CWA/ICWA Final :: Advanced Financial Accounting : December 2006

*I—10(AFA)* *Revised Syllabus*
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 from the rest
Total six questions are to be answered.
Marks

(a)	Accounting involves communication. — Comment.
(b)	Define accounting regulations. State in this context the present framework of corporate accounting in India.
(c)	Define cash and cash equivalent as suggested in accounting standard 3 to be used for preparing a cash-flow statement.
(d)	Distinguish between prior period items and accounting estimates.
(e)	Accounting to sec. 79 of the Companies Act, 1956, what are the two provisions when companies cannot issue share at a discount.
(f)	What is meant by sweat equity share?
(g)	State the disclosure requirement in a case where the Profit and Loss Account and Balance Sheet of a company do not comply with the accounting standard.
(h)	When can revenue be recognized in the case of a transaction of sale of goods?
(i)	Can a company changes the method of providing depreciation?
(j)	What is the function of suspense account in Government Accounting?

2x10

Barun Limited operates a number of retail outlets to which goods are invoiced at wholesale price which is cost plus 25%. The outlets sell the goods at the retail price which is wholesale price plus 20%.

Following is the information regarding one of the outlets for the year ended 31.3.06.

	Rs.
Stock at the outlet 01.04.05 Goods invoiced to the outlet during the year Gross profit made by the outlet Goods lost by fire Expenses of the outlet for the year Stock at the outlet 31.03.06	30,000 3,24,000 60,000 ? 20,000 36,000

You are required to prepare the following accounts in the books of Barun Limited for the year ended 31.03.06:

(a)
(b)
(c)

Outlet Stock Account;
Outlet Profit & Loss Account,
Stock Reserve Account.

6+5+5

Please turn over

( 2 )
I—10(AFA) Revised syllabus
Marks

The following were the Balance Sheets of Bimal Ltd. And Robin Ltd. As at 31st March, 2006:

10+6

Liabilities	Bimal Ltd. (Rs. In lakhs)	Robin Ltd. (Rs. In lakhs)
Equity Shares Capital (fully paid share of Rs. 10 each) Securities Premium Foreign Projects Reserve General Reserve Profit and Loss Account 12% Debentures Bills Payable Sundry Creditors Sundry Provisions	15,000 3,000 - 9,500 2,870 - 120 1,080 1,830	6,000 - 310 3,200 825 1,000 - 463 463
	33,400	12,500

Assets	Bimal Ltd. (Rs. In lakhs)	Robin Ltd. (Rs. In lakhs)
Land and Buildings Plant and Machinery Furniture, Fixtures and Fittings Stock Debtors Cash at Bank Bills Receivable Cost of Issue of Debentures	6,000 14,000 2,304 7,862 2,120 1,114 -	- 5,000 1,700 4,041 1,020 609 80 50
	12,500	33,400

All the bills receivable held by Robin Ltd. Were Bimal Ltd.’s acceptances.
On 1st April, 2006 Bimal Ltd. Took over Robin Ltd. In an amalgamation in the nature of merger. It was agreed that in discharge of consideration for the business Bimal Ltd. Would allot three fully paid equity shares of Rs. 10 each at par for every two shares held in Robin Ltd. It was also agreed that 12% debentures in Robin Ltd. Would be covered into 13% debentures in Bimal Ltd of the same amount and denomination.

Expenses of amalgamation amounting to Rs. 1 lakh were borne by Bimal Ltd.
You are required to:

(i)	Pass journal entries in the books of Bimal Ltd, and
(ii)	Prepare Bimal Ltd.’s Balance Sheet immediately after the merger.

From the following information prepare (i) Debtor’s Ledger Adjustment Account and (ii) General Ledger Adjustment Accounting under self balancing system:
Opening Balance of Sundry Debtors as per list – Rs. 20,000 (Dr.), Rs. 1,000 (Cr.)
Cash and Cheques Receipts – Rs. 80,000 per special column in Cash Book
Credit Sales Rs. 1,00,000 – per Sales Day Book
Discount Allowed Rs. 3,000 – per Cash Book
Returns Inwards Rs. 2,000 – per Return Book
Bad Debt Rs. 1,500 – per Journal
Bills Receivable Received Rs. 10,000 – per Bills Receivable Book
Bills Receivable Discounted Rs. 4,000
Provision for bad debt Rs. 1,000
Bad Debt Dividend Rs. 500
Closing Credit Balance in Sundry Debtors – Rs. 3,000
Rs. 500 is to be transferred from Debtor’s Ledger to Creditor’s Ledger, similarly, Rs. 600 is to be transferred from Creditor’s Ledger to Debtor’s Ledger.

8+8

( 3 )
I—10(AFA) Revised syllabus
Marks

Tile Company leased land in 2002 at a royalty of 10 paise per ton on all the clay raised. Dead rent was Rs. 10,000. Short working was to be recouped during the first 4 years. The clay raised in the first 4 years was as follows:

5+5+6

	Tons
2002 2003 2004 2005	75,000 90,000 60,000 1,20,000	(strike for 3 months)

There was a provision for proportionate reduction in dead rent in case of stoppage of work by strike, lock-out, accident etc.
Show Ledger Accounts in the books of Tile Company.

Y Ltd. Undertook a contract No. 80 for Rs. 7,50,000. The contract account showed the following particulars:
2003:
Materials Rs. 30,000, Wages Rs. 25,000, Overheads Rs. 10,000, Plant Rs. 1,00,000 and Materials at the site at close Rs. 3,000.
2004:
Materials Rs. 1,00,000, Wages Rs. 60,000, Overheads Rs. 15,000, Materials Returned Rs. 8,000. The Plant at its depreciated value was transferred to contract No. 88. Uncertified work Rs. 15,000.
2005:
Materials Rs. 1,60,000; Wages Rs. 1,00,000, Overheads Rs. 28,000 and Materials sold Rs. 4,000.
The amount of work certified at the end of the first year was Rs. 1,00,000. The work certified up to the end of the second year was Rs. 4,00,000 and the work certified in the third year was Rs. 3,50,000. 80 per cent of the certified work was received in cash.
Profit to be taken credit for are one-third and one-half on cash basis in each of the two years respectively. Depreciate plant by 10 per cent on balance at the beginning of each year.
Prepare accounts in respect of the contract at the end of each year.

5+5+6

Please turn over

( 4 )
I—10(AFA) Revised syllabus
Marks

From the following particulars finished by OPTEX Ltd., prepare the Balance Sheet as at 31st March, 2006 as required by Part I, Schedule VI of the Companies Act. Give notes at the foot of the Balance Sheet as may be found necessary.

		Debit (Rs.)	Credit (Rs.)
Equity Capital (face value of Rs. 100) Land Building Plant and Machinery Furniture Calls in Arrears General Reserve Loan from State Financial Corporation		- 2,00,000 3,50,000 5,25,000 50,000 1,000 - -	10,00,000 - - - - - 2,10,000 1,50,000
Stock: Finished Raw Materials Sundry Creditors (for goods and expenses) Loans (unsecured) Preliminary Expenses Cash at Bank Cash Balance Profit & Loss Account Proposed Dividend Advances Sundry Debtors Provision for Taxation	2,00,000 50,000	2,50,000 - - 13,300 2,47,000 30,000 - - 42,700 2,00,000 -	- 2,00,000 1,21,000 - - - 1,00,000 60,000 - - 68,000
		19,09,000	19,09,000

The following additional information is also provided:

(a)

Miscellaneous expenses included Rs. 5,000 audit fees and Rs. 700 for out of pocket expenses paid to the auditors.

(b)

2000 equity shares were issued for consideration other than cash.

(c)

Debtors of Rs. 52,000 are due for more than six months.

(d)

cost of Assets:

Building
Plant and Machinery
Furniture

Rs. 4,00,000
Rs. 7,00,000
Rs. 62,500

(e)

The balance of Rs. 1,50,000 in the loan account with State Finance Corporation is inclusive of Rs. 7,500 for interest accrued but not due. The loan is secured by hypothecation of the plant and machinery.

(f)

Balance at Bank includes Rs. 2,000 with Simplex Bank Ltd., which is not a scheduled Bank.

(g)

Bills receivable for Rs. 2,75,000 maturing on 30th June, 2006 have been discounted.

(h)

The company had contract for the errection of machinery at Rs. 2,50,000 which still incomplete.

Write short notes on the following:

(a)
(b)
(c)
(d)

Appropriation Act;
Difference between Government and commercial functions;
Principles of Government Accounting;
Demand for grant.

4x4

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CWA/ICWA Inter :: Advanced Financial Accounting : December 2006