Accounts Paper 1

SIDDHARTH EDUCATION SERVICES LTD.

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For CS, CA, ICWA [Foundation, Inter, Final] Prestige Chambers, Opp. Thane Railway Stn. P.F.2, Thane (W):2533 4903. VaibhavSoc., 1st Floor, Opp. Municipal Garden, Dombivli (E) Tel:2443455. Ist floor, Popatlal Bldg, Ranade Road, Dadar (W)  –  65540023.   65540023. Also at vashi  ______________________  _________________________________ ______________________ ______________________ ______________________ ____________________ _________ ICWA ACCOUNTS PAPER 1 Question 1 is compulsory answer any 5 from the rest

Attempt all questions Q1(A) Fill in the blanks (1 mark each) 1. Fundamental accounting assumptions are __________ ________ __________. 2. Branch profit is calculated by preparing branch account is in case of __________ method. 3. In case of hire purchase instalment, once goods are repossessed amount amount paid by the purchaser will be accounted as ___________. 4.  __________ means means setting off excess royalty royalty with shortworking. shortworking. Q1(B) Answer the following: (2 marks each) 1. State briefly Garner v/s Murray rule. 2. Distinguish between liability and provision. 3. State briefly EPS 4. State briefly stock turnover ratio 5. State briefly price earning ratio Q1(C) Match the column: (1 mark each) Column A Redemption of Preference shares Redemption of Debentures Earnings per share Revenue recognition Segment reporting reporti ng Contract costing

Column B AS 17 AS 9 AS 20 AS 19 AS 7 Section 80 Section 121 Section 77

Q2(A) From the following information 1. Convert branch trial balance into rupees; (use Opening rate 1$ = Rs.20, closing rate 1$ = Rs. 24, average rate 1$ = Rs. 22 and for fixed assets 1$ = Rs. 18 (4 marks) 2. Prepare final accounts of X ltd as on 31st March 2002. X ltd has head office in india and branch at usa. (6 marks)

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Particulars

Head office Rs. in thousands Share capital 4000 Reserves and surplus 2000 Land 1000 Building (cost) 2000 Reserve for depreciation of building 400 Plant and machinery (cost) 5000 Reserve for dep of Plant 1200 Debtors 560 Creditors 400 Stock as on 1.4.01 200 Branch stock reserve 8 Cash and bank balance 20 Purchases 480 Sales 1040 Goods sent to branch 200 MD’s salary 60 Salaries and wages 150 Rent Office expenses 50 Commission receipts 512 Branch/ H O current a/c 240

Branch $ in thousands

400 260 120 60 40 20 40 246 10 90 24 36 200 14

Additional information: 1. Stock as on 31.3.02 HO- Rs. 3,00,000 and Branch- $ 6,250. 2. Head office always sent goods to branch at cost plus 25%. 3. RDD to be made 5%. 4. Depreciation is to be charged on WDV basis 10% on buildings and 20% on plant and machinery. 5. MD is entitled to 2% commission on net profits. 6. Income tax provision to be made 47.5% Q2(B) Explain redemption of debentures by sinking fund method. (6 marks) Q3(A) Explain redemption of preference shares ( 4 marks) Q3(B) From the following information relating to C bank limited, prepare profit and loss account and balance sheet for the year ended 31.3.02 (12 marks) Shares of Rs.100 each Statutory reserve (fully invested in 5% govt. Sec at par) Bad debts Establishment expenses Current deposits Interest paid Savings accounts Acceptances for customers

2,00,000 1,20,000

Cash in hand Investment in shares (mkt value Rs.2,00,000) 12,875 Cash with banks in india 1,27,725 Interest received 13,65,227 Term loans in india 7,48,490 Cash credit hypothecation india 17,20,000 Cash credit pledge in india 47,500 Bills purchased 2

22,650 92,500 2,84,500 12,86,400 10,00,000 12,56,000 9,44,000 16,00,000

Discount Profit and loss account (1.4.01) credit Fixed deposits Commission and exchange Premises Additional information:

4,95,000 8,20,400 8,75,000 2,92,900 4,80,000

Loans to employees Salaries allowances Dividend paid for 00-01 Dividend received

40,770 4,45,467 20,000 8,000

1. The chief executive of the bank drew a remuneration of Rs. 48,000 which is included in salaries and allowances. 2. Unexpired discount as on 31.3.02 Rs. 40,000. 3. Establishment expenses includes Advertisement 10000, Stationery 63000, Rent 18000, Lighting 3000, Audit fees 8000, Postage and telegram 4600, Revenue stamps 400, Stamp paper 1500 4. Provide for taxation at 40% and surcharge at 5% thereon. 5. Current account includes 500000 debit balance being overdraft. 6. Advances made have been classified as under: Particulars Term loan Cash credit(H) Cash credit (P) Standard assets 999960 1255950 943900 Sub standard assets 6 4 40 Doubtful upto 1 year 2 3 5 Doubtful 1 to 3 years 20 20 20 Doubtful more than 3 years 10 20 30 Loss assets 2 3 5 Total 1000000 1256000 944000 No provision has been made so far against these assets. Doubtful assets are secured to the extent of 50% of the dues. Q4(A) Following is balance sheet of SLTD as on 31.3.07 Liabilities Authorised capital 20,000 10% preference shares of 10 each 1,80,000 equity shares of 10 each

Amount

Assets Fixed assets 2,00,000 Cost 18,00,000 Provision for depreciation 20,00,000

Amount 6,00,000 2,00,000 4,00,000 2,00,000

Issued capital Investments 20,000 10% preference shares of 10 each 2,00,000 Current assets 20,000 equity shares of 10 each 2,00,000 Stock 50,000 Reserves and surplus Debtors 50,000 General reserve 2,40,000 Cash and bank balance 1,00,000 Securities premium 1,40,000 Miscellaneous expenditure 40,000 Profit n loss account 37,000 Current liabilities and provisions 23,000 Total 8,40,000 Total 8,40,000 For the year ended 31.3.08, the company made net profit of 30,000 after providing for 40,000

depreciation and writing of miscellaneous expenditure of 20,000. The preference dividend for the year ended 31.3.08 was paid before 31.3.08. Except cash and bank balance other current assets and current liabilities on 31.3.08 were same as on 31.3.07. The company redeemed preference shares at a premium of 10%. The company issued bonus shares in ratio 1 share for every 2 equity shares held

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as on 31.3.08. To meet cash requirements of redemption the company sold a portion of the investments, so as to leave a minimum balance of 60,000 after such redemption. Investments were sold at 90% of cost as on 31.3.08. Prepare (i) Necessary journal entries (ii) Cash and bank account and (iii) Balance sheet as on 31.3.08. (12 marks) Q4(B) Write short note an AS 7. (4 marks) Q5(A) From the following information prepare balance sheet: (10 marks) Current ratio 2.8 Long term loans to current liabilities 1.8 Liquid ratio 1.6 Average collection period 3 months Total assets turnover 2/3 Reserves to capital 0.6 Fixed assets turnover 1.25 Sales 4000000 Q5(B) Distinguish between hire purchase system and instalment purchase system (6 marks) Q6(A) A, B and C are equal partners whose balance sheet as on 31.3.01 is as follows: Liabilities Amount Creditors 5000 A’s loan 1000 Capitals: A 800 C 500

Assets Amount Cash in hand 50 Stock 800 Debtors 1000 Plant and machinery 2000 Furniture and fittings 800 Land and buildings 2000 B’s capital a/c  650 Total 7300 Total 7300 Due to lack of liquidity and weak financial position of the partners of the partners, the firm is dissolved. A and C are not able to contribute anything, and sum of 200 is received from B. All of them declared insolvent. The following assets realized stock – 500 plant and machinery – 50% furniture – 75% less. Land and building – 40% and debtors 45% less only. Realisation expenses amounted to 50. Close the firm books. (12 marks) Q6(B) Explain dead rent. (4 marks) Q7(A) Prepare income and expenditure account and balance sheet of A trust for the year ended 31st December 2002. (12 marks) Receipts and payment account for the year ended 31.12.02 Receipts To balance b/d: Cash Bank Stamp To Subscriptions: 2001 2002 2003 To entrance fees

Amount 500 4000 300 4650 67200 2600 8000

Payments By rent By miscellaneous expenses By postage expenses By furniture By creditors for sports materials By cost of prizes By cash purchase of sports material By match expenses 4

Amount 9750 28800 1200 8000 12200 4150 2000 7030

To General donations To donation for prize fund To sale of old sports material To interest on prize fund investment To Miscellaneous receipts Total Additional information:

4050 2800 5200 300 225 99825

By balance c/d Cash Bank Stamps

545 26000 150 99825

Particulars As on 31.3.01 As on 31.3.02 Sports materials 4000 5000 Furniture 40000 ? 5% Prize fund investments 11700 ? Creditors for sports materials 1400 2950 Subscription in arrears 4750 ? Subscription in advance 1400 ? Prize fund 12000 ? Rent paid in advance 750 Outstanding rent 750 Outstanding miscellaneous expenses 2280 4020 Miscellaneous expenses paid in advance 750 850 Book value of sports materials sold was Rs. 4000. Depreciation to be provided on furniture 10%. Half of the entrance fees to be capitalised. There are 720 members each paying annual subscription of Rs. 100. Q7(B) Distinguish between receipts payments account and income expenditure account (4 marks) Q8. Write short notes on: (4 marks each) a. Accounting standard 2 b. Contingent liability c. Accounting standard 4 d. Cum interest price and ex interest price.

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