A_MQP_Paper6_Set2_Dec24 (1)

INTERMEDIATE EXAMINATION SET-2
MODEL ANSWERS TERM – DEC 2024

PAPER – 6 SYLLABUS 2022
FINANCIAL ACCOUNTING
Time Allowed: 3 Hours Full Marks: 100
The figures in the margin on the right side indicate full marks.
SECTION – A (Compulsory)
I. Choose the correct option: [15 x 2 = 30]
(i) Which of the following is/ are true regarding Trial Balance.
a. It is prepared for a particular period.
b. A trial balance is just a statement.
c. The agreement of a trial balance is a conclusive proof of absolute accuracy of the
books of accounts.
d. All of the above
(ii) Purchased goods from Mr. R for ₹ 3,600 but wrongly recorded as ₹6,300 to the debit of
Mr. R. In the rectification entry, Mr. R’s account will be credited with —
a. ₹9,900
b. ₹2,700
c. ₹2,600
d. ₹6,300
(iii) If any stock is taken by a co-venturer, it will be treated as.

a. an income of the joint venture.
b. an expense of the joint venture.
c. to be ignored from joint venture.
d. it will be treated in the personal books of the co-venturer.
(iv) X draws a bill on Y for ₹1,80,000 for mutual accommodation in the ratio of 2:1. X got it
discounted for₹1,69,200 and remitted 1/3rd of the proceeds to Y. How much money should
be remitted by X to Y at the time of maturity so as to enable Y to honour the bill?
a. ₹ 1,20,000
b. ₹ 1,15,200
c. ₹1,16,800
d. ₹ 1,20,400
(v) Due to retrospective effect on revision of salary of employees, the arrears of salary
relating to past years, payable in current year is.
a. Prior - period item
b. Extra - ordinary item
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Directorate of Studies, The Institute of Cost Accountants of India
c. Ordinary item requiring separate disclosure
d. Contingent item
(vi) Subscription of ₹6,25,000 had been shown in the Income and Expenditure Account
prepared for the year ending 31st March, 2023. Additional information is as below:
Particulars On 31st March, 2022 (₹) On 31st March, 2023 (₹)
Subscription Outstanding 55,000 72,000
Subscription Received in Advance 31,000 37,000
The amount of subscription received during the year 2022-23would be:

a. ₹6,36,000
b. ₹6,02,000
c. ₹6,14,000
d. ₹6,48,000
(vii) Sacrificing ratio is:

a. New Profit sharing ratio - old profit sharing ratio.
b. Equal to old profit sharing ratio
c. Equal
d. Old profit sharing ratio - new profit sharing ratio.
(viii) B and D are partners, sharing profit or loss in the ratio 3 : 2. They admit K for 1/6th share
of profits in the firms of which she takes 2/3rd from B and 1/3rd from D. What will be the
new profit sharing ratio?
a. 44: 31: 15
b. 31: 44: 15
c. 32: 41: 14
d. 15: 31: 44
(ix) Excess of hire purchase price over cash price is known as

a. Installment
b. Cash down payment
c. Interest
d. Capital value of asset
(x) Arti Ltd. purchased a machine on hire purchase system for a cash price ₹5,00,000 to be
paid as ₹78,700 cash down and the balance by three equal annual instalments of ₹2,00,000
each. If interest is charged @ 20% per annum, then amount of interest payable in second
instalment will be.
a. ₹1,00,000
b. ₹61,112
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c. ₹33,328
d. ₹84,260
(xi) Which one is the correct one? Fundamental accounting assumptions as per AS 1 are:
a. Going Concern, Matching and Consistency;
b. Money Measurement, Going Concern and Prudence;
c. Accounting Period, Going Concern and Entity Concept; and
d. Going Concern, Consistency and Accruals.
(xii) The IRDA issued a circular under _________of the Insurance Act, 1938, which mandates
insurers to comply with Ind AS and its implementation Roadmap issued by the MCA.
a. Section 35
b. Section 34
c. Section 36
d. Section 40
(xiii) Provision for Doubtful Debt on 1st April, 2022 was ₹13,000. During the year 2022-23 the
Bad-debt was₹ 9,500. The Sundry Debtors on 31st March, 2023 were ₹3,25,000. Provision
is to be made @ 5% on Debtors. If on 31st March, 2023, there was additional Bad debt of
₹2,500 then Provision for doubtful- debt will be:
a. debited to Profit & Loss Account by ₹ 16,125.
b. debited to Profit & Loss Account by ₹15,125.
c. debited to Profit & Loss Account by ₹ 3,000.
d. debited to Profit & Loss Account by ₹ 900.
(xiv) Which of the following commission is allowed by the consignor to the consignee to
encourage the consignee for putting-up hard work in introducing new product in the
market?
a. Del-credere Commission
b. Over-riding Commission
c. Hard work Commission
d. Ordinary Commission
(xv) Outstanding salaries is shown as –

a. An Asset in the Balance Sheet
b. A Liability in the Balance sheet
c. By adjusting it in the P & L A/c
d. Both (b) and (c)
Answer:
i ii iii iv v vi vii viii ix x
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b a a a c c d a c b
xi xii xiii xiv xv
d b b b d
SECTION – B
(Answer any five questions out of seven questions given. Each question carries 14 Marks)
[5 x 14 =70]
2. (a) On comparing the Cash Book of Saksham with the Bank Pass Book for the year ended
31st March, 2024, following discrepancies were noticed:
(i) Out of ₹82,000 paid in by cheques into the bank on 25th March, cheques amounting
to ₹30,000 were collected on 5th April.
(ii) Out of cheques drawn amounting to ₹31,200 on 28th March a cheque for ₹10,000
was presented on 3rd April.
(iii) A cheque for ₹4,000 entered in Cash Book but omitted to be banked on 31st March.
(iv) A cheque for ₹2,400 deposited into bank but omitted to be recorded in Cash Book
and was collected by the bank on 29th March.
(v) A bill receivable for ₹ 2,080 previously discounted (discount ₹80) with the bank had
been dishonoured but advice was received on 3rd April.
(vi) A bill for ₹40,000 was retired/paid by the bank under a rebate of 600 but the full
amount of the bill was credited in the bank column of the Cash Book..
(vii) A cheque of ₹ 10,000 wrongly credited in the Pass Book on 29th March was reversed
on 2nd April.
(viii) Bank had wrongly debited ₹20,000 in the account on 31st March and reversed it on
10th April, 2024.
(ix) A cheque of ₹800 drawn on the Savings Account has been shown as drawn on
Current Account in Cash Book.
Prepare a Bank Reconciliation Statement as on 31st March, 2024, if the Balance as per
Cash Book on 31st March was ₹1,58,280.
(b) Prepare the Rectified entries of the following with a suitable narration:
(i) An amount of ₹ 50 received from C. Sen has been credited to D. Sen Account
(ii) Purchase of furniture for ₹ 2,500 has been debited to purchase account.
(iii) Sale of old machine for ₹ 2,000 has been recorded in sales account.
(iv) Basu account has been debited for ₹ 3,500 for salary paid to him for the like
amount.
(v) Annual white –washing of ₹ 800 has been wrongly debited to income tax account.
(vi) Income tax paid for ₹ 800 has been wrongly debited to income tax account
(vii) discount received for ₹ 150 has been recorded as interest received.
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(viii) Goods purchased for the proprietor amounting to ₹ 200 has been debited to
purchase account.
(ix) Wages of ₹ 1,500 paid for constructing a new building has been to wages account.
[7+7=14]
Answer:
(a)
Bank Reconciliation Statement
As on 31st March 2024
Particulars ₹ ₹
Balance as per Cash Book (Dr.) 1,58.280
Add: (b) Cheques issued on 28th March but not yet presented for 10,000
payment
(d) A cheque deposited into bank but not recorded in Cash Book 2,400
(f) Rebate on bill not entered in Cash Book (Note) 600
(g) Cheque wrongly credited by bank 10,000
(i) Cheque drawn on Savings Bank A/c but wrongly recorded in 800 23,800
Current A/c
1,82,080
Less: (a) Cheques deposited on 25th March but not yet collected 30,000
till 31st March
(c) A cheque entered in Cash Book but not yet banked 4,000
(c) Discounted Bills Receivable dishonoured but not recorded in 2,080
Cash Book
(h) Amount Wrongly debited by the Bank 20,000
56,080
Balance as per Bank Pass Book (Cr.) 1,26,000
(b)
Journal Entries
Particulars Dr. Cr.
₹ ₹
(i) D. Sen Account …………………… Dr. 50
To C. Sen A/c 50
(being the rectifying entry for the amount received from C. Sen
wrongly credited to D. Sen Account)
(ii) Furniture Account ………………… Dr. 2,500
To Purchases A/c 2,500
(being the rectifying entry for purchase of furniture wrongly
debited to purchases Account)
(iii) Sales Account …………………... Dr. 2,000
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To Machine A/c 2000
(being the rectifying entry for wrongly crediting sale account for
sale of old machine)
(iv) Salary Account ………………………. Dr 3,500
To Basu account 3,500
(being the rectifying entry for wrongly debiting Basu Account for
salary paid to him)
(v) Maintenance ………………………….. Dr 800
To Income tax Account 800
(being the rectifying entry for debiting building Account for
annual white-washing charges)
(vi) Drawing Account……………………… Dr 800
To income tax Account 800
(being the rectifying entry for wrong posting of income tax)
(vii) Interest received Account ……………….Dr 150
To Discount received Account 150
(being the rectifying entry for wrong posting of discount received
as interest received)
(viii) Drawing Account………………………. Dr 200
To Purchase Account 200
(being the rectifying entry for wrongly debiting purchase account
for goods purchased for proprietor)
(ix) Building Account ………………………. Dr 1,500
To wages account 1,500
(being the rectifying entry for wrongly debiting wage account for
wages paid for constructing building)
3. (a) RG Cellular of Kolkata consigned 100 mobile handsets to Techno Traders of Durgapur.
The cost of each handset was ₹ 25,000. The consignor paid insurance ₹ 15,000, freight
₹ 8,000. An account sale was received from Pluto, showing gross sale proceeds of 80 units
at ₹ 30,000 each.
The expenses paid and deducted by him were: Carriage ₹ 2,000; Establishment expenses
₹ 10,300; Insurance₹ 24,000; Commission ₹ 85,000. The handsets lying unsold with Pluto
were valued at ₹ 5,05,000
Prepare the journal entries in the books of Techno Traders given that maintains
Consignment Inward A/c.
(b) Beta Ltd. sells its products only on hire purchase terms, the hire purchase price being
‘cost plus 33.33%’. From the given information, Examine and analyze the operating
results from the hire purchase transactions by drafting necessary accounts under Debtors
method:
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Particular 1.4.2023 (₹) 1.4.2024 (₹)

Stock out on hire at H.P price 2,40,000 ?
Stock in hand at shop 30,000 42,000
Instalments due from customers 18,000 30,000
Further information:
- Goods repossessed (installments not yet matured ₹ 12,000) valued at ₹ 4,800;
- Purchases made during the year 2023-24 amounted to ₹ 4,08,000;
- Cash collected from customers during 2023-24 was ₹ 4,80,000. [7+7=14]
Answer:
(a)
Books of Techno Traders
Journal
Particular Dr. Cr.
₹ ₹
Consignment Inward A/c [100 × ₹ 25,000] Dr. 25,00,000
To, RG Cellular A/c
(Being goods received from Jupiter) 25,00,000
Consignment Inward A/c………………. Dr. 36,300
To, Bank A/c (₹ 2,000 + ₹ 10,300 + ₹ 24,000) 36,300
(Being expenses paid for consignment)
Bank A/c…………………………….. Dr. 24,00,000
To, Consignment Inward A/c (80 × ₹ 30,000) 24,00,000
(Being goods received on consignment sold)
Consignment Inward A/c Dr. 85,000
To, Commission A/c 85,000
(Being commission due from Jupiter)
RG Cellular A/c……………………………. Dr. 5,05,000
To, Consignment Inward A/c 5,05,000
(Being stock lying unsold)
Consignment Inward A/c Dr. 2,83,700
To, RG Cellular A/c 2,83,700
(Being balance of Consignment Inward A/c transferred to Jupiter
account)
RG Cellular A/c Dr. 22,78,700
To, Bank A/c 22,78,700
(Being payment made for balance due to consignor)
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(b) Debtors Method

Books of Beta Ltd.
Hire Purchasing Trading Account
Dr. for the year ended 31.3.2024 Cr.
Particulars (₹) Particulars (₹)
To, H.P. Stock [at H.P. price: 2,40,000 By, Stock Reserve [2,40,000 × 1/4] 60,000
1.4.2023]
To, H.P. Debtors [1.4.2023] 18,000 By, Goods sent on H.P. [ Load: 1,32,000
5,28,000 × ¼]
To, Goods sent on H.P. [at 5,28,000 By, Cash Received 4,80,000
H.P. Price– W.N:1]
By, Goods Repossessed 12,000
[Un matured Installments]
To, Loss on Repossession 7,200
[WN:4]
To, Stock Reserve [2,64,000 × 66,000 By, H.P. Stock [at H.P. Price: 2,64,000
1/4] 31.3.2024- WN:3]
To, General P/L A/c [ Profit 1,18,800 By, H.P. Debtors [ 31.3.2024] 30,000
on H.P transferred
9,78,000 9,78,000
Working Notes:
1. Goods sent on H.P. basis (at H.P. price)
Memorandum Shop Stock Account
To, Opening Balance 30,000 By, Goods sent on H.P [at cost: 3,96,000
To, Purchases 4,08,000 Bal. Fig.]
By, Closing Balance 42,000
4,38,000 4,38,000
Therefore, Goods Sent on H.P [at H.P price] = 3,96,000 + 33 1/3% = ₹ 5,28,000.
2. Instalments Matured during the year

Memorandum H.P Debtors Account
To, Opening Balance [Installments due] 18,000 By, Cash Received 4,80,000
To, Installments Matured [Bal. Fig.] By, Closing Balance 30,000
4,92,000 [Installments due]
5,10,000 5,10,000
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3. Balance of H.P. Stock on 31.3.2024
Memorandum H.P. Stock Account
To, Opening Balance [ stock out 2,40,000 By, Installments Matured [WN:2] 4,92,000
on hire purchase at H.P price]
To, Goods sent on H.P [WN:1] 5,28,000 By, Goods Repossessed 12,000
[Unmatured12,000 installments]
By, Closing Balance [Stock 2,64,000
with customers at SP – Bal. fig.]
7,68,000 7,68,000
4. Loss on Repossession = Instalments not yet matured on repossessed goods – Value on

repossession = ₹ [12,000 – 4,800] = ₹ 7,200. It is to be debited to H.P. Trading A/c.
Alternatively, instead of recording value of “Goods Repossessed” and “Loss on Repossession”,

the value on repossession ₹ 4,800 may be reflected on the credit side of H.P. Trading A/c.
4. The Income and Expenditure account of an association for the year ended 31 March 2022
is as under:
Dr. Cr.
To, Salaries 1,20,000 By, Subscription 170000
To, Printing and Stationery 6,000 By, Entrance fee 4000
To, Telephone 1,500 By, Contribution for Dinner 36000
To, Postage 500
To, General expenses 12000

To, Interest and bank charges 5500
To, Audit fees 2500
To, Annual Dinner Expenses 25000
To, Depreciation 7000
To, Surplus 30000
2,10,000 2,10,000
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The aforesaid Income and Expenditure account has been prepared after the following
adjustments:
Particulars (₹)
Subscription outstanding as on 31st March 2022 16,000
Subscription outstanding as on 31st March 2023 18,000
Subscription received in advance as on 31st March 2022 13,000
Subscription ‘received in advance as on 31st March 2023 8,400
Salaries outstanding as on 31st March 2022 6,000
Salaries outstanding as on 31st March 2023 8,000
Audit fees for 2020-21 paid during 2022-23 2,000
Audit fee for 2022-23 not paid 2,500
The building owned by the association since 2004 costs 1,90,000
Equipment as on 31st March, 2022 valued at 52,000
At the end of the year after depreciation of ` 7,000, equipment amounted to 63,000
In 2021-22, the association raised a bank loan of which is still not paid 30,000
Cash in hand as on 31st March 2023 28,500
Cash in hand as on 31st March 2022 13,600
Capital Fund as on 31st March 2022 2,20,600
Prepare Receipts and Payment Account of the association for the year ended 31st March
2023 and the Balance Sheet as at that date. [14]
Answer:
Receipts and Payments
for the year ended 31st March, 2023
Receipts (₹) Payments (₹)
To, Balance b/d 13,600 By, Salaries W.N. (2) 1,18,000
To, Subscription (WN.3) 1,63,400 By, Printing & Stationery 6,000
To, Entrance Fees 4,000 By, Postage 500
To, Annual Dinner Contribution 36,000 By, Telephone 1,500
By, General Expenses 12,000
By, Audit Fees 2,000
By, Dinner Expenses 25,000
By, Interest 5,500
By, Equipments W.N. (1) 18,000
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By, Balance c/d 28,500
2,17,000 2,17,000
Balance Sheet as at 31st March, 2023

Liabilities (₹) (₹) Assets (₹)
Capital (W.N.- 4) 2,20,600 Buildings 1,90,000
Add: Surplus 30,000 2,50,600 Equipment’s 63,000
Bank Loan 30,000 Cash in Hand 28,500
Creditors : Salaries 8,000 Subscription Receivable 18,000
Audit Fees O/S 2,500
Subscription Received in 8,400
Advance
2,99,500 2,99,500
Working Notes:
(1)
Dr. Equipment Account Cr.
To, Balance b/d To, Bank A/c (B/f) 52,000 By, Depreciation By, Balance c/d 7,000
18,000 63,000
70,000 70,000
(2)
Dr. Salaries Account Cr.
To, Salary O/S (2022 - 23) 8,000 By, Income & Expenditure A/c 1,20,000
To, Bank A/c (Bal.fig.) 1,18,000 By, Salary O/S (2021-22) 6,000
1,26,000 1,26,000
(3)
Dr. Subscription Account Cr.
To, Subscription Receivable (2021- 16,000 By, Subscription Receive in 13,000
22) Advance (2021-22)
To, Subscription Received in 8,400 By, Subscription Receivable 18,000
Advance (2022-23) 1,70,000 (2022-23) 1,63,400
To, Income & Expenditure A/c By, Bank A/c (Bal. fig.)
1,94,400 1,94,400
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(4)
Balance Sheet as at 31st March, 2022
Liabilities (₹) Assets (₹)
Capital fund (Bal. fig.) 2,20,600 Building 1,90,000
Bank loan 30,000 Equipment 52,000
Creditors Salaries 6,000 Cash in hand 13,600
Audit Fees O/S 2,000 Subscription Receivable 16,000
Subscription Received in Advance 13,000
2,71,600 2,71,600
5. A and B were partners of a firm sharing profits and losses in the ratio 2:1. The Balance
Sheet of the firm as at 31st March, 2023 was as under:
Capital Accounts: Plant and Machinery 5,00,000
A 8,00,000 Building 9,00,000
B 4,00,000 Sundry Debtors 2,50,000
Reserves 5,25,000 Stock 3,00,000
Sundry Creditors 2,75,000 Cash 1,50,000
Bills Payable 1,00,000
21,00,000 21,00,000
They agreed to admit P and Q into the partnership on the following terms:
(i) The firm’s goodwill to be valued at 2 years’ purchase of the weighted average of the
profits’ of the last 3 years. The relevant figures are:
1) Year ended 31.03.2020 - Profit ₹37,000
(ii) The value of the stock and Plant & Machinery were to be reduced by 10%.
(iii) Building was to be valued at ₹ 10,11,000.
(iv) There was an unrecorded liability of ₹ 10,000.
(v) A, B, P & Q agreed to share profits and losses in the ratio 3: 2 :1:1.
(vi) The value of reserve, the values of liabilities and the values of assets other than cash
were not to be altered.
(vii) P and Q were to bring capitals equal to their shares of Profit considering B’s capital
as base after all adjustments.
Prepare the following:
(1) Memorandum Revaluation Account,
(2) Partner’s Capital Accounts and
(3) The Balance Sheet of the newly constructed firm. [14]
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Answer:
Memorandum Revaluation Account
To, Stock A/c 30,000 By, Building 1,11,000
To, Plant & Machinery A/c 50,000
To, Unrecorded Liability A/c 10,000
To, Profit transferred to 21,000
Partners ‘Capital A/c (in old
ratio)
A = ₹14,000 1,11,000 1,11,000
B = ₹7,000
To, Building 1,11,000 By, Stock A/c 30,000
By, Plant & Machinery A/c 50,000
By, Unrecorded liability A/c 10,000
By, Loss transferred to Partners’ 21,000
Capital
A/c s (in new ratio)
A = ₹9,000
B = ₹6,000
P = ₹3,000
Q = ₹3,00
1,11,000 1,11,000
Dr. Partners’ Capital Accounts Cr.

Particulars A (₹) B (₹) P (₹) Q (₹) Particulars A (₹) B (₹) P (₹) Q (₹)
To, 9,000 6,000 3,000 3,000 By, Balance 8,00,000 4,00,000 - -
Memorandum b/d
Revaluation By,
A/c Memorandum 14,000 7,000 - -
To, Reserves 2,25,000 1,50,000 75,000 75,000 Revaluation
A/c A/c
To, A & B - - 12,000 12,000 By, Reserves 3,50,000 1,75,000 - -
A/c A/c
(W.N.2) By, P & O 20,000 4,000 - -
To, Balance 9,50,000 4,30,000 2,15,000 2,15,000 A/c (W.N.2)
c/d By, Cash A/c - - 3,05,000 3,05,000
(Refer (Bal. fig.)
W.N.3) 11,84,000 5,86,000 3,05,000 3,05,000 11,84,000 5,86,000 3,05,000 3,05,000
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Balance Sheet of newly reconstituted firm as on 31.03.2023

Capital Accounts: Plant and Machinery 5,00,000
A — ₹9,50,000 Building 9,00,000
B — ₹4,30,000 Sundry Debtors 2,50,000
P — ₹2,15,000 Stock 3,00,000
Q — ₹2,15,000 18,10,000 Cash 7,60,000
Reserves 5,25,000 (₹1,50,000 + ₹3,05,000 +
₹3,05,000)
Sundry Creditors 2,75,000
Bills Payable 1,00,000
27,10,000 27,10,000
Working Notes:
1. Calculation of Goodwill Weighted Average Profit:

Year Profit (₹) Weight Weighted Profit (₹)
2019 37,000 1 37,000
2020 40,000 2 80,000
2021 45,000 3 1,35,000
6 2,52,000
Weighted Average Profit = ₹2,52,000/6 = ₹42,000

Goodwill is valued at 2 year’s purchase
Value of Goodwill: ₹42,000 × 2 = ₹84,000
2. (a) Profit Sacrificing Ratio
Particulars Old Shares NewShares Sacrificed Gained

Share Share
AB 2/3 3/7 5/21 —
p 1/3 2/7 1/21 —
Q — 1/7 — 1/7
— 1/7 — 1/7
(b) Adjustment for Goodwill

Partners Goodwill as per old ratio Goodwill as per new ratio Effect (₹)
(₹) (₹)
A 56,000 36,000 + 20,000 —
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B 28,000 24,000 + 4,000 —
P — 12,000 — 12,000
Q — 12,000 — 12,000
84,000 84,000 24,000 24,000
Journal
Particulars Dr. (₹) Cr. (₹)

P’s Capital A/c Dr. 12,000
Q’s Capital A/c Dr. 12,000
To A’s Capital A/c 20,000
To B’s Capital A/c 4,000
Calculation of closing capitals of P and Q

B’s capital is taken as base. Closing capital of B after all adjustments is 4,30, 000.Total capital of firm
will be = ₹4,30,000 × 7/2 = ₹15,05,000 Hence, P’s and Q’s closing capital should be ₹2,15,000
(₹15,05,000 × 1/7) each i.e. at par with B (as per new profit and loss sharing ratio).
6. (a) A firm has two departments – Raw Materials and Manufacturing. The finished goods are
produced by the Manufacturing Department with raw materials supplied by Raw Materials
department at selling price. Prepare Departmental Trading and Profit and Loss Account by
using the following information for the year ended on 31st March 2023.
Particulars Raw Materials Dept. Manufacturing Dept.
(₹) (₹)
Opening Stock 1,20,000 20,000
Purchases 8,00,000 6,000
Sales 8,80,000 1,80,000
Manufacturing Expenses -- 24,000
Selling Expenses 1,600 800
Raw Materials transferred to 1,20,000 --
Manufacturing Dept.
Closing Stock 80,000 24,000
Cost of the closing stock of the manufacturing department consists of 25% for
manufacturing expenses and 75% for raw materials. In the preceding year Raw Materials
Department earned gross profit at the rate of 10%. Salaries of ₹5,000 and Insurance
Premium of ₹1,600 are allocated between the two departments on the basis of sales ratio.
Calculate the Net Profit of the firm as a whole.
(b) A fire occurred in the premises of Sri. G. Vekatesh on 1.4.2023 and a considerable part of
the stock was destroyed. The stock salvaged was ₹ 28,000. Sri Venkatesh had taken a fire
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insurance policy for ₹ 17,10,000 to cover the loss of stock by fire.
Critically assess the situation and advice the management, the insurance claim which
company should claim from the insurance company for the loss of stock by fire. The
following particulars are available:
Purchases for the year 2022 9,38,000 Stock on 1.1.22 1,44,000
Sales for the year 2022 11,60,000 Stock on 31.12.2022 2,42,000
Purchases from 1.1.23 to 1.4.23 1,82,000 Wages paid during 2022 1,00,000
Sales from 1.1.23 to 1.4.23 24,00,000 Wages paid 1.1.23 to 1,80,000
1.4.23
Sri Venkatesh had in June 2022 consigned goods worth ₹ 50,000, which unfortunately
were lost in an accident. Since there was no insurance cover taken, the loss had to be
borne by him full. Stocks at the end of each year for and till the end of calendar year 2021
had been valued at cost less 10%.
From 2022, however there was a change in the valuation of closing stock which was
ascertained by adding 10% to its costs. [7+7=14]
Answer:
6. (a)
Dr. Departmental Trading and Profit & Loss Account for the year ended 31.3.2023 Cr.
Raw Manufac- Raw Manufac-
Particulars Materials turing Particulars Materials turing
To, Opening Stock 1,20,000 20,000 By, Sales 8,80,000 1,80,000
To, Purchases 8,00,000 6,000 By, Transfer 1,20,000
To, Transfer (Received from - 1,20,000 (Transferred to MF)
RM) By, Closing Stock 80,000 24,000
To, Manufacturing Expenses - 24,000
To, Gross Profit c/d 1,60,000 34,000
10,80,000 2,04,000 10,80,000 2,04,000
By, Gross Profit b/d
To, Salaries (44:9) To, Selling 4,150 850 1,60,000 34,000
By Gross Profit b/d
Expenses 1,600 800
To, Insurance Premium (44:9) 1328 272
To, General P/L A/c
(Dept. Net Profit 1,52,922 32,078
transferred)
1,60,000 34,000 1,60,000 34,000
16
Dr. General Profit & Loss Account for the year ended 31.3.2022 Cr.
To, Stock Reserve (WN:1) 1380 By, Departmental Profit & Loss 1,52,922
To, Capital A/c (NP transferred) 1,83,620 A/c 32,078
1,85,000 Raw Materials Manufacturing 1,85,000
Working Notes:
1. Unrealized Profit in unsold stock:

Profit rate on transferred goods = GP rate of Raw Materials Dept.
= {Gross profit / (Sales + Transfer)} × 100
= {1,60,000 / (8,80,000 + 1,20,000)} × 100
= 16%
Value of the goods of Manufacturing dept. included in the Closing stock of Raw Materials
Dept.
= ₹ 24,000 × 75% = ₹ 18,000
Unrealized Profit in Closing Stock = ₹ 18,000 × 16% = ₹ 2,880
Value of the goods of Manufacturing dept. included in the Opening stock of Raw Materials
Dept.
= ₹. 20,000 * 75% = ₹ 15,000
Unrealized Profit in Opening Stock = ₹ 15,000 × 10% = ₹ 1,500
Net Stock Reserve = ₹ 2,880 – ₹ 1,500 = ₹ 1,380
(b) In order to find the rate of gross profit on sales for the year 2022, the following Trading
Account is to be prepared for the same year as:
Trading Account
Dr. For the year ended 31st Dec. 2022 Cr

To, Opening Stock 1,60,000 By, Sales 11,60,000
1,44,000 × (100/90) By, Stock lost by Accident 50,000
To, Purchases 9,38,000 By, Closing Stock (2,42,000 2,20,000
×100/110)
To, Wages 1,00,000
To, Profit & Loss A/c (G.P. 2,32,000
transferred)
R 14,30,000 14,30,000
a
the of Gross Profit on Sales = 2,32,000/11,60,000 × 100 = 20%
17
Dr. Trading Account for the period (from 1.1.23 to 1.4.23) Cr.
To, Opening Stock 2,20,000 By, Sales 2,40,000
To, Purchases 1,82,000 By, Closing Stock 2,28,000
To, Wages 18,000
To, Profit & Loss A/c (G.P. @20% of 48,000
sales)
4,68,000 4,68,000
Amount of Claim = Stock destroyed – Stock salvaged
= ₹ 2,28,000 –₹ 28,000
= ₹ 2,00,000
As the policy amount is less than the value of stock destroyed, average clause is applicable.
Here, the amount of claim will be:
Net Claim = Loss of Stock × (Amount of Policy / Stock at the date of fire)
= ₹ 2,00,000 × (1,71,000 / 2,28,000)
= ₹ 1,50,000/-
7. (a) Make a comparative study of provisions between AS 12 and Ind AS 20.
(b) Big Box Ltd., a start-up purchased on April 1, 2020, a machine worth ₹ 44,85,000 in
relation to which it received ₹ 7,35,000 as grant from Government of India. The company
decided to treat this grant as a capital receipt. It is estimated that the realizable value of the
machine at the end of its useful life of 4 years will be ₹ 15,36,000. During the financial year
2022-23, the grant became refundable as the start-up company failed to comply with the
necessary terms and conditions of the grant.
Evaluate the amount of depreciation that is to be charged to the statement of profit and loss
for the years 2022-23 and 2023-24 given that the company follows straight line method of
charging depreciation. [7+7=14]
Answer:
7. (a) Presently, in India, Indian Accounting Standard (Ind AS) 20 Accounting for Government
Grants and Disclosure of Government Assistance deal with the issue of government grants.
Ind AS 20 differs from AS 12, with respect to the following points:
Ind AS 20 AS 12
Disclosure required in financial statements No specific guidance as does not deal with
with indication on other forms of other forms of government assistance
government assistance received
Government grants in the nature of capital Government grants as capital
contribution are not recognized contribution are specifically recognized
18
Prohibition of recognition of grants Grants for non-depreciable assets are
directly to the shareholder’s fund required to be shown as a capital reserve
under shareholder’s funds
Recognition of non-monetary grants at fair Recognition of non-monetary grants at
value acquisition cost or nominal value
No option to deduct the amount of grant Optional to deduct the amount of grant from
from the book value of the asset. the book value of the asset.
7. (b) As per AS 12, the amount refundable in respect of government grant is related to specific
fixed asset is recorded by increasing the book value of the asset or by reducing the capital
reserve or the deferred income balance, as appropriate, by the amount refundable. In case the
book value of the asset is increased, depreciation is provided on the revised book value.
Calculation of Depreciation for the years 2022-23 and 2023-24

Particulars ₹ ’000
Cost of machine on 01.01.2020 4,485
Less: Grant from Government of India 735
Net cost of machine 3,750
Estimated useful life 4 years
553.5
Depreciation p.a. under straight line method
Depreciation charged during 2020-21 and 2021-22 [553.5 × 2] 1,107

Book value of machine on 01.04.2022 [3,750 – 1,107] 2,643
Add: Refund of government grant during 2022-23 735
Revised Book value of machine 3,378
Remaining useful life of machine 2 years
Revised depreciation p.a. 921
8. Answer the following questions :

(a) Parshuram Ltd., which commenced its operations in 2019-20, provides the following
details:
Financial Profit before Tax Timing Permanent Corporate Remarks
year (₹) Difference Difference Tax rate
(₹) (₹)
2019-2020 28,00,000 +3,15,000 +3,50,000 40% Reversible
in 2022-23
2020-2021 31,50,000 +2,10,000 +2,80,000 38% Reversible
in 2021-22
2021-2022 35,00,000 -70,000 +3,15,000 35% Reversible
19
in 2022-23
2022-2023 24,50,000 Nil +4,20,000 30% -
Analyze and evaluate the amount of Current Tax for the four financial years. [5]
(b) From the following particulars presented by Mr. Shankar for the year ended 31st March
2023, Prepare Profit and Loss Account after taking into consideration the given details:
Gross Profit ₹ 1,00,000, Rent ₹ 22,000; Salaries, ₹ 10,000; Commission (Cr.) ₹ 12,000;
Insurance ₹ 8,000; Interest (Cr.) ₹ 6,000; Bad Debts ₹ 2,000; Provision for Bad Debts
(1.4.2021) ₹ 4,000; Sundry Debtors ₹ 40,000; Discount Received ₹ 2,000; Plant &
Machinery ₹ 80,000.
Adjustments:
(i) Outstanding salaries amounted to ₹ 4,000; (b) Rent paid for 11 months;
(ii) Interest due but not received amounted to ₹ 2,000
(iii) Prepaid Insurance amounted to ₹ 2,000;
(iv) Depreciate Plant and Machinery by 10% p.a.
(v) Further Bad Debts amounted to ₹ 2,000 and make a provision for Bad Debts @5%
on Sundry Debtors.
(vi) Commissions received in advance amounted to ₹ 2,000. [5]
(c) S and N are partners sharing Profit /(Loss) in the ratio of 5:3. They admit J into
3 1 1
partnership for th in the Profit/(Loss) in which J acquired th share from S and
10 5 10
th share from N respectively. Calculate the new profit and loss sharing ratios of the
partners. [4]
Answer:
(a) Calculation of Current Tax (₹ in Lakhs)

Particulars 2019-20 2020-21 2021-22 2022-23
Profit before tax 28.00 31.5 35.00 24.50
Timing Differences 3.15 2.10 (0.70) Nil
Permanent Differences 3.50 2.80 3.15 4.20
Taxable Income 34.65 36.40 37.45 28.70
Corporate tax rate 40% 38% 35% 30%
Current Tax (Taxable Income Tax rate) 13.86 13.832 13.1075 8.61
(b)
20
Mr. Shankar
Profit and Loss Account
Dr. for the year ended 31st March 2022 Cr.
Particulars (₹) (₹) Particulars (₹) (₹)
To, Rent 22,000 By, Trading A/c. 1,00,000
Add: Outstanding 2,000 24,000 -Gross Profit
” Salaries 10,000 ” Commission 12,000
Add: Outstanding 4,000 14,000 Less: Received in advance 2,000 10,000
” Insurance 8,000 ” Interest 6,000
Less: Prepaid 2,000 6,000 Add: Accrued Interest 2,000 8,000
” Bad Debts 2,000
Add: further Bad Debts 2,000 4,000 ” Discount received 2,000
” Depreciation on Plant 8,000 ” Provisions for Bad 4,000
& Machinery @10% Debts
on
`80,000
” Capital A/c 66,100 Less: New Provision @ 1,900 2,100
(Net Profit Transferred) 5% on (`40,000 – `2,000)
1,22,100 1,22,100
(c)
5 1 25  8 17
S’s new share = [  ]= =
8 5 40 40
3 1 15  4 11
N’s new share = [  ]= =
8 10 40 40
3 12
I’s share = 
10 40
Hence New profit/loss sharing ratios of the partners = 17:11:12
21

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INTERMEDIATE EXAMINATION SET-2

MODEL ANSWERS TERM – DEC 2024

I. Choose the correct option: [15 x 2 = 30]

(iii) If any stock is taken by a co-venturer, it will be treated as.

The amount of subscription received during the year 2022-23would be:

(vii) Sacrificing ratio is:

(ix) Excess of hire purchase price over cash price is known as

(xv) Outstanding salaries is shown as –

i ii iii iv v vi vii viii ix x

Particular 1.4.2023 (₹) 1.4.2024 (₹)

(b) Debtors Method

2. Instalments Matured during the year

4. Loss on Repossession = Instalments not yet matured on repossessed goods – Value on

Alternatively, instead of recording value of “Goods Repossessed” and “Loss on Repossession”,

To, General expenses 12000

Balance Sheet as at 31st March, 2023

Dr. Partners’ Capital Accounts Cr.

Balance Sheet of newly reconstituted firm as on 31.03.2023

1. Calculation of Goodwill Weighted Average Profit:

Weighted Average Profit = ₹2,52,000/6 = ₹42,000

2. (a) Profit Sacrificing Ratio

Particulars Old Shares NewShares Sacrificed Gained

(b) Adjustment for Goodwill

Particulars Dr. (₹) Cr. (₹)

Calculation of closing capitals of P and Q

1,60,000 34,000 1,60,000 34,000

1. Unrealized Profit in unsold stock:

Particulars (₹) Particulars (₹)

Calculation of Depreciation for the years 2022-23 and 2023-24

Depreciation charged during 2020-21 and 2021-22 [553.5 × 2] 1,107

Revised depreciation p.a. 921

8. Answer the following questions :

(a) Calculation of Current Tax (₹ in Lakhs)

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