CA - FOUNDATION

PRINCIPLES AND PRACTICE

ACCOUNTING
SERIES – 4
JANUARY - 2025
VOL – 33, 34, 35 & 36
Date : 23.12.2024

Vidya Sagar Institute

K-50, Bhawna Tower, Income Tax Colony, Tonk Road,
Near Durga Pura, Bus Stand, Jaipur - 302018
Mobile :- 93514-68666 Ph. :- 7821821250, 7821821251, 7821821252,
7821821253, 7821821254. web : www.vsijaipur.com
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 VIDYA SAGAR
CAREER INSTITUTE LIMITED

CA FOUNDATION
PRINCIPLES AND PRACTICE OF ACCOUNTING
SERIRS - 4
Time : 3 Hours M. Marks: 100
Vol : 33, 34, 35 & 36 Date : 23.12.2024
Course : 100% (Jan - 2025)
==========================================================================
Questions 1 is compulsory.
Attempt any 4 from the remaining
==========================================================================

1(a) State with reasons whether the following statements are True or False: 2x6 =
12
(i) Reducing balance method of depreciation is followed to have a uniform charge for
depreciation and repairs and maintenance together.

(ii) Goodwill is intangible asset therefore it cannot be valued.

(iii) Reserve Fund and General Reserve are same.

(iv) M/s. XYZ & Co. runs a cafe. They renovated some of the old cabins. Because of this
renovation some space was made free and number of cabins was increased from
15 to 18. The total expenditure incurred was ` 30,000 and was treated as a
revenue expenditure.

(v) Agreement of Trial Balance is conclusive proof of Accuracy.

(vi) Book keeping and Accounting are same

(b) Differentiate between provision and contingent liability. 4

(c) M/s Puneet & Co. find the following errors in their books of account before 4
preparation of Trial Balance. You are required to pass necessary journal entries:
(i) A purchase of ` 5,600 from M/s Ajeet & Co. was recorded in the accounts of
M/s Amit & Co. as ` 6,500. Day Book entry has also been passed incorrectly.
(ii) A sale of ` 9,800 to M/s Bantu Bros. was recorded in M/s Bindu & Co.’s account
as ` 8,900. Day Book entry has also been incorrectly passed.
(iii) Discount allowed ` 560 (as per Cash Book) has been posted to Commission
Account. But the Cash Book total should be ` 650, because discount allowed of
` 90 to M/s Sapna Bros. has been omitted.
(iv) A cheque of ` 9,700 drawn by M/s Bantu Bros. has been dishonoured, but
wrongly debited to M/s Bhakt & Co.
Should the Trial Balance tally without rectification of errors?

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2(a) Mr. Prakash furnishes following information for his readymade garments business: 12
(i) Receipts and Payments during 2023-24:

Receipts Amount Payments Amount

` `
Bank Balance as on 16,250 Payment to Sundry 3,43,000
1-4-2023 creditors

Received from Sundry 4,81,000 Salaries 75,000

debtors
Cash sales 1,70,800 General expenses 22,500

Capital brought in the 50,000 Rent and taxes 11,800

business during the
year

Interest on Investment 9,750 Drawings 96,000

received
Cash purchases 1,22,750

Balance at bank on 36,600

31-03-2024
Cash in hand on 20,150
31-03-2024

7,27,800 7,27,800

(ii) Particulars of other Assets and Liabilities are as follows:

1st April, 2023 31st March, 2024

(`) (`)
Machinery 85,000 85,000
Furniture 24,500 24,500
Trade Debtors 1,55,000 ?
Trade Creditors 60,200 ?
Inventory 38,600 55,700
12% Investment 85,000 85,000
Outstanding Salaries 12,000 14,000

(iii) Additional information:

(1) 20% of total sales and 20% of total purchases are in cash.
(2) Of the debtors, a sum of ` 7,200 should be written off as Bad debt and further a
provision for doubtful debts is to be provided @2%.
(3) Provide depreciation @10% p.a. on machinery and furniture
You are required to prepare Trading and Profit & Loss Account for the year ended
31st March, 2024, and Balance Sheet as on that date.

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(b) Mr. Y accepted a bill for ` 50,000 drawn on him by Mr. X on 1st August, 2021 for 8
3 months. This was for the amount which Y owed to X. On the same date Mr. X got the
bill discounted at his bank for ` 49,000.
On the due date, Y approached X for renewal of the bill. Mr. X agreed on condition that
`10,000 be paid immediately along with interest on the remaining amount at 12% p.a.
for 3 months and that for the remaining balance Y should accept a new bill for
3 months. These arrangements were carried through. On 31st December, 2021, Y
became insolvent and his estate paid 40%.
Prepare Journal Entries in the books of Mr. X

3(a) The Income and Expenditure Account of the Women Club for the Year ended on 12
December 31, 2021 is as follows.

Expenditure ` Income `
To Salaries 47,500 By Subscription 75,000
To General Expenses 5,000 By Entrance Fees 2,500
To Audit Fee 2,500 By Contribution for Annual 10,000
Dinner
To Secretary’s honorarium 10,000 By Annual Sports Meet 7,500
Receipts
To Stationary and Printing 4,500
To Annual Dinner Expenses 15,000
To Interest and bank 1,500
charges
To Depreciation 3,000
To Surplus 6,000
95,000 95,000
This account had been prepared after the following adjustments:

`
Subscription outstanding at the end of 2020 6,000
Subscription received in advance on 31st December,2020 4,500
Subscription received in advance on 31st December, 2021 2,700
Subscription outstanding on 31st December,2021 7,500

Salaries outstanding at the beginning and end of the year 2021 were respectively ` 4,000
and ` 4,500. General Expenses include insurance prepaid to the extent of ` 600. Audit fee
for the year 2021 is as yet unpaid. During the year 2021 audit fee for the year 2020 was
paid amounting to ` 2,000
The Club owned a freehold lease of ground valued at ` 1,00,000. The club had sports
equipment on 1st January, 2021 valued at ` 26,000. At the end of the year 2021, after
depreciation, this equipment amounted to `27,000. In the year 2020, the Club had raised
a bank loan of `20,000.This was outstanding throughout the year 2021.On 31st
December, 2021 in hand was ` 16,000.
You are required to:
Prepare the Receipts and Payments Account for the year ended on December 31, 2021
and the Balance Sheet as on that date.

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(b) On 30th September, 2017, the bank account of Neel, according to the bank column of the 8
Cash- Book, was overdrawn to the extent of Rs. 8,124. On the same date the bank
statement showed a debit balance of Rs. 41,516 in favour of Neel. An examination of the
Cash Book and Bank Statement reveals the following:
1. A cheque for Rs. 26,28,000 deposited on 29th September, 2017 was credited by
the bank only on 3rd October, 2017
2. A payment by cheque for Rs. 32,000 has been entered twice in the Cash Book.
3. On 29th September, 2017, the bank credited an amount of Rs. 2,34,800 received
from a customer of Neel, but the advice was not received by Neel until 1st
October, 2017.
4. Bank charges amounting to Rs. 1,160 had not been entered in the Cash Book.
5. On 6th September, 2017, the bank credited Rs. 40,000 to Neel in error.
6. A bill of exchange for Rs. 2,80,000 was discounted by Neel with his bank. This
bill was dishonoured on 28th September, 2017 but no entry had been made in the
books of Neel.
7. Cheques issued upto 30th September, 2017 but not presented for payment upto
that date totalled Rs. 26,52,000.

You are required:

(a) to show the appropriate rectifications required in the Cash Book of Neel, to arrive
at the correct balance on 30th September, 2017 and
(b) to prepare a bank reconciliation statement as on that date.

4(a) Following are the Manufacturing A/c, Creditors A/c and Raw Material A/c provided 12
by M/s. Praveen related to financial year 2023-24. There are certain figures missing
in these accounts.
Raw Material A/c
Particulars Amount Particulars Amount
(`) (`)
To Opening Stock A/c 1,27,000 By Raw Materials
Consumed
-
To Creditors A/c - By Closing Stock
Creditors A/c
Particulars Amount Particulars Amount
(`) (`)
To Bank A/c 23,50,000 By Balance b/d 15,70,000
To Balance c/d 6,60,000 -
Manufacturing A/c
Particulars Amount Particulars Amount
(`) (`)
To Raw Material A/c - By Trading A/c 17,44,000
To Wages 3,65,000
To Depreciation 2,15,000
to Direct Expenses 2,49,000

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 Additional Information:
(i) Purchase of machinery worth ` 12,00,000 on 1st April; 2023 has been
omitted, Machinery is chargeable at a depreciation rate of 15%.
(ii) Wages include the following:
Paid to factory workers - ` 3,15,000
Paid to labour at office - ` 50,000
(iii) Direct expenses included the following :
Electricity charges - ` 80,000
of which 25% pertained to office
Fuel charges - ` 25,000
Freight inwards - ` 32,000
Delivery charges to customers - ` 22,000
You are required to prepare revised Manufacturing A/c and Raw Material A/c.

(b) Prepare a Petty Cash Book on the Imprest System from the following: 8
2021 `
June 1 Received ` 1,00,000 for petty cash
“ 2 Paid taxi fare 2,000
“ 3 Paid cartage 10,000
“ 4 Paid for courier 2,000
“ 5 Paid wages 2,400
“ 5 Paid for stationery 1,600
“ 6 Paid for the repairs to machinery 6,000
“ 6 Auto fare 400
“ 7 cartage 1,600
“ 7 Paid for courier 2,800
“ 8 Cartage 12,000
“ 9 Stationery 8,000
“ 10 Sundry expenses 20,000
.
5 (a) Prepare a bank reconciliation statement from the following particulars as on 31st 5
March, 2018.
Particulars (`)
Debit balance as per bank column of the cash book 18,60,000
Cheque issued to creditors but not yet presented to the Bank 3,60,000
for payment
Dividend received by the bank but not entered in the Cash book 2,50,000
Interest allowed by the Bank 6,250
Cheques deposited into bank for collection but not collected by 7,70,000
bank up to this date
Bank charges not entered in Cash book 1,000
A cheque deposited into bank was dishonoured, but no 1,60,000
intimation received
Bank paid house tax on our behalf, but no intimation received 1,75,000
form bank in this connection
.

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(b) M/s. Green Channel purchased a second-hand machine on 1st January, 2015 for 5
` 1,60,000. Overhauling and erection charges amounted to ` 40,000. Another machine
was purchased for ` 80,000 on 1st July, 2015.
On 1st July, 2017, the machine installed on 1st January, 2015 was sold for ` 1,00,000.
Another machine amounted to ` 30,000 was purchased and was installed on 30th
September, 2017.
Under the existing practice the company provides depreciation @ 10% p.a. on original
cost. However, from the year 2018 it decided to adopt WDV method and to charge
depreciation @ 15% p.a. You are required to prepare Machinery account for the years
2015 to 2018.

OR
(b) Ved, Jain and Agrawal are in partnership sharing profit and losses at the ratio of 2:5:3. 5
The Balance Sheet of the partnership as on 31.12.2022 was as follows:
Balance Sheet of M/s Ved, Jain & Agrawal

Liabilities ` Assets `
Capital A/cs Sundry fixed assets 15,00,000
Ved 2,55,000 Inventory 3,00,000
Jain 9,45,000 Trade receivables 1,50,000
Agrawal 6,75,000 Bank 15,000
Trade payables 90,000
19,65,000 19,65,000
The partnership earned profit ` 6,00,000 in 2022 and the partners withdrew
` 4,50,000 during the year. Normal rate of return 30%.
You are required to calculate the value of goodwill on the basis of 5 years' purchase of
super profit. For this purpose, calculate super profit using average capital employed.

(c) The Balance Sheet of XYZ Ltd. as at 31st March, 2021 inter alia includes the 10
following

`
50,000, 8% Preference Shares of `100 each, `70 35,00,000
paid up
1,00,000 Equity Shares of `100 each fully paid 1,00,00,000
up
Securities Premium 5,00,000
Capital Redemption Reserve 20,00,000
General Reserve 50,00,000

Bank 15,00,000
Under the terms of their issue, the preference shares are redeemable on 31st March,
2022 at 5% premium. In order to finance the redemption, the company makes a rights
issue of 50,000 equity shares of ` 100 each at ` 110 per share, ` 20 being payable on
application, ` 35 (including premium) on allotment and the balance on 1st January,
2023. The issue was fully subscribed and allotment made on 1st March, 2022. The
money due on allotment were duly received by 31st March, 2022. The preference
shares were redeemed after fulfilling the necessary conditions of Section 55 of the
Companies Act, 2013.
You are asked to pass the necessary Journal Entries. (Ignore date column)

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6(a) A, B and C are partners in a firm sharing profits and losses as 8:5:3. 15
Their balance sheet as at 31st December, 2018 was as follows:

Rs. Rs.
Sundry creditors 1,50,000 Cash 40,000
General reserve 80,000 Bills receivable 50,000
Partners’ loan accounts: Sundry debtors 60,000
A 40,000 Stock 1,20,000
B 30,000 Fixed assets 2,80,000
Partners’ capital accounts:
A 1,00,000
B 80,000
C 70,000
5,50,000 5,50,000

From 1st January, 2019 they agreed to alter their profit-sharing ratio as 5:6:5.
It is also decided that:
(a) the fixed assets should be valued at Rs. 3,31,000;
(b) a provision of 5% on sundry debtors to be made for doubtful debts;
(c) the goodwill of the firm at this date be valued at three years’ purchase of the
average net profits of the last five years before charging insurance premium;
and
(d) the stock be reduced to Rs. 1,12,000.
There is a joint life insurance policy for Rs. 2,00,000 for which an annual premium of
Rs. 10,000 is paid, the premium being charged to profit and loss account.
The surrender value of the policy on 31st December, 2018 was Rs. 78,000.
The net profits of the firm for the last five years were Rs. 14,000, Rs. 17,000,
Rs. 20,000, Rs. 22,000 and Rs. 27,000.
Goodwill and the surrender value of the joint life policy was not to appear in the
books.
Draft journal entries necessary to adjust the capital accounts of the partners and
prepare the revised balance sheet.

(b) What are the advantages of Subsidiary Books? 5

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