among the remaining partners in
sacrificing ratio i.e., 4:1
Bimal’s share= 1,25,000 x 4/5 = `1,00,000
Kamal’s share =1,25,000 x 1/5 = ` 25,000

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SUGGESTED ANSWER ACCOUNTING

(b) Balance Sheet of ABC as at 31st March, 2025
Liabilities Amount Assets Amount

m
c. o
` `
Capital
o m 27,50,000 Furniture &
m
8,12,500

Add: m
.c Fixtures
s e
s e Additional 3,75,000 Less: Depreciation (81,250) 7,31,250
g l a
laAdd: Net Profit 8,12,500 39,37,500 Vehicle a
Capital

ag 3,43,750
Add: Additions 62,500
Outstanding Less: Depreciation (68,750) 3,37,500
Commission 43,750
Trade payables 1,82,500 Trade receivables 16,25,000
Less: Provision for
doubtful

m
debts (48,750) 15,76,250

. c o
Inventories 8,12,500

e m
s Cash at Bank
Prepaid expenses 18,750

l a
g41,63,750
6,87,500

a 41,63,750

Working Note:
Profit and Loss Account of ABC (Revised)

Particulars Amount Particulars Amount
(`) (`)
To Outstanding Commission 43,750 By Balance b/d 8,37,500

om
To Net profit 8,12,500 By Prepaid expenses 18,750
m c.8,56,250
c. o Question 5 m
8,56,250

em l a se
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ag
(a) On 1 July, 2022, Maritime
st
Limited purchased second hand machine for
` 1,20,000 and reconditioned the same by spending ` 18,000. On
1 January, 2023 a new machine was purchased for ` 72,000.
st

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SUGGESTED ANSWER FOUNDATION EXAMINATION: MAY 2025

On 30th June, 2024 the machine purchased on 1st January, 2023 was sold for
` 48,000 and another machine was installed at a cost of ` 90,000.
Rate of depreciation is 15% on original cost every year.
Show the Machinery Account from 1st July, 2022 to 31st March, 2025.
(5 Marks)
(b) Attempt any ONE of the two Sub-parts i.e. either (i) or (ii)
(i) For mutual accommodation of himself and Gagan, Aman drew upon
Gagan a bill of ` 7,500 at 3 months on 01.04.2024. Gagan accepted the
bill and returned to Aman who discounted it immediately @ 8% p.a.
According to agreement, Aman and Gagan shared the proceeds as 2:1.
On the date of maturity Aman remitted his share to Gagan who
honoured the bill by payment.
Show journal entries in the books of Aman and Gagan.
(ii) The following are some of the transactions of Digital Stores for the year
2024-25 as per their Rough Book:
Sold to M/s Alpha Industries
10 Laptops @ ` 77,000 per laptop
5 Laserjet Printers @ 21,000 per printer
Less: Trade Discount @ 15%
Sold old furniture to Singh Consultants on credit ` 19,000
Sold 20 Desktops to Brown & Co. @ ` 34,000 per desktop on credit
Sold 10 Tablets to GOKU Institute @ ` 7,000 per tablet for cash
Sold on credit to JAT Enterprises
15 Mobile phone @ ` 25,000 per mobile phone
10 External Hard Disk @ ` 4,500 per external hard disk
Less: Trade Discount @ 10%
Make out the Sales Book of Digital Store. (5 Marks)

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SUGGESTED ANSWER ACCOUNTING

(c) Following notes pertain to the Balance Sheet of PQR Company Limited as at
31st March, 2024:

m
c. o
` in lakhs

o m m
c
. shares of ` 100 each
Authorized capital:

m s e
e a
5,00,000 500
s l
a
l Issued and Subscribed capital: ag
500
g
a 1,50,000 Equity Shares of ` 100 each, ` 70 paid up 105
10,000 11% Preference Shares of ` 100 each fully paid 10
115
Reserves and Surplus:
Revaluation Reserve 5.20

m
General Reserve 25
Capital Redemption Reserve
. c o 25

e m
s
Securities premium (collected in cash) 30
Profit and Loss Account (Cr. a
l
ag has made final call@ ` 30 each on 1,50,000
Balance) 20

On 30 April, 2024, the Company
th

equity shares. The call money was received by 31st May, 2024.
Thereafter, on 1st July, 2024 the company decided to issue bonus shares at
the rate of 3 equity shares for every 5 equity shares held by way of
capitalising its reserves, it decided that there should be minimum usage of
balance in Profit & Loss A/c.
On 1st October, 2024, the Company issued right shares at the rate of one
m
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equity share for every five shares held on that date at a premium of 10%. All
m .
c. o m
the rights shares were accepted by the existing shareholders and the money

em se
was duly received by 31st October, 2024.

s g la
la
Show necessary journal entries in the books of the company for bonus issue

g a
and rights issue. Also prepare notes on Share Capital & Reserve & Surplus
a relevant to the Balance Sheet of the company after the issue of bonus shares
& rights share. (10 Marks)

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SUGGESTED ANSWER FOUNDATION EXAMINATION: MAY 2025

Answer
(a) Machinery Account
Date Particulars Amount Date Particulars Amount
` `
1-7-22 To Bank A/c 1,20,000 31-3-23 By Depreciation A/c 18,225
1-7-22 To Bank A/c – 18,000 31-3-23 By Balance c/d 1,91,775
reconditioning
charges
1-1-23 To Bank A/c 72,000
2,10,000 2,10,000
1-4-23 To Balance b/d 1,91,775 31-3-24 By Depreciation 31,500
(20,700+10,800)
31-3-24 By Balance c/d 1,60,275
1,91,775 1,91,775
1-4-24 To Bal. b/d 1,60,275 30-6-24 By Depreciation on 2,700
machinery sold (WN 1)
30-6-24 To Bank 90,000 30-6-24 By Bank A/c (WN 1) 48,000
30-6-24 By Profit and Loss A/c 7,800
(WN 1)
31-3-25 By Depreciation on 30,825
remaining machinery
(WN 1)
31-3-25 By Bal c/d 1,60,950
2,50,275 2,50,275

Working Note:
1. Book Value of Machines
Machinery Machine Machinery Total
Purchased on purchased on Purchased
1st July,2022 1st Jan,2023 on 30th
for ` 72,000) June,2024
Cost of machine 1,38,000 72,000 2,10,000
purchased
Depreciation for 2022-23 (15,525) (2,700) (18,225)

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SUGGESTED ANSWER ACCOUNTING

Written down value as on 1,22,475 69,300 1,91,775
31-3-2023

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Depreciation for 2023-24 (20,700) (10,800) (31,500)

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Written down value as on 1,01,775 58,500 90,000 2,50,275

.
31-3-2024
em
em
Depreciation for 2024-25 (20,700) (2,700) (10,125) (33,525)

l a s
l a s
(3 months only for

ag
ag
Machine II)
Written down value as on 55,800
30-6-2024
Less: Sale Proceeds (48,000) (48,000)
Loss on Sale 7,800 (7,800)
Written down value as on 81,075 79,875 160,950
31-3-2025

(b) In the books of Aman

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Journal Entries

.
em
Date Particulars DR. CR.

l a s (in `) (in `)
1-4-24
To Gagan a
Bills receivables A/c
g Dr. 7,500
7,500
(Bill of exchange drawn on Mr. Gagan)
1-4-24 Bank A/c Dr. 7,350
Discount A/c Dr. 150
To Bills receivable A/c 7,500
(Bills receivable discounted with the
m
c. o
bank at a charge of ` 8% per annum
m
c. o
` 7,500 x 8% x 3/12 = ` 150)

s em
em
1-4-24 Gagan A/ c Dr. 2,500

s g la
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To Bank A/c 2,450

g a
a
To Discount A/c 50
(1/3rd share of bill paid to Gagan)

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SUGGESTED ANSWER FOUNDATION EXAMINATION: MAY 2025

4-7-24 Gagan A/c Dr. 5,000
To Bank A/c 5,000
(Aman remitted his share to Gagan on
due date)

In the books of Gagan
Journal Entries

Date Particulars DR. CR.
(in `) (in `)

1-4-24 Aman Dr. 7,500

To Bills payable A/c 7,500

(Bill of exchange accepted and sent to
Mr. Aman)

1-4-24 Bank A/c Dr. 2,450

Discount A/c 50

To Aman 2,500

(The amount and discount due and
received from Aman)

1-7-24 Bank A/c Dr. 5,000
To Aman 5,000

(Gagan received the amount remitted
from Aman)

4-7-24 Bills Payable Dr. 7,500

To Bank 7,500
(Being Bill of exchange honoured by
payment)

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SUGGESTED ANSWER ACCOUNTING

Or
Sales Book of Digital Stores
m
omAlpha Industries c. o
Date Particulars Details Amount

c. M/s. em
` `

m
2024
e l a s
l a s 10 Laptops @ ` 77,000 7,70,000
ag
ag
5 Laser jet Printers @ ` 21,000 1,05,000
8,75,000
Less: Trade discount 15% (1,31,250)
Sales as per invoice no. dated ..... 7,43,750
M/s. Brown & Co. 20 desktop @
` 34,000
Sale as per invoice no. dated ...... 6,80,000

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M/s JAT Enterprises

.
15 mobile phone @ ` 25,000 3,75,000

s em
10 hard desk @ ` 4,500 45,000

g la 4,20,000
a discount
Less: 10% trade (42,000)
Sales as per invoice no. dated...... 3,78,000
Total 18,01,750

Note: Cash sale and sale of furniture are not entered in Sales Book.
(c) In the books of PQR Company
Journal Entries
m
m c. oCr. (`)
c. o
Date Dr. (`)

s em
em
2024 Equity Share Final Call A/c Dr. 45,00,000

s g la 45,00,000
la a
April 30 To Equity Share Capital A/c

ag (Final call of ` 30 per share on
1,50,000 equity shares made due)

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SUGGESTED ANSWER FOUNDATION EXAMINATION: MAY 2025

May 31 Bank A/c Dr. 45,00,000
To Equity Share Final Call A/c 45,00,000
(Final call money on equity shares
received)
July 1 Capital Redemption Reserve A/c Dr. 25,00,0000
Securities Premium A/c Dr. 30,00,0000
General Reserve A/c Dr. 25,00,0000
Profit and Loss A/c (b.f.) Dr. 10,00,0000
To Bonus to Shareholders A/c 90,00,000
(Bonus issue of 3 shares for every 5
shares held, by utilising various
reserves as per Board’s resolution
dated…….)
Bonus to Shareholders A/c Dr. 90,00,000
To Equity Share Capital A/c 90,00,000
(Capitalisation of profit)
Oct. 31 Bank A/c Dr. 52,80,000
To Securities Premium A/c 4,80,000
To Equity Share Capital A/c 48,00,000
(Being Rights issue of 1 shares for
every 5 shares held as per board
resolution dated ………..)

Notes to Balance Sheet as at 31st October, 2024 (after bonus issue)
(` in Lakhs)
`
Authorised Capital
5,00,000 shares of ` 100 each 500
500

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SUGGESTED ANSWER ACCOUNTING

Issued and subscribed capital
10,000 11% Preference shares of ` 100 each, fully paid 10
m
c. o
2,88,000 Equity shares of ` 100 each, fully paid 288 298
m
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(Out of the above, 90,000 equity shares @ ` 10 each
s em
e m
were issued by way of bonus shares and 48,000 shares
l a
a s
issued at 110 per share)
l Revaluation Reserve ag
g
a Capital Redemption Reserve 25
5.20

Less: Utilised for bonus issue (25) NIL
Securities premium 30
Less: Utilised for bonus issue (30)
Add: Received from Bonus issued 4.8 4.8
General Reserve 25

m
Less: Utilised for bonus issue (25) NIL
Profit and Loss Account
. co 20

em
Less: Utilised for bonus issue. (10) 10
Closing Balance
l a s 20

Working Note:
a g
1. Number of bonus shares to be issued- 15,00,000X 3/5= 90,000 shares
2. The Issued and subscribed and paid-up capital should be increased as
per details given below: `
Existing issued Equity share capital 1,50,00,000
Add: Issue of bonus shares to equity shareholders 90,00,000

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Add: Issue of right share to Equity Shareholders 48,00,000

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c. o Question 6 m
2,88,00,000

em l a of ` 10 each at se
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a as follows:
(a) R Ltd. invited applications for issuing 1,00,000 equity shares

ag a premium of ` 2 per share. The amounts were payable
On application & allotment - ` 6 per share (including premium)
Balance on the First & Final Call

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SUGGESTED ANSWER FOUNDATION EXAMINATION: MAY 2025

Applications were received for 2,50,000 shares. Applications for 1,00,000
equity shares were rejected and pro-rata allotment was made to the
remaining applicants. The first & final call was made. The amount was duly
received except on 3,000 shares applied by Ms. Jane. Her shares were
forfeited.
The forfeited shares were reissued as fully paid-up @ ` 8 per share.
Pass necessary Journal entries to record the above transactions in the books
of R Ltd. (15 Marks)
(b) Define Measurement and Valuation Principles in brief. (5 Marks)
Answer
(a) Journal entries in the books of R
Particulars Dr. (`) Cr. (`)
1 Bank A/c Dr. 15,00,000
To Share Application & Allotment 15,00,000
A/c (2,50,000 X ` 6)
(Application money on 2,50,000 shares
at ` 6 per share received.)
2 Share Application & Allotment A/c Dr. 15,00,000
To Share Capital A/c (WN 1) 4,00,000
(1,00,000 X ` 4)
To Securities premium A/c (WN 1) 2,00,000
1,00,000 X ` 2)
To Bank A/c (WN 1) (1,00,000 X 6,00,000
` 6)
To Share First & Final Call A/c 3,00,000
(WN 1)
(Application money transferred)
3 Share First & Final Call A/c (1,00,000 X Dr. 6,00,000
` 6)
To Share Capital A/c 6,00,000
(Amount First & Final Call A/c due from
members as per Directors, resolution
no...... dated.....)

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SUGGESTED ANSWER ACCOUNTING

4 Bank A/c (3,00,000 - ` 6,000) Dr. 2,94,000
Calls in arrear A/c (WN 3) Dr. 6,000

m
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To Share First & Final Call A/c 3,00,000
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c. o m
(Receipt of the amounts due on first
call)
s e
s em Tocapital
5 Share A/c Dr. 20,000
g l a
l a a
ag (2,000To Calls
Share forfeiture A/c 14,000
in arrear A/c 6,000
shares forfeited for non-
payment of final call)
6 Bank A/c Dr. 16,000
Share forfeiture A/c 4,000
To Share Capital Account 20,000
(Forfeited shares reissued at ` 2

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discount)
7 Share forfeiture A/c
. Dr. 10,000
To Capital reserve A/c
s em 10,000

g l a
(Share forfeiture transferred to capital
reserve*)
a
Working notes:
1.
Shares Shares Money Application Application Excess Share Amount Money
Applied Allotted Received Money Money Application First and received Refunded
on Transferred Transferred Money Final Call from Share
Application to Share to Security @ First and

m
@ Capital@ Premium ` 6/- Final Call

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` 6/- @` 2/- after

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` 4/-

c. o .
adjusting

m
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excess appl.

em
money

s gla
1,00,000 - 6,00,000 - - - - - 6,00,000

gla 1,50,000 1,00,000 9,00,000 4,00,000 2,000,00
a
3,00,000 6,00,000 3,00,000* -

a 2,50,000 1,00,000 15,00,000 4,00,000 2,000,00 3,00,000 6,00,000 2,94,000** 6,00,000

*6,00,000 less 3,00,000
** ` 3,000,00 less ` 6,000.
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SUGGESTED ANSWER FOUNDATION EXAMINATION: MAY 2025

2. Number of shares allotted to Ms. Jane = 3,000 x 1,00,000 / 1,50,000 =
2,000 shares
3. Calculation of calls in arrear

Final call due from Ms. Jane 12,000
Less: Adjusted with final call (6,000)
Calls in arrear 6,000

Calculation of amount Transferred to Capital Reserve
Amount Forfeited on 2,000 shares 14,000
Less: Discount given on Re-issue (4,000)
Amount Transferred to Capital Reserve 10,000
Alternatively, assuming the excess application money retained by the
company can also be treated as “calls in advance’. In such case, journal
entry no 2 will be
Share Application & Allotment A/c Dr. 15,00,000
To Share Capital A/c (WN 1) (1,00,000 4,00,000
X ` 4)
To Securities premium A/c (WN 1) 2,00,000
1,00,000 X ` 2)
To Bank A/c (WN 1) (1,00,000 X 6,00,000
` 6)
To Calls in advance A/c 3,00,000
(WN 1)
(Application money transferred)
Further, journal entry, no 4 shall be :

Bank Account (` 3,00,000 -` 6,000) Dr 2,94,000
Calls in Arrears (2000 shares X ` 3) Dr 6,000
Calls in Advance Dr 3,00,000
To Share first and final call 6,00,000

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SUGGESTED ANSWER ACCOUNTING

(b) Measurement is vital aspect of accounting. Primarily transactions and
events are measured in terms of money. Any measurement discipline deals
with three basic elements of measurement i.e.
m
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(1) Identification of objects and events to be measured;

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(2) Selection of standard or scale to be used;

l a s
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(3) Evaluation of dimension of measurement standard or scale.
a g
ag principles. These are:
There are four generally accepted measurement bases or valuation

(i) Historical Cost: It means acquisition price. According to this base,
assets are recorded at an amount of cash or cash equivalent paid at
the time of acquisition. Liabilities are recorded at the time of proceeds
received in exchange for the obligation.
(ii) Current Cost: Assets are carried out at the amount of cash or cash

m
equivalent that would have to be paid if the same or an equivalent

. co
asset was acquired currently. Liabilities are carried at the undiscounted

em
amount of cash or cash equivalents that would be required to settle
the obligation currently.
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(iii) Realizable Value: As per realisable value, assets are carried at the
amount of cash or cash equivalents that could currently be obtained by
selling the assets in an orderly disposal and Liabilities are carried at their
settlement values. Liabilities are carried out at settlement values.
(iv) Present Value: As per present value, an asset is carried at the present
discounted value of the future net cash inflows that the item is
expected to generate in the normal course of business. Liabilities are
carried at the present discounted value of future net cash outflows that

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are expected to be required to settle the liabilities in the normal course

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