CA Foundation June 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

June 2024

Notes · Sample Papers · Previous Year Papers · Mock Tests

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SUGGESTED ANSWER JUNE 2024 m
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FOUNDATION c. o EXAMINATION s em
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PAPER – 1: ACCOUNTING

Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.
Wherever necessary, suitable assumptions should be made and disclosed by way
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 Ture or False:
(i) If Closing Stock appears in the Trial Balance then it does not enter in
Trading Account. It is shown only in the Balance Sheet.
(ii) If the amount is posted in the wrong account or it is written on the wrong
side of the account, it is called error of principle.
(iii) Accounting Standards can override the statute.
(iv) Promissory Note is different from Bill of Exchange because the amount
is paid by maker in case of former and by the acceptor in the later.
(v) All errors are rectified by means of journal entries.
(vi) Revaluation Account is also known as Profit and Loss Adjustment
Account. (6 x 2 = 12 Marks)
(b) (i) Define accounting policy. What are the conditions under which a company
can change its accounting policy?
(ii) Explain the following:
(1) Cash Basis of Accounting
(2) Going Concern concept (2 x 2 = 4 Marks)
(c) Pass journal entries for the following transactions in the books of Mr. Kapil:
(i) Purchased goods from Sonu for ` 1,50,000 at a trade discount of 10%
plus CGST and SGST@ 6% each.

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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

(ii) Sold goods to Mohit for ` 50,000 and charged CGST and SGST @ 5%
each. Out of the amount due 40% is received by cheque immediately.

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(iii) Goods costing ` 25,000 withdrawn for personal use. Such Goods were
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purchased by paying CGST and SGST @ 6% each.

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(iv) Machinery purchased from M/s Bright Industries for ` 2,00,000 plus

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CGST and SGST @ 9% each. Paid ` 1,00,000 immediately by cheque and

g l balance to be paid after two months. (4 x 1 = 4 Marks)
aAnswer
(a) (i) True: If closing stock appears in the trial balance then it is not entered in
the trading account but it is shown only in the balance sheet because it
has already been adjusted to purchase account.
(ii) False: If the amount is posted in the wrong account or it is written on
the wrong side of the account, it is called error of commission and not
error of Principle.
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(iii) False: Accounting standards cannot override the statute. The standards

em note, it is generally the maker who
are required to be framed within the ambit of prevailing statutes.
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lain case of the bill of exchange, the person
(iv) True: In case of the promissory
makes the payment, g
a be liable to make the payment to the holder of
but
accepting the bill shall
the bill.
(v) False: Errors not affecting the trial balance can be rectified by passing
a rectification journal entry. While other errors that affect one account
of trial balance cannot be rectified by passing journal entries. Totaling
errors cannot be rectified by passing journal entries

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(vi) True: Revaluation is also called as profit and loss adjustment account.

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It is used to record the gain/loss arising from the revaluation of assets
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c. o (b) (i) Accounting Policy: m
and liabilities of a firm at the time of reconstitution.

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(a) Accounting Policies refer to specific accounting

ag methods of applying these principles adopted by the enterprise in
the preparation and presentation of financial statements; and
(b) Policies are based on various accounting concepts, principles, and
conventions.

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SUGGESTED ANSWER ACCOUNTING

Conditions under which change takes place:
A change in accounting policies shall be made in the following conditions:
(a) It is required by some statute or for compliance with an Accounting
Standard
(b) Change would result in more appropriate presentation of financial
statement
(ii) (i) Cash Basis of Accounting is the method of recording financial
transactions, by which revenues and expenditure and assets and
liabilities are reflected in the accounts in the period in which the
receipts or payments are actually effected/made.
(ii) Going Concern concept states that the financial statements are
normally prepared on the assumption that an enterprise is a going
concern and will continue in operation for the foreseeable future.
Hence, it is assumed that the enterprise has neither the intention
nor the need to liquidate or curtail materially the scale of its
operations; if such an intention or need exists, the financial
statements may have to be prepared on a different basis and, if so,
the basis used needs to be disclosed.
The valuation of assets of a business entity is dependent on this
assumption. Traditionally, accountants follow historical cost in
majority of the cases.
(c) Journal entries in the books of Mr. Kapil

S Particulars L.F. Amount Amount
No. Dr. (` ) Cr. (` )
(i) Purchases A/c Dr. 1,35,000
Input CGST A/c Dr. 8,100
Input SGST A/c Dr. 8,100
To Sonu’s A/c 1,51,200
(Being goods purchased from
Sonu, CGST and SGST payable @
6% each)

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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

(ii) Bank A/c Dr. 22,000
Mohit’s A/c Dr. 33,000
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omOutput CGST A/c
To Sales A/c 50,000
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c. To 2,500
em
m To Output SGST A/c
e (Being goods sold to Mohit,
2,500
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ag charged CGST and SGST @ 5%
each and received 40% in cash)
(iii) Drawings A/c Dr. 28,000
To Purchase A/c 25,000
To Input CGST A/c 1,500
To Input SGST A/c 1,500
(Being goods withdrawn for
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personal use and input CGST and
input SGST debited at the time of
.
purchase reversed)
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Input CGST A/c ag
(iv) Machinery A/c Dr. 2,00,000
Dr. 18,000
Input SGST A/c Dr. 18,000
To Bank A/c 1,00,000
To Bright Industries 1,36,000
(Being machinery purchased and
paid ` 1,00,000 immediately, CGST

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and SGST @ 9% each)

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c. o (a) The Trial Balance of Mr. Sarvesh Kumar as on 31 March,2024
Question 2
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e did not tally
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and the difference was posted to Suspense Account. On aa scrutiny of the
st

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books; the following errors were detected:
(i) The total of Sales Returns Book for January 2024 has been casted short
by ` 1,000.

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SUGGESTED ANSWER ACCOUNTING

(ii) Freight paid for installation of a Machine ` 6,500 was posted to the
Freight Account as ` 5,600.
(iii) Goods of the value of ` 2,500 returned by a customer were entered in
the Sales day Book and posted therefrom to the credit of his account.
(iv) ` 18,000 paid for purchase of old Motorcycle for personal use of
Mr. Sarvesh Kumar was debited to conveyance account.
(v) A purchase of ` 6,700 had been posted to creditor’s account as ` 6,000.
(vi) Receipt of cash ` 5,000 from Mr. Avinash was posted to the debit of his
account.
(vii) A cheque for ` 2,500 received form Mr. Alok had been dishonoured and
was posted to the debit of Mr. Ashok.
(viii) Sale of ` 8,500 to Mr. Deepak was recorded in the sales book correctly
but while posting in ledger credited to his account.
(ix) The total of “Discount Allowed” column in the cash for the month of
December 2023 amounting to ` 3,800 was not posted.
(x) Sale of old office table for ` 2,200 treated as sale of goods.
You are required to pass necessary journal entries with narrations to rectify
the above errors. (12 Marks)
(b) On 1st April,2022, LMP Co. which depreciates its machinery @10% p.a. on
diminishing balance method, had ` 9,72,000 to the debit of Machinery
Account. On 1st October, 2022, part of machinery purchased on 1st April, 2020
for ` 80,000 was sold for ` 45,000.
Also, a new machinery at a cost of ` 1,50,000 was purchased on 1st October,
2022 and installed on the same date and installation charges being ` 8,000.
The company changed the method of depreciation from diminishing balance
method to straight line method with effect from 1st April, 2020 and adjusted
the difference on 31st March, 2023. The rate of depreciation remains the
same.

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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

Show the Machinery Account and ascertain the amount chargeable to Profit
and Loss Account as depreciation in the year 2022-23. (8 Marks)

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Answer
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(a)
c. oJournal Entries in the Books of Mr. Sarvesh Kumar
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Particulars L.F. Amount Amount

g la(i) Returns Inward/ Sales Return A/c Dr. Dr. (` ) Cr. (` )

a 1,000
To Suspense A/c 1,000
(Being the mistake in totalling the
Returns Inward Book corrected)
(ii) Machinery A/c Dr. 6,500
To Freight A/c 5,600

paid om
To Suspense A/c 900
(Being the freight
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emnot to be
installation of machinery should

la s
have been capitalised and

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a Return A/c Dr.
charged to freight Account)
(iii) Returns Inward/Sales 2,500
Sales A/c Dr. 2,500
To Suspense A/c 5,000
(Being value of goods returned by a
customer wrongly posted to sales
and omission of debit to sales

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returns account, now rectified)

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(iv) Drawings A/c Dr. 18,000
c. o18,000
c. o To Conveyance A/c
se
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s em (Being the motorcycle purchased for
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gla Mr. Suresh Kumar debited to his
a
a Drawings Account instead
Conveyance Account as previously
of

done by mistake)

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SUGGESTED ANSWER ACCOUNTING

(v) Suspense A/c Dr. 700
To Creditors (personal) A/c 700
(Being the mistake in crediting the
creditors account less by ` 700, now
corrected)
(vi) Suspense A/c Dr. 10,000
To Mr. Avinash’s A/c 10,000
(Being cash received for Rs 5,000
wrongly posted to the debit of his
account now corrected)
(vii) Mr. Alok’s A/c Dr. 2,500
To Ashok’s A/c 2,500
(Being the cheque of Mr. Alok
dishonoured, previously debited to
Mr. Ashok)
(viii) Deepak A/c Dr. 17,000
To Suspense A/c 17,000
(Being the correction of mistake by
which the account of Deepak A/c was
credited instead of being debited)
(ix) Discount A/c Dr. 3,800
To Suspense A/c 3,800
(Being the total of discount allowed
during December not posted; error
now rectified)
(x) Sales A/c Dr. 2,200
To Furniture A/c 2,200
(Being the rectification of mistake by
which sales of furniture was entered
in sales book and hence now
corrected by debiting the sales A/c)

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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

(b) Alternative 1
The question is solved based on the information given in the question by
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giving retrospective effect of depreciation only on the remaining machinery
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as on 31.03.2023 i.e. by ignoring the retrospective impact of change in the

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method of depreciation on the machinery disposed off.

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

01.04.22 To Balance 9,72,000 01.10.22 By Depreciation on 3,240
b/d machinery sold
01.10.22 To Bank 1,58,000 (W.N.1)
By Bank- 45,000

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01.10.22 Machinery sold

. co By Loss on sale of 16,560

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01.10.22 machinery (W.N.1)

l a s By Depreciation on
31.03.23 remaining

a g machineries
(W.N.3)
1,31,100

31.03.23 By Balance c/d 9,34,100
11,30,000 11,30,000

Working Note:
1. Calculation of amount of Depreciation, written down value and
loss on sale of the part of the machinery

m om`
c. 80,000
c. o Cost as on 01.04.2020
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se (8,000)
s em Less: Depreciation @10% for the year 2020-2021
g la
gla Written Down Value (WDV) as on 31.03.2021 or
a 72,000

a 01.04.2021
Less: Depreciation @10% for the year 2021-2022 (7,200)
Written Down Value (WDV) as on 01.04.2022 64,800

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SUGGESTED ANSWER ACCOUNTING

Less: Depreciation @10%for the half year till 30th (3,240)
September, 2022
Written Down Value (WDV) as on 1.10.2022 61,560
Less: Sale price of the asset sold on 01.10.2022 (45,000)
Loss on sale of Machinery sold 16,560

2. Computation of the written down value of the machinery.

`

Cost price of Machinery as on 01.04.2020
(972000*100/90*100/90) 12,00,000
Less: Cost of Machinery sold 80,000
Cost of Remaining asset as on 01.04.2020 11,20,000
Less: Depreciation @ 10% for the year 2020-2021
on diminishing balance method (1,12,000)
Written down value of the remaining asset as on 10,08,000
01.04.2021
Less: Depreciation @ 10% for the year 2021-2022 (1,00,800)
on diminishing balance method
Written down value of the remaining asset as on 9,07,200
31.03. 2022
Total depreciation as per diminishing balance 2,12,800
method
Total depreciation as per straight line method
( `11,20,000*10%*2 years) 2,24,000
Excess depreciation to be charged to profit and (11,200)
loss A/c

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3. Total Depreciation to be charged to Profit and Loss Account
during the year 2022-2023

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S. Particulars Depreciation
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c. o Depreciation at 10% on existing machinery m
No. (` )

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1.

s e 1,12,000
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on 01.4.2022 i.e. (11,20,000*10%)
a
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Depreciation on addition i.e. 1,58,000* 10%
7,900
*1/2
3 Difference depreciation on method change
11,200
(W.No.1)
Sub-total 1,31,100
4. Depreciation on machinery sold 1.10.2022 3,240
Grand Total 1,34,340

Alternative 2
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The question is solved based on the. information given in the question by
e m on all the machinery (including
s
giving retrospective effect of depreciation
the machinery disposed off). a
gl books of LMP Co.
Inathe
Machinery Account
Date Particulars Amount Date Particulars Amount
(` ) (` )
01.04.22 To Balance 9,72,000 01.10.22 By Depreciation on 4,000
b/d machinery sold

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1,58,000 (W.N.1)

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01.10.22 To Bank 01.10.22 By Bank-Machinery
c. o45,000

c. o em 15,000
sold

em s
01.10.22 By Loss on sale of

s la
machinery (W.N.1)

gla
31.03.23 By Depreciation on
ag 1,31,900

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remaining
machineries (W.N.5)
31.03.23 By Balance c/d 9,34,100
11,30,000 11,30,000

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SUGGESTED ANSWER ACCOUNTING

Working Note:
1. Calculation of amount of Depreciation, written down value and
loss on sale of the part of the machinery
`
Cost as on 01.04.2020 80,000
Less: Depreciation @10% for the year 2020-2021 (on (8,000)
SLM)
Written Down Value (WDV) as on 31.03.2021 or 72,000
01.04.2021
Less: Depreciation @10% for the year 2021-2022 (on (8,000)
SLM)
Written Down Value (WDV) as on 01.04.2022 64,000
Less: Depreciation @10%for the half year till 30 th
(4,000)
September, 2022(SLM)
Written Down Value (WDV) as on 1.10.2022 60,000
Less: Sale price of the asset sold on 01.10.2022 (45,000)
Loss on sale of Machinery sold 15,000

2. Computation of the written down value of the machinery.
` `
Cost price of Machinery as on 01.04.2020
(972000*100/90*100/90) 12,00,000
Less: Cost of Machinery sold 80,000
Cost of Remaining asset as on 01.04.2020 11,20,000 80,000
Less: Depreciation @ 10% for the year (1,12,000) 8,000
2020-2021 on diminishing balance method
Written down value of the remaining asset as 10,08,000 72,000
on 01.04.2021
Less: Depreciation @ 10% for the year
2021-2022 on diminishing balance method (1,00,800) 7,200

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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

Written down value of the remaining asset as 9,07,200 64,800
on 31.03.2022

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Total depreciation as per diminishing balance 2,12,800 15,200
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method

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Total depreciation as per straight line method
s e
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a ag
(`11,20,000*10%*2 years) 2,24,000
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(`80,000*10%* 2 Years) 16,000
Excess depreciation to be charged to profit (11,200) (800)
and loss A/c

5. Total Depreciation to be charged to Profit and Loss Account
during the year 2022-2023

S. Particulars Depreciation
No. (` )

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1. Depreciation at 10% on existing machinery on
1,12,000
01.4.2022 i.e. (11,20,000*10%)
2.
s em i.e. 1,58,000*10%
Depreciation on addition
a
7,900
*1/2
g l
3
(W.No.1)
a
Difference depreciation on method change
12,000

Sub-total 1,31,900
4. Depreciation on machinery sold 1.10.2022 4,000
Grand Total 1,35,900

Alternative 3

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The change in the method of computing depreciation is treated as a change

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in accounting estimate which may affect the current period only or both
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the current period and future periods. Accordingly, the question is solved

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by ignoring the retrospective effect of depreciation as mentioned in the

las question.
a g
ag

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SUGGESTED ANSWER ACCOUNTING

In the books of LMP Co.
Machinery Account
Date Particulars Amount Date Particulars Amount
(` ) (` )
01.04.22 To Balance 9,72,000 01.10.22 By Depreciation 3,240
b/d on machinery sold
01.10.22 To Bank 1,58,000 (W.N.1) 45,000
01.10.22 By Bank-
Machinery sold 16,560
01.10.22 By Loss on sale of
machinery (W.N.1) 98,620
31.03.23 By Depreciation
on remaining
machineries
(W.N.4)
31.03.23 By Balance c/d 9,66,580
11,30,000 11,30,000

Working Note:
1. Calculation of amount of Depreciation, written down value and
loss on sale of the part of the machinery

Particulars Amount
(` )
Cost as on 01.04.2020 80,000
Less: Depreciation @10% for the year 2020-2021 (8,000)
Written Down Value (WDV) as on 31.03.2021 or 72,000
01.04.2021
Less: Depreciation @10% for the year 2021-2022 (7,200)
Written Down Value (WDV) as on 01.04.2022 64,800
Less: Depreciation @10%for the half year till 30 th
(3,240)
September, 2022
Written Down Value (WDV) as on 1.10.2022 61,560
Less: Sale price of the asset sold on 01.10.2022 (45,000)
Loss on sale of Machinery sold 16,560

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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

2. Computation of written down value of the remaining asset as on
01.04.2022

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m c. o
`

c o m
mLess:. WDV of the part of the machinery sold as on e
Total WDV of the machinery as on 01.04.2022 9,72,000

e 01.04.2022
(64,800)
l a s
a s
l Written down value of the remaining asset as on ag
ag 01.04.2022
9,07,200

3. Computation of the written down value of the machinery as on
31.03.2023
`
Written down value of the remaining asset 9,07,200
as on 01.04.2022
m
c. o
Less: Depreciation @ 10% for the year 2022-
(90,720) 8,16,480

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2023
Add: New machinery e purchased on 1,58,000
la s
g
Less: Depreciationafor 6 months @10%
1.10.2022 (1,50,000 +8,000)
(7,900) 1,50,100
Written down value of the machinery as on 9,66,580
31.03.2023

4. Total Depreciation to be charged to Profit and Loss Account
during the year 2022-2023

S. Particulars Depreciation

om
No. (` )

m c. 90,720
c. o m
1. Depreciation at 10% on existing machinery

se
on 01.4.2022 i.e. (9,07,200*10%)

s em 2. Depreciation on addition i.e. 1,58,000*
g la
la a
7,900
10%*1/2

ag Sub-Total 98,620
3. Depreciation on machinery sold 1.10.2022 3,240
Grand Total 1,01,860

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SUGGESTED ANSWER ACCOUNTING

Question 3
(a) The Receipts and Payments Account of Vandana Sports Club for the year
ended 31st March, 2024 are as follows:
Receipts and Payments Account
Receipts Amount Payment Amount
(` ) (` )
To Balance b/d By Salaries 1,55,000
Cash in hand 5,200 By Rent & Electricity 69,750
Cash at Bank 35,500 40,700 By Library Books 10,500
To Subscriptions 2,95,000 By Newspaper & Magazines 16,600
To Entrance fees 50,000 By Sports Equipment 28,500
To Miscellaneous Income 19,850 By Sundry Expenses 71,050
To Interest on Investments 8,000 By Balance c/d
Cash in hand 8,750
Cash at Bank 53,400 62,150
4,13,550 4,13,550

Details of other assets and liabilities are furnished as follows:

Particulars 31st March 2023 31st March 2024
(`) (`)
Salaries Outstanding 10,200 12,400
Outstanding Rent & Electricity 6,500 7,600
Investment (8% Govt. Bonds) 1,00,000 1,00,000
Interest Accrued on Bonds 2,000 2,000
Subscription receivable 18,700 20,600
Subscription received in advance 7,000 8,400
Furniture 65,500
Sports Equipment 41,500
Library Books 22,000

The closing values of furniture and sports equipment are to be determined
after charging depreciation at 10% and 15% respectively inclusive of
additions, if any during the year. The Club’s library books are revalued at the

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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

end of every year and the value at the end of 31st March,2024 was ` 30,000.
60% of the Entrance fee is to be capitalized.

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You are required to prepare:

o m m
.c
(i) Income and Expenditure Account for the year ended 31 March,2024
e
st

e m
(ii) Balance Sheet as on 31 March, 2024
st
(12 Marks)
l a s
s
a to dissolve the business as on 31 Mrach,2024 when their Balancea
ldecided
(b) P, Q and R wee partners sharing profit & losses in the ratio of 3:2:1. They g
g
a Sheet was as follows:
st

Liabilities Amount Assets Amount
(`) (`)
Capital A/c: Land & Building 4,85,000
P 3,55,000 Machinery 1,88,000
Q 2,20,000 Furniture 1,05,000
m
c. o
R 1,25,000 7,00,000 Stock 55,800

em60,000 Cash & Bank
General Reserve 1,50,000 Trade Debtors 1,56,000

las 1,24,000
Employees Provident Found 44,200

ag
Trade Creditors
10,34,000 10,34,000

The following information is given to you:
(i) There was an unrecorded investment which was sold for ` 30,000.
(ii) One of the creditors agreed to take over some items of furniture of Book
value ` 25,000 at ` 24,000. The rest of the creditors were paid at a
discount of 5%.

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co
(iii) Out of the trade debtors ` 9,000 proved bad, remaining were fully
m .
c. o m
realized.

em
(iv) The other assets were realised as under:
la se
las Land & Building ` 5,25,000
a g
ag Machinery ` 1,70,000
Furniture Remaining taken over by P at ` 75,000
Stock ` 60,000

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SUGGESTED ANSWER ACCOUNTING

(v) Expenses of dissolution amounted to ` 18,700.
(vi) There was an outstanding bill for repairs which had to be paid for
` 3,500.
You are required to prepare:
(1) Realisation A/c
(2) Cash & Bank A/c
(3) Partner’s Capital A/c in the books of partnership firm. (8 Marks)
Answer
(a) In the books of Vandana Sports club.
Income and Expenditure Account for the year ending 31st March, 2024
Expenditure Amount Income Amount
(` ) (` )
To Salaries (W.N.2) 1,57,200 By Subscription 2,95,500
(WN. 2)
To Rent & Electricity 70,850 By Interest on 8,000
(W.N.2) Investments
To Magazines & 16,600 By Misc. Income 19,850
Newspapers
To Sundry Expenses 71,050 By Entrance Fees 20,000
To Depreciation:
Furniture 6,550
Sports Equipment 10,500
Library Books 2,500 19,550
To Excess of income over 8,100
expenditure
3,43,350 3,43,350

Balance Sheet as on 31st March, 2024
Liabilities Amount Amount Assets Amount Amount
(` ) (` ) (` ) (` )
Furniture Cost 65,500

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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

Less: Depreciation (6,550) 58,950
Sports Equipment:

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Opening balance 41,500
m
c. obalance 2,66,700 m
Capital Fund: Addition 28,500

m s e
e a
Opening 70,000

s l
a ag
(W.N.1)

g l Add: Excess of Less: Depreciation (10,500) 59,500
a exp Income over 8,100 Library Books:
Opening Balance 22,000
Entrance fees 30,000 3,04,800 Addition 10,500
(60%)
Subscription 8,400 32,500
received in
advance

om
Outstanding Less: Depreciation (2,500) 30,000

c.Investments
Expenses:

em Bonds)
Salaries 12,400 (8% 1,00,000

l a s Cash in hand
Rent & Electricity 7,600
ag20,000 Cash at Bank 8,750
53,400
Subscription 20,600
Receivable
Interest accrued on 2,000
Bonds
3,33,200 3,33,200

m
Alternatively, the capitalised portion of entrance fee of ` 30,000 may be

co
shown separately in the liability side.
m .
c. o Working Notes:
se
m
s em 1. Balance Sheet as on 31st March, 2023
g l a
gla Liabilities ` Assets a
a
` `
Outstanding Furniture 65,500
expenses:
Salaries 10,200 Library Books 22,000

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SUGGESTED ANSWER ACCOUNTING

Rent & Electricity 6,500 16,700 Sports Equipment 41,500
Subscription 7,000 Investments 1,00,000
received in advance
Capital Fund 2,66,700 Cash in hand 5,200
(Balancing figure) Cash at Bank 35,500
Subscription 18,700
receivable
Interest accrued 2,000
2,90,400 2,90,400
2.

(i) Expenses Salaries Rent &
(`) Electricity (` )
Paid during the year 1,55,000 69,750
Add: Outstanding on 31.3.2024 12,400 7,600
1,67,400 77,350
Less: Outstanding on 31.3.2023 (10,200) (6,500)
Expenditure for the year 1,57,200 70,850
(ii) Depreciation:
(a) Furniture @10% on ` 65,500 6,550
(b) Sports Equipment @ 15% on 10,500
` 70,000
(c) Library books 32,500
Revalued at (30,000) 2,500
19,550
(iii) Subscription:
Received as per receipt and 2,95,000
payment A/c
Add: Receivable on 31.3.2024 20,600
Add: Prepaid as on 31.3.2023 7,000
3,22,600
Less: Receivable on 31.3.2023 (18,700)
Less: Prepaid as on 31.3.2024 (8,400)
2,95,500

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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

iv Entrance Fees:
Received as per receipt and payment 50,000
m
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A/c

o m m
c
Less: Capitalized (30,000)
.
mCharged s e
e a
to Income & Expenditure 20,000

a s g l
(b)
g l Particulars Realisation Account
a
a Amount
(`)
Amount Particulars
(`)
Amount Amount
(`) (`)
To Sundry Assets: By Creditors 1,24,000
Debtors 1,56,000 By Employee’s 60,000
Stock 55,800 Provident
Fund
Furniture 1,05,000 By Bank A/c:
Plant & 1,88,000 Land and 5,25,000
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Machinery Building

em Stock
Land and 4,85,000 9,89,800 1,47,000

s
Building

la
To Bank-Creditors: 95,000 60,000

ag
(W.No.1)
To Bank A/c 3,500 Machinery 1,70,000
o/s bill for
repairs
To Bank A/c 18,700 Unrecorded 30,000 9,32,000
(expenses) Investment
To Bank (Employee 60,000 By P’s Capital 75,000
provident Fund) A/C

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To Profit transferred

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to:

c. o P’s Capital A/c 12,000

se
m
em la
Q’s Capital A/c 8,000

las R’s Capital A/c 4,000 24,000
a g
ag 11,91,000 11,91,000

20

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SUGGESTED ANSWER ACCOUNTING

Partner’s Capital Accounts
Particulars P (`) Q (`) R (`) Particulars P (`) Q (`) R (`)
To Realisation 75,000 By Bal. b/d 3,55,000 2,20,000 1,25,000
A/c -
Furniture
To Bank 3,67,000 2,78,000 1,54,000 By Gen. Reserve 75,000 50,000 25,000

By Realisation 12,000 8,000 4,000
Profit
4,42,000 2,78,000 1,54,000 4,42,000 2,78,000 1,54,000

Bank Account

Particulars ` Particulars `
To Balance b/d 44,200 By Realisation A/c:
To Realisation A/c (Assets 9,32,000 (Liabilities Paid) 1,77,200
realized) By P’s Capital A/c 3,67,000
By Q’s Capital A/c 2,78,000
By R’s Capital A/c 1,54,000
9,76,200 9,76,200

Working Note 1:
Payment to Trade Creditors:

Particulars Amount
(`)
Trade creditors as per Balance sheet 1,24,000
Less: Furniture (Book Value `25,000 accepted at ` 24,000) 24,000
1,00,000
Less: Discount @ 5% 5,000
Amount Paid to Creditors 95,000

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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

Question 4
(a) Anu and Manu are carrying on business in partnership and sharing profits &
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losses in the ratio of 5:3. The firm’s Balance Sheet as on 31st March, 2024 was
m
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as follows:

m . s e
a
Balance Sheet as on 31st March,2024

s e l
l a ag
Liabilities Amount Assets Amount
g
a Capital Accounts:
(`) (`)
Building 3,80,000
Anu 2,80,000 Machinery 1,43,000
Manu 2,50,000 Furniture 85,000
Long Term Loan 2,00,000 Trade Receivables 1,64,000
Trade Payables 1,19,500 Inventories 48,400
Outstanding liabilities 16,200 Investments 15,200

8,65,700 co
m Cash & Bank 30,100

. 8,65,700
m with effect from 1 April, 2024 on
They decided to admit Ranu as aepartner
la s
st

g
the following terms:
a share in the future profits and new profit sharing
(i) Ranu will be paid 1/5
ratio would be 5:3:2.
(ii) Ranu will bring ` 1,00,000 as his capital.
(iii) Goodwill of firms is to be valued at 2 years’ purchase of average profit
of past 3 years and Ranu will bring his share of goodwill in cash. The
profits of past 3 years ending on 31st March were as under:

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31st March,2022 ` 87,000

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31st March,2023 `

se
1,06,000

s em 31st March,2024
g la
la
`

g
1,22,000
a
a (iv) It was also agreed that the partners will not withdraw their share of
goodwill nor will the goodwill appear in the books of account.

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SUGGESTED ANSWER ACCOUNTING

(v) It was also decided to value the assets:
Building is to be appreciated by ` 50,000 and Machinery is to be
depreciated by 10%. Furniture is revalued at ` 80,000. Investments at
` 16,000 and Inventories at ` 47,500.
Provision for doubtful debts is to be created on debtors @ 5%.
You are required to prepare Revaluation Account, Partners’ Capital Accounts
and Balance Sheet of the reconstituted firm as on 1stApril, 2024. (12 Marks)
(b) Harshit Traders are carrying on the retail business of electrical goods. They
keep their books of account under single entry system. The Balance Sheet as
on 31stMarch, 2023 was as follows:

Liabilities Amount (`) Assets Amount (`)
Capital A/c 6,05,000 Motor Vehicle 1,10,000
Trade Creditors 75,200 Furniture 73,500
Salary payable 9,000 Stock in trade 1,70,800
Trade Debtors 1,45,400
6% Investments 60,000
Cash in hand & at 1,29,500
Bank
6,89,200 6,89,200

The summary of Cash and Bank Book for the year ended 31st March, 2024
was given as below:

Receipts Amount Payments Amount
(`) (`)
Cash in hand & at Bank Cash Purchases 9,48,400
on 1st April,2023 1,29,500 Payment to Trade
Cash Sales 10,22,400 Creditors 75,45,000
Receipts form Trade Salaries 4,12,800
Debtors 85,52,000 Rent & taxes 2,51,600
Interest on investments 3,600 Sundry Expenses 1,38,400
Drawings 2,40,000

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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

Cash in hand & at Bank 1,71,300
on 31st March,2024

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97,07,500 97,07,500

o m m
.c
Additional Information:
s e
e m
(i) Gross Profit ratio of 12.5% on Sales is maintained throughout the year.
l a
s
la discount received from Trade Creditors amounted to ` 35,000. a g
g
(ii) During the year, discount allowed to Trade debtors was for ` 62,500 and

a
(iii) As on 31st Mrch,2024. The closing balances to Trade Debtors and Trade
Creditors were `2,20,500 and ` 1,05,600 respectively.
(iv) On 31st March,2024 an amount of ` 14,800 was outstanding towards
Salary.
(v) Depreciation @ 10% p.a. to be charged on Motor Vehicle and Furniture.

m
You are required to prepare Trading and Profit & Loss account for the year

. co
ended 31st March,2024 and Balance Sheet as n that date. (8 Marks)
Answer
s em
(a)
g l a
Revaluation Account

Particulars a ` Particulars `

To Machinery A/c 14,300 By Building A/c 50,000

To Furniture A/c 5,000 By Investments 800
To Provision for Doubtful Debts 8,200
To Inventories 900

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To Partner’s capital A/c:

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(Profit on revaluation)

em Anu (5/8) 14,000
la se
las a g
g
Manu (3/8) 8,400 22,400
a 50,800 50,800

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SUGGESTED ANSWER ACCOUNTING

Partner’s Capital Accounts
Particulars Anu (`) Manu (`) Ranu (`) Particulars Anu (`) Manu Ranu (`)
(`)
By Bal. b/d 2,80,000 2,50,000
To Bal c/d. 3,20,250 2,74,150 1,00,000 By Profit on 14,000 8,400
revaluation
By Bank - - 1,00,000
(Capital)
By Bank 26,250 15,750 -
(Goodwill)
—

3,20,250 2,74,150 1,00,000 3,20,250 2,74,150 1,00,000

Balance Sheet (after admission of Ranu) as on 1st April, 2024

Liabilities ` ` Assets `
Capital accounts: Building 4,30,000
Anu 3,20,250 Machinery 1,28,700
Manu 2,74,150 Furniture 80,000
Ranu 1,00,000 6,94,400 Trade Receivable 1,55,800
Long term loan 2,00,000 Inventories 47,500
Trade Payable 1,19,500 Investments 16,000
Outstanding liabilities 16,200 Cash and Bank 1,72,100
10,30,100 10,30,100

Working Notes:
1. Calculation of Goodwill:
87,000+1,06,000+1,22,000
Average profit = = ` 1,05,000
3
Two years’ purchase of average profits= 1,05,000 x 2= ` 2,10,000
Goodwill to be brought in by Ranu=` 2,10,000 x 2/10=` 42,000
2. Calculation of Sacrificing Ratio = Old- New Ratio
Anu = 5/8-5/10 = 5/40
Manu = 3/8-3/10 = 3/40
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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

Goodwill brought in by Ranu shared (at the profit sacrificing ratio)
by:

m
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`

co m
Anu (` 42,000 x 5/8) 26,250

m . s e
a
Manu (` 42,000 x 3/8) 15,750

s e l
a ag
42,000
l
ag 3. Bank balance after admission of Ranu:
Bank Account
Particulars ` Particulars `
To bal b/d 30,100 By Balance c/d 1,72,100
To Anu’s Capital A/c 26,250
To Manu’s Capital A/c 15,750

m
To Ranu’s capital A/c 1,00,000

c. o 1,72,100 1,72,100

s
Alternatively, goodwill can also be
em calculated on the basis of weighted

l a
g of Harshit Traders
average profit, since the profit of the firm is on increasing trend.
(b) In the a
books
Trading and Profit and Loss Account for the year ended 31st March,
2024
Particulars Amount Amount Amount Amount
(`) (`) (`) (`)
To Opening 1,70,800 By Sales
Stock

om
To Purchases Cash 10,22,400

m c.2,31,600
c. o m
Cash 9,48,400 Credit (W.N. 1) 86,89,600 97,12,000

se
Credit 76,10,400 85,58,800 By Closing

s em (W.N. 2) stock

g la
la a
To Gross 12,14,000 (bal fig)

ag profit c/d
(12.5% of
97,12,000)
99,43,600 99,43,600

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SUGGESTED ANSWER ACCOUNTING

To Rent & 2,51,600 By Gross 12,14,000
taxes profit b/d
To Salaries 4,18,600 By Discount 35,000
(W.N. 3) received
To Sundry 1,38,400 By Interest on 3,600
expenses investment
To Discount 62,500
allowed
To Depreciati
on
(10% on 11,000
(1,10,000 & 7,350 18,350
73,500))
To Net Profit 3,63,150
(b.f.)
12,52,600 12,52,600

Balance Sheet as at 31st March, 2024
Liabilities Amount Assets Amount
Capital Motor vehicle 1,10,000
Opening balance 6,05,000 Less: Depreciation (11,000) 99,000
Less: Drawings (2,40,000) Furniture & Fittings 73,500
3,65,000
Add: Net profit 3,63,150 7,28,150 Less: Depreciation (7,350) 66,150
for the years
Trade creditors 1,05,600 Closing Stock 2,31,600
Outstanding 14,800 Trade receivable 2,20,500
salary
6% Investment 60,000
Cash in hand & at bank 1,71,300
8,48,550 8,48,550

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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

Working Notes:
1. Trade Debtors Account
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c. o
` `

e m
s
To Balance b/d 1,45,400 By Cash/Bank 85,52,000

s em sales (Bal. fig.) 86,89,600 By Discount allowed 62,500 gla
To Credit

g la By Balance c/d 2,20,500 a
a 88,35,000 88,35,000

2. Trade Creditors Account
` `
To Cash/Bank 75,45,000 By Balance b/d 75,200
To Discount received 35,000 By Purchases credit 76,10,400

m
To Balance c/d 1,05,600

c. o
76,85,600 76,85,600

3. Computation of salary to be
s emcharged to Profit & Loss A/c
g la
a per cash book)
`
Salary expenses paid (as 4,12,800
Less: Outstanding expenses as on 31.3.2023 (9,000)
4,03,800
Add: Outstanding expenses as on 31.3.2024 14,800
4,18,600

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Question 5

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(a) Manish closed his books of account on 31stMarch, each year. Inventory taking
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for the year ended 31st March, 2024 was completed by 10th April, 2024 on

s em which date value of the stock available in godown was of `4,50,000 at cost.
g la
gla Following are the details of transactions that took place between
a
a 31st March, 2024 and 10th April, 2024:
(i) Goods sold to customers `1,10,000.
(ii) Sales return ` 10,000.

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SUGGESTED ANSWER ACCOUNTING

(iii) Purchases ` 85,000 (Including Cash Purchases ` 10,000).
(iv) Purchases return amounted to ` 2,500.
(v) Goods costing 15,000 received in March, for sale on consignment basis,
out of which 60% of goods had been sold by 10th April. These sales are
not included in above sales.
(vi) After the stock was taken, it was found that there was certain very old
slow- moving items costing ` 14,850, which should be taken at ` 9,500
to ensure disposal to an interested customer.
Goods are sold at a profit margin of 25% on cost. Ascertain the value of
inventory for inclusion in the final accounts for the year ended 31st March,
2024. (5 Marks)
(b) Attempt any ONE of the two sub-parts i.e. either (i) or (ii)
(i) Mr. Prakash runs a factory which produces Pressure Cookers. The following
details were obtained about his manufacturing expenses for the year ended
31st March 2024:

Amount (`)
Opening Work-in – Progress 6,25,000
Closing Work–in Progress 7,15,000
Opening Inventory of Raw material 5,85,000
Closing Inventory of Raw material 4,70,000
Purchases 18,74,000
Purchase Returns 95,000
Indirect Material 1,88,000
Direct Wages 3,97,000
Indirect Wages 82,000
Power & Electricity 1,76,000
Repairs and Maintenance 2,65,000
Depreciation on Factory Shed 1,44,000
Depreciation on Plant & Machinery 1,62,000
Sale of scrap 36,000

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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

You are required to prepare Manufacturing Account for the year ended
31st March, 2024. (5 Marks)

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OR
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(ii) From the following particulars, prepare the Bank Reconciliation

s em
m
Statement of businessman as on 31stMarch, 2024:
e Sl. l a
l a s Particulars
ag
ag No.
`

1 Bank Overdraft as per cash book 24,000
2 Cheque deposited as per bank statement but not 4,000
recorded in cash book
3 Cash received from Exe was entered in bank 3,150
column of cash book.
4 Debit side of the bank column casted short 1,000

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5 A cheque for ` 9,000 deposited but collection as per 8,950

mcollection, collected by the
bank statement
Bills sent to the bank e
6
s
la in cash book
for 4,200

g
bank but not recorded
7 Bank chargesarecorded twice in cash book 40
8 Noting charges debited in Pass-Book for 60
discounted bill dishonoured
9 Cheques deposited on 25thMarch, 2024 but 4,800
collected by bank on 5th April,2024
10 Cheques issued on 26th Mrach,2024 but presented 3,000

m
for encashment on 6th April,2024

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c. o (c) The following is the abstract of Balance Sheet HappysemLtd.. as on
(5 Marks)

s em 31 March,2024:
st

g l a
gla a
a
`
Issued and paid up capital
90,000 Equity shares of ` 10 each fully paid-up 9,00,000

30

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SUGGESTED ANSWER ACCOUNTING

Less: Calls–in–arrear (10,000 Equity shares of ` 2 each) 20,000 8,80,000
40,000 Equity shares of ` 10 each,` 4 cash paid up 1,60,000
Reserves and Surplus:
Capital Reserve (realized in cash) 60,000
Capital Redemption Reserve 1,60,000
Securities Premium 1,00,000
General Reserve 1,20,000
Profit and Loss Account 7,00,000

On 1stApril, 2024. The company makes final call @ 6 each on 40000 equity
shares. The call money is duly received by 30th April,2024.
On 1st May,2024 the Board of Directors of the company decided:
(i) To forfeit the share on which final call of ` 2 each is due:
(ii) To re- issue the forfeited share @` 11 each as fully paid up:
(iii) To issue fully paid bonus shares in the ratio of one fully paid bonus share
for every two fully paid shares held; and
(iv) To use minimum balance of Profit and Loss Account.
Pass necessary journal entries in the books of the company on the basis of
the above decisions. (10 Marks)
Answer
(a) Statement of Valuation of Inventory as on 31st March, 2024
Particulars Amount Amount
(`) (`)
Value of stock as on 10th April, 2024 4,50,000
Add: Cost of sales during the period from
31st March, 2024 to 10th April, 2024:
Sales (` 1,10,000-` 10,000) 1,00,000
Less: Gross profit (25% on cost i.e. 20% on (20,000) 80,000
sales)
5,30,000

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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

Less: Purchases during the period from
31st March, 2024 to 10th April, 2024 (85,000- 82,500

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2,500)

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Unsold stock out of goods received on

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consignment basis (40% of ` 15,000) 6,000
s e
s e Loss l a
ag
on revaluation of slow-moving 5,350 93,850

la
ag
inventories (14,850-9,500)
4,36,150

ALTERNATE PRESENTATION
Statement of Valuation of Inventory as on 31st March, 2024
Particulars Amount Amount
(`) (`)
Value of stock as on 10th April, 2024 4,50,000
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Add: Cost of sales during the period from
.
em
31st March, 2024 to 10th April, 2024:
Sales
s 1,10,000
a cost i.e. 20% on (22,000)
Less: Gross profit (25% lon
sales) a g 88,000
2,500
Purchase Returns
5,40,500
Less: Purchases during the period from
31st March, 2024 to 10th April, 2024 85,000
Sales Returns 8,000

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Unsold stock out of goods received on

m
consignment basis (40% of ` 15,000)
.c o 6,000

c. o Loss on revaluation of slow-moving 5,350
s em1,04,350

em la 4,36,150
inventories (14,850-9,500)

las a g
ag

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SUGGESTED ANSWER ACCOUNTING

(b) (i) In the Books of Mr. Prakash
Manufacturing Account for the year ended on March 31,2024
Particulars ` Amount Particulars Amount`
`
To Opening W.I.P. 6,25,000 By Closing W-I-P 7,15,000
To Raw Material By Sale of Scrap 36,000
Consumed:
Opening inventory 5,85,000 By Trading A/c- 31,82,000
Purchases 18,74,000 Cost of finished
24,59,000 goods transferred
Less: Returns (95,000)
23,64,000
Less: Closing (4,70,000)
inventory 18,94,000
To Direct Wages 3,97,000
To Manufacturing
Overhead:
Power and 1,76,000
Electricity
Indirect Wages 82,000
Indirect Materials 1,88,000
Repairs & 2,65,000
Maintenance
Depreciation on
Factory Shed 1,44,000
Depreciation on
Plant &
Machinery 1,62,000 10,17,000
39,33,000 39,33,000

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m .co
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e m
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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

OR
(ii) Bank Reconciliation Statement as on 31st March,2024
m
m
Particulars
o
Details Amount
c. o
c
. as per Cash Book
` `
em
mOverdraft
e Add: Cash received from Exe entered in bank
24,000
l a s
a s
l column of cash book ag
ag Cheque deposited but collected less as per bank
3,150
50
statement
Noting charges not recorded in cash book 60
Cheque deposited but collected by bank on 4,800 8,060
5th April
32,060
Less: Cheque deposited but not recorded in
m
c. o
Cash Book 4,000

m in the bank not
Debit side of bank column casted short 1,000

s e
Bills for collection credited
yet entered in theacash book
4,200

gl twice
Bank Chargesarecorded 40
Cheque issued but not presented 3,000 12,240
Overdraft as per bank Pass book 19,820
Alternatively, the above question can also be solved using adjusted cash book.
(c) Journal Entries in the books of Happy Ltd.

Date Particulars Debit ` Credit `

o m
c
1-4-2024 Equity share final call A/c Dr. 2,40,000
m .
c. o m
To Equity share capital A/c 2,40,000

em
(Being final calls of ` 6 per share
la se
las on 40,000 equity shares due as
a g
ag 30-4-2024
per Board’s Resolution dated….)
Bank A/c Dr. 2,40,000
To Equity share final call A/c 2,40,000

34

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SUGGESTED ANSWER ACCOUNTING

(Being final call money on
40,000 equity shares received)
1-5-2024 Equity Share Capital Account 1,00,000
To Calls-in-Arrears A/c 20,000
To Forfeited Shares A/c 80,000
(Bring forfeiture of 10,000
Shares due to Non-Payment of
Final Call of 2 per share)
1-5-2024 Bank A/c Dr. 1,10,000
To Securities Premium A/c 10,000
To Equity Share Capital A/c 1,00,000
(Being re-issue of 10,000
forfeited shares at ₹ 11 each)
Forfeited Shares A/c Dr. 80,000
To Capital Reserve A/c 80,000
(Being the profit on re-issue
transferred to Capital Reserve)
1-5-2024 Capital Reserve Dr. 1,40,000
Securities Premium A/c Dr. 1,10,000
Capital Redemption Reserve A/c Dr. 1,60,000
General Reserve A/c Dr. 1,20,000
Profit and Loss A/c (b.f.) Dr. 1,20,000
To Bonus to shareholders 6,50,000
A/c
(Being making provision for
bonus issue of one share for
every two shares held)
1-5-2024 Bonus to shareholders A/c Dr. 6,50,000
To Equity share capital A/c 6,50,000
(Being issue of bonus shares
@ ` 10 per share)

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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

Working Notes:
1. Number of Bonus shares to be issued-
m
`

omauthorised capital should be increased as per
(1,30,000 shares / 2) X 1 = 65,000 shares
c. o
c. The em
s
2.

e m details given below: l a
l a s ag
ag
Existing issued Equity share capital (9,00,000 13,00,000
+4,00,000)
Add: Issue of bonus shares to equity shareholders 6,50,000
Total 19,50,000

Question 6
(a) The following balances appeared in the Books of Mac Ltd. as on
31stDecember, 2023:

o m
c
. each, ` 75 paid up 60,00,000
Amount (`)

m
e fully paid up
80,000, 10% Preference shares of ` 100
2,00,000 Equity share of ` 100seach
gl a 2,00,00,000
Securities Premium
a
Capital Redemption Reserve
6,50,000
42,00,000
General Reserve 85,00,000

Under the terms of their issue, the preference shares are redeemable on 31st
March,2024 at a premium of 5%. In order to finance the redemption, the
company makes a right issue of 60,000 equity shares of ` 100 each at a
premium of 10%, ` 25 being payable on application, ` 45 (including

m
premium) on allotment and the balance on 1st August, 2024. The issue was

m c. o
fully subscribed and the allotment made on 1st March,2024. The amount due

c. o on allotment was duly received by 25th March,2024.

s emconditions
em la
The preference shares were redeemed after fulfilling the necessary

las of section 55 of the Companies Act, 2023.
a g
ag You are required to pass the necessary Journal Entries (including narrations)
to give effect to the above arrangement. Also prepare the Notes to accounts
on Share Capital Reserves and Surplus relevant to the Balance Sheet

36

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SUGGESTED ANSWER ACCOUNTING

immediately after the redemption of preference shares as on
31st March, 2024. Ignore date column in Journal. (15 Marks)
(b) What are the advantages of Subsidiary Books? (5 Marks)
Answer
(a) Journal Entries In the books of Mac ltd.

Amount Amount
( `) ( `)
10% Preference Share Final Call A/c Dr. 20,00,000
To 10% Preference Share Capital A/c 20,00,000
(Being final call made on preference
shares @ ` 25 each to make them fully
paid up)
Bank A/c Dr. 20,00,000
To 10% Preference Share Final Call A/c 20,00,000
(Being receipt of final call money on
preference shares)
Bank A/c Dr. 15,00,000
To Equity Share Application A/c 15,00,000
(Being receipt of application money on
60,000 equity shares @ ` 25 per share)
Equity Share Application A/c Dr. 15,00,000
To Equity Share Capital A/c 15,00,000
(Being capitalisation of application
money received)
Equity Share Allotment A/c Dr. 27,00,000
To Equity Share Capital A/c 21,00,000
To Securities Premium A/c 6,00,000
(Being allotment money due on 60,000
equity shares @ ` 45 per share including
a premium of ` 10 per share)

37

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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

Bank A/c Dr. 27,00,000
To Equity Share Allotment A/c 27,00,000
m
m
(Being receipt of allotment money on

o c. o
c
. Reserve A/c m
equity shares)

m s e
e To Capital Redemption Reserve A/c l a
General Dr. 44,00,000

l a s 44,00,000
ag
ag (Being transfer of CRR the amount not
covered by the proceeds of fresh issue of
equity shares i.e., 80,00,000 - 15,00,000 –
21,00,000)
10% Preference Share Capital A/c Dr. 80,00,000
Premium on Redemption of Preference Dr. 4,00,000
Shares A/c
To Preference Shareholders A/c
o m 84,00,000

. c
(Being amount payable to preference
shareholders on redemptionm at 5%
s e
premium)
a
glA/c
To Bank A/c
a
Preference Shareholders Dr. 84,00,000
84,00,000
(Being amount paid to preference
shareholders)
General Reserve A/c Dr. 4,00,000
To Premium on Redemption of 4,00,000
Preference shares A/c
m
co
(Being writing off premium on
m .
c. o m
redemption of preference shares)

em
Notes to Accounts:
la se
las a g
g
`

a 1 Share Capital:
Equity Share Capital
Issued, Subscribed & Paid Up:

38

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SUGGESTED ANSWER ACCOUNTING

2,00,000 Equity Shares of ` 100 each 2,00,00,000
fully paid up
60,000 Equity Shares of ` 100 each, 36,00,000 2,36,00,000
` 60 called up & paid up

2 Reserves and Surplus:
Securities Premium 6,50,000
Add: Amount received @ - 10 per 6,00,000 12,50,000
share on 60,000 Equity Shares

Capital Redemption Reserve 42,00,000
Add: Transferred on Redemption (WN- 44,00,000 86,00,000
1)
General Reserve 85,00,000
Less: Transferred to Capital Redemption (44,00,000)
Reserve
Less: Adjustment of Premium payable (4,00,000) 37,00,000
on Redemption
1,35,50,000

Working Note 1
Amount to be transferred to Capital Redemption Reserve on
Redemption:
Nominal Value of 80,000 Preference
Shares Redeemed 80,00,000
Less: Proceeds of 60,000 Equity Shares issued,
- 60 called up & paid up 36,00,000
Transfer to Capital Redemption Reserve 44,00,000
Note: At the time of redemption of preference shares out of
accumulated divisible profits, it is necessary to transfer to the Capital
Redemption Reserve Account an amount equal to the amount repaid
on the redemption of preference shares on account of face value less

39

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SUGGESTED ANSWER FOUNDATION EXAMINATION: JUNE 2024

proceeds of a fresh issue of shares made for the purpose of
redemption.

m
m
(b) The use of subsidiary books affords the undermentioned advantages:
c. o
(i)
.co
Division of work: Since in the place of one journal there will be so
s em
em
many subsidiary books, the accounting work may be divided amongst
l a
l a s a number of clerks.
a g
ag (ii) Specialization and efficiency: When the same work is allotted to a
particular person over a period of time, he acquires full knowledge of
it and becomes efficient in handling it. Thus, the accounting work will
be done efficiently.
(iii) Saving of the time: Various accounting processes can be undertaken
simultaneously because of the use of a number of books. This will lead
to the work being completed quickly.

m
(iv) Availability of information: Since a separate register or book is kept

. co
for each class of transactions, the information relating to each class of

em
transaction be available at one place.

l a s
(v) Facility in checking: When the trial balance does not agree, the

a g
location of the error or errors is facilitated by the existence of separate
books. Even the commission of errors and frauds will be checked by
the use of various subsidiary books.

m
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c. o se
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s em g la
gla a
a

40

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