Question Paper

Financial Accounting (CFA510): January 2008

 Answer all 70 questions.
 Marks are indicated against each question.
Total Marks : 100
<Answer>
1. Which of the following events/transactions is not recorded in the books of accounts of a business?
(a) Withdrawal of goods by the proprietor for his personal consumption
(b) Sale of an asset on credit
(c) Purchase of a new asset in exchange of an old asset
(d) Receipt of interest by proprietor on bank fixed deposit held jointly with his spouse
(e) Loss of stock by fire.
(1 mark)
<Answer>
2. In relation to price, the phrase markdown means
(a) The first selling price at which goods are offered
(b) The selling price lowered below the cost
(c) The selling price lowered below the original selling price
(d) The selling price lowered below the previous selling price
(e) The difference between the cost and the original selling price.
(1 mark)
<Answer>
3. Revenue does not include
(a) Inflow of cash out of sale of goods
(b) Interest on investment
(c) Rent received
(d) Dividend received
(e) Advance received for supplies.
(1 mark)
<Answer>
4. In which of the following methods, the cost of the asset is spread over in equal proportion during its useful
economic life?
(a) Straight line method
(b) Written down value method
(c) Units-of-production method
(d) Sum-of-the-years’-digits method
(e) Machine-hour rate method.
(1 mark)
<Answer>
5. At the time of finalization of accounts, entries passed for outstanding expenses, depreciation and interest on capital
are referred to as
(a) Opening entries
(b) Journal entries
(c) Adjustment entries
(d) Contra entries
(e) Closing entries.
(1 mark)
<Answer>
6. Which of the following accounts appear(s) in the balance sheet of a business?
I. Stock at the end of the financial year.
II. Stock at the beginning of the financial year.
III. Prepaid rent.
IV. Interest received.
(a) Only (I) above
(b) Only (II) above
(c) Both (I) and (III) above
(d) Both (II) and (III) above
(e) (I), (III) and (IV) above.
(1 mark)

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 <Answer>
7. Balance appearing in the credit column of a trial balance can be
I. An income.
II. An outstanding expense.
III. A Liability.
IV. An income received in advance.
(a) Only (I) above
(b) Only (II) above
(c) Only (III) above
(d) Both (I) and (III) above
(e) All (I), (II), (III) and (IV) above.
(1 mark)
<Answer>
8. The rule applicable to a nominal account is
(a) Debit what comes in and credit what goes out
(b) Debit the receiver and credit the giver
(c) Debit all expenses and losses and credit all incomes and gains
(d) Debit the giver and credit the receiver
(e) Debit what goes out and credit what comes in.
(1 mark)
<Answer>
9. Balance Sheet of a business concern is a
(a) Statement of revenue and expenses
(b) Statement of cash receipts and cash payments
(c) Cash flow statement
(d) Valuation statement
(e) Statement of assets and liabilities.
(1 mark)
<Answer>
10.Amount received as interest on trade investments held by a company should be transferred to
(a) Trading account
(b) Profit and loss account
(c) Profit and loss appropriation account
(d) Trade investments account
(e) Revaluation reserve account.
(1 mark)
11.Retained earnings is the amount of <Answer>
(a) Profit after tax less dividends
(b) Profit before tax less dividends
(c) Profit before interest and taxes less dividends
(d) Profit before depreciation and taxes less dividends
(e) Profit before taxes and after depreciation less dividends.
(1 mark)
12.If the profit is 25% of the cost price then it is <Answer>

(a) 25% of the sale price

(b) 33% of the sale price
(c) 20% of the sale price
(d) 12.5% of the sale price
(e) 50% of the sale price.
(1 mark)
13.Ledger is also called as <Answer>

(a) The principal book

(b) The book of original entry
(c) The journal
(d) The subsidiary books
(e) The profit and loss account.
(1 mark)

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 <Answer>
14.Return outward book is maintained by a business to record
(a) Return of goods purchased on cash
(b) Return of goods sold on credit
(c) Return of goods purchased on credit
(d) Return of capital goods purchased on credit
(e) Return of capital goods sold on credit.
(1 mark)
15.The liabilities payable over a longer period of time, generally after one year, are called <Answer>

(a) Current liabilities

(b) Provisions
(c) Non-current liabilities
(d) Contingent liabilities
(e) Reserves.
(1 mark)
16.A credit sale of Rs.2,000 was wrongly entered in the purchases book. The impact of the error on gross profit is <Answer>
that, it
(a) Decreases the gross profit by Rs.2,000
(b) Increases the gross profit by Rs.2,000
(c) Decreases the gross profit by Rs.4,000
(d) Increases the gross profit by Rs.4,000
(e) Has no impact.
(1 mark)
17.A person who is carrying on profession is required to get his accounts audited, if his gross receipts exceed <Answer>

(a) Rs.40 lakhs in a year

(b) Rs.50 lakhs in a year
(c) Rs.10 lakhs in a year
(d) Rs.15 lakhs in a year
(e) Rs.25 lakhs in a year.
(1 mark)
18.The system of accounting in which revenue is recognized when it is earned and expenses are recognized when <Answer>
they are incurred, is called
(a) Accrual system
(b) Hybrid system
(c) Income Tax system
(d) Cash system
(e) Deferral system.
(1 mark)
19.The valuation of goodwill is necessary in the case of <Answer>

I. Sale of a company.
II. Valuation of shares of a company.
III. Purchase of another company.
(a) Only (I) above
(b) Only (II) above
(c) Both (I) and (II) above
(d) Both (II) and (III) above
(e) All (I), (II) and (III) above.
(1 mark)
20.Which of the following items is deducted from total assets of the concern to arrive at its net worth? <Answer>

(a) All outside liabilities

(b) Only current liabilities
(c) Only long term liabilities
(d) All reserves and surpluses
(e) Securities premium.
(1 mark)

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21.The systematic allocation of the costs of intangible assets to the periods in which they provide benefits is called <Answer>

(a) Amortization
(b) Depreciation
(c) Depletion
(d) Deterioration
(e) Appropriation.
(1 mark)
<Answer>
22.Errors which can affect both the accounts involved in the transaction are
(a) Errors of complete omission
(b) Errors of partial omission
(c) Errors of overcasting
(d) Errors of undercasting
(e) Errors of carry forward.
(1 mark)
<Answer>
23.Gains arising from sources other than normal operations of the business are called
(a) Gross profit
(b) Operating profit
(c) Non-operating surplus
(d) Profit before tax
(e) Profit after tax.
(1 mark)
<Answer>
24.Which of the following is not treated as an allowable expense for computing managerial remuneration?
(a) Payment of ex-gratia to an employee
(b) Compensation paid in lieu of breach of contract
(c) Bad debts written-off
(d) Directors’ remuneration
(e) Any tax notified as a tax on abnormal profits.
(1 mark)
<Answer>
25.Which of the following persons can be appointed as an auditor of a company?
(a) A body corporate
(b) A person indebted to the company for Rs.1,500
(c) A person holding the shares of the company as a trustee
(d) A person appointed as a director of the company
(e) An officer of the company.
(1 mark)
<Answer>
26.When fixed assets are sold at book value
(a) The total assets will increase
(b) The total liabilities will increase
(c) The total assets will decrease
(d) There is no change in the total assets
(e) The liabilities will decrease.
(1 mark)
<Answer>
27.Advance tax that appears in the trial balance is shown
(a) As an expense in the profit and loss account
(b) As an appropriation of profits in the profit and loss appropriation account
(c) As a current liability in the balance sheet
(d) Under the head fixed assets in the balance sheet
(e) Under the head loans and advances in the balance sheet.
(1 mark)
<Answer>
28.Profit on revaluation of fixed assets should be transferred to
(a) General Reserve a/c
(b) Capital Reserve a/c
(c) Suspense a/c
(d) Profit and loss a/c
(e) Profit and loss appropriation a/c.
(1 mark)
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 <Answer>
29.If the articles of a company permit, between two annual general meetings the Directors can declare
(a) Interim dividend
(b) Bonus issue
(c) Rights issue
(d) Redemption of debentures
(e) Redemption of preference shares.
(1 mark)
30.The value of the goodwill, according to the simple profit method, is <Answer>

(a) The product of current year’s profit and number of years of purchase
(b) The product of last year’s profit and the number of years of purchase
(c) The product of average profit of the given years and number of years of purchase
(d) The expected average profit for future years
(e) The product of average profit of last year, current year and coming year and number of years of
purchase.
(1 mark)
31.The three column cash book represents <Answer>

(a) Real accounts only

(b) Both real and nominal accounts
(c) Personal accounts only
(d) Both real and personal accounts
(e) Real, personal and nominal accounts.
(1 mark)
32. On June 10, 2001, Santosh Ltd. had taken a bank loan on which interest at the rate of 8% per annum is payable on <Answer>

June 30 and December 31, every year. The loan is secured by a charge on the factory building. The interest
accrued and due as on March 31, 2007 was shown in the Balance Sheet of the company under the head
(a) Current liabilities
(b) Secured loans
(c) Miscellaneous expenditure
(d) Loans and advances
(e) Unsecured loans.
(1 mark)
<Answer>
33.Which of the following assets appear under the category of ‘current assets’ in the balance sheet of a company?
(a) Stores and spare parts
(b) Discount on issue of securities
(c) Trust securities
(d) Development of property
(e) Live stock.
(1 mark)
<Answer>
34.Which of the following items does not come under the heading ‘Provisions’ on the balance sheet?
(a) Provision for taxation
(b) Proposed dividend
(c) Provision for contingencies
(d) Proposed addition to reserves
(e) Provision for insurance, pension and provident fund.
(1 mark)
<Answer>
35.Auditing begins where _______ ends.
(a) Sales
(b) Accounting
(c) Manufacturing
(d) Accounting year
(e) Stock valuation.
(1 mark)

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36.Which of the following is optional while submitting the annual reports in the Annual General Meeting? <Answer>
(a) Balance sheet
(b) Profit and loss account
(c) Funds flow statement
(d) Directors’ report
(e) Auditors’ report.
(1 mark)
37.Contingent liabilities do not include <Answer>

(a) Liability for calls on partly paid shares

(b) Liability for bills discounted
(c) Liability for bills accepted
(d) Liability under guarantee
(e) Arrears of dividends on cumulative preference shares.
(1 mark)
38.The costs that are incurred for establishing a company and getting it ready to commence business, for which it is <Answer>
being formed, are called
(a) Accrued expenses
(b) Preliminary expenses
(c) Investments
(d) Manufacturing expenses
(e) Administrative expenses.
(1 mark)
39.Assets which are acquired for the purpose of using them in the conduct of the business operations and not for <Answer>
reselling them in order to earn profit are to be treated as
(a) Fixed assets
(b) Current assets
(c) Liquid assets
(d) Intangible assets
(e) Miscellaneous expenditure to the extent not written-off.
(1 mark)
40.Which of the following is an example of a representative personal account? <Answer>

(a) Rent
(b) Stock of stationary
(c) Outstanding salaries
(d) Cash in hand
(e) Repairs to machinery.
(1 mark)
41.Valley Ltd. has issued 20,000, 10% Preference Shares of Rs.100 each, fully paid and 2,60,000 Equity Shares of <Answer>
Rs.10 each, fully paid, which are issued at a premium of Rs.20. The profit for the year 2006-07 is Rs.21,68,000.
 The company has to provide Rs.8,76,000 for taxation of the previous year 2005-06.
 The company declared an equity dividend of 10%.
The total amount debited to Profit and Loss Appropriation account on account of the above decisions is
(a) Rs. 4,60,000
(b) Rs. 2,86,000
(c) Rs.13,62,000
(d) Rs.13,36,000
(e) Rs.11,36,000. (2marks)

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 <Answer>
42.Sarovar Ltd. incurred the following costs during the year 2006-07:
Particulars Rs.
Design of tools involving new technology 2,50,000
Modification of the formulation of a process 3,00,000
Troubleshooting in connection with breakdowns during commercial
production 1,50,000
Adaptation of an existing capability to a particular customer’s need as part
of a continuing commercial activity 1,70,000
In its income statement, Sarovar Ltd. should report research and development expense of
(a) Rs.5,50,000
(b) Rs.1,60,000
(c) Rs.2,35,000
(d) Rs.2,85,000
(e) Rs.1,70,000.
(2marks)
<Answer>
43.Following is the Balance Sheet of Ravera Enterprises as on March 31, 2007:
Liabilities Rs. Assets Rs.
Capital 5,00,000 Land and building 2,50,000
Long term loan 1,50,000 Machinery 3,00,000
Creditors 90,000 Fictitious assets 60,000
Bank overdraft 35,000 Debtors 95,000
Stock 60,000
Cash 10,000
Total 7,75,000 Total 7,75,000
The profit after tax for the year 2006-07 was Rs.60,000 and has accrued evenly throughout the year. The rate of
return on average capital employed in similar business is 12%. The normal profit of Ravera Enterprises based on
average capital employed should be
(a) Rs.56,400
(b) Rs.49,200
(c) Rs.67,200
(d) Rs.60,000
(e) Rs.52,800.
(2marks)
<Answer>
44.Following is the data pertaining Venus Ltd. as on March 31, 2007 :
Particulars Rs.
Authorised share capital 50,000 shares of Rs.100 each 25,00,000
Issued/subscribed/called-up capital 15,05,000
Calls in arrear 5,000
Interim dividend declared 1,05,000
Current year profit 2,37,000
If final dividend of 10% is declared (in addition to interim dividend), the amount that will have to be transferred to
General Reserve in lieu of dividend declared (inclusive of interim dividend) out of current year profit would be
(a) Rs.23,700
(b) Rs.15,000
(c) Rs.25,500
(d) Rs.19,125
(e) Rs.17,775.
(2marks)

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 <Answer>
45.Owner’s equity at the beginning of the year Rs.22,000. During the year, the owner contributed Rs.12,000
additionally towards capital and withdrew Rs.8,000 for his personal use. If the firm had a net profit of Rs.16,000
for the year, what was the owner’s equity at the end of the year?
(a) Rs.34,000
(b) Rs.58,000
(c) Rs.18,000
(d) Rs.42,000
(e) Rs.30,000.
(2marks)
<Answer>
46.Consider the following data pertaining to Zircon Ltd.
I. Average capital employed in the business is Rs.6,00,000.
II. Rate of interest expected from capital having regard to the risk involved is 10%.
III. Net trading profits of the company for the past three years were Rs.1,07,600, Rs.90,700 and Rs.1,12,500.
IV. Fair remuneration to the directors for their services is Rs.12,000 per annum.
The value of goodwill on the basis of 3 years’ purchase of super profits calculated on the average of past three
years profits is
(a) Rs.1,30,800
(b) Rs. 43,600
(c) Rs. 94,800
(d) Rs. 55,600
(e) Rs. 59,080.
(2marks)
<Answer>
47.The Managing Director of Avon Ltd. is entitled to a commission of 5% on net profits before charging such
commission. The net profit of the company for the year ended March 31, 2007 was reported to be Rs.76,50,000.
Subsequently, it was noticed that the following transactions were omitted:
Particulars Rs.
Payment of Director’s remuneration 1,50,000
Sale of a plant (cost price Rs.3,00,000; written down value Rs.2,40,000) 3,30,000
Payment of bonus to Production Executive 1,50,000
Payment of income tax and super tax 15,000
Issue of 60,000 equity shares of Rs.10 each at a premium of Rs.2 7,20,000
The commission payable by the company to the managing director for the year 2006-07 was
(a) Rs.3,70,500
(b) Rs.3,78,000
(c) Rs.3,85,500
(d) Rs.3,52,860
(e) Rs.4,80,000.
(2marks)
<Answer>
48.Xelon Ltd. proposed a dividend of 15%. The called-up equity share capital of the company is Rs.75,000. Calls-in-
arrear amounted to Rs.5,000 and calls in advance aggregated to Rs.12,500. The amount of dividend payable is
(a) Rs.12,375
(b) Rs.10,500
(c) Rs. 9,750
(d) Rs. 8,750
(e) Rs. 8,625.
(2marks)

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 <Answer>
49.The reserves and surplus of a company at the beginning of the accounting year were Rs.20,00,000. During the year
the company made profit and appropriated the same as follows:
Rs.
Profit during the year 5,00,000
Less:
Dividend distributed 1,00,000
Transfer to General Reserves 2,00,000
Balance in the profit & loss Account 2,00,000
The reserves and surplus at the end of the year, would be
(a) Rs.22,00,000
(b) Rs.24,00,000
(c) Rs.25,00,000
(d) Rs.21,00,000
(e) Rs.24,50,000. (2marks)
<Answer>
50.Anu Ltd. paid a dividend of Rs.3,60,000 at the end of March 31, 2007. At the beginning of April 01, 2006, there
was Rs.1,20,000 of dividends in arrears. If the company’s capital structure was 15,000 9%, cumulative preference
shares of Rs.100 each fully paid-up and 30,000 equity shares of Rs.30 fully paid-up, in the year 2006-07 how
much dividend was paid by Anu Ltd. to its equity shareholders?
(a) Rs.1,95,000
(b) Rs.2,25,000
(c) Rs.1,35,000
(d) Rs.1,05,000
(e) Rs.2,40,000.
(2marks)
<Answer>
51.The balance sheet items of Super Ltd. as at March 31, 2007 have increased by the following amounts compared
with those at the end of the previous year:
Assets – Rs.2,32,000
Liabilities – Rs.1,40,000
Share Capital – Rs.1,00,000
The only change to retained earnings during 2006-07 was relating to a dividend payment of Rs.20,000. The net
income for the year 2006-07 amounted to
(a) Rs.14,000
(b) Rs.10,000
(c) Rs. 8,000
(d) Rs.12,000
(e) Rs. 4,000.
(2marks)
<Answer>
52.On June 15, 2007 a fire occurred in the godown of Recants Ltd. and part of the stock was destroyed. The value of
the stock salvaged was Rs.16,000. The following transactions took place between April 01, 2007 and June 15,
2007:
Particulars Rs.
Purchases 5,40,000
Sales 10,00,000
Wages 2,20,000
Opening stock 4,00,000
On an average, the company makes a gross profit of 20% on sales. The value of stock lost by fire was
(a) Rs.3,60,000
(b) Rs.3,28,000
(c) Rs.3,44,000
(d) Rs.3,24,000
(e) Rs.2,00,000.
(2marks)

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 <Answer>
53.The following data is extracted from the books of Fara Ltd.:
Year Profit (Rs.)
2004-2005 2,20,500
2005-2006 3,22,500
2006-2007 2,40,000
Additional information:
i. An office expense of Rs.8,250 was omitted to be provided in the year 2004-05.
ii. 10% profits of 2005-06 are of non-recurring nature.
iii. Bad debts provision of Rs.15,750 on sundry debtors in 2006-07 is no longer required.
The simple average of maintainable profit of the company is
(a) Rs.2,52,750
(b) Rs.2,61,000
(c) Rs.2,51,500
(d) Rs.2,34,900
(e) Rs.2,46,250. (2marks)
<Answer>
54.The balance in the creditors account of a company as on December 1, 2007 was Rs.1,70,000. During the month a
sum of Rs.92,500 was paid to the creditors and goods purchased on credit from them amounted to Rs.1,23,500.
Purchase returns were Rs.4,000. They allowed a sum of Rs.2,400 as cash discount. A bill for Rs.4,000 accepted
earlier by the company in favour of a creditor was dishonoured on December 20, 2007. The balance of creditors
account as on December 31, 2007 was
(a) Rs.2,01,000
(b) Rs.1,97,100
(c) Rs.1,98,600
(d) Rs.2,02,600
(e) Rs.2,01,600.
(2marks)
<Answer>
55.The following balances are extracted from the books of Ambica Ltd. as on March 31, 2007:
Particulars Rs. Particulars Rs.
Called-up share capital 5,00,000 Fixed assets 7,70,000
Secured loans 4,00,000 Calls in arrears 30,000
Loans to employees 51,200 Capital reserve 90,000
Cash 4,000 Profit and loss account (credit balance) 50,000
Sundry debtors 1,10,000
Stock 96,000 Sundry creditors 91,200
Bank balance 40,000 Preliminary expenses 30,000
The total of the liabilities side of the balance sheet of Ambica Ltd. as on March 31, 2007 was
(a) Rs.11,01,200
(b) Rs.11,00,200
(c) Rs.11,31,200
(d) Rs.11,41,200
(e) Rs.11,01,900.
(2marks)
56.In the books of Brenda Ltd., the balance in the furniture and fixtures account as on March 31, 2006 was <Answer>
Rs.3,10,000. The following additional information is given:
I. Sales of the company during the year 2006-07 include Rs.17,000 in respect of sale of an old furniture on
March 31, 2007. The book value of the furniture on April 01, 2006 was Rs.20,000.
II. Depreciation @ 5% is provided on furniture and fixtures.
The amount at which the furniture and fixtures is shown in the balance sheet of Brenda Ltd. as on March 31, 2007
was
(a) Rs.3,10,000
(b) Rs.2,74,500
(c) Rs.2,75,500
(d) Rs.2,77,500
(e) Rs.2,78,350.
(2marks)

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 <Answer>
57.The following is the Balance Sheet of Pioneer Ltd. as on March 31, 2007:
Balance Sheet as on March 31, 2007
Liabilities Rs. Assets Rs.
75,000 equity shares of Rs.10 Goodwill 60,000
each, fully paid 7,50,000 Plant and Machinery 8,50,000
General reserve 3,30,000 Other current assets 2,00,000
Bank loan 1,50,000 Sundry debtors 4,00,000
Sundry creditors 4,20,000 Preliminary expenses 1,40,000
Total 16,50,000 Total 16,50,000
Additional Information:
I. Sundry debtors include a debt of Rs.90,000 of which only Rs.60,000 is likely to be recovered. A provision
has to be made for the balance.
II. The average profit earned by the company during the last four years was Rs.1,20,000.
III. The average rate of dividend paid by the company during the last four years was 12%.
The value of goodwill of the company by using the capitalization method is
(a) Rs. 60,080
(b) Rs. 1,50,000
(c) Rs. 1,20,000
(d) Rs. 8,50,000
(e) Rs.10,00,000.
(2marks)
<Answer>
58.The opening balance in the Reserve for discount on creditors of a firm is Rs.4,400 and discount received during
the year is Rs.3,200. If the business wants to keep its Reserve for discount on creditors at the rate of 2% on its
sundry creditors of Rs.3,25,000, the profit and loss account will be
(a) Credited with Rs.3,300
(b) Debited with Rs.3,300
(c) Credited with Rs.7,700
(d) Credited with Rs.5,300
(e) Credited with Rs.9,700.
(2marks)
<Answer>
59.Consider the following data pertaining to ABC Ltd. for the year 2006-07:
Partciulars Rs.
Opening balance of debtors 90,000
Closing balance of debtors 80,000
Collection from debtors during the year 1,80,000
Discount allowed to debtors 8,000

The amount of credit sales during the year 2006-07 were

(a) Rs.2,68,000
(b) Rs.1,78,000
(c) Rs.1,88,000
(d) Rs.1,98,000
(e) Rs.1,62,000.
(2marks)

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 <Answer>
60.Consider the following data pertaining to Band Ltd.:
i. Average profits of the last three years Rs. 7,29,000
ii. Remuneration to Directors Rs. 1,29,000
iii. Capital employed Rs.36,00,000
iv. Normal rate of return 12%
The amount of super profit for calculation of goodwill is
(a) Rs.7,29,000
(b) Rs.6,00,000
(c) Rs.2,97,000
(d) Rs.4,32,000
(e) Rs.1,68,000.
(2marks)
<Answer>
61.Pivotal Limited depreciates its machinery which was bought on April 1, 2004 for Rs.3,50,000 at 10% using the
written down value method. On April 1, 2007 the company decided to change the method of depreciation to the
straight line method with retrospective effect. Excess depreciation of Rs.10,850 on account of change in the
method of depreciation was credited to the profit and loss account by the company. The depreciation percentage as
per the straight line method would be
(a) 10.50%
(b) 10.00%
(c) 8.00%
(d) 6.00%
(e) 4.00%.
(2marks)
<Answer>
62.Consider the following data pertaining to M/s. Ramu Enterprises as on March 31, 2007:
Particulars Rs.
Net sales 8,00,000
Total purchases 5,00,000
Wages paid 50,000
Carriage inward 20,000
Carriage outward 15,000
Gas, water and fuel 20,000
Raw materials destroyed by fire 10,000
Opening stock 1,50,000
Gross profit on sales @ 20%
The value of closing stock of M/s. Ramu Enterprises for the year ended March 31, 2007 was
(a) Rs.73,800
(b) Rs.90,000
(c) Rs.74,800
(d) Rs.76,200
(e) Rs.75,200.
(2marks)

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63.Consider the following data pertaining to Joy Ltd. for the year ended March 31, 2007: <Answer>
Particulars Rs.
Sales 4,00,000
Excess of opening stock over closing stock 40,000
Plant & Machinery 1,70,000
Rent received 55,000
Purchases 2,85,000
Sales commission paid 12,000
Additional information:
 Rent received in advance amounted to Rs.2,500.
 A credit purchase of Rs.15,000 was wrongly recorded in sales day book as Rs.51,000.
 The company has the practice of depreciating the Plant and Machinery at the rate of 15% per annum on
straight line method. The original cost of the Plant and Machinery was Rs.2,00,000.
 Sales commission was paid only to the extent of two thirds of the amount payable.
The net profit of the company for the period ended March 31, 2007 was
(a) Rs.18,000
(b) Rs.19,500
(c) Rs.13,500
(d) Rs.28,000
(e) Rs.18,500. (2marks)
64.Rosy Ltd. is following weighted average cost method for valuing its inventory. The details of purchase and issue <Answer>
of its raw-materials during the 1st week of December, 2007 are as follows:
 1.12.2007 Opening stock 50 units value Rs.2,200.
 2.12.2007 Purchased 100 units @ Rs.47.
 4.12.2007 Issued 50 units.
 5.12.2007 Purchased 200 units @ Rs.48.
The value of inventory at the end of the 1st week December, 2007 was
(a) Rs.14,200
(b) Rs.14,300
(c) Rs.14,000
(d) Rs.14,400
(e) Rs.14,600.
(2marks)
65.The total of debit column of trial balance of a company is Rs.2,45,000 and that of the credit column is <Answer>
Rs.2,72,900. Subsequently the following mistakes are discovered:
Correct Amount Amount which appears in
Particulars
(Rs.) trial balance (Rs.)
Opening stock 40,500 40,600
Advertisement expenses 15,000 15,000 (credit column)
Interest from investments 36,000 30,000
Sundry creditors 76,000 80,000
The total of the corrected trial balance is
(a) Rs.2,74,900
(b) Rs.2,59,900
(c) Rs.2,75,100
(d) Rs.2,84,900
(e) Rs.2,82,800.
(2marks)

13
 <Answer>
66.The balance in the accumulated provision for depreciation account of a company as on April 1, 2006 was
Rs.1,00,000 when the original cost of the assets amounted to Rs.5,00,000. The company charges 10% depreciation
on a straight line basis for all the assets. One such asset costing Rs.2,50,000 with an accumulated depreciation of
Rs.40,000 was disposed off on April 1, 2006. The closing balance of the accumulated depreciation account on
March 31, 2007 was
(a) Rs.1,10,000
(b) Rs. 85,000
(c) Rs. 60,000
(d) Rs.1,25,000
(e) Rs.1,07,750.
(2marks)
<Answer>
67.Consider the following Balance Sheet of Penguin Ltd. as on March 31, 2007:
Liabilities Rs. Assets Rs.
Share capital 20,00,000 Land 2,00,000
Profit and loss account 1,00,000 Buildings 10,00,000
Provision for depreciation: Plant and machinery 15,00,000
Buildings 2,00,000 Furniture and fittings 1,00,000
Plant and machinery 5,00,000 Investments 4,45,000
Furniture and fittings 20,000 Sundry debtors 1,50,000
Short-term loan 6,00,000 Closing stock 50,000
Sundry creditors 50,000 Cash and bank 25,000
Total 34,70,000 Total 34,70,000

The company charges depreciation on all fixed assets (except land) at the rate of 10% on written down value
method. The amount to be charged to profit and loss account for the year ended March 31, 2007 on account of
depreciation was
(a) Rs.2,60,000
(b) Rs.1,88,000
(c) Rs.2,80,000
(d) Rs.2,08,000
(e) Rs.9,08,000.
(2marks)

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 <Answer>
68.An inexperienced book-keeper of Volga Ltd. has drawn up the following trial balance of the firm for the year
ended March 31, 2007:
Trial Balance as on March 31, 2007
Particulars Debit (Rs.) Particulars Credit (Rs.)
Provision for doubtful debts 4,000 Capital 91,820
Bank overdraft 33,080 Sundry creditors 32,740
Sundry debtors 59,660 Discount allowed 14,660
Discount received 5,040 General expenses 16,580
Drawings 24,000 Returns inward 6,600
Office furniture 43,100 Cash sales 1,21,600
Purchases 2,18,460 Credit sales 2,16,040
Rent and rates 6,280
Salaries 50,400
Opening stock 48,360
Provision for depreciation on office 7,280
furniture
Total 4,99,660 Total 5,00,040
The amount debited/credited to suspense account in corrected trial balance was
(a) Rs. 380 (Debit)
(b) Rs. 1,060 (Credit)
(c) Rs.23,500 (Debit)
(d) Rs. 8,340 (Debit)
(e) Rs.23,500 (Credit).
(2marks)
<Answer>
69.On April 01, 2006, Chitra Lekha Limited showed a balance of Rs.5,600 to the credit of Provision for bad and
doubtful debts. On March 31, 2007 the Sundry Debtors showed a balance of Rs.2,50,400. Out of the total debtors,
the status of the following debtors is as follows:
 Sinha Rs.3,800 – identified as bad debt and is to be written off.
 Gupta Rs.9,000 – expected to realize only 80%.
 Patel Rs.8,000 – expected to realize only 60%.
 Iyer Rs.5,500 – likely to file insolvency petition and the percentage of recovery is not known.
All other debts as on the date of finalization of accounts are estimated to be good. The closing balance of provision
for bad and doubtful debts for the year ended as on March 31, 2007 was
(a) Rs.14,300
(b) Rs. 8,700
(c) Rs.15,700
(d) Rs.10,500
(e) Rs. 4,900.
(2marks)
<Answer>
70.In the books of Pannalal Kunnalal Ltd. the machinery account shows a debit balance of Rs.30,000 as on April 1,
2005.The machinery was sold on September 30, 2006 for Rs.15,000. If the company charges depreciation @20%
p.a. on diminishing balance method, the amount of depreciation and the profit/loss on sale of machinery reflected
in the profit and loss account of the company for the period ended March 31, 2007 was
(a) Depreciation of Rs.6,000 and loss on sale of machinery Rs.3,000
(b) Depreciation of Rs.4,800 and loss on sale of machinery Rs.4,200
(c) Depreciation of Rs.2,400 and loss on sale of machinery Rs.6,600
(d) No depreciation and loss on sale of machinery Rs.9,000
(e) Depreciation of machinery Rs.4,800 and profit on sale of machinery Rs.4,200.
(2marks)

E
N
D

O
F

15
Q
U
E
S
T
I
O
N

P
A
P
E
R

16
 Suggested Answers
Financial Accounting (CFA510): January 2008
Answer Reason
1. D The receipt of interest by proprietor on bank fixed deposit held jointly with his spouse cannot be < TOP >
entered in the books of account of the business. The other items i.e. withdrawal of goods by the
proprietor for personal consumption, sale of an asset on credit, purchase of new asset in exchange of
old asset and loss of stock by fire are all recorded in the books of account of a firm.
2. C The phrase markdown means the selling price lowered below the original selling price. < TOP >

3. E Inflow of cash or receivables out of sales, interest on investment, royalty and dividends are revenue < TOP >
items. Where as advance received for supplies is not a revenue item.
4. A Under straight line method of depreciation, the depreciable asset whether tangible or intangible is < TOP >
depreciated over its useful life with an equal amount of depreciation in each period. This is the widely
used approach of recognizing an equal amount of depreciation expense in each period of a depreciable
asset’s useful life. Thus, alternative (a) is the correct answer.
5. C At the time of finalization of accounts entries passed for outstanding expenses, depreciation and < TOP >
interest on capital are known as adjusting entries. Hence, (c) is the correct answer
6. C Stock at the end of the financial year is the closing stock, and prepaid rent is the amount of rent which < TOP >
is paid in advance. Interest received is an income appearing in profit and loss account. Similarly, stock
at the beginning is the opening value of stock which appears on the debit side of the trading account.
Hence item (I) and (III) are appearing in balance sheet and option (c) is the right answer.
7. E Balance appearing on the credit side of a trial balance can be an income or Profit or Gain, an < TOP >
Outstanding expense, a liability or an income received in advance.
8. C The rule applicable to nominal account is debit all expenses and losses and credit all incomes and < TOP >
gains.
9. E Balance sheet is a statement of assets and liabilities of a business organization at any particular date. < TOP >

10. B Amount of income from investment should be transferred to the profit and loss account, distinguishing < TOP >
between trade investments and other investments. Therefore, amount received as interest on trade
investments held by a company should be transferred to its Profit and loss account.
11. A Retained earnings is profit after tax less dividends. < TOP >

12. C If the profit is 25% of the cost price then it is 20% of the sales price. < TOP >

Particulars Rs.
Assume cost price 100
Add: Profit 25% 25
Selling price 125
Percentage of profit on selling price 25/125x 100 = 20%
13. A The ledger is also called as principal book as the final information pertaining to the financial position < TOP >
of the business emerges only from the accounts. Hence, (a) is the correct answer.
14. C Return outward book is maintained by a business to record return of goods purchased on credit. < TOP >

15. C The liabilities payable over a longer period of time, generally after one year are called non-current < TOP >
liabilities.
16. C A credit sale of Rs.2,000 was wrongly entered in the purchases book. The impact of the mistake is that < TOP >
purchases increased by Rs.2,000 and sales decreased by Rs.2,000, with this the gross profit will
decrease by Rs.4,000.
17. C A person who is carrying on profession required to get his accounts audited, if his gross receipts < TOP >
exceed Rs.10 lakhs in a year
18. A The system of accounting in which revenue is recognized when earned and expenses are recognized < TOP >
when incurred, is called accrual system.
19. E The valuation of goodwill is necessary whenever a business is sold or purchased and also for valuation < TOP >
of shares. Thus (e) is the correct answer.

17
20. A Net worth is arrived after deducting all outside liabilities both current and non-current from total assets < TOP >
of the concern.
21. A The systematic allocation of the costs of intangible assets to the periods in which they provide < TOP >
benefits is called amortization.
22. A Errors which can affect both the accounts are errors of complete omission. For instance, if a < TOP >
transaction is omitted to be recorded in the purchase book, both purchases a/c and creditor’s a/c will be
affected. Errors of partial omission, errors of overcasting, errors of undercasting and errors of carry
forward may affect only one account.
23. C a. The difference between net sales and cost of goods sold is called gross profit. < TOP >

b. The difference between gross profit and operating expenses is called operating profit.
c. Gains arising from sources other than normal operations of the business is called non-operating
surplus.
d. The difference between profit before interest and taxes and interest is called profit before tax.
e. The difference between profit before tax and tax for the year.
Hence (c) is correct answer.
24. A Payment of ex-gratia to an employee is not treated as an allowable expense for computing managerial < TOP >
remuneration. Thus, alternative (a) is the correct answer.
25. C According to Section 226(3) of the Companies Act, 1956, a body corporate, an officer of the company, < TOP >
a person indebted to the company for an amount exceeding Rs.1,000, a person disqualified to be
appointed as an auditor of its subsidiary company, a person holding any security of the company are
disqualified to be appointed as an auditor. However, a person holding the shares of the company as a
nominee or a trustee for any third person and in which the holder has no beneficial interest shall not be
disqualified. Hence the answer is (c).
26. D When fixed assets are sold for book value, there will be no change in the total assets. Hence, (d) is < TOP >
correct answer.
27. E < TOP >
Advance tax that appears in the trial balance is shown under the head loans and advances in the
balance sheet.

28. B When a company revalues its fixed assets and if there is a profit on revaluation, it should be < TOP >
transferred to Capital Reserve a/c.
29. A If the articles of a company permits the directors can declare an interim dividend between two annual < TOP >
general meetings.
30. C The value of the goodwill, according to the simple profit method, is the product of average profit of < TOP >
the given years and number of years.
31. E The three column cash book is a refinement over single column cash book and double column cash < TOP >
book. Under three column cash book an additional column for discount is included on either side.
Thus, it represents cash column-real account, Bank column-personal account and discount column-
nominal account. The three-column cash book represents real, personal and nominal accounts.
32. B Schedule VI of the Companies Act, 1956 clearly specifies that the interest accrued on secured loans < TOP >
but not paid should be shown under the head ‘Secured Loans’.
33. A The Companies Act, 1956 specifies both the form and contents of the balance sheet of a company. < TOP >
Stores and Spare parts (a) are shown under the category of current assets. Discount on issue of
securities is shown under the head Misc. expenditure; Development of property (d) and Live stock (e)
are shown under fixed assets; Trust securities (c) are investments
34. D Proposed additions to reserve does not come under the head provision, it should be listed under < TOP >
‘Reserves and surplus’.
35. B Auditing begins where -- Accounting ends. The auditing begins as soon as the accounting process is < TOP >
completed. (b) is the correct answer.
36. C In an Annual General Meeting, submission of funds flow statement is not mandatory. But submission < TOP >
of Balance Sheet, Profit & Loss account, Directors’ report and Auditors’ report are mandatory. Hence,
(c) is correct answer.
37. C Liability for bills accepted is a current liability and it is not a contingent liability. < TOP >

18
38. B The costs/expenses that are incurred for establishing a company are called preliminary expenses. < TOP >

39. A The assets which are acquired for the purpose of using them in the conduct of business operations and < TOP >
not for reselling to earn profit are to be treated as fixed assets.
40. C  Outstanding salaries is an example of representative personal account. < TOP >

Rent is an example of nominal account

Stock of stationery is an example of real account

Cash in hand is an example of real account

Repairs to machinery is an example of nominal account. Hence, (c) is correct answer.

41. D Provision for taxation of the previous year = Rs. 8,76,000 < TOP >

Dividend on 10% 20,000 Preference Shares of Rs.100 = Rs. 2,00,000

10% Dividend on 2,60,000 equity shares of Rs.10 each = Rs. 2,60,000
The total amount debited to Profit and Loss appropriation account = Rs.13,36,000
42. A R &D costs include design of tools and modification of the formulation of a process, totaling to < TOP >
Rs.5,50,000. R &D costs does not include trouble shooting breakdowns during production and
adaptation of existing capability for a specific customer.
43. B Particulars Rs. < TOP >
Total assets 7,75,000
Less: Fictitious assets 60,000
Long term loan 1,50,000
Creditors 90,000
Bank overdraft 35,000
Capital employed at the end 4,40,000
Less: ½ of the profit during the year 2006-2007 30,000
Average capital employed 4,10,000
Normal profit = Average capital employed ×Normal rate of return
= Rs.4,10,000 ×12% = Rs.49,200.
44. E Calculation of Transfer to General Reserve : < TOP >

Final dividend declared Rs.15,05,000 – Rs.5,000  10% = Rs.1,50,000

Total of dividend declared and proposed during the year
= Rs.(1,05,000 + 1,50,000) = Rs.2,55,000
Dividends as a percent of paid-up capital = (2,55,000/15,00,000)  100 = 17%
Since this rate of dividend falls in the slab – greater than 15% but less than 20% – the transfer to
reserves should be 7.5% of the current profits.
Transfer to reserves = (7.5/100)  2,37,000 = Rs.17,775.
45. D The owners’ equity at the beginning of the year = Rs.22,000 < TOP >
Add: additional capital = Rs.12,000
Net Profit = Rs.16,000
Total = Rs.50,000
Less: Drawings during the year = Rs. 8,000
Owners’ equity at the at the end of the year = Rs.42,000.

19
46. C Trading profits for the last three years : < TOP >

Particulars Rs.
Year 1 1,07,600
Year 2 90,700
Year 3 1,12,500
Total 3,10,800
Average Profit (3,10,800 / 3) 1,03,600
Less : Remuneration of the directors 12,000
Average Maintainable Profits 91600

Less: Normal Profit expected @ 10% on average capital 60,000

 10 
 6, 00, 000  
employed  100 
Super Profit 31,600
Goodwill at 3 years’ purchase (31,600  3) 94,800
47. A < TOP >

Particulars Rs. Rs.

Net Profit as calculated 76,50,000
Add: Revenue Profit on sale of plant 60,000
77,10,000
Less: Director’s remuneration 1,50,000
Bonus paid to production executive 1,50,000 3,00,000
Net Profit 74,10,000
Where the amount for which the fixed asset is sold exceed the written-down value, credit shall be
given for so much of the excess as is not higher than the difference between the original cost of the
fixed asset and its written down value. Hence only Rs.60,000 (Rs.3,00,000 – Rs.2,40,000) should be
added
The director’s remuneration and the bonus paid to any member of company’s staff should be deducted
whereas Income tax and super tax should not be deducted.
Credit should not be given to profits by way of premium on shares
Managing Director’s Commission = 74,10,000  5% = Rs.3,70,500.
48. B Dividend is payable on paid up capital; < TOP >

Rate of dividend = 15%

Called-up capital Rs.75,000
Less: Calls in arrears Rs. 5,000
Paid up capital Rs.70,000
15  Rs.70,000
 Rs.10, 500
Dividend payable = 100
49. B (Rs.) < TOP >
Reserves & Surplus (opening balance) 20,00,000
Add : Transfer to General Reserve 2,00,000
Balance in Profit & Loss A/c 2,00,000
Reserves & Surplus (at year end) 24,00,000
50. D Of the Rs.3,60,000 paid, Rs.1,20,000 was paid toward dividends in arrears and Rs 2,40,000 was paid < TOP >
toward dividends for 2006-07. Of the Rs.2,40,000, Rs.1,35,000 was paid to preferred shareholders
(15,000 shares x Rs 100 per share x .09), leaving Rs.1,05,000 to be paid to equity shareholders
(Rs.2,40,000 – Rs.1,35,000).

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51. D < TOP >

Particulars Rs. Rs.

Assets increased by 2,32,000
Add: Dividend paid during the year 20,000
2,52,000
Less: Liabilities increased by 1,40,000
Share capital increased by 1,00,000 2,40,000
Net income for the year 12,000
52. C Trading account in the books of Recants Ltd. for the period April 1, 2007 to June 15, 2007 < TOP >

Dr. Cr.
Particulars Rs. Particulars Rs.
To Opening stock 4,00,000 By Sales 10,00,000
To Purchases 5,40,000 By Stock lost by fire 3,44,000
(Bal. fig.)
To Wages 2,20,000 By Closing stock 16,000
(stock salvaged)
To Gross profit 2,00,000
(Rs.10,00,000 x 20/100)
13,60,000 13,60,000
53. A The average maintenance profits of the company are < TOP >

Year Rs. Rs.

2004-2005 Profit 2,20,500
Less : Omission of office expenses 8,250 2,12,250
2005-2006 Profit 3,22,500
Less : 10% non-recurring 32,250 2,90,250
2006-2007 Profit 2,40,000
Add : Provision for bad debts 15,750 2,55,750
Total profits 7,58,250
The simple average maintainable profits of the company
= Rs.7,58,250  3 = Rs.2,52,750.
54. C Dr. Creditors a/c Cr. < TOP >

Particulars Rs. Particulars Rs.

To Cash 92,500 By Balance b/d 1,70,000
To Purchases Returns 4,000 By Purchases 1,23,500
To Discount received 2,400 By Bills Payable 4,000
To Balance c/d 1,98,600
2,97,500 2,97,500
By Balance b/d 1,98,600
55. A Balance Sheet of Ambica Ltd. as on March 31, 2007 < TOP >

Liabilities Rs. Assets Rs.

Share capital 5,00,000 Fixed assets 7,70,000
Less call in arrears 30,000 4,70,000 Sundry debtors 1,10,000
Capital reserve 90,000 Stock 96,000
P & L A/c 50,000 Loans to employees 51,200
Secured loans 4,00,000 Cash 4,000
Bank 40,000
Sundry creditors 91,200 Preliminary expenses 30,000
11,01,200 11,01,200

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56. C Dr. Furniture and fixtures account Cr. < TOP >

Particulars Rs. Particulars Rs.

To Balance b/d 3,10,000 By Bank (sale) 17,000
By Profit and loss account 2,000
By Depreciation (Rs.3,10,000 x 5%) 15,500
By Balance c/d 2,75,500
3,10,000 3,10,000

Particulars Rs.
Written down value of machinery sold as on April 01, 2006 20,000
Less : Depreciation (Rs.20,000 x 5%) 1,000
Value of machine on March 31, 2007 19,000
Less : Sale consideration 17,000
Loss on sale of machine 2,000
57. B Computation of net tangible assets of Pioneer Ltd. < TOP >

Particulars Rs. Rs.

Plant & machinery 8,50,000
Other current assets 2,00,000
Sundry debtors 4,00,000
14,50,000
Less: Liabilities:
Bank loan 1,50,000
Sundry creditors 4,20,000
Provision for bad debts 30,000 6,00,000
Net tangible assets 8,50,000
Average ma int ainable profit
= Total value of the business= Normal rate of return x 100
Rs.1, 20, 000
= 12% = Rs.10,00,000
Goodwill = Total value of the business – Net tangible assets
= Rs.10,00,000 – 8,50,000 = Rs.1,50,000.
58. D The formula for calculating the amount of adjusting entry in respect of reserve for discount on < TOP >
accounts payable is, discount received during the period plus the required reserve minus the old
reserve. Discount received during the year is 3,200, required reserve at the rate of 2% is 6,500 and old
reserve is 4,400. So the net amount that can be credited to Profit & Los A/c is 3,200 plus 6,500 =
9,700 minus 4,400 = 5,300. Discount receivable being an income, it is credited to P&L A/c.
59. B Dr. Sundry Debtors account Cr. < TOP >
Particulars Rs. Particulars Rs.
To Balance b/d 90,000 By Bank (collection 1,80,000
from debtors)
To Credit sales (Bal. fig.) 1,78,000 By Discount allowed 8,000
By Balance c/d 80,000
2,68,000 2,68,000
60. E < TOP >

Particulars (Rs.)
Average profits: 7,29,000
Less: Remuneration from alternative employment 1,29,000
6,00,000
Less: Normal profit @ 12% on capital employed 4,32,000
(12% of Rs.36,00,000)
Super Profit 1,68,000

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61. C Amount (Rs.) < TOP >
Cost of the machinery on 1.4.2004 3,50,000
Less :Depreciation for 2004-05 at 10% 35,000
W.D.V. on 1.4.2005 3,15,000
Less : Depreciation for 2005-06 31,500
W.D.V. on 1.4.2006 2,83,500
Less : Depreciation for 2006-07 28,350
W.D.V. on 1.4.2007 2,55,150
Total depreciation provided Rs. (3,50,000 – 2,55,150) 94,850
Less : excess depreciation provided credited 10,850
Total depreciation provided 84,000
Depreciation per annum (84,000/3) = 28,000
Annual depreciation
x100
Rate of depreciation = Cost
28, 000
x 100
= 3, 50, 000 = 8%
62. B Books of Ramu Enterprises < TOP >

Dr. Trading Account for the period ending March 31, 2007 Cr.
Particulars Rs. Particulars Rs.
To Opening stock 1,50,000 By Net Sales 8,00,000
To Purchases 5,00,000 By Stock lost by fire 10,000
To Wages 50,000 By Closing stock 90,000
To Carriage inward 20,000
To Gas, water, fuel 20,000
To Gross Profit 1,60,000
(Rs.8,00,000 x 20%)
9,00,000 9,00,000
63. C Net Profit of Joy Ltd. for the year ending March 31, 2007 < TOP >

Dr. Cr.
Particulars Rs. Rs. Particulars Rs.
To Purchases 2,85,000 By Sales 4,00,000
Add: Omitted to be recorded 15,000 3,00,000 Less Wrong Credit 51,000 3,49,000
To Excess of opening stock over
closing stock 40,000

To Gross Profit 9,000

3,49,000 3,49,000
To Sales Commission 12,000 By Gross Profit 9,000
+ Accrued 6,000 18,000 By Rent received 55,000
Less :received in advance
To Depreciation 30,000 2,500 52,500
To Net Profit 13,500
61,500 61,500
The net profit is Rs.13,500
64. A Stores Ledger in the books of Rosy Ltd. for the 1st week of December, 2007 < TOP >

Purchases Issues Balance

Date Quantity Rate Quantity Rate Quantity Rate
Rs. Rs. Rs.
(units) Rs. (units) Rs. (units) Rs.
1.12.07 - - - - - - 50 44 2,200
2.12.07 100 47 4,700 - - - 150 46 6,900
4.12.07 - - - 50 46 2,300 100 46 4,600
5.12.07 200 48 9,600 - - - 300 47.33 14,200

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65. B < TOP >

Particulars Rs.
Total of debit side of trial balance 2,45,000
Add : Advertisement expenses 15,000
Less : Opening stock (excess taken) 100
Total of trial balance (Debit side) 2,59,900

Particulars Rs.
Total of credit side of trial balance 2,72,900
Add : Interest on investments (less taken) 6,000
Less : Sundry creditors (excess taken) 4,000
Less : Advertisement expenses (wrongly taken) 15,000
Total of trial balance (credit side) 2,59,900
66. B < TOP >

Particulars Rs.
The opening balance in the accumulated depreciation a/c = 1,00,000
Less : Accumulated depreciation of the asset disposed = 40,000
60,000
Add : Current year’s depreciation 25,000
(5,00,000 – 2,50,000) × (10/100)
The balance of the accumulated depreciation account = 85,000
67. B < TOP >

Particulars Rs.
Depreciation:
Buildings (Rs.10,00,000 – Rs.2,00,000)  10% 80,000
Machinery (Rs.15,00,000 – Rs.5,00,000)  10% 1,00,000
Furniture (Rs.1,00,000 – Rs.20,000)  10% 8,000
Total depreciation 1,88,000
68. C Corrected Trial Balance < TOP >

Particulars Debit (Rs.) Credit (Rs.)

Provision for doubtful debts 4,000
Bank overdraft 33,080
Sundry debtors 59,660
Discount received 5,040
Drawings 24,000
Office furniture 43,100
Purchases 2,18,460
Rent and rates 6,280
Salaries 50,400
Opening stock 48,360
Provision for depreciation on office furniture 7,280
Capital 91,820
Sundry creditors 32,740
Discount allowed 14,660
General expenses 16,580
Returns inward 6,600
Cash sales 1,21,600
Credit sales 2,16,040
Suspense account 23,500
Total 5,11,600 5,11,600
Suspense (Debit) = Rs.23,500.

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69. D The amount debited to profit and loss account in respect of provision for doubtful debts is Rs.8,700 < TOP >
and the closing provision is Rs.10,500.
Provision for bad and doubtful debts
Dr. Cr.
Particulars Rs. Rs. Particulars Rs.
To Bad debts (Sinha) 3,800 By Balance b/d 5,600
To Provision 1,800 By Profit and loss account 8,700
Gupta 20% of Rs.9,000
Patel 40% of Rs.8,000 3,200
Iyer 100% of Rs.5,500 5,500
To Balance c/d 10,500

14,300 14,300
70. C Machinery Account < TOP >

Date Particulars Rs. Date Particulars Rs.

April 1, 05 To Balance b/f 30,000 March 31, 06 By Depreciation 6,000
______ March 31, 06 By Balance c/d 24,000
30,000 30,000
Sept.30, 06 By Depreciation 2,400
April 1, 06 To Balance b/f 24,000 “ By Bank 15,000
______ March 31, 07 By P&L a/c 6,600
24,000 24,000
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