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Mock Test Paper - Series I: April, 2024
Date of Paper: 29th April, 2024
Time of Paper: 2 P.M. to 5 P.M.

FOUNDATION COURSE
PAPER – 1: ACCOUNTING
Question No. 1 is compulsory.
Answer 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.
(Time allowed: 3 Hours) (100 Marks)
1. (a) State with reasons whether the following statements are True or False:
(i) Accounting Standards for non-corporate entities in India are
issued by the Central Government.
(ii) Subsidy received from the government for working capital by a
manufacturing concern is a revenue receipt.
(iii) Reducing balance method of depreciation is followed to have a
uniform charge for depreciation and repairs and maintenance
together.
(iv) Discount at the time of retirement of a bill is a gain for the drawee.
(v) Business of partnership comes to an end on death of a partner.
(vi) Receipts and Payments Account highlights total income and
expenditure. (6 Statements x 2 Marks = 12 Marks)
(b) Discuss the limitations which must be kept in mind while evaluating the
Financial Statements. (4 Marks)
(c) The balance of Machinery Account of a firm on 1st April, 2023 was
` 28,54,000. Out of this, a plant having book value of ` 2,16,000 as on
1st April, 2023 was sold on 1st July, 2023 for ` 82,000. On the same
date a new plant was purchased for ` 4,58,000 and ` 22,000 was spent
on its erection. On 1st November, 2023 a new machine was purchased
for ` 5,60,000. Depreciation is written off @ 15% per annum under the
diminishing balance method. Calculate the depreciation for the year
ended 31st March, 2024. (4 Marks)
(12+4+4= 20 Marks)
2. (a) Mr. Bhatt’s trial balance as on 31st March, 2024 did not agree. The
difference was put to a Suspense Account.

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During the next trading period, the following errors were discovered:
(i) The total of the Purchases Book of one page, ` 5,615 was carried
forward to the next page as ` 6,551.
(ii) A sale of ` 462 was entered in the Sales Book as ` 642 and
posted to the credit of the customer.
(iii) A return to creditor, ` 300 was entered in the Returns Inward
Book; however, the creditor's account was correctly posted.
(iv) Cash received from Geet, ` 895 was posted to debit of Meet.
(v) Goods worth ` 1,400 were dispatched to a customer before the
close of the year but no invoice was made out.
(vi) Goods worth ` 1,600 were sent on sale or return basis to a
customer and entered in the Sales Book at the close of the year,
the customer still had the option to return the goods. The gross
profit margin was 20% on Sale.
(vii) ` 500 due from Mr. Manas was omitted to be taken ·to the trial
balance.
(viii) Sale of goods to Mr. Deep for ` 6,000 was omitted to be recorded.
You are required to give journal entries to rectify the errors in a way so
as to show the current year's profit or loss correctly (10 Marks)
(b) The Bank Pass Book of Account No.7749 of Ms. Tina showed an
overdraft of ` 1,34,300 on 31st March 2024. On going through the Pass
Book, the accountant found the following:
(i) A Cheque of `4,320 credited in the pass book on 28 th March 2024
being dishonoured is debited again in the pass book on
1st April 2024. There was no entry in the cash book about the
dishonour of the cheque until 15 th April 2024.
(ii) Bankers had credited her account with ` 11,200 for interest
collected by them on her behalf, but the same has not been
entered in her cash book.
(iii) Out of ` 82,000 paid in by Ms. Tina in cash and by cheques on
31st March 2024 cheques amounting to ` 30,000 were collected
on 7th April, 2024.
(iv) Out of Cheques amounting to ` 31,200 drawn by her on
27th March, 2024 a cheque for ` 10,000 was encashed on 3rd
April, 2024.
(v) Bankers seems to have given here wrong credit for ` 2,000 paid
in by her in Account No. 8765 and a wrong debit in respect of a
cheque for ` 1,200 against her account No.8765.
(vi) A cheque for ` 4,000 entered in Cash Book but omitted to be
banked on 31st March, 2024.

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(vii) A Bill Receivable for ` 20,800 previously dishonoured (Discount
` 800) with the Bank had been dishounoured but advice was
received on 1st April, 2024.
(viii) A Bill for ` 40,000 was retired /paid by the bank under a rebate of
` 700 but the full amount of the bill was credited in the bank
column of the Cash Book.
(ix) A Cheque for ` 9,600 deposited into bank but omitted to be
recorded in Cash Book and was collected by the bank on
31st March, 2024.
Prepare Bank Reconciliation Statement as on 31 st March, 2024.
(10 Marks)
(10 +10 = 20 Marks)
3. (a) Lucky does not maintain proper books of accounts. However, he
maintains a record of his bank transactions and also is able to give the
following information from which you are required to prepare his final
accounts for the year 2023:
1.1.2023 31.12.2023
` `
Debtors 1,02,500 −
Creditors − 46,000
Stock 50,000 62,500
Bank Balance − 50,000
Fixed Assets 7,500 9,000
Details of his bank transactions were as follows:
`
Received from debtors 3,40,000
Additional capital brought in 5,000
Sale of fixed assets (book value ` 2,500) 1,750
Paid to creditors 2,80,000
Expenses paid 49,250
Personal drawings 25,000
Purchase of fixed assets 5,000
No cash transactions took place during the year. Goods are sold at
cost plus 25%. Cost of goods sold was ` 2,60,000. (10 Marks)
(b) Arun, Varun and Tarun are in partnership, sharing profits and losses
equally.
Tarun died on 30th June 2023. The Balance Sheet of Firm as at
31st March 2023 stood as:

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Liabilities Amount Assets Amount
Creditors 20,000 Land and Building 1,50,000
General Reserve 12,000 Investments 65,000
Capital Accounts: Stock in trade 15,000
Arun 1,00,000 Trade receivables 35,000
Varun 75,000 Less: Provision for
doubtful debt (2,000) 33,000
Tarun 75,000 Cash in hand 7,000
Cash at bank 12,000
2,82,000 2,82,000
In order to arrive at the balance due to Tarun, it was mutually agreed
that:
(i) Land and Building be valued at ` 1,75,000
(ii) Debtors were all good, no provision is required
(iii) Stock is valued at ` 13,500
(iv) Goodwill will be valued at one Year's purchase of the average
profit of the past five years. Tarun's share of goodwill be adjusted
in the account of Arun and Varun.
(v) Tarun's share of profit from 1 st April 2023, to the date of death be
calculated on the basis of average profit of preceding three years.
(vi) The profit of the preceding five years ended 1 st March were:
2023 2022 2021 2020 2019
25,000 20,000 22,500 35,000 28,750
You are required to prepare:
(1) Revaluation account
(2) Capital accounts of the partners and
(3) Balance sheet of the Firm as at 1 st July, 2023. (10 Marks)
(10 + 10 = 20 Marks)
4 (a) Amar, Akbar and Antony are in partnership. The following is their
Balance Sheet as at March 31, 2024 on which date they dissolved their
partnership. They shared profit in the ratio of 5:3:2.
Liabilities ` Assets `
Creditors 80,000 Plant and machinery 60,000
Loan A/c – Amar 20,000 Premises 80,000
Capital A/cs - Amar 1,00,000 Stock 60,000
Akbar 30,000 Debtors 1,20,000
Antony 90,000
3,20,000 3,20,000

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It was agreed to repay the amounts due to the partners as and when
the assets were realised, viz.
April 15, 2024 ` 60,000
May 1, 2024 ` 1,46,000
May 31, 2024 ` 94,000
Prepare a statement showing how the distribution should be made
under maximum loss method.
(10 Marks)
(b) The following information of M/s. Zara Club are related for the year
ended 31st March, 2024:
(1)
Balances As on As on
01-04-2023 31-3-2024
(`) (`)
Stock of Sports Material 6,75,000 10,12,500
Amount due for Sports Material 6,07,500 8,77,500
Subscription due 1,01,250 1,48,500
Subscription received in advance 81,000 47,250
(2) Subscription received during the year ` 33,75,000
(3) Payments for Sports Material during the year ` 20,25,000
You are required to:
(A) Ascertain the amount of Subscription and Sports Material that will
appear in Income & Expenditure Account for the year ended
31.03.2024 and
(B) Also show how these items would appear in the Balance Sheet as
on 31.03.2024. (10 Marks)
(10 + 10 = 20 Marks)
5. (a) From the following information, draw up a Trial Balance in the books of
Shri Hari Om as on 31st March,2024:
Particulars Amount Particulars Amount
(`) (`)
Capital 4,20,000 Purchases 1,08,000
Discount Allowed 3,600 Carriage Inward 26,100
Carriage Outwards 6,900 Sales 1,80,000
Return Inward 900 Return Outwards 2100
Rent and Taxes 3,600 Plant and Machinery 2,42,100
Stock on 1st April Sundry Debtors
46,500 60,600
2023
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Sundry Creditors 36,000 Investments 10,800
Commission Received 5,400 Cash in Hand 300
Cash at bank 30,300 Motor Cycle 1,03,800
Stock on 31st March,
61,500
2024
(5 Marks)
(b) Attempt any ONE out of the two sub parts i.e. either (i) or (ii).
(i) Following information is provided for M/s. VS Wires for the year
ended 31st March, 2024:
`
Opening Inventory 6,00,000
Purchases 40,32,000
Carriage Inwards 1,80,000
Wages 3,00,000
Sales 66,00,000
Returns inward 6,00,000
Returns outward 4,32,000
Closing Inventory 12,00,000
You are required to pass necessary closing entries in the journal
proper of M/s. VS Wires. (5 Marks)
OR
(ii) Mr. Mandeep runs a factory, which produces detergents.
Following details were available in respect of his manufacturing
activities for the year ended 31-03-2024.
Opening work-in-progress (27,000 units) 78,000
Closing work-in-progress (42,000 units) 1,44,000
Opening inventory of Raw Materials 7,80,000
Closing inventory of Raw Materials 9,60,000
Purchases 24,60,000
Hire charges of Machinery @ ` 0.70 per unit
manufactured
Hire charges of factory 7,80,000
Direct wages-contracted @ ` 0.80 per unit
manufactured
and @ ` 0.40 per unit of closing W.I.P.
Repairs and maintenance 5,40,000
Units produced - 15,00,000 units

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You are required to prepare a Manufacturing Account of Mr. Mandeep
for the year ended 31-03-2024. (5 Marks)
(c) Face Ltd. (unlisted company other than AIFI, Banking company, NBFC
and HFC) provides thefollowing information as at 31 March, 2023:
Particulars ` `
Shareholder’s fund
(a) Authorized Share Capital
90,000 equity shares of `10 each 9,00,000
fully paid up
Issued, Subscribed & Paid up
60,000 equity shares of ` 10 each 6,00,000
fully paid up
(b) Reserve and Surplus
Profit & Loss Account 3,24,000
Debenture redemption reserve 36,000 3,60,000
Non-current liabilities
(a) Long term borrowings
12% Debentures 3,60,000
Current Liabilities
(a) Trade Payable 3,45,000
Total 16,65,000
Non-current Assets
(a) Property, Plant and Equipment 3,45,000
(b) Non-current Investments (DRR 54,000 3,99,000
Investment)
Current Assets
(a) Inventories 4,05,000
(b) Trade Receivables 2,25,000
(c) Cash in Hand 90,000
(d) Cash at Bank 5,46,000 12,66,000
Total 16,65,000
At the AGM on 01.04.2023, it was resolved:
(a) To give existing equity shareholders the option to purchase one `
10 share at ` 15 for every four shares (held prior to the bonus
distribution). This option was taken up by all the shareholders.
(b) To issue one bonus share for every five shares held.
(c) To repay the debentures at a premium of 3%.
Give the necessary journal entries for these transactions. (10 Marks)
(5 + 5 + 10 = 20 Marks)

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6. (a) Avent Limited is a company with an authorised share capital of
` 1,00,00,000 in equity shares of ` 10 each, of which 6,00,000 shares
had been issued and fully paid up on 31 st March, 2023. The company
proposes to make a further issue of 1,35,000 of these ` 10 shares at a
price of ` 14 each, the arrangement of payment being :
(i) ` 2 per share payable on application, to be received by 31 st May,
2023;
(ii) Allotment to be made on 10 th June, 2023 and a further ` 5 per
share (including the premium to be payable);
(iii) The final call for the balance to be made, and the money received
by 31st December, 2023.
Applications were received for 5,60,000 shares and dealt with as
follows:
(1) Applicants for 10,000 shares received allotment in full;
(2) Applicants for 50,000 shares received allotment of 1 share for
every 2 applied for; no money was returned to these applicants,
the surplus on application being used to reduce the amount due
on allotment;
(3) Applicants for 5,00,000 shares 'received an allotment of 1 share
for every 5 shares applied for; the money due on allotment was
retained by the company, the excess being returned to the
applicants; and
(4) The money due on final call was received on the due date.
You are required to record these transactions (including bank
transactions) in the Journal Book of Avent Limited. (15 Marks)
(b) Discuss the factors taken into consideration for calculation of
depreciation. (5 Marks)
Or
Write short notes on Accommodation bill and Renewal of bill. (5 Marks)
(15 + 5 = 20 Marks)

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