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Introduction to Cost and Management Accounting – CA Inter Costing Study Material is designed strictly as per the latest syllabus and exam pattern.

Introduction to Cost and Management Accounting – CA Inter Costing Study Material

Question 1.
What is Cost Accounting? Enumerate its important objectives. [CA Inter May 2016, May 2010, May 2008, Nov. 2002, May 2001, 3 Marks]
Answer:
Cost Accounting is defined as “the process of accounting for cost which begins with the recording of income and expenditure or the bases on which they are calculated and ends with the preparation of periodical statements and reports for ascertaining and controlling costs.”

The main objectives of the cost accounting are as follows:
(i) Ascertainment of Cost: The main objective of Cost Accounting is accumulation and ascertainment of cost. Costs are accumulated, assigned and ascertained for each cost object which may be a unit, job, operation, process, department or service.

(ii) Determination of Selling Price and Profitability: The cost accounting system helps in determination of selling price and thus profitability of a cost object. Cost accounting system provides a basis for price fixation and rate negotiation.

(iii) Cost Control: It ensures that expenditures are in consonance with pre-determined set standard and any variation from these set standards is noted and reported on continuous basis. To exercise control over cost, following steps are followed:

• Determination of pre-determined standard or results.
• Measurement of actual performance.
• Comparison of actual performance with set standard or target.
• Analysis of variance and action.

(iv) Cost Reduction: It may be defined “as the achievement of real and permanent reduction in the unit cost of goods manufactured or services rendered without impairing their suitability for the use intended or diminution in the quality of the product.”

(v) Assisting management in decision making: Cost and Management Accounting by providing relevant information, assist management in planning, implementing, measuring, controlling and evaluating of various activities. A robust cost and management accounting system provides internal and external information to the industry which will be relevant for decision making.

Question 2.
Distinguish between Cost Control and Cost Reduction [CA Inter Dec. 2021j May 2019, May 2016, May 2014, Nov. 2011, 5 Marks]
Answer:
Difference between Cost Control and Cost Reduction.

Cost Control	Cost Reduction
Cost Control aims at maintaining the costs as per the established standards.	Cost Reduction is concerned with reducing costs by challenging the standards and en­deavours to improvise them continuously.
It seeks to attain lowest possible cost under existing conditions.	It recognises no condition as permanent, since a change will result in lower cost.
Emphasis is on past and present	Emphasis is on present and future.
It is a preventive function	It is a corrective function which operates even when an efficient cost control system exists.
It ends when targets are achieved.	It has no visible end and is a continuous process.

Question 3.
State the difference between Cost Accounting and Management Accounting. [CA Inter Nov. 2020, May 2011, 4 Marks]
Answer:
Difference between Cost Accounting and Management Accounting

Basis	Cost Accounting	Management Accounting
Nature	It records the quantitative aspect only	It records both qualitative and quantitative aspect.
Objective	It records the cost of produc­ing a product and providing a service	It prorides information to management for planning and co-ordination
Area	It only deals with cost ascertainment.	It is wider in scope as it includes F.A., budgeting, Tax, Planning.
Recording of data	It uses both past and present figures.	It is focused with the projec­tion of figures for future.
Development	It’s development is related to industrial revolution.	It develops in accordance to the need of modern business world.
Rules and Regulations	It follows certain principles and procedures for recording costs of different products	It does not follow any specific rules and regulations.

Question 4.
State the difference between Financial Accounting and Cost Accounting. [ICAl Module]
Answer:
Difference between Financial Accounting and Cost Accounting

Basis	Financial Accounting	Cost Accounting
Objective	It provides information about the financial performance of an entity.	Ascertainment of cost for the purpose of cost control and decision-making.
Recording of data	It records Historical data.	It makes use of both historical and pre-determined costs.
Users of information	The users of financial ac­counting statements are shareholders, creditors, fi­nance analysts, government and its agencies, etc.	The cost accounting infor­mation is generally used by internal management. But sometimes regulatory au­thorities also.
Analysis of cost and profit	It shows profit or loss of the organization either segment wise or as a whole.	It provides the cost details for each cost object ie. product, process, job, operation, con­tracts, etc.
Time period	Financial Statements are prepared usually for a year.	Reports and statements are prepared as and when required.
Presentation of information	A set format is used for pre­senting financial information.	In general, no set formats for presenting cost information is followed.

Question 5.
Why Cost and Management Accounting information are required by the staff at operational level? Describe. [CA Inter May 2018, 5 Marks]
Answer:
The operational level staffs like supervisors, foreman, team leaders are requiring Cost and Management Accounting information:

• to know the objectives and performance goals for them.
• to know product and service specifications like volume, quality and process, etc.,
• to know the performance parameters against which their performance is measured and evaluated,
• to know divisional (responsibility centre) profitability etc.

Question 6.
Describe the uses of Cost and Management Accounting information by the managers. [ICAl Module]
Answer:
The managers use the information:

• to know the cost of a cost object and cost centre,
• to know the price for the product or service,
• to measure and evaluate performance of responsibility centres,
• to know the profitability-product-wise, department-wise, customer-wise etc.,
• to evaluate the strategic options and to make decisions

Question 7.
Briefly explain the essential features of a good cost accounting system. [CA Inter Nov. 2012, Nov. 2005, May 2004, 4 Marks]
Answer:
Essential features of a good cost accounting system are as follows:
(a) Informative and simple: Cost accounting system should be tailor-made, practical, simple and capable of meeting the requirements of a business concern.
(b) Accurate and authentic: The data to be used by the cost accounting system should be accurate and authenticated; otherwise it may distort the output of the system and a wrong decision may be taken.
(c) Uniformity and consistency: There should be uniformity and consistency in classification, treatment and reporting of cost data and related information. This is required for benchmarking and comparability of the results of the system for both horizontal and vertical analysis.
(d) Integrated and inclusive: The cost accounting system should be integrated with other systems like financial accounting, taxation, statistics and operational research etc. to have a complete overview and clarity in results.
(e) Flexible and adaptive: The cost accounting system should be flexible enough to make necessary amendment and modifications in the system to incorporate changes in technological, reporting, regulatory and other requirements.
(f) Trust on the system: Management should have trust on the system and its output. For this, an active role of management is required for the development of such a system that reflects a strong conviction in using information for decision making.

Question 8.
What are the essential factors for installing a cost accounting system? Explain. [CA Inter May 2017, Nov. 2010, 4 Marks]
Answer:
Before setting up a system of cost accounting, the following factors should be studied:
(i) Objective: The objective of costing system, for example whether it is being introduced for fixing prices or for establishing a system of cost control.

(ii) Nature of Business or Industry: The industry in which the business is operating. Every business or industry has its own uniqueness and objectives. According to its cost information requirement, cost accounting methods are followed. For example, an oil refinery maintains process wise cost accounts to find out the cost incurred on a particular process, say in crude refinement process etc.

(iii) Organisational Hierarchy: Costing system should fulfil the information requirements of different levels of management. Top management is concerned with the corporate strategy, strategic level management is concerned with marketing strategy, product diversification, product pricing etc. Operational level management needs the information on standard quantity to be consumed, report on idle time etc.

(iv) Knowing the product: Nature of the product determines the type of costing system to be implemented. The product which has by-products requires costing system which accounts for by-products as well. In case of perishable or short self- life products, marginal costing is appropriate to know7 the contribution and minimum price at which products could be sold.

(v) Knowing the production process: A good costing system can never be established without the complete knowledge of the production process. Cost apportionment can be done on the most appropriate and scientific basis if a cost accountant can identify degree of effort or resources consumed in a particular process. This also includes some basic technical know-how and process peculiarity.

(vi) Inf ormation synchronisation: Establishment of a department or a system requires substantial amount of organisational resources. While drafting a costing system, information needs of various other departments should be taken into account. For example, in a typical business organisation accounts department needs to submit monthly stock statement to its lender bank, quantity wise stock details at the time of filing returns to tax authorities etc.

(vii) Method of maintenance of cost records: The organisation must determine beforehand the manner in which Cost and Financial accounts could be inter-locked into a single integral accounting system and how the results of separate sets of accounts ie. cost and financial, could be reconciled by means of control accounts.

(viii) Statutory compliances and audit: Records are to be maintained to comply with statutory requirements and applicable cost accounting standards should be followed.

(ix) Information Attributes: Information generated from the Costing system should possess all the attributes of useful information ie. it should be complete, accurate, timely, relevant to have an effective management information system (MIS).

Question 9.
Give any five examples of the impact of use of Information Technology in Cost Accounting. [CA Inter January 2021, 5 Marks]
Answer:
Example of Impact of Information Technology in cost accounting may include the following:
(i) After the introduction of ERPs, different functional activities get inte-grated and as a consequence a single entry into the accounting system provides custom made reports and saves an organisation from preparing different sets of documents.

(ii) A move towards paperless environment can be seen in which the related department can get the e-copy of documents like Bill of Material, Material Requisition Note, Goods Received Note, labour utilisation report etc.

(iii) Information Technology with the help of internet (including intranet and extranet) helping in resource procurement and mobilisation. For example, production department can get materials from the stores without issuing material requisition note physically. Similarly, purchase orders can be initiated to the suppliers with the help of extranet. This enables an entity to shift towards Just-in-Time (JiT) approach of inventory management and production.

(iv) Cost information for a cost centre or cost object is ascertained with accuracy in timely manner. Each cost centre and cost object is codified and all related costs are assigned to the cost objects or cost centres using assigned codes.

(v) Uniformity in preparation of report, budgets and standards can be achieved with the help of IT. ERP software plays an important role in bringing uniformity irrespective of location, currency, language and regulations.

(vi) Cost and revenue variance reports are generated in real time basis which enables the management to take control measures immediately.

(vii) IT enables an entity to monitor and analyse each process of manufacturing or service activity closely to eliminate non-value added activities.

Question 10.
Define cost object and give three examples. [CA Inter May 2000, 2 Marks]
Answer:
Cost object is anything for which a separate measurement of cost is re-quired. Cost object may be a product, a service, a project, a customer, a brand category, an activity, a department or a programme etc.
Examples:

• Product: Smart phone, Tablet computer, SUV Car, Book etc.
• Project: Metro Rail project, Road projects etc.
• Activity: Quality inspection of materials, Placing of orders etc.

Question 11.
Cost of a product or service is required to be expressed in suitable cost unit. State the cost units for the following industries:
(i) Steel
(ii) Automobile
(iii) Transport
(iv) Power
(v) Hotel
(vi) Hospital [CA Inter May 2014, May 2013, 6 Marks]
Answer:

Industry	Cost Unit
(i) Steel	Tonne
(ii) Automobile	Numbers
(iii) Transport	Passenger km/Tonne km
(iv) Power	Kilowatt hour (Kwh)
(v) Hotel	Per room day/ or per meal
(vi) Hospital Tonne	Per patient day/ or per bed/day

Question 12.
Mention the Cost Unit of the following Industries;
1. Electricity
2. Automobile
3. Cement
4. Steel
6. Brick Making
7. Coal Mining
8. Engineering
9. Professional Services
10. Hospital [CA Inter Nov. 2019, 5 Marks]
Answer:

Industry	Cost Unit Basis
(1) Electricity	Kilowatt-hour (kwh)
(2) Automobile	Number
(3) Cement	Ton/per bag etc.
(4) Steel	Ton
(5). Gas ‘	Cubic feet
(6) Brick-making	1,000 bricks
(7) Coal mining	Tonne/ton
(8) Engineering	Contract, job
(9) Professional services	Chargeable hour, job, contract
(10) Hospitals	Patient day

Question 13.
Mention and explain types of responsibility centres. [CA Inter Nov. 2018, 5 Marks]
Answer:
There are 4 types of responsibility centres:
(i) Cost Centres: The responsibility centre which is held accountable for incurrence of costs which are under its control. The performance of this responsibility centre is measured against pre-determined standards or budgets. The cost centres are of two types, viz., Standard Cost Centre and Discretionary Cost Centre.

(ii) Revenue Centres: The responsibility centres which are accountable for generation of revenue for the entity. For example, sales department which is the responsible for achievement of sales target and revenue generation. Though, revenue centres does not have control on the all expenditures it incurs but some time expenditures related with selling activities like commission to sales person etc. are incurred by revenue centres.

(iii) Profit Centres: These are the responsibility centres which have both responsibility of generation of revenue and incurrence of expenditures. Since, managers of profit centres are accountable for both costs as well as revenue, profitability is the basis for measurement of performance of these responsibility centres. Examples of profit centres are decentralised branches of an organisation.

(iv) Investment Centres: These are the responsibility centres which are not only responsible for profitability but also has the authority to make capital investment decisions. The performance of these responsibility centres is measured based on Return on Investment (Rol) besides profit.

Question 14.
Specify the types of Responsibility centres under the following situations: [CA Inter July 2021, 5 Marks]
(i) Purchase of bonds, stocks or real estate property.
(ii) Ticket counter in a Railway station. .
(iii) Decentralized branches of an organisation.
(iv) Maharatna, Navratna and Miniratna public sector undertaking (PSU) of Central Government.
(v) Sales Department of an organisation.
Answer:
(i) Investment Centre
(ii) Revenue Centre
(iii) Profit Centre
(iv) Investment Centre
(v) Revenue Centre

Question 15.
What is meant by “Cost Centre”? What are the different types of cost centres? [CA Inter Nov. 2016, May 2015, Nov. 2002, 4 Marks]
Answer:
Cost Centre: It is the responsibility centre which is held accountable for incurrence of costs which are under its control. The performance of this responsibility centre is measured against pre-determined standards or budgets.
The cost centres are of two types:
(a) Standard Cost Centre: It is the cost centre where output is measurable and input required for the output can be specified. An estimate of standard units of input to produce a unit of output is set and the actual cost for inputs is compared with the standard cost. Any deviation (variance) in cost is measured and analysed into controllable and uncontrollable cost. The manager of the cost centre is expected to comply with the standard and held responsible for adverse cost variances. The input-output ratio for a standard cost centre is clearly identifiable.
(b) Discretionary Cost Centre: The cost centre whose output cannot be measured in financial terms, thus input-output ratio cannot be defined. The cost of input is compared with allocated budget for the activity. Examples are Research & Development department, Advertisement department.

Question 16.
What do you mean by ‘Profit Centre’? [CA Inter May 2016, 2 Marks]
Answer:
Profit Centre is the responsibility centre which has both responsibility of generation of revenue and incurrence of expenditures. Since, managers of profit centres, are accountable for both costs as well as revenue, profitability is the basis for measurement of performance of these responsibility centres. Examples are decentralised branches of an organisation.

Question 17.
Distinguish between Profit Centres and Investment Centres. [CA Inter May 2006, 2 Marks]
Answer:
Profit centres are the responsibility centres which have both responsibility of generation of revenue and incurrence of expenditures. Profitability is the basis for measurement of performance of these responsibility centres. Investment centres are the responsibility centres which are not only responsible for profitability but also have the authority to make capital investment decisions. The performance of these responsibility centres are measured on the basis of Return on Investment (Rol) besides profit.

Question 18.
Distinguish between cost units and cost centres. [CA Inter May 2011, 4 Marks]
Answer:
Cost units: It is a unit of product, service or time (or combination of these) in relation to which costs may be ascertained or expressed. A batch which consists of a group of identical items and maintain its identity through one or more stages of production may also be considered as a cost unit. Cost units are usually the units of physical measurement like number, weight, area, volume, length, time and value.

Cost centre: It is the responsibility centre which is held accountable for incur-rence of costs which are under its control. The performance of this responsi-bility centre is measured against pre-determined standards or budgets. The cost centres are of two types, viz, Standard Cost Centre and Discretionary Cost Centre.

Question 19.
State the limitations of cost accounting. [ICAI Module]
Answer:
The limitations of cost accounting are as follows:
1. Expensive: It is expensive because analysis, allocation and absorption of overheads requires considerable amount of additional work, and hence additional money.
2. Requirement of reconciliation: The results shown by cost accounts differ from those shown by financial accounts. Thus preparation of reconciliation statements is necessary to verify their accuracy. ;
3. Duplication of work: It involves duplication of work as organisation has to ; maintain two sets of accounts ie. Financial Accounts and Cost Accounts.

Question 20.
Discuss cost classification based on variability and controllability. [CA Inter May 2018, May 2008, Nov. 2006, Nov. 2004, May 2003, Nov. 2001, May 2001, 4 Marks]
Answer:
Cost classification based on variability

• Fixed cost : These are the costs which are incurred for a period, and which, within certain output and turnover limits, tend to be unaffected by fluctuations in the levels of activity (output or turnover). They do not tend to increase or decrease with the changes in output. For example, rent, insurance of factory building etc.
• Variable costs: These costs tend to vary with the volume of activity. Any increase in the activity results in an increase in the variable cost and vice versa. For example, direct material cost, direct labour cost, etc.
• Semi-variable costs: These costs contain both fixed and variable components and are thus partly affected by fluctuations in the level of activity. For example, telephone bill, gas and electricity etc. Cost classification based on controllability
• Controllable costs: Cost that can be controlled, typically by a cost, profit or investment centre manager is called controllable cost. Controllable costs incurred in a particular responsibility centre can be influenced by the action of the manager heading that responsibility centre e.g., direct costs.
• Uncontrollable costs: Costs which cannot be influenced by the action of a specified member of an undertaking are known as uncontrollable costs. For example, expenditure incurred by the tool room is controllable by the foreman in-charge of that section but the share of the tool-room i expenditure which is apportioned to a machine shop is not controlled by the machine shop foreman.

Question 21.
Explain the following:
1. Explicit costs
2. Implicit costs [CA Inter May 2014, May 2005, May 2001, 2 Marks]
Answer:
Explicit costs: These costs are also known as out-of-pocket costs and refer to costs involving immediate payment of cash. Salaries, wages, postage and telegram, printing and stationery, interest on loan etc. are some examples of explicit costs involving immediate cash payment.
Implicit costs: These costs do not involve any immediate cash payment. They are not recorded in the books of account. They are also known as economic costs.

Question 22.
Explain:
(i) Product cost [CA Inter Nov. 2016, May 2003, 2 Marks]
(ii) Sunk cost [CA Inter Nov, 2016, May 2003, 2 Marks]
(iii) Opportunity Cost [CA Inter May 2018, Nov. 2016, May 2003, 2 Marks]
Answer:
(i) Product Cost: These are the costs which are associated with the pur! chase and sale of goods (in the case of merchandise inventory). In the production scenario, such costs are associated with the acquisition and conversion of materials and all other manufacturing inputs into finished product for sale. Hence, under marginal costing, variable manufacturing costs and under absorption costing, total manufacturing costs (variable and fixed) constitute inventoriable or product costs.

(ii) Sunk cost: Historical costs incurred in the past are known as sunk costs, They play no role in decision making in the current period. For example, in case of decision relating to the replacement of a machine, the WDV, of the existing machine is a sunk cost and therefore, not considered,

(iii) Opportunity Cost: This cost refers to the value of sacrifice made or benefit of opportunity foregone in accepting an alternative course of action. For example, a firm financing its expansion plan by withdrawing money from its bank deposits. In such a case the loss of interest on the bank deposit is the opportunity cost for carrying out the expansion plan.

Question 23.
Define the following:
(a) Imputed Cost
(b) Capitalised cost [CA Inter Nov. 2009, 2 Marks]
Answer:
(a) Imputed Cost: Imputed costs are notional costs which do not involve any cash outlay. For example, interest on capital, the payment for which is not actually made. These costs are similar to opportunity costs.
(b) Capitalised Cost: Capitalised Costs are costs which are initially recorded as assets and subsequently treated as expenses. Example, installation expenses on the erection of a machine are added to the cost of a machine.

Question 24.
Explain the following:
1. Out-of-pocket cost
2. Shut down costs
3. Discretionary costs
4. Engineered costs [ICAI Module]
Answer:
1. Out-of-pocket Cost: It is that portion of total cost, which involves cash outflow. It can be used in decisions relating to fixation of selling price in recession, make or buy, etc. Out-of-pocket costs can be avoided or saved if a particular proposal under consideration is not accepted.

2. Shut down Costs: Those costs, which continue to be, incurred even when a plant is temporarily shut-down e.g. rent, rates, depreciation, etc. These costs cannot be eliminated with the closure of the plant.

3. Discretionary Costs: Such costs are not tied to a clear cause and effect relationship between inputs and outputs. They usually arise from periodic decisions regarding the maximum outlay to be incurred. Examples include advertising, public relations, executive training etc.

4. Engineered Costs: These are costs that result specifically from a clear cause and effect relationship between inputs and outputs. The relationship is usually personally observable. Examples of inputs are direct material costs, direct labour costs etc. Examples of output are cars, computers etc.

Question 25.
Distinguish between product cost and period cost. [CA Inter June 2009, May 2006, 2 Marks]
Answer:
Product costs are associated with the purchase and sale of goods. In the production scenario, such costs are associated with the acquisition and conversion of materials and all other manufacturing inputs into finished product for sale. Hence under marginal costing, variable manufacturing costs and under absorption costing, total manufacturing costs (variable or fixed) constitute inventoriable or product costs.
Period costs are the costs, which are not assigned to the products but are charged as expense against revenue of the period in which they are incurred. All non-manufacturing costs such as general & administrative expenses, selling and distribution expenses are recognised as period costs.

Question 26.
State the types of cost in the following cases:
(i) Interest paid on own capital not involving any cash outflow.
(ii) Withdrawing money from bank deposit for the purpose of purchasing new machine for expansion purpose.
(iii) Rent paid for the factory building which is temporarily closed.
(iv) Cost associated with the acquisition and conversion of material into finished product. [CA Inter May 2012, 4 Marks]
Answer:
(i) Imputed Cost
(ii) Opportunity cost
(iii) Shutdown cost
(iv) Product cost

Question 27.
Describe the various methods of costing. [ICAI Module]
Answer:
(i) Single or Output Costing: Under this method, the cost of a product is ascertained, the product being the only one produced like bricks, coals, etc.

(ii) Batch Costing: In this method, a batch represents a number of small orders passed through the factory in batch and each batch is treated as a unit of cost and costed separately. The cost per unit is determined by dividing the cost of the batch by the number of units produced in the batch.

(iii) Job Costing: In this method, cost of each job is ascertained separately. It is suitable in all cases where work is undertaken on receiving a customer’s order like a printing press, motor workshop, etc.

(iv) Contract Costing: Under this method, the cost of each contract is ascertained separately. It is suitable for firms engaged in the construction of bridges, roads, buildings etc.

(v) Process Costing: Under this method, the cost of completing each stage of work is ascertained, like cost of making pulp and cost of making paper from pulp.

(vi) Operating Costing: It is used in the case of concerns rendering services like transport, supply of water, retail trade etc.

(vii) Multiple Costing: It is a combination of two or more methods of costing mentioned above. Suppose a firm manufactures bicycles including its components; the parts will be costed by job or batch costing but the cost of assembling the bicycle will be computed by Single or output costing method.

Question 28.
State the method of costing that would be most suitable for:
(a) Oil refinery
(b) Bicycle manufacturing
(c) Interior decoration
(d) Airlines company [CA Inter Nov. 2008, 2 Marks]
Answer:

Industry	Costing Method
Oil Refinery	Process costing
Bicycle manufacturing	Multiple costing
Interior decoration	Job costing
Airlines	Operating costing

Question 29.
Identify the methods of costing for the following:
(i) Where all costs are directly charged to a specific job.
(ii) Where all costs are directly charged to a group of products.
(iii) Where cost is ascertained for a single product.
(iv) Where the nature of the product is complex and method cannot be ascertained. [CA Inter Nov. 2017, Nov. 2014, 4 Marks]
Answer:
(i) Job Costing
(ii) Batch Costing
(iii) Unit Costing or Single or Output Costing
(iv) Multiple Costing

Question 30.
State the method of costing and also the unit of cost for the following industries:
(i) Hotel
(ii) Toy-making
(iii) Steel
(iv) Ship Building [CA Inter Nov. 2015, 4 Marks]
Answer:

Industry	Method of Costing	Unit of Cost
Hotel	Operating Costing	Room day/per bed
Toy Making	Batch Costing	Units/Batch
Steel	Process Costing/Single Costing	Per Tonne/Per MT
Ship Building	Contract Costing	Project/Unit

Question 31.
Give the method of costing and the unit of cost against the under noted industries:
(i) Road transport
(ii) Steel
(iii) Bicycles
(iv) Bridge construction [CA Inter Nov. 2016, 4 Marks]
Answer:

Industry	Method of Costing	Suggestive Unit of Cost
Road Transport	Operating Costing	Passenger k.m. or tonne k.m.
Steel	Process Costing/Single or Unit Costing	Tonne/Metric Ton (MT)/ per kg/per bar
Bicycles	Multiple Costing	Number/per piece
Bridge Construction	Contract Costing	Project/Unit

Question 32.
State the Method of Costing to be used in the following industries: (i) Real Estate
(ii) Motor repairing workshop
(iii) Chemical Industry
(iv) Transport service
(v) Assembly of bicycles
(vi) Biscuits manufacturing Industry
(vii) Power supply Companies
(viii) Car manufacturing Industry
(ix) Cement Industry
(x) Printing Press [CA Inter Nov. 2020, 5 Marks]
Answer:

Industries	Method of Costing
(i) Real Estate	Contract Costing
(ii) Motor Repairing Workshop	Job Costing
(iii) Chemical Industry	Process Costing
(iv) Transport Service	Service/Operating Costing
(v) Assembly of Bicycles	Unit/Single/Output/Multiple Costing
(vi) Biscuits Manufacturing Industry	Batch Costing
(vii) Power Supply Companies	Service/Operating Costing
(viii) Car Manufacturing Industry	Multiple Costing
(ix) Cement Industry	Unit/Single/Output Costing
(x) Printing Press	Job Costing

Question 33.
State the method of costing that would be most suitable for:
(i) Oil Refinery
(ii) Interior Decoration
(iii) Airlines Company
(iv) Advertising
(v) Car Assembly
Answer:

Industry	Method of Costing
(i) Oil Refinery	Process Costing
(ii) Interior Decoration	Job Costing
(iii) Airlines Company	Operation/Service Costing
(iv) Advertising	Job Costing
(v) Car Assembly	Multiple Costing

Question 34.
What are the techniques of costing used for ascertaining cost? [CA Inter Dec. 2021, 5 Marks]
Answer:
1. Uniform Costing: When a number of firms in an industry agree among themselves to follow the same system of costing, they are said to follow a system of uniform costing.

2. Marginal Costing: It is defined as the ascertainment of marginal cost by differentiating between fixed and variable costs. It is used to ascertain effect of changes in volume or type of output on profit.

3. Standard Costing: Here, standard costs are pre-determined and subsequently compared with the recorded actual costs. It is thus a technique of cost ascertainment and cost control. It is especially suitable where the manufacturing method involves production of standardised goods of repetitive nature.

4. Historical Costing: It is the ascertainment of costs after they have been incurred.

5. Absorption Costing: It is the practice of charging all costs, both variable and fixed to operations, processes or products. This differs from marginal costing where fixed costs are excluded.

Preliminary – CA Inter Law MCQ is designed strictly as per the latest syllabus and exam pattern.

Preliminary – CA Inter Law MCQ

Question 1.
Angel Infrastructure Pvt. Ltd. with a paid-up capital of ₹ 45 Lakhs and annual turnover of ₹ 175 Lakhs, is a wholly owned subsidiary of Almightly Infrastructure Development Ltd. a listed company. Can Angel Infrastructures be called a small company?

(a) Yes. The paid-up capital and annual turnover of Angel Infrastructure Pvt. Ltd. is not exceeding the limit as specified under the definition of small company.
(b) No. Because Angel Infrastructure Pvt. Ltd. is a wholly owned subsidiary company.
(c) No. Because Angel Infrastructure Pvt. Ltd. is not a subsidiary of a listed company.
(d) No. Because the paid-up capital is ₹ 45 Lakhs less than prescribed limit of ₹ 50 Lakhs but its turnover is exceeding = ₹ 100 Lakhs.

Answer:

(b) No. Because Angel Infrastructure Pvt. Ltd. is a wholly owned subsidiary company.

Question 2.
Seema Bulbs Ltd. is desirous of having significant influence in Shaukeen LED Bulbs and Tubes Ltd. so that the latter becomes its ‘associate company. For exercising ‘significant influence’ one of the options available to Seema Bulbs is to control at least 20% of total voting power of Shaukeen LED Bulbs and Tubes Ltd. What is the other option available?

(a) To control or participate in the recruitment decisions relating to appointment of middle management personnel of Shaukeen LED Bulbs and Tubes Ltd. under an agreement.
(b) To control or participate in the dividend decisions of Shaukeen LED Bulbs and Tubes Ltd. under an agreement.
(c) To control or participate in the business decisions of Shaukeen LED Bulbs and Tubes Ltd. under an agreement.
(d) To control or participate in the export decisions of Shaukeen LED Bulbs and Tubes Ltd. under an agreement.

Answer:

(c) To control or participate in the business decisions of Shaukeen LED Bulbs and Tubes Ltd. under an agreement.

Question 3.
Ruchir Marcons Ltd. which provides marketing and consultancy services is keen to have a ‘significant influence’ in Ruchika Marketing Ltd. so that it becomes its ‘associate company. For having ‘significant influence’ Ruchir Marcons Ltd. needs to control certain percentage of total voting power of Ruchika Marketing Ltd. What is that?

(a) For creating ‘significant influence’ Ruchir Marcons Ltd. must control at least 5% of total voting power of Ruchika Marketing Ltd.
(b) For creating ‘significant influence’ Ruchir Marcons Ltd. must control at least 10% of total voting power of Ruchika Marketing Ltd.
(c) For creating ‘significant influence’ Ruchir Marcons Ltd. must control at least 15% of total voting power of Ruchika Marketing Ltd.
(d) For creating ‘significant influence’ Ruchir Marcons Ltd. must control at least 20% of total voting power of Ruchika Marketing Ltd.

Answer:

(d) For creating ‘significant influence’ Ruchir Marcons Ltd. must control at least 20% of total voting power of Ruchika Marketing Ltd.

Question 4.
H Ltd. is the holding company of S Pvt. Ltd. As per the last profit and loss account for the year ending on 31st March, 2023 of S Ltd., its turnover was to the extent of ₹ 1.50 crores; and paid-up share capita) was ₹ 40 lakhs. Since S Pvt Ltd., as per the turnover and paid- up share capital norms, qualifies for the status of a ‘small company it wants to be categorized as ‘small company. Advise.

(a) If H Ltd. converts itself into a private limited company, S Pvt. Ltd. being its subsidiary can be categorized as a ‘small company’ since it meets turnover and paid-up share capital norms applicable to a ‘small company’.
(b) So long as S Pvt. Ltd. meets the turnover and paid-up share capital norms applicable to a
Preliminary ‘small company’ (which at present is the case), it shall be categorized as a ‘small company’.
(c) S Pvt. Ltd. cannot be categorized as a ‘small company’ because it is the subsidiary of another company.
(d) Categorization of S Pvt. Ltd. is possible only if H Ltd., the holding company, also meets the turnover and paid-up share capital norms applicable to a ‘small company’.

Answer:

(c) S Pvt. Ltd. cannot be categorized as a ‘small company’ because it is the subsidiary of another company.

Question 5.
Savita and her husband Sukesh have got Incorporated Savi Trading Company Private Limited with authorised and paid-up share capital of ₹ 40 lakhs. As per its last profit and loss account relating to the FY 2021-22, the turnover was ₹ 1 crore and 70 lakhs. Accordingly, their company is considered as a ‘small company’ in the FY 2022-23. They think that the status of ‘small company’, once bestowed, will continue till next 10 financial years. Advise.

(a) Their contention that the status of ‘small company’, once bestowed, will continue till next 10 financial years is absolutely correct.
(b) The status of ‘small company’, once bestowed, can continue till next 7 financial years only.
(c) The status of ‘small company’ will keep on changing from time to time, for it is not permanent for any particular period.
(d) If ROC permits, the status of ‘small company’ can continue maximum for 3 years including the year in which it is attained.

Answer:

(c) The status of ‘small company’ will keep on changing from time to time, for it is not permanent for any particular period.

Questions From RTPs, MTPs, And Past Exams (Memory Based) Of ICAI

Question 6.
Feel Rich Co. Ltd. having its registered office at New Delhi, is a subsidiary of a German company named Richman Company limited. The financial year of the parent/holding company ends on 31st December every year. The subsidiary company intends to follow a different financial year for consolidation of its accounts with its parent company, situated outside India. For doing so it is required to take prior permission of the competent authority.

For the purpose from the following who will be this competent authority (MTP-April 19)

(a) Registrar of Companies at New Delhi
(b) Central Government
(c) Tribunal
(d) SEBI
Answer:
(b) Central Government

Question 7.
A Ltd. is the holding company of B Ltd. Another company C Ltd. is the subsidiary company of B Ltd, Is there any relationship between A Ltd. and C Ltd. [RTP-May 19]

(a) There is no relationship between A Ltd. and C Ltd.
(b) C Ltd. is deemed to be the subsidiary of A Ltd.
(c) A Ltd. shall be deemed to be the holding company of C Ltd. provided A Ltd. acquires at least 10% stake in C Ltd.
(d) C Ltd. shall be deemed to be the subsidiary of A Ltd. if the latter company acquires minimum 10% stake in the former company within six months after C Ltd. becomes subsidiary of B Ltd.

Answer:

(b) C Ltd. is deemed to be the subsidiary of A Ltd.

Question 8.
Shruti, a common friend of Suchitra and Sukanya, got incorporated OPC sometime before and during a chit-chat with her friends informed them that there is some limit on the maximum capital which her OPC can have and she would have to convert her OPC either into a private or public limited company if such limit exceeded. Suchitra and Sukanya who are desirous of forming a private limited company for carrying on textile trading business, are unsure about the maximum capital which a private limited company can have. Advise. (RTP-May 19, MTP-March 19]

(a) A private limited company can have maximum of ₹ 1 crore as share capital.
(b) A private limited company can have maximum of ₹ 2 crores as share capital.
(c) A private limited company can have maximum of ₹ 5 crores as share capital.
(d) A private limited company can have unlimited share capital.

Answer:

(d) A private limited company can have unlimited share capital.

Question 9.
Part of the capital for which application have been received from the public and shares allotted to them is known as: [MTP-Oct. 19]

(a) Nominal capital
(b) Issued capital
(c) Subscribed capital
(d) Called up capital

Answer:

(c) Subscribed capital

Question 10.
Roma along with her six friends has got incorporated Roma Trading Ltd. in May 2021. She kept the paid-up share capital at ₹ 30 lakhs. Further, in April 2022, she noticed that in the last financial year, the turnover of the company was well below ₹ 20 crores. Advise whether the company can be treated as a ‘small company. [RTP-Nov. 20]

(a) Roma Trading Ltd. is definitely a ‘small company’ since its paid-up capital is much below 2 crores and also its turnover has not exceeded the threshold limit of ₹ 20 crores.

(b) The concept of ‘small company’ is applicable only in case of a private limited company/OPC and therefore, despite meeting the criteria of ‘small company’ it being a public limited company cannot enjoy benefits of ‘small company’.

(c) Unlike a private limited company/OPC which automatically becomes a ‘small company’ as soon as it meets the criteria of ‘small company’, Roma Trading Ltd. being a public limited company has to maintain the norms applicable to a ‘small company’ continuously for two years so that, thereafter, it is treated as a ‘small company’.

(d) If all the shareholders of Roma Trading Ltd. give an undertaking to the ROC stating that they will not let the paid share capital and also turnover exceed the limits applicable to a ‘small company’ in the next two years, then it can be treated as a ‘small company’.

Answer:

(b) The concept of ‘small company’ is applicable only in case of a private limited company/OPC and therefore, despite meeting the criteria of ‘small company’ it being a public limited company cannot enjoy benefits of ‘small company’.

Question 11.
Abhilasha and Amrita have incorporated a ‘not for profit’ private limited company which is registered u/s 8 of the Companies Act, 2013. One of their friends has informed them that their company can be categorized as a ‘small company’ because as per the last profit and loss account for the year ending on 31st March, 2022, its turnover was less than 20 crores and its paid-up share capital was less than ₹ 2 cores. Advise. [MTP-March 21]

(a) Sec. 8 company, which meets the criteria of ‘turnover’ and ‘paid-up share capital’ in the last financial year, can avail the status of ‘small company’ only if it acquires at least 5% stake in another ‘small company’ within the immediately following financial year.

(b) If the acquisition of minimum 5% stake in another ‘small company’ materializes in the second financial year (and not in the immediately following financial year) after meeting the criteria of ‘turnover’ and ‘paid- up share capital’ then with the written permission of concerned ROC, it can acquire the status of ‘small company’.

(c) The status of ‘small company’ cannot be bestowed upon a ‘not for profit’ company which is registered u/s 8 of the Companies Act, 2013.

(d) Sec. 8 company, if incorporated as a private limited company (and not as public limited company) can avail the status of ‘small company’ with the permission of concerned ROC, after it meets the criteria of’ turnover’ and ‘paid-up share capital’.

Answer:

(c) The status of ‘small company’ cannot be bestowed upon a ‘not for profit’ company which is registered u/s 8 of the Companies Act, 2013.

Question 12.
Kamya Ltd. is incorporated on 3rd January, 2022. As per the Companies Act, 2013, what will be the financial year for the company: [MTP-March 22]

(a) 31st March, 2022.
(b) 31st December, 2022.
(c) 31st March, 2023.
(d) 30th September, 2023.

Answer:

(c) 31st March, 2023.

CA Inter Law Question Paper May 2018 – CA Inter Law Study Material is designed strictly as per the latest syllabus and exam pattern.

CA Inter May 2018 Law Question Paper

Question 1(a).
MNP Private Ltd. is a company registered under the Companies Act, 2013 with a paid up share capital of ₹ 45 lakh and turnover of ₹ 3 crores. Explain the meaning of the ‘Small Company’ and examine the following in accordance with the provisions of the Companies Act, 2013:
(i) Whether the MNP Private Ltd. can avail the status of Small Company?
(ii) What will be your answer if the turnover of the company is ₹ 1.50 crore?
Answer:
As per section 2(85) of Companies Act, 2013, small company means company other than public company, which has:

• Paid up share capital not exceed than ₹ 50 lacs or such higher amount as may be prescribed which shall not be more than ₹ 10 crore; and
• Turnover not more than ₹ 2 crore or such higher amount not exceeding ₹ 100 crore as per profit and loss account of its immediately preceding financial year
  1. Accordingly, MNP Private Ltd. cannot avail status of small company as its turnover is more than ₹ 2 cr.
  2. Answer will be different, if it has turnover of ₹ 1.5 cr. Then, it will be treated as small company.

Question 1(b).
Rera Ltd. company incorporated under the Companies Act, 2013 having turnover of ₹ 100 crore. Net profit ₹ 3 crore. Accumulated loss of ₹ 50 crore and securities premium ₹ 300 crore as per the audited accounts of the company for the financial year 2016-17.

The CFO of the company informed the directors of the company that the Corporate Social Responsibility (CSR) committee is required to be constituted as per the Companies Act, 2013. The directors seek your advice as a professional regarding the criteria required to constitute CSR committee and whether it is applicable to Rera Ltd. or not.
Answer:
Company, which attracts provision of section 135 of Companies Act, 2013 regarding corporate social responsibility, required to constitute Corporate Social Responsibility Committee (CSR). If company attracts any one of following criteria, it is required to spend 2% of its average net profit on CSR activities and require to constitute CSR committee:

• A net worth of ₹ 500 crore or more
• A turnover of ₹ 1,000 crore or more
• Net profit of ₹ 5 crore or more

From the figures given in question, it can be said that company is not attracting any of criteria of section 135 and therefore it is not required to constitute CSR committee. CSR provisions are not applicable to Rera Ltd.

Question 1(c).
ABC Ltd. sells its products through some agents and it is not the custom in their business to sell the products on credit. Mr. Pintu, one of the agents sold goods of ABC Ltd. to M/s. Parul Pvt. Ltd. (on credit) which was insolvent at the time of such sale. ABC Ltd. sued Mr. Pintu for compensation towards the loss caused due to sale of products to M/s. Parul Pvt. Ltd. Will ABC Ltd. succeed on its claim?
Answer:
An agent is bound to conduct the business of his principal according to principal’s directions or the custom of trade (in absence of principal’s directions). When agent acts otherwise, and any loss is incurred, he must make it good to his principal. – Section 211 of Indian Contract Act, 1872. It is one of duty of agent.

When Pintu, one of agents sold goods to M/s. Parul Pvt. Ltd. on credit, he has committed breach of his duty. He has neither obtained direction from his principal nor followed custom. Moreover, Parul Pvt. Ltd. was insolvent at the time of sale. An agent should have exercise duty to act with reasonable care and skill. Accordingly, agent is liable to compensate loss to his principal. ABC Ltd. will succeed in its claim.

Question 1(d).
X owned a land with fifty tamarind trees. He sold his land and the timber (obtained after cutting the fifty trees) to Y. X wants to know whether the sale of timber tantamount to sale of immovable property. Advise him with reference to provisions of General Clauses Act, 1897.
Answer:
As per section 3(26) of General Clauses Act, 1897, immovable property includes:

• Land,
• Benefits to arise out of land,
• Things attached to the earth, or
• Permanently fastened to anything attached to the earth.

Accordingly, timber is not immovable property because they are not permanently attached to the earth. Sale of timber does not tantamount to sale of immovable property.

Question 2(a).
(i) PET Ltd. incurred loss in business up to current quarter of financial year 2017-18. The company has declared dividend at the rate of 12%, 15% and 18% respectively in the immediate preceding three years. In spite of the loss, the Board of Directors of the company has decided to declare interim dividend @ 15% for the current financial year. Examine the decision of PET Ltd. stating the provisions of declaration of interim dividend under the Companies Act, 2013.
(ii) Alpha Ltd. a section 8 company is planning to declare dividend in the Annual General Meeting for the financial year ended 31-3-2018. Mr. Chopra is holding 800 equity shares as on date. State whether the act of the company is according to the provisions of the Companies Act, 2013.
Answer:

1. Average rate of dividend declared by PET Ltd. during preceding three financial years is 15% (i.e., 12+15+18/3). Accordingly, Board can declare interim dividend of not more than 15%. – Declaration and Payment of Dividend.
2. Section 8 company has several benefits available and restrictions are imposed upon it. It cannot declare dividend or distribute its profit among member. Alpha Ltd. cannot declare dividend being section 8 company. Act of company to declare dividend is not as per provisions of Companies Act, 2013.

Question 2(b).
As per the provisions of the Companies Act, 2013, every company is required to file with the Registrar of Companies, the Annual Return as prescribed in section 92, in Form MGT-7. Explain the particulars required to be contained in it.

Question 2(c).
Mr. V draws a cheque of ₹ 11,000 and gives to Mr. B by way of gift. State with reason whether-

1. Mr. B is a holder in due course as per the Negotiable Instruments Act, 1881?
2. Mr. B is entitled to receive the amount of ₹ 11,000 from the bank?

Answer:
Negotiable Instruments Act, 1881 to understand theory part of ‘holder’ and ‘holder in due course’:

1. Person is called as holder in due course if he has received the instrument for consideration. There are no exceptions to this condition. Therefore, Mr. B cannot be treated as holder in due course. He is certainly a holder with good title thereto and hence he will have every right to claim payment upon instrument.
2. Holder has right to possession and right to receive amount due in his own name.

Question 2(d).
Bholenath drew a cheque in favour of Surendar. After having issued the cheque, Bholenath requested Surendar not to present the cheque for payment and gave a stop payment request to the bank in respect of the cheque issued to Surendar. Decide; under the provisions of the Negotiable Instruments Act, 1881 whether the said acts of Bholenath constitute an offence?

Question 3(a).
TDL Ltd. a public company is planning to bring a public issue of equity shares in June, 2018. The company has appointed underwrites for getting its shares subscribed. As a Chartered Accountant of the company appraise the board of TDL Ltd. about the provisions of payment of underwriter’s commission as per Companies Act, 2013.

Question 3(b).
(i) Rupa Limited, a listed company appointed M/s. VG & Associates an audit firm as company’s auditor in the Annual General Meeting held on 30-9-2017. Explain the provisions of the Companies Act, 2013 relating to the appointment or reappointment of an auditor in relation to the tenure of an auditor.
(ii) PKC Ltd. wants to appoint Mr. Praveen Kumar, a practicing Chartered Accountant as the statutory auditor of the company and asked proposed auditor to give a certificate in this regard. What are contents of the certif-icate to be issued in accordance with the Companies (Audit & Auditors) Rules, 2014?

Question 3(c).
Explain briefly any four effects by repeal of an existing Act by central legislature enumerated in section 6 of the General Clauses Act, 1897.

Question 3(d).
Differentiate Mandatory Provision from a Directory Provision. What factors decide whether a provision is directory or mandatory?

Question 4(a).
Bazaar Limited called its AGM in order to lay down the financial statements for shareholders’ approval. Due to want of quorum, the meeting was cancelled. The directors did not file the annual returns with the Registrar. The directors were of the idea that the time for filing of returns within 60 days from the date of AGM would not apply, as AGM was cancelled. Has the company contravened the provisions of Companies Act, 2013? If the company has contravened the provisions of the Act, how will it be penalized?
Answer:
Every company shall file Annual Return within 60 days from holding of AGM to ROC. If AGM is not held for a year, annual return should be filed within 60 days from the last day on which AGM should have been held. – Section 92

Accordingly, Bazaar Ltd. shall file its annual return within 60 days from holding of AGM. If meeting is cancelled for any reason, it shall file annual return within 60 days from last day on which AGM should have been held. Company has not filed annual return within stipulated time. It has contravene provision of section 92 of Companies Act, 2013.

If a company fails to file its annual return within specified time, it shall be punishable with fine of not less than ₹ 50,000 but which may extend to ₹ 5 lakhs and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to 6 months or with fine which shall not be less than ₹ 50,000 but which may extend to ₹ 5 lakh rupees, or with both.

Question 4(b).
Benson Limited issued a notice with the agenda for nine businesses to be transacted in the Annual General Meeting (two businesses were regarding appointment of Mr. Sahu and Mr. Pranav as directors). The Chairman decided to move the resolutions for all the nine businesses together to save the time of the members present. Examine the validity of the resolutions.
Answer:
Businesses proposed to be transacted at meeting, and enlisted in agenda are moved separately at meeting. However, Chairman of meeting, if desires that two or more resolutions (Le., businesses) should be moved together, then it can be moved together unless Act require it to be moved separately.

Where notice has been given of several resolutions, each resolution must be put to vote separately. However, as per Companies Act, 2013, resolution regarding appointment of two or more directors cannot be passed as single resolution unless it has been unanimously approved earlier. Therefore, Benson Ltd. cannot take up all businesses together. Businesses regarding appointment of two directors should be taken separately.

Question 4(c).
State any four contents of a Directors Responsibility Statement as required under Section 134 of the Companies Act, 2013.

Question 4(d).

1. Define Grammatical Interpretation. What are the exceptions to grammatical interpretation?
2. What is a Document as per the Indian Evidence Act, 1872?

Answer:

1. When the Court applied only ordinary rules of speech for finding out the meaning of the words used in statute, it is called as grammatical inter-pretation. It is deals with verbal expression of the law.
2. Section 3 of Indian Evidence Act, 1872 states that document means any matter expressed or described upon any substance by means of letters, figures or marks or by more than one of those means, intended to be used, or which may be used, for the purpose of recording that matter. Following are exceptions to grammatical interpretation:
   • Words or expression used in act is defective or creating ambiguity, Courts go beyond letter of laws and use other courses to find out true intention of legislature. If statutory expression is defective because of inconsistency, the Court must ascertain the spirit of law.
   • If by going through text leads to result, which is unreasonable, Court must resolve such issue logically.

Question 4(e).
What is the meaning of service by post as per provision of the General Clauses Act, 1897?

Question 5(a).
(i) Harsh purchased 1000 shares of Singhania Ltd. from Pratik and sent those shares to the company for transfer in his name. The company neither transferred the shares nor sent any notice of refusal of transfer to any party within the period stipulated in the Companies Act, 2013. What is the time frame in which the company is supposed to reply to transferee? Does Harsh, the transferee have any remedies against the company for not sending any intimation in relation to transfer of shares to him?
(ii) Xgen Limited has a paid-up equity capital and free reserves to the extent of ₹ 50,00,000. The company is planning to buy-back shares to the extent of ₹ 4,50,000. The company approaches you for advice with regard to the following:
(a) Is special resolution required to be passed?
(b) What is the time limit for completion of buy-back?
(c) What should be ratio of aggregate debts to the paid-up capital and free reserves after buy-back?
Answer:
(ii) (a) A company can buy-back shares upto 10% of its paid up capital and free reserves by passing Board Resolution. Here, Xgen Ltd. has paid up capital and free reserve of ₹ 50,00,000. Company can buy-back its 10% shares Le., ₹ 5,00,000 with Board Resolution. Company intend to buv-back shares of ₹ 4,50,000 which is less than 10% of its paid up capital and free reserve. Special Resolution is not required.

(b) Buy-back shall be completed within period of 12 months from date of passing resolution.

(c) The post debt equity ratio of company is not more than twice the capital and its free reserve after such buy-back.

Question 5(b).
M/s. Techno Ltd. maintains its Register of Members at its registered office in Mumbai. A group of members residing in Kolkata wants to keep the register of,members at Kolkata:
(i) Explain with provisions of Companies Act, 2013, whether the company can keep the Registers and Returns at Kolkata.
(ii) Does Mr. Ranjit, Director (but not a shareholder) of the company have the right to inspect the Register of Members?
Answer:
(i) Register of Members is kept at registered office of company. It can be kept at other place where at least 10% of members are residing, if approved by Special Resolution. – Section 88 Accordingly, if company comply it, Register of Members can be kept at Kolkata.

(ii) Register of Members shall be kept open for inspection at least 2 hours during business hours as decided by Board. It can be inspected by any member, debenture holder, other security holder or beneficial owner without payment of fee and by any other person on payment of fee as per Articles of Association. Hence, Mr. Ranjit has right to inspect Register of Members even if he is not shareholder.

Question 5(c).
Give four differences between Bailment and Pledge.

Question 5(d).
Mr. D was in urgent need of money amounting ₹ 5,00,000. He asked Mr. K for the money. Mr. K lent the money on the sureties of A, B and N without any contract between them in case of default in repayment of money by D to K. D makes default in payment. B refused to contribute, examine whether B can escape liability.
Answer:
Contract of guarantee is basically contract and therefore it should fulfil all elements of contract. A contract of guarantee may be created either by express or implied method. It may be either oral or written. It is not necessary to execute contract or reduce it in writing. Implied guarantee may be inferred from the conduct of parties.

In the given case, K lent money on sureties of A, B and N but it is not clear that whether they have agreed to be sureties for Mr. D. If they have not agreed to become surety, Mr. B can escape his liability. Alternative, if they have agreed to be sureties for Mr. D, Mr. B cannot escape from his liability, as executing formal contract is not necessary. Co-surety is liable to contribute his part of share when default has taken place by debtor.

Question 6(a).
Can equity share with differential voting rights be issued? If yes, state the conditions under which such shares may be issued.

Question 6(b).
Explain the term ‘charge’. State the circumstances under which necessity to crate arise. What is the time limit for registration of charge with the registrar?
Or
Explain provisions for ‘Appointment of Trustee for Depositors’ under the Companies Act, 2013.

Question 6(c).
Rahul, a transporter was entrusted with the duty of transporting tomatoes from a rural farm to a city by Aswin. Due to heavy rain, Rahul was stranded for more than two days. Rahul sold the tomatoes below the market rate in the nearby market where he was stranded fearing that the tomatoes may perish. Can Aswin recover the loss from Rahul on the ground that Rahul had acted beyond his authority?
Answer:
Aswin cannot recover the loss from Rahul on the ground that Rahul had acted beyond his authority. Because an agent has authority, in an emergency to do all such acts for the purpose of protecting his principal from loss as would be done by a person of ordinary prudence, in his own case, under similar circumstances.

When the agent has acted beyond his authority in emergency, principal is bound by the act of an agent. In the given case, heavy rain for more than two days created situation of emergency. In this situation, transportation was not possible and if waited for longer period, tomato would be perished. Therefore, act of selling tomatoes below that market price in emergency was intended to protect his principal.

Question 6(d).
State the rule lay down by the Negotiable Instruments Act, 1881 for ascertaining the date of maturity of a bill of exchange.