CWA ICWA Foundation : Accounting - December 2009

CWA ICWA Foundation • Accounting • December 2009

This Paper has 66 answerable questions with 11 answered.

P–2(ACT) Syllabus 2008
Time Allowed : 3 Hours	Full Marks : 100

The figures in the margin on the right side indicate full marks.
SECTION I
Answer Question No. 1 which is compulsory and any two questions from the rest of Section I.
Marks

The figures in the margin on the right side indicate full marks.

SECTION I

Answer Question No. 1 which is compulsory and any two questions from the rest of Section I.

Marks

(a)

In each of the following one of them is correct. Indicate the correct answer.

1x9

(i)

Till the discounted bill is paid by the acceptor it remains:

A.	A contingent liability for the Acceptor.
B.	A contingent liability for the Drawer.
C.	A contingent liability for the Bank.
D.	A liability for the Drawer.

(1)

(ii)

Net worth is:

A.	Total Assets Less Outside Liabilities.
B.	Total liabilities plus Owners’ equity.
C.	Current Assets less Current liabilities.
D.	Total Accumulated profit less Liabilities.

(1)

(iii)

When Cash is received for services rendered in the past:

A.	Owners’ equity increases.
B.	Current assets increase.
C.	Profit increases.
D.	None of the above.

(1)

(iv)

When an endorsed bill is dishonored, for the endorsee, it becomes the liability:

A.	Of the drawee.
B.	Of the drawer.
C.	Of the payee.
D.	Of the endorser.

(0)

(v)

Life membership fees received by a non–profit organization is treated as:

A.	Revenue receipt.
B.	Capital receipt.
C.	Deferred revenue receipt.
D.	Both revenue & Capital receipt.

(0)

(vi)

Increase in the value of opening stock results in which of the following:

A.	Increase in gross profit and net profit.
B.	Reduction in gross profit and increase in net profit.
C.	No effect on net profit.
D.	None of the above.

(0)

(vii)

_____ method of stock valuation considers the purchase price of stock which entered the godown last.

A.	FIFO
B.	LIFO.
C.	Weighted average.
D.	All the above method.

(0)

(viii)

The Trial Balance checks:

A.	Arithmetical Mistake.
B.	Honesty of the book keeper.
C.	Valuation of Closing Stock.
D.	Nature of the business.

(1)

(ix)

Expenses incurred in the formation of a company are shown in:

A.	Debit side of P & L A/c.
B.	As an asset in Balance Sheet.
C.	As a liability in Balance Sheet.
D.	Credit side of P & L A/c.

(1)

(b)

Fill in the blanks:

1x5

(i)

The withdrawal of money from the business by the owner for his personal use is called __________.

(1)

(ii)

Effects of an event must be recognized in the same accounting period in which they are entered as per __________ concept.

(1)

(iii)

If the current year’s depreciation has to be shown in the trial balance, is would be shown in the __________ side of the trial balance.

(1)

(iv)

The Depreciation mentioned under 1 (b) (iii) above is not __________ from the corresponding asset in the balance sheet.

(0)

(v)

On return of goods to the seller by the buyer, the seller issues __________ note to the buyer.

(0)

(c)

State with reasons whether the following statements are true or false:

2x8

(i)

If the profit sharing ratio among the co–ventures is not given, the profit of the joint venture is distributed among the co–ventures in capital ratio.

(0)

(ii)

Balances of personal accounts are carried forward to the next year.

(1)

(iii)

Salary paid to Harish will be debited to his personal account.

(0)

(iv)

A drawer himself may be the payee of a bills of exchange/cheque.

(0)

(v)

Accumulated depreciation can be located in the debit side of the trial balance.

(0)

(vi)

The accumulated in 1(c) (v) above is not deducted from the corresponding asset in the Balance Sheet.

(0)

(vii)

Income received in advance is an asset.

(1)

(viii)

Petty Cash is an expense.

(0)

Based on the following information prepare a Bank Reconciliation Statement as on 31st December, 2008 find the balance as per pass book:

(i)
(ii)
(iii)
(iv)
(v)
(vi)

Bank Overdraft as per cash book on 31.12.2008 Rs.6,340;
Interest on overdraft for 6 months ending 31.12.2008 Rs.160 is entered in pass book;
Bank charges amounted to Rs.30 for the above period were entered in the pass book;
Cheques issued but not presented upto 31.12.2008 amounted to Rs.1168;
Cheques sent for collection to the bank but not collected upto 31.12.2008 amounted to Rs.2,170;
Interest on investments collected by the bank and entered in the pass book Rs.1200.

6+1

(0)

(b)

Explain the following three statements in not more than 10 words each:

1x3

(i)

P & L A/c is a Period Statement.

(0)

(ii)

Balance Sheet is a Point of Time Statement.

(0)

(iii)

Statement of Affairs is a Point of Time Statement.

(0)

(a)

Shyam consigned 2,00,000 units @ Rs.5/- each to Mr. Ram, and paid Freight and Insurance amounting to Rs.1,00,000. Ram spent further the following amounts:

		Rs.
(i)	Insurance	5,000
(ii)	Godown Rent	4,000
(iii)	Clearing	6,000

2,000 units were damageed during transit due to heavy rains.
Ram sold 1,00,000 units @ Rs.10/- per unit.
Ram realized salvage value of damageed units Rs.2,000/-
Ram is to get a commission @ 5% on sales.
Determine the abnormal loss.

(0)

(b)

From the following information determine the cash and bank balance, as on 31.11.2009:

	Rs.
Written Down value of Land & Building Accumulated depreciation on Land & Building Insurance Premium paid in advance Creditors Debtors Furniture Capital Cash & Bank Balance	32,000 2,000 900 13,000 5,000 12,000 55,000 ?

(0)

(c)

From the following information determine amounts to be transferred to the Profit & Loss Account:

		Rs.
(i)	Sundry Debtors as on 31.03.2009	50,000
(ii)	Provision for debt as on 01.04.2008	4,000
(iii)	Bad debts written off during the year 2008–09	1,000
(iv)	Recovery of bad debts earlier written off	1,000
(v)	Provision for bad and doubtful debt is maintained @ 5%.

(0)

(d)

Discuss the effects of not providing depreciation. Only two points need be given.

(0)

(a)

Mohan sold goods on 1st September, 2009 for 2,00,000/- to Sohan. Sohan immediately accepted a 3 months bill. On the due date Sohan requested for the renewal of the bill for a further period of two months. Mohan agrees to pay interest @ 9% per annum to be included in the new bill. Determine the amount of the new bill.

(0)

(b)

Pass Journal entries in the current year for the rectification of following errors which were located after the final accounts of previous had been prepared. These errors relate to earlier year. Rate of depreciation on fixed assets is 10%.

(i)	Purchase of a second hand scooter was debited to the conveyance account amounting to Rs.5,000/-
(ii)	Cash received from Mr. Z was wrongly entered in the account of Y, amount being Rs.4,000/-.
(iii)	Goods purchased from A was recorded in the sales book amounting to Rs.15,000/-
(iv)	A cheque for Rs.500/- issued to the Supplier (Creditor) wrongly debited to purchases.

(0)

(c)

The Cost of the machinery in use with a firm as on 1st April, 2008 was Rs.2,50,000 against which depreciation provision stood at Rs.1,05,000 on that date, the firm provides depreciation at 10% p.a. on SLM basis. On 01.10.2008 two machines costing Rs.15,000 and 12,000 each, both purchased on 1st Oct., 2005 had to be discarded and had to be replaced by two machines costing Rs.20,000 & 15,000 each on the same date. On of the discarded machine realized Rs.8,000/- and the other is expected to realized Rs.3,000/-. Prepare the following Accounts.

(i)	Machine A/c

(ii)	Machine Disposal A/c and

(iii)

Provision for Depreciation A/c

for the year ended 31st March, 2009.

1+2+2

(0)

SECTION II
Answer Question No. 5 which is compulsory and any two questions from the rest in the Section II.
Marks

SECTION II

Answer Question No. 5 which is compulsory and any two questions from the rest in the Section II.

Marks

(a)

In each of the following, one of the alternatives is Correct. Indicate the correct one.

1x10

(i)

Cost of Normal waste of material under contract costing is debited to:

A.	Contract A/c
B.	Trading A/c
C.	Material A/c
D.	P & L A/c

(0)

(ii)

Variable Costs are fixed:

A.	For a period
B.	Per unit
C.	Depends upon the entity
D.	For a particular process of production

(1)

(iii)

When re-ordering quantity is 300 units, minimum usages is 20 units, minimum lead time is 5 days, maximum stock 400 units, re-ordering level will be:

A.	300 units
B.	200 units
C.	400 units
D.	100 units

(0)

(iv)

When over-absorption of overheads is Rs.20,000 and the actual machine hour were 50,000. The overhead rate per machine hour is Rs.5/-. Actual overheads would be:

A.	Rs.5,00,000
B.	Rs.2,30,000
C.	Rs.2,50,000
D.	Rs.2,70,000

(0)

(v)

When Break–even sales is 12,000 units, selling price per unit Rs.10/-, Maximum sales is 20,000 units. The margin of safety is

A.	Rs.70,000
B.	Rs.80,000
C.	Rs.60,000
D.	Rs.50,000

(0)

(vi)

A company with fixed costs amounting to Rs.50,000 seeks to earn a profit @ 20% of selling price. The selling price is Rs.20/- per unit and the variable costs are Rs.15/- per unit. The units sold will be:

A.	50,000
B.	60,000
C.	25,000
D.	None of the above

(0)

(vii)

The concept of EOQ has been losing its shade since the introduction of:

A.	Perpetual Inventory System
B.	JIT Inventory System
C.	FIFO
D.	LIFO

(0)

(viii)

In an increasing price trend, value of closing stock of inventory would be higher under:

A.	FIFO
B.	LIFO
C.	Actual Cost
D.	Average Cost

(0)

(ix)

Costing method in which fixed overheads are included in the cost of inventory is

A.	Variable costing
B.	Direct Costing
C.	Absorption Costing
D	Process Costing

(0)

(x)

If sales is Rs.2,70,000, variable costs are 60%, Fixed Costs are Rs.1,00,000. BEP would be:

A.	Rs.1,00,000
B.	Rs.2,00,000
C.	Rs.2,20,000
D.	Rs.2,50,000

(0)

(b)

(i)

Determine the machine hour rate from the following information:

Days available during the year 2008–09 Machine hours available Expenses	306 days 8 hours per day
	Rs.
Power Lighting Lubrication oil Repairs Depreciation Salary of Directors	2,79,600 20,000 40,000 1,00,000 50,000 1,00,000

(0)

(ii)

(A)	Standard hours for a Job	1000 hours
(B)	Incentive is allowed on percentage of time saved compared to standard hours
(C)	Rate of pay per hour	Rs.2/-
(D)	Incentive Scheme are as follows:
	% of time saved Saving upto 10% Saving between 11% and 20% Saving between 21% and 40%	Bonus 10% of time saved 15% of time saved 20% of time saved.

Determine the earnings of Ram Who completed the job in 900 hours.

(0)

(iii)

Fixed costs are always fixed. Do you agree?

(0)

(iv)

Discuss in brief the accounting treatment of the material loss arising out of avoidable causes.

(0)

(v)

How the cost of unavoidable labour turnover is treated in cost accounts?

(0)

(c)

State with reason whether the following statements are true or false.

2x5

(i)

The cost of abnormal waste of materials in a contract is transferred to the costing P&L A/c.

(0)

(ii)

The break even point remains the same even if the fixed costs are reduced.

(0)

(iii)

In Contract Costing the work-in-progress does not include uncertified work.

(0)

(iv)

Fixed overheads per unit will reduce as production rises.

(0)

(v)

There is no difference between marginal cost and differential cost.

(0)

(a)

Ramnath Ltd. Manufactures and sells a typical brand of tiffin boxes under its on brand name. The installed capacity of the plants is 1,20,000 units per year distributable evenly over each month of calendar year. The cost accountant of the company has informed the following cost structure of the product, which is as follows:
Raw Material Rs.20 per unit.
Direct Labour Rs.12 per unit
Direct expenses Rs.2 per unit.
Variable overheads Rs.16 per unit.
Fixed overhead Rs.3,00,000 per year.
Semi–variable overheads are as follows:

(i)	Rs.7,500 per month upto 50% capacity &
(ii)	Additional Rs.2,500 per month for every additional 25% capacity utilization or part thereof, the plant was operating at 50% capacity during the first seven months of the calendar year 2009, at 100% capacity in the remaining months of the year.

The selling price for the period from 1st Jan, 2009 to 31st July 2009 was fixed at Rs.69 per unit. The firm has been monitoring the profitability and revising the selling price to meet its annual profit target of Rs.8,00,000.
You are required to suggest the selling price per unit for the period from 1st August 2009 to 31st December 2009.
Prepare cost sheet clearly showing the total and per unit cost and also profit for the period.

(A)	From 1^st Jan. to 31^st July 2009.

(B)	From 1st Aug. To 31st Dec.2009.

3+3

(0)

(b)

Discuss the uses of Break Even Analysis. How P/V Ratio can be improved?

2+2

(0)

(a)

Rama & Co. Undertook a contract for Rs.2,80,000 for constructing a building. The following is the information concerning the contract during the year 2009:

Particulars	Rs.
Materials Purchased Labour engaged on site Plant installed at site at cost Direct expenditure Other charges Materials sent to site Materials returned to stores Work certified Value of plant as on 31st Dec.,2009 Cost of work not yet certified Material at site 31st Dec.2009 Wages accrued 31st Dec.2009 Direct expenditure accrued 31st Dec.,2009 Cash received from contractee	95,000 75,000 25,000 3,000 5,000 90,000 600 2,00,000 15,000 5,000 1,900 2,500 250 1,90,000

Prepare contract account in the books of Rama & Co. for the year ending 31st Dec., 2009 and show

(i)	The total profit and
(ii)	Profit to be carried over to Profit and Loss A/c.

6+2

(0)

(b)

What is Bin Card? Give its specimen.

1+1

(0)

(a)

Closing stock lying on the last day of accounting year is valued at market price. Whether valuation is acceptable.

(0)

(b)

From the following information, Calculate

1x4

(i)

The overhead absorption rate based on direct labour hours

(0)

(ii)

The overhead absorption rate based on machine hours

(0)

(iii)

Under absorption of overheads and

(0)

(iv)

Over absorption of overheads.

		Budgeted	Actual
Direct Material Direct Labour Production overheads Direct Labour Hours Machine Hours	Rs. Rs. Rs.	1,10,000 2,20,000 2,20,000 50,000 55,000	1,20,000 2,40,000 2,10,000 60,000 60,000