CS Executive June 2026 Question Paper Corporate Accounting and Financial Management

FOR CS EXECUTIVE EXAM PREPARATION

CS Executive 2026
Question Paper ·
Corporate Accounting
and Financial
Management
EXAM YEAR TYPE

CS Executive 2026 Question Paper
SUBJECT DATE

Corporate Accounting and Financial Management June 2026

Notes · Sample Papers · Previous Year Papers · Mock Tests

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Roll No. ..................................... :1:

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Time allowed : 3 hours Maximum marks : 100

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Total number of questions : 6 Total number of printed pages : 15
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NOTE : gAnswer
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PART–I

1. Vibha Project Ltd., a mid-sized manufacturing company, is reviewing its financial performance

for the year ended 31st March 2025. The Finance Director has sought a detailed analysis

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of the company’s working capital efficiency and profitability position. During an internal review,

the following key performance indicators .and financial information were identified :
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Debtors Collection Period a: s3 months
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• a (Stock Velocity) : 6 months
Inventory Holding Period

• Creditors Payment Period : 2 months

• Gross Profit Ratio : 20%.

It was further observed that :

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• The Gross Profit for the year amounted to ` 5,00,000.

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c. o • The value of Bills Receivable stood at ` 60,000, while sBills mpayable amounted to
• The closing stock exceeded the opening stock by ` 20,000.
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` 36,667.

The Finance Director is particularly interested in understanding how efficiently the company

is managing its receivables, payables, and inventory and how these factors impact liquidity

and profitability.

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Based on the above information, you are required to :

(a) Calculate the Total Sales of the company

(b) Determine the value of Sundry Debtors.

(c) Compute the value of Sundry Creditors.

(d) Ascertain the Closing Stock.

(e) Analyse the working capital cycle of the company based on the given turnover ratios.

(f) Comment on the liquidity position and efficiency in managing receivables, payables,

and inventory.

(g) Draft a brief note to the Finance Director highlighting :

(i) Key observations from the financial analysis

(ii) Strengths and weaknesses in working capital management

(iii) Suggestions for improvement.

(2+2+2+2+2+2+3=15 marks)

2. (a) X applied for 2,000 shares of ` 10 each at a premium of ` 2.50 per share. He

was allotted 1000 shares. After having paid ` 3 per share on application, he did

not pay the allotment money of ` 4.50 per share (including premium) and on his

subsequent failure to pay the first call of ` 2 per share, his shares were forfeited.

These shares were reissued @ ` 8 per share credited as fully paid-up.

Pass Journal entries to record forfeiture and reissue of shares.

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(b) On 1st April, 2024, XY Ltd. took over assets of ` 4,50,000 and liabilities of

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co consideration by issuing 8% Debenture of ` 100 each at l0% premium.
` 60,000 of Himalyan Ltd. for the purchase consideration of ` 4,40,000. It paid

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emsame date it issued another 3,000, 8% Debenture of ` 100 at discountgofla10%,
the purchase

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la redeemable at premium of 5% after 5 years. According to the terms ofa the issue
On

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` 30 is payable on application and the balance on the allotment of debentures.
You are required to pass journal entries for the financial year 2024-25 in the books
of XY Ltd. to record the above transactions.

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(c) The following balances are extracted from XYZ Ltd. at the end of the year

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2024-25 :

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75,000 a g 75,000
`a
1,15,000
`a
1,15,000

26,000 35,000 Loss 8,000
8,000 11,500

55,000 37,000 30,000 30,000

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41,000 53,000 Depreciation 20,000 22,000
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33,500 21,500 45,000 35,000

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ag 45,000 45,000 51,500 48,000

1,000 6,500 6,000
Expenses

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Additional Information :

(i) 10% dividend was paid in cash,

(ii) New machinery for ` 15,000 was purchased and old machinery costing

` 6,000 was sold for ` 2,000; accumulated depreciation was ` 3,000.

(iii) ` 10,000, 8% debentures were redeemed by purchase from open market

@ ` 96 for a debenture of ` 100.

(iv) An investment of ` 18,000 was sold at a book value.

You are required to prepare a cash flow statement for the year ended 31.03.2025

as per AS 3 (revised) using the indirect method.

3. (a) The Summary Balance Sheet of ABC Ltd. as on 3lst March, 2025 read as

under :

Liabilities Amount Assets Amount
Share Capital : Freehold property 1,15,000
Authorized share Stock 1,35,000
Capital : Trade Receivables 75,000
40,000 Equity Shares of 4,00,000 Cash 30,000
` 10 each. Balance at Bank 2,00,000
Issued and Subscribed :
20,000 Equity Shares of
` 10 each fully paid. 2,00,000
Profit and Loss Account 1,20,000
12% Debentures 1,20,000
Trade Payables 1,15,000
5,55,000 5,55,000

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The Annual General Meeting of ABC Ltd, it was resolved that :

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.cTo give option to existing shareholders to be purchased one shareseof m
(a) To issue one bonus share for every four shares held.

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(b)
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a distribution), this option being taken up by all shareholders.

(c) To repay the debentures at a premium of 3%.

You are requested to pass necessary journal entries and after completion of

these transactions, prepare the Balance Sheet of ABC Ltd. as per Company

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Act 2013.

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(b) Raj Ltd recently reported the following income Statement :
a
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a

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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.

You are required to compute projected Net Income and expected growth rate in

dividend.

(c) A company made a public issue of ` 1,25,000 equity shares of ` 100 each as

on 15th March, 2026, ` 50 payable on application. The entire issue was underwritten

by A, B, C, and D in the proportion of 30%, 25%, 25% and 20% respectively.

Under the terms agreed upon a maximum limit of underwriting commission was payable

to underwriters. A, B, C and D also agreed on firm underwriting of 4000, 6000,

Nil, 15,000 shares respectively. The total subscription excluding firm underwriting but

including marked application received were 90,000. Marked applications were received

from A-24,000, B-20,000, C-12,000 and D-24,000. Consider firm underwriting shares

are treated as unmarked application.

Prepare a statement showing net underwriter liability.

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

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4. (a) The Balance Sheets of H Ltd. and S Ltd. as on 31st March 2026 were as

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under :
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Particulars H Ltd. S

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Ltd.

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(`)
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a Shareholder’s Funds
I. EQUITY AND LIABILITIES
(1)
a) Authorised Share Capital : – –

Issued and Subscribed Equity Shares capital of Rs. 5,00,000 2,00,000
100 each
b) Reserves and Surplus : General Reserve 1-4-2025 1,00,000 60,000

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P. & L. A/c 1,40,000 90,000
(2) Non-Current Liabilities
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(3) Current Liabilities
Bills Payables
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Trade Payables (Creditors) 80,000 50,000
Total 8,20,000 4,40,000
II. ASSETS
(1) Non-Current Assets
a) Fixed Assets :

(i) Tangible Assets 3,60,000 2,20,000

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(ii) Intangible Assets : Goodwill 40,000 30,000

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b) Non-Current Investments

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1,500 Shares in S Ltd. 2,40,000 –

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c) Other Non-Current Assets – –

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a (2) Current Assets
Stock 1,00,000 90,000
Bills Receivables (Debtors) 20,000 75,000
Cash and Cash Equivalent 60,000 25,000
Total 8,20,000 4,40,000
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The Profit & Loss Account of S Ltd. showed a credit balance of ` 50,000 on

01.04.2025. A dividend of l5% was paid in January 2026 for the year 2024-2025.

This dividend was credited by H. Ltd. to its Profit & Loss Account. The shares

were acquired on 1st October 2025. The bills payable was all issued in favour of

H Ltd. included in the creditors of S Ltd. ` 20,000 are related to goods sold by

S Ltd. included in the stock of S Ltd. are goods of the value of ` 8,000 supplied
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by H Ltd. at a profit of 33 % on cost.
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You are required to calculate consolidated profit of the companies, Net Worth of

S Ltd. as on 1st October 2025 and minority interest.

(6 marks)

(b) Solar Equipment Ltd. wants to arrange overdraft facilities with its bankers during the

period March to May. Prepare a cash budget for the above period on the basis

of the under-mentioned data indicating the extent of bank overdraft facilities, the company

will require at the end of each month :

(` `
`
6,240
7,200
12,150
12,300
11,300 13,400

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Additional Information :

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(i)
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50% of the credit sales will be realized in the month following the month
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of sales and remaining 50% in the second month following the month of sales.
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of purchases.

(iii) Workers are paid in the same month for their wages.

(iv) Cash at bank on 1st March, is estimated to be ` 1,250 lakh.

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m. convertible debentures ` 100 each redeemable
(c)
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PQR Ltd. has issued 10000, 12%
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l at a premium of 5%. The debenture holders also had
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after a period of five years

the option at the time of redemption to convert 30% of their holdings into equity

shares of ` 10 each at a price of ` 20 per share and balance in cash. Debenture

holders amounting ` 2,00,000 opted to get their debentures converted into equity

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shares as per terms of the issue. You are required to calculate the number of shares

m issued and cash paid for redemption of remaining debentures..
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(4 marks)

ag OR (Alternate question to Q. No. 4)

4A. (i) What are differences between Ind AS 16 and IGAAP 10 ?

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(ii) Explain the components and factors of financial forecasting.

(iii) ‘‘The accounting standards seek to describe the accounting principles, valuation techniques,

and the methods of applying these accounting principles in the preparation and presentation

of the financial statements so that they represent a true and fair view of the financial

position and financial performance of the enterprise.’’

Discuss the need for Accounting Standards.

PART–II

5. A capital budgeting decision is faced by Sunrise manufacturing company. The company is

planning to introduce a new product line requiring additional machine. The management must

choose between two imported machines with same capital cost but different annual operating

costs, operating lives, overheads and cash flow implications. Based on projected sales, operating

costs, advertisement expenditure, depreciation, taxation and additional equipment requirements,

the company evaluates the financial feasibility of the imported machine and identifies one of

the most suitable machines in current scenario.

The company is planning to diversify its operations by launching a new product line. The

decision to introduce the product is driven by changing market conditions, technological

advancements and the need to remain competitive. The management team, led by the CEO

and supported by the financial analyst, operations manager and marketing manager, undertakes

a detailed evaluation of market demand, pricing strategy, desired quality product of additional

output and production requirements. Due to fast changing technology, the expected life span

of machine is not for longer period.
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After carefully marketing the new product line and analysis of both the imported machines,

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the management team desires to consider the most profitable machine out of two imported
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machines.
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e of both the machines and expected sales revenue and cost associated with a s
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The details

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from

` Lakh 60,000 60,000
` 1,00,000 80,000

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`

g l a 10,000 6,000

a 8,000
12,000
10,000
10,000
4,000 2,000
2,000 2,000

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On the basis of above facts given, you are required to calculate the most profitable investment

option by following method :

(a) Average Accounting Rate of Return Method;

(b) Pay-back period Method;

(c) Equivalent Net Present Value Method;

(d) Determine Annual profit after tax and Annual Cash Flow after tax.

(5×4=20 marks)

Attempt all parts of either Q. No. 6 or Q. No. 6A

6. (a) The CFO of KKK Limited started restructuring of company's capital structure. He
is concerned with what the company has to pay for the capital it has mobilized through
various sources of finance. The cost of capital has to be specially considered because
cost of capital has direct effect on profit earning capacity of the company. Therefore,
it is necessary for the CFO to take into consideration the cost of capital which should
not be burdensome for the company and should try to develop an optimum capital
structure so that the cost of capital can be minimized.
The CFO is considering the restructuring plan and possibility of raising ` 50,00,000
by issuing equity shares, preference shares and debentures. The details are as
follows :
(i) 2,00,000 Equity Shares of ` 10 each 20,00,000
(ii) 1,00,000 10% Debenture of ` 10 each 10,00,000
(iii) 1,00,000 11% Preference Shares of ` 10 each 10,00,000
(iv) Retained Earnings 10,00,000
Total 50,00,000
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Market Price of :

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Equity shares is ` 18,

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Preference shares is ` 12, and

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Debenture is ` 12.

g la You are the Company Secretary of the Company, help the CFO in determininga weighted
Earnings per share of the company are ` 2. The corporate tax rate is 50%.
a
average cost of capital (using weights based on market values.)

(b) Calculate operating and financial leverage under situations A, B and C and financial

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plans 1, 2 and 3 respectively from the following information and find which plan

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will give the highest value and the least value.
Installed capacity 1,200 (units)em
l a s800 (units)
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Actual production and sales
Selling price per unit ` 15
Variable cost per unit ` 10
Fixed costs (`)
Situation A 1,000
Situation B 2,000
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Situation C 3,000
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1 2 3

ag Equity ` 5,000 7,500 2,500
` 5,000 2,500 7,500

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(c) The Production of ABC Ltd., during the previous year was 1000000 units. The same

level of activity is intended to be maintained during the current year also.

The expected ratios of cost to selling price are :

Raw material 40%

Direct Wages 20%

Overheads 20%

The raw materials ordinarily remain in stores for 3 months before production. Every

unit of production remains in the process for 2 months and is assumed to be consisting

of 100% raw material, wages and overheads.

Finished goods remain in the warehouse for 3 months. Credit allowed by creditors

is 4 months from the date of the delivery of raw material and credit given to debtors

is 3 months from the date of dispatch.

The estimated balance of cash is to be held ` 2,00,000.

Lag in payment of wages 1/2 month.

Lag in payment of expenses l/2 month.

Selling price is ` 8 per unit. Both production and sales are in a regular cycle.

Company makes a provision of 10% for contingency (except cash).

Prepare a working capital forecast from the above information.

(d) The value of the company can be maximized if the shareholders’ wealth is maximized.

The par value of equity share of COMOS Limited is ` 100 per share. The company’s

earning per share is ` 10. The return on retained earnings of the company is 15%

and the rate of capitalization of the market is 10%.
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The following are the alternates available before the management regarding the distribution

mhave a pay-out ratio of 20% . co
of dividend :

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(i) To
(ii)m To have a pay-out ratio of 40%
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(iii)
(iv) To have a pay-out ratio of 0% or To have a retention of earning 100%.
You are required to calculate market price of the equity shares of the company in
all above circumstances and suggest which alternative consider the best by using Walters’
Model.

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OR (Alternate question to Q. No. 6)

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. financial tool for management in decision making.’’
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e the advantages of cash flow analysis.
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6A. (i) ‘‘Cash Flow Analysis is an important
Explain this statement andadiscuss
(ii) ‘‘Capital Budgeting is a gl not only because of the high investment cost of capital
important
projects, but also due to their irreversible nature, long-term commitment and impact
on profitability.’’
Explain this statement and discuss the importance of capital budgeting.
(iii) Decisions on investments are determined by various factors like risk involved, return,

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purpose, period etc. Do you think there are differences between investment and

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speculation? If so, what are the differences ? Give examples.
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.maximization though
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edevelopment, providing
One of the main objectives of a business organization is profit

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there are other objectives like service to society, nation's

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employment opportunities etc. Are there any arguments
maximization by business organization ?

(5 marks each)
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