# CA Foundation Accounts Question Paper

These CA Foundation Accounts Study Material CA Foundation Accounts Question Paper is designed strictly as per the latest syllabus and exam pattern.

## CA Foundation Accounts Question Paper Pattern

Question No. 1 is compulsory.

Candidates are also required to answer any four questions from the remaining five questions.
Working notes should form part of the respective answers.

Question 1(a).
(a) State with reasons, whether the following statements are True or False: [6 statements x 2 = 12 marks]
(i) Trade Discount is a reduction granted by a supplier from the list price of goods/or services on business considerations for prompt payment.

(ii) M/s. XYZ & Co. runs a cafe. They renovated some of the old cabins. Because of this renovation some space was made free and number of cabins was increased from 15 to 18. The total expenditure incurred was ₹ 30,000 and was treated as a revenue expenditure.

(iii) Valuation of inventory at cost or net realizable value is based on principle of Conservatism.

(iv) In case of bill of exchange, the drawer and the payee may not be the same person but in case of a promissory’ note, the maker and the payee may be the same person.

(v) A Partnership firm cannot own any Assets.

(vi) Since company has existence independent of its members, it continues to be in existence despite the death, insolvency or change of members.

(b) Distinguish between Provision and Contingent Liability. (4 Marks)

(c) X purchased a machinery on 1st January 2017 for ₹ 4,80,000 and spent ₹ 20,000 on its installation. On July 1,2017 another machinery costing ₹ 2,00,000 was purchased. On 1st July, 2018 the machinery purchased on 1st January, 2017 having become scrapped and was sold for ₹ 2,90,000 and on the same date fresh machinery was purchased for ₹ 5,00,000. Depreciation is provided annually on 31st December at the rate of 10% p.a. on written down value. Prepare Machinery account for the years 2017 and 2018. (4 Marks)
(a) (i) False: Trade discount is a reduction granted by a supplier from the list price of goods or services on business considerations for increasing the sales of the business or as trade practice other than for prompt payment.

(ii) False: This expenditure should be treated as Capital expenditure since it will increase profitability of the business.

(iii) True: Because under the principle of lower of cost or net realizable value, any loss due to decrease in sales price of the inventory below its cost is recognized immediately as it is anticipated that the enterprise will make losses whenever it will sell.

(iv) False: In case of a promissory note, maker is the person who is absolutely liable to pay the amount mentioned therein whereas the payee is the person who is entitled to receive the payment. Thus both can never be same.

(v) True: Since a partnership firm does not have separate entity it cannot own any asset in its own name. The property of the firm is actually the joint property of all the partners.

(vi) True: A company has a separate legal entity i.e. its existence is independent of its members. The company is consequently able to enjoy perpetual succession and continues in existence irrespective of death/insolvency/change of members, until it is wound up by law.

(b) Contingent liability:
→ A contingent liability is a possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise. Possible obligation – An obligation is a possible obligation if, based on the evidence available, its existence at the balance sheet date is considered not probable or

→ A contingent liability is a present obligation that arises from past events but is not recognised because:

• it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
• a reliable estimate of the amount of the obligation cannot be made.

It is said to be ‘probable’ if chances of its happening are more than not happening i.e. probability is more than half.

Contingent Assets:

• A contingent asset is a possible asset that arises from past events the existence of which will be confirmed
• only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise.
• An example is a claim that an enterprise is pursuing through legal processes, where the outcome is uncertain.
• An enterprise should not recognise a contingent asset.
• However, when the realisation of income is virtually certain, then the related asset is not a contingent asset and its recognition is appropriate.
• A contingent asset is not disclosed in the financial statements.
• It is usually disclosed in the report of the approving authority (Board of Directors in the case of a company, and, the corresponding approving authority in the case of any other enterprise), where an inflow of economic benefits is probable.

(c) Working Note:

Machinery Account

Question 2(a).
On 30th September, 2018, the bank account of XYZ, according to the bank column of the cash book, was overdrawn to the extent of ₹ 8,062. An examination of the Cash book and Bank Statement reveals the following:
(i) A cheque for ₹ 11,14,000 deposited on 29th September, 2018 was credited by the bank only on 3rd October, 2018.

(ii) A payment by cheque for ₹ 18,000 has been entered twice in the Cash book.

(iii) On 29th September, 2018, the bank credited an amount of ₹ 1,15,400 received from a customer of XYZ, but the advice was not received by XYZ until 1st October, 2018.

(iv) Bank charges amounting to ₹ 280 had not been entered in the cash book.

(v) On 6th September 2018, the bank credited ₹ 30,000 to XYZ in error.

(vi) A bill of exchange for ₹ 1,60,000 was discounted by XYZ with his bank.
The bill was dishonoured on 28th September, 2018 but no entry had been made in the books of XYZ.

(vii) Cheques issued upto 30th September, 2018 but not presented for pay¬ment up to that date totalled ₹13,46,000.

(viii) A bill payable of ₹ 2,00,000 had been paid by the bank but was not entered in the cash book and bill receivable for ₹ 60,000 had been discounted with the bank at a cost of ₹ 1,000 which had also not been recorded in cash book.

You are required:
To show the appropriate rectifications required in the cash book of XYZ, to arrive at the correct balance on 30th September, 2018 and to prepare a Bank Reconciliation Statement as on that date. (10 Marks)

(b) Correct the following errors – (i) without opening a Suspense Account and (ii) with opening a Suspense Account:
(1) The sales book has been totalled ₹ 2,100 short.
(2) Goods worth ₹ 1,800 returned by Gaurav & Co. have not been recorded anywhere.
(3) Goods purchased ₹ 2,250 have been posted to the debit of the supplier Sen Brothers.
(4) Furniture purchased from Mary Associates, ₹ 15.000 has been entered in the purchase Daybook.
(5) Discount received from Black and White ₹ 1,200 has not been entered in the books.
(6) Discount allowed to Radhe Mohan & Co. ₹ 180 has not been entered in the Discount Column of the Cashbook. The account of Radhe Mohan & Co. has, however, been correctly posted. (10 Marks)
Adjusted Cash Book (Bank Column only)

Bank Reconciliation Statement
as on 30th September, 2018

 Particulars Amount (₹) Amount (₹) Cr. Balance as per adjusted cash book 175942 Add: (1) Cheque deposited but not credited by bank 1114000 1114000 1289942 Less: (1) Amount wrongly credited by bank 30000 (2) Cheque issued but not presented for payment 1346000 1376000 Cr. Balance as per pass book 86058

(b) (i) Without opening a suspense account
(1) In the credit side of the Sales A/c:
“By wrong totalling of the Sales Book ₹ 2100″

(2)

 Date Particulars L.F Amount Amount Sales Return A/c                                                          Dr To Gaurav & Co.’s A/c (Being goods returned by Gaurav & Co. not recorded any-where) 1800 1800

(3) In the credit side of Supplier Sen Brothers A/c:
“By error in posting ₹4500”

(4)

 Date Particulars L.F Amount Amount Furniture A/c                                                               Dr To Purchases A/c (Being correction of Furniture purchased entered in the Purchase Day Book) 15000 15000

(5)

 Date Particulars L.F Amount Amount Black and White A/c                     Dr To Discount received A/c (Being rectification of the entry omitted) 1200 1200

(6) In the debit side of Discount allowed A/c:
“To omission of entry in the Cash book ₹ 180”.

(ii) With opening a Suspense A/c
Journal Entries

Suspense A/c

Question 3(a).
Anand of Bangalore consigned to Raj of Pune, goods to be sold at invoice price which -represents 125% of cost. Raj is entitled to a commission of 10% on sales at invoice price and 25% of any excess realised over invoice price. The expenses on freight and insurance incurred by Anand were ₹ 12,000. The account sales received by Anand shows that Raj has effected sales amounting to ₹ 1,20,000 in respect of 75% of the consignment. His selling expenses to be reimbursed were ₹ 9,600. 10% of consignment goods of the value of ₹ 15,000 were destroyed in fire at the Pune godown and the insurance company paid ₹ 12,000 net of salvage. Raj remitted the balance in favour of Anand.

You are required to prepare Consignment Account and the account of Raj in the books of Anand along with the necessary calculations. (10 Marks)

(b) A firm sends goods on “Sale or Return basis”. Customers have the choice of returning the goods within a month. During May 2018, the following are the details of goods sent:

 Date (May) 2 8 12 18 20 27 Customers P B Q D E R Value (₹) 17,000 22,000 25,000 5,500 2,000 28,000

Within the stipulated time, P and Q returned the goods and B, D and E signified that they have accepted the goods.
Show in the books of the firm, the Sale or Return Account and Customer-Q for Sale or Return Account as on 15th June 2018. (5 Marks)

(c) Attempt any ONE of the following two sub-parts i.e. either (i) or (ii)
(i) The following amounts are due to X by Y. Y wants to pay on 10th July 2019. Interest rate of 9% p.a. is taken into consideration.
Due dates                              ₹
10th January                         750
26th January (Republic Day) 1,200
23rd March                           3,300
18th August (Sunday)           4,100
Determine average due date and the amount to be paid on 10th July 2019. Assume 10th January as base date. (5 Marks)

(ii) Ramesh has a Current Account with Partnership firm. He had a debit balance of ₹ 85,000 as on 01 -07-2018. He has further deposited the following amounts:
Date                       Amount (₹)
14-07-2018            1.23.000
18-08-2018            21.000

He withdrew the following amounts:
Date                       Amount (₹)
29-07-2018            92,000
09-09-2018            11,500
Show Ramesh’s A/c in the books of the firm. Interest is to be calculated at 10% on debit balance and 8% on credit balance. You are required to prepare current account as on 30th September, 2018 by means of product of balances method. (5 Marks)
(a) In the books of Anand
Consignment A/c

Raj’s A/c

Working notes:
(1) Calculation of value of Goods sent on Consignment
Abnormal loss – 10% of consignment goods of the invoice value of ₹ 15000
If, 10% – 15000
Then, 100% – ₹ 150000 – Value of Goods sent on Consignment
Invoice price = 125% of cost
Loading of goods sent on consignment = $$\frac { 150000×2 }{ 125 }$$ = ₹ 30000

(2) Calculation of Commission
Invoice price of the goods sold = 75% of 150000 = ₹ 112500
Excess of selling price over invoice price = 120000 – 112500 = ₹ 7500
Total Commission = 10% of ₹ 112500 + 25% of ₹ 7500
= 11250 + 1875
= ₹ 13125

(b) Sale or return A/c

O’s A/c

(c) Base Date = 10 Jan
(i)

= 10th Jan. + $$\frac{1153500}{9350}$$
= 10th Jan. + 123.36 days
= 10th Jan. + 123 days = 13th May
Interest upto 10th July = 9350 x $$\frac{9}{100}$$ x $$\frac{58}{365}$$ = ₹ 133.717 or ₹ 133.72
Amount to be paid on 10th July, 2019 = 9350 + 133.72 = ₹ 9483.72
Days are rounded off as per mathematical rule.

(ii) Ramesh’s current account with the firm
as on 30th September, 2018

Working Mote: Interest:

Question 4(a).
Arup and Swarup were partners. The partnership deed provides inter alia.
(i) That the annual accounts be balanced on 31st December each year;

(ii) That the profits be allocated as follows:
Arup: One-half; Swarup: One-third and Carried to reserve account: One Sixth;

(iii) That in the event of death of a partner, his executor will be entitled to the following:

• The capital to his credit at the date of death;
• His proportionate share of profit to date of death based on the average profits of the last three completed years; and
• His Share of goodwill based on three years’ purchase of the average profits for the three preceding completed years

Trial Balance as on 31st December, 2018

 Particulars Debit (₹) Credit (₹) Arup’s Capital 90,000 Swarup’s Capital 60,000 Reserve 50,000 45,000 Bills receivable 55,000 Investment 1,10,000 Cash Trade payables 20,000 Total 2,15,000 2,15,000

The profits for the three year were 2016: ₹ 51,000; 2017: ₹ 39,000 and 2018: ₹ 45,000. Swarup died on 1st May 2019.
Show the calculation of Swarup (A) Share of profits; (B) Share of Goodwill; (C) Draw up Swarup’s Executors Account as would appear in the firms’ ledger transferring the amount to the Loan account. (10 Marks)
(b) From the following Income and Expenditure account and the Balance sheet of a club, prepare its Receipts and Payments Account and subscription
account for the year ended 31st March, 2019:
Income & Expenditure Account for the year 2018-19

Balance sheet as at 31st March, 2019

(i) Upkeep of ground ₹ 660 and printing ₹ 264 relating to 2017-18 were paid in 2018-19
(ii) One fourth of entrance fee has been capitalized by transfer to General- Fund
(iii) Subscription outstanding in 2017-18 was ₹ 880 and for 2018-19 ₹ 770
(iv) Subscription received in advance in 2017-18 was ₹ 220 and in 2018-19 for ₹ 2019-20 was ₹ 110
(v) Furniture was purchased during the year (10 Marks)
(A) Share of profits:
Average profits = $$\frac{51000+39000+45000}{3}$$
= ₹ 45000
Swarup’s share of profits = 45000 x $$\frac { 4 }{ 12 }$$ x $$\frac { 2 }{ 5 }$$ = ₹ 6000

(B) Share of Goodwill:
Average profits = ₹ 45000
Goodwill = Average profits x No. of years purchase
= 45000 x 3 = ₹ 135000
Swarup’s share of goodwill = 135000 x $$\frac { 2 }{ 5 }$$ = ₹ 54000

(C) Swarup’s Executors’ A/c:

(b) Receipts and Payments A/c for the year ended 31st March, 2019

Subscription A/c

Question 5(a).
An inexperienced book keeper has drawn up a Trial balance for the year ended 31st March, 2019.

Draw up a corrected Trial Balance by debiting or crediting any residual errors to a Suspense account. (5 Marks)

(b) Mr. Shyamal runs a factory, which produces detergents. Following details were available in respect of his manufacturing activities for the year ended 31-03-2019.
Opening work-in-progress (9000 units)       26,000
Closing work-in-progress (14,000 units)      48,000
Opening inventory of Raw Materials           2,60,000
Closing inventory of Raw Materials             3,20,000
Purchases                                                     8,20,000
Hire charges of Machinery @ ₹ 0.70 per unit manufactured
Hire charges of factory                                2,60,000
Direct wages-contracted @ ₹ 0.80 per unit manufactured
and @ ₹0.40 per unit of closing W.I.P
Repairs and maintenance                            1,80,000
Units produced-5,00,000 units
Required a Manufacturing Account of Mr. Shyamal for the year ended 31 -03-2019. (5 Marks)

(c) The balance sheet of Mittal on 1st January, 2018 was as follows:

During 2018, his profit and loss account revealed a net profit of ₹ 15,10,000. This was after allowing for the following:
(i) Interest on capital @ 6% p.a.
(ii) Depreciation on plant and machinery @10% and on Furniture and Fixtures @ 5%.
(iii) A provision for Doubtful debts @ 5% of the trade receivables as at 31st December 2018.
But while preparing the profit and loss account he had forgotten to provide for (1) outstanding expenses totalling ₹ 1,85,000 and (2) prepaid insurance to the extent of ₹ 25,000.
His current assets and liabilities on 31st December, 2018, were: Trade receivables ₹ 21,00,000; Cash at bank ₹ 5,20,000 and Trade payables ₹ 13,84,000. During the year he withdrew ₹ 6,20,000 for domestic use. Closing inventories is equal to net trade receivables at the year-end.
You are required Draw up revised Profit and Loss account and Balance Sheet at the end of the year. (10 Marks)
Trial Balance as on 31 st March 2019

 Name of accounts L.F. Dr. Bal. Cr. Bal. 1. Provision for Doubtful Debts 250 2. Cash Credit Account 1654 3. Capital 4591 4. Trade Payables 1637 5. Due from Customers 2983 6. Discount Received 252 7. Discount Allowed 733 8. Drawings 1200 9. Office Furniture 2155 10. Carriage Inward 829 11. Purchases 10923 12. Returns Inward 330 13. Rent & Rates 314 14. Salaries 2520 15. Sales 16882 16. Inventory 2418 17. Provision for Depreciation on Furniture 364 18. Suspense A/c (bal. Fig.) 1225 Total 25630 25630

(b) In the books of Mr. Shyam Lai
Manufacturing A/c
for the year ended 31st March, 2019

Working Notes:
(1) Direct Wages

(2) Direct Expenses
500000 units @ ₹0.70 per unit = ₹ 350000

(c) Profit and Loss A/c

 Particulars Amount Particulars Amount To Outstanding Expenses 185000 By balance b/d 1510000 To Net Profit 1350000 By Prepaid Insurance 25000 Total 1535000 Total 1535000

Balance Sheet as at 31st December, 2018

Question 6(a).
B Limited issued 50,000 equity shares of ₹ 10 each payable as ₹ 3 per share on application, ₹ 5 per share (including ₹ 2 as premium) on allotment and ₹ 4 per share on call. All these shares were subscribed. Money due on all shares was fully received except from X, holding 1000 shares who failed to pay the allotment and call money and Y, holding 2000 shares, failed to pay the call money. All those 3,000 shares were forfeited. Out of forfeited shares, 2,500 shares (including whole of X’s shares) were subsequently re-issued to Z as fully paid up at a discount of ₹ 2 per share.
Pass necessary journal entries in the books of B limited. Also prepare Balance Sheet and notes to accounts of the company. (15 Marks)
(b) Distinguish between Periodic Inventory System and Perpetual Inventory System. (5 Marks)
In the books of B Limited
Journal Entries

Balance sheet of B Limited
as at ……………

Working note:
1. Calculation of Capital reserve

Notes to Accounts:

 1. Share Capital: ₹ ₹ Authorised Capital ……. Equity shares of ₹ 10 each ………. Issued Capital 50000 Equity shares of ₹ 10 each 500000 Subscribed, Called up & Paid up Capital 49500 Equity shares of ₹ 10 each 495000 Add: Share forfeiture (500 x 6) 3000 498000 2. Reserves and Surplus : Securities premium reserve 98000 Capital Reserve 7000 105000 3. Cash and cash equivalent 603000

(b) Periodic/Physical inventory system:

• No records of inventory are maintained.
• Inventory is ascertained by physical counting at the end of the year and then valued.
• It is simple and commonly followed by small organisations.

Perpetual/continuous inventory system:

• Inventory records also known as stores records are maintained in which details of each and every item are kept.
• The records may be in only quantity form or may include value also (known as priced ledger).
• The details of receipt and issue are recorded instantly and balance as certained.
• Hence balance of all items of inventory are always available. The balance of year end can be used in financial accounting for final accounts.