CA Foundation September 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

September 2025

Notes · Sample Papers · Previous Year Papers · Mock Tests

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PAPER – 1: ACCOUNTING
m
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) The materiality depends only upon the amount of the item and not upon
the size of the business, nature and level of information, level of the

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person making the decision etc.

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(ii) While preparing the Income and Expenditure Account as per accrual

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concept, the income and expenditure is considered in the period in which

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actual receipts or actual payments are made.

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(iii) Profit sharing ratio and capital contribution ratio need not be same.
(iv) Depreciation is not provided in the financial year when the entity incurs
loss.
(v) The concept that helps in keeping business affairs free from the influence
of the personal affairs of the owner is known as the matching concept.
(vi) A Company cannot issue equity shares at discount to general public.
(6 x 2 = 12 Marks)

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(b) Explain the generally accepted valuation principles. (4 Marks)

. co (c) Record the following transactions in the purchase book:
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s em 2 December,2024
nd

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Purchased from Gupta & Co. on credit

gla 100 plates @ ` 150 per
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plate

a 500 small bowls @ ` 50 per bowl
Less: Trade discount @10%
Packing charges @ ` 2 per plate and ` 1 per bowl

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FOUNDATION EXAMINATION: SEPTEMBER 2025

6th December,2024 Purchased a furniture for shop from M/s Plywood
Co. on credit for ` 15,000/-
8th December,2024 Purchased on credit from M/s Ajanta & Co.
50 Boxes of spoon@ ` 200 per box
40 boxes of Fork@ ` 250 per box
Less: Trade Discount @ 8%
15th December,2024 Purchased for cash from Steel House
40 big bowl @ ` 70/- per bowl
27th December,2024 Purchased one dozen cookers @` 750 each from
M/s Verma & Sons on credit

(4 Marks)
Answer
(a) 1. False: As per materiality principle, all the items having significant
economic effect on the business of the enterprise should be disclosed in
the financial statements.
2. False: While preparing the Income and Expenditure Account as per
accrual concept, the items of revenue nature pertaining to the current
period of account are included and not the actual receipt and
payments.
3. True: Profit sharing can be different from that of capital introduced by
each of the partner. It is not necessary that partner contributing more
capital should have a higher profit-sharing ratio and vice versa. Profit
Sharing ratio is determined by mutual agreement among partners.
4. False: Depreciation is a charge against profit and not an appropriation
of profit. Therefore, depreciation has to be provided for, even in case
of loss in a financial year.
5. False: The concept that helps in keeping business affairs free from the
influence of the personal affairs of the owner is called Business entity
concept. Under matching concept all expenses matched with the
revenue of that period is taken into consideration.
6. True: According to Section 53 of the Companies Act, 2013, a Company
cannot issue shares at a discount except in the case of issue of sweat

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ACCOUNTING

equity shares (issued to employees and directors). Thus, any issue of
shares at discount shall be void.

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(b) There are four generally accepted measurement bases or valuation
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principles. These are:

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(i) Historical Cost: It means acquisition cost. According to this, assets are

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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
equivalent that would have to be paid if the same or an equivalent
asset was acquired currently. Liabilities are carried at the undiscounted
amount of cash or cash equivalents that would be required to settle
the obligation currently.
(iii) Realisable Value: As per realisable value, assets are carried at the

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amount of cash or cash equivalents that could currently be obtained

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by selling the assets in an orderly disposal and Liabilities are carried at

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their settlement values.

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(iv) Present Value: As per present value, an asset is carried at the present

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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
are expected to be required to settle the liabilities in the normal course
of business.
(c) Purchases Book

Date Particulars Details Amount
2024
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` `

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2nd Dec M/s. Gupta & Co.

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100 Plates @ ` 150 per plate
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las 500 small bowls @ ` 50 per bowl
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a40,000
25,000

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Less: 10% trade discount (4,000)
36,000

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FOUNDATION EXAMINATION: SEPTEMBER 2025

Add: Packing charges @ 2 for 100 700 36,700
plates and 1 for 500 bowls
8th Dec M/s Ajanta & Co.
50 Boxes spoons @ ` 200 per box 10,000
40 Boxes Fork @ ` 250 per box 10,000
20,000
Less: 8% trade discount (1,600) 18,400
27th Dec M/s. Verma & Sons
1 doz. Cookers @ ` 750 9,000 9,000
Total 64,100

Note :
1. Purchases in cash is recorded through Cash Book.
2. Purchase of furniture being fixed asset will be recorded through
Journal.
Question 2
(a) The following are the details of machineries held by a firm:

Machine Purchase Purchase Useful Life Scrap
Date Value (`) Value (`)
M1 01/04/2020 11,00,000 8 years 20,000
M2 01/04/2022 9,40,000 8 years 40,000
M3 01/04/2024 8,10,000 5 years --

The firm uses 'sum of years digits' method for charging depreciation and
maintains a separate account for it.
On 1st April, 2024, the M1 machine has become obsolete and has been sold
for ` 1,34,000/-. On the same date the estimated useful remaining life of M2
machine is reassessed at 3 years with ` 10,000 as scrap value.
You are required to prepare the Machinery Account, Provision for
Depreciation Account and Machinery Disposal Account for the year ending
31st March, 2024 and 31st March, 2025. (8 Marks)

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ACCOUNTING

(b) Pass the Journal entries to record/rectify the following transactions in the
books of Mr. Dutt. Suspense account may be used, if required:

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(i) Sale of goods to Mahesh at the list price of ` 1,80,000/- less 10% trade
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discount. Out of the amount due 50% is received, out of which two-third
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is received by cheque and the balance amount is received in cash. CGST
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s eand SGST applicable is 6% each.
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(ii) One of the debtors, Mr. X has agreed to pay his dues of ` 3,000/- to
Mr. C who is a creditor of Mr. Dutt with the same amount being due to
him.
(iii) Employees have been given inventory having selling price of ` 1,00,000
(Cost price ` 75,000) on the eve of Deepawali as a gift. CGST and SGST
applicable is 6% each.
(iv) Sale of ` 2,500/- made to Mr. Kamal Kumar has been debited to
Mrs. Kamla Rani.
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(v) A second hand machinery was purchased and its overhauling charges

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paid are `15,000/-. The accountant debited the overhaul charges to

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Repairs and Maintenance Account. Depreciation on machinery has been
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charged at 10%.
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(vi) A purchase of ` 151 from Mr. X was entered in Purchase Day Book as
` 15 and posted to Mr. X account as ` 51.
(vii) R has been issued a credit note allowing rebate of ` 6,000/- as goods
supplied to him was found defective. CGST and SGST charged @ 6%
each.
(viii)S was also given a credit note of ` 2,000/- for making prompt payment

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for outstanding against goods sold to him. CGST and SGST charged on

m sale was @ 6%.
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c. o (ix) An accrual of telephone charges for ` 2,538 has beenmcompletely
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gla (x) A cheque of ` 25,390 issued to Mr. C. Dass (shownaunder trade payables)
a towards his dues has been wrongly debited to the purchases.
(12 Marks)

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FOUNDATION EXAMINATION: SEPTEMBER 2025

Answer
(a)
Dr. Machinery Account (at original cost) Cr.
Date Particulars ` Date Particulars `
01.04.2023 To Bal b/d 20,40,000 31.03.2024 By Balance c/d 20,40,000
M1-11,00,000 M1- 11,00,000
M2- 9,40,000 M2- 9,40,000
20,40,000 20,40,000
01.04.2024 To Balance b/d 20,40,000 01.04.2024 By Machinery 11,00,000
Disposal A/c
01.04.2024 To Bank A/c 8,10,000 31.03.2025 By Balance c/d 17,50,000
M1- 9,40,000
M2- 8,10,000
28,50,000 28,50,000

Dr. Provision for Depreciation Account Cr.
Date Particulars ` Date Particulars `

31.03.2024 To Balance c/d 11,55,000 1.04.2023 By Balance b/d 8,30,000
M1- 7,80,000 M1- 6,30,000
M2- 3,75,000 M2- 2,00,000
31.03.2024 By Depreciation A/c 3,25,000
M1- 1,50,000
M2-1,75,000
11,55,000 11,55,000
01.04.2024 To Machinery 7,80,000 01.04.2024 By Balance b/d 11,55,000
Disposal A/c (M1) M1- 7,80,000
M2- 3,75,000
31.03.2025 To Balance c/d 9,22,500 31.03.2025 By Depreciation A/c 5,47,500
M2-6,52,500 M2- 2,77,500
M3- 2,70,000 M3- 2,70,000

17,02,500 17,02,500

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Dr. Machinery Disposal Account Cr.
Date Particulars ` Date Particulars

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01.4.2024 To Machinery 11,00,000 01.04.2024 By Provision for 7,80,000

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Disposal A/c Depreciation A/c

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01.04.2024 By Bank A/c 1,34,000

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01.04.2024 By Profit and Loss 1,86,000

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A/c (Loss on sale of
machinery)
11,00,000 11,00,000

Working Notes:
(1) Calculation of Total of sum of digit of depreciation of Machine 1
and 2 from 1st April,2020- 31st March,2023

Machinery (M1) Machinery (M2)

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Cost 11,00,000 9,40,000
Depreciation
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(6,30,000) [10,80,000 x (2,00,000)
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(8+7+6) 8
[9,00,000 x ]

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(2) Calculation of Depreciation for the year 2023-24 and 2024-25

2023-2024 2024-2025
Machine 1 (M1) 10,80,000 X 5/36
= 1,50,000
Machine 2 (M2) 9,00,000 X 7/36 5,55,000 X3 /6= 2,77,500
= 1,75,000
Machine 3 (M3) 8,10,000 X 5/15 = 2,70,000
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TOTAL 3,25,000
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c. o (3) Calculation of Depreciation on the machinery disposedm
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10,80,000 * = 7,80,000
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36
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FOUNDATION EXAMINATION: SEPTEMBER 2025

(b) Journal Entries in the books of Mr. Dutt
S Particulars Dr. (`) Cr. (`)
No.
i) (a) Mahesh A/c Dr. 1,81,440
To Sales 1,62,000
To Output CGST 9,720
To Output SGST 9,720
(Being goods sold to Mahesh at 10%
trade discount, CGST and SGST is
applicable at 6% each.)
(b) Bank A/c Dr. 60,480
Cash A/c Dr. 30,240
To Mahesh 90,720
(Being 50% of the amount due is
received from Mahesh, out of which
2/3rd is received by cheque and 1/3rd
in cash)
ii) Mr. C Dr. 3,000
To Mr. X 3,000
(Being Mr. X paid his dues to
Mr. C)
iii) Misc Expenses A/c /Diwali Gift A/c Dr. 84,000
To Purchases 75,000
To Input CGST 4,500
To Input SGST 4,500
(Being inventory given to employees
as Gift and GST input reversed)
iv) Kamal Kumar Dr. 2,500
To Kamla Rani 2,500
(Being sale to Mr. Kamal Kumar has
been wrongly debited to Mrs. Kamla
Rani now rectified)

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v) Machinery A/c Dr. 13,500
Depreciation A/c Dr. 1,500
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To Repairs and Maintenance 15,000
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(Being overhauling charges wrongly

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a/c now rectified)

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a To X 100
To Suspense 36
(Being purchases of ` 151 from X
wrongly posted in purchase book as
` 15 and posted to Mr. X as ` 51 now
rectified)
vii) Rebate A/c Dr. 6,000

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Output CGST Dr. 360

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Output SGST Dr. 360

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To R 6,720

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(Being rebate allowed to R for the
goods supplied was found defective)
viii) Discount allowed A/c Dr. 2,000
To S 2,000
(Being credit given for making
prompt payment for outstanding
goods sold)
ix) Telephone exp. A/c Dr. 2,538
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To Outstanding Expenses A/c 2,538
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(Being telephone charges omitted to

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be recorded now rectified)
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l25,390
las x) Mr. C. Dass A/c Dr.
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ag To Purchases A/c
(Being Cheque issued to Mr. C. Dass
25,390

wrongly debited to purchases now
rectified)

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FOUNDATION EXAMINATION: SEPTEMBER 2025

Question 3
(a) From the following particulars furnished by Mr. Wye, prepare his Trading and
Profit & Loss Account for the year ended on 31st March, 2025. Also prepare
his Balance Sheet as on 31st March, 2025:

01.04.2024 (` ) 31.03.2025 (` )
Creditors 6,30,800 4,96,000
Expenses Outstanding 24,000 13,200
Fixed Assets (including machinery) 4,64,400 4,81,600
Stock in hand 3,21,600 4,44,800
Cash in hand 1,18,400 48,000
Cash at bank 1,60,000 2,75,200
Sundry Debtors 6,61,200 ?

Details of the year’s transactions are as follows: (`)
Cash and discount credited to debtors 25,60,000
Returns from debtors 58,000
Bad debts 16,800
Gross Sales (Both cash and credit) 28,72,400
Discount allowed by creditors 28,000
Returns to creditors 16,000
Capital introduced by cheque 3,40,000
Collection from debtors deposited into bank after receiving 25,00,000
cash
Cash purchases 41,200
Expenses paid by cash 3,82,800
Drawings by cheque 17,200
Machinery acquired by cheque 1,27,200
Cash deposited into bank 2,00,000

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ACCOUNTING

Cash withdrawn from bank 3,69,600
Cash sales 1,84,000
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Payment to creditors by cheque 24,10,800

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Note: No Fixed Asset has been sold during the year. (12 Marks)
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(b) Mr. Pm a
s e was carrying on a business. On 1 April, 2023, he admitted Q as a
st

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g a would be ` 24,000. On 1 July, 2023, R was admitted as a partner anda
lfirm
partner giving him one-fourth profit. It was agreed that the goodwill of the

a it was agreed that the goodwill of the firm be determined at ` 40,000 and
st

the new profit sharing ratio of P, Q and R will be 3:1:1. On 1st September,
2023, S was also admitted as a partner and at this time, goodwill was valued
at ` 72,000/- and they agreed to share profits in the ratio of 3:1:1:1. On
1st April, 2024, R decided to retire and T was admitted as a partner. Goodwill
was agreed at ` 96,000 and the profit sharing ratio amongst P, Q, S and T
now agreed to be 5:4:3:4.

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All these agreements about goodwill have not been taken into account. On
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1st April, 2024, when R retires and T is admitted, the partners decided to

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account for the goodwill by making necessary entries in respect of goodwill

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in the books without keeping the goodwill account in books.
gworking of the goodwill and to pass the required
journal entry.
a
You are required to show
(8 Marks)
Answer
(a) In the Books of Mr. Wye
Trading Account for the year ended 31st March, 2025
Particulars Amount ` Particulars Amount `

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To Opening Stock 3,21,600 By Sales (Gross) 28,72,400

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To Purchases (Net) (WN 2) 23,45,200 By Less: Sales Returns (58,000) 28,14,400

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(41,200 + 23,20,000 -

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16000)

gla To Gross Profit c/d (bal. fig) 5,92,400 By Closing Stock
a 4,44,800

a 32,59,200 32,59,200

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FOUNDATION EXAMINATION: SEPTEMBER 2025

Profit & Loss Account for the year ended 31st March, 2025

Particulars Amount Particulars Amount
To Expenses (net of o/s 3,72,000 By Gross Profit b/d 5,92,400
adj.) (WN. 5)
To Depreciation on Fixed 1,10,000 By Discount Received 28,000
Assets (WN. 4)
To Bad Debts 16,800
To Discount allowed to 60,000
Debtors (WN 1)
To Net Profit transferred to
Capital A/c 61,600
6,20,400 6,20,400

Balance Sheet as at 31st March, 2025

Particulars Amount Particulars Amount
Wye’s capital Fixed assets (incl.
4,81,600
machinery)
Opening (WN 3) 10,70,800 Stock-in-hand 4,44,800
Add: Net Profit 61,600 Sundry debtors (WN 1) 7,14,800
Capital 3,40,000
Cash-in-hand 48,000
introduced
Less: Drawings (17,200) Cash at bank 2,75,200
Capital (closing) 14,55,200
Creditors 4,96,000
Expenses 13,200
outstanding
19,64,400 19,64,400

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Working Notes:
1. Sundry Debtors Account
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Particulars
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` Particulars `

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To Balance b/d 6,61,200 By Cash A/c 25,00,000
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To Sales A/c 26,88,400 By Discount Allowed A/c

la(` 28,72,400 - ` 1,84,000) g
60,000

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(` 25,60,000 -25,00,000)
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a By Bad Debts A/c
By Return Inwards A/c
16,800
58,000
By Balance c/d (Bal. fig) 7,14,800
33,49,600 33,49,600
2. Sundry Creditors Account (Calculation of Purchases on Credit)
Particulars ` Particulars `
To Bank A/c
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24,10,800 To Balance b/d 6,30,800
o Purchases A/c (Bal 23,20,000
28,000 cBy
To Discount Recd. A/c
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To Returns to
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16,000
Creditors A/c
To Balance c/d
a 4,96,000
29,50,800 29,50,800

3. Balance Sheet as on 1st April,2024
Liabilities Amount Assets Amount
(`) (`)
Opening Capital (bal. 10,70,800 Fixed assets (incl.
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4,64,400

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fig) machinery)
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c. o Creditors 6,30,800 Stock in hand
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se 6,61,200
3,21,600

s em Expenses outstanding 24,000 Sundry debtors
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la Cash at bank a
Cash in hand 1,18,400

ag 1,60,000
17,25,600 17,25,600

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FOUNDATION EXAMINATION: SEPTEMBER 2025

4. Fixed Assets A/c

Particulars ` Particulars `
To Balance b/d 4,64,400 By Depreciation A/c (Bal
1,10,000
fig)
To Bank A/c 1,27,200 By Balance c/d 4,81,600
5,91,600 5,91,600

5. Expenses Payable A/c

Particulars ` Particulars `
To Bank A/c 3,82,800 To Balance b/d 24,000
To Balance c/d 13,200 By Profit & Loss A/c
3,72,000
(Bal Fig)
3,96,000 3,96,000

Note: The calculations in Working Notes 1 to 5 can also be presented in a
statement format.
(b) Journal Entry
Q’s Capital A/c Dr. 9,600
S’s Capital A/c Dr. 14,000
T’s Capital A/c Dr. 24,000
To P’s Capital A/c 37,200
To R’s Capital A/c 10,400
(Being Capital A/c of the partners adjusted on admission and Retirement
(See Working Note))
Working Note:
Calculation of Ratios and Goodwill
1. 1-4-23 Q is admitted

1
Q’s share = 24,000 x = 6,000
4
New Profit sharing Ratio of P and Q is 3:1

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Sacrifice Ratio =1 since entire sacrifice is made by P only.
2. 1-7-23 R is admitted old Ratio 3:1
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New Ratio
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3:1:1
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Sacrifice Ratio P:Q 3:1
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eR’s share = 40,000 x 1 = 8,000 l a
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ag 3. 1-9-23 S is admitted old Ratio 3:1:1
5

New Ratio P:Q:R:S 3:1:1:1
Sacrifice Ratio P:Q:R 3:1:1

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S share of Goodwill 72,000 x = 12,000
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4.
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1-4-24 R is retired and T is admitted
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3:1:1:1. c
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Old Ratio P:Q:R:S
New Ratio P:Q:S:T s
laAllocation = old Share- New Share
5:4:3:4

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Partners Sacrifice/Gain

3 5 24 -15 9
P= - = = (Sacrifice)
6 16 48 48
1 8-12 -4
Q= - 4 = = (Gain)
6 16 48 48
1
R= - (Sacrifice)
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6

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1 3 8-9 -1
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S= - = = (Gain
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6 16 48 48

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-4

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T = (Gain)

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16
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a Partners
ag Statement showing Goodwill Distribution among
Goodwill share P Q R S T
distribution
On Admission of Q 6,000 (Cr) 6,000 (Dr)

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FOUNDATION EXAMINATION: SEPTEMBER 2025

On Admission of R 6,000 (Cr) 2,000 (Cr) 8,000 (Dr)
On Admission of S 7,200 (Cr) 2,400 (Cr) 2,400 (Cr) 12,000 (Dr)
On retirement of R 18,000(Cr) 8,000(Dr) 16,000(Cr) 2,000 (Dr) 24,000 (Dr)
and Admission of T
Total Effect 37,200 (Cr) 9,600 (Dr) 10,400 (Cr) 14,000(Dr) 24,000(Dr)

Alternatively, distribution of Goodwill and calculation of ratios can also be
presented in the following format:
Statement showing the effect of raising and immediately
writing back of goodwill
Total P Q R S T
` ` ` ` ` `
1-04-2023 Credit in old ratio +24,000 +24,000 - - - -
1 : nil
Debit in new ratio -24,000 -18,000 -6,000 - - -
3:1
1-07-2023 Credit in old ratio +40,000 +30,000 +10,000 - - -
3:1
Debit in new ratio -40,000 -24,000 -8,000 -8,000 - -
3:1:1
1-09-2023 Credit in old ratio +72,000 +43,200 +14,400 +14,400 - -
3:1:1
Debit in new ratio -72,000 -36,000 -12,000 -12,000 -12,000 -
3:1:1:1
1-04-2024 Credit in old ratio +96,000 +48,000 +16,000 +16,000 +16,000 -
3:1:1:1
Debit in new ratio -96,000 -30,000 -24,000 - -18,000 -24,000
5:4:3:4
Net amount payable/ - +37,200 -9,600 +10,400 -14,000 -24,000
receivable

Question 4

(a) P and Q have been carrying on the business in the name of Bharat Springs
in partnership sharing profit and losses in the ratio of 2:3. Their Balance Sheet
as on 31st March, 2024 has been as follows:

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ACCOUNTING

Liabilities (` ) Assets (` )

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Capital Accounts: Building 85,000
P
m 80,000 Plant 55,000
c. o
Q
.co 1,60,000 Furniture 26,700
s em
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a s
General Reserve
l Creditors
50,000 Debtors 48,000
ag
ag Bills Payable
57,800 Bills Receivable 11,600
16,500 Stock 54,800
Bank 83,200
3,64,300 3,64,300

On 1st April, 2024, they have decided to admit R into the partnership giving
him a 1/5th share in future profits on the following terms:

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(i) R will bring ` 80,000 as his share of capital but is unable to bring in cash

.
for his share of goodwill. It was decided to calculate goodwill of the firm

em
based on R's share in the profits and the capital contribution made by
him to the firm.
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(ii) Partners will not withdraw their share of goodwill nor will the goodwill
appear in the books of account.
(iii) General Reserve will be transferred to the Partners' Capital Accounts.
(iv) Provision for doubtful debts is to be made on debtors @ 2%.
(v) A liability of creditors of ` 1,440 is to be written back as no longer
payable.
(vi) Stock shall be written down by 10%.
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(vii) Building is to be revalued at ` 1,00,000/-, Plant at ` 60,000/- and

c. o emwill remain
Furniture at ` 24,000/-.

em s
la in their book
(viii)Partners agreed that the values of the assets and liabilities

las g
value because of above-mentioned adjustments.aThey also agreed that
the same and, as such, there should not be any change

ag for the purpose of goodwill computation, any effect of revaluation shall
be ignored.

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FOUNDATION EXAMINATION: SEPTEMBER 2025

You are required to make :
(1) Memorandum Revaluation Account
(2) Capital Accounts of the partners
(3) Balance Sheet of the New Firm (12 Marks)
(b) Following is the Receipts and Payments Account of Smart Club for the year
ended on 31st March, 2025:
Receipts and Payments Account for the year ended on
31st March, 2025
Receipts Amount Payments Amount
(` ) (` )
To Balance b/d 2,50,000 By Salaries and Wages 1,65,000
To Subscription 4,20,000 By Office Expenses 35,000
To Donation for Match 55,000 By Telephone Charges 28,000
Fund
To Sale of Match tickets 20,000 By Match Expenses 1,10,000
To Entrance Fees 85,000 By Electricity Charges 32,000
By Sports Equipment 2,50,000
By travelling and 65,000
Conveyance
By Balance c/d 1,45,000
8,30,000 8,30,000

Additional Information:
(i) The subscriptions include ` 40,000/- received for the year ended on
31st March, 2024. On 31st March, 2025 subscriptions due but not received
were ` 25,000/-. Advance subscription received for the year ending on
31st March, 2025 but pertaining to year 2025-2026 amounted to
` 35,000/-. The subscriptions received in advance for the year ended
31st March, 2024 includes ` 14,000/-pertaining to the year 2024-25.
(ii) Opening Balance of Match Fund on 1st April, 2024 is ` 30,000/-.
(iii) Outstanding Salaries and Wages are ` 40,000/- for the year ended on
31st March, 2025.

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ACCOUNTING

(iv) Depreciate Sports Equipment by 25% for the year ended on 31st March,
2025.

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(v) Capitalize 50% of the Entrance Fees.

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Prepare Income and Expenditure Account of the Club from the above

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particulars for the year ended on 31st March, 2025 and Balance Sheet as on
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that date. (8 Marks)

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a(a)g
Answer
Memorandum Revaluation Account
Particulars ` Particulars `
To Provision for Bad Debts 960 By Liability of Creditors A/c 1,440
A/c
To Stock A/c 5,480 By Building A/c 15,000
To Furniture A/c 2,700 By Plant A/c 5,000
To Profit on Revaluation
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A/c

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em
P’sCapital-2/5 4,920 12,300

s
Q’s Capital-3/5 7,380

l a
g 1,440 By Provision for Bad Debts A/c 960
21,440 21,440

To Building A/c
a
To Liability of Creditors A/c
15,000 By Stock A/c 5,480
To Plant A/c 5,000 By Furniture A/c 2,700
Loss on Revaluation A/c
P’s Capital-8/25 3,936
Q’s Capital-12/25 5,904
R’s Capital-5/25 2,460 12,300

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21,440 21,440

m Partners’ Capital Accounts
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c. o se
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Particulars P Q R Particulars P Q R

s g la
` ` ` ` ` `

la a
To P’s Capital A/c 2,400 By Balance b/d 80,000 1,60,000 -

ag (see WN)
To Q’s Capital A/c 3,600
To Memorandum 3,936 5,904 2,460 By Bank A/c 80,000
revaluation A/c

19

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FOUNDATION EXAMINATION: SEPTEMBER 2025

By General 20,000 30,000
Reserve
To Balance c/d 1,03,384 1,95,076 71,540 By R’s Capital A/c 2,400 3,600 -
(see WN)
By Memorandum 4,920 7,380
revaluation A/c -

1,07,320 2,00,980 80,000 1,07,320 2,00,980 80,000

Balance Sheet of Bharat Springs as at April 1,2025

Liabilities ` Assets `
Capital A/c: Building 85,000
P 1,03,384 Plant 55,000
Q 1,95,076 Furniture 26,700
R 71,540 3,70,000 Debtors 48,000
Bills Payable 16,500 Bills Receivable 11,600
Creditors 57,800 Stock 54,800
Bank (83,200+80,000) 1,63,200
4,44,300 4,44,300

Working Notes:
1. Calculation of New Profit-Sharing Ratio
R’s Share = 1/5
P’s Share= 4/5*2/5= 8/25
Q’s Share= 4/5 *3/5 =12/25
R’s New Share = 5/25
New Profit Sharing Ratio between P:Q:R = 8: 12: 5
2. Calculation of goodwill:
R’s contribution of ` 80,000 consists of only 1/5th of capital.
Therefore, total capital of firm should be ` 80,000 x 5 = ` 4,00,000
But combined capital of P, Q and R amounts including general reserve
` 80,000 + 1,60,000 + 80,000+50,000 =3,70,000

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ACCOUNTING

Thus, the hidden goodwill of the firm is ` 30,000 (` 4,00,000 -
` 3,70,000).

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R's share 1/5th = 6,000

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3. Goodwill will be shared by P & Q in their sacrificing ratio 2:3

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e a
(b) In the books of Smart Club
s l
l a Income and expenditure Account for the year ended on
ag
ag Dr
31st March 2025
Cr
Expenditure Amount Income Amount
(` ) (` )
Salaries and wages 1,65,000 By Subscriptions 3,84,000
Add: Outstanding (W.N.2)
Salaries for 2025 40,000 2,05,000 By Entrance fees 42,500
To Office expenses (50% × 85,000)

om
35,000
By Excess of

c
To Depreciation (25% × 2,50,000) 62,500 6,000

.
To Telephone Charges expenditure over

em
28,000
income

s
To Electricity charges 32,000
To Travelling and conveyance

g l a 65,000

a
To Match expenses (Excess of Exp. 5,000
Over collection)

4,32,500 4,32,500

Balance Sheet of Smart Club as at 31st March, 2025
Liabilities ` Assets `
Capital Fund: Opening (WN 1) 2,46,000 Sports Equipment 2,50,000 1,87,500
Less: Deficit for the year (6,000) 2,40,000 Less: Depreciation (62,500)

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Subs received in advance 35,000 Cash at bank 1,45,000

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c. o m
Outstanding Salaries 40,000 Subscription outstanding 25,000

em se
Match fund (WN.3) -

s
Entrance Fees* 42,500

g la
gla 3,57,500
a 3,57,500

a *Alternatively, entrance fees can also be added to the Capital Fund. In that
case capital fund shall be ` 2,82,500.

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FOUNDATION EXAMINATION: SEPTEMBER 2025

Working Note 1:
Balance Sheet as at 1st April, 2024

Liabilities ` Assets `
Match fund 30,000 Cash at Bank 2,50,000
Subs received in advance 14,000
Capital Fund (Balancing 2,46,000 Subscription 40,000
Figure) Outstanding in 2024

2,90,000 2,90,000

Working Note 2: Calculation of Subscription as per Income & Exp a/c
`
Subscription as per Receipt & Payment A/c 4,20,000
Add: Subscription Outstanding for 2025 25,000
Subscription received in advance 2024 14,000
Less: Subscription Outstanding for 2024 (40,000)
Subscription received in advance 2025 (35,000)
3,84,000

Working Note 3: Match Expenses/Fund to be shown in Income &
Expenditure A/c and Balance sheet as on 31st Mar’25

Income & Balance-sheet
Expenditure A/c `
Match Fund 30,000 30,000
Add: Donation for Match fund 55,000 55,000
Add: Proceeds from Sale of 20,000 20,000
tickets
Less: Match expenses adjusted (1,10,000) (1,05,000)
Balance (5,000) Nil

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Question 5
(a) Attempt any ONE of the two sub-parts i.e. either (i) OR (ii)
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(i) From the following information supplied by Mr. D, prepare a Bank

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Reconciliation Statement as on 31st March, 2025 after amending cash on

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that date:
s e
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a
l 1. ag
(` )

ag Bank overdraft as per Bank statement 20,000
2. Cheques issued but not presented for payment 11,000
3. Cheques recorded in the bank column of the cash 3,000
book but not sent to the Bank for collection
4. Payment received form customers directly by the 6,000
bank
5. Bank charges debited in the statement 40

o m
c
6. Cheques deposited with the Bank but not collected 9,000

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February at `4,960) e
7. A bill for `5,000 (discounted with the Bank in 20

a s dishonoured on 31 March and st

g l the bank
noting charges paid by
8. Premium of alife policy of D paid by the Bank on his 350
standing advice
9. Overdraft balance (Cr.) on 15th March, 2025 of
`14,000 was carried over as debit balance on the next
day in cash book

(5 Marks)

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OR

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(ii) P owed ` 2,00,000 to Q. On 1st October, 2024, P accepted a bill drawn

se
by Q for the due amount for 3 months. Q got the bill discounted with his

s em la
bank for ` 1,98,000 on 3rd October, 2024. On 31st December, 2024, before
g
la a
the due date, P approached Q for renewal of the bill. Q agreed on the

ag conditions that ` 1,00,000 along with interest at 12% per annum for 3
months on the amount of ` 1,00,000/- will be paid and P would accept
a new bill for three months for the balance amount. These arrangements
were carried out on 2nd January, 2025. However, on 2nd April, 2025,

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FOUNDATION EXAMINATION: SEPTEMBER 2025

before the due date, P became insolvent and only 40% of the amount of
the bill could be recovered from his estate.
Pass the necessary journal entries (with narration) in the books of Q.
(5 Marks)
(b) Mr. Sahil runs a factory which produces sugar. Following details are available
in respect of his manufacturing activities for the year ended on
31st March, 2025:

(` )
Opening Work in Progress (15 tones) 4,50,000
Closing Work in Progress (12 tones) 3,60,000
Raw Materials consumed 32,00,000
Closing inventory of Raw Materials 7,60,000
Hire charges of machine @`200 per ton produced
Direct Wages – Contracted @ ` 400 per ton manufacture
and @ `200 per ton of closing WIP
Factory Rent 2,40,000
Repairs & Maintenance of plant 1,50,000
Sugar produced -500 tones
Sale of Scrap 84,000

Prepare the Manufacturing Account of Mr. Sahil for the year ended on
31st March, 2025. (5 Marks)
(c) Alpha Limited has an authorized Equity Share Capital of ` 20 lakhs divided
into equity shares of ` 100 each and 10% Redeemable Cumulative Preference
Shares of ` 5.00 lakhs divided into ` 100/- per share. The paid-up equity
capital is of ` 13,50,000/- and 10% Redeemable Cumulative Preference
Shares of 100 each of ` 3,00,000/-, Balances in other accounts are: Securities
Premium ` 35,000/-, Profit & Loss Account ` 80,000/- and General Reserve
` 4,00,000/-. The Company has investments of the face value of ` 40,000/-
being carried in the books at a cost of ` 45,000/-.
The Company has decided to redeem the Cumulative Preference Shares at
10% premium, partly by making an issue of equity shares of the face value

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ACCOUNTING

of ` 1,50,000/- at a premium of 10%. Investments are sold at 110% of their
face value. All preference shareholders have been paid off except 2 holders
holding 500 shares.
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You are required to pass the necessary Journal Entries for effecting the above

. em
s
transactions. Working should form part of your answer. (10 Marks)
Answer em a
s l
a
(a) l(i) ag
ag
In the Books of Mr. D
Cash Book (Bank Column)

Particulars Amount Particulars Amount
` `
To Customer A/c By Bank charges 40
(Direct deposit) 6,000 By Premium of life policy 350

m
By Customer A/c

. c o (B/R dishonoured) 5,020
30,410 Bym Cheque recorded in the
To Balance c/d
s e bank column of cash book 3,000

l a
ag By Error - (Overdraft balance
but not sent to Bank
28,000
carried over as debit
balance)
36,410 36,410

Bank Reconciliation Statement on 31st March, 2025

Particulars Amount

m om (`)
c. 30,410
c. o Overdraft as per Cash book
m
se 9,000
em la
Add: Cheques deposited but not yet collected

las a g 39,410

ag Less: Cheques issued but not presented for payment (11,000)
Debit balance as per pass book (overdraft) 28,410

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FOUNDATION EXAMINATION: SEPTEMBER 2025

Note: Due to missing information in the question, the overdraft
balance as per the Pass Book does not align with the overdraft balance
as per the Bank Statement given in the question.
(ii) OR
In the books of Q
Journal Entries

Particulars ` `

1.10.24 Bills Receivable A/c Dr. 2,00,000
To P 2,00,000
(Being a 3 month’s bill drawn on P
for the amount due)
3.10.24 Bank A/c Dr. 1,98,000
Discount A/c Dr. 2,000
To Bills Receivable A/c 2,00,000
(Being the bill discounted)
31.12.24 P Dr. 2,00,000
To Bank A/c 2,00,000
(Being the bill cancelled up due to
P’s inability to pay it)
2.1.25 P Dr. 3,000
To Interest A/c 3,000
(Being the interest due on
` 1,00,000 @ 12% for 3 months)

2.1.25 Bank A/c Dr. 1,03,000
To P 1,03,000
(Being the receipt of a portion of
the amount due on the bill
together with interest)

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2-1-25 Bills Receivable A/c Dr. 1,00,000

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To P 1,00,000

o m
(Being the new bill drawn for the
c. o
.c balance)
e m
em P To Bills Receivable A/c l a s
s
2-4-25 Dr. 1,00,000

la 1,00,000 a g
ag (Being the dishonour of the bill due to
P’s insolvency)
2-4-25 Bank A/c Dr. 40,000
Bad Debts A/c Dr. 60,000
To P 1,00,000
(Being the receipt of 40% of the
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c. o
amount due on the bill from P’s

emof Mr. Sahil
estate)

(b) s
lafor the year ended 31 March, 2025
In the Books

a g
Manufacturing Account st

Particulars Tonnes Amount Particulars Tonnes Amount
(` ) (` )
To Opening Work- in- 15 4,50,000 By Closing Work- 12 3,60,000
Process in-Process
To Raw Materials 32,00,000 By Sale of Scrap 84,000
Consumed:

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To Direct Wages – 2,02,400 By Trading A/c – 500

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W.N. (1) Cost of finished 38,98,400
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em
To Hire charges 1,00,000 goods

la se
s g
transferred

la
on Machinery (500

g
units @ ` 200)
a
a To Indirect expenses:
Factory rent 2,40,000

27

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FOUNDATION EXAMINATION: SEPTEMBER 2025

Repairs and 1,50,000
Maintenance of
Plant
43,42,400 43,42,400

Working Notes:
(1) Direct Wages – 500 units @ ` 400 = ` 2,00,000
12 units @ ` 200 = ` 2,400
` 2,02,400

(c) In the books of Alpha Limited
Journal Entries

Particulars Dr. (`) Cr. (`)
1 10% Redeemable Preference Share Dr. 3,00,000
Capital A/c
Premium on Redemption of Preference Dr. 30,000
Shares A/c
To Preference Shareholders A/c 3,30, 000
(Being the amount payable on
redemption of 3000 ,10% Redeemable
Preference Shares transferred to
Shareholders Account)
2 Profit & Loss A/c Dr. 30,000
To Premium on Redemption of 30,000
Preference Shares A/c
(Being premium on redemption of
preference shares adjusted against to
Profit & Loss Account)
3 Bank A/c 1,65,000
To Equity Share application A/c 1,65,000
(Being amount received on issue of
equity share)

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4 Equity Share Application A/c Dr. 1,65,000
To Equity Shares Capital A/c 1,50,000
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To Securities Premium A/c 15,000
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(Being the issue of 1,500 Equity Shares
s em
m
eGeneral Reserve A/c (W.N 1)
of ` 100 each at a premium of 10%)
l a
l a
5 s Dr. 1,50,000
a g
ag (Being the amount transferred to
To Capital Redemption Reserve A/c 1,50,000

Capital Redemption Reserve A/c as per
the requirement of the Act.)
6 Bank A/c Dr. 44,000
Profit and Loss A/c Dr. 1,000
To Investment 45,000

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c. o
(Being investment sold at 11% of face
value)
7 Preference Shareholders A/cem

la s Dr. 2,75,000
To Bank A/c
g
(Being the amountapaid to preference
2,75,000

share holders holding 2,500 shares)

Working Note:
(1) Amount to be Transferred to Capital Redemption Reserve Account
Face value of share to be redeemed ` 3,00,000
Less: Proceeds from fresh issue (excluding premium) (` 1,50,000)

o m
m .c
` 1,50,000

c. o Question 6 s
m
eat premium of
em l a application ` 2
s g
(a) ABC Limited has issued 1,20,000 Equity shares of ` 10 each

gla ` 2 per share for public subscription payable as
a
follows: On

a per share; on allotment ` 5 per share (including premium); on first call ` 2
per share; on second and final call ` 3 per share.

29

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FOUNDATION EXAMINATION: SEPTEMBER 2025

Application has been received for 1,80,000 shares. Allotment has been made
on pro rata to the applicants for 1,44,000 shares, the remaining applications
being refused. T, to whom 4,800 shares has been allotted, failed to pay the
allotment and first call money and his shares have been forfeited. After the
second and final call has been made, N, to whom 6,000 shares were allotted,
has also failed to pay the two calls. His shares have also been forfeited.
Subsequently, out of these forfeited shares, 7,800 shares (including all shares
of T) were re-issued to P as fully paid-up at ` 8 per share.
Show the necessary Journal Entries and entries in Cash Book. (15 Marks)
(b) From the following particulars, ascertain the value of inventories as on
31st March, 2025:

(` )
Inventory as on 1st April,2024 1,76,900
Purchases 9,64,000
Manufacturing Expenses 1,90,000
Selling Expenses 78,500
Administrative Expenses 25,000
Financial Expenses 24,900
Sales 15,37,000

(i) At the time of valuing inventory as on 31st March, 2024, a sum of ` 7,500
was written off on a particular item remaining in the balance, which was
originally purchased for ` 70,000 and was sold during the year for
` 65,000. Barring the transaction relating to this item, the gross profit
earned during the year was 20% on sales.
(ii) On 15th March, 2025, the goods of the sale value of ` 20,000 (included
in above sales) were sent on sale or return basis to a customer, the period
of approval being four weeks. He returned 40% of the goods on 10th April,
2025, approving the rest. (5 Marks)

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ACCOUNTING

Answer
(a) In the Books of ABC Ltd.
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Cash Book (Bank column only)

c o m
mTo.Equity Share e
Date Particulars ` Date Particulars

s
`

s e Application A/c 3,60,000 By Equity Share
l a
g a
l (Being application
Application A/c 72,000
ag
a money received on
(Being excess money
refunded on 36,000
1,80,00 shares @ ` 2 shares @ ` 20 each as
each) per Board’s Resolution
No…dated….)
To Equity Share 5,29,920 By Balance c/d 14,26,320
Allotment A/c
(Being allotment

m
money received on

. co
1,15,200 shares @

m
` 50 each)

s e
a
To Equity Share first 2,18,400
Call A/c
g l
(Being First
a
Call
money received on
1,09,200 shares @3
each)
To Equity Share 3,27,600
Second and Final Call
A/c
(Being First Call

m
co
money received on

m .
c. o
1,09,200 shares @3

m
se
each)

em la
To Equity Share

las Capital A/c 62,400
a g
ag (Being forfeited
shares issued at 8 per
share)
14,98,320 14,98,320

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FOUNDATION EXAMINATION: SEPTEMBER 2025

Journal Entries
Date Particulars Amount Amount
(` ) (` )
i) Equity Share Application A/c Dr. 2,40,000
To Equity Share Capital A/c 2,40,000
(Being application money on
1,20,000 shares @` 2 each
transferred to Equity Share Capital
Account)
ii) Equity Share Allotment A/c Dr. 6,00,000
To Equity Share Capital A/c 3,60,000
To Securities Premium A/c 2,40,000
(Being allotment money 1,20,000
shares @ ` 5 per share including
premium of ` 2 per share being
made due)
iii) Equity Share Application A/c Dr. 48,000
Calls in arrear A/c Dr. 22,080
To Equity Share Allotment A/c 70,080
(Surplus of application money
adjusted and amount due to ‘T’ on
4,800 shares transferred to call in
arrear A/c)
iv) Equity Share First Call A/c Dr. 2,40,000
To Equity Share Capital A/c 2,40,000
(Being first call money received for
1,20,000 shares ` 2 per share being
made as per Board’s resolution
No…. dated ……)
v) Calls in arrear A/c (10,800 x 2) Dr. 21,600
To Equity share First call A/c 21,600
(First call money due on 10,800
shares transferred to call in arrear
a/c)

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m
m .co
c. o

e m
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s a g
ACCOUNTING

vi) Equity Share Capital A/c (4800 x 7) Dr. 33,600
Securities Premium A/c (4800 x 2) Dr. 9,600

m
c. o
To Call in arrear A/c 31,680

m
co
To Share forfeiture A/c 11,520

. em
s
(4,800 shares forfeited for non-

e m l a
s
payment of allotment and call

g a
lvii) Equity Share Final Call A/c
money)
ag
a To Equity Share Capital A/c
Dr. 3,45,600
3,45,600
(Being final call money received on
1,15,200 shares for ` 3 per share
being made as per Board’s
resolution No…. dated ……)
viii) Calls in arrear A/c Dr. 18,000

m
To Equity share final call A/c 18,000

. co
(Final call money due on 6,000

em
shares transferred to call in arrear
a/c)
l a s
ix)
a
To Call in arrear A/c g
Equity Share Capital A/c (6000 x 10) Dr. 60,000
30,000
To Share forfeiture A/c 30,000
(6,000 shares forfeited for non-
payment of first call and final call
money)
x) Forfeited Shares A/c (7,800X ` 2) Dr. 15,600
To Equity Share Capital A/c

m
c. o
(Being loss on re-issue of 7,800 15,600

m shares @ ` 2 each as per Board’s

c. o Resolution No……dated…...)
10,920se
m
s em xi) Forfeited Shares A/c (Note no 4) Dr.
g la
la a
To Capital Reserve A/c 10,920

ag (Being profit on re-issue transferred
to Capital Reserve)

Alternately, journal entries can also be passed without using the Calls in
Arrears Account.
33

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FOUNDATION EXAMINATION: SEPTEMBER 2025

Working Notes:
1. Calculation of Money paid by T on application
4,800 shares was allotted, hence applied shares = 4,800*
1,44,000/1,20,000 = 5,760
Hence application money paid by T = 5,760 X2 = 11,520
2. Amount due/Payable on Allotment by T
Allotment money Due (4,800*5) 24,000
Excess money received on application (11,520 – (4,800*2)) 1,920
Money not received from T 22,080
3. Money actually received on Allotment
Money receivable on Allotment 6,00,000
Excess application money 48,000
5,52,000
Money not paid by T (22,080)
5,29,920
4. Calculation of Capital Reserve
Forfeited amount on 4,800 T’s shares 11,520
Forfeited amount on 3,000 N’s shares (30,000 x 3000) 15,000
6,000 26,520
Less: Loss on re-issue of 7,800 Shares 15,600
10,920
(b) Statement of Valuation Inventory on 31st March, 2025

Particulars ` `
Inventory as on 1st April, 2024 1,76,900
Less: Book value of abnormal inventory
(` 70,000 - ` 7,500) 62,500 1,14,400

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m
m .co
c. o

e m
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ACCOUNTING

Add: Purchases 9,64,000
Manufacturing Expenses 1,90,000
m
c. o
12,68,400

o m m
c
Sales as. per books
Less: Cost of goods sold:
s e
emSales of abnormal item l a
15,37,000

la s
Less: (65,000)
ag
g
a Less: Goods sent on approval basis 14,72,000
(20,000)
14,52,000
Less: Gross Profit @ 20% (2,90,400) (11,61,600)
Inventory in trade as on 31st March, 2025 1,06,800

m
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s em
g l a
a

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

35

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.co s e m
e m l a
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ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 35 of 35