JAIN COACHING CLASSES [B.R.

JAIN]
Ph. No. : 98285-22345, 96725-22345, 0291-2652345

PAPER 1 - ACCOUNTING
MOCK TEST

Time: 3 Hours Marks: 100

INSTRUCTIONS
1) Question 1 is compulsory.
2) Attempt any four questions from the remaining five questions.
3) Wherever necessary, suitable assumptions should be made and disclosed by way of note
forming part of the answer.
4) Working Notes should form part of the answer.

Question 1

(a) State with reasons, whether the following statements are True or False : (6×2 = 12 marks)
(i) Expenses incurred for removal of inventory to a new site is revenue expenditure
(ii) The value of human resources is generally shown as assets in the Balance Sheet
(iii) Depreciation can't be provided in case of loss, in financial year
(iv) Book keeping involves Communication
(v) Agreement of trial balance is not a conclusive proof of accuracy
(vi) Participating preference shareholders enjoy voting rights.

(b) Write a short note on any two of the following (4 marks)

(i) Cost Concept
(ii) Minimum Subscription
(iii) Conversion Cost

(c) Zed enterprises furnishes the following information for the year ended 31st March,2021.

Particulars Amount
Value of stock as on 1st April, 2020 28,00,000
Purchases during the year 1,38,40,000
Manufacturing Expenses during the year 28,00,000
Sales the year 2,08,80,000

The following further information is also provided

(i) At the time of valuing stock in 31st March, 2020 a sum of Rs. 2,40,000 was written off for
a particular item which was originally purchased for Rs. 8,00,000. This item was sold during
the year ended 31st March, 2021 for Rs. 6,40,000.
(ii) Except for the above transaction, the rate of gross profit during the year was 1/3rd on cost.
Ascertain the value of Stock as on 31st March, 2021. (4 marks)

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 JAIN COACHING CLASSES [B.R. JAIN]
Ph. No. : 98285-22345, 96725-22345, 0291-2652345

Question 2

(a) T draws on J a bill of exchange for Rs. 1,80,000 on 1st April, 2022 for 3 months. J accepts the
bill and sends it to T, who gets it discounted from his banker for Rs. 1,72,800. T 'immediately
remits Rs. 57,600 to J. On the due date, T, being unable to remit the amount due, accepts a bill
for Rs. 2,52,000 for three months, which is discounted by J from his banker for Rs. 2,40,660.
J sends Rs. 40,440 to T. Before the maturity of the bill, T becomes bankrupt and his estate
paying fifty paisa in a rupee. Give the journal entries in the books of T (9 marks)

(b) There was an error in the Trail Balance of Mr. Steel on 31st March 2022, and the difference
in Books was carried to a Suspense Account. On going through the books you find that:
i. Rs. 5,400 received from Mr. A was posted to the debit of his account.
ii. Rs. 1,000 being purchases return were posted to the debit of purchases Account.
iii. Discount received Rs. 2,000 was posted to the debit of Discount Account.
iv. Rs. 2,740 paid for repairs to Motor car was debited to Motor Car Account as Rs. 1,740.
v. Rs. 4,000 paid to B was debited to A's Account
Give Journal Entries to rectify the above error and ascertain the amount transferred to
Suspense Account on 31st March, 2022 by showing the Suspense Account, assuming that the
Suspense Account is balanced after the above corrections (7 marks)

(c) What are the subfields of Accounting ? (4 marks)

Question 3

(a) Rajeev, a trader, does not keep proper books of account for his business. From the following
information ascertain his profit or loss for the year ended March 31st, 2017 and also prepare
his Statement of Affairs as on that date. (10 marks)

Particulars 01-Apr-16 (Rs.) 31-Mar-17 (Rs.)

Stock-in-Trade 30,060 32,580
Sundry Creditors 29,000 34,560
Sundry Debtors 20,160 19,080
Cash-in-Hand 450 2,520
Bank-Overdraft 33,280 Nil
Bills Receivable 28,800 9,000
Furniture 2,700 2,700
Scotter 3,420 Nil
Bank Balance Nil 5,220

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 JAIN COACHING CLASSES [B.R. JAIN]
Ph. No. : 98285-22345, 96725-22345, 0291-2652345

Additional information -
Rajeev has withdrawn Rs. 360 p.m. from the business for his personal use. 10% depreciation is
to be charged on furniture. 1,080 was considered as irrecoverable amount from debtors and 5%
provision was created for doubtful debts. Rs. 360 provision is created for Bills Receivable.

(b) Face Ltd. (unlisted company other than AIFI, Banking company, NBFC and HFC) provides
the following information as at 31 March, 2023:

Particulars Rs. Rs.

Shareholder’s fund
(a) Authorized Share Capital
90,000 equity shares of Rs.10 each fully paid up 9,00,000

Issued, Subscribed & Paid up

60,000 equity shares of Rs.10 each fully paid up 6,00,000

(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 Investment) 54,000 3,99,000

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

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 JAIN COACHING CLASSES [B.R. JAIN]
Ph. No. : 98285-22345, 96725-22345, 0291-2652345

At the AGM on 01.04.2023, it was resolved:

(a) To give existing equity shareholders the option to purchase one Rs. 10 share
at Rs. 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)

Question 4

(a) M, N and O were in partnership sharing profits and losses in the ratio of 3:2:1. There was no
provision in the agreement for interest on capitals or drawings.
M died on 31st March, 2021 and on that date, the partners' balances were as under:
Capital Account: M - ₹75,000 (Cr); N - ₹50,000 (Cr); O - ₹25,000 (Cr)
Current Account: M - ₹50,000 (Cr); N - ₹37,500 (Cr); O - ₹12,500 (Dr)
By the partnership agreement, the sum due to M's estate was required to be paid within a period
of 3 years, and minimum installment of ₹ 37,500 each were to be paid, the first such installment
falling due immediately after death and the subsequent installments at half-yearly intervals.
Interest @ 12% p.a. was to be credited half-yearly.
In ascertaining-M's share, Goodwill (not recorded in the books) was to be Valued at ₹1,12,500
and the assets, excluding the Joint Assurance Policy (mentioned below) were valued at ₹75,000
in excess of the book values. No Goodwill account was raised and no alteration was made to
the book values of fixed assets. The Joint Assurance Policy shown in the books at ₹50,000
matured on 01.04.2021, realizing ₹65,000; payment of ₹37,500 each were made to M's
Executors on 01.04.2021, 30.09.2021 and 31.03.2022. N and O continued trading on the same
terms and conditions as previously and the net profit for the year ending 31.03.2022 (before
charging the interest due to M's estate) amounted to ₹ 65,000. During that period, the partners'
drawings were N - ₹18,750 and O - ₹10,000.
On 01.04.2022, the partnership was dissolved and an offer to purchase the business as a going
concern for ₹2,25,000 was accepted on that day. A cheque for that sum was received on
30.06.2022.
The balance due to M's estate, including interest, was paid on 30.06.2022 and on that day, N
and O received the sums due to them.
You are required to write-up the Partners' Capital Accounts and Partners' Current Accounts
from 01.04.2021 to 30.06.2022. Show also the account of executors of M. (15 marks)

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 JAIN COACHING CLASSES [B.R. JAIN]
Ph. No. : 98285-22345, 96725-22345, 0291-2652345

(b) Mr. Shyamal runs a factory, which produces detergents. Following details were available in
respect of his manufacturing activities for the year ended 31-03-2019.

Amt.

Opening work-in-progress (9,000 units) 26,000

Closing Work-in-Progress (14,000 units) 48,000

Opening inventory of Raw Materials 2,60,000

Closing inventory of Raw Materials 3,20,000

Purchases 8,20,000

Hire charges of Machinery @ 0.70 per unit Manufactured

Hire Charges of Factory 2,60,000

Direct wages-contracted @ 0.80 per unit Manufactured

and @ 0.40 per unit of closing W.I.P

Repairs and Maintenance 1,80,000

Units Produced 5,00,000 Units

Required a Manufacturing Account of Mr. Shyamal for the year ended 31.03.2019. (5 marks)

Question 5

(a) From the following information supplied by M.B.S club prepare Receipts and Payments
account and Income & Expenditure. Account for the year ended 31st March 2019.

01.04.2018 31.03.2019
Rs. Rs.
Outstanding Subscription 1,40,000 2,00,000
Advance Subscription 25,000 30,000
Outstanding Salaries 15,000 18,000
Cash in Hand & at Bank 1,10,000 ?
10% Investment 1,40,000 70,000
Furniture 28,000 14,000
Machinery 10,000 20,000
Sport Goods 15,000 25,000

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 JAIN COACHING CLASSES [B.R. JAIN]
Ph. No. : 98285-22345, 96725-22345, 0291-2652345

Subscription for the year amount to ₹3,00,000/-. Salaries paid ₹60,000. Face value of the
Investment was ₹1,75,000, 50% of the Investment was sold at 80% of Face Value at the end
of the year. Interest on Investments was received ₹14,000. Furniture was sold for ₹8000 at
the beginning of the year. Machinery and Sports Goods purchased and put to use at the last
date of the year. Charge depreciation @ 15% p.a. on Machinery and Sports Goods and @
10% р.а. on Furniture.
Following Expenses were made during the year:
Sports Expenses: ₹50,000
Rent: 24,000 out of which ₹2,000 outstanding
Misc. Expenses : ₹5,000 (12 marks)

(b) X Ltd. whose accounting year is the calendar year, purchased machineries on 1st April, 2023
costing Rs. 30,000. It further purchased a machine costing Rs. 20,000 on 1st October, 2023
and another machine costing Rs. 10,000 on 1st July, 2024. On 1st January, 2025, of the
machineries which were purchased on 1st April, 2023, one machine costing Rs. 10,000
become obsolete and was sold for Rs. 3,000. Show how the machinery account would appear
for all the three years in the books of X Ltd. after charging depreciation at 10% p.a. on written
down value method. (8 marks)

Question 6

(a) BP Limited issued a prospectus inviting applications for 120,000 equity shares of Rs. 10
each at a premium of Rs. 2 per share payable as follows:

On Application 3 per share

On Allotment 5 per share (including premium)
On first and Final Call 4 per share
Applications were received for 3,60,000 equity shares. Applications for 80,000 shares were
rejected and the money refunded. Shares allotted to remaining applications as follows:

Category No. No of shares Applied No. of shares Allotted

1 1,60,000 80,000
2 1,20,000 40,000

Excess money received with applications was adjusted towards sums due on Allotment and
the balance amount returned to the applicants. All calls were made duly received except the
final call by a shareholder belonging to Category I who has applied for 680 shares. His
shares were forfeited. The forfeited shares were reissued at 13 per share fully paid-up.
Pass necessary journal entries for the above transactions in the books of BP Ltd. Open call
in arrears account whenever required. (12 Marks)

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 JAIN COACHING CLASSES [B.R. JAIN]
Ph. No. : 98285-22345, 96725-22345, 0291-2652345

(b) Following are the information related to business of Raman Nath who requires you to
reconcile his Cash Book with the Pass Book Balance:

Balance as Per Cash Book (Cr.) 4,000

Unpresented cheques 3,200
Uncredited cheques 2,400

Additional information :
(a) The debit side of the Cash Book (Bank Column) has been undercast by Rs. 500
(b) A cheque of Rs. 200 paid to a creditor has been entered by mistake in the Cash Column.
(c) Bank charges Rs. 180 has not been entered in the Cash Book.
(4 Marks)
Solution
Bank Reconciliation Statement
Particulars Amt
Balance as per Cash Book (CR.) 4000
Less - Unpresented cheques -3,200
Add - Uncredited cheques 2400
Less - Debit side of the Cash Book been undercast -500
Add - Cheque paid to a creditor now been correctly entered in the Bank Column 200
Add - Bank charges 180
Balance as per Pass Book (Overdraft) 3080

(c) Avantika Ltd. purchased machinery worth Rs 9,90,000 from Avneet Ltd. The payment was
made by issue of 10% debentures of Rs.100 each. Pass the necessary journal entries for the
purchase of machinery and issue of debentures when: (i) Debentures are issued at par; (ii)
Debentures are issued at 20 % discount; and (iii) Debentures are issued at 20% premium
(4 Marks)

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