MTP_Intermediate_Syllabus 2016_Jun2023_Set1

Paper 5- Financial Accounting

Dos, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1
 MTP_Intermediate_Syllabus 2016_Jun2023_Set1

Paper 5- Financial Accounting

Full Marks : 100 Time allowed: 3 hours

Section - A

1. Answer the following questions

(a) Multiple choice questions: [10x1=10]

(i) Management Accounting is primarily based on the data available from

___________ ____________.
(a) Cost Accounting
(b) Financial Accounting
(c) Book Keeping
(d) Ledgers

(ii) ____________ __________ is the additional commission payable to the consignee for
taking over additional responsibility of collecting money from customers.
(a) Del Credre Commission
(b) Over-riding Commission
(c) Ordinary Commission
(d) None of the above

(iii) The provision which is created on Sundry Debtors for allowing discount on receipt of
Cash in that accounting period is called_____________ _____________.
(a) Provision for Discount on Debtors
(b) Provisions for Bad Debt
(c) Provision for Discount on Creditors
(d) Provision for Doubtful Debts

(iv) Drawings is shown in the Balance Sheet as ___________ ______________.

(a) As an addition to the Capital Account
(b) A deduction from the Capital Account
(c) Part of Current Liabilities
(d) Part of Current Assets

(v) Sales : ₹45,000

Opening Stock : ₹18,000
Purchases : ₹30,000
Cost of Goods Sold : ₹27,000
Trading Expenses : ₹12,000
Net Profit is _______________________.

(a) ₹6,000
(b) ₹18,000
(c) ₹12,000
(d) None of the above

(vi) The retiring partner becomes entitled to get back which of the following?
(a) Balance of his capital and current account at the time of retirement.
(b) Share of goodwill, undistributed profit or loss, reserves and profit or loss on
revaluation of assets and liabilities
(c) Salary, commission, interest on capital, if any and all other dues till the date of
retirement
(d) All of the above

Dos, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 2
 MTP_Intermediate_Syllabus 2016_Jun2023_Set1

(vii) _____________ ____________ refers to the fixed yearly or half-yearly rent payable by
the lessee to the landlord in addition to the minimum rent.
(a) Surface Rent
(b) Dead Ren
(c) Minimum Rent
(d) Excess working

(viii) Which of the following is not a step under Partial Repossession?

(a) Calculate Book value of Goods Repossessed
(b) Calculate Agreed Value of Goods Repossessed
(c) Loss on default = Book Value + Agreed Value
(d) None of the above

(ix) Which one is the correct Fundamental accounting assumptions as per AS 1?

(a) Going Concern, Matching and Consistency
(b) Money Measurement, Going Concern and Prudence
(c) Accounting Period, Going Concern and Entity Concept
(d) Going Concern, Consistency and Accruals

(x) Which of the following is not an advantage of Computerised Accounting?

(a) Easy to Install
(b) Relatively Inexpensive
(c) Simple Backup Procedure
(d) Lack of Security

(b) Match the following: [5x1=5]

Column ‘A’ Column ‘B’

1. A software which is developed on the A Live Stock
basis of specific requirements of the
organisation
2. Construction Contracts B Capital Receipt
3. Real Account C Customised Accounting
4. Amount received towards Endowment D Expenditure
Fund
5. Debit balance in Nominal Account E AS 7

(c) Fill in the blanks: [5x1=5]

(i) Depreciation Account is ____________ Account.

(ii) Joint Ventures do not follow ____________ Basis of Accounting.
(iii) Outstanding subscription is shown in the ___________ side of Balance Sheet.
(iv) Profit or loss on consignment is retained/paid by the _______________.
(v) Loss on sale of old car is shown on the ___________ side of the Profit and Loss
Account.

(d) State whether the following statements are true or false: [5x1=5]

(i) Royalty agreements contain a provision for carrying forward of short workings in
the subsequent years, which is adjusted against the surplus royalty. This process of
adjustment is called excess workings.
(ii) Bearer plant is a plant that is expected to bear produce for more than a period of
twelve months.

Dos, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 3
 MTP_Intermediate_Syllabus 2016_Jun2023_Set1

(iii) Garner vs. Murray principle does not apply if there are only two partners.
(iv) Branches in respect of which the whole of the accounting records are kept at
Head Office only, are known as Dependent Branch.
(v) The profit or loss on joint venture is shared between the co-venturers in an equal
ratio.

Section - B

Answer any five from the following. Each question carries 15 marks (5x15=75)

2. (a) The Trial Balance of a concern has agreed but the following mistakes were discovered
after the preparation of final Accounts.
(i) No adjustment entry was passed for an amount of ₹5,000 relating to outstanding
rent.
(ii) Purchase book was overcast by ₹2,000.
(iii) ₹3,500 depreciation of Machinery has been omitted to be recorded in the book.
(iv) ₹600 paid for purchase of stationary has been debited to Purchase A/c.
(v) ₹3,000 received in respect of Book Debt had been credited to Sales A/c.

Show the effect of the above errors in Profit and Loss Account & Balance Sheet. [5]

(b) For mutual benefit of Mr. A and Mr. B on 1 st April, 2021. Mr. A drew a four months’ bill on
Mr. B for ₹6,000. Mr. B returned the bill after acceptance on the same date. Mr. A
discounted the bill from his banker @ 5% per annum and remit 50% of the proceed to
him. On due date Mr. A failed to send the amount due and therefore Mr. B draws a bill
for ₹10,500, which is duly accepted by Mr. A. Mr. B discounted the bill for ₹9,900 and
sent ₹1,950 to Mr. A. Before the bill is due for payment Mr. A became insolvent. Later
30% was received from his estate. Pass necessary journal entries in the books of A. [10]

3. (a) ABB School maintains separate building fund. As on 31.3.2021, balance of building fund was
₹10,00,000 and it was represented by 15% Fixed Deposit of ₹6,00,000 and current account
balance of ₹4,00,000. During the year 2021-2022, the school collected as donations towards
the building fund ₹5,60,000 and transferred 40% of development fees collected ₹22,56,500
to Building Fund. Capital work in progress as on 31st March, 2021 was ₹8,25,000 for which
contractors' bill upto 75% was paid on 30.09.2021. The extension of building was finished on
31.12.2021 costing ₹7,25,000 for which contractors' bill was fully met. It was decided to
transfer the cost of completed building (₹15,50,000) to the corresponding asset account.

Pass journal entries to incorporate the above transactions in the books of ABB School for the
year 2021-2022 and show the trial balance of Building Fund Ledger.

(b) What is the accounting treatment of a ‘Specific Fund’ maintained by a club? [(8+4)+3=15]

4. P and Q are partners sharing profits in the ratio of 3:2. They admit R as a new partner from 1st
April. They decide to share future profits in the ratio of 4:3:3. The Balance Sheet as at 31st
March, 2022 is given below:

Liabilities ₹ Assets ₹
P's Capital 17,600 Goodwill 1,000
Q's Capital 25,400 Land & Building 6,000

Dos, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 4
 MTP_Intermediate_Syllabus 2016_Jun2023_Set1

Workmen Compensation 2,000 Investments [Market Value ₹4,500] 5,000

Fund
Investment Fluctuation Fund 1,000 Debtors 10,000
Employees' Provident Fund 1,000 Stock 30,000
Provision for Doubtful Debts 1,000 Bank Balance 25,000
R's Loan 30,000 Advertisement Suspense A/c 1,000
78,000 78,000

Terms of R's admission are:

i. R contributes proportionate capital and 60% of his share of goodwill in cash.
ii. Goodwill will be valued at 2 years' purchase of super profit of last three completed years
The profits were - 2019-2020 ₹48,000, 2020-2021 ₹93,000, 2021-2022 ₹1,38,000. The normal
profits are ₹53,000. No Goodwill will appear in the books of new firm.
iii. Land & Building was found undervalued by ₹10,000.
iv. Stock was overvalued by ₹7,000.
v. Provision for doubtful debts is to be made equal to 5% of the debtors.
vi. Claim on account of workmen compensation is ₹1,000.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet. [15]

5. (a) The following information provided by the Shobha Departmental Store for the year ended
31st March, 2023:
Department Purchase(units) Sales Closing Stock(units)
X 2500 2550 units @ ₹ 160 per unit 250
Y 5000 4800 units @ ₹180 per unit 400
Z 6000 6240 units @ ₹ 200 per unit 140

The total value of purchases is ₹15 Lakh. It is observed that the rate of gross profit is the same in
each department.
You are required to prepare the Departmental Trading Account for the year ended 31st March,
2023.
[9]
(b) Following information is available from the books of S & Co. for the year ended 31st March,
2023:
(i) Total Sales amounted to ₹ 560 Lakh including the sale of old Machinery for ₹ 8 Lakh (Book
Value ₹ 15 Lakh). The total Cash Sales were 80% less than the total Credit Sales.
(ii) Cash collection from debtors amounted to 75% of the aggregate of the opening debtors
and the Credit Sales for the period. Debtors were allowed Cash discounts for ₹ 15.60
Lakh.
(iii) Bills Receivable drawn during the year totaled ₹45 Lakh of which bills amounting to ₹ 28
Lakh were endorsed in favour of Credito₹ Out of these endorsed B/R, some bills for ₹ 4.60
Lakh were dishonoured for non-payment as the parties became insolvent, their estate
realizing nothing.
(iv) Cheques received from Sundry Customers for ₹41 Lakh were dishonoured; a sum of ₹ 5
Lakh is irrecoverable.
(v) Bad Debts written off in the earlier years was recovered of ₹ 7.50 Lakh.
(vi) Transfers from Creditors Ledger to Debtors Ledger were of ₹ 38 Lakh.
(vii) Sundry Debtors, as on 1st April, 2022, stood at ₹ 128 Lakh.

You are required to show the General Ledger Adjustments Accounts in the Debtors Ledger.
[6]

Dos, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 5
 MTP_Intermediate_Syllabus 2016_Jun2023_Set1

6. (a) On 31st January, 2023 the premises of Pali Textiles Limited were destroyed by fire. The
records of the company revealed the following particulars:
Particulars ₹
Stock on 01.04.2021 11,35,000
Stock on 31.03.2022 12,64,100
Purchase Less returns, during the year ended 31st March, 2022 65,45,000
Sales Less returns, during the year ended 31st March, 2022 91,00,000
Purchase Less return, from 01.04.2022 to 31.01.2023 56,64,000
Sales Less returns, from 01.04.2022 to 31.01.2023 78,24,000

In valuing stock on 31st March, 2022 ₹ 45,900 had been written off out of certain stock which
was of a poor selling line, having cost ₹1,37,700. A portion of these goods were sold in October,
2022 at a loss ₹11,080 on the original cost of ₹ 55,080. The remaining stock of this goods on the
date of fire was to be valued at 80% of its original cost. Subject to the above exception, gross
profit had remained at a uniform rate throughout. The stock salvaged from fire was ₹1,23,800.
You are required to compute the amount of claim to be lodged for loss of stock. The stock was
insured for ₹12,50,000. [7]

(b) The following particulars relate to hire purchase transactions:

(i) X purchased three cars from Y on hire purchase basis, the cash price of each car being
₹ 2,00,000.
(ii) The hire purchaser charged depreciation @ 20% on diminishing balance method.
(iii) Two cars were seized by on hire vendor when second instalment was not paid at the end
of the second year. The hire vendor valued the two cars at cash price less 30%
depreciation charged under it diminishing balance method.
(iv) The hire vendor spent ₹10,000 on repairs of the cars and then sold them for a total amount
of ₹ 1,70,000.
You are required to compute:
(I) Agreed value of two cars taken back by the hire vendor.
(II) Book value of car left with the hire purchaser.
(III) Profit or loss to hire purchaser on two cars taken back by their hire vendor.
(IV)Profit or loss of cars repossessed, when sold by the hire vendor. [8]

7. (a) (i) List the disclosures required to be made as per AS-10. [7]
(ii) What will be the value of inventory as per AS 2:
On 31.3.2022, the closing stock of GR Ltd. includes 10,000 units costing @ ₹10 each, and
the current market price of which as on that date was @ ₹ 9 per unit i.e. ₹ 90,000. [2]

(b) Write down the advantages of Pre-Packaged Accounting Software. [6]

8. Write short notes on any three of the following: [3x5=15]

(a) Basic features of a Joint Venture business;

(b) Difference between Double Entry System and Single Entry System;
(c) Minimum Rent / Dead Rent;
(d) Salient features of Computerized Accounting System.

Dos, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 6