CWA ICWA Inter - Group I : Financial Accounting - December 2010

CWA ICWA Inter - Group I • Financial Accounting • December 2010

This Paper has 39 answerable questions with 4 answered.

I—P5(FAC) Syllabus 2008
Time Allowed : 3 Hours	Full Marks : 100

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

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

Answer Question No. 1 which is compulsory and any five questions from the rest.

Marks

(a)

State whether the following statements are True (T) or False (F):

1x5=5

(i)

Preference shares may be redeemed from the securities premium

(2)

(ii)

Life membership fee may be capitalized and shown in Balance Sheet in liabilities side

(2)

(iii)

R and S divided profit in the ratio of 3:2. T is admitted for 1/5 th share in the business. The new profit sharing ratio will be 3:2:1.

(2)

(iv)

As per AS–2 inventory is valued at the lower of net realizable value and current replacement cost.

(0)

(v)

The Contract of insurance is a contract of guarantee.

(0)

(b)

Fill in the blanks

1x5=5

(i)

Excess of hire purchase price over ________ is treated as hire purchase charges.

(0)

(ii)

Excess of minimum rent over royalties is termed as _________

(0)

(iii)

Balance of preliminary expenses account is shown in Company’s Balance Sheet under the head of _______ on assets side.

(0)

(iv)

The “Average Clause” is applicable when the actual loss is ____________ than the sum assured.

(0)

(v)

Turnover ratios are also known as ______ ratios.

(0)

(c)

Explain the following in single sentences

1x5=5

(i)

Stock Turnover ratio

(0)

(ii)

Net Realizable value,

(0)

(iii)

Personal Accounts

(0)

(iv)

Buy Back of shares

(0)

(v)

Price Earning ratio

(0)

(d)

State the method of preparing Cash Flow statement.

(0)

(e)

What reconciliation entry will be required to be passed in the books of Head office when cash sent by the Branch to Head Office at the end of accounting year has not reached the Head Office?

(0)

(f)

From the four alternatives given against each statement, choose the correct alternative:

1x5=5

(i)

In the absence of an agreement amongst the partners, loan given by a partner to the firm will be at an interest at the rate of

10%

(0)

(ii)

Depreciation accounting is a process of

Apportionment

Valuation

Allocation

Appropriation

(0)

(iii)

Which of the following is a Capital Expenditure

A)	Freight and cartage on purchase of new machine
B)	Legal expanses in connection with defending a title to firm’s property
C)	Expenditure on painting of factory shed
D)	Wages paid to machine operator.

(0)

(iv)

AS–6 is related to:

A)	Valuation of inventories
B)	Accounting for Construction Contracts
C)	Cash Flow Statements
D)	Depreciation accounting

(1)

(v)

As per Section 17 of Banking Companies Act, an Indian Banking company prior to declaration of dividend must transfer to reserve fund the following percentage of profit

10%

20%

25%

30%

(0)

(a)

Ravi purchased a machine on hire purchase system from Moon & Sons. He paid Rs.100000 at the time of agreement and the remaining amount including interest was payable in four annual instalments of Rs.100000 each at the end of each year commencing from the date of agreement. Interest is charged @ 10% per annum.

You are required to prepare the Machinery Account and Moon & Sons account in the books of Ravi for four years if he provides depreciation on machinery @ 20 percent per annum on written down value basis.

(0)

(b)

Match the following:

(i)	AS – 3	(1)	Accounting for Research and Development
(ii)	AS – 7	(2)	Revenue Recognition
(iii)	AS – 9	(3)	Accounting for Construction Contracts
(iv)	AS – 8	(4)	Cash Flow Statements
(v)	AS – 5	(5)	Contingencies and Events Occurring after Balance Sheet date.

(0)

(a)

KC limited has declared 15 percent dividend on equity share capital of Rs.2000000 (divided into shares of Rs.100 each) for the year ending 31^st March, 2010 and dispatched dividend warrants on 18^th July. 2010 by opening a separate bank account on the day. A person holding 800 equity shares did not claim the amount of his share of dividend.

What journal entries will be passed in the books of the company for declaration and the dispatch of dividend warrants and transferring the unclaimed amount so Unclaimed Dividend Account? What further journal entry will he passed in the books of the company when the unclaimed amount is not claimed by the claiment within stipulated time U/S 205(A)(5) of 7 years. Corporate dividend tax may be taken at 17 percent (gross).

(0)

(b)

From the following information prepare a statement of Proprietor’s Fund:–

(i) Current ratio 2.5; (ii) Liquied ratio 1.5; (iii) Proprietory ratio ( Fixed Assets/Prorietory Fund) 0.75; (iv) Working capital Rs. 90,000; (v) Reserves and Surplus Rs.60,000 (vi) Bank Overdraft Rs.20,000; (vii) There is no long term loan or fictitious assets.

(0)

(a)

The following (i) Receipts and Payments Account tor 2009–10; (ii) Balance Sheet, s on 31^st March,2009 and other information are given by the Shiva City College: –

(i)

Receipts and Payments Account for the year ended 31^st March, 2010:

	Rs.		Rs.
To Opening Balance To Tuition fees To Grant To Interest on Bank F.D. To Hall Rent	6,00,000 18,00,000 9,00,000 9,000 30,000	By Salary & Allowances By Provident Fund Contribution BY Printing & Stationery By Books for Library By Postage & Telegram By Newspapers By Laboratory Equipments By Telephone Expenses By Repairs for Building By Misc. Charges By Audit Fee By Creditors for out standing By Bank Fixed Deposit By Closing Balances	21,15,000 1,66,200 51,000 78,000 15,000 9,000 29,400 25,000 32,000 18,000 10,000 21,000 4,00,000 3,69,400
	33,39,000		33,39,000

(ii)

Balance Sheet as on 31^st March, 2009

Liabilities	Rs.	Assets	Rs.
Outstanding Exp Building Fund Scholarship Fund General Reserves Capital Fund	21,000 18,00,000 3,00,000 15,00,000 39,15,000	Cash and Bank Furniture Land and Building Tuition Fee (Outstanding) Library Books Fixed Deposit in Bank	6,00,000 10,50,000 48,00,000 66,000 7,20,000 3,00,000
	75,36,000		75,36,000

(iii)

Other information:

(1)

It was ascertained that Rs.1.70,000 was outstanding by way of tuition fees on 31.03.2010

(2)

The creditors outstanding for library books amounted to Rs.30000 at the end of the financial year 2009–10.

(3)

Outstanding salaries were Rs.90000 as on 31.3.10.

(4)

Depreciation to be charged: Land and Building at 5% Furniture, at 10% and Library Books at 20 %.

You are required to prepare for Shiva City College;

(a)	Income and Expenditure Account for the year ended 31^st March, 2010
(b)	Balance Sheet as on 31^stMarch, 2010

(0)

(b)

Describe how the classification of investments is done by a Banking Company.

(0)

(a)

Asha, Bipasa and Chitra are partners in a partnership firm sharing profits and losses as 8:7:5. From 1.4.09 the partners decided to change their profit sharing ratio as 5:4:1 and for that purpose the following adjustments were agreed upon.

Balance Sheet of the firm As on 31.3.2009 was as under.

(Fig in Rs)
Liabilities		Rs.	Assets		Rs.
Capital A/cs: Asha– Bipasha– Chitra– Reserves B’s loan Trade creditors	50,000 40,000 30,000	1,20,000 30,000 20,000 40,000	Plant & Machinery Furniture Stock Trade Debtors Less Provision Bank	52,000 (–)2000	80,000 10,000 40,000 50,000 30,000
		2,10,000			2,10,000

(i)	Furniture and Machinery were to be depreciated and appreciated by 5% and 10% respectively.
(ii)	Provision for bad debts was to be increased by Rs. 3000.
(iii)	P.& L. A/c. of the firm for the year ended 31.3.10 showed a net profit of Rs.68,700.
(iv)	A contingent liability of Rs.10,000 was to be treated as actual liability.

The partners decided not to alter the book values of the assets, liabilities and reserves but recorded the change by passing one single journal entry.

You are required –

(a)	to show a single journal entry adjusting the capitals of the partners as on 1–4–09, and
(b)	to show the P.&L. A./c. for the year ended 31.3.10 after considering the following adjustments: (i) Interest on capital at 5%, (ii) Interest on B’s loan and (iii) transfer 20% of the divisible profit to the reserves after charging such reserve.

(0)

(b)

State the various accounting concepts.

(0)

(a)

Credential General Insurance Co. supplies you the following information. You are asked to show the amount of claim as it would appear in the Revenue Account for the year ended 31.3.2010.

	Direct business Rs.	Indirect business Rs.
Claims paid during the year: Claims payable– 1.4.09 31.3.10 Claims recieved: Claims receivable– 1.04.09 31.3.10 Expenses of the management– (included Rs.61,500 as Surveyo’s fees and Rs.78,300 as legal expencses for settlement of claims)	90,10,000 15,08,500 17,25,000 – – – 4,10,000	12,40,000 1,55,000 65,500 3,60,000 95,000 1,90,500

(0)

(b)

A limited company finds that the stock sheets as on 31.3.2010 had included an item twice, the cost of which was Rs.50,000.

You are asked to suggest, how the error would be dealt with in the accounts for the year ended on 31.3.2010.

(0)

(c)

While preparing the financial statements of X Co.Ltd, for the year ended 31.12.2009, you came across the following information. State with reasons, how you would deal with them in the financial statements;

There was a major theft of stores valued at Rs.20 lakhs in the preceding year which was detected only during the current accounting year ended on 31.12.2009.

(0)

(a)

Calcutta Head Office has its branch at kanpur. Goods are invoiced to Branch at cost plus 33– 1/3%. All expenses of the Branch are paid by the H.O. From the following particulars you are required to show Branch Stock A/c., Branch Adjustments A/c., Loss in Transit A/c., Pilferage A/c. and Branch P. & L. A/c. in the books of H.O.

	Rs.
Opening stock at branch at cost to branch Goods sent to branch at invoice price Loss in transit at invoice price Goods pilfered at Branch – (at invoice price) Normal loss at invoice price Sales (Credit) Expenses of branch Recovered from Insurance Co. against loss in transit Closing stock at Branch at invoice price	60,000 1,30,000 20,000 6,000 3,000 2,20,000 35,000 12,000 80,500

(0)

(b)

Define Computer Software and explain what should be the period of amortization of the computer software.

(0)

Write short notes on any three

3x5=15

(a)

Non–Banking Assets

(0)

(b)

Disclosures necessary under AS–7.

(0)

(c)

Features of Financial Accounts and Balance Sheet of non–profit seeking organizations.

(0)

(d)

Contingent liability.

(0)

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