SIDDHARTH EDUCATION SERVICES LTD.

®
For CS, CA, ICWA [Foundation, Inter, Final]
Prestige Chambers, Opp. Thane Railway Stn. P.F.2, Thane (W):2533 4903.
VaibhavSoc., 1st Floor, Opp. Municipal Garden, Dombivli (E) Tel:2443455.
Ist floor, Popatlal Bldg, Ranade Road, Dadar (W) – 65540023.
Also at vashi
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ICWA ACCOUNTS PAPER 2

Question 1 is compulsory answer any 5 from the rest

Q1(A) Match the column: (8 marks)

Column A Column B
1. AS 1 a. Effects of changes in foreign exchange rates
2. AS 3 b. Accounting for investments
3. AS 13 c. Disclosure of accounting policies
4. AS 16 d. Cash flow statement
5. AS 10 e. Borrowing costs
6. AS 11 f. Segment reporting
7. AS 20 g. Accounting for fixed assets
8. AS 19 h. Leases
i. Earnings per share
j. Related parties disclosures

Q1(B) Explain following terms: (6*2=12)

1. Shortworkings
2. Issue for consideration other than cash
3. Pre and post incorporation period
4. Debtors system for branch
5. Fundamental accounting assumptions
6. Dissolution of partnership

Q2(A) Sunshine company sells goods for cash and on hire purchase and latter being cash retail price
plus 12.5% thereon. Following are the particulars for the year ended 31st December 2007.

Particulars Amount
Stock with hire purchase customers as on 1.1.08 29700
Purchase during the year 158400
Stock at shop as on 1.1.08 22000
Stock at shop as on 31.12.08 26400
Cash sales during the year 79200
Cash received during the year 101750
Instalments due but not received as on 1.1.08 4400
Instalments due but not received as on 31.12.08 6600
Hire purchase sales during the year 118800
Prepare the following: 1) General trading account. 2) Hire purchase trading account. (10 marks)

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Q2(B) From the following information prepare branch trading profit and loss account.

BRANCH CASH ACCOUNT

Particulars Amount Particulars Amount

To Balance b/f 10500 By Bank 59000
To Debtors 37000 By Petty Expenses 1500
To Cash sales 22500 By Balance c/f 9500
Total 70000 Total 70000

BRANCH DEBTORS ACCOUNT

Particulars Amount Particulars Amount

To balance b/f 4000 By cash 37000
To sales 60000 By bills receivable 2000
By discount 1000
By bad debts 500
By balance c/f 23500
64000 Total 64000
BRANCH ACCOUNT

Particulars Amount Particulars Amount

To balance b/f To balance b/f
Branch stock 5000 Branch outstanding expenses 1000
Branch cash 10500 By bank 59000
Branch debtors 4000 By balance 28000
Branch prepaid expenses 500
To goods sent to branch 60000
To sundry expenses 8000
Total 88000 Total 88000
Closing stock at branch was 6000 and expenses outstanding were 2000. (6 marks)

Q3 (A) The balance sheet of M LTD as on 31.3.09 is as under

Liabilities Amount Assets Amount

2000 Equity shares of 100 each 200000 Fixed Assets
8% Preference shares 100000 At cost 500000
General Reserve 60000 Less Depreciation 160000
12% debentures 60000 340000
Sundry creditors 80000 Stock 60000
Debtors 80000
Bank 20000
500000 500000
The company wishes to forecast balance sheet as on 31.3.10. The following additional particulars are
available:

1. Fixed assets costing 100000 have been installed on 1.4.09 but payment made on 31.3.10.
2. The fixed assets turnover ratio on the basis of gross value of fixed assets would be 1.5
3. The stock turnover ratio would be 14.4 (calculated on the basis of average stock).
4. The break up of cost and profit would be as follows:

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 Material 40%
Labour 25%
Manufacturing expenses 10%
Office and selling expenses 10%
Depreciation 5%
Profit 10%
Total 100%
5. The profit is subject to interest and tax at 50%.
6. Debtors would be 1/9th of sales.
7. Creditors would be 1/5th of material consumed.
8. In march 2010 a dividend @10% on equity capital would be paid.
9. 12% debentures for 25000 have been issued on 1st april 09.
Prepare the forecast balance sheet as on 31.3.10 (12 marks)
Q3(B) Mention purposes for which share premium account can be utilised (4 marks)
Q4(A) V LTD issued 120000 equity shares of 10 each at premium of 2.5 per share payable on
application. The amount payable on allotment was fixed at Rs.4 per share and equivalent sum was
due on a call to be made. Total applications received 220000 shares & after consulting stock
exchange, following scheme of allotment was decided upon
Category A B C
Grouping of shares 1 – 100 101 – 500 Over 500
No of applications received 2400 350 10
No of shares applied for 140000 70000 10000
No of shares allotted 84000 28000 8000
It was decided that the excess amount received on applications would be utilised in payment of
allotment money and surplus to be refunded to the applications. Applicant Ram from category A
applied for 200 shares defaulted in payment of allotment money. Applicant Laxman from category C
who was allotted 1600 shares failed to pay call money. Their shares were forfeited after respective
calls made and reissued as fully paid up for 8 and 6 per share respectively. You are required to
journalise all the transactions. (12 marks)
Q4(B) i. Explain calls in arrears and calls in advance. (2 marks)
ii. Explain ex interest and cum interest price. (2 marks)
Q5(A) The C electricity company decides to replace one of its old plant with a modern one with large
capacity. The plant when installed in 1940 cost the company Rs. 24 lakhs, the components of
materials, labour and overheads being in the ratio of 5:3:2. It is ascertained that the costs of
materials and labour have gone up by 40% and 80% respectively. The proportion of overheads to
total costs is expected to remain the same as before.
The cost of new plant as per improved design is Rs. 60 lakhs and in addition, material recovered from
the old plant of a value of Rs. 240000 has been used in the construction of new plant. The old plant
was scrapped and sold for Rs. 750000. Required to Journalise the transactions. (6 marks)

Q5(B) Clear profits of K electricity company is Rs. 70000 for the year ended 31.3.06. Other details are
as follows:

Development Reserve 200000

Loan by electricity board 400000
Depreciation provision 60000
Tariff dividend control reserve 50000

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Cost of fixed assets 800000
5% Investments made out of contingency reserve 200000
Working capital 200000
Reserve bank rate 9%
From the above data calculate 1. Capital base. 2. Reasonable return. 3. Disposal of surplus. 4.
Distribution of clear profits. (2.5 marks each)

Q6 The following balances have been extracted from P LTD as on 30th September 2007.

Particulars Dr Amt in 000’s Cr Amt in 000’s

Share capital (authorised and issued) 150000
8% redeemable preference (40000 shares) 4000
Securities premium 2500
Preference share redemption 4800
General reserve 10000
Land (cost) 30000
Building (WDV) 70000
Furniture (WDV) 2000
Motor vehicles (WDV) 3500
Gross profits 90000
Establishment charges 25000
Rent taxes and insurance 1200
Commission 600
Discount received 500
Interest on investments 800
Depreciation 6000
Sundry office expenses 6000
Payment to auditors 400
Debtors and Creditors 10660 2560
Profit and loss account as on 30.9.06 1000
Unpaid dividend 200
Cash in hand 1200
Cash at bank 19500
Security deposit 1000
Outstanding expenses 600
Investment in G.P notes 20000
Stock 35300
Provision for tax (i/e 30.9.06) 7000
Income tax paid under dispute (i/e 30.9.06) 10000
Advance payment of income tax 22000
Total 269160 269160

The following further details are available:

1. The preference shares were redeemed on 1st October, 2006 at a premium of 20% but no
entries were passed for giving effect thereto, except payment standing to the debit of
Preference Share Redemption Account.
2. Depreciation as provided upto 30th September, 2006 is as follows:
Rs.
(a) Buildings 21000 thousand

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 (b) Furniture 2,000 thousand
(c) Motor Vehicles 6,000 thousand

3. Establishment charges include Rs. 1,800 thousand paid to Managing Director as

Remuneration in terms of the agreement which provides for a remuneration of 5% of annual
net profits.
4. Payment of Auditors includes Rs. 100 thousand for taxation work in addition to audit fees.
5. Market value investments on 30th September, 2007 Rs. 18,000 thousand.
6. Sundry debtors include Rs. 4,000 thousand due for a period exceeding six months.
7. All receivables and deposits are considered good for realisation.
8. Income tax demand for the year ended 30.9.2006 Rs. 10000 thousand has not been provided
for against which an appeal is pending.
9. Income tax to be provided @ 40%
10. Directors recommended payment of dividend on equity shares at the rate of 12%.
11. Ignore previous year’s figures
You are required to prepare the Profit & Loss Account for the year ended 30th September,
2007 and a Balance Sheet as at that date in vertical format. (16 marks)

Q7(A) Dr. Arun Gupta’s Receipts and Payments account for the year ending 31.3.03 is as follows

Payments Amount Receipts Amount

To Balance b/f 66100 By rent (for 18 months ending 30.6.03) 45000
To fees 214200 By telephone charges 4500
To miscellaneous receipts 200 By salary to assistant 33000
To sale of old equipment 4000 By journals etc 1000
By library books (purchased on 1.7.02) 5000
By medical equipment 8000
By furniture (purchased on 1.10.02) 7000
By purchase of medicines 43000
By conveyance expenses 50000
By drawings 60000
By miscellaneous expenses 1000
By balance c/f 27000
Total 284500 Total 284500
Additional information:

Particulars Balance as on 31.3.02 Balance as on 31.3.03

Outstanding fees 2000 5000
Stock of medicines 10000 18600
Creditors for medicines 100 300
Medical equipment as 31.3.02 Rs.50000. Medical equipment was sold as well as purchased on 1st Jan
03. The cost of equipment sold being R. 6000. Equipment is subject to depreciation @20% p.a. As on
31.3.02 Furniture - Rs. 5000, library books – Rs. 1000. Depreciate furniture by 10% and library books
by 20%. Salary to assistant still payable is Rs. 3000. 40% of the conveyance is for domestic purposes.

Prepare Receipts and Expenditure account of Dr. Arun for the year ended 31.3.03 and balance as on
that date. (12 marks)

Q7(B) Write short note on Accounting Standard 5 (4 marks)

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Q8 Write short notes on: (4 marks each)

a. Balance sheet ratios

b. Accounting standard 2
c. Accounting standard 9
d. Accounting standard 17